October 23, 2026
Policymakers have long shown an interest in adding a cap on out-of-pocket expenditures in Original Medicare (OM) which would limit seniors’ exposure to catastrophic medical costs. Currently, the vast majority of Medicare beneficiaries have such protections either through Medicare Advantage plans (which are required to have out-of-pocket limits) or through supplemental Medigap coverage, Medicaid, or employer-sponsored supplemental insurance. However, individuals in OM who lack such coverage are still exposed to significant financial risks.
ARC developed an OM Simulation Model, funded by West Health, to estimate the federal budgetary costs of implementing cost sharing caps at various levels between $5,000 and $9,250. In a new issue brief, we find that instituting caps within this range would cost between $275 and $500 billion over 10 years. Approximately 75,000 to 260,000 OM beneficiaries without supplemental coverage under current law would benefit from such a policy and would save between $2,700 and $4,000 annually.
Such a cap on beneficiary cost sharing would have other benefits that we have not modeled – including reductions in Medigap and ESI supplemental premiums, reduced state spending for dual-eligible beneficiaries, and lower levels of uncollected cost sharing experienced by providers.
Read the full research brief here.