Most insurance a person carries before retirement shares a common feature: once out-of-pocket spending hits a set number for the year, the plan absorbs the rest. Original Medicare, the traditional program run directly by the federal government, works differently. After the annual deductibles are satisfied, beneficiaries keep paying a fixed percentage of the cost of most care, and nothing in the program stops that running total from climbing. A single serious illness that stretches across months of treatment can therefore generate a bill with no built-in stopping point.
The 80/20 split at the center of Part B
For doctor visits, outpatient procedures, lab work, and most other medical services, Original Medicare uses a straightforward formula. Once a beneficiary meets the annual Part B deductible, Medicare pays 80 percent of the Medicare-approved amount and the patient owes the remaining 20 percent, a share Medicare spells out in its cost rules. For a routine appointment, 20 percent is a modest figure. The math changes entirely when the approved amount is large. Twenty percent of a cancer treatment plan, a course of dialysis, or repeated specialist care is a percentage of a very big number, and because the coinsurance never converts to a flat cap, the patient’s share simply keeps accruing alongside the cost of care.
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What the 2026 numbers actually look like
The fixed costs are known in advance. The standard Part B premium in 2026 is $202.90 a month, and the annual Part B deductible is $283, figures confirmed by the Centers for Medicare and Medicaid Services. Those are the predictable entries. The 20 percent coinsurance is the open-ended one. A beneficiary who runs up $80,000 in Medicare-approved outpatient charges over a difficult year is responsible for roughly $16,000 of it, because there is no annual out-of-pocket maximum on the Part B side of Original Medicare. Employer coverage and Medicare Advantage plans both carry that kind of ceiling. Traditional Medicare, on its own, does not.
Where a single illness turns costly
The gap becomes most visible during a sustained illness rather than a one-time procedure. Chemotherapy administered over many months, ongoing infusions, frequent imaging, and repeated specialist visits each generate their own approved charge, and 20 percent of each one lands on the patient. Hospital stays add a separate layer through Part A, which carries its own deductible and daily coinsurance. Because the two parts of Original Medicare track costs independently and neither imposes a yearly cap, a retiree facing a major diagnosis can watch coinsurance stack across dozens of separate claims with no single number that ends the exposure. That structure is exactly why so much attention goes to the coverage that sits on top of Medicare.
Kidney failure illustrates the arithmetic starkly. A beneficiary on regular dialysis receives treatments several times a week, every week, and each session carries its own Medicare-approved amount and its own 20 percent slice. Certain expensive drugs administered in a clinic setting fall under Part B rather than Part D, so their coinsurance is exposed to the same open-ended share. Over a full year, the running 20 percent on repeated high-cost care is what separates a chronic diagnosis under Original Medicare from the same diagnosis under a plan that stops charging once a ceiling is reached.
How Medigap and Advantage caps close the gap
The traditional way to contain the risk is a Medicare Supplement, or Medigap, policy. Sold by private insurers under standardized federal labels, these plans exist specifically to pay some or all of the coinsurance and deductibles that Original Medicare leaves behind, and Medicare’s own guidance describes several lettered plans that cover the Part B 20 percent share in full. A retiree with that kind of supplement effectively converts the open-ended coinsurance into a predictable premium. The catch is timing: the strongest guaranteed right to buy a Medigap policy, without medical underwriting, generally falls in a one-time window around when a person first enrolls in Part B, and outside it insurers in many states can charge more or decline coverage based on health history.
Medicare Advantage takes a different route to the same problem. Those plans are required to include an annual limit on in-network out-of-pocket spending, which gives enrollees the ceiling Original Medicare lacks, though often in exchange for provider networks and prior-authorization rules that traditional Medicare does not impose. The tradeoff between the two paths is the real decision a beneficiary makes at enrollment, and it turns less on the monthly premium than on how each option handles a catastrophic year.
The number that never appears on Original Medicare’s ledger
The defining fact is an absence. Original Medicare publishes a premium, a Part A deductible, a Part B deductible, and a coinsurance percentage, but it publishes no maximum. Every other layer of retiree health coverage, from a Medigap policy to a Medicare Advantage plan to leftover employer insurance, is in one way or another a tool for supplying the ceiling the base program declines to set. For a beneficiary weighing those layers, the calculation is not what an average year costs but what the worst year could, because on the 20 percent share that worst year has no upper bound of its own.
This article was produced with the assistance of artificial intelligence and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
