The 80/20 split at the heart of Medicare Part B sounds manageable until the bills grow large. After a beneficiary meets the annual deductible, Part B pays 80% of the Medicare-approved amount for physician visits, outpatient care, lab tests and medical equipment, and the patient owes the other 20%. That share sounds small on a routine office visit, but it applies to every covered service with no yearly ceiling. On surgery, cancer treatment or repeated specialist care, the running 20% can reach into the thousands, which is exactly the exposure a Medigap policy is designed to close.
How the 80/20 math actually works
The coinsurance is calculated on the Medicare-approved amount, not on whatever a provider might list as a charge. Medicare sets an approved rate for each service, pays 80% of it, and the beneficiary is responsible for the remaining 20%. That distinction protects patients from inflated sticker prices, but only when the provider accepts what Medicare pays. The deductible comes first: nothing is paid at the 80% rate until the beneficiary has covered the annual Part B deductible out of pocket, after which the split begins for the rest of the year.
For 2026 the numbers are concrete. The standard Part B deductible is $283, and once it is met the 20% coinsurance applies to each Medicare-approved service, according to the agency’s 2026 cost figures. Because that 20% never stops accruing, the total a beneficiary owes rises directly with how much care they need, and there is no built-in point at which Original Medicare takes over the full cost.
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Assignment and excess charges can push the bill higher
The clean 80/20 arithmetic assumes a provider accepts Medicare assignment, meaning they agree to the approved amount as full payment. Most physicians who see Medicare patients do, but those who do not can bill above the approved rate. Non-participating providers are allowed to charge what is known as an excess charge, up to a set percentage over the approved amount, and that extra sits on top of the standard 20% coinsurance. A beneficiary who does not confirm assignment before treatment can end up owing more than the tidy one-fifth share suggests.
These excess charges are one reason the real cost of Original Medicare is harder to predict than the headline percentage implies. A few states bar excess charges entirely, and certain Medigap plans reimburse them, but a beneficiary in most of the country seeing a non-participating specialist faces a bill that exceeds the basic coinsurance. Checking whether a provider accepts assignment is a small step that directly affects how closely the 80/20 rule holds in practice, as the Medicare cost rules describe.
The absence of any annual limit compounds all of this. Private insurance and Medicare Advantage plans stop charging once a member hits a maximum, but traditional Medicare has no such cutoff. The 20% share, plus any excess charges, keeps landing on the beneficiary regardless of how high the year’s total climbs, which is precisely why a serious diagnosis can turn a modest-sounding coinsurance into a major financial burden.
What Medigap covers and when to buy it
Medicare Supplement policies, sold by private insurers under standardized letter names, exist to absorb the 20% and the other gaps Original Medicare leaves open. Depending on the plan, Medigap can pay the Part B coinsurance, the hospital costs under Part A, and in some cases the excess charges from non-participating providers. A comprehensive plan can reduce a beneficiary’s out-of-pocket share on most covered services to little or nothing, converting an open-ended liability into a fixed monthly premium.
Timing determines both price and availability. The strongest right to buy any Medigap policy, regardless of health history, runs during the six-month open enrollment period that begins when a person is 65 or older and enrolled in Part B. During that window insurers cannot deny coverage or charge more for pre-existing conditions. After it closes, applicants in most states can be medically underwritten, which means higher premiums or outright rejection, according to Medicare’s guidance on comparing Medigap policies.
The plans are standardized so that a given letter offers the same benefits from any insurer, which lets buyers compare on price and service rather than fine print. Premiums still vary widely by company, region and rating method, so two identical plans can cost noticeably different amounts. That standardization is a genuine consumer advantage, but it rewards shopping around rather than assuming every version of a plan costs the same.
For anyone weighing whether to add Medigap, the underlying question is how much uncapped risk they are willing to carry. A healthy beneficiary might gamble on paying the 20% as it comes, but the gamble only looks cheap until the year they need extensive care. With no ceiling in Original Medicare and a one-time window that protects the right to buy coverage, the decision made at 65 tends to shape a retiree’s medical costs for far longer than a single year.
This article was researched and drafted with the assistance of AI and reviewed by The Money Overview editorial team.
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