Written and maintained by CASRAI Editorial Board
Last updated
Short answer: The Medicare Advantage (MA) over-the-counter (OTC) benefit is an optional supplemental benefit that some MA plans offer. It pays for health-related items and medications that are available without a prescription and are not covered by Medicare Part A, Part B or Part D. CMS’s Medicare Managed Care Manual says a plan may never offer as a Part C supplemental benefit an OTC drug or item that is also covered under Part B or paid for under Part D. Plans may not give enrollees cash for these items. People searching for “medicare otc benefits” are usually asking about this MA feature, not about Original Medicare.
General information about program rules, not medical or coverage advice. Which items a given member can buy depends on that plan’s Evidence of Coverage and current OTC catalog.
Definition and scope
Under 42 CFR 422.100(c)(2), supplemental benefits are those offered under 42 CFR 422.102. Supplemental benefits are health-related services that Medicare Parts A, B and D do not cover, and the regulation sets requirements they must meet. The OTC benefit is one such supplemental benefit. The Medicare Managed Care Manual, Chapter 4, Section 40 (the revision dated April 2016, so check the current CMS text before relying on its wording) describes the OTC benefit as health-related items and medications that are available without a prescription and are not covered by Part A, B or D.
The HHS Office of Inspector General (OIG) describes the same arrangement in its March 16, 2026 work-plan item: plans “may offer supplemental benefits, such as over-the-counter (OTC) benefits,” and these benefits “are funded through rebates and must be used on CMS-approved, health-related items.”
Is the OTC benefit part of Original Medicare?
No. The rule concerns MA supplemental benefits, which by definition are not covered by Medicare Parts A, B or D. An item that Original Medicare covers cannot be provided through the OTC benefit; the manual states that MA plans may never offer as a Part C supplemental benefit an OTC drug or item that is also covered under Part B or paid for under Part D for the plan’s enrollees. Items are bought for the enrollee only.
How the benefit works in practice
Access
Section 40.2 of the manual requires items to be available at a wide variety of retail outlets or through a mail-order catalog. A plan can meet the uniform-access expectation with one mail-order contractor. The catalog may be a paper catalog, a website list or an order form, and it must list all plan-covered OTC items and the price of each. The plan bears the mailing cost and may set a minimum order amount.
How the money moves
Section 40.3 says the plan “may not give enrollees money to purchase covered OTC items or drugs.” It may instead:
- reimburse the enrollee on submitted receipts;
- let the enrollee buy through a plan catalog or list; or
- issue a debit card linked to eligible items.
A plan may set a dollar amount per month or per year. The manual treats the purchase method as not part of the benefit, so it can change during the plan year with prior notice. Under Section 40.3.1, every plan must also allow manual reimbursement on submitted receipts in circumstances it describes, for example when the debit-card network is not operating.
Item types: eligible, dual-purpose and excluded
Section 40.4 of the manual sorts items into categories (its Table IV) that are either eligible or “dual purpose.” Dual-purpose items may be bought only after the enrollee discusses the purchase with their provider or meets other plan requirements; the plan may require a written note or a verbal discussion. A plan that covers a category, such as cough medicines, “must cover all items and brands” in it.
Examples named in the 2016 manual’s list of categories include:
- adhesive bandages, gauze and other dressings, antibacterial ointment, peroxide and thermometers;
- antacids, analgesics, antihistamines and decongestants;
- compression hosiery, rib belts and elastic knee supports;
- toothbrushes, toothpaste, floss, and denture adhesives and cleaners;
- incontinence pads;
- in-home monitoring and testing equipment, such as blood pressure, cholesterol, blood sugar, pregnancy, HIV and fecal occult blood tests;
- vitamins and minerals, and fiber supplements.
The same manual lists categories that were not eligible in that revision: homeopathic and alternative medicines (including botanicals, herbals, probiotics and nutraceuticals), baby items, contraceptives, convenience and comfort items (such as fans, magnifying glasses, ear plugs, insoles and arch supports), cosmetics (such as mouthwash, deodorants, moisturizers and teeth whiteners), and food products or supplements such as energy and protein bars and power drinks. Whether a specific item is covered today depends on the current CMS guidance and the plan’s catalog.
Where it matters for labs, clinics and supply decisions
For clinics and supply teams, the useful part of the manual is its boundary cases and what a plan must disclose. Use the table below as a checklist of what the manual says, then compare it with the member’s plan documents.
| Question | What the Medicare Managed Care Manual says (April 2016 revision) |
|---|---|
| Could Part B or Part D cover the item? | Then it cannot be an OTC supplemental benefit. Insulin-administration supplies such as alcohol wipes and syringes must be paid for under Part D and are not eligible. |
| Is the item sometimes Part B? | The plan must flag items that may be Part B or D covered in some circumstances. Example: gauze can be Part B when used as prescribed for surgical wound dressing changes, and is then not drawn from the OTC benefit. |
| Is the item “dual purpose”? | The enrollee may buy it only after discussing it with their provider or meeting other plan requirements. |
| Does the plan cover the whole category? | A covered category, such as cough medicines, must include all items and brands in it. |
| How does the member pay? | Receipt reimbursement, a plan catalog or list, or a debit card linked to eligible items; never cash. Manual receipt reimbursement must also be available as a fallback. |
| Who may use the items? | Items may be purchased for the enrollee only. |
Oversight is active. OIG’s work-plan item says CMS required plans to report OTC utilization and cost data in 2024, that MA organizations take varying approaches to delivering the benefit, and that OIG will audit selected organizations on whether OTC benefits are accurately reported to CMS and administered according to federal rules.
For background on related supply topics, see the CASRAI guides on Medicare DME coverage, wound dressings, medical thermometers, blood pressure cuffs and compression socks.
Common misunderstandings
- It is not cash. A plan may not give enrollees money; it reimburses against receipts, runs a catalog, or issues a card linked to eligible items.
- It is not Part D. Items paid for under Part D, such as insulin-administration supplies, are excluded from the OTC benefit.
- Not every OTC product qualifies. Items must meet the supplemental-benefit criteria and be health related, and the manual lists categories that are not eligible.
- Category coverage is all-brands. If a plan covers a category, it must cover all items and brands in it.
- It is plan-specific. Not every MA plan offers the benefit, and the purchase method can change during the year with prior notice.
FAQ
What is the Medicare Advantage OTC benefit?
An optional supplemental benefit under which an MA plan helps pay for health-related, non-prescription items and medications that Medicare Parts A, B and D do not cover.
Is the OTC benefit part of Original Medicare?
No. It is offered by MA plans as a supplemental benefit, and the manual bars plans from offering items that Part B or Part D already covers.
Can a plan give members cash for OTC items?
No. The manual lets a plan reimburse on receipts, offer a catalog or list, or issue a debit card linked to eligible items.
Where can a member find which items their plan covers?
In the plan’s OTC catalog, which the manual says must list all plan-covered OTC items and the price of each, and in the plan’s Evidence of Coverage.
Who oversees the benefit?
CMS sets the rules, and OIG has an active work-plan audit item (announced March 16, 2026) on how OTC benefits are reported and administered.
Sources
- CMS, Medicare Managed Care Manual, Chapter 4, Section 40 “Over-the-Counter (OTC) Benefits”, Rev. 121, issued April 22, 2016; checked 2026-11-01.
- HHS OIG, Work Plan item OAS-26-06-057, Utilization and Oversight of Medicare Part C Supplemental Benefits for Over-the-Counter Items, last modified March 16, 2026; checked 2026-11-01.
- eCFR, 42 CFR 422.100, checked 2026-11-01.
