Medicare supplement insurance, also called Medigap, is designed to bridge the payment gap left by original Medicare, a traditional indemnity plan that in most cases pays only a portion of the charges for covered services and products. Participants are responsible for deductibles and co-insurance that can easily run into the thousands of dollars each year -- costs that Medigap plans cover. Yet despite this and several other advantages that overwhelmingly support purchasing Medigap insurance, the plans have some drawbacks.
Medigap Plans Save Money
All Medigap plans cover the Part A deductible, which is $1,260 for each benefit period as of the time of publication. Since a benefit period can be as short as 60 days, you could theoretically have up to six in a year; it’s unlikely you would actually have more than two or three under even the worst of circumstances, given that benefit periods are triggered by hospital admissions for separate incidents.
Because the average Medigap plan costs about $150 a month, it’s clear that the policy nearly pays for itself with a single hospital admission. Because all Medigap plans also cover the co-insurance for Parts A and B, buying such coverage almost becomes an easy decision.
It’s Easy to Choose a Medigap Plan
Medigap plans are standardized. There are 10 different plans, each identified by a letter: A, B, C, D, F, G, K, L, M and N. Numerous private health insurance companies are licensed to sell them, but the Plan A sold by one company is identical in benefits to every other Plan A on the market. This is the law, and it makes it easy to compare different companies’ offerings. The only real difference is the monthly premium.
Medigap Plans Are Easy to Work With
Unlike Medicare Advantage, or MA, plans, which have strict rules about when participants can enroll and disenroll, you can sign up for a Medigap plan any time, without having to wait for an open enrollment period. In addition, you can go to any doctor who accepts Medicare, and you aren’t restricted to network providers, as you are with most MA plans. Claims are filed automatically with Medicare and your supplement provider, which usually means less paperwork for you. In addition, Medigap plans don't have the geographical limitations common to many MA plans. Once you’re covered by a Medigap plan, you cannot be canceled: Renewals are annual, but they’re guaranteed.
Medigap Plans Aren't Cheap
The average cost of a Medigap plan is about $150 per month, in addition to the premium you pay for Medicare Part B and, in most cases, a Part D prescription drug plan. Although Medigap can protect you from higher deductibles and co-insurance payments, the premiums can add up as well, putting pressure on most seniors' fixed incomes.
No Integral Prescription Drug Coverage
Before 2006, some Medigap plans included prescription drug coverage, but in that year, when the Part D prescription drug program was introduced, drug coverage was eliminated from Medigap policies. This requires participants to choose from a large selection of different plans offered by various companies and also requires an additional monthly premium payment. By contrast, many MA plans include prescription drug coverage.
Guaranteed Acceptance Is Limited
During the initial coverage election period, that seven-month window that opens the month you first become eligible for Medicare, your acceptance into any Medigap plan is guaranteed, regardless of any pre-existing health conditions. After that, though, if you decide to change plans, your acceptance into a Medigap plan depends on your health situation, and you could be denied.
- Medicare.gov: Medicare 2015 Costs at a Glance
- Medicare.gov: How to Compare Medigap Policies
- Medicare Profs: 5 Things to Know Before Choosing a Medigap Policy
- Medicare.gov: What’s Medicare Supplement Insurance (Medigap)?
- Medicare.gov. "How to Compare Medigap Policies." Accessed March 28, 2020.
- Medicare.gov. "Switching Medigap Policies." Accessed March 28, 2020.
Dale Marshall began writing for Internet clients in 2009. He specializes in topics related to the areas in which he worked for more than three decades, including finance, insurance, labor relations and human resources. Marshall earned a Bachelor of Arts in communication from the University of Connecticut.