Switching to Medicare comes with a big decision, and choosing the right plan to meet your healthcare needs is no small feat. You’ve probably heard much about Medigap, also known as Medicare Supplement Insurance. This popular option helps fill the gaps in Original Medicare (Parts A and B). But are you aware of the disadvantages of Medigap plans?
While Medigap can be a lifesaver, like any insurance, it has drawbacks to consider before enrolling. This article examines Medigap plan disadvantages so you can confidently decide about your healthcare.
Understanding the Basics of Medigap
Before we discuss Medigap’s potential downside, let’s make sure we understand what it is and what it does.
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What is Medigap?
Medigap is supplemental insurance provided by private insurance companies. Unlike Medicare Advantage, which replaces your Original Medicare, Medigap works alongside Parts A and B to cover some of the costs Original Medicare doesn’t.
These additional benefits can provide valuable peace of mind, knowing you have an extra layer of coverage for healthcare expenses. Some out-of-pocket expenses that a Medicare Supplement plan covers include:
- Copayments
- Coinsurance
- Deductibles
How Does Medigap Work?
When you use a healthcare provider that accepts Medicare, you’ll typically pay your Original Medicare deductibles, copays, or coinsurance. After Original Medicare processes your claim, your Medigap plan will step in to cover its portion of the remaining costs, depending on your specific plan.
This additional coverage can be especially beneficial if you have high medical expenses or a chronic health condition. Original Medicare covers about 80% of all medically necessary costs, and you must pay the remaining 20%.
A good way to understand this is to have a look at this chart:
The chart shows you the out-of-pocket costs built into Medicare and what each of the ten standardized Medigap plans pays after Medicare has paid its share.
What is the Downside to Medigap?
Now that you understand the basics of supplemental insurance, what are the disadvantages of a Medigap plan? For most people, the most significant negative is the cost. But there are others, so let’s go through them.
1. Medigap Plan Disadvantages – Premiums Can Be Expensive
One factor to consider is Medigap plan premiums, which are expensive in some areas of the country. You must factor in this additional monthly cost and your Part B premiums.
Premium costs vary based on age, gender, health history, tobacco use, plan, where you live, and insurance provider. This separate premium is something to consider if you’re seeking more than basic coverage.
| State | Insurance Company | Plan G | High-Deductible Plan G |
|---|---|---|---|
| Connecticut | Humana | $226.92 | $67.35 |
| Iowa | Aetna | $1,730 | $627 |
| Maryland | Aetna | $203 | $63 |
For example, people in areas with higher cost-of-living may face steeper premiums than those in more rural areas. If you’re on a tight budget, it’s important to factor in the potential cost of a Medigap plan.
Additionally, some Medigap policies have waiting periods before coverage, so understand these details before enrolling.
2. Not Having Coverage for Everything
You might be surprised to know that Medigap plans don’t cover everything. One significant disadvantage is that they don’t cover prescription drugs. Original Medicare and Medicare Supplement plans typically do not offer drug coverage.
If you need help covering medications, you’ll need to enroll in a stand-alone Medicare Part D Prescription Drug Plan.
Similarly, routine dental, vision, and hearing care often aren’t covered by Medigap plans. So, if those benefits are important to you, you might be better served by exploring alternatives such as Medicare Advantage, which often includes these extras.
Many Medicare Advantage plans require you to see in-network providers and may have restrictions, such as requiring specialist referrals. However, remember that switching back to a Medigap plan from Medicare Advantage can be challenging.
3. Restrictions On When You Can Switch Plans
While you have flexibility with provider choice under Medigap, switching Medigap plans can be challenging once you’re enrolled outside of your Initial Enrollment Period. While it might be tempting to switch plans, this often requires undergoing medical underwriting, where the insurance company assesses your health to determine eligibility and pricing.
They may ask you health-related questions to determine whether they can offer you coverage and at what price. Unfortunately, pre-existing conditions can lead to higher premiums or even coverage denial.
Medigap plans aren’t as flexible as other health insurance in this way, so make sure you choose a plan you’ll be happy with long term. Be sure to consider whether the plan offers coverage that meets your individual needs, as coverage can vary depending on your specific plan.
FAQs About Medigap Plan Disadvantages
Why would I choose Medigap over Medicare Advantage?
Medigap plans, and Medicare Advantage plans are two popular choices. Both plans offer ways to enhance your Original Medicare (Part A and Part B) coverage but work quite differently.
The main advantage of a Medigap policy over a Medicare Advantage plan is flexibility and greater control over your healthcare. With a Medigap plan, you can choose any doctor or hospital nationwide that accepts Medicare.
In contrast, Medicare Advantage plans generally operate through a network of providers. You might find your choices are limited, or you’ll need to pay more out of pocket if you receive care outside the network. Medigap plans cover out-of-pocket costs associated with Original Medicare, no matter where you receive care within the United States.
What Does Medigap Not Pay For?
As we discussed earlier, one of the most noteworthy disadvantages of a Medigap plan is that it doesn’t cover prescription drug costs. You may need to pay a separate premium if you add a Part D plan for prescription drug coverage. Most Medigap plans do not cover long-term care, such as nursing homes or assisted living. Some Medigap policies have limits on what they pay for mental health care.
Most also don’t cover routine dental, vision, hearing, acupuncture, or chiropractic care. If you develop health issues in the future that require additional services, you may want to consider a Medicare Advantage plan that offers more comprehensive coverage. Be sure to review the specifics of any plan you’re considering, as plan benefits and costs can vary.
Conclusion
Medigap plan disadvantages exist, including costly monthly premiums and not having coverage for prescription drug costs. By carefully weighing the pros and cons and considering factors such as your health, budget, and preferences, you’ll be equipped to make the best possible decision for your needs.
Regardless of your final choice, take the time to research the available Medigap plans and carefully compare their coverage and costs to those of a Medicare Advantage plan. Speak with a licensed insurance agent to help determine the most cost-effective approach for your unique situation.