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How the Best Medigap Plans Can Save You Money

Nov 28, 2019 3 min read Ben Gran

If you're about to retire, about to turn 65 or helping a loved one plan to sign up for Medicare, you might be surprised to learn that Medicare — despite all the great things about it — doesn't cover 100% of health care costs. Most people, even those who are generally in good health, will have some out-of-pocket costs, such as deductibles, copays or coinsurance.

Fortunately, you can buy additional insurance called Medigap that cover the "gap" between Medicare and your extra costs. The best Medigap plans can help protect you and your loved ones from significant out-of-pocket expenses.

Here's how the best Medigap plans work.



What are the best Medigap plans? That depends …

Choosing the right Medigap plan takes some careful planning. There are 10 different Medigap plans, and two of them are no longer available for people who are newly eligible for Medicare (as of Jan. 1, 2020).

Most Medigap plans cover the coinsurance costs for Medicare Part A and Part B. They can protect you and your family from major costs related to a long hospitalization or hospice care. These plans can also help you avoid extra out-of-pocket costs on your routine doctor visits and screenings.

Beyond that, if you want additional coverage for things like skilled nursing care, the Medicare Part A deductible or foreign travel coverage for emergency medical care, you need to read the fine print to make sure your Medigap plan will cover them.

Check out this chart that compares Medigap plans Opens in new window.


How much do the best Medigap plans cost?

Medigap plans have different levels of coverage depending on your financial goals. Some have higher premiums but more generous coverage, and some have lower premiums but higher deductibles. Not all Medigap plans cover the same services or have the same benefits.

Also, the price of Medigap plans depends on where you live and a few other factors. Different states have different pricing and features, and different insurance companies offer different plans.

According to AARP Opens in new window, as of 2019 the average premium for Medigap Plan F (one of the most popular plans) was $326 per month. But you can probably get a lower premium if you choose a plan with a higher deductible. The price of your Medigap plan might be more or less than that, depending on which plan you choose and where you live.

For example, if you have to pay a premium of $300 for Medigap coverage, that means you're paying $3,600 per year in additional premium costs compared to Medicare. But if that premium can help you avoid thousands of dollars in additional coinsurance costs, it's worth it.

Medigap can also be a form of financial protection for the future, as you get older and potentially have more serious and costly health problems. Even if Medigap doesn't seem immediately "worth it," the financial protection might be more valuable to you in a few years if you encounter a serious health issue. You might want to lock in a Medigap plan as soon as possible, during your six-month Medigap Open Enrollment Period Opens in new window, because you might not be able to buy a plan later in life.

The best way to find out how much Medigap plans would cost for you, and to find plans in your area, is to use Medicare.gov's Find a Medigap Policy Opens in new window tool.



Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, public policy, financial services, technology, and business.


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