New Report Shows Medigap Insurance Increasing As Advantage Plans Decrease

A new study shows the cost of Medicare Advantage premiums decreasing, while Medicare supplements increase, leaving many wondering if they really need supplemental insurance with Medicare.

A new analysis by MedicareWire researchers shows the average cost of supplemental Medicare insurance (aka, Medigap plans) is increasing faster than the cost of living while Medicare Advantage plan rates are decreasing. The researchers found that many seniors are facing 2021 policy increases as high as 15 percent, leading many to wonder if they really need supplemental insurance with Medicare:

More information can be found at

For the 2021 plan year, Medicare Advantage plan premiums decreased 11 percent to $21.00 per month, from an average of $23.63 in 2020. Over the past three years, the average monthly Medicare Advantage premium has fallen more than 34.2 percent. 2021 marks the lowest average monthly premium for Medicare Advantage since 2007.

With Medigap plan rates going up, many beneficiaries are comparing their coverage with Advantage plans because the private health insurance option appears to be more affordable. “This is where so many people get into financial hot water,” says David Bynon, founder at MedicareWire. “What most Medicare beneficiaries don’t take into account is that many healthcare costs, particularly hospitalization, can be more costly with a Medicare Advantage plan.”

In an effort to assist people with Medicare to find supplemental insurance they can afford, MedicareWire offers a rate analysis and coverage service. The service helps seniors and people with disabilities find a plan and insurance carrier with the lowest-cost Medigap plan available in their area. More information can be found at the URL above.

A recent Kaiser Family Foundation report confirms Bynon’s assertion that Medicare Advantage plans are not a financially viable option for everyone. Kaiser discovered that nearly half of all Medicare Advantage enrollees would experience higher healthcare costs than people with Original Medicare for a 5-day hospital stay.

Medigap plans, which help pay some of the coverage gaps (e.g., deductibles, copays, and coinsurance) in Medicare, are universally considered the premium supplemental option for seniors. However, many retirees find supplemental coverage options difficult to understand and wrongly assume they are more costly than the Medicare Advantage option. Adding to the confusion is a lack of price transparency. Nearly all Medicare supplement insurance carriers do not disclose monthly premiums and rate increases without first capturing a prospect’s personal information.

The researchers at MedicareWire suggest that while most Medicare Advantage plans may seem to have a lower cost, especially those priced with a zero-dollar premium, many private plans have an out-of-pocket limit as high as $7,550 per year. The researchers also found that the cost of hospitalization can be excessively high, even higher than Original Medicare itself.

The uncertainty over the actual total cost of Medicare and supplemental insurance vs. a Medicare Advantage plan is responsible for many enrollees making unsound coverage choices. Many health insurance experts believe a general lack of understanding of shared costs with Medicare Advantage plans is the root cause.

With traditional Medicare and a Medigap plan, most of a beneficiary’s Medicare-approved costs are covered in advance through their monthly premiums. Medicare Advantage works the other way around. With an Advantage plan, beneficiaries pay most of their costs when they use health care services. This is where people get into trouble.

The MedicareWire researchers found that more than 50 percent of the 2021 Medicare Advantage plans will charge their members $1,500 or more for a 5-day hospital stay, while traditional Medicare, without additional coverage, costs just $1,452 (the Part A deductible). This cost is just for inpatient hospitalization services and does not include the coinsurance or copayment costs for the doctors, lab services, diagnostics, medications, and other health services. The report authors explain that even though Medicare Advantage plan premiums are decreasing, the total cost to be in a plan is rising.

“Most people with Medicare benefits can strike a good balance between cost and coverage with a Medicare Supplement Plan N policy,” says Bynon. “This supplement leaves its policy-holders with a small copay when they go to their doctor or need care at the emergency room.” People with a Plan N policy also pay excess charges (additional fees some doctors charge) and the annual Medicare Part B deductible.

In most locations, Plan N policies start at less than $100 per month but can be more in high-cost-of-living areas. Although more than the average monthly cost of a Medicare Advantage plan, many people feel it’s justified. With a slightly higher cost upfront, Plan N helps people budget their health care costs and avoid unexpected costs in the event of serious illness or accident.

Most seniors and people with disabilities are on a fixed budget, making a $100 per month premium for a Plan N seem excessive compared to most Medicare Advantage plans. This is where the MedicareWire researchers say many people get into trouble when choosing their Medicare options. By making a steady, predictable payment every month, people in Original Medicare, supplemented with a Medigap plan, can avoid the high healthcare costs that come with hospitalization, skilled nursing care, and rehabilitation.

Release ID: 88991769