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Medigap Coverage

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Because of its high cost relative to its benefit, less than one in ten Medicare beneficiaries purchases a Medigap plan with prescription drugs. Three of the ten standardized Medicare supplemental plans, (plans H, I, and J) include prescription drug coverage. All three plan types have a $250 deductible for the drug benefit and require 50 percent coinsurance. The H and I plans have a cap on drug benefits of $1,250 while the J plan caps the benefit at $3,000. The typical premium for a plan with the lower cap costs about $90 per month or $1,080 per year.

Beneficiaries with medigap Still Pay High Out-Of-Pocket Drug Costs

Medigap is expensive, inefficient, and often uses higher prices to discriminate against the oldest beneficiaries.

Expensive. Medigap policies that cover prescription drugs are expensive relative to comparable policies that do not cover drugs. Additionally, premiums vary tremendously from place to place, and from beneficiary to beneficiary. Finally, a beneficiary cannot only pay for prescription drugs -- they must also buy the other benefits in the package.

Medigap Preimums For Drugs Are High and Increase With Age, 1999: Bar Graph

Inefficient. Because it is sold to individuals, Medigap does not offer beneficiaries the kind of premiums that result from group purchasing. This also adds to the administrative costs per policy, which are typically two to three times more than that of group coverage.

Costs increase with age as well as health inflation. This "attained age" pricing practice causes excessive premiums for those who need it most -- the very old. It also disproportionately affects women since they comprise nearly three-fourths of people over age 85.

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Coverage for Medicare Beneficiaries

Retiree Health Coverage

Medigap Coverage

Medicare Managed Care


Beneficiaries Lacking Coverage