Report Shows Value of Medigap for Rural and Low-Income Seniors

Limiting First-Dollar Coverage in Medigap Would Harm Beneficiaries 

Washington, D.C. – Low- and moderate-income Medicare beneficiaries, particularly those living in rural areas, continue to rely on the financial protection Medigap provides, according to a new report from America’s Health Insurance Plans (AHIP).

Medicare supplement (Medigap) insurance is private health insurance designed to supplement Medicare. Nearly 10 million Medicare beneficiaries currently rely on Medigap coverage to help cover significant out-of-pocket costs that are not covered by Medicare, such as deductibles, coinsurance, and copayments.

Medigap coverage allows seniors and Medicare beneficiaries with disabilities to budget for medical costs and avoid the confusion and difficulty of handling complex medical bills. A recent survey found that the vast majority (90 percent) of Medigap policyholders are satisfied with their coverage.

“Medigap provides financial security and peace of mind to millions of the nation’s most vulnerable Medicare beneficiaries,” said AHIP President and CEO Karen Ignagni, noting previous research published in Health Affairs showing that Medigap beneficiaries, on average, are more likely to have one or more chronic health care conditions than the Medicare population as a whole.

The new report, based on data from the Medicare Current Beneficiary Survey (MCBS), is an update to previous research showing the value Medigap provides to low-income and rural Medicare beneficiaries. Key findings from the new report include the following:

  • Thirty-three (33) percent of Medigap policyholders resided in rural areas in 2011; by comparison, 23 percent of all Medicare beneficiaries resided in rural areas.
  • Forty-six (46) percent of all Medigap policyholders and 57 percent of rural Medigap policyholders had annual incomes of $30,000 or less.
  • Ninety-four (94) percent of rural Medigap policyholders and 90 percent of all Medigap policyholders had incomes of $50,000 or less.

To access the full report, please visit

Proposals to Limit First-Dollar Coverage in Medigap Would Harm Beneficiaries

As part of the current debt and deficit discussions, AHIP is urging policymakers to avoid cutting benefits that millions of seniors and people with disabilities rely on. While some proposals would limit first-dollar coverage in Medigap coverage, research has shown that this would cause beneficiaries to avoid care that is medically necessary – resulting in higher costs for enrollees and the country.

white paper commissioned by AHIP concluded that “an across-the-board ban on first-dollar coverage Medigap plans is an overly blunt tool for lowering healthcare expenditures and invites adverse, unintended consequences.”  These concerns have been echoed by other organizations:

  • In a letter to HHS, the National Association of Insurance Commissioners (NAIC) said that “Medigap’s protections are now inappropriately being held responsible for encouraging the overuse of covered services and increasing costs in the Medicare program,” and that “the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.”
  • The Center for Medicare Advocacy said that, “Introducing further cost-sharing in Medigap plans would create a significant financial burden, but that’s not all. When required to pay beyond their means, people skip needed medical care and treatment, leading to poor health outcomes, increased emergency room visits and hospitalizations.”
  • joint letter to the NAIC from a variety of consumer groups said that these proposals “are based on the false assumptions that beneficiaries with supplemental coverage use more Medicare services than necessary and that additional cost sharing will result in federal health care savings.” Moreover, the groups said, “We remain deeply concerned that any attempt to add cost sharing in Medigap plans will cause disproportionate harm to beneficiaries with low and modest incomes, those who are chronically ill and those living in rural communities.”

Importantly, the cost savings often cited by proponents of restricting first-dollar coverage in Medigap are based on proposals that would apply this change to current Medicare beneficiaries.  Imposing cost sharing on current Medigap policyholders would add a significant burden on vulnerable Medicare beneficiaries, many of whom have been paying for these benefits for many years, often have very tight budgets, and rely on Medigap for predictability in their health care costs and protection against high medical bills.

AHIP continues to reach out to Medigap beneficiaries through The Partnership to Protect Medigap, a coalition of seniors and their families who support the program. For more information, visit

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