A new report by the General Accounting Office (GAO) finds that Medigap policies are expensive, offer only modest prescription drug coverage, and leave policyholders with high out-of-pocket costs.
Purchasers of Medigap policies can choose from among 10 standardized plans. Nearly two-thirds of those with a standardized Medigap policy purchased one of two mid-level policies that cover Medicare's cost-sharing requirements and selected other benefits but do not offer prescription drug coverage. Only 8 percent of policyholders bought policies offering drug coverage. Reasons for the low usage include the price and availability of the policies and their limited prescription benefits. In Delaware, for example, no insurer offers a Medigap plan with prescription drug coverage and in Rhode Island only one insurer offers such a plan.
The average annual premium for a Medigap policy was $1,300 in 1999. Plans with prescription drug coverage averaged about $1,600, compared to $1,150 for plans without the coverage. Despite these premiums, Medigap purchasers continue to have high out-of-pocket costs for health care services, averaging about $1,400 in 1998.
The GAO also found that it pays to shop around for a policy. Premiums vary widely not only from state to state, but within states as well. For example, researchers found that in Texas a 65-year-old consumer could pay anywhere from $300 to $1,683 for plan A, depending on the insurer. In Ohio, plan F could range from $996 to $1,944.
The GAO report, titled Medigap Insurance: Plans Are Widely Available but Have Limited Benefits and May Have High Costs, is available online at: http://www.gao.gov/new.items/d01941.pdf
For more on Medigap coverage, click here.