What Is Medigap Insurance? Plans, Cost & When You Need It

One sentence definition: Medigap insurance is a private supplemental policy that covers your portion of Original Medicare benefits, the 20% coinsurance and deductibles that Medicare requires you to pay. Original Medicare doesn't have an out-of-pocket maximum, so one moderate hospital visit can cost a Medicare beneficiary thousands of dollars. Medigap eliminates the surprise medical bills because monthly premiums cover them.

KFF data shows that in 2023, 12.5 million Americans (about 42% of those enrolled in Original Medicare) had Medigap policies. They spend an average of $2,600 a year in premiums for this financial peace of mind. About 3.5 million Medicare beneficiaries who have Original Medicare receive no supplemental coverage and the rest receive other supplemental coverage, primarily from employer retiree plans, Medicaid. That last group is the one that financial advisors are concerned with.

This guide will help you understand how Medicare supplement insurance works, what plans are available, how much they cost in 2026, and the need to shop for Medicare supplement insurance as soon as you join Medicare.

Why Medigap exists: the 20% problem

Original Medicare was created in 1965 with an agenda that included the design of cost-sharing. For 2026, Part A has a $1,684 deductible per benefit period, and will require coinsurance for each day spent in the hospital after day 60. Part B has a $257 deductible per year, followed by 20% coinsurance on all covered services for the remainder of the year, and no max out-of-pocket limit.

The 20% doesn't sound like much until the actual medical event happens. The total billed cost of a 5-day hospital stay following surgery is between $50,000 and $100,000. Often, the patient's 20% balance will be $5,000 to $10,000 from an individual event, even with Medicare's negotiated rate reduction. Original Medicare doesn't have anything to stop the meter. Medigap was created specifically to put a ceiling on that exposure.

It's easiest to see the financial sense for those who have set retirement incomes. The costs of a Medigap premium are more predictable, costing you $150 to $250 per month, than the $5,000 surprise bill. KFF analysis reveals that Medigap beneficiaries in traditional Medicare experience significantly fewer problems with cost-related care than those who do not have supplementary coverage. 

How Medigap works alongside Medicare

Medigap doesn't replace Medicare. It works alongside it as a secondary payer. Here's the actual sequence when you get medical care:

1. You receive care from any provider that accepts Medicare

2. The provider bills Medicare

3. Medicare pays its share (typically 80% of the approved amount for Part B services)

4. Medicare automatically forwards the remaining bill to your Medigap insurer through a system called "crossover billing"

5. Your Medigap plan pays its share, based on the plan letter

6. You pay whatever's left, which depending on your plan may be $0

The crossover system is the underrated practical benefit of Medigap. Most Medigap policyholders rarely see a bill at all because Medicare and the insurer settle directly. This is in contrast to Medicare Advantage, where members navigate a single insurer's network, prior authorization process, and copay structure.

Importantly, you cannot have Medigap and Medicare Advantage at the same time. They're alternative paths to coverage, and federal law prohibits the combination. Medigap requires you to be enrolled in Original Medicare.

Medigap plans available in 2026

Medigap plans are identified by letters: A, B, D, G, K, L, M, and N for new enrollees, plus C and F for those eligible before January 1, 2020. Federal law standardizes coverage by letter. A Plan G from Mutual of Omaha covers exactly the same services as a Plan G from UnitedHealthcare. Premiums and customer service vary. Coverage doesn't.

Three states (Wisconsin, Massachusetts, Minnesota) have their own state-specific standardization systems that differ from the federal lettering, but they follow the same principle.

Plan G has become the default recommendation since Plan F closed to new enrollees in 2020. KFF Medigap data shows Plan G now accounts for the largest share of new Medigap enrollment, followed by Plan N. The two together represent the practical decision space for most new beneficiaries.

For the full landscape including each plan's coverage profile, see our Medigap plans complete guide, which has the side-by-side coverage chart.

What Medigap actually costs

The price of Medigap insurance is more variable than other types of insurance. There are three reasons for premium difference: state, age at enrollment, and pricing method. It is possible that an identical Plan G would cost $130 per month in one state, but $300 per month in another state, all for the same age buyer.

In 2025, a JAMA Health Forum report compared Plan G premiums in every state and uncovered substantial differences related to state consumer protections laws. The price patterns differed among states with community rating, which charge everyone the same premium, versus the 40 states with traditional underwriting.The two states with community rating (where everyone pays the same premium) and the 40 states with traditional underwriting had different price patterns.

Now in practice, it's an AARP/UnitedHealthcare observation that their Medigap plans are generally priced $30 to $70 more per month than other plans that provide the same Plan G coverage. The brand recognition does not come with any additional value, rather it is federally standardized, it is just a premium brand. Independent brokers are likely to refer you to one of the three companies: Mutual of Omaha, Aetna, or Cigna, and these companies offer the same Plan G coverage at significantly lower monthly premiums. When it comes to choosing an insurance company to join, you should always compare at least three insurance companies before you sign up. 

Pricing methods also matter for long-term cost:

• Attained-age rated: Premium increases as you age. Most common. Lower at 65, higher at 80.

• Issue-age rated: Premium fixed at your age when you enrolled. Doesn't increase as you age, only with inflation.

• Community rated: Same premium for everyone regardless of age. Used in just a few states.

Over 20 to 25 years of retirement, an issue-age or community-rated plan can save thousands compared to attained-age, even if the initial premium is slightly higher.

When you actually need Medigap

Do I need medigap is the right question to ask. Not everyone on Medicare benefits equally from a supplement.

You probably need Medigap if:

• You're on Original Medicare and want predictable healthcare costs

• You travel frequently or live in multiple states (Medigap works with any provider accepting Medicare)

• You have ongoing medical conditions likely to generate substantial Part B coinsurance

• You can't tolerate financial uncertainty on a fixed income

• You want to keep your current doctors and avoid network restrictions

You probably don't need Medigap if:

• You're on Medicare Advantage (you can't have both, and Advantage plans have their own out-of-pocket maximum)

• You qualify for Medicaid, which pays Medicare cost-sharing for dual-eligible beneficiaries

• You have employer or union retiree coverage that fills Medicare's gaps adequately

• You're a VA-eligible veteran using VA healthcare for most needs

The 3.5 million Original Medicare beneficiaries without supplemental coverage are typically people who fall through these eligibility cracks. They earn too much for Medicaid but can't afford Medigap premiums, and they don't qualify for VA or employer retiree coverage. This group bears the greatest financial risk in the U.S. Medicare system.

The timing trap most new beneficiaries miss

The biggest mistake one can make when buying a Medigap plan is to not take part in the one-time guaranteed-issue window. You have a 6-month Medigap Open Enrollment Period starting the month you turn 65 years old and enroll in Medicare Part B, and all insurers are required to sell you any plan they offer at the lowest possible rate, no matter your health or medical history. Pre-existing conditions cannot be excluded or be more expensive to own or be charged for.

Once this expires, in 42 states, medical underwriting will be allowed for insurers. They may refuse insurance coverage altogether, or refuse to accept coverage of some sort, or impose much higher rates for individuals who are not in good health. The Johns Hopkins study reveals that no states have consumer protections in place all year round that stop this; only 8 states have such protections, with community rating protections in place in Washington and Vermont and partial protections in Arkansas.

The real world: If a person enrolls in Medicare Advantage at age 65, believing that they can change to Original Medicare with a Medigap insurance plan at a later time, they may end up not being eligible for a Medigap policy if their health deteriorates in the meantime. KFF estimated that 1.4 million Medicare Advantage enrollees saw their plan canceled for 2026, and it was for this reason that they were given a special guaranteed-issue period to obtain a Medigap plan.

When it comes to timing, it's not so much about the plan letter you select as much as it is about the timing. A Medicare broker who is licensed can discuss the trade-offs with you without any cost to you.