When you choose a Medigap plan at age 65, you are making a decision that could impact the rest of your life. Often, people choose the plan with the lowest initial cost, but certain plan types can become significantly more expensive over time.
Two of our clients learned this lesson the hard way, and their mistake became more apparent with each passing year. Fortunately, their daughter sought guidance in lowering their monthly costs without sacrificing coverage.
This case study will cover their initial situation, the adjustments we helped them make, and how you can avoid a similar situation during your own retirement.
Rationale: Why Study and Share This Situation?
Healthcare costs are a significant source of stress and financial risk in retirement. Original Medicare – Parts A & B – reduce these costs by about 64%, but your share of the expenses can still be significant.
Most people mitigate their exposure to healthcare costs with a Medigap or Medicare Advantage plan, which provides additional coverage. You have a one-time chance to enroll in a Medigap plan without medical underwriting when you sign up for Medicare during your initial enrollment period, and you can enroll in Medicare Advantage during any allowed enrollment period without underwriting.
Underwriting involves the insurance company reviewing your medical history and current health issues before determining your risk-adjusted premium. This review can result in significantly higher premiums based on your health, so it is important to choose the right plan the first time.
To choose the right plan for your situation, you need a comprehensive understanding of the coverage you are buying as well as the method by which premiums are determined. This includes choosing between issue-age, attained-age, and community rated plans, when choosing a Medigap plan for your Medicare supplement.
About the Author:
I’m Pat Burris, CFP®, the Social Security and Medicare Specialist at Meld Financial. I have helped clients achieve their dream retirement for over 40 years, and I was fortunate to work with the clients in this case study to reduce their monthly healthcare premiums.
By sharing their story, I hope to help you:
- understand the types of Medigap plans and their impact on your monthly expenses.
- choose the type of plan that matches your situation now and in the future.
- help you avoid changing plans later in life when medical underwriting could become a challenge.
The Clients: A Couple with Attained-Age Medigap Plans
I was contacted by the daughter of the two clients in this case study, who I will call John and Jane Doe, for assistance managing her parents’ Medicare supplement costs. The daughter explained that she had begun managing her parents’ finances as John’s dementia became apparent.
Both John and Jane were enrolled in Medicare Supplement Plan G, a type of Medigap policy that provides supplemental coverage for hospital stays, doctor appointments, and other medical costs. The clients had chosen this plan when they enrolled in Medicare at retirement, and they had not made any changes to their coverage since that time.
The Problem: Premiums Increased Each Year
John and Jane were happy with the coverage their Medigap plan provided, but their monthly premiums were rising significantly each year. Their daughter was surprised to receive a notification that the premiums would increase between $75 and $100 per month the following year.
Jane was age 83 and the annual increase would push her monthly cost to $333.28, while John was age 85 and his premium would rise to $425.47 per month. These high monthly costs did not fit into their budget.
Both Jane and John had attained-age plans, which base premiums on the current age of the insured. I informed their daughter that premiums would continue to rise each year as her parents aged.
The Solution: Switching From Attained-Age to Issue-Age Plans
At their daughter’s request, I explored the available Plan G options for John and Jane. Typically, they would need to undergo medical underwriting to switch plans, but I was able to find a replacement plan that did not require underwriting.
This option was also Plan G, so the coverage it provided was virtually identical to their current plan. However, premiums were determined using the “issue-age” method, meaning monthly costs were determined based on their age at the time they enrolled in the plan rather than being recalculated based on their age each year.
Premiums for the new plan were just $233 per month each, and the Does’ daughter chose to enroll her parents in the plan I’d found. I informed her that issue-age plan premiums can still increase each year based on inflation or rising medical costs for the insurer, but her parents’ age would not influence the cost.
The Outcome: Predictable Premiums with No Loss of Coverage
The Does and their daughter were extremely pleased with the change. Their coverage remained stable, but their total premiums fell from $758 to $466 – saving them nearly $300 per month.
Lower monthly expenses gave the Does some “breathing room” in their budget each month. Their daughter was also able to plan for her parents’ future with far more confidence since she could reliably predict their monthly healthcare expenses.
See the graphic below for a review of the Doe’s situation.
Does Your Medigap Cost Too Much? Review Your Coverage Today.
At Meld Financial, we understand that predictable expenses are vital to retirement on a fixed income. Our experienced advisors can help you review your coverage and determine if you have the right Medigap plan for your situation.
Keep in mind that you can only make changes to your Medicare supplement insurance during open enrollment each year. This period started on October 15th and ends on December 7th in 2025, so if you would like to review your coverage for the upcoming year, be sure to contact a member of our team today.
This case study is for illustrative and educational purposes only. Names and certain details have been changed to protect client privacy. This example does not guarantee similar results, nor should it be considered a recommendation, prediction, or individualized advice. Each client’s situation is unique and outcomes may vary.
