Escaping the Medigap Trap: A Path to Real Choice in Medicare

Each year, millions of Americans become eligible for Medicare and must choose between traditional, government-run Medicare or a privately administered Medicare Advantage plan.¹ That decision can determine not only what care they receive, but when, where, and at what cost—often with lasting consequences for their health and financial security.

Traditional Medicare offers broad national access to providers and has few coverage restrictions but lacks a cap on out-of-pocket costs, exposing enrollees to potentially catastrophic expenses if they become seriously ill.² To protect against that risk, most beneficiaries rely on some form of supplemental coverage.³ For those without Medicaid or retiree benefits, the primary alternative is private insurance known as Medigap.

Medigap helps offset Medicare enrollees’ cost sharing, including deductibles, copays, and coinsurance. However, premiums can reach hundreds of dollars a month, leaving many low- and middle-income beneficiaries without options for comprehensive coverage under traditional Medicare. Confronted with these costs, many turn to a more affordable option: Medicare Advantage.

Medicare Advantage plans offer lower premiums, extra benefits, and capped out-of-pocket costs—eliminating the need for supplemental coverage—but often limit provider networks and impose utilization controls to restrict access to care.⁴ For enrollees who grow dissatisfied with these restrictions, returning to traditional Medicare may not be an option. After an initial Medicare enrollment window of no more than 12 months, most beneficiaries lose their “guaranteed right” to buy a Medigap plan without medical underwriting, which allows insurers to deny coverage or charge higher premiums based on preexisting conditions.⁵ Without access to affordable supplemental coverage, many enrollees are effectively locked into Medicare Advantage—creating a dynamic known as the “Medigap trap.”⁶

The Medigap trap raises several difficult questions: How can policymakers restore meaningful choice between public and private coverage? Should reforms focus on building catastrophic protection directly into traditional Medicare, on making supplemental coverage more affordable, or both? And what solutions would protect beneficiaries without jeopardizing Medicare’s long-term fiscal sustainability? This report addresses these questions, examining how the plan designs, payment structures, and enrollment rules of Medicare and Medicare Advantage combine to create the Medigap trap and outlining reforms to restore genuine coverage choice for Medicare beneficiaries.

Medicare Advantage plans appeal to beneficiaries by offering financial protections and extra benefits that traditional Medicare does not. Supported by generous federal payments that exceed what traditional Medicare would spend on equivalent beneficiaries by upward of 14 percent in 2026, Medicare Advantage plans can offer low or no monthly premiums and cap out-of-pocket costs—eliminating the need for supplemental coverage.⁷ They also aggressively advertise additional benefits such as dental, vision, hearing, and prescription drug coverage.⁸

But these benefits come with trade-offs. Because Medicare Advantage plans receive a fixed, risk-adjusted payment per enrollee, they have strong financial incentives to limit spending on care through narrow or tiered provider networks, prior authorization requirements, and site-of-care limitations. These restrictions are not always apparent to consumers when choosing coverage.⁹ Plans often engage in tactics that include publishing inaccurate provider directories to misrepresent network size, with a recent KFF investigation finding that 55 percent of mental health professionals listed as in-network by Medicare Advantage plans were not providing care to any of their enrollees.¹⁰ These barriers help explain why beneficiaries grow increasingly dissatisfied with Medicare Advantage as their health needs rise—primarily due to concerns about access to and quality of care, rather than cost.¹¹

Traditional Medicare, in contrast, has no financial incentive to restrict care. Because it reimburses providers for each service rendered, beneficiaries can see nearly any doctor or hospital in the country, obtain the vast majority of services without prior authorization, and receive care without site-of-service restrictions.¹² That flexibility, however, comes at a cost. Enrollees must pay a share of every service, including deductibles for inpatient care and 20 percent coinsurance for most outpatient services.¹³ With no cap on annual out-of-pocket costs, this can amount to thousands of dollars in uncovered expenses each year for individuals with complex or chronic illnesses.¹⁴

To protect against unlimited costs, nearly 9 in 10 traditional Medicare beneficiaries have supplemental coverage, which helps offset deductibles, copays, and coinsurance.¹⁵ In 2022, 31 percent had employer-sponsored insurance, 16 percent were covered by Medicaid, and 42 percent purchased private Medigap policies. But supplemental coverage is not equally available: Employers are increasingly less likely to offer retiree benefits, Medicaid covers only very-low-income adults, and Medigap—the only option for beneficiaries without employer or government assistance—can be prohibitively expensive.¹⁶ In 2023, monthly premiums averaged $217 and reached as high as $466.¹⁷ That same year, half of Medicare beneficiaries earned less than $36,000 and one-quarter earned less than $21,000, putting Medigap out of reach for many.¹⁸

Federal enrollment rules further restrict access to Medigap. Individuals age 65 and older who initially enroll in Medicare Part B have a six-month guaranteed-issue window during which insurers must sell them a Medigap plan at standard rates, regardless of health status.¹⁹ Those who initially choose Medicare Advantage—or start in traditional Medicare with Medigap and later switch to Medicare Advantage—have 12 months to reverse course and return to traditional Medicare with guaranteed-issue rights.²⁰

However, after those windows—and barring specific extenuating circumstances—those protections disappear.²¹ In 46 states, territories, and Washington, D.C., Medigap insurers can deny coverage or charge significantly higher premiums based on preexisting conditions.²² Only four states—Connecticut, Massachusetts, Maine, and New York—require insurers to offer at least one Medigap policy on a guaranteed-issue basis during an annual enrollment period. Without affordable supplemental coverage, many Medicare Advantage enrollees are left with no realistic path back to traditional Medicare, where they would face exposure to unlimited out-of-pocket costs. This effectively traps beneficiaries in Medicare Advantage plans, even when those plans no longer meet their health needs.

Evidence suggests that the freedom to switch back to traditional Medicare depends heavily on whether beneficiaries can obtain supplemental coverage. For example, a 2025 study examining coverage choices by Medicare beneficiaries found that seriously ill Medicare Advantage enrollees in states with guaranteed-issue Medigap rights and community rating were nearly twice as likely to switch to traditional Medicare than were those in states without such protections.²³ Similarly, a 2023 study found that Medicare Advantage beneficiaries with full Medicaid coverage were more than two-and-a-half times more likely to switch back to traditional Medicare than beneficiaries who did not qualify for Medicaid.²⁴ By contrast, the millions of Medicare Advantage enrollees who live in states without guaranteed-issue Medigap rights and who lack Medicaid or other supplemental insurance are left with Medigap as the only path to financial protection if they want to switch back to traditional Medicare.²⁵

The Medigap trap poses the greatest challenges for people under age 65 with disabilities.²⁸ This group—more than 7 million enrollees in 2023, or roughly 12 percent of the Medicare population––is 26 percent more likely than older beneficiaries to report difficulty paying medical bills.²⁹ Yet federal law does not require insurers to offer Medigap coverage to these beneficiaries, and state protections vary widely.³⁰ In many states, disabled people under age 65 are offered only limited Medigap options or are denied coverage entirely.* These barriers likely help explain why, in 2022, more than half of this population were enrolled in Medicare Advantage, even though the limited networks and prior authorization requirements can be particularly burdensome for patients who require frequent, specialized care.³¹

To address the Medigap trap effectively, policymakers should target its three root causes: structural asymmetry between traditional Medicare and Medicare Advantage, the information failures that lead to uninformed enrollment decisions, and the lack of viable exit options once beneficiaries become dissatisfied with Medicare Advantage. The most durable solutions would combine reforms across all three areas.

Creating parity between traditional Medicare and Medicare Advantage

Cap out-of-pocket costs in traditional Medicare. The absence of an out-of-pocket cap in traditional Medicare Parts A and B exposes beneficiaries to potentially catastrophic expenses and drives demand for supplemental coverage in the first place. Establishing an out-of-pocket cap—coordinated with the existing $2,100 limit in Part D—would provide universal financial protection regardless of supplemental coverage status.³² Such a reform could substantially reduce reliance on Medigap, lower Medigap premiums for those who continue to purchase supplemental coverage, and ensure that no beneficiary faces unlimited financial risk due to serious illness.³³

The design of an out-of-pocket cap would involve trade-offs. A lower cap would provide greater financial protection and less reliance on Medigap, while a higher cap would preserve the supplemental insurance market but still protect beneficiaries from the most extreme costs. An income-based cap could offer greater financial protection for lower-income beneficiaries at a lower federal cost than a uniform cap but would require ongoing income verification, potentially increasing administrative complexity.

Regardless of how it is structured, an out-of-pocket cap would align traditional Medicare with the financial protections already offered across all other insurance markets.³⁴ It would also transform competition between plans: With catastrophic protection available in traditional Medicare, Medicare Advantage plans could no longer rely on the out-of-pocket cap as a differentiator; they would have to compete on care coordination, quality, and beneficiary experience instead.

Reduce Medicare Advantage overpayments. The Medigap trap also arises from a payment imbalance that favors Medicare Advantage over traditional Medicare. The Medicare Payment Advisory Commission (MedPAC) estimates that Medicare Advantage plans receive federal payments averaging 114 percent of what Medicare would spend on comparable beneficiaries in traditional Medicare—an estimated $76 billion in excess payments in 2026.³⁵ These overpayments allow Medicare Advantage plans to offer $0 premiums, extra benefits, and other features that traditional Medicare cannot match—not because Medicare Advantage is more efficient but because it is more generously funded.³⁶ Reducing Medicare Advantage overpayments and reinvesting them in traditional Medicare could finance additional benefits, lower premiums, or reduce cost-sharing—leveling a playing field that currently tilts toward Medicare Advantage.

Supporting informed decision-making

The Medicare program requires older adults to make high-stakes, often irreversible coverage decisions while they are still learning a new program, new rules, and new deadlines.³⁷ Yet the system delivers key information late, presents plan restrictions in formats that resist comparison, and offers inadequate decision support. Addressing this problem requires making long-term trade-offs explicit, standardizing plan disclosures, and providing navigation support before enrollment deadlines foreclose options.

Ensure beneficiaries receive timely, actionable information. Because automatic Medicare enrollment is tied to claiming Social Security, roughly 40 percent of Medicare-eligible 65-year-olds receive no proactive enrollment notifications.³⁸ To give beneficiaries time to weigh their options, Social Security statements should flag Medigap guaranteed-issue windows as time-limited protections that, once closed, may not reopen.

Require standardized disclosure of access barriers. Many beneficiaries remain unaware of Medicare Advantage restrictions until after enrollment, when they encounter ghost networks, prior authorization denials, and care delays that surface only after guaranteed-issue windows have closed.³⁹ The Centers for Medicare and Medicaid Services should require Medicare Advantage plans to publish, in a standardized format, which services require prior authorization, along with approval, denial, and appeal rates, and display this information in Medicare Plan Finder. Plans should also be required to show how their provider networks in specific regions compare with the full set of providers and hospitals participating in traditional Medicare, enabling beneficiaries to understand how network restrictions may limit access to care before they make enrollment decisions.

Provide decision support tools. The average Medicare beneficiary can choose from 39 Medicare Advantage plans in 2026, each with distinct benefit designs, cost-sharing structures, and provider network rules.⁴⁰ To reduce choice overload and help beneficiaries understand the long-term implications of their coverage decisions, policymakers should expand access to free counseling through increased funding for State Health Insurance Assistance Programs.⁴¹ Medicare.gov should also adopt a new “coverage pathway” comparison model that presents traditional Medicare as integrated coverage packages combining traditional Medicare, Medigap, and Medicare Part D into a single profile. This would allow beneficiaries to compare complete coverage packages directly with Medicare Advantage plans rather than evaluating fragmented components across multiple pages. The platform should also include proactive decision guidance, such as a countdown to the Medigap guaranteed-issue deadline and interactive modules explaining Medigap enrollment timelines, underwriting rules, and how changes in health status can affect future access to supplemental coverage.

Strengthening access to affordable supplemental coverage

Even with better information, beneficiaries who choose Medicare Advantage and later become dissatisfied need viable exit options. Several reforms could expand access to affordable Medigap coverage for those seeking to return to traditional Medicare.

Pair guaranteed-issue Medigap with premium stabilization. One frequently proposed approach to addressing the Medigap trap is expanding guaranteed-issue protections with community-rated premiums.⁴² These reforms allow beneficiaries to move between Medicare Advantage and traditional Medicare—either during an annual enrollment period or continuously throughout the year—without facing medical underwriting or sharp premium increases due to changes in health status.

However, evidence from states with guaranteed-issue protections suggests that without additional safeguards, these policies can raise premiums and reduce overall Medigap enrollment. These effects stem from adverse selection into Medigap: Healthier beneficiaries stay in Medicare Advantage to take advantage of low premiums and extra benefits, then switch to traditional Medicare with Medigap only after developing serious health conditions.⁴³ Data from Connecticut, New York, and Maine—three of the four states with continuous or annual guaranteed-issue Medigap requirements—confirm this pattern. Medigap enrollees in these states are older, more likely to have chronic conditions, and have higher risk scores than enrollees in non-guaranteed issue states.⁴⁴ This dynamic leaves Medigap plans with a disproportionately costly population, which likely explains why Medigap premiums in guaranteed-issue states are approximately 10 percent higher, and enrollment roughly 30 percent lower, than in states without such protections.

These findings underscore the importance of pairing guaranteed-issue protections with policies that stabilize premiums and the Medigap market. A reinsurance program could reimburse Medigap insurers for a portion of claims costs for very-high-cost enrollees, keeping premiums low for all policyholders. Similar mechanisms have stabilized the ACA marketplaces and Medicare Part D, demonstrating that guaranteed-issue markets can function with appropriate risk-spreading infrastructure.⁴⁵ Such a program could be financed through an assessment on Medicare Advantage plans with disproportionately high rates of disenrollment to traditional Medicare—recouping costs attributable to plans that fail to adequately serve sicker beneficiaries who ultimately disenroll.

Policymakers could also consider continuous-coverage incentives or rules that discourage strategic timing of Medigap enrollment. Beneficiaries who delay enrollment beyond their initial eligibility period could face modest premium surcharges or limited waiting periods. Such policies could encourage earlier participation without reintroducing full medical underwriting, mirroring the late enrollment penalties already used in Medicare Parts B and D.⁴⁶

Create special enrollment periods tied to care access problems. Current rules provide limited opportunities to switch coverage outside annual enrollment periods.⁴⁷ Creating a special enrollment period for Medicare Advantage enrollees who experience documented care access problems—such as repeated prior authorization denials, a primary care provider leaving the network, or the inability to obtain timely specialty care—would provide an escape valve for beneficiaries trapped in plans that fail to deliver promised access. This approach targets relief to those experiencing the harms the trap creates, rather than opening guaranteed-issue access to all beneficiaries regardless of circumstances.

Require Medicare Advantage plans to support beneficiary transitions. Medicare Advantage plans could be required to provide “off-ramp” assistance for beneficiaries seeking to leave, including information about Medigap options, counseling on the financial implications of switching coverage, and continued coverage during a transition period while new coverage is arranged. This would shift some administrative and financial responsibility onto the plans whose restrictions drive beneficiary dissatisfaction in the first place.

The Medigap trap is a predictable—and reversible—result of policy choices: Medicare’s lack of catastrophic protection, Medicare Advantage’s payment advantages, and restrictive enrollment rules that combine to funnel beneficiaries into private plans and lock them there. The reforms outlined in this report would both prevent beneficiaries from falling into the Medigap trap and offer a way out for those already in it. While some of these reforms would increase federal spending, policymakers have several financing options, such as addressing Medicare Advantage overpayments or levying a reinsurance assessment on Medicare Advantage plans with high switch rates.

With Medicare Advantage enrollment now exceeding 50 percent of Medicare beneficiaries and projected to reach nearly two-thirds by 2034, the window for preserving meaningful choice in Medicare is narrowing.⁴⁸ Every year that passes, more beneficiaries age out of their guaranteed-issue windows, more discover that Medicare Advantage’s restrictions do not match their needs, and more find themselves locked into insufficient coverage they cannot leave. Restoring real choice requires reform now, before the Medigap trap becomes the default experience of American health care in retirement.

* Authors’ note: The disability community is rapidly evolving to use identity-first language in place of person-first language. This is because it views disability as being a core component of identity, much like race and gender. Some members of the community, such as people with intellectual and developmental disabilities, prefer person-first language. In this report, the terms are used interchangeably.

Special thanks to Andrea Ducas, Judy Feder, Angela Liu, Kata Kertesz, and Cori Uccello for their contributions, feedback, and guidance, and to Kierra Jones for fact-checking.