Key Takeaways

• Medigap, or Medicare Supplement Insurance, is designed to reduce your out-of-pocket costs—but in 2025, some of those costs are growing faster than most enrollees realize.

• If you’re a Postal Service Health Benefits (PSHB) enrollee, it’s essential to understand how Medicare, Medigap, and PSHB interact—especially with changes in deductibles, coinsurance, and inflation trends.

Understanding What Medigap Covers—and What It Doesn’t

Medigap policies are designed to help pay for the “gaps” in Original Medicare. That typically includes costs like:

• Part A coinsurance and hospital costs after Medicare benefits are used up

• Part B coinsurance or copayment

• Blood (first 3 pints)

• Part A hospice care coinsurance or copayment

• Skilled nursing facility care coinsurance

• Part A deductible

However, Medigap doesn’t cover everything. It does not pay for:

• Prescription drugs (unless paired with a Part D plan)

• Vision, dental, or hearing care

• Long-term custodial care

• Private-duty nursing

You may assume that a Medigap plan will shield you from rising costs—but in 2025, that protection is eroding for several key reasons.

1. Rising Part B Deductibles and Premiums Shift More Burden to You

In 2025, the standard Medicare Part B premium is $185 per month. The annual deductible is $257. While some older Medigap plans (like Plan C and Plan F) cover the Part B deductible, these plans are no longer available to new enrollees as of 2020.

So if you turned 65 after January 1, 2020, you can’t buy a Medigap plan that pays your Part B deductible. That means you must cover it yourself—and that deductible continues to rise nearly every year. As the deductible increases, your personal share of expenses does too.

2. Inflation and Healthcare Costs Are Outpacing Medigap Rate Protections

Medigap plans are standardized, but they are issued by private insurers and can adjust premiums based on factors like age, inflation, and medical cost trends.

• In 2025, healthcare inflation is projected to rise by about 6%—but Medigap premiums are growing even faster for some age bands.

• Community-rated plans spread the cost across all policyholders but can still rise yearly.

• Issue-age-rated or attained-age-rated plans become more expensive as you age.

If your plan increases your monthly cost each year—and your coinsurance and deductibles also rise—you may find that the “gap coverage” feels less like a safety net and more like a shifting target.

3. PSHB Integration May Reduce the Value of Medigap

If you’re a retired Postal Service worker enrolled in the Postal Service Health Benefits (PSHB) Program, your coordination of benefits matters.

• In 2025, PSHB plans offer strong coordination with Medicare Part B, often reducing or eliminating many out-of-pocket costs.

• Many PSHB plans waive deductibles and copayments for Medicare-enrolled retirees.

That means Medigap may be duplicating coverage you already have. And yet, some retirees still purchase Medigap out of habit or misunderstanding, without realizing PSHB alone may already fill most of those gaps when Medicare is primary.

4. Medicare Part A Costs Are Still Growing—and Medigap Covers Only So Much

Even though most people don’t pay a premium for Part A, the hospital deductible is increasing in 2025. It now stands at $1,676 per benefit period. That’s a significant out-of-pocket cost if you’re hospitalized more than once in a year.

Most Medigap plans cover this deductible. However, some enrollees opt for lower-cost Medigap plans that exclude this coverage—or impose limits based on benefit period frequency.

In addition, skilled nursing facility coinsurance in 2025 is $209.50 per day for days 21–100. Medigap plans may cover this, but again, not all plans cover it equally.

5. Your Enrollment Date Still Dictates Your Options

The Medigap plan you can buy depends heavily on when you enrolled in Medicare. If you missed your 6-month Medigap Open Enrollment Period, insurers in most states can:

• Deny you coverage

• Charge higher premiums

• Impose pre-existing condition waiting periods (unless you’re in a guaranteed issue situation)

For PSHB annuitants retiring in 2025 or later, it’s especially important to time your Medigap decisions carefully around Medicare Part B enrollment and your eligibility status. Once you miss the window, your options narrow significantly.

6. The $2,000 Drug Cost Cap Doesn’t Help Medigap Users

In 2025, Medicare Part D introduces a $2,000 annual cap on out-of-pocket drug costs. However, this doesn’t affect Medigap plans because:

• Medigap policies do not cover prescription drugs.

• If you have a separate Part D plan, that’s where the $2,000 cap applies.

For PSHB retirees enrolled in a Medicare-integrated PSHB plan, prescription drug benefits are often bundled as a Medicare Part D Employer Group Waiver Plan (EGWP). This offers better coordination than buying a standalone Part D plan with Medigap—but only if you’re enrolled in both Medicare and PSHB.

7. Medigap Doesn’t Cover Everything You Might Expect in Retirement

As healthcare needs grow in retirement, many people find that Medigap doesn’t stretch as far as they thought. Medigap still does not cover:

• Routine dental, hearing, or vision services

• Long-term care at home or in nursing facilities

• Personal care or custodial services

• Foreign emergency care (unless your plan includes it, and even then, it’s limited)

You may need to purchase separate coverage for these services, rely on PSHB supplemental benefits (if available), or pay out of pocket.

8. Medigap Plan Changes Are Possible in the Future

Though Medigap plans are currently standardized across 10 plan types (A, B, D, G, K, L, M, N), future legislative or CMS rule changes may reduce or reshape the plan offerings.

There is growing pressure to:

• Reduce duplicative or redundant coverage options

• Align Medigap cost-sharing more closely with Medicare Advantage standards

• Modify premium-setting models to reduce age-based inequity

If you rely on a Medigap plan today, keep an eye on regulatory changes that could affect your access or benefits in coming years.

Why You Need to Rethink Your Strategy in 2025

With the introduction of the PSHB Program, better integration with Medicare, and the rising cost of supplemental insurance, many postal retirees should reassess their assumptions.

If you’re retired or planning to retire this year, now is the time to:

• Reevaluate your actual out-of-pocket expenses

• Compare your PSHB plan’s Medicare coordination with what a Medigap policy offers

• Check whether your current Medigap plan is truly delivering value

• Review whether your enrollment timing limits your choices going forward

Many retirees are discovering they are overpaying for duplicate benefits—especially those enrolled in both PSHB and Medigap without understanding how well PSHB already covers Medicare gaps.

Don’t Let Familiar Terms Lead to Costly Mistakes

Medigap plans are often promoted as reliable solutions to Medicare’s complexity—but in 2025, the landscape has shifted.

• PSHB plans offer new opportunities for reduced cost-sharing when Medicare is primary.

• Medigap premiums continue to rise with age and inflation.

• Some benefits people assume are covered—like dental, vision, or prescriptions—still require separate coverage.

The bottom line: The safety net Medigap once offered isn’t as automatic or complete as it used to be.

Review Your Options Before You Lock in More Cost

Whether you’re nearing retirement or are already enrolled, it pays to pause and review whether Medigap still fits your needs in the context of PSHB and Medicare.

Speak with a licensed agent listed on this website to get help understanding how your PSHB plan coordinates with Medicare, and whether Medigap still adds value in your case. Your financial future may depend on knowing what’s covered—and what’s quietly getting more expensive each year.