When people compare Medigap and Medicare Advantage, they often start and stop at the premium. “Medigap is $150/month; Medicare Advantage is $0. So Medicare Advantage saves me $1,800 a year.”
That arithmetic is incomplete. The right comparison accounts for total out-of-pocket costs across different health scenarios — and it looks very different depending on how much care you use.
Scenario A: Healthy Year (Few Medical Services)
In a year where you see your primary care doctor a few times, get standard screenings, and take a few generic prescriptions, Medicare Advantage's lower (or zero) premium is a clear financial advantage. You're paying more with Medigap for coverage you're largely not using.
Example: Medigap Plan G at $160/month = $1,920/year in premiums + $257 Part B deductible = $2,177. A $0-premium MA plan with $20 PCP copays and $5 generic drugs might cost $400–$600 total. Advantage: Medicare Advantage.
Scenario B: Moderate Year (One Significant Health Event)
You have outpatient surgery, or a hospital admission for a few days, or need specialist care for a new diagnosis. Medicare Advantage MOOP kicks in — but so do copays at every step.
Example: A 2-day hospital stay with an MA plan might cost you $400–$1,400 depending on the daily inpatient copay. With Medigap Plan G, the only cost is the Part B deductible ($257 in 2025). The Medigap plan's premium advantage starts to narrow significantly.
Scenario C: Serious or Chronic Illness
Multiple hospitalizations, specialist visits, imaging, chemotherapy, dialysis, or other intensive care. This is where the MOOP becomes critical.
Example: With a Medicare Advantage plan with a $5,000 MOOP, you might pay up to $5,000 out of pocket for covered Part A/B services, plus up to $2,000 for drugs (2025 Part D cap), for a potential annual exposure of $7,000 or more.
With Medigap Plan G, your maximum out of pocket for Part A and B services is essentially zero after the $257 deductible — regardless of how much care you receive. You still have separate drug costs through Part D.
Over multiple serious illness years, the Medigap premium cost is usually far less than the MA cost differential.
The Math Over Many Years
Medicare Advantage makes financial sense for the majority of beneficiaries in any given year, because most beneficiaries are relatively healthy most years. But the tail risk — the years with serious illness — is where Medigap's value shows. Over a 20-year retirement, most people will experience at least one or two serious health events.
The Medigap Timing Problem
One critical constraint: if you start with Medicare Advantage and later want to switch to Medigap, you may face medical underwriting in most states. If your health has declined, you may be denied or charged significantly higher premiums. This is why the decision made at 65 is so consequential — and why it deserves careful thought, not just a premium comparison.
Call us at (530) 395-5309 and we'll walk through a personalized cost comparison based on your health history, medications, and financial situation.