When you become eligible for Medicare at age 65, you face a fundamental choice: stay with Original Medicare and add supplemental coverage (Medigap), or switch to a Medicare Advantage plan. Each path has distinct cost structures, coverage rules, and trade-offs.
Understanding the Two Paths
Path 1: Original Medicare + Medigap
Original Medicare includes:
- Part A (hospital insurance): Usually premium-free if you paid Medicare taxes for 10+ years
- Part B (medical insurance): $174.70/month standard premium in 2024
What Original Medicare Doesn’t Cover:
- Part A deductible: $1,632 per benefit period (2024)
- Part B deductible: $240/year
- Part B coinsurance: 20% of approved amounts with no cap
- Prescription drugs: Requires separate Part D plan
Medigap (Medicare Supplement Insurance) fills these gaps. Private insurers sell standardized plans labeled A through N. Medigap policies:
- Pay some or all of Original Medicare’s cost-sharing
- Allow you to see any provider who accepts Medicare nationwide
- Require monthly premiums in addition to Part B premium
- Do not include prescription drug coverage
Path 2: Medicare Advantage (Part C)
Medicare Advantage plans are offered by private insurers and replace Original Medicare. These plans:
- Must cover everything Original Medicare covers
- Often include Part D drug coverage
- Usually include extra benefits (dental, vision, hearing, fitness)
- Use provider networks (HMO, PPO, or hybrid)
- Have annual out-of-pocket maximums
- May have lower premiums but charge copays and coinsurance
Medigap Plan Options
Ten standardized Medigap plans exist (A, B, C, D, F, G, K, L, M, N). Plan G has become the most popular since Plan F became unavailable to new Medicare enrollees after January 1, 2020.
Plan G Coverage:
- Part A coinsurance and hospital costs (365 additional days after Medicare benefits exhausted)
- Part B coinsurance or copayment (generally 20% of approved amount)
- Blood (first 3 pints)
- Part A hospice care coinsurance or copayment
- Skilled nursing facility coinsurance
- Part A deductible ($1,632 in 2024)
- Part B excess charges (amounts above Medicare-approved charges)
- 80% of foreign travel emergency care
Plan G Does NOT Cover:
- Part B deductible ($240 in 2024)
- Prescription drugs
- Dental, vision, or hearing services
- Long-term care
Plan N is a lower-cost alternative that requires copays ($20 for some office visits, $50 for ER visits not resulting in admission) and doesn’t cover Part B excess charges.
Premium Comparison
Medigap Premiums
Medigap premiums vary significantly by:
- Geographic location
- Age at purchase
- Tobacco use
- Gender (in some states)
- Rating method (attained-age, issue-age, or community-rated)
Typical Monthly Medigap Plan G Premiums (non-smoker):
| Age | Low-Cost Area | Average Area | High-Cost Area |
|---|---|---|---|
| 65 | $120-150 | $150-200 | $200-300 |
| 70 | $150-180 | $180-240 | $250-350 |
| 75 | $180-220 | $220-290 | $300-420 |
Attained-age policies (most common) increase premiums as you age. Issue-age policies lock in a rate based on your age at purchase. Community-rated policies charge the same rate regardless of age.
Medicare Advantage Premiums
Many Medicare Advantage plans charge $0 monthly premium beyond the Part B premium. Others charge $20-150/month for enhanced benefits.
Typical Medicare Advantage Costs:
| Plan Type | Monthly Premium | In-Network PCP Copay | Specialist Copay | Annual Out-of-Pocket Max |
|---|---|---|---|---|
| HMO Basic | $0 | $0-10 | $30-50 | $4,000-6,000 |
| HMO Enhanced | $30-75 | $0-5 | $20-40 | $3,000-5,000 |
| PPO Standard | $50-100 | $0-15 | $40-60 | $5,000-7,500 |
| PPO Premium | $100-150 | $0 | $25-40 | $3,500-5,000 |
Annual Cost Comparison
Costs depend heavily on how much healthcare you use. Here’s a comparison framework:
Low Healthcare Usage
Minimal doctor visits, no hospitalizations, few prescriptions.
Original Medicare + Medigap:
- Part B premium: $2,096/year
- Medigap Plan G: $2,100/year (at $175/month)
- Part D premium: $420/year (average basic plan)
- Part B deductible: $240
- Total: $4,856/year
Medicare Advantage:
- Part B premium: $2,096/year
- Plan premium: $0-360/year
- Part D: Included
- Copays: $100-300/year
- Total: $2,196-2,756/year
Advantage: Medicare Advantage saves $2,000-2,600/year with low usage
High Healthcare Usage
Multiple specialist visits, hospitalization, expensive medications.
Original Medicare + Medigap:
- Part B premium: $2,096/year
- Medigap Plan G: $2,100/year
- Part D premium: $420/year
- Part B deductible: $240
- Part D drug costs: $1,500-3,000/year
- Total: $6,356-7,856/year
Medicare Advantage:
- Part B premium: $2,096/year
- Plan premium: $0-360/year
- Copays and coinsurance: $2,000-6,000/year
- Drug costs: $1,500-3,000/year
- Maximum out-of-pocket cap protects against higher costs
- Total: $5,596-11,456/year (capped at out-of-pocket maximum)
Advantage: Medigap provides more predictable costs; Medicare Advantage has wider range
Worked Example: 67-Year-Old Retiree
Margaret, 67, lives in suburban Ohio. She has well-controlled diabetes, takes two generic medications, and sees her primary care doctor 4 times per year and an endocrinologist twice per year.
Option 1: Original Medicare + Medigap Plan G + Part D
| Cost Component | Annual Amount |
|---|---|
| Part B premium | $2,096 |
| Medigap Plan G | $1,980 ($165/month) |
| Part D premium | $360 |
| Part B deductible | $240 |
| Part D drug costs | $240 (generics, after deductible) |
| Total Annual | $4,916 |
Margaret can see any doctor in the US who accepts Medicare. If she travels to Florida for winter, she has full coverage.
Option 2: Medicare Advantage HMO (Humana Gold Plus)
| Cost Component | Annual Amount |
|---|---|
| Part B premium | $2,096 |
| Plan premium | $0 |
| Part D: Included | $0 |
| PCP copays (4 visits × $5) | $20 |
| Specialist copays (2 visits × $40) | $80 |
| Drug costs | $180 (lower copays for generics) |
| Total Annual | $2,376 |
Margaret must use in-network doctors. The plan covers Ohio but not Florida.
Annual Savings with Medicare Advantage: $2,540
But Consider:
If Margaret is hospitalized, Medicare Advantage costs rise significantly:
- Hospital copays: $350-400/day for days 1-6, varying amounts after
- Potential costs for 5-day hospital stay: $1,500-2,000
With Medigap Plan G, the same hospitalization adds zero additional cost (Part A deductible is covered).
Key Decision Factors
Choose Original Medicare + Medigap If:
- You want freedom to see any Medicare-accepting provider
- You travel frequently or live part-time in different states
- You prefer predictable costs regardless of health changes
- You can afford higher monthly premiums for peace of mind
- You have chronic conditions requiring frequent specialist care
- You anticipate potential hospitalizations
Choose Medicare Advantage If:
- You’re comfortable using network providers
- You rarely travel or have providers in multiple locations
- You want lower monthly premiums and can handle copays
- You’re generally healthy with predictable, modest healthcare needs
- You value included extras (dental, vision, fitness programs)
- The annual out-of-pocket maximum provides adequate protection
Switching Considerations
Medigap to Medicare Advantage:
- Can switch during annual enrollment (October 15 - December 7)
- Consider: You may not be able to return to Medigap without underwriting
Medicare Advantage to Medigap:
- Can switch during annual enrollment, but…
- May face medical underwriting for Medigap
- Could be denied or charged higher rates based on health
- Some states have guaranteed issue periods; most don’t
Critical Warning: If you leave Medigap for Medicare Advantage, returning later may require passing medical underwriting. Health conditions developed in the interim could result in denial or significantly higher premiums.
Pre-Decision Checklist
Before choosing between Medigap and Medicare Advantage:
- List all your current doctors and verify which accept Original Medicare
- If considering Medicare Advantage, confirm your doctors are in-network
- Calculate your typical annual healthcare usage (visits, procedures, prescriptions)
- Estimate total costs under each option using the Medicare Plan Finder tool
- Consider your travel patterns and need for out-of-area coverage
- Review your prescription drugs on each plan’s formulary
- Check the out-of-pocket maximum on Medicare Advantage plans
- Understand the Medigap pricing method (attained-age vs. issue-age)
- Research Medicare Advantage plan ratings (aim for 4+ stars)
- Consider future health changes and their cost impact under each option
- Understand that switching from Medigap to Medicare Advantage may be one-way
- If buying Medigap, do so during your initial enrollment period to avoid underwriting
- Compare at least 3 Medigap insurers if going that route
- Review what extra benefits (dental, vision) Medicare Advantage includes
- Verify Part D drug coverage is adequate under either path
