Medicare Supplement vs. Medicare Advantage: Real Cost Comparison

The most consequential Medicare decision most people make isn’t when to claim Social Security or which Part D plan to pick — it’s whether to go with Medicare Supplement (Medigap) or Medicare Advantage (Part C).

Both cover the gaps in Original Medicare, but they do it in fundamentally different ways, with very different cost structures. The right choice depends on your health, where you live, how you use healthcare, and how much financial risk you’re comfortable carrying.

This guide cuts through the marketing to compare the real costs of each approach across different health scenarios.

The Two Coverage Models

Before comparing costs, you need to understand what you’re actually comparing.

Original Medicare + Medigap

• Original Medicare (Parts A and B) pays for most of your hospital and medical care
• Medigap (Medicare Supplement Insurance) is a private policy that fills the gaps — the deductibles, copays, and coinsurance that Original Medicare leaves you paying
• Part D (a separate standalone plan) covers prescription drugs

Under this model, you have three separate components:

1. Medicare Part B premium (mandatory)
2. Medigap premium (separate private policy)
3. Part D premium (if you need drug coverage)

Coverage network: Original Medicare is accepted by virtually every doctor and hospital in the United States. There are no network restrictions — you can see any provider who accepts Medicare, anywhere in the country, without referrals.

Medicare Advantage (Part C)

• A private insurance plan that replaces Original Medicare
• Typically bundles Part A, Part B, and Part D coverage into a single plan
• Often includes extra benefits (dental, vision, hearing, fitness)
• Plans are offered by private insurers approved by Medicare

Coverage network: Most Medicare Advantage plans use HMO or PPO networks. Seeing an out-of-network provider may cost significantly more (PPO) or may not be covered at all except in emergencies (HMO).

Premium Comparison: What You Pay Monthly

This is where the two models look most different on the surface.

Medicare Advantage Premiums

Many Medicare Advantage plans — particularly HMO plans — charge $0 in monthly premiums. You still pay your Part B premium ($185/month in 2025), but the MA plan itself may cost nothing additional.

In 2025, the average Medicare Advantage premium nationally is approximately $17/month (down from prior years as plans compete aggressively). $0 plans are common in many markets.

Medigap Premiums

Medigap premiums vary by plan type, your age, gender, where you live, and the insurance company. The most popular plan — Plan G (which covers almost everything except the Part B deductible) — typically costs:

• Age 65: $100–$200/month in most markets
• Age 70: $130–$250/month
• Age 75: $170–$310/month

The wide range reflects geographic variation. Urban markets with high medical costs tend to have higher Medigap premiums; rural areas or states with lower medical costs tend to have lower premiums.

Add a standalone Part D plan ($20–$50/month is typical for a basic plan) and the combined monthly cost for Original Medicare + Plan G + Part D might be $150–$250/month above the base Part B premium.

Surface-level comparison: At first glance, Medicare Advantage looks dramatically cheaper — often $0 vs. $150–$250/month. But that premium difference doesn’t tell the whole story.

Out-of-Pocket Exposure: Where the Real Comparison Lives

The premium comparison misses a crucial variable: how much you pay when you actually use healthcare.

Medigap Out-of-Pocket Exposure

With Plan G (the most popular Medigap plan):

• Part A deductible: $0 (Medigap pays)
• Part B deductible: $257/year (you pay this once per year — Plan G does not cover it)
• Part B coinsurance: $0 (Medigap pays 20% after Part B deductible)
• Skilled nursing coinsurance: $0 (Medigap pays days 21–100)
• Hospital stays beyond 60 days: $0 (Medigap pays)

After meeting the Part B deductible ($257/year), your out-of-pocket costs for medical care are essentially $0 regardless of how much care you use. There is no annual cap needed because there’s no meaningful exposure.

With Plan N (less expensive than Plan G):

• $20 copay for doctor visits
• $50 copay for emergency room visits (waived if admitted)
• Part B deductible still applies
• Same broad coverage otherwise

Medicare Advantage Out-of-Pocket Exposure

Medicare Advantage plans have:

• Copays for every service (doctor visits, specialist visits, lab tests, imaging)
• Deductibles (drug deductibles, sometimes medical deductibles)
• Coinsurance for hospital stays and procedures
• An annual out-of-pocket maximum (capped by law at $9,350 in-network in 2025)

Typical cost-sharing on a Medicare Advantage plan:

• Primary care visit: $5–$15 copay
• Specialist visit: $30–$50 copay
• Outpatient surgery: 20% coinsurance or flat copay
• Inpatient hospital: $250–$350 per day for the first few days
• Emergency room: $90–$120 copay (waived if admitted)

If you’re healthy and rarely use care, these copays are manageable. If you have a serious illness or hospitalization, costs accumulate quickly — though the out-of-pocket maximum (often $5,000–$7,500 for many plans) eventually limits total exposure.

Three Real-World Cost Scenarios

Let’s compare actual costs for three health profiles. We’ll use a representative Medicare Advantage plan (with $0 premium, $5,500 MOOP) and Medigap Plan G ($150/month) + Part D ($35/month).

Scenario 1: Healthy, Low Utilizer

Annual healthcare use: 4 primary care visits, 1 specialist visit, 2 prescriptions (generic)

In this scenario, the healthy person saves about $2,600/year with Medicare Advantage. The low premium advantage dominates when you barely use care.

Scenario 2: Moderate Health Needs

Annual healthcare use: 8 doctor visits, 3 specialist visits, 1 outpatient procedure, 4 prescriptions (2 brand)

The gap narrows considerably. Medicare Advantage still saves about $1,400/year, but the out-of-pocket costs for care are taking a real bite.

Scenario 3: High Healthcare User (Serious Illness or Surgery)

Annual healthcare use: 2-week hospital stay, 6 specialist visits, 20 doctor visits, ongoing prescriptions including specialty drug

In this high-utilization scenario, Medigap costs less in total — despite having higher premiums. The out-of-pocket maximum on the MA plan ($5,500 in this example) plus premiums exceeds what Medigap costs in total.

The crossover point — where Medigap’s higher premiums are offset by lower out-of-pocket costs — is roughly 1–2 hospitalizations per year, or significant specialist use.

Network: The Hidden Cost of Medicare Advantage

Cost tables don’t capture the full picture of Medicare Advantage’s network constraints.

With Original Medicare + Medigap:

• Any doctor or hospital that accepts Medicare — across all 50 states — is accessible to you
• No referrals required to see specialists
• No prior authorization for most services (though some still apply)

With Medicare Advantage:

• HMO: You must use in-network providers except in emergencies. Out-of-network care is generally not covered.
• PPO: Out-of-network care is covered but at higher cost-sharing (often 30–50% coinsurance vs. in-network rates)
• Referrals: Required for specialists in most HMO plans
• Prior authorization: More common than in Original Medicare, and denials require appeals

For most healthy retirees in a single location, network constraints are manageable. But if you travel frequently, spend winters in a different state, or need complex specialist care, the network limitation is a real cost — potentially a large one.

See our detailed Medicare Advantage HMO vs. PPO comparison for a deeper look at network tradeoffs.

Drug Coverage: Part D vs. MA-PD

Most Medicare Advantage plans include prescription drug coverage (called MA-PD plans). Standalone Part D plans are separate.

Key differences:

Formulary: Every MA-PD and standalone Part D plan has its own drug formulary. Before choosing either, enter your specific medications into the Medicare Plan Finder to compare drug costs. This is the single most important step — don’t skip it.

Catastrophic coverage: In 2025, the Inflation Reduction Act caps out-of-pocket drug costs at $2,000/year for all Part D plans (standalone and MA-PD). This change made drug cost comparison more straightforward than in prior years.

Coordination: With Medigap + standalone Part D, your drug plan is separate from your medical coverage — simpler in some ways, but you’re managing two plan relationships.

Medigap Premium Risk Over Time

One underappreciated Medigap cost factor: premiums increase with age. Most Medigap plans are “attained-age rated,” meaning your premium rises each year as you get older, plus general medical inflation.

A Plan G policy costing $150/month at 65 might cost $250/month at 75 and $380/month at 85. This escalating cost is real and should factor into long-term planning.

Medicare Advantage premiums are generally more stable year to year (though plan design can change, and you can switch annually during AEP).

When Medigap Tends to Win

• You have chronic conditions requiring frequent specialist care or hospitalizations
• You travel frequently or split time between states
• You want maximum predictability in healthcare costs
• You want the freedom to see any Medicare provider without referrals
• You’re comfortable with higher monthly premiums in exchange for low point-of-care costs

When Medicare Advantage Tends to Win

• You’re generally healthy and use healthcare infrequently
• You want extra benefits (dental, vision, hearing) bundled into one plan
• Your doctors are in the plan’s network and you’re unlikely to need out-of-network care
• You want lower monthly cash outflow
• You’re in a market with highly-rated plans (4.5–5 stars)

The Underwriting Consideration

This is critical: Medigap has a timing window. When you first become eligible for Medicare and enroll in Part B, you have a 6-month Open Enrollment Period during which Medigap insurers must sell you any plan they offer, at standard rates, regardless of health history. After that window closes, insurers can deny coverage or charge higher rates based on health conditions (in most states).

Medicare Advantage plans must accept any Medicare-eligible applicant during enrollment periods, with no underwriting.

This means:

• If you start with Medicare Advantage and later want to switch to Medigap, you may not qualify due to pre-existing conditions
• The decision isn’t fully reversible without risk
• Most advisors recommend starting with Medigap if you can afford it, because you can always switch to Medicare Advantage later (no underwriting for MA), but switching the other way is harder

See our Medigap plans guide for detailed coverage differences between Plan G, Plan N, and other options.

Summary: Which Is Right for You?

There’s no universally correct answer. Here’s the decision framework in plain terms:

Choose Medigap if you value certainty, travel or use healthcare in multiple locations, have or expect complex healthcare needs, and can afford higher monthly premiums.

Choose Medicare Advantage if you’re healthy, your doctors are in-network, you want lower monthly costs, extra benefits (dental, vision) matter to you, and you understand and accept the network limitations.

Be cautious about doing nothing — if you’re defaulting to one option because you haven’t compared, you may be leaving money on the table or accepting coverage that won’t serve you well when you need it most. The annual Medicare AEP gives you the opportunity to switch your Medicare Advantage plan each fall. Medigap requires underwriting after your initial eligibility window in most states.

If you’re unsure, contact your state’s free SHIP (State Health Insurance Assistance Program) counselors for unbiased guidance. They have no financial interest in which plan you choose.

More on Medicare costs and coverage:

• Medigap Plans Compared: All 10 Supplement Options
• Medicare Advantage vs. Original Medicare
• Medicare Advantage HMO vs. PPO
• Medicare Annual Enrollment Period Strategy Guide
• IRMAA: Medicare’s High-Income Surcharge
• Medicare Part D: Drug Coverage Explained