Medigap vs Medicare Advantage: Real Cost Modeling Guide

Why total‑cost modeling matters for your Medicare decision

Choosing between Medicare Advantage and Original Medicare with a Medigap policy often comes down to more than monthly premiums. A low monthly price can still leave you exposed to copays, coinsurance, or high drug costs later in the year. We recommend modeling annualized premiums, expected out-of-pocket costs, and Part D expenses. Run low, average, high, and catastrophic scenarios to find your break-even point.

This guide gives an advisor-led toolkit to build that model. For more context, read our head-to-head comparison.

• A clear list of the core cost components to include in your annual model.
• Scenario runs for low, average, high, and catastrophic utilization so you can see break-even points.
• A downloadable spreadsheet template you can customize with your actual premium and medication costs.
• Advisor notes on how geography and enrollment timing change the numbers and the recommended next steps.

Numbers to pull and assumptions to standardize every side‑by‑side model

Want a side‑by‑side that actually reflects what you’ll pay this year? Start with the mandatory basics and work outward.

Always include the Medicare Part B premium. It’s required no matter which path you choose.

How to model Medicare Advantage (MA‑PD) vs. Original Medicare + Medigap

Medicare Advantage plans that include drug coverage are bundled. That means medical and pharmacy costs sit in one policy.

Model the MA premium, Part B premium, copays and coinsurance, and the plan’s MOOP (maximum out‑of‑pocket). For 2026, the federal cap on MA MOOP is up to $9,250 in‑network and up to $13,900 combined in‑ and out‑of‑network.

Also include prescription cost sharing inside the MA formulary. Many MA plans include the drug portion for little or no extra premium. Estimate drug premiums around the projected MA drug average for 2026 when you lack a plan quote.

What to model for Original Medicare with Medigap

Original Medicare does not include drugs. You must add a standalone Part D plan plus a Medigap premium.

Model the Part B premium, the chosen Medigap monthly premium, any uncovered Part A/B deductibles or excess charges, and the standalone Part D premium. For 2026 use estimated averages for Part D and account for the Part D deductible limit and drug out‑of‑pocket cap.

Exact data points to pull for accurate annualized comparisons

• Monthly premiums: Part B, MA plan premium (if any), Medigap premium, and standalone Part D premium.
• Deductibles: MA medical deductible, Part D deductible (max $615 in 2026 if applicable), and any Medicare Part A/B deductibles not covered by Medigap.
• Copays and coinsurance amounts for common services such as primary care, specialist visits, outpatient procedures, and hospital stays.
• MOOP limits for MA plans and the expected annual drug out‑of‑pocket exposure under Part D (2026 drug OOP cap $2,100).
• Formulary details: drug tiers, pharmacy network rules, prior authorization, and specialty drug cost sharing.
• Provider network access and travel behavior, since MA network restrictions can change cost and access compared with Original Medicare.
• Local rating rules that affect Medigap premiums over time, and any age/gender rating factors for the client’s zip code.

Plan availability and pricing vary greatly by county and zip code. Always pull live quotes and check network directories for the client’s address.

If you want a deeper look at hidden cost traps and why low MA premiums can mislead, see our guide at Medigap vs Advantage: Hidden costs to watch for.

The takeaway: standardize your assumptions, pull localized quotes, and model low, average, and catastrophic scenarios so you can see the true break‑even point.

Scenario runs that reveal your break-even point

Worried a low Medicare Advantage premium will cost you later? Build four utilization scenarios so clients can see where costs flip.

Model low (healthy), average, high (chronic care), and catastrophic years. Each scenario changes expected visits, hospital days, and drug needs.

Research shows utilization shocks are usually the dominant driver that flips which option is cheaper. So make those shocks central to your runs.

Which variables to stress-test

• Utilization shocks: model a five-day hospital stay, follow-up specialist visits, and imaging to show how MA copays add up.
• Drug cost changes: run scenarios for a standard maintenance regimen and for expensive brand drugs to expose Part D risk differences.
• Premium trajectories: compare issue-age, attained-age, and community-rated Medigap paths with 3–8% annual increases.
• Network and prior authorization risk: simulate out-of-network use or a denied service to show unexpected MA costs.
• Geography and plan design: vary MOOP and local Medigap pricing to reflect county-level differences.

Sensitivity runs to present to clients

• Baseline year: use current premiums, average utilization, and the client’s actual drug list to set a neutral comparison.
• Healthy year: show total cost when visits are minimal so clients see the value of low MA premiums.
• Chronic-care year: model frequent specialists and tests to highlight how Medigap reduces point-of-service spending.
• Catastrophic shock: include an extended hospital stay and surgery to demonstrate how Medigap converts coinsurance into covered amounts.
• Premium-growth path: show a 3% versus 8% Medigap premium rise over five to ten years to reveal long-term break-even points.
• Drug-price shock: simulate a sudden move to high-cost branded drugs and compare Part D standalone exposure against MA-PD integrated coverage.
• Network denial scenario: estimate costs if a needed procedure is out-of-network or delayed by prior authorization under MA.

Present these runs side-by-side with the same baseline assumptions. Use a simple annualized formula: premiums plus expected out-of-pocket plus Part D costs.

Need a practical checklist for hidden gaps and auditing your numbers? See our guide on spotting coverage gaps for how to apply model outputs to real risk scenarios: How to spot Medicare coverage gaps before they cost you

Advisor spreadsheet blueprint and workflow

Want a client-ready model that actually matches real costs where they live? Build a clean workbook that separates inputs, calculations, and scenario outputs.

We recommend tabs for Inputs, Plan Comparison, Scenario Runs, Local Quotes, and Long‑Range Projections. Keep calculations transparent so clients can audit every line.

Required inputs and core formulas

• Part B premium so you never omit this mandatory cost from both options.
• Plan premiums: Medigap monthly, MA premium, and standalone Part D premium if applicable.
• Deductibles, copays, and coinsurance for common services and for expected procedures.
• MA plan MOOP and network rules, plus formulary tiers and pharmacy restrictions for drugs.
• Client drug list, typical utilization, travel behavior, and any employer, VA, or dual‑eligibility benefits.
• Local rating method for Medigap: community, issue‑age, or attained‑age so future premiums are modeled correctly.

Core formulas should be visible and simple. Compute annual fixed costs as sum of monthly premiums times 12.

For maximum exposure use two formulas from our toolkit: MA = (premiums × 12) + MOOP. Medigap = (premiums × 12) + Part B deductible.

Localization, long‑range runs, and enrollment constraints

Localize every quote and network check. County and zip code change MA networks and premiums materially.

Model long horizons with a total‑cost‑of‑care approach. Use a blended medical inflation assumption of about 5 to 7 percent annually.

Remember enrollment limits. The six‑month Medigap Open Enrollment starts when a beneficiary is age 65 and enrolled in Part B.

• Pull live local quotes for each plan and verify network directories for the client’s providers.
• Confirm the client’s Medigap eligibility window to avoid assuming guaranteed issue when underwriting may apply.
• Document the Medigap rating method so you can project attained‑age or issue‑age premium paths.
• Check employer or VA benefits that might affect Part B, Part D, or supplemental coverage coordination.
• Flag dual eligibility or LIS potential since state or low‑income rules can change Part D costs.
• Run sensitivity for utilization shocks and for premium growth over 5 to 15 years so break‑even points are clear.

Use the model to guide a plan recommendation and then translate results into next steps. See our enrollment workflow for how an advocate turns modeled findings into a finalized plan.

What an insurance advocate does at your Medicare enrollment

Turn your model into a personalized recommendation

A transparent, localized total-cost model clarifies the trade-off between predictable Medigap premiums and lower-premium, variable-cost Medicare Advantage plans.

Model annualized premiums, expected out-of-pocket, and Part D costs. Run low, average, high, and catastrophic scenarios to find your break-even point.

Enrollment timing and underwriting change your options and long-term costs. Getting Medigap during your six-month open enrollment avoids underwriting risk. An advisor interprets runs, localizes quotes, and maps provider networks so you get a recommendation you can trust.

Want a client-ready model or a one-on-one consult? We serve clients across 26 states. Call us at (312) 420-3396 or email jevans@myrt66ins.com to schedule time.

If you want to see how an advocate turns modeled findings into enrollment steps, read What an insurance advocate does at your Medicare enrollment.