If you are approaching 65 or have recently enrolled in Medicare, you face a decision that can shape your healthcare costs for years: Medigap vs. Medicare Advantage. After enrolling in Original Medicare (Parts A and B), it is time to choose supplemental coverage. While not required, doing so helps cover costs that Original Medicare does not — only 6% of enrollees go without it.1 Understanding your Medicare options for 2026 means weighing trade-offs between Medigap (Medicare Supplement) and Medicare Advantage (Part C), which affect your premiums, provider network, and out-of-pocket exposure. For families managing established wealth, this decision deserves strategic attention alongside your investments and tax planning.
What is Medigap?
Medigap complements Original Medicare and covers cost gaps — deductibles, coinsurance, and copayments. Medicare Part B requires beneficiaries to pay 20% of approved costs for most covered services, with no annual out-of-pocket cap, which can add up quickly if you need surgery or have a chronic condition.2 Medigap does not cover anything outside Original Medicare, including most dental, vision, and hearing needs. Most states offer 10 types of Medigap plans. Plans with the same letter provide identical standardized benefits regardless of the insurer.
What is Medicare Advantage?
Medicare Advantage is a bundled approach providing extra coverage for prescriptions, dental, vision, and hearing. Plans may also include benefits such as flex cards and transportation. However, the landscape of extra benefits has shifted. After years of rapid expansion, the share of plans offering perks such as over-the-counter allowances has declined.3 Enrollment growth has also slowed.4 Review your Annual Notice of Change (ANOC) each fall to confirm what is covered.
Medicare Advantage plans have an out-of-pocket maximum that Original Medicare lacks. In 2026, approximately 3,373 plans are available nationwide — a 9% decrease from 2025.5 On average, beneficiaries can choose from more than 30 plans with prescription drug coverage in their area. If you enroll, confirm your prescriptions are covered and your doctors are in-network. Under the Inflation Reduction Act, annual out-of-pocket costs for Part D prescription drug coverage are capped at $2,100. When you reach that limit, you pay $0 for covered drugs for the rest of the year, a meaningful improvement for clients managing high-cost medications.
Key differences between Medigap and Medicare Advantage
- Enrollment
Enrollment rules are one of the most important differences. During the Medigap open enrollment period (the first six months of Part B coverage), plan providers cannot deny an application because of existing health conditions. After that, insurers in most states can use medical underwriting. You can enroll in or switch a Medicare Advantage plan during the Medicare open enrollment period between Oct. 15 and Dec. 7 each year.One risk: Plan terminations have increased. A 2026 study found that approximately 10% of Medicare Advantage enrollees in nonemployer HMO or PPO plans faced forced disenrollment when their plan exited their county — a sharp departure from the roughly 1% average seen between 2018 and 2024.6 Some in rural areas had few or no alternative options. Review your ANOC each fall to confirm what is covered.
- Coverage
Original Medicare does not cover dental, vision, or hearing. While Medicare Advantage extra benefits are enticing, weigh the details before enrolling. Extra coverage is often far from comprehensive. Make sure you are not sacrificing necessary coverage — such as a preferred doctor or prescriptions — for less essential benefits.
- Networks
Medigap lets you see virtually any doctor nationwide who accepts Medicare. According to recent data, approximately 98% of nonpediatric physicians participate in the Medicare program.7 If you are selective about doctors, travel frequently, or are a “snowbird,” the broad Medigap network may be attractive. Medicare Advantage plans typically use PPO or HMO networks, limiting you to a set of providers, generally in your area.
- Cost
Cost is one of the most visible differences, though the full picture is more nuanced than the premium alone.Medicare Advantage: The average monthly premium is estimated at $14 in 2026, down from $16.40 in 2025.8 In fact, 75% of enrollees in individual plans with prescription drug coverage pay no premium beyond the Medicare Part B premium of $202.90 per month. Some plans also offer Part B premium reductions.
Medigap: Premiums vary widely by plan, location, insurer, and age. For a 65-year-old in 2026, premiums generally range from $100 to $200 per month. The average across all Medigap plans is approximately $217, with Plan G — the most popular for new enrollees — averaging $164 per month.9
Why choose Medigap at a higher premium? Short-term savings can lead to long-term costs. A younger, healthier person might choose Medicare Advantage to save money but could regret it if they develop a chronic condition and cannot switch to Medigap because of underwriting.
How to decide
There is no single best solution. The right choice depends on your healthcare needs, budget, and priorities. If you value freedom to see any doctor nationwide that accepts Medicare, you may prefer Original Medicare paired with Medigap. If you value lower premiums and additional benefits, Medicare Advantage may be worth considering. To compare options, consult a licensed Medicare professional like Chapter, the official Medicare partner of Mercer Advisors.
Mercer Advisors partners with Chapter to provide clients age 64 and older with free, personalized Medicare advisory services. Chapter’s licensed experts compare thousands of nationwide options to help optimize healthcare coverage, reduce medical costs in retirement, and navigate enrollment decisions.
Mercer Advisors clients receive:
- No-cost guidance: Mercer Advisors clients get complimentary access to Chapter’s dedicated Medicare navigation team.
- A comprehensive search: Chapter evaluates thousands of Medicare Advantage, Medigap (Supplement), and prescription drug plans.
- A fiduciary-style approach: Chapter advisors are structured to provide unbiased recommendations tailored to individual doctor and prescription needs rather than specific plan commissions.
- Ongoing support: Assistance covers initial enrollment periods as well as year-round support and annual coverage reviews.
Coordinating Medicare with your broader financial plan
Your Medicare decision doesn’t exist in isolation. For families managing established wealth, healthcare coverage is part of a larger financial picture. Higher-income beneficiaries pay an income-related monthly adjustment amount, or IRMAA, on top of standard Part B and Part D premiums. In 2026, individuals with modified adjusted gross income above $109,000 (or $218,000 for married couples filing jointly) face surcharges that can push the Part B premium as high as $689.90 per month.10 Because IRMAA is based on your income from two years prior, coordinating Roth conversions and capital gains with your financial professional can help you understand the impact before deciding.
Investment management: Planning for healthcare costs
Your Medicare choice affects your annual cash flow, which influences how you withdraw from your portfolio. A lower-premium Medicare Advantage plan may free up cash, but higher out-of-pocket costs when you need care can require larger withdrawals. Modeling multiyear income scenarios can help you see how different coverage paths affect your portfolio.
Estate planning: Protecting your legacy
Healthcare decisions and estate planning are closely linked. Understanding your Medicare coverage and potential long-term care needs helps you plan how assets may be used in retirement and transferred to heirs.
Insurance solutions: Choosing the right coverage
The Medigap vs. Medicare Advantage decision is itself an insurance solution. Working with a licensed Medicare professional like Chapter alongside your financial professional helps your healthcare coverage complement your other financial strategies.
Not a client and would like to learn more?
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You can switch from Medicare Advantage to Original Medicare and buy a Medigap plan, but outside your initial Medigap open enrollment period (the first six months of Part B coverage), insurers in most states can use medical underwriting. They may deny your application, charge a higher premium, or impose a waiting period for pre-existing conditions. Four states — Connecticut, Maine, Massachusetts, and New York — allow switching without underwriting.
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No. Medigap plans sold after Jan. 1, 2006, do not cover prescription drugs. If you choose Medigap, you need a standalone Part D plan. Most Medicare Advantage plans include Part D.
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Under the Inflation Reduction Act, annual out-of-pocket costs for Part D prescription drug coverage are capped at $2,100 in 2026. When you reach that limit, you pay $0 for covered drugs for the rest of the year.
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Yes. If your modified adjusted gross income exceeds $109,000 for individuals or $218,000 for married couples filing jointly in 2026, you will pay an IRMAA surcharge on top of your standard premiums, based on your income from two years prior.
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Mercer Advisors partners with Chapter to provide clients age 64 and older with complimentary, personalized Medicare advisory services. Chapter’s professionals compare thousands of options to help optimize coverage, and your Mercer Advisors team can coordinate your Medicare decision with your broader financial planning. Not a client and would like to learn more? Let’s talk.
1 “A Snapshot of Sources of Coverage Among Medicare Beneficiaries.” KFF, Dec. 19, 2025.
2 “What You’ll Pay in Out-of-Pocket Medicare Costs in 2026.” National Council on Aging, June 25, 2026.
3 “Medicare Advantage in 2026: Premiums, Out-of-Pocket Limits, Supplemental Benefits, and Prior Authorization.” KFF, June 5, 2026.
4 “Medicare Advantage in 2026: Enrollment Update and Key Trends.” KFF, June 5, 2026.
5 “Medicare Advantage 2026 Spotlight: A First Look at Plan Premiums and Benefits.” KFF, Dec. 9, 2025.
6 “1 in 10 Medicare Advantage Enrollees Face Forced Disenrollment in 2026.” Johns Hopkins Bloomberg School of Public Health, Feb. 18, 2026.
7 “How Many Physicians Have Opted Out of the Medicare Program?” KFF, Jan. 17, 2025.
8 “Medicare Advantage 2026 Spotlight: A First Look at Plan Premiums and Benefits.” KFF, Dec. 9, 2025.
9 “Key Facts About Medigap Enrollment and Premiums for Medicare Beneficiaries.” KFF, Oct. 18, 2024.
10 “Premiums: Rules for Higher-Income Beneficiaries.” Social Security Administration.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy.
Mercer Advisors is not a Medicare provider and does not provide Medicare supplemental and prescription plans. These services are provided by Chapter Medicare LLC d/b/a Chapter Advisory LLC through a referral relationship with Mercer Advisors.
For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
