April 9, 2025
Contact: Erin Hemlin, APG Vice President of Communications
Tel: 202-770-1901
WASHINGTON — Medicare beneficiaries are likely to spend less on their health care premiums and out-of-pocket costs if they enroll in a Medicare Advantage (MA) plan versus signing up for traditional Medicare plus purchasing a Medicare supplemental (Medigap) plan and a Part D prescription drug plan, a new study shows. That’s in large part because most MA plans include prescription drug coverage as well as dental, vision, and hearing care – benefits that traditional Medicare patients must buy separately – and because the substantial cost –sharing in traditional Medicare drives many patients without other supplemental coverage options to buy private Medigap plans to protect themselves against out-of-pocket costs.
The new study, by the Berkeley Research Group and commissioned by America’s Physician Groups, compared premium costs across five major U.S. markets for three prototypical types of Medicare patients with different health care needs. The five different markets were examined because private MA, Part D, and Medigap plan premiums can vary across markets. Differences related to the health status of prototypical patients, or “personas” – a relatively healthy one, a patient with periodic health care episodes including hospitalization, and one with six or more chronic conditions – were examined because sicker patients are likely to incur more out-of-pocket costs.
The study showed that, across the five markets and for all three types of patients, the annual premium for the most popular combined Medicare Advantage and Part D plans (so-called MA-PD plans) was zero – that is, nothing beyond the standard Part B premium that Medicare enrollees pay for physician services. By contrast, total premium costs beyond Part B premiums for the same types of patients in all markets — if they enrolled in traditional Medicare plus a Part D plan as well as Medigap – ranged from $1,872 to $4,564. A large part of the difference was the high cost of annual Medigap premiums, which ranged from $1,872 to $3,900. Medigap premiums can also rise in price by 5-8 percent per year, whereas MA plan premiums tend to be more stable.
Beyond premiums, the coverage available through MA plans typically did a better job of lowering out-of-pocket costs for enrollees compared to being in traditional Medicare and buying Medigap plus a Part D plan. Admittedly, there was some variation across markets due to the differences among the Medigap plans available in various markets: For example, in three of the markets sampled, the prototypical chronically ill patients would save $560 on average in out-of-pocket costs if they enrolled in traditional Medicare plus Medigap and a prescription drug plan versus buying an MA-PD plan. But on average across the five markets, enrolling in an MA-PD plan resulted in lower out-of-pocket costs for all types of patients (see table below).
“This study highlights the complexity of the choices facing Medicare beneficiaries, but also the substantial burden that the need to purchase Medigap coverage imposes on those who elect traditional Medicare,” said Susan Dentzer, President and CEO of America’s Physician Groups (APG). She also noted that Medicare beneficiaries face other tradeoffs in choosing one form of coverage versus another, such as a preference for the broad access to providers available under traditional Medicare versus the defined provider networks of MA plans. But the strong financial considerations that nudge many enrollees toward MA are real, Dentzer said, and underscore the imperative of continuing to improve the program, as APG noted in its recent report, Medicare Done Right: Prescriptions for Success.”
APG is the leading organization representing physicians engaged in value-based payment models, and the more than 200,000 clinicians affiliated with its member groups provide care to roughly 1 in 3 MA enrollees nationwide. Studies have shown that APG groups engaged in full-risk relationships with MA plans produce superior outcomes for MA enrollees and other Medicare beneficiaries.[1]
[1] See Cohen KR et al, Medicare Risk Arrangement and Use and Outcomes Among Physician Groups. JAMA Netw Open. 2025; 8(1):e2456074. 10.1001/jamanetworkopen.2024.56074; also Vabson B, Cohen K, Ameli O, et al. Potential spillover effects on traditional Medicare when physicians bear Medicare Advantage risk. Am J Manag Care. Published online February 26, 2025. doi:10.37765/ajmc.2025.89686.
