Milliman's 2026 Index Puts Retiree Health Savings at $418,000, and the Medicare Advantage Discount Is Shrinking

A healthy 65-year-old couple retiring in 2026 needs $418,000 in savings to cover Original Medicare with a Medigap Plan G and Part D policy, up $30,000, or 7.7%, from 2025 (Milliman, June 2026). The same couple choosing Medicare Advantage with Part D needs $211,000, up $28,000, or 15.3%, the largest single-year jump the index has recorded since it launched.

The two figures come from the 2026 Milliman Retiree Health Cost Index, published June 22, 2026, which has tracked the present-value savings a healthy 65-year-old needs to fund lifetime out-of-pocket health costs since 2018. Robert Schmidt, a co-author of the index, put the year's move plainly: "Healthcare costs in retirement don't move in a straight line, and 2026 is a good reminder of that" (Milliman, June 2026). The line reads as understatement next to the arithmetic. A 15.3% one-year jump on the Medicare Advantage path is more than double the Medigap path's 7.7% increase, and it inverts a multi-year pattern: from 2022 through 2026, Milliman's own index shows the Medigap path compounding at roughly 3% a year on average against roughly 2% a year for the Medicare Advantage path (Milliman, June 2026). A single year running 15.3% against 7.7% breaks that trend line entirely on the MAPD side, reversing a five-year pattern in one plan cycle.

Decomposing $418,000 and $211,000

Both headline figures are couple totals built from separate male and female projections that assume average health status, retirement at 65, and continuous enrollment for the rest of the projected lifetime. On the Medigap Plan G plus Part D path, a male retiree with a life expectancy of 88 needs $199,000 in savings against $297,000 of projected lifetime spending; a female retiree with a life expectancy of 90 needs $219,000 against $340,000 of lifetime spending. Add the two and the couple figure is $418,000 in savings against $637,000 of projected lifetime health spending. On the Medicare Advantage plus Part D path, the same male retiree needs $100,000 against $148,000 of lifetime spending, the female retiree needs $111,000 against $172,000, and the couple total comes to $211,000 in savings against $320,000 of lifetime spending.

2026 Milliman RHCI figures	Medigap Plan G + Part D	Medicare Advantage + Part D
Male (65, life expectancy 88): savings needed	$199,000	$100,000
Male: projected lifetime spending	$297,000	$148,000
Female (65, life expectancy 90): savings needed	$219,000	$111,000
Female: projected lifetime spending	$340,000	$172,000
Couple: savings needed	$418,000	$211,000
Couple: projected lifetime spending	$637,000	$320,000
Change from 2025	+7.7% ($30,000)	+15.3% ($28,000)

Figures per the 2026 Milliman Retiree Health Cost Index (Milliman, June 2026).

The gap in dollar terms actually widened slightly, from about $205,000 in 2025 to $207,000 in 2026, because both paths grew in absolute terms even as MAPD grew faster in percentage terms. The more informative number sits underneath both changes: divide $211,000 by $418,000 and Medicare Advantage's 2026 savings requirement runs 50.5% of the Medigap path's, up from roughly 47.2% a year earlier on Milliman's own 2025 figures. That four-point shift in relative cost is the actuarial story the two headline numbers alone do not tell. Medicare Advantage has functioned as the discount option in this index every year it has run; the discount itself is what is compressing.

Why the Medicare Advantage Path Is Rising Faster

Milliman attributes the acceleration to two forces landing in the same plan year: rising MAPD premiums in most states and a leaner benefit design once carriers get there. KFF's 2026 Medicare Advantage enrollment update puts MAPD enrollment at just over 35 million people, 55% of eligible Medicare beneficiaries, up 1.1 million, or roughly 3%, from February 2025 (KFF, 2026). More than two-thirds of states saw MAPD premium increases in 2026, a reversal after a decade of largely flat or falling MAPD premiums, and carriers paired the increases with reduced supplemental benefits and higher cost-sharing, both of which raise the out-of-pocket projection Milliman's model is pricing even when the plan's own premium looks contained.

The mechanism sits one layer deeper in how Medicare's prescription drug benefit now allocates catastrophic-phase risk. The Inflation Reduction Act's Part D redesign, in full effect since January 2025, replaced the old catastrophic-phase split, in which plans covered roughly 15% of costs above the threshold and Medicare's reinsurance program covered about 80%, with a new split under which plans carry 60% of catastrophic-phase liability and reinsurance covers 20%, with manufacturers funding a 20% discount. That shift moved a large share of tail drug-cost risk from the federal reinsurance program onto plan balance sheets, MAPD plans included, since MAPD carries an integrated Part D benefit rather than a standalone one. CMS's final CY 2026 Part D Redesign Program Instructions also raised the catastrophic out-of-pocket threshold to $2,100 from $2,000 (CMS, 2026), a smaller cushion increase than plan sponsors had built pricing around, and the agency's Part D Premium Stabilization Demonstration, which reduces the uniform base beneficiary premium and caps year-over-year premium increases for participating standalone plans, shrank its own cushion for 2026: the uniform reduction fell to $10 from $15, and the allowable year-over-year premium increase cap rose to $50 from $35 (Congressional Research Service, 2026). A program built to stabilize Part D premiums got less generous in the same year MAPD plan liability rose, and the two moves compound rather than offset.

The claims-experience side of that story is visible in the standalone Medigap market too, even though Medigap itself sits outside Part D. Brett Mushett, a consulting actuary at Telos Actuarial, reviewing a sample of early 2026 Medigap Plan G rate filings, said the pattern across states "is an indication that carriers are looking to correct their premium rates in light of upward pressure on their claims experience" (KFF Health News, 2026). Q1 2026 Plan G rate filings from Aetna, Blue Cross Blue Shield, Cigna, Humana, Mutual of Omaha, and UnitedHealthcare ranged from 12% to more than 26% (KFF Health News, 2026), well above the $164 average monthly Plan G premium KFF measured in 2023 (KFF, 2023) and above the 3% to 5% annual increases that had been typical in some states as recently as a few years ago. Medigap's slower 7.7% index move this year is not because its underlying claims trend is mild; it is because Medigap sits on a much larger cost base, so the same dollar increase in premium and Part B cost-sharing registers as a smaller percentage move than it does against Medicare Advantage's lower starting point.

How Sensitive Is the $418,000 Number, Really

A present-value savings figure is only as good as the assumptions compounding underneath it, and Milliman discloses its own sensitivity ranges rather than leaving the reader to guess. The index discounts projected future costs at a 3.0% assumed annual investment return and applies mortality drawn from the PubG-2016 tables at the 50th percentile with the MP-2021 mortality improvement scale, adjusted through 2024 by the IRS (Milliman, June 2026). Medical trend runs at 4.8% annually over a 25-year projection horizon, built on the Society of Actuaries' Getzen trend model layered with Milliman's own research.

Move any one of those inputs and the headline savings figure moves with it. Milliman's own published sensitivities show that a five-year shift in life expectancy alone, holding everything else fixed, changes the required savings figure by 32% to 42%; a one-point change in the annual medical trend assumption changes it by 13% to 15%; and health status matters more than either: a retiree in above-average health needs 9% to 27% less than the base case, while a retiree in below-average health needs 13% to 41% more. None of that variance is a flaw in the methodology. It is the correct actuarial behavior of a present-value calculation compounding a mid-single-digit trend assumption and a multi-decade mortality projection, and it is also the reason a single index figure, however well sourced, functions best as an order-of-magnitude anchor rather than a number any individual retiree, or any plan sponsor modeling a population, should treat as precise to the dollar.

The Trade-Off Behind the Two Numbers

The $207,000 gap between paths is not a discount without a cost. Medicare Advantage plans bundle an out-of-pocket maximum, generally in the $3,000 to $9,000 range depending on the plan and whether it is in-network or combined, that caps a bad claims year in a way Original Medicare has no equivalent for without a Medigap policy layered on top, which is precisely why Medigap exists as a product category. Sen. Ron Wyden's observation that "traditional Medicare is the only federal health insurance program without an out-of-pocket cap" (KFF Health News, 2026) is the structural fact Medigap Plan G is priced to solve, and it is why the $418,000 figure buys something the $211,000 figure does not: a fixed, predictable annual cost with essentially no exposure to a catastrophic claims year, in exchange for a materially higher premium paid every year regardless of health status.

Medicare Advantage buys the opposite trade. The lower savings requirement comes with network restrictions, prior authorization on many services, and cost-sharing that can vary meaningfully from plan to plan and year to year as carriers adjust benefit designs, the same adjustment Milliman cites as driving part of the 2026 MAPD increase. It also carries a switching risk that Medigap does not: roughly 2.6 million people lost their Medicare Advantage coverage in recent plan-year exits when carriers withdrew from specific markets or counties, and about 440,000 of them moved to Medigap afterward (KFF, 2026), often at older ages and without the guaranteed-issue protections a 65-year-old has when first enrolling. A retiree choosing Medicare Advantage at 65 for the lower savings requirement is implicitly accepting some probability of having to re-underwrite into Medigap later, at a materially higher premium than a 65-year-old would pay, if medically underwritten at all in states without continuous guaranteed-issue rules.

What This Means for Retiree Medical Pricing and Decumulation Advice

For actuaries pricing employer-sponsored retiree medical liabilities, the widening relative distance between the two paths is a book-of-business question, not just a consumer one. A plan sponsor whose retiree population skews toward Medicare Advantage wraparound or wraparound-equivalent subsidy design is now pricing against a cost base compounding at roughly double the rate of a sponsor whose retiree population defaults to Medigap-style supplemental coverage, and that divergence, if it persists, will show up in accumulated postretirement benefit obligation remeasurements before it shows up in a plan sponsor's cash contribution decisions. The same Part D catastrophic-phase liability shift driving MAPD premium increases also touches employer group waiver plans directly, since EGWPs sit inside the same redesigned benefit structure, so a sponsor's own trend assumption for retiree drug liabilities needs to reflect the 2026 catastrophic-phase economics rather than a pre-redesign baseline.

For advisors and actuaries supporting decumulation decisions in defined-contribution and HSA-funded retiree health strategies, the practical read is less about which path is cheaper in isolation and more about which risk a specific retiree's balance sheet can absorb. A retiree with a large HSA balance and low risk tolerance for a bad claims year is buying insurance against tail risk with the incremental $207,000 the Medigap path requires; a retiree comfortable underwriting some out-of-pocket variability, and confident in the durability of their current MAPD plan's network and benefit design, can fund a materially smaller present-value target. Milliman's sensitivity ranges argue for building any individual plan around a distribution of outcomes rather than a single point estimate, since a five-year longevity surprise alone can move the required savings by roughly a third in either direction, before the choice between Medigap and Medicare Advantage even enters the calculation.