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. The cheaper path is the one repricing.

Key Takeaways

  • $418,000 against $211,000, up 7.7% and 15.3% respectively. The Medicare Advantage move is the largest single-year increase since the index launched in 2018.
  • 50.5% of the Medigap requirement is where Medicare Advantage now sits, up from roughly 47.2% a year earlier. The discount itself is compressing.
  • 60% of catastrophic-phase Part D liability now sits with plans, against roughly 15% before the redesign, with federal reinsurance down to 20% from about 80%.
  • 12% to more than 26% on Q1 2026 Medigap Plan G rate filings across six carriers, against the 3% to 5% annual increases typical in some states a few years ago.
  • A five-year shift in life expectancy moves the required savings by 32% to 42%, a wider swing than the choice between the two coverage paths produces.

Decomposing $418,000 and $211,000

Both headline figures are couple totals built from separate male and female projections assuming average health status, retirement at 65 and continuous enrollment (2026 Milliman Retiree Health Cost Index, June 2026). 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, and a female retiree with a life expectancy of 90 needs $219,000 against $340,000.

2026 Milliman RHCI figuresMedigap Plan G + Part DMedicare 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)

The dollar gap widened slightly, from about $205,000 in 2025 to $207,000, because both paths grew in absolute terms even as MAPD grew faster in percentage terms. The informative number sits underneath both: $211,000 divided by $418,000 puts the Medicare Advantage requirement at 50.5% of the Medigap path, up from roughly 47.2%.

That four-point shift reverses a five-year pattern. From 2022 through 2026 the index shows the Medigap path compounding at roughly 3% a year on average against roughly 2% for Medicare Advantage. Medicare Advantage has been the discount option every year the index has run, and the discount is what is compressing.

Where the MAPD Increase Comes From

Milliman attributes the acceleration to rising MAPD premiums in most states paired with leaner benefit design. KFF puts MAPD enrollment just over 35 million, 55% of eligible beneficiaries, up 1.1 million from February 2025. More than two-thirds of states saw MAPD premium increases in 2026, a reversal after a decade of largely flat or falling premiums, and carriers paired them with reduced supplemental benefits and higher cost-sharing, both of which raise the out-of-pocket projection even where the premium looks contained.

The mechanism sits a layer deeper, in how Part D allocates catastrophic-phase risk. The Inflation Reduction Act redesign, in full effect since January 2025, replaced a split where plans covered roughly 15% of costs above the threshold and federal reinsurance about 80%. Plans now carry 60% of catastrophic-phase liability against 20% reinsurance, with manufacturers funding a 20% discount. That moved a large share of tail drug-cost risk onto plan balance sheets, MAPD included, because MAPD carries an integrated rather than standalone Part D benefit.

Two cushions shrank in the same year. CMS's final CY 2026 instructions raised the catastrophic out-of-pocket threshold to $2,100 from $2,000, a smaller increase than sponsors had priced around, and the Part D Premium Stabilization Demonstration cut its uniform base premium reduction to $10 from $15 while raising the allowable year-over-year increase cap to $50 from $35. A program built to stabilize Part D premiums got less generous in the year plan liability rose.

The Medigap side is not benign, which is the point that changes the pricing read. Q1 2026 Plan G 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 and above the 3% to 5% annual increases typical in some states recently. Consulting actuary Brett Mushett read the filings as "carriers looking to correct their premium rates in light of upward pressure on their claims experience."

Medigap's slower 7.7% index move is a base effect, not mild trend. It sits on a much larger cost base, so the same dollar increase registers as a smaller percentage than it does against Medicare Advantage's lower starting point. For a plan sponsor, that arithmetic transfers directly: a retiree population skewing toward MAPD-equivalent subsidy design is pricing against a cost base compounding at roughly double the rate of a Medigap-default population, and employer group waiver plans sit inside the same redesigned Part D structure, so a retiree drug trend assumption built on a pre-redesign baseline is now wrong at the catastrophic layer.

What the $207,000 Buys, and How Firm Either Number Is

The gap is not a discount without a cost. Medicare Advantage plans bundle an out-of-pocket maximum, generally $3,000 to $9,000 depending on plan and network, that caps a bad claims year in a way Original Medicare has no equivalent for without Medigap layered on top. That is the structural fact Plan G is priced to solve: a fixed, predictable annual cost with essentially no catastrophic exposure, in exchange for a materially higher premium paid regardless of health status.

Medicare Advantage buys the opposite trade, with network restrictions, prior authorization and cost-sharing that varies by plan and year, the same adjustment Milliman cites as driving part of the 2026 increase. It also carries switching risk Medigap does not. Roughly 2.6 million people lost Medicare Advantage coverage in recent plan-year exits when carriers withdrew from markets, and about 440,000 moved to Medigap afterward, often at older ages and without the guaranteed-issue protections a 65-year-old has at first enrollment.

Neither figure is precise to the dollar, and Milliman publishes the ranges rather than leaving the reader to guess. The index discounts at a 3.0% assumed annual investment return, applies PubG-2016 mortality at the 50th percentile with the MP-2021 improvement scale adjusted through 2024, and runs medical trend at 4.8% over a 25-year horizon.

Move any one input and the headline moves further than the coverage choice does. A five-year shift in life expectancy alone changes the required savings by 32% to 42%. A one-point change in annual medical trend changes it by 13% to 15%. Health status matters more than either: above-average health needs 9% to 27% less than the base case, below-average health 13% to 41% more.

That variance is not a methodology flaw. It is the correct behavior of a present value compounding a mid-single-digit trend against a multi-decade mortality projection, and it means the $418,000 works as an order-of-magnitude anchor rather than a target. A longevity surprise inside the normal range moves the number by roughly a third before the Medigap-versus-Advantage decision is made at all.

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