Choosing Medicare coverage often comes down to one key question: the cost to have vs cost to use. There are two sides to that answer: the cost to have a plan, and the cost to use it. Ultimately, understanding the difference helps you decide if a Medicare Supplement (Medigap) or a Medicare Advantage plan fits your budget and health needs.
Cost to Have vs Cost to Use: Definitions in Plain Language
- Cost to Have: Your monthly premium. This is the price you pay every month to keep your plan active.
- Cost to Use: The money you pay when you see the doctor or go to the hospital. This includes deductibles, copays, and coinsurance.
What Drives Monthly Premiums: Cost to Have vs Cost to Use
- Medigap: Higher monthly premium. However, in exchange, you eliminate or reduce most use-costs.
- Medicare Advantage: Often a lower monthly premium, sometimes even $0. But you pay more when you use services.
What Drives Use-Costs: Cost to Have vs Cost to Use
- Copays: A fixed amount you pay when you visit the doctor, specialist, or hospital.
- Deductibles: For example, deductibles are what you must pay out-of-pocket before coverage begins.
- Coinsurance: A percentage of the bill you’re responsible for.
The Out-of-Pocket Maximum on Medicare Advantage
Medicare Advantage plans include a yearly limit, called the Maximum Out-of-Pocket (MOOP). Once you hit this amount, the plan covers 100% of approved costs for the rest of the year. In 2025, the maximum allowed out-of-pocket limit for Medicare Advantage is $9,350 for in-network services (KFF, GoHealth, Medicare Interactive).
Original Medicare has no out-of-pocket maximum. Therefore, people often add Medigap.
Medigap’s Role in Reducing Use-Costs
Medigap plans step in to cover what Medicare doesn’t. Depending on the letter plan, Medigap can pay your Part A deductible, Part B coinsurance, and even excess charges. That means your out-of-pocket costs when you use care stay low or disappear entirely.
Hospital Stay Example
For example, let’s walk through a simple inpatient stay.
- Scenario: 5 days in the hospital.
Medicare Advantage Example:
- Day 1–5: $150 copay per day
- Total = $750 out-of-pocket
Original Medicare Only:
- $1,676 Part A deductible (2025) owed in full CMS
Original Medicare + Medigap Plan G:
- $0 owed for hospital stay (after Part B deductible is met)
This shows how different the ‘cost to use’ can look depending on the coverage.
Decision Checklist: Cost to Have vs Cost to Use
Finally, ask yourself these cost-to-have vs cost-to-use questions:
- Am I more comfortable with a higher monthly premium to avoid surprise bills?
- Would I rather pay less each month and risk paying more when I use services?
- Do I want the protection of a yearly out-of-pocket maximum, or the predictability of Medigap?
- Do I travel often or live in more than one state each year?
Related Reading
Costs are only part of the Medicare decision. If you want a bigger picture of what to review before making a choice, read my other post: Medicare 101: What to Know Before Choosing a Plan
Want More Clarity?
This article gave you the basics of “cost to have” versus “cost to use.” If you want a deeper look at how Medicare Advantage and Medicare Supplement compare across networks, referrals, hospital stays, and costs, check out my ebook: Guide To Medicare Choices.
It expands on everything here in plain language so you can make a confident choice.
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FAQ
Do all Medicare Advantage plans have a maximum?
Yes, every Medicare Advantage plan has a yearly out-of-pocket maximum.
Do Medigap plans pay Part B coinsurance?
Yes, most Medigap plans cover Part B coinsurance.
What about excess charges?
Only certain Medigap plans, like Plan G, cover excess charges if your doctor bills more than Medicare’s approved amount.
References section at the bottom:
- Kaiser Family Foundation: Medicare Advantage Premiums, Out-of-Pocket Limits, and More for 2025
- GoHealth: Medicare Out-of-Pocket Maximums
- Medicare Interactive: Maximum out-of-Pocket Limit
- CMS Fact Sheet: 2025 Medicare Parts A & B Premiums and Deductibles
This content is for educational purposes only and does not constitute official Medicare advice. I am not affiliated with Medicare or any government agency. For complete coverage options, visit Medicare.gov or call 1-800-MEDICARE.
Examples shared are general scenarios for educational purposes and do not reflect any specific individual or situation. This content does not provide plan recommendations or enrollment guidance.
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