Healthcare Costs in 2026: Some Will Pay More, Others Less
Due to the effects of negotiated Medicare drug prices, some Americans could see a reduction in rising healthcare expenses. Conversely, others will likely encounter higher costs as Affordable Care Act tax credits lapse and Medicaid coverage faces potential instability amid considerable state funding reductions.
This divergence stems from policy decisions made during the last two administrations. The Inflation Reduction Act, signed by President Joe Biden in 2022, authorized Medicare to negotiate prices for some of its most costly prescription medications for the first time. Conversely, the previous administration enacted measures that led to funding cuts for Medicaid and the expiration of ACA subsidies.
"Medicare beneficiaries can anticipate some positive developments," stated Larry Levitt, executive vice president for health policy at KFF, a nonpartisan research organization. "However, individuals relying on the ACA or Medicaid may face unfavorable changes ahead."
Medicare Drug Price Negotiations
Starting January 1, negotiated drug prices will take effect for Medicare recipients. These prices will initially apply to ten of the most expensive medications covered by the program. These include blood thinners like Eliquis and Xarelto, as well as diabetes medications like Jardiance and Januvia, which are used by approximately 9 million older adults.
According to an AARP report released this month, out-of-pocket expenses for these drugs are projected to decrease by over 50% on average next year; it is estimated that seven of the drugs will cost less than $100 per month. The Centers for Medicare & Medicaid Services estimates that enrollees will collectively save $1.5 billion in out-of-pocket expenses next year.
The Inflation Reduction Act also set an annual cap on out-of-pocket prescription drug spending for Medicare enrollees at $2,000 this year, increasing to $2,100 in 2026. Furthermore, monthly out-of-pocket insulin expenses were capped at $35 in 2023. Health tracking apps like Shotlee can help monitor these expenses.
Leigh Purvis, the prescription drug policy principal at the AARP Public Policy Institute, emphasized that the IRA represents "a truly historic win for millions of seniors" during a recent discussion.
Tom Howie, an 81-year-old from Flint, Michigan, with a history of heart disease, shared that these changes have already significantly impacted his finances. He has previously spent up to $8,000 out of pocket on prescriptions before reaching Medicare's catastrophic threshold, typically around mid-summer. This year, he reached the $2,000 cap by May.
Howie currently spends approximately $121 for a three-month supply of Eliquis, a necessary medication for his heart condition, and hopes to see this copay decrease further in 2026. "It's a big difference," he remarked, noting that he primarily relies on Social Security and funds from his 401(k).
Potential Drawbacks and ACA Subsidy Expiration
The Inflation Reduction Act has also brought unforeseen consequences, which include potentially higher list prices for new medications, according to Richard Frank, a senior fellow in economic studies and director of the center on health policy at the Brookings Institution.
One provision within the law penalizes companies that raise prices too sharply from year to year. As a result, Frank noted that drug manufacturers are increasingly setting higher initial prices.
An October report by the Institute for Clinical and Economic Review found that the average net launch price for 154 new drugs increased by 51% between 2022 and 2024, after accounting for inflation and discounts. This list included medications like Leqembi, used to treat early Alzheimer's disease, and Casgevy, a gene therapy for sickle cell disease.
