Health Care Costs Set to Shift in 2026: Some Americans Face Rising Expenses, Others See Relief
As 2026 approaches, Americans on different health coverage plans will experience diverging trends in health care costs. While some will benefit from historic cost reductions under Medicare, others relying on Affordable Care Act (ACA) marketplace plans and Medicaid may face higher expenses and increased uncertainty due to policy changes and funding cuts.
Medicare Brings Relief with Drug Price Negotiations
Starting January 1, 2026, Medicare will implement the first negotiated drug prices for some of its costliest prescription medications, a major provision of the Inflation Reduction Act passed under President Joe Biden in 2022. This landmark policy empowers Medicare to negotiate prices on 10 high-cost drugs, including widely used blood thinners like Eliquis and Xarelto, and diabetes medications such as Jardiance and Januvia. Nearly 9 million Medicare beneficiaries use these medications.
Analyses from AARP and the Centers for Medicare & Medicaid Services (CMS) project significant savings for Medicare enrollees, with out-of-pocket costs expected to drop by more than 50% on average for these drugs — many falling below $100 per month. Beyond negotiated pricing, the Inflation Reduction Act also caps annual out-of-pocket drug expenses at $2,100 in 2026 (up from $2,000 in 2025) and limits insulin costs to $35 per month, providing further financial protection for seniors and other Medicare users.
For individuals like Tom Howie, an 81-year-old heart disease patient from Flint, Michigan, these changes have already made a profound impact. Previously paying as much as $8,000 yearly on medications, Howie noted that thanks to recent reforms, his out-of-pocket spending has been capped much sooner in the year, with hopes that further reductions are on the horizon.
However, experts caution that the Inflation Reduction Act has also led to some unintended consequences. Drug manufacturers, deterred by penalties on sharp price increases, appear to be setting higher initial list prices for new medications, a trend observed in recent years and likely to continue until addressed by additional policy measures.
Rising Costs and Uncertainty for ACA and Medicaid Enrollees
Conversely, people covered by ACA marketplace plans and Medicaid face growing challenges. Subsidies that helped keep ACA premiums affordable during recent years are set to expire, as Congressional Republicans have declined to extend enhanced financial assistance. This expiration, combined with insurer rate hikes, could push average premiums up by as much as 114% for some consumers in 2026, according to analyses by the Kaiser Family Foundation (KFF).
Early enrollment data indicate that more Americans are either dropping ACA coverage or switching to lower-cost plans in response to rising prices. Without subsidy extensions, affordability remains a key concern for many.
Medicaid also confronts major funding shifts due to the 2023 “One Big Beautiful Bill” signed by former President Donald Trump, which ends federal incentives for states to expand Medicaid and imposes other cuts. Beginning in January 2026, these changes leave low-income adults in nonexpansion states stuck in a “coverage gap,” unable to afford ACA plans yet not qualifying for Medicaid. More restrictive Medicaid policies, such as work requirements, are expected to take effect in 2027, potentially reducing access further. Experts warn this could increase uncompensated care burdens on hospitals and lead to greater medical debt among vulnerable populations.
Pharmaceutical Industry Deals and Their Impact
In addition to policy shifts, the Trump administration has pursued efforts to lower prescription drug costs through voluntary agreements with pharmaceutical companies. By leveraging threats of tariffs and introducing a “most favored nation” pricing model aligned with prices in other wealthy countries, deals with 14 drugmakers have resulted in some lowered prices for consumers paying out of pocket.
Notably, agreements with Novo Nordisk and Eli Lilly reduced costs for GLP-1 weight loss drugs like Wegovy and Zepbound across Medicare, Medicaid, and cash-paying customers. A website, TrumpRx.gov, aims to help consumers access these discounted prices.
However, analysts express concern that these voluntary deals lack the binding force of legislation. If the threat of tariffs recedes, drugmakers could revert to raising prices aggressively. Moreover, lower prices for cash-paying patients may still be unaffordable for many who have lost access to insurance subsidies, limiting the practical help these deals can provide.
Looking Ahead: Potential Legislative Actions
Despite current challenges, there remains hope that Congress could extend ACA subsidies in 2026, potentially retroactively. Recent bipartisan efforts in the House, involving some Republicans breaking with party leadership, have set the stage for a vote on subsidy extensions early next year. Extending these subsidies could ease premium increases and improve coverage stability for millions.
In summary, 2026 will be a pivotal year for health care costs in the United States. Seniors on Medicare stand to benefit from historic drug price negotiations and cost caps, while individuals relying on ACA coverage and Medicaid face uncertainty and rising expenses due to expiring subsidies and funding cuts. Continued policy developments and legislative actions will determine how these divergent trends impact Americans across the health care spectrum.