A sharp divide in U.S. healthcare costs is set to emerge in 2026, leaving some Americans with significant savings while others face higher premiums and fewer coverage options.
Older adults on Medicare are expected to benefit from lower prescription drug costs as the first federally negotiated prices take effect. Meanwhile, millions of people who rely on Affordable Care Act (ACA) plans, or Medicaid, may see their costs rise, or their coverage become less certain, following policy changes enacted by the Trump administration and Republican lawmakers.
“These changes create a clear split,” said Larry Levitt, executive vice president for health policy at KFF, a nonpartisan health research organization. “If you’re on Medicare, there’s some good news. If you’re on the ACA or Medicaid, there may be difficult times ahead.”
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Medicare Drug Prices: Long-Awaited Relief for Seniors
Beginning January 1, 2026, Medicare beneficiaries will see the first results of the Inflation Reduction Act (IRA), signed into law by President Joe Biden in 2022. For the first time, Medicare will implement negotiated prices for some of its most expensive prescription drugs.
The initial round covers 10 high-cost medications used by nearly 9 million older Americans, including blood thinners Eliquis and Xarelto, as well as diabetes drugs Jardiance and Januvia.
According to a recent AARP analysis, out-of-pocket costs for these medications are expected to drop by more than 50% on average next year, with seven of the drugs costing less than $100 per month. The Centers for Medicare & Medicaid Services estimates Medicare enrollees will collectively save $1.5 billion in out-of-pocket costs in 2026.
The IRA also introduced several additional consumer protections:
- A $2,000 annual cap on out-of-pocket prescription drug spending in 2025, rising slightly to $2,100 in 2026
- A $35 monthly cap on insulin costs, implemented in 2023
“This is truly a historic win for millions of seniors,” said Leigh Purvis, prescription drug policy principal at the AARP Public Policy Institute.
A Real-Life Impact: One Senior’s Story
For Tom Howie, an 81-year-old retiree in Flint, Michigan, the changes have already made a significant difference.
Howie, who has a long history of heart disease and underwent quadruple bypass surgery in 1997, previously spent up to $8,000 out of pocket each year on prescription medications before reaching Medicare’s catastrophic coverage threshold.
This year, he reached the new $2,000 cap by May.
Living on Social Security and limited retirement savings, Howie currently pays about $121 for a three-month supply of Eliquis. He hopes that the cost will fall further once negotiated prices take effect.
“It’s a big difference,” Howie said. “I basically live on Social Security, with some help from my 401(k). Every dollar matters.”
Unintended Consequences of Drug Pricing Reform
While the Inflation Reduction Act has delivered meaningful savings, it has also produced some unintended side effects, according to health policy experts.
One provision penalizes drugmakers for raising prices too aggressively year over year. As a result, some pharmaceutical companies are setting higher prices when launching new medications.
A report from the Institute for Clinical and Economic Review found that the average net launch price of 154 new drugs increased 51% between 2022 and 2024, even after adjusting for inflation and discounts. The list included high-profile treatments such as Leqembi for early Alzheimer’s disease and Casgevy, a gene therapy for sickle cell disease.
“There’s little reason to believe this trend will reverse soon,” said Richard Frank, a senior fellow at the Brookings Institution. “At least not until policymakers address it directly.”
ACA and Medicaid: Rising Costs and Growing Uncertainty
While Medicare beneficiaries see relief, people covered through the Affordable Care Act and Medicaid face a far more uncertain future.
Enhanced ACA tax credits that helped keep premiums affordable are set to expire after Republicans in Congress declined to extend them. Combined with insurer rate increases, premiums could rise by an average of 114% for some enrollees in 2026, according to KFF.
Early enrollment data suggest that many consumers are already dropping ACA coverage or switching to cheaper plans with higher deductibles.
At the same time, changes approved under President Trump’s “One Big Beautiful Bill” will significantly alter Medicaid funding. Starting in January, states will lose a key financial incentive to expand Medicaid, leaving millions of low-income adults in 10 states stuck in a coverage gap—earning too much to qualify for Medicaid but too little to afford ACA plans.
Even broader Medicaid changes, including work requirements, are scheduled to take effect in 2027.
“That’s going to be one of the biggest shifts we’ll see,” said Stacie Dusetzina, a health policy professor at Vanderbilt University. “More people will lose access to care, leading to higher medical debt and more uncompensated care for hospitals.”
Trump Administration Drug Deals: A Partial Offset?
Some Americans outside Medicare could still see modest drug cost reductions through deals brokered by the Trump administration.
Trump has pursued a “most favored nation” pricing strategy, aiming to align U.S. drug prices with those paid in other wealthy countries. In May, he signed an executive order directing federal agencies to pursue the approach.
Since then, the administration has reached agreements with 14 pharmaceutical companies, offering tariff relief in exchange for lower prices through direct-to-consumer programs and reduced costs for certain government purchases. A new website, TrumpRx.gov, links consumers to these direct-pay options.
One of the most significant agreements involved Novo Nordisk and Eli Lilly, which lowered out-of-pocket prices for the weight loss drugs Wegovy and Zepbound. The deal also reduced what Medicare and Medicaid pay for the drugs, saving taxpayer dollars.
Still, experts caution that these deals rely on voluntary cooperation from drugmakers.
“Unlike the Inflation Reduction Act, this approach isn’t written into law,” Levitt said. “If the leverage disappears, companies could raise prices again.”
Dusetzina added that even discounted cash prices may remain out of reach for many.
“They’re lower prices, but not necessarily affordable ones,” she said. “If someone loses insurance because subsidies expire, it’s unlikely they’ll be able to pay hundreds of dollars out of pocket for medications.”
What Comes Next
There remains a possibility that Congress could revive ACA subsidies. Although Republican leaders blocked an extension this year, a group of House Republicans joined Democrats to force a vote in 2026.
If lawmakers reach an agreement, the subsidies could be applied retroactively to January 1, with a new enrollment period allowing people to regain coverage.
Frequently Asked Questions
What is changing in U.S. health care costs in 2026?
In 2026, health care costs will diverge significantly depending on coverage type. Medicare beneficiaries are expected to see lower prescription drug costs due to negotiated prices, while many people on Affordable Care Act (ACA) plans or Medicaid may face higher premiums, reduced subsidies, or loss of coverage.
Who will benefit from lower drug prices?
People enrolled in Medicare will benefit the most. Starting January 1, 2026, negotiated prices will apply to 10 of Medicare’s most expensive prescription drugs, significantly reducing out-of-pocket costs for millions of seniors.
Which drugs are included in Medicare price negotiations?
The first group includes 10 high-cost medications, such as Eliquis, Xarelto, Jardiance, and Januvia. These drugs are commonly used to treat heart disease, diabetes, and other chronic conditions.
How much can Medicare beneficiaries save?
On average, out-of-pocket costs for the negotiated drugs are expected to drop by more than 50%. Total savings for Medicare enrollees are projected to reach $1.5 billion in 2026. Additionally, annual out-of-pocket drug spending is capped at $2,100.
Why are ACA health insurance premiums expected to rise?
Enhanced ACA tax credits that helped lower monthly premiums are expiring after Congress declined to extend them. When combined with insurer rate increases, some enrollees could see premiums rise by more than 100%.
What does this mean for Medicaid coverage?
Funding changes approved under President Trump’s legislation reduce incentives for states to expand Medicaid. As a result, low-income adults in states that have not expanded Medicaid may remain in a coverage gap, leaving them uninsured.
Conclusion
The year 2026 will mark a turning point in the U.S. health care system, one defined less by universal change than by widening disparities. For millions of seniors on Medicare, long-sought reforms are finally delivering relief through lower drug prices and capped out-of-pocket costs. These changes represent one of the most significant federal interventions in prescription drug pricing in decades.
