In 2026, a significant division in American health care costs is expected to emerge, with contrasting implications for Medicare recipients and those reliant on the Affordable Care Act (ACA) and Medicaid. As price negotiations for certain Medicare drugs take effect, some beneficiaries stand to benefit greatly, while others may face escalating expenses due to the expiration of ACA tax credits and shifting Medicaid funding.
The anticipated changes stem largely from the actions of the Biden and Trump administrations. Under the Inflation Reduction Act signed by President Biden in 2022, Medicare gained the ability to negotiate prices for some of its most costly medications. Effective January 1, 2026, these negotiations will cover ten expensive drugs, including popular treatments such as Eliquis and Jardiance. Approximately 9 million older adults utilize these medications, and a report indicates that out-of-pocket expenses for these drugs could drop significantly, with an estimated average reduction of over 50%. Seven of the negotiated drugs are projected to cost less than $100 monthly once the changes are implemented.
For instance, beneficiaries are expected to save about $1.5 billion collectively in out-of-pocket costs in the upcoming year. Additionally, the Inflation Reduction Act introduced an annual cap on prescription drug spending for Medicare recipients, initially set at $2,000, increasing to $2,100 in 2026. Insulin costs have already been capped at $35 per month for Medicare users.
However, not all feedback has been entirely positive regarding the Inflation Reduction Act. It has also reportedly led to increased list prices for new medications, as drug companies adapt by setting initial prices higher to avoid penalties related to steep year-over-year price hikes. This phenomenon may result in new drugs entering the market at inflated prices, diminishing the intended savings for consumers.
Conversely, the situation for ACA and Medicaid beneficiaries appears more precarious. Enhanced ACA subsidies that have helped keep premiums in check are disappearing due to congressional inaction, which could lead to average premium increases of up to 114% when combined with insurance rate hikes for 2026. Early enrollment data suggests a trend where fewer individuals are maintaining ACA coverage, as many opt for less expensive plans or exit the system altogether.
On the Medicaid front, changes stemming from former President Trump’s legislative efforts are set to further complicate matters. New provisions will eliminate financial incentives for states to expand Medicaid, particularly impacting low-income adults in states that have not embraced expansion. As a result, many will remain in a coverage gap, unable to afford ACA plans but also ineligible for Medicaid assistance. Additionally, sweeping changes, including work requirements, are planned for 2027, leading to even greater access challenges for low-income individuals.
Despite these setbacks for some, efforts initiated during the Trump administration might help reduce drug costs for non-Medicare recipients. The former president initiated “most favored nation” pricing, aiming to align U.S. drug prices with those of other wealthy countries. Through various agreements with pharmaceutical companies, including notable deals that lowered costs for medications like those by Novo Nordisk and Eli Lilly, some consumers may benefit from reduced prices, especially those paying out of pocket.
Yet experts emphasize the limitations of these savings. Many individuals facing rising health insurance costs may struggle to afford medication even with these new arrangements. The hope remains for those relying on ACA plans, as there are discussions about reinstating the subsidies they previously relied on—a possibility that would hinge on Congress’s actions in the coming months.
