Health care will get more expensive for some in 2026 – and cheaper for others

A major health care divide is coming in 2026.

Some Americans may finally catch a break on rising costs, as the first negotiated Medicare drug prices go into effect. Others will end up paying more, as Affordable Care Act tax credits expire and Medicaid coverage becomes more uncertain amid drastic cuts in state funding.

The divide is the result of decisions made by the last two administrations. In 2022, President Joe Biden signed the Inflation Reduction Act, which for the first time gave Medicare the authority to negotiate prices on some of its most expensive prescription drugs. And in July, President Donald Trump signed the “big, beautiful bill,” which slashed funding for Medicaid and didn’t extend ACA subsidies.

“If you’re on Medicare, there’s some good news,” said Larry Levitt, executive vice president for health policy at KFF, a nonpartisan research group. “If you’re on the ACA or Medicaid, it may be bad news ahead for you.”

Starting Jan. 1, the first negotiated drug prices will go into effect for people with Medicare. These prices will apply to the 10 costliest drugs in the program, including the blood thinners Eliquis and Xarelto and the diabetes drugs Jardiance and Januvia. The drugs are used by nearly 9 million older adults.

Out-of-pocket costs for the negotiated drugs are estimated to fall next year by more than 50%, on average, according to a report published this month by AARP; seven of the drugs will cost less than $100 per month. A separate estimate from the Centers for Medicare & Medicaid Services projects enrollees will save $1.5 billion in out-of-pocket costs next year.

The Inflation Reduction Act also capped annual out-of-pocket prescription drug spending for Medicare enrollees at $2,000 this year, a limit that will rise to $2,100 in 2026. And in 2023, out-of-pocket insulin costs were capped at $35 a month.

The IRA “is truly a historic win for millions of seniors,” Leigh Purvis, the prescription drug policy principal at the AARP Public Policy Institute, said on a recent call with reporters.

Tom Howie, of Flint, Michigan, said the changes have already had a big impact.

The 81-year-old has a long history of heart disease, including multiple heart attacks that led to quadruple bypass surgery in 1997.

In past years, he spent as much as $8,000 out of pocket on prescriptions before reaching Medicare’s so-called catastrophic threshold, which he typically hit around mid-summer. This year, he reached the $2,000 cap by May.

Howie, who lives on a fixed income, currently pays around $121 for a three month supply of Eliquis, one of the drugs he needs for his heart. He hopes that copay will fall further in 2026.

“It’s a big difference,” he said. “I just get my Social Security, basically, and then I have some money from my 401(k).”

To be sure, the Inflation Reduction Act hasn’t been all upside. It’s also brought some unexpected drawbacks, including higher list prices for new medications, said Richard Frank, a senior fellow in economic studies and director of the center on health policy at ​​the Brookings Institution, a nonpartisan think tank.

One provision in the law penalizes companies for raising prices too sharply from year to year.

As a result, Frank said, drugmakers are increasingly setting prices higher from the outset.

A report published in October by the nonprofit research group the Institute for Clinical and Economic Review found that the average net launch price for 154 new drugs increased 51% over three years, 2022 to 2024, after accounting for inflation and discounts. The drugs on the list included Leqembi, which is used to treat early Alzheimer’s disease, and Casgevy, a gene therapy for sickle cell disease.

“I don’t see any reason to believe that’s not going to at least continue for a bit, until people figure out some sort of policy moves to address that,” Frank said.

Moves by the Trump administration and Republican lawmakers have brought uncertainty to health care costs.

Enhanced ACA subsidies that helped keep premiums affordable are expiring after Republicans in Congress declined to extend them. Some people could pay up to 114% more, on average, in premiums when combined with rate increases by insurers next year, according to an analysis by KFF, a health care research group.

Already, early enrollment data provided by state health officials show that more people appear to be walking away from ACA coverage or switching to cheaper plans for 2026 compared to this time last year.

Changes to Medicaid funding approved under Trump’s “One Big Beautiful Bill,” including the end of a financial incentive for states to expand Medicaid, are set to take effect in January. That means that in the 10 states that haven’t expanded Medicaid, low income adults will remain in a “coverage gap,” Levitt said, meaning they make too little to pay for ACA coverage but aren’t eligible for Medicaid.

More sweeping Medicaid changes, such as work requirements, are scheduled to go into effect in 2027.

“That’s going to be one of the biggest changes we’re going to see,” said Stacie Dusetzina, a health policy professor at Vanderbilt University in Nashville, Tennessee. “More and more people won’t have any access to care, and that will theoretically lead to more uncompensated care for hospitals and doctors and more medical debt for people if they actually need to go and get care.”

Still, it’s possible that people who aren’t on Medicare could see drug costs go down, driven by efforts from the Trump administration.

Trump has pushed to align the cost of prescription drugs in the U.S. with the lowest prices in other wealthy countries, signing an executive order in May directing federal officials to implement the “most favored nation” pricing model. Since then, the administration has struck deals with 14 pharmaceutical companies, which have offered a combination of lower prices — through direct-to-consumer offers and charging the federal government less for certain drugs — in exchange for tariff relief.

A new website, TrumpRx.gov, will connect people to drugmakers’ direct-pay websites.

In November, the president struck arguably his largest deal, this one with Novo Nordisk and Eli Lilly — the makers of the weight loss drugs Wegovy and Zepbound — to lower the cost of the GLP-1 medications for people who pay out of pocket without using insurance. The deal also reduced the price Medicare and Medicaid pays for the drugs, a move that saves the federal government, and subsequently taxpayers, money.

Levitt said he still has some concerns about the strategy, noting that unlike the Inflation Reduction Act — which codified the pricing provision into law — Trump’s approach relies on voluntary deals with drugmakers.

“President Trump has been using the threat of tariffs as leverage with drug companies,” Levitt said. “If that threat goes away in the future, there won’t be anything holding drug companies back from raising prices again.”

The lower costs offered through TrumpRx may still not make certain drugs more affordable for all, Dusetzina said.

“They’re lower prices for people paying cash, but still not low prices,” Dusetzina said. “That’s really key. If you can’t afford to keep your health insurance because you’ve lost access to health insurance subsidies, then it seems unlikely that you would have the resources to pay out of pocket for drugs through TrumpRx.”

Levitt said there may still be hope for Americans on ACA plans if Congress reaches a deal to extend subsidies next year.

Republicans held firm against Democrats’ efforts to extend the subsidies by the end of the year — but not before a key group of House Republicans broke ranks with Speaker Mike Johnson, R-La., and teamed up with Democrats to force a vote sometime next year.

“They could be retroactive to Jan. 1,” Levitt said, “and there could be a new enrollment period to allow people to sign up.”