EP Wealth advisors share important Medicare updates for 2026 to help you adjust your retirement strategy and manage medical care costs in the year ahead. Find an advisor near you.

5 Medicare Changes in 2026: How They Can Impact Your Financial Planning

Healthcare can be one of the most significant expenses you face in retirement. If you’re not prepared, rising premiums, deductibles, and prescription costs can affect your savings plan. Here, EP Wealth advisors share 2026 Medicare policy updates to help you plan ahead and adjust your retirement planning strategy if needed.

1. Premium and Deductible Increases for Parts A and B

The Centers for Medicare & Medicaid Services (CMS) announced the 2026 Medicare premiums, deductibles, and coinsurance amounts in November 2025. Costs have increased modestly, reflecting overall healthcare inflation and utilization trends.

Part A covers inpatient hospital care, skilled nursing facility care, and some home health services. In 2026:

• The hospital deductible will rise to $1,736, up $60 from 2025.
• Hospital coinsurance for days 61–90 will increase to $434 per day, while lifetime reserve days rise to $868 per day.
• Skilled nursing facility coinsurance will increase to $217 per day (up from $209.50).

Part B covers physician services, outpatient care, medical equipment, and preventive services.

• The standard monthly premium increases from $185.00 in 2025 to $202.90 in 2026.
• The annual Part B deductible rises from $257 to $283.

These higher costs mean retirees should anticipate slightly higher healthcare-related cash flow needs in 2026.

2. Part B Monthly Adjustments for High-Income Beneficiaries

High-income Medicare beneficiaries will again face income-related monthly adjustment amounts (IRMAA) for Part B premiums in 2026. These adjustments are based on 2024 modified adjusted gross income (MAGI).

• Individuals earning up to $109,000 (or $218,000 for married couples filing jointly) will pay the standard $202.90 monthly premium.
• Above those thresholds, Part B premiums range roughly from $284.10 to $689.90 per month, depending on income.

This makes tax and withdrawal planning critical. Managing income through strategies such as Roth conversions, careful capital gains timing, or withdrawal sequencing may help some individuals stay within lower IRMAA brackets, which can reduce the likelihood of higher premium charges.

3.$2,100 Out-of-Pocket Spending Cap for Prescriptions

The 2025 introduction of a $2,000 annual cap on out-of-pocket prescription costs continues in 2026, with a slight increase to $2,100 due to inflation indexing.

Here’s how it works in 2026:

• Deductible phase: You pay 100% of drug costs up to your plan’s deductible (up to $615).
• Initial coverage phase: You typically pay cost-sharing (often coinsurance) until you reach the $2,100 cap.
• After $2,100: You pay $0 for covered Part D prescriptions for the rest of the year.

The cap applies to covered medications under Part D and represents a major cost safeguard for retirees who rely on multiple or high-cost prescriptions.

4. No More ‘Donut Hole’ Coverage Gap

The donut hole was a phase in Medicare Part D where beneficiaries temporarily paid a larger share of their prescription drug costs after total drug spending reached a certain level. Many people experienced a sudden jump in out-of-pocket costs during this phase, which made annual prescription spending harder to predict.

With the redesigned Part D benefit, this separate gap no longer exists. Instead, Medicare now uses a straightforward three-step structure: a deductible phase, an initial coverage phase, and then full coverage for covered drugs once you reach the out-of-pocket cap.

In 2026, once your out-of-pocket drug spending reaches $2,100, you will not pay anything for covered Part D medications for the rest of the year. This structure removes the surprise cost increases that the donut hole created and makes annual drug expenses easier to plan for.

5. Medicare Prescription Payment Plan

The Medicare Prescription Payment Plan, introduced in 2025, continues into 2026 and offers beneficiaries the option to spread out their drug payments throughout the year rather than paying large amounts at once.

If you opt in:

• You’ll continue to pay your Part D plan premium.
• You’ll receive a monthly bill from your plan for your share of prescription costs instead of paying directly at the pharmacy counter.

While this plan doesn’t reduce total costs, it was designed with the aim of making budgeting easier and helping prevent unexpectedly large pharmacy bills. This is an especially useful feature for retirees living on fixed income or managing withdrawals from investment accounts.

Additional Medicare Updates for 2026: Drug Price Negotiation and Part D Restructuring

Several provisions of the Inflation Reduction Act (IRA) take full effect in 2026, marking an important shift in how Medicare handles prescription costs.

Medicare Drug Price Negotiation Program

Starting in 2026, Medicare will begin negotiating prices directly for a limited number of high-cost prescription drugs. This Drug Price Negotiation Program is expected to lower prices for some widely used medications, with additional drugs added in future years.

Part D Redesign and Cost Sharing

The Part D benefit has been fully restructured under the IRA to rebalance how costs are shared between Medicare, plan sponsors, and drug manufacturers. The result should be:

• Greater price stability for beneficiaries
• More predictable plan premiums
• Reduced out-of-pocket exposure for those with high drug costs

High-Income Part D Surcharges

Just like Part B, Part D premiums for higher-income beneficiaries include a small IRMAA surcharge. In 2026, surcharges range from $14.50 to $91 per month, based on income brackets starting at $109,000 (individual) or $218,000 (joint).

Together, these updates continue Medicare’s effort to make prescription costs more predictable and affordable while balancing program funding.

Plan Ahead with Professional Guidance

Accounting for healthcare expenses — including annual Medicare adjustments — is essential to maintaining a strong retirement plan. As costs shift and new rules take effect, your financial advisor can help you:

• Reassess projected medical spending
• Adjust your income strategy to manage IRMAA exposure
• Evaluate Part D plan options and coverage changes
• Integrate healthcare expenses into your broader retirement budget

Contact EP Wealth and connect with an advisor who can help you navigate these updates and keep your retirement plan on track.

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