A major health-care split is looming in 2026. Medicare beneficiaries will see the first negotiated drug prices take effect, while those on the Affordable Care Act and Medicaid may face higher costs as subsidies expire and state funding is cut.
Medicare Drug Prices Begin in 2026
Starting January 1, 2026, Medicare will apply negotiated prices to the 10 most expensive drugs in the program. The list includes blood thinners Eliquis and Xarelto and diabetes medications Jardiance and Januvia, used by nearly 9 million older adults.
According to a report released this month by AARP, the new prices are expected to reduce out-of-pocket costs for Medicare enrollees by more than 50 % on average. Seven of the drugs will cost less than $100 per month. The Centers for Medicare & Medicaid Services projects that enrollees will save $1.5 billion in out-of-pocket expenses next year.
The Inflation Reduction Act also capped annual out-of-pocket prescription spending for Medicare enrollees at $2,000 this year, a limit that will rise to $2,100 in 2026. In 2023, 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.
Real-World Impact for Seniors
Tom Howie, an 81-year-old Flint, Michigan resident, said the changes have already made a difference. He has a long history of heart disease, including multiple heart attacks that led to quadruple bypass surgery in 1997.
In previous years, he spent as much as $8,000 out of pocket on prescriptions before reaching Medicare’s catastrophic threshold, which he typically hit around mid-summer. This year, he reached the $2,000 cap by May.
Howie currently pays about $121 for a three-month supply of Eliquis, one of the drugs he needs for his heart. He hopes that the 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).”
Unexpected Drawbacks of the IRA
The Inflation Reduction Act is not without downside. It has also introduced higher list prices for new medications, according to Richard Frank, a senior fellow in economic studies and director of the center on health policy at the Brookings Institution.
One provision 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, 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.
Uncertainty for Obamacare and Medicaid
Moves by the Trump administration and Republican lawmakers have added 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.
Early enrollment data from state health officials already 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.”
Trump’s Direct-Pay Drug Deals
Despite the uncertainty, people who aren’t on Medicare could still see drug costs go down, driven by efforts from the Trump administration. The president 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 pay 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.”
Limitations of Direct-Pay Savings
The lower costs offered through TrumpRx may still not make certain drugs affordable for everyone, 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.”
Hope for ACA Subsidy Extension
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.”
Key Takeaways
- Medicare beneficiaries will see negotiated drug prices starting January 2026, cutting out-of-pocket costs by more than 50 % on average.
- ACA subsidies are set to expire, potentially raising premiums by up to 114 % and pushing more people off coverage.
- Medicaid funding cuts will create coverage gaps in 10 non-expanded states, and work-requirement changes are slated for 2027.
The coming year will test whether the benefits of the Inflation Reduction Act for seniors outweigh the higher list prices for new drugs, while the fate of ACA subsidies and Medicaid funding will shape health-care access for millions of Americans.
