Prepare Now: Medicare Costs Are Set to Jump in 2026—Here’s Your Game Plan

Introduction:

If you are a Medicare beneficiary or planning for your retirement, you need to know about some significant cost increases projected for 2026. The Centers for Medicare and Medicaid Services (CMS) has forecast one of the largest Part B premium increases in years, alongside rises in deductibles and other out-of-pocket costs.

For retirees on a fixed income, every dollar matters. This article breaks down the key changes and, more importantly, gives you actionable financial strategies to prepare now—especially during the current Medicare Open Enrollment period (Oct. 15 – Dec. 7).

The Key Projected Cost Hikes for 2026

These estimates are critical for your retirement budget:

1. Medicare Part B Premium: The standard monthly premium is expected to jump from $185 to approximately **$206.50**, an increase of 11.6%. The Part B annual deductible is also projected to increase from $257 to **$288**.

2. Part D Prescription Drug Costs: The base premium for Part D is estimated to rise by about 6%, and the maximum annual deductible is projected to increase from $590 to **$615**.

3. The Out-of-Pocket Cap (The Good News!): The maximum amount you will pay out-of-pocket for covered Part D drugs will be capped at $2,100 for the year, a small increase from 2025's $2,000 cap but a major protection compared to past years.

4. IRMAA Surcharges: Higher-income beneficiaries who pay the Income-Related Monthly Adjustment Amount (IRMAA) will see their surcharges increase for both Part B and Part D.

These increases are being driven by rising healthcare costs, an increase in beneficiaries, and growing drug prices.

Four Financial Strategies You Can Use to Lower Your Costs

You don't have to simply accept these rising costs. As your financial advisor, Renner Financial Group recommends these proactive steps:

1. Review Your Coverage During Open Enrollment (Oct. 15 – Dec. 7)

Medicare’s Annual Enrollment Period is your chance to fight back against rising costs. Don't let your plan auto-renew!

• Compare All Options: Use Medicare's Plan Finder tool to check all available options in your area, including new Medicare Advantage (Part C) plans. While Original Medicare costs are rising, the average premium for Medicare Advantage plans with drug coverage is projected to decrease slightly for 2026.

• Check Your Medigap Policy: If you have Original Medicare and a Medigap policy, shop around. Even small premium differences between companies can save you hundreds a year, since the core benefits of the same Medigap letter plan are standardized.

2. Actively Try to Lower Your Future IRMAA

Your IRMAA surcharge in 2026 is based on your Modified Adjusted Gross Income (MAGI) from your 2024 tax return (the one you filed this year). If you are close to an IRMAA income threshold, certain strategies can help lower your future taxable income:

• Qualified Charitable Distributions (QCDs): If you are age 70½ or older, you can donate directly from your Traditional IRA to charity. This amount reduces your MAGI and can count toward your Required Minimum Distribution (RMD) without being taxed.

• Strategically Time Roth Conversions: Converting funds from a Traditional IRA to a Roth IRA creates a taxable event that counts as income. Carefully plan Roth conversions over multiple years to avoid having one large conversion year trigger a higher IRMAA bracket two years later.

• Appeal a Reduction: If you have had a "life-changing event" like retirement, the death of a spouse, or reduced work hours, you can apply to the Social Security Administration to have your IRMAA reduced.

3. Search for Extra Help or Assistance Programs

If you have limited income and resources, you may qualify for programs that can significantly reduce your costs.

• Extra Help: This is a federal program that subsidizes Part D prescription drug costs, eliminating premiums and deductibles for those who qualify.

• Medicare Savings Programs (MSPs): These state programs can help pay for Part B premiums, deductibles, and co-insurance.

4. Factor Health Costs into Your Overall Budget

A potential increase of $21.50 per month for your Part B premium may seem small, but it adds up quickly on a fixed income. Make sure your overall retirement budget accounts for a few hundred dollars more in annual healthcare expenses starting next year.

Need a Personalized Plan?

Don't navigate these complex changes alone. At Renner Financial Group, we help novice investors and retirees align their investments and withdrawal strategies with their healthcare costs to ensure a confident retirement - contact us to develop your personalized plan now.