2026 will see a major health care divide.
Some Americans may finally be able to take a break from rising prices as… first negotiated drug prices under Medicare take effect. Others will end up paying more because Affordable Care Act tax breaks set to expire And Medicaid coverage is becoming increasingly uncertain amid sharp cuts in government funding.
This gap is a result of decisions made by the last two administrations. In 2022, President Joe Biden signed Inflation Reduction Actgiving Medicare the power to negotiate prices for some of the most expensive prescription drugs for the first time. And in July, President Donald Trump signed a “big, beautiful bill” that cut Medicaid funding and did not extend ACA subsidies.
“If you're on Medicare, there's good news,” said Larry Levitt, executive vice president for health policy at KFF, a nonpartisan research group. “If you are on the ACA or Medicaid, you may be in for some bad news.”
Medicare drug costs
On January 1, the first negotiated drug prices for people on Medicare will go into effect. These prices will apply to the 10 most expensive drugs in the program, including the blood thinners Eliquis and Xarelto, and the diabetes drugs Jardines and Januvia. Almost 9 million older people use these drugs.
According to report released this month by AARP; seven medications will cost less than $100 per month. Separate assessment Participants in Centers for Medicare and Medicaid Services projects will save $1.5 billion in out-of-pocket costs next year.
The Inflation Relief Act also capped annual prescription drug costs for Medicare beneficiaries at $2,000 this year, a limit that will rise to $2,100 in 2026. And in 2023, out-of-pocket spending on insulin was capped at $35 per month.
The IRA “truly is a historic victory for millions of seniors,” Lee Purvis, director of prescription drug policy at the AARP Public Policy Institute, said during a recent call with reporters.
Tom Howey of Flint, Michigan, said the changes have already had a big impact.
The 81-year-old has a long history of cardiovascular disease, including multiple heart attacks that led to quadruple bypass surgery in 1997.
In past years, he spent about $8,000 out of pocket on prescriptions before reaching the so-called Medicare catastrophic threshold, which he typically reached around mid-summer. This year, it reached the $2,000 limit by May.
Howie, who lives on a fixed income, currently pays about $121 for a three-month supply of Eliquis, one of the medications he needs for his heart. He hopes the surcharge will drop even further in 2026.
“It's a big difference,” he said. “Basically, I just take Social Security and then I have some money from my 401(k).”
Of course, the Inflation Reduction Act was not all that positive. It also brought with it some unexpected downsides, including higher list prices for new drugs, said Richard Frank, a senior fellow for economic studies and director of the Brookings Institution's Center for Health Policy, a nonpartisan think tank.
One of the provisions of the law penalizes companies for raising prices too sharply from year to year.
As a result, Frank said, drug makers are increasingly charging higher prices from the start.
Report published in October non-profit research group of the Institute of Clinical and Economic Expertise. found that the average net launch price of 154 new drugs increased by 51% over three years, from 2022 to 2024, after accounting for inflation and discounts. The drugs included Lekembi, which is used to treat early-stage Alzheimer's disease, and Kasgevy, a gene therapy for sickle cell disease.
“I don't see any reason to believe that this won't continue, at least for a while, until people come up with some policy steps to address this problem,” Frank said.
Uncertainty over Obamacare and Medicaid
Actions by the Trump administration and Republican lawmakers have brought uncertainty to health care spending.
Expanded ACA subsidies that helped keep insurance premiums affordable are set to expire after congressional Republicans refused to renew them. According to the company, some people could pay an average of 114% more in insurance premiums when combined with insurers raising rates next year. KFF analysis, health research group.
Already, early enrollment data provided by state health officials show that more people are likely to drop ACA insurance or switch to cheaper plans in 2026 compared to this time last year.
Changes to Medicaid funding approved as part of Trump's “One Big Beautiful Bill,” including ending the financial incentive for states to expand Medicaid, are scheduled to take effect in January. That means that in the 10 states that haven't expanded Medicaid, low-income adults will remain in the “coverage gap,” Levitt said, meaning they earn too little to pay for ACA insurance but are not eligible for Medicaid.
More sweeping changes to Medicaid, such as work requirements, are scheduled to take effect in 2027.
“This will be one of the biggest changes we'll see,” said Stacy Dusetsina, a professor of health policy at Vanderbilt University in Nashville, Tennessee. “More and more people will not have access to health care, and this will theoretically lead to more uncompensated care from hospitals and doctors, as well as more medical debt for people if they actually need to go and get care.”
Pharmaceutical offers
However, it is possible that people not on Medicare could see lower drug prices thanks to the Trump administration's efforts.
Trump has pushed to bring U.S. prescription drug costs in line with the lowest prices in other rich countries, signing an executive order in May directing federal officials to implement a “most favored nation” pricing model. Since then the administration entered into deals with 14 pharmaceutical companieswhich offered a combination of lower prices—through direct-to-consumer offerings and reduced federal government fees for certain drugs—in exchange for tariff breaks.
New site, TrumpRx.govwill connect people with drug manufacturers' direct payment websites.
In November, the president struck perhaps his biggest deal yet, this time with Novo Nordisk and Eli Lilly, makers of the weight-loss drugs Wegovy and Zepbound, to lower the cost of GLP-1 drugs for people who pay out of pocket without using insurance. The deal also lowered the price that Medicare and Medicaid pay for drugs, saving the federal government and subsequently taxpayers money.
Levitt said he still has some concerns about the strategy, noting that unlike the Inflation Relief Act, which codified the pricing provision into law, Trump's approach relies on voluntary deals with drugmakers.
“President Trump used the threat of tariffs as leverage against pharmaceutical companies,” Levitt said. “If this threat goes away in the future, there will be nothing to stop pharmaceutical companies from raising prices again.”
The lower prices offered through TrumpRx may still not make some drugs more affordable for everyone, Dusetsin said.
“These are lower prices for people paying cash, but still not low prices,” Dusetsina said. “This is really important. If you can't afford to keep your health insurance because you've lost access to health insurance subsidies, then it's unlikely you'll have the resources to pay for your medications out of pocket through TrumpRx.”
Levitt said Americans may still have hope for the ACA plans if Congress reaches an agreement to extend the subsidies next year.
Republicans stood firm against Democratic attempts 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-Louisiana, and teamed up with Democrats to push for a vote sometime next year.
“They could be retroactive to Jan. 1,” Levitt said, “and there could be a new registration period for people to sign up.”
