Medicare 2025/2026: Key Updates on Premiums, Deductibles, and Drug Costs

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Medicare underwent some of its most significant changes in decades during 2025, particularly regarding prescription drug costs. As we prepare for 2026, it is vital to understand how these changes affect your healthcare budget.

1. The $2,000 Out-of-Pocket Cap (The Big 2025 Change)

The most impactful update in 2025 was the introduction of a $2,000 annual cap on out-of-pocket costs for prescription drugs covered under Medicare Part D.

• What happened in 2025: For the first time, once you spent $2,000 on covered drugs, you paid $0 for the rest of the year. This eliminated the infamous “donut hole” (coverage gap).

• Looking at 2026: This $2,000 cap remains a permanent feature, though it may be adjusted slightly for inflation in future years.

2. Medicare Part B: Premiums and Deductibles

Medicare Part B covers doctor visits, outpatient care, and some preventive services. Most people have this premium deducted directly from their Social Security check.

The increase for 2026 is largely driven by projected healthcare price inflation and the cost of new specialty drugs.

3. Medicare Part A (Hospital Insurance)

While most people do not pay a premium for Part A (if they worked at least 10 years), the deductibles for hospital stays changed:

• In 2025: The inpatient hospital deductible was $1,676 per benefit period.

• In 2026: This deductible is rising to $1,748. This is the amount you pay before Medicare starts covering your hospital stay.

4. The “Medicare Prescription Payment Plan”

Introduced in 2025, this program—often called “Smooth Pay”—allows beneficiaries to spread their out-of-pocket drug costs over the course of the calendar year rather than paying a large amount all at once at the pharmacy. This has been a lifesaver for those taking high-cost medications early in the year.

5. Medicare Advantage (Part C) in 2026

If you are on a private Medicare Advantage plan, you may have noticed changes during the Open Enrollment period that just ended (Dec 7).

• Network Changes: Many plans adjusted their doctor networks in 2025 to manage the new $2,000 drug cap costs.

• Extra Benefits: Some plans have reduced “extra” perks (like gym memberships or grocery cards) to focus more on core medical coverage.

Key Takeaways for January 2026

1. Check your Social Security Statement: See how the $202.90 Medicare Part B premium affects your net monthly payment after the 2.8% COLA increase.

2. Review your Drug Formulary: Even with the $2,000 cap, ensure your specific medications are still covered by your plan in 2026.

3. New Drug Negotiations: 2026 marks the first year where the prices of the first 10 drugs negotiated by the government go into effect, which may further lower costs for popular medications like Eliquis and Jardiance.