Just as retirees were celebrating Social Security's 2.8% cost-of-living adjustment for 2026, Medicare delivered sobering news: Part B premiums are increasing by $17.90 per month, pushing the standard premium to $202.90—the highest in the program's history.
Breaking Down the 2026 Medicare Changes
The Centers for Medicare & Medicaid Services released the 2026 Medicare cost figures, and they represent significant increases across multiple categories:
- Monthly Part B premium: $202.90 (up from $185.00 in 2025)
- Annual Part B deductible: $283 (up $26 from $257)
- Dollar increase: $17.90 per month / $214.80 per year
- Percentage increase: 9.7%
For context, this 9.7% premium increase significantly outpaces both general inflation and the 2.8% Social Security COLA, meaning many retirees will see their net monthly income decline in real terms.
Why Premiums Are Rising So Fast
Several factors are driving the premium surge:
Expensive New Drugs
Medicare Part B covers drugs administered in doctor's offices and outpatient settings, including expensive infusion therapies and biologics. As more costly specialty drugs enter the market—particularly in oncology and rare disease treatment—Part B spending increases accordingly.
Rising Healthcare Utilization
The aging Baby Boomer generation is driving increased demand for healthcare services. More enrollees means more claims, spreading costs across the premium base.
Provider Payment Increases
Physician and hospital payment rates under Medicare are adjusted annually, and recent increases have pushed Part B costs higher.
The Social Security Offset Problem
Here's the math that will frustrate millions of retirees:
- Average Social Security benefit in 2025: $1,976/month
- 2.8% COLA increase: +$55.33/month
- Medicare Part B increase: -$17.90/month
- Net increase: $37.43/month
For retirees who automatically have Part B premiums deducted from their Social Security checks—the vast majority—the COLA increase will be partially offset by higher Medicare costs. Instead of a $55 monthly raise, they'll see closer to $37.
"The Medicare premium increase effectively gives back a third of the COLA to the healthcare system. Retirees on fixed incomes are running in place."
— Analysis of 2026 retirement cost increases
High-Income Surcharges: IRMAA Gets Worse
Retirees with higher incomes face an additional challenge: Income-Related Monthly Adjustment Amounts (IRMAA) that can multiply Part B costs substantially.
IRMAA is determined by your modified adjusted gross income from two years prior. For 2026 (based on 2024 income), the surcharges are:
- Individual income up to $106,000: Standard premium ($202.90)
- $106,001 - $133,000: Standard + $81.00 = $283.90
- $133,001 - $167,000: Standard + $202.40 = $405.30
- $167,001 - $200,000: Standard + $323.90 = $526.80
- $200,001 - $500,000: Standard + $445.30 = $648.20
- Above $500,000: Standard + $485.50 = $688.40
For married couples filing jointly, the thresholds are doubled. These surcharges can turn a $2,435 annual premium into over $8,200 for high earners.
2026 Retirement Planning Changes You Need to Know
Beyond Medicare, several other retirement-related numbers are changing for 2026:
401(k) Contribution Limits
- Employee contribution limit: $24,500 (up from $23,500)
- Catch-up contribution (50+): $8,000 (combined limit: $32,500)
- Super catch-up (60-63): $10,000 additional
IRA Contribution Limits
- Annual contribution limit: $7,500 (up from $7,000)
- Catch-up contribution (50+): $1,100
Social Security Full Retirement Age
Starting in November 2025, full retirement age increased to 66 years and 10 months for those born in 1959. In November 2026, FRA will reach 67 for those born in 1960 or later—completing a 42-year phase-in of the higher retirement age.
Strategies to Manage Rising Medicare Costs
1. Review Your Part D Coverage
Medicare Part D (prescription drug) plans change annually. The annual enrollment period runs through December 7, giving you time to compare plans and potentially lower drug costs that supplement Part B-covered medications.
2. Manage IRMAA Through Income Planning
Since IRMAA is based on income from two years prior, strategic Roth conversions, capital gains harvesting, and distribution timing can help manage future surcharges. Work with a tax professional to model scenarios.
3. Consider Health Savings Accounts
If you're still working and enrolled in a high-deductible health plan, maximize HSA contributions. These funds can be used tax-free for Medicare premiums and other qualified expenses in retirement.
4. Evaluate Medicare Advantage Alternatives
Some Medicare Advantage plans offer lower effective costs than Original Medicare plus Medigap coverage, though they come with network restrictions. Compare total costs including premiums, deductibles, and out-of-pocket maximums.
5. Plan for Healthcare Inflation
Healthcare costs have consistently outpaced general inflation for decades. Retirement projections should assume 5-7% annual healthcare cost increases rather than the 2-3% general inflation rate.
The Bigger Picture for Retirees
The 2026 Medicare premium increase illustrates a fundamental challenge for retirement planning: healthcare costs are outpacing both inflation and income growth for retirees. The Social Security COLA formula, while helpful, wasn't designed to keep pace with medical cost inflation.
According to Fidelity's annual estimate, a 65-year-old couple retiring today should expect to spend approximately $315,000 on healthcare throughout retirement—and that number grows each year.
Action Items Before January 1
With the new year approaching, consider these time-sensitive moves:
- Complete Medicare plan reviews by December 7 (enrollment deadline)
- Maximize 2025 retirement contributions before year-end
- Take required minimum distributions (RMDs) by December 31 if applicable
- Consider Roth conversions before 2025 tax rates change
- Update retirement income projections to reflect new Medicare costs
The $17.90 monthly increase may seem modest in isolation, but compounded over a 20-30 year retirement, rising Medicare premiums can consume hundreds of thousands of dollars. Planning ahead remains the best defense against healthcare cost inflation eating away at retirement security.
