Older Americans and Rising Medicare Costs

As older Americans prepare for Medicare enrollment this fall, they’re facing increased healthcare costs, fewer plan options, and a changing environment influenced by upcoming federal regulations set for 2026.

Open enrollment is scheduled from October 15 to December 7, allowing over 67 million Medicare beneficiaries to choose whether to retain or modify their current coverage. During this time, participants can switch between traditional Medicare and Medicare Advantage, or modify their prescription drug and supplemental coverage.

Declining and Costlier Drug Plans

A significant change this year involves the availability of stand-alone Part D prescription drug plans, which many people using traditional Medicare have. These optional plans, offered by private insurers, require a monthly premium from participants.

The number of these Part D plans is declining. Premiums have climbed in recent years, with projections indicating a potential increase of up to $50 per month in the coming year. According to Diane Faligowski, CEO of an Oregon insurance agency, the uptick is partly due to a provision in the 2022 Anti-Inflation Act that caps out-of-pocket drug expenses, pushing much of the financial burden onto insurers.

Currently, the maximum out-of-pocket cost for drugs is $2,000, which will rise to $2,100 next year.

“Part D plans are struggling to survive,” said Faligovski. Medicare is also entering negotiations to lower prices on ten frequently prescribed high-cost medications, which could further impact insurers’ costs.

Meanwhile, stabilization programs that helped keep insurance premiums manageable will be reduced starting next year, according to David Lipshutz from the Medicare Advocacy Center.

Although current policies from the Trump administration will persist, they do permit insurers to raise premiums by up to $50, a jump from this year’s $35 limit.

Notably, the changes regarding drug cost caps also apply to Medicare Advantage plans. However, it’s anticipated that the drug portion of their premiums will not raise significantly, as they typically incur higher costs per member than traditional Medicare.

“Medicare Advantage insurers benefit from significant rebates, which can help lower premiums and provide additional perks that make these plans appealing,” Lipshutz noted.

Challenges for Medicare Advantage

Currently, Medicare Advantage covers more than half of the eligible population, a sharp rise from 19% in 2007 to 54% in 2025. Paul Ginsburg from USC indicated that one factor behind this growth has been the advantageous federal payments to plans.

Ginsburg explained, “Part of the rapid expansion stems from Medicare overpaying, allowing attractive options for beneficiaries.” However, these payments are now becoming stricter. Some insurers have employed aggressive coding techniques to inflate patient severity and secure higher payments, but the Centers for Medicare and Medicaid Services is curtailing this behavior gradually.

Additionally, some insurers misjudged how quickly patients would resume elective surgeries post-pandemic, which led to undervalued plans.

“The result? Some plans offered premiums that were just too low,” Ginsburg remarked. “Some companies ended up losing money, while others fell short of expected profits.”

This has triggered some Medicare Advantage insurers to trim supplemental benefits, cut back on coverage, or exit the market entirely. United Healthcare plans to discontinue certain PPO plans, affecting around 600,000 members, while Humana anticipates losing about 550,000 members due to less profitable plans. Aetna is also planning to shut down approximately 90 plans across 34 states.

“Plans will likely prioritize stabilizing profits over expansion,” Lipshutz commented. However, many still aim to offer low or no premiums, which remains a strong draw for new enrollees.

New Consumer Tools

For the first time, the Medicare Plan Finder website will include provider directory details, enabling beneficiaries to check if their doctors or hospitals are part of a plan’s network. Although this update is useful, experts caution that these directories can often be unreliable.

To mitigate this, Medicare intends to allow a temporary special enrollment period in 2026 for beneficiaries who find incorrect provider information after selecting a plan. This grace period will only apply to the 2026 plan year.

Additionally, updates to the Plan Finder tool will give beneficiaries a chance to explore extra benefits in Medicare Advantage beyond just dental, hearing, and vision care.

Upcoming Policy Changes

Changes to Medicare are also being introduced through the Tax and Budget Reconciliation Bill signed in July. Historically, legally present immigrants could enroll if they had enough work history. However, the new law narrows this eligibility, making Medicare available only to specific groups such as green card holders and certain residents under the Compact of Free Association. This could affect about 100,000 people who might lose their coverage, according to estimates.

Current beneficiaries affected will receive notifications next year and will lose coverage by January 2027. Furthermore, the 2025 Tax Act slows down the process of simplifying Medicare savings programs that assist low-income seniors with premiums and costs.

This legislation also restricts Medicare’s negotiating power on some costly drugs, which could lead to higher costs for patients in need of those medications and increased overall spending for Medicare.

On the brighter side, the Inflation Control Act of 2022 has empowered Medicare to negotiate drug prices, with the first ten negotiated drugs set to see lower prices starting next year, including widely used medications like Eliquis.

What Beneficiaries Need to Know

Experts advise beneficiaries to pay careful attention to communications from their insurers as the enrollment window approaches. By September 30, Medicare Advantage insurers must send out annual change letters detailing any alterations to benefits and coverage for the upcoming year.

“These letters might not seem exciting at first glance, but they contain crucial information that can significantly impact your coverage,” Lipshutz emphasized.