How Federal Spending Cuts Will Increase Health Care Costs in 2026
The Republican budget reconciliation legislation, known as the “One Big Beautiful Bill,” (OBBB) was signed by President Trump in early July. The OBBB cuts over $1 trillion from Medicaid programs over the next 10 years – the largest rollback of federal support for health care in American history.
As a result of the bill’s wide-ranging provisions, an estimated 10 million people will lose their health insurance, and millions will pay more to stay insured. The Commonwealth Fund estimates that the bill could drive the overall number of uninsured people to above 40 million by 2034, noting that “millions of Americans [will] experience unnecessary suffering, higher health care costs, poorer health, and shorter lives” as a result.
Michael Heimall
HealthWell expects significant changes to the health care landscape next year and beyond, and we know the patients we serve may be anxious and uncertain about how these changes and higher health care costs will affect them. Amid this uncertainty, one thing will not change: HealthWell’s commitment to ensuring that patients do not forgo needed care simply because they cannot afford it.
Changes to Medicare and Medicaid Increase Costs to Patients
Medicaid was expanded (to adults with income up to 138% of the federal poverty level) after passage of the Affordable Care Act (ACA) in 2010, helping to reduce the rate of uninsured individuals from about 14-16% to a record low of 7.7% by 2023. The ACA guaranteed Medicaid enrollees essential health benefits and preventive services without cost sharing. Forty states and the District of Columbia expanded their Medicaid programs because of this provision.
Medicaid currently covers about one in four Americans (more than 72 million people), including the 16% of Medicare beneficiaries who also receive Medicaid assistance.
Medicaid funding cuts under the OBBB are estimated to result in up to 10 million adults and children losing coverage by 2034. Fewer people would be enrolled in Medicaid through the ACA expansion, and barriers for eligibility and enrollment are set to increase.
The OBBB’s stricter income and work requirements for Medicaid beneficiaries — requiring most adults ages 19-64 to be working or participating in qualifying activities for at least 80 hours a month or attending school half-time — may result in many low-income individuals and families losing coverage completely. Importantly, if someone is denied Medicaid because they do not meet new work requirements, they will also be ineligible for any subsidized plans available through the ACA marketplace. This change is scheduled to go into effect on a federal basis on January 1, 2027 (or earlier on an individual state basis).
The 2010 ACA also made several changes to Medicare, most notably phasing out of the Medicare Part D prescription drug benefit coverage gap (known as the “donut hole”) and providing for preventive benefits without cost sharing.
In 2023, Medicare beneficiaries received additional relief after implementation of the Inflation Reduction Act, which negotiated the prices that Medicare pays for selected Part D prescription drugs and established a $2,000 cap on annual out-of-pocket costs for Part D prescription medications – a threshold that will rise each year to cover inflation (the 2026 cap will be $2,100 after paying a $615 deductible).
The OBBB also imposes a nine-year ban on implementing improvements to Medicare Savings Programs (MSPs), which help lower-income Medicare beneficiaries pay for premiums and out-of-pocket costs. In addition, it reduces support for people with Low-Income Subsidy (a cost-sharing program within Medicare Part D that makes prescription drugs more affordable), reducing the amount of premium support these beneficiaries receive and forcing them to pay more for prescriptions.
ACA Marketplace Premiums to Rise in 2026
Americans covered by commercial insurance through ACA marketplaces also may see their insurance premiums increase — by an average of 26% in 2026, according to KFF. This is the largest rate change insurers have requested since 2018. Premiums will vary based on where consumers live, the type of plan they choose, and their insurer.
Moreover, the December 31st planned expiration of enhanced premium tax credits (established through the American Rescue Plan Act of 2021 and the Inflation Reduction Act of 2022 and used by about 92% of marketplace enrollees) means that marketplace enrollees may see their out-of-pocket premium costs increase by an average of 114%. The OBBB plan also reinstates the income gap barring people who earn more than four times the federal poverty level (that’s $62,600 for a single person, $84,600 for a couple, and $128,600 for a family of four) from getting any tax credits to help them purchase coverage.
Without these credits, nearly all subsidized ACA enrollees can expect their monthly premiums to rise, impacting the affordability of health insurance for many Americans. For example, a family of four making $85,000 would have to pay an additional $197 in premiums for coverage in 2026 and face an additional $900 in medical bills if a family member is seriously ill or injured, according to an August report from the Center on Budget and Policy Priorities.
Low-income enrollees would experience the steepest percent increase in their annual premium payments if enhanced subsidies are unavailable. A 45-year-old enrollee making $25,000 (166% of the federal poverty level) would see their annual premium payments grow by an average of 573%, or $917, for a benchmark silver plan (an increase from $160 for the annual premium payment with enhanced subsidies to $1,077 without enhanced subsidies).
The OBBB also completely removes eligibility for subsidized marketplace coverage from most legal immigrants, including asylees, refugees, and young adult “Dreamers” – people who came to the U.S. as children and are protected against deportation by the Deferred Action for Childhood Arrivals program.
Up to an estimated 57% of current ACA enrollees (approximately 13.6 million individuals) will drop their ACA coverage as a result of the expiring tax credits, additional paperwork and other requirements of the OBBB. Not all will pick up coverage elsewhere – including the estimated 48% of adult marketplace enrollees who are self-employed or employed by small businesses that do not offer employer-based health care. The Congressional Budget Office estimates that expiration of premium tax credits will cause the number of uninsured Americans to increase by 2.2 million in 2026, 3.7 million 2027 and 3.8 million, on average, in each year from 2026 to 2034.
To help people who may struggle to afford their ACA Marketplace insurance premiums, HealthWell offers an ACA Marketplace Insurance Premium Assistance Fund, which aims to provide a safety net for enrollees in the ACA Marketplace with household income within 200% of the federal poverty level (FPL). Eligible grant recipients under the fund may receive up to $2,000 in financial assistance per enrollment period of 12 months to be applied toward the cost of insurance premium for a Marketplace plan. The applicant must:
- Be enrolled or newly enrolled in an ACA Marketplace plan (Bronze, Silver, Gold, or Platinum)
- Be eligible for subsidy at renewal
- Have a household income at or below 200% of FPL; and
- Be a resident of the United States
When Health Care Becomes A Difficult Choice – HealthWell Provides Relief
The OBBB also eliminates or slashes other sources of governmental assistance for low-income individuals, including assistance with energy bills through the Low Income Home Energy Assistance Program (LIHEAP) and food assistance through the Supplemental Nutrition Assistance Program (SNAP), creating additional financial pressures on families facing higher health care costs.
We regularly hear from patients we serve that the high cost of health care can force them to make tough decisions between paying for care and paying for necessities like rent, utilities and food – the costs of which are also increasing. Changes under the OBBB will make those decisions even tougher for more people than ever before.
HealthWell stands ready to help those who are struggling – people covered under Medicare, Medicaid, and marketplace health plans (including catastrophic coverage plans). If you or someone you know is having problems affording their prescribed treatments, please reach out to us on the web or toll-free at 800-675-8416.
If you would like to help HealthWell in our mission to reduce financial barriers to care for underinsured patients with chronic or life-altering diseases, we and the patients we serve would be grateful. Please know that 100 percent of every dollar donated goes directly to patient grants and services.
We will be covering the topic of financial toxicity – problems patients have related to the cost of medical care – here on the blog throughout 2026. You can subscribe to our series by signing up for RWHC Alerts (see the top of this page) and follow along as we explore how health care providers and non-profit organizations are helping patients to navigate and alleviate their financial distress.
In addition, starting in the first quarter of 2026, HealthWell will sponsor “Financial Toxicity & Patient Navigation: A Real-Time, Solutions-Focused Webinar Series.” The series will detail actionable solutions to help patients and professionals navigate the financial challenges of care. Learn more about the webinar series here: https://www.healthwellfoundation.org/about/financial-toxicity-webinar-series/
