Rising Health Care Expenses For Retirees Could Wipe Out Social Security’s 2026 COLA Increase

Key Takeaways
Standard Medicare Part B premiums are expected to rise by 11.6% next year, eating up much or all of Social Security’s projected cost-of-living adjustment increase for 2026.Medicare Part B and D premiums and cost sharing alone account for nearly a quarter of average monthly Social Security benefits.COLAs haven’t kept up with the cost of living for older Americans in years.

Health care expenses for retirees are climbing at a rate that far outpaces Social Security’s annual cost-of-living adjustments.

Each year, the Social Security Administration adjusts benefits for its recipients based on inflation. The Senior Citizens League predicts the Social Security cost-of-living adjustment (COLA) for 2026 will be 2.7%. However, standard Medicare Part B premiums are expected to rise by 11.6% next year, so much or all of the COLA will be eaten up by health care costs.

An increased COLA is always good for retirees. But a boost that doesn’t keep up with the rise of other costs won’t help those who need it most. 

“Medicare Part B and D premiums and cost sharing alone account for nearly a quarter of average monthly Social Security benefits,” said Nancy Ochieng, senior policy analyst with health care think tank KFF’s program on Medicare policy.

“We found that out-of-pocket health care spending consumes a larger portion of income,” than anything else for many on Medicare, Ochieng said.

Benefits Fall Behind

COLAs haven’t kept up with the cost of living for older Americans for some time. Between 2010 and 2024, COLAs increased Social Security benefits by 58%, while inflation drove up seniors’ expenses by 73% in the same period, according to research by The Senior Citizens League.

Over 7 million Medicare beneficiaries spent more than 10% of their income on Part B premiums alone in 2024, according to Ochieng. 

“This highlights the burden of Part B premiums for many Medicare beneficiaries who are already living on relatively low incomes, and have modest financial resources to cover costly medical care or services not covered by Medicare,” Ochieng said.

Things like dental services, eye exams, in-home care, nursing home stays, and  premiums for supplemental coverage are not covered by Medicare.

Medicare does supply critical health care coverage for nearly 69 million beneficiaries. But the program, and health care in general, is expensive for older adults, particularly those on fixed incomes in retirement.

“Health care is one of the most unavoidable expenses in retirement, and rising costs only add to the pressure today’s retirees are already feeling,” said Tina Ambrozy, head of strategic customer solutions at Nationwide.

A 65-year-old retiring in 2025 can expect to spend an average of $172,500 on health care and medical expenses throughout retirement, according to a Fidelity report from July. As much as 44% of those expenses go to Medicare Part B and Part D premiums.