Rising Healthcare Costs Under Medicare: 2026 Projections for Retirees

According to a recent Milliman report, a healthy couple retiring at age 65 in 2026 is projected to need $418,000 in savings to cover healthcare expenses under Original Medicare with Medigap Plan G and Part D. This figure marks a 7.7% or $30,000 increase from 2025. Milliman also forecasts that healthcare costs may total $637,000 over the couple's remaining years, emphasizing the impact of inflation and evolving insurance coverage on retirees' financial planning.

The Retiree Health Cost Index from Milliman provides annual updates on retirees' healthcare financial requirements, factoring in geographic, timing, and coverage selection influences. For those opting for Medicare Advantage plus Part D (MAPD), the necessary savings will be $211,000 in 2026, reflecting a 15.3% increase. This coverage implies lifetime costs of $320,000, with predictions based on a 3% annual investment return assumption.

Milliman highlights that the increase in Medigap-related costs is driven by rising Medigap and Medicare Part B premiums, coupled with expected long-term healthcare inflation. For MAPD participants, higher medical costs and plan adjustments have led to increased premiums and out-of-pocket expenses. Robert Schmidt, co-author of the RHCI, pointed out the variable nature of retirement healthcare costs and stressed the crucial role of out-of-pocket expenses in planning. The full details of Milliman's 2026 Retiree Health Cost Index can be reviewed for comprehensive insights.