Inflation, Higher Federal Program Premiums Drive Up Healthcare Costs for 2026 Retirees

The average healthy 65-year-old couple retiring this year is projected to spend up to $637,000 on healthcare expenses over the course of their remaining lifetimes, according to the 2026 Milliman Retiree Health Cost Index.

The figure is based on several factors driving up the cost of federal Medigap and Medicare Part B premiums along with projected growth in long-term healthcare inflation, Milliman stated.

Year-over-year higher projected long-term healthcare inflation, according to the index. The higher costs are partially offset by lower Part D premiums.    

For people utilizing Medicare Advantage plus Part D, most states saw premium increases in 2026, reflecting rising medical costs and plan adjustments following changes to Part D that became effective in 2024 due to the Inflation Reduction Act. Patient out-of-pocket expenses were significantly reduced because of the law’s elimination of cost-sharing in the catastrophic phase of insurance coverage, but as a result, plan liability rose, driving an increase in premiums. In addition, reduced supplemental benefits and other higher cost-sharing requirements caused greater increases in expected out-of-pocket costs for MAPD plans.

Running the Numbers

The two most common healthcare coverage options chosen by Medicare-eligible retirees on the individual market were Original Medicare with Medigap plus part D and Medicare Advantage plus Part D. A healthy 65-year-old man retiring in 2026 with a Medigap plan was projected to spend $297,000 on healthcare in his remaining lifetime, and a woman with the same coverage was expected to spend $340,000, according to the index. A man with MAPD was projected to spend $148,000, while a woman was anticipated to spend $172,000.

Women’s costs are generally expected to be higher because women on average live longer than men. A retired man was projected to live until 88 and a woman until 90 in Milliman’s calculation.

A range of plus or minus five years in life span can increase or lower retirement healthcare costs significantly, according to the index. Under either plan option, living five years longer increases the projected amount a person may spend by approximately 42%, while dying five years earlier reduced the projected amount a person may spend by about 32%.

Assuming an investment return of 3% per year, the average man with Medigap coverage would need to save $199,000 to afford these costs, while a woman will need to save $219,000, an increase of $30,000 (7.7%) per couple from Milliman’s 2025 estimates. A man with MAPD will need $100,000, and a woman $111,000, a $28,000 (15.3%) increase per couple from 2025. The required savings for a couple has increased both for those on Medigap (by roughly 3%) and on MAPD (by 2%) since Milliman first launched the index in 2022.

Other Factors

The cost of healthcare in retirement will also depend on individual circumstances, Milliman’s summary explained, such as when someone retires, where they live during retirement and what Medicare benefit plan they choose. The cost of Medicare Advantage, Medigap and Part D plans can vary greatly by state. For example, in Florida, the average 65-year-old retiring in 2026 with Medigap can be expected to spend as much as $375,000 on healthcare in their lifetime, as opposed to between $225,000 and $250,000 in Hawaii.

Healthier retirees, representing the average of the lowest-cost one-third of Medicare beneficiaries, can expect to spend approximately 9% less on healthcare costs for a Medigap plan and 27% less on a MAPD plan. Retirees with below-average health quality, representing the average of the highest-cost one-third of beneficiaries, can expect to spend 13% more on healthcare costs for Medigap during their lifetime and 41% more on MAPD.

Impact of Retiring Earlier

Most people cannot apply for Medicare until age 65, so retiring early means healthcare can be even more costly, according to the index. For example, if someone retires at age 60, they can expect to pay 59% more for healthcare expenses if enrolled in Medigap and 91% more for healthcare expenses than if they enroll in a MAPD plan.

Conversely, delaying retirement allows retirees to boost retirement savings while continue earning income and employer-sponsored benefits. Retiring at age 70, for example, would allow a retiree to pay 29% less in healthcare expenses in retirement than if they retired at age 65 and enrolled in Medigap. They would pay 30% less for healthcare with a MAPD plan.