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Rising healthcare costs could erase your Social Security COLA

The Social Security benefit could actually go down in 2026

Updated:

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.

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Key Insights

  • Healthcare costs for retirees are climbing faster than inflation.
  • The Social Security cost-of-living adjustment (COLA) is unlikely to keep up.
  • Many older Americans may see little to no net benefit from the upcoming increase.

Current projections suggest Social Security recipients could receive a 2.7% cost-of-living adjustment (COLA) in 2026. That’s the good news.

Here’s the bad news: This year’s higher healthcare costs could consume much of the gain, leaving many older Americans with little to no improvement in their monthly budgets.

The Social Security Administration calculates COLA based on general consumer inflation, but retirees spend disproportionately on healthcare, an expense that continues to rise faster than overall prices. 

Medicare premiums, prescription drug costs, and out-of-pocket expenses are all projected to increase in the coming year. For many beneficiaries, these higher medical bills could offset or even surpass the modest boost from COLA.

The hidden equalizer

A key factor is Medicare Part B premiums, which are automatically deducted from Social Security checks. When these premiums rise, they directly reduce the net increase retirees see from COLA. Analysts note that even a relatively small bump in premiums can swallow most of the adjustment, particularly for those living on fixed incomes.

Healthcare is already one of the biggest expenses for older adults, and as life expectancies increase, so does the duration of these costs. Retirees often face the double challenge of limited income growth and rising medical needs. While COLA was designed to help Social Security keep pace with inflation, the mismatch between broad inflation measures and retiree-specific expenses is leaving many behind.

Advocates argue that Social Security’s inflation formula should better reflect the spending realities of retirees, especially the steep rise in healthcare. Without reform, seniors will continue to face financial pressure each year as their COLA gains are absorbed by medical costs.