This Medicare premium just crossed $200 a month for the first time. Here’s why.

MRK +2.94% REGN +2.56%

Blame medical inflation and more people in need of costly care for the 9.7% jump in Medicare Part B premiums next year.

Starting in January, people on Medicare will pay $202.90 in 2026 for their monthly Part B premiums, which provide coverage for services like doctor’s visits, outpatient procedures and medications administered by a healthcare professional. That’s up from $185.00 in 2025.

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The government has a simple explanation for the largest-ever dollar increase for these premiums, citing “projected growth in overall healthcare spending.” Medicare’s spending growth is supposed to increase 8.9% across 2026 and 2027, outpacing the 5.6% jump in predicted health spending growth in general.

Physician-administered drugs like Merck’s MRK cancer medication Keytruda and Regeneron’s REGN Eylea treatment for age-related eye diseases make up the biggest chunk of Medicare Part B spending — though a Centers for Medicare and Medicaid Services (CMS) spokesperson said “cost fluctuations for individual drugs” weren’t “significant enough” to be a major cost driver for premiums in 2026.

The CMS decides how to set Part B premiums using a calculation that assesses projected spending and the status of the Medicare trust, which is funded by revenue and premiums, to finance Medicare spending. But sometimes the calculation can take into account the previous year’s spending if it was higher than expected, according to Matthew Fiedler, a senior fellow in economic studies for the Brookings Institution’s Center on Health Policy.

There are a range of factors that can influence spending for Medicare in any given year, like expensive new drugs for diseases affecting millions of people or higher costs of managed care as more people choose Medicare Advantage.

“They’re seeing the inflation in the medical sector,” said Julie Carter, counsel for federal policy at the Medicare Rights Center, referring to the CMS. “There’s a lot driving up medical costs.”

The CMS predicts that the fastest-growing categories for all of Medicare in 2026 are managed care, which means Medicare Advantage, and outpatient hospital services.

At the same time, people are living longer, tend to need more costly care and are using the system to get it. (People underused their healthcare during the pandemic, and some experts like Fiedler believe some are still catching up on missed or delayed care.)

Plus, more care is moving from inpatient settings to less expensive outpatient facilities. Part B, however, only includes spending on outpatient services.

Part B premiums will likely increase again in 2027, possibly by 6% to 7%. Back in June, Medicare predicted that Part B premiums will increase again in 2027, to $218.60. That’s up 7.7% from the current cost of $202.90. It’s also a 5.8% increase compared to the earlier projection that Part B premiums for 2026 would be $206.50.

That said, there’s two schools of thought about what premium costs may look like over the next few years. Healthcare costs in general are rising, and hospitals may raise prices if more people, including those younger than age 65, go without health insurance and end up getting care they can’t pay for, according to Tricia Neuman, executive director of the Kaiser Family Foundation’s Program on Medicare Policy. This would likely lead the CMS to raise the price of premiums.

“It’s entirely possible that premiums will continue to increase without additional efforts to slow the growth in Part B spending,” she said. “The number of people on Medicare is rising. There has been, and continues to be, a shift from inpatient to outpatient services.”

But there are also a few events that could stem Part B growth in the near term. Starting next year, costs are set to go down for Medicare Part D since the government negotiated prices for 10 drugs, and that’s projected to lower costs for Medicare as a whole by $6 billion. Then, in 2028, the first batch of negotiated prices for some Part B drugs is set to go into effect.

“I don’t think the fact that premiums went up a lot this year is necessarily an indicator that that’s going to continue,” Fiedler said.

It’s rare, but it’s happened.

Back in 2021, the CMS announced that Medicare Part B premiums would go up by 14.5% to $170.10 in 2022, based on predicted demand at the time for Biogen BIIB and Eisai’s ESAIY JP:4523 newly approved Alzheimer’s disease drug, Aduhelm. But there were questions about whether the drug worked as well as the companies claimed, and Aduhelm’s $56,000 price tag was cut in half before it was eventually discontinued.

The CMS ended up lowering Part B premiums in 2023 to $164.90 as a result of the price cut.

The most recent double-digit percentage increase in Part B premiums was 10% in 2017, though the cost of premiums stayed the same in 2018.

About 7 million people on Medicare spend at least 10% of their income on their Part B premiums alone, according to a Kaiser Family Foundation analysis last year that highlighted the impact of even single-digit percentage increases.

And with Part B premiums continuing to rise, some experts have raised questions about whether more people may opt for Medicare Advantage plans, which sometimes have no monthly premium.

However, there is growing concern that the cost of care for beneficiaries on private coverage is far more expensive than getting care from Medicare.

“Medicare is paying $80 billion [more] for Medicare Advantage enrollees than it would pay for if they were covered under traditional Medicare,” KFF’s Neuman said.

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