In the latest CPI data through November 2025, some healthcare-related CPI categories (such as medical care services) have increased faster than overall CPI and faster than food inflation. This suggests that the trend will continue into 2026, creating immediate financial challenges for retirees, near-retirees, and business owners. With medical costs up, Medicare premiums climbing, and future benefit changes possible under the One Big Beautiful Bill (BBB), comprehensive retirement planning centered on healthcare has become a necessity. In 2025, planning for healthcare expenses must be a central part of both individual and business owner retirement strategies.
Healthcare Inflation Data Is Already Reshaping Retirement Budgets
Medical costs are rising steeply, prompting concerns about how healthcare inflation impacts retirement savings. Today, a 65-year-old retiree can expect to spend about $172,500 on health care premiums, out-of-pocket expenses, prescriptions, and other medical costs during retirement—a figure that represents over a 4% increase from 2024. However, this amount does not cover potentially significant long-term care expenses, such as nursing homes, assisted living, or home care.
Milliman projects that a healthy 65-year-old retiring in 2025 could spend approximately $275,000 (male) or $313,000 (female) on healthcare expenses over retirement under Original Medicare + Medigap + Part D, though the savings needed ‘in today’s dollars’ is lower due to assumed investment returns.
Why this matters now: unpredictability and compounding risk
Healthcare inflation moves faster and with more volatility than general inflation. Drug pricing trends, hospital fees, utilization rates, and demographic factors push medical costs higher, and most of these forces sit entirely outside an individual’s control. Over a 20–30-year retirement, even modest annual increases compound aggressively. Costs that feel manageable today can easily triple or quadruple by the time retirement begins.
For small business owners, self-employed professionals, and anyone with variable income, this uncertainty makes retirement budgeting harder and raises the risk of underfunding healthcare needs. Planning for medical expenses in retirement now requires more than a conservative cushion. It requires building a substantial, realistic savings base that can absorb both expected healthcare costs and the surprises that inevitably arise.
How BBB May Impact Medicare Structure, Premiums & Cost-Sharing
While most current projections reflect today’s Medicare environment, there is growing uncertainty about how future cost-sharing, premium structures, and benefit design could evolve under the BBB. It raises the stakes for careful retirement-health planning. There are a few risk areas to be aware of under the BBB when looking at long-term-care cost projections.
Key risk areas under BBB
Premium increases & IRMAA exposure for high-income retirees: If the BBB adjusts income thresholds or recalibrates benefit subsidies, some retirees, especially those with substantial retirement distributions or business sale proceeds, may see higher premiums or additional surcharges. This could significantly increase ongoing out-of-pocket costs as the Medicare premiums for 2025 and early 2026 as the BBB takes effect.
Changes to deductibles, co-pays, and drug cost-sharing: As policymakers seek to offset increased Medicare expenditures, there may be pressure to tighten coverage, raise deductibles/co-pays, or restructure drug-benefit design. For retirees, this means unpredictable out-of-pocket costs and a renewed need for supplemental coverage.
Long-term care cost burden remains largely unaddressed: Even the most generous Medicare or supplemental plans rarely cover long-term care. With rising average life expectancies and increasing care costs, long-term care needs could dwarf standard medical costs in retirement. Be proactive and create a long-term care cost analysis to avoid being blindsided later.
Because these risks are real, and because legislative changes often come with limited notice, business owners and soon-to-be retirees should incorporate “what-if” healthcare-cost stress tests into retirement planning now.
Why HSA Strategy Becomes More Valuable Entering 2026
Given rising healthcare costs and uncertainty around future Medicare rules, a well-used Health Savings Account (HSA) can be one of the most powerful tools in a retirement planner’s toolkit. Let’s take a look at the advantages of utilizing an HSA strategy for 2026.
The advantages of HSAs in a volatile health-cost environment
HSAs offer a triple-tax advantage: Contributions may be pre-tax or otherwise tax-advantaged, earnings grow tax-free, and qualified withdrawals for medical expenses are tax-free. This makes HSAs ideal for covering unexpected or rising out-of-pocket costs during retirement. However, beginning with the first month you’re enrolled in Medicare, your HSA contribution limit is generally zero, including during periods of retroactive Medicare coverage—making advance planning critical.
Flexibility and control: Unlike insurance plans, HSA funds can be used for a wide range of medical and health-related costs. They can cover things like deductibles and out-of-pocket costs for dental, vision, and long-term-care expenses. HSA funds generally can’t be used for health insurance premiums, except for limited categories (such as long-term care insurance, COBRA, unemployment coverage, and certain Medicare premiums after age 65—excluding Medigap).
Buffering against inflation: As medical costs rise, so will needs for out-of-pocket spending. HSA funds can act as a dedicated “health expense bucket,” providing peace of mind and reducing the risk that retirement savings are drained by medical bills.
Financial advisers are already highlighting HSAs as a critical component of retirement income planning for 2026, especially for those with variable incomes or business ownership, who may have less predictable pension or employer healthcare coverage. Being prepared can help lift the health cost burden for small business owners.
Latest published (2025 retiree) actuarial estimates (illustrative for planning)
Here’s a ballpark projection based on the latest actuarial estimates, a useful “what-if” chart for anyone designing a retirement plan today.
| Scenario | Expected Lifetime Medical Cost (not including long-term care) |
| Original Medicare + Medigap + Part D (65-year-old couple) | ~ $388,000 |
| Medicare Advantage + Part D (same couple) | ~ $183,000 |
| Single 65-year-old (male, Medigap) | ~ $281,000 |
| Single 65-year-old (female, Medigap) | ~ $320,000 |
Even before factoring in your long-term care, inflation beyond current estimates, or potential increases to Medicare premiums or cost-sharing under BBB, a middle-of-the-road couple retiring at 65 needs nearly $400,000 earmarked solely for medical and health costs. Remember that this number doesn’t include long-term care like nursing homes, assisted living, and home care, dental, vision, hearing, dental implants, or periods of poor health, chronic conditions, or high-cost treatments. Because of these gaps, many retirees underestimate and under-save, which leaves them vulnerable to major financial stress later.
Why Late-2025 Early-2026 Is a Critical Moment for Retirement Planning
Healthcare inflation is accelerating now, not gradually down the road. That makes 2025–2026 a pivotal window for re-assessing retirement savings targets and building medical-cost buffers. Uncertainty around Medicare structure under BBB means benefit design, premiums, and out-of-pocket obligations may shift, and not always for the better. Waiting to act could expose you to unknown risks. The HSA and other tax-advantaged strategies remain underutilized, even as they offer one of the few reliable ways to hedge against rising medical costs and potential out-of-pocket surprises. Small-business owners and entrepreneurs face unique exposure to variable income, less predictable employer benefits, and uncertain future access to retiree-health benefits. For these groups, a dedicated health-cost plan is especially important.
Healthcare Planning Must Be a Pillar of Your 2026 Retirement Strategy
If you’re approaching retirement, running a business, or simply thinking ahead and treat healthcare in retirement as a core part of financial planning and retirement income planning for 2026 and beyond.
Given rising medical inflation, escalating lifetime cost estimates, increasing medical out-of-pocket retirement estimates, and possible changes under BBB to Medicare cost structure, now is the time to embed health-cost risk planning into your broader retirement framework. That means building a realistic healthcare expense savings bucket, stress-testing your retirement and withdrawal projections under different medical-cost inflation scenarios, considering long-term-care insurance or contingency plans for catastrophic medical events or extended care needs, and regularly revisiting and adjusting your plan as healthcare costs, policy rules, and your personal health evolve.
Ready to start looking at your retirement account going into 2026? Schedule a free consultation with one of our advisors today to better prepare for your future, today.
