Today, there are millions of older Americans who receive monthly benefits from Social Security and health coverage through Medicare. Both programs have changed significantly in 2026 – for better and for worse.
In January, Social Security recipients received a 2.8% cost-of-living adjustment, or COLA. This is a very good trunk, going through the 2025 upgrade.
Image source: Getty Images.
On the other hand, treatment costs have increased significantly. And that has a big impact on this year’s Social Security COLA.
What Social Security COLA and Medicare Increases Mean for Your Budget
When the Social Security Administration announced its 2026 COLA back in October 2025, it said that following the hike, the average retiree benefit could increase from $2,015 to $2,071 a month — an increase of $56. But significant increases in Medicare costs render the COLA less effective.
In January, the standard monthly premium for Medicare Part B increased from $185 to $202.90 — an increase of $17.90. Social Security recipients, in turn, receive a much smaller average net COLA of about $38.
Social Security recipients who enroll in Medicare have their Part B premiums automatically deducted from their benefits. So every time the cost of Part B increases, it results in a small net increase.
It is possible that the increase in Medicare Part B costs would actually eliminate the COLA entirely. Fortunately, however, there are conditions that prevent Social Security benefits from actually decreasing year over year due to increases in the cost of Part B.
But still, many seniors on Social Security may find themselves struggling because of their limited COLA. And let’s remember that higher Part B premiums aren’t the only change coming to Medicare this year.
Not only has the annual deductible for Part B increased, but the cost of care under Part A has also increased across the board. This year, Medicare enrollees will pay more for hospital admissions, and they will have higher daily coinsurance for longer periods of time.
Additionally, some seniors may find that their individual Part D or Medicare benefit plan costs have increased. So all told, many retirees can have a hard time making ends meet and covering their recurring expenses.
How to improve your financial situation
If you’re a retiree collecting Social Security who’s also on Medicare, you may have a hard time managing your monthly bills — especially if you’re only looking at a $38 net COLA like the average beneficiary. The good news is that there are steps you can take to improve your financial picture.
First, try budgeting. It may seem hokey, but it works. And if you map out your monthly expenses, you may find that there are areas where you can cut back a little.
Then, read your treatment benefits carefully. Part D and benefit plans each set their own rules. But knowing how your coverage works may lead to savings — or at least help you avoid additional costs.
From there, think about your easy solution to increase your income. If you’re mobile and have a way to get to a part-time job, this can be a great way to pay yourself a big monthly salary. If you have some retirement savings, see if investing that money in a different way will allow it to grow more efficiently.
Finally, if you have a home with extra space, take advantage of it. Rent a room or a dark room. You can even potentially rent a parking space in your car if there is a demand for it in your neighborhood.
Unfortunately, increases in Medicare costs are eating up a lot of this year’s Social Security COLA. If you’re feeling the pain, take steps to reduce your expenses as much as possible and increase your income, even if it means getting a little creative.
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