Insurers have gained enough experience with Medicare Part D to accurately price plans with no need for subsidies, CMS stated.
The Trump administration plans to end a temporary subsidy program that helped bring down premiums for Medicare prescription drug plans, arguing that insurers now have enough experience under recently overhauled rules to price their products without additional taxpayer support.
The Centers for Medicare and Medicaid Services (CMS) stated in a July 28 fact sheet that the subsidy program—known as Part D Premium Stabilization Demonstration—will expire at the end of 2026, returning the program to “traditional market conditions” in 2027.
The Biden administration created the subsidy program in 2024 to limit premium increases caused by Medicare changes under the Inflation Reduction Act (IRA). At the time, the CMS stated that the subsidies were needed both to improve premium stability during the IRA implementation period by delivering more “predictable options” for people with Medicare Part D coverage and allowing participating plan sponsors to accumulate the experience necessary for bidding in future years.
The CMS stated on July 28 that its analysis of insurers’ 2027 bids showed that plan sponsors had gained enough experience under the redesigned benefit to support their pricing assumptions without the temporary subsidies.
Premium Impact
The CMS stated that the national base beneficiary premium will rise to $41.33 in 2027 from $38.99 in 2026, an increase of approximately 6 percent.
However, the figure is a statutory starting point used to calculate individual plan premiums and does not necessarily reflect what a particular enrollee will pay.
CMS Administrator Dr. Mehmet Oz said most beneficiaries would face increases of less than $10, while some would see their premiums fall.
“The Biden admin gave billions of taxpayer money directly to Big Insurance Companies. This is unacceptable,” Oz said in a post on X. “We are stabilizing the market so this bailout is no longer needed.”
The subsidy cost taxpayers roughly $6.2 billion in 2025 and $3.6 billion in 2026, according to a KFF analysis citing estimates from the Government Accountability Office.
The Medicare Payment Advisory Commission estimated in a recent report that the subsidy lowered the average stand-alone Part D premium from $65 to $39 per month in 2025, a reduction of 40 percent, after accounting for the separate statutory premium cap. In 2026, it lowered the projected average from $60 to $44, or by approximately 27 percent.
KFF’s analysis of actual enrollment and plan selections found that the average monthly premium for stand-alone plans fell from $39 in 2025 to $36 in 2026.
Nearly 24.9 million people were enrolled in stand-alone Part D plans in 2026, up from 23.2 million a year earlier, per KFF.
By Tom Ozimek
