The Trump administration will end a temporary program that paid insurers to limit increases in Medicare Part D prescription-drug premiums. The program will expire after 2026, and the regular Part D bidding rules will return for 2027.
The change could raise premiums for some people with stand-alone drug plans, but the exact effect is not known yet. Plans set different prices in different areas, and the Centers for Medicare and Medicaid Services, known as CMS, expects to publish final 2027 plan premiums in mid-to-late September.
The decision concerns monthly insurance premiums. It does not repeal the annual limit on what Part D enrollees pay out of pocket for covered drugs.
Background
Medicare Part D is the federal prescription-drug benefit for older adults and some younger people with disabilities. Private insurers offer stand-alone drug plans and drug coverage included in Medicare Advantage plans. The federal government subsidizes the coverage, while enrollees may pay a monthly premium, deductibles and part of each prescription’s cost.
The Inflation Reduction Act changed Part D by limiting annual out-of-pocket spending and changing how costs are divided among the federal government, insurers and drug manufacturers. The Biden administration created the Part D Premium Stabilization Demonstration for 2025 because the redesign created uncertainty about how much insurers would raise premiums.
In 2025, the demonstration reduced the base premium used in participating plans by $15 per month and limited the year-to-year increase. CMS reduced the subsidy to $10 for 2026 and allowed a larger premium increase.
The Decision
On July 28, CMS announced that the demonstration will end on December 31, 2026. The agency said insurers now have enough experience with the redesigned benefit and that the market should return to its traditional competitive conditions.
CMS Administrator Mehmet Oz said the change would stop directing extra taxpayer money to insurance companies and that the effect on premiums should be small. The administration also emphasized that a separate statutory formula limits the increase in the national base beneficiary premium to 6% for 2027. CMS calculated that national base amount at $41.33.
That number is not the final premium for every enrollee. A plan’s actual premium can be higher or lower. Income-related adjustments also apply to some higher-income beneficiaries.
What Different Sides Are Saying
The administration
CMS argues that the demonstration was always temporary. It says insurers have had two years to adjust to the redesigned benefit and should compete without an extra premium subsidy. Supporters also argue that continuing the program would add federal spending and conceal the full price of plan choices.
The administration points to the 6% cap on growth in the national base beneficiary premium as protection against an extreme systemwide increase. It also says competition may lead some plans to absorb part of the change.
Beneficiary advocates and critics
Critics worry that ending the subsidy will expose enrollees to higher premiums at the same time that other household costs remain high. The Associated Press reports that roughly 25 million Part D users could be affected, although the size of any increase will vary by plan.
AARP and other advocates have cautioned that the effect cannot be measured until insurers release their prices. Their practical advice is to compare plans carefully during Medicare’s annual enrollment period, even if a person is satisfied with the current plan.
What independent analysis shows
The Government Accountability Office estimated that the demonstration would cost the federal government about $9.8 billion across 2025 and 2026. GAO also found that, without the demonstration, monthly premiums for people staying in the same stand-alone plans would have risen sharply on average in 2025.
GAO warned that the program’s precise effect was difficult to isolate because premiums were also changing in response to the larger Part D redesign, insurer decisions and market competition. That uncertainty still applies when estimating 2027 prices.
Fact Check
Claim: Every Part D enrollee’s premium will rise by the same amount
Verdict: False. CMS says final premiums will depend on each plan’s bid and benefit design. The agency will publish the 2027 plan landscape in September, so no single increase applies to everyone.
Claim: The annual drug-cost cap is ending
Verdict: False. Medicare’s official cost guide treats the annual out-of-pocket limit as a separate Part D protection. Ending the premium demonstration does not repeal that limit.
Claim: The temporary subsidy had no cost to taxpayers
Verdict: False. The Government Accountability Office estimated a federal cost of about $9.8 billion for 2025 and 2026. The payments reduced what plans otherwise would have collected through premiums or absorbed themselves.
Claim: The 6% cap guarantees that a person’s plan premium can rise only 6%
Verdict: False. CMS explains that the cap applies to the national base beneficiary premium used in the subsidy formula. Individual plan premiums can change by more or less because of plan-specific bids and adjustments.
Claim: We already know the average 2027 premium
Verdict: False. CMS has published bidding benchmarks, not the final plan landscape. The Associated Press and CMS both say actual 2027 premiums will become clear in the fall.
What Beneficiaries Can Do
People with Part D should read the Annual Notice of Change that their plan sends before open enrollment. The notice lists the next year’s premium, deductible, drug list, pharmacy network and cost-sharing rules.
Medicare’s annual enrollment period runs from October 15 through December 7. Beneficiaries can compare plans on Medicare.gov or seek free counseling through a State Health Insurance Assistance Program. A lower premium does not always mean lower total cost, so comparisons should include regular prescriptions and preferred pharmacies.
What Comes Next
CMS expects to release final 2027 premiums and plan choices in September. Those numbers will show whether insurers pass the lost subsidy to enrollees, absorb part of it or change benefits and service areas.
Congress could also examine whether the demonstration should be restored, redesigned or evaluated more fully. For now, the most accurate conclusion is limited: the extra subsidy is ending, federal spending will fall, and many enrollees may pay more, but the size of the change remains unknown.
Related Links
- CMS 2027 Part D announcement
- Associated Press: subsidy decision
- GAO evaluation of the demonstration
- CMS 2026 demonstration parameters
- KFF: Part D costs in 2026
- Medicare.gov: Part D costs
Discussion Questions
- Why was the temporary subsidy created?
- Why does CMS want to end it?
- Who benefits when premiums are subsidized?
- How should policymakers weigh premiums against taxes?
- Why are exact 2027 prices still unknown?
- What does the 6% cap actually cover?
- Why are premiums and out-of-pocket costs different?
- What should beneficiaries compare during open enrollment?
- Should Congress continue a similar program?
- What additional evidence would improve the debate?
