The Trump administration plans to end a federal subsidy program that has helped stabilize premiums for Medicare Part D prescription drug plans. The Centers for Medicare and Medicaid Services (CMS) said the program will conclude at the end of the 2026 contract year, one year earlier than previously scheduled.
The decision affects a program that provided billions of dollars in support to insurers offering Medicare prescription drug coverage. According to The Wall Street Journal, the subsidy program provided insurers with an estimated $3.6 billion in 2026 after distributing $6.2 billion in 2025.
CMS Says Subsidy Program Is No Longer Needed to Stabilize the Market
The program, known as the Part D Premium Stabilization Demonstration, was introduced during the Biden administration following changes linked to the Inflation Reduction Act. CMS Administrator Mehmet Oz described the payments as a temporary measure that was no longer necessary. “We are stabilizing the market so this bailout is no longer needed,” Oz said in a post on the social media platform X.
According to Bloomberg, CMS said the base monthly payment for beneficiaries will rise from $38.99 in 2026 to $41.33 in 2027, representing an increase of about 6%. The agency also noted that policies from the Inflation Reduction Act limit annual increases to the base premium for Medicare prescription drug coverage through 2029.
The administration said the impact will vary among beneficiaries. A CMS official estimated that 25% of enrollees will see premiums remain unchanged or decrease in 2027, while about 30% will pay less than $10 more per month.
The remaining beneficiaries are expected to experience higher costs. According to The Wall Street Journal, around 45% of Part D enrollees could see monthly increases mainly between $11 and $20, although lower-cost plans will remain available for people who choose to switch coverage.
Millions of Medicare Beneficiaries Could Face New Plan Decisions
Medicare Part D provides prescription drug coverage through private insurers for people enrolled in Medicare. Around 25 million Americans receive this coverage through stand-alone Part D plans, while another 31 million receive drug benefits through Medicare Advantage plans, according to reports.
The end of the subsidy may influence how some beneficiaries choose their coverage in the future. Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, wrote that stand-alone Medicare Part D plans “may soon seem even less affordable” after the change, potentially encouraging more enrollment in Medicare Advantage plans.
Medicare Advantage plans are offered by private insurers and generally combine medical and prescription drug benefits. They often include drug coverage without an additional premium, which could make them more attractive to some beneficiaries if stand-alone Part D costs increase.
The policy change has also become part of a wider debate over healthcare affordability ahead of the 2026 midterm elections. Critics of the decision argue that higher prescription drug costs could create challenges for older Americans living on fixed incomes.
Leslie Dach, chair of the advocacy group Protect Our Care, said the change would make healthcare costs harder to manage for some seniors. Supporters of the administration’s position argue that ending the subsidy removes federal support that they consider unnecessary.
The subsidy program has provided an estimated $9.8 billion in total support since its creation, according to a Government Accountability Office report. The final impact on beneficiaries will become clearer when Medicare enrollees receive information about their 2027 premiums during the fall enrollment period.
