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) said 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, CMS said 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.
CMS said Tuesday 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
CMS said the national base beneficiary premium will rise from $38.99 in 2026 to $41.33 in 2027, an increase of approximately 6 percent.
The figure is a statutory starting point used to calculate individual plan premiums, however, 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.
Broader Drug-Pricing Push
The CMS decision to end the subsidies is consistent with President Donald Trump’s broader criticism of payments to insurance companies and other health care intermediaries.
In January, Trump called on Congress to enact what he called the “Great Healthcare Plan,” which would include ending billions of dollars in taxpayer-funded subsidies to insurance companies and instead send the money directly to eligible Americans.
Trump has also demanded that pharmaceutical companies cut prices under his administration’s most-favored-nation policy, which seeks to align U.S. drug prices with the lowest prices charged in other developed countries.
The White House later announced that the administration had since reached voluntary pricing agreements with all 17 manufacturers. It has also pressed Congress to write the pricing framework into federal law.
“In case after case, our citizens pay massively higher prices than other nations pay for the same exact pill,” often “from the same factory,” Trump said when announcing the initiative.
