The Trump administration is ending a Medicare Part D subsidy that helped control prescription drug premiums for nearly 25 million older adults and people with disabilities enrolled in stand-alone drug plans.

The Part D Premium Stabilization Demonstration will end after December 2026. Starting in 2027, insurers will return to traditional pricing rules without the additional premium reductions and limits on monthly increases provided by the program.

Final plan prices have not been released. However, administration officials acknowledge that some beneficiaries could face increases of up to $20 per month. CMS Administrator Dr. Mehmet Oz says many increases will remain below $10 and that some people could pay less.

CMS Says Insurers No Longer Need the Support

CMS says insurance companies have gained enough experience with the redesigned Medicare prescription drug benefit to calculate their 2027 prices without additional federal assistance.

The agency reviewed preliminary bids submitted by Part D insurers and concluded that the market could return to traditional conditions. Oz described the program as a corporate “bailout” that is no longer necessary, arguing that low-cost options will remain available.

That framing focuses on the billions paid to private insurance companies. However, the subsidy was designed to reach beneficiaries indirectly by reducing the premiums insurers charged and limiting how quickly those premiums could rise.

Ending payments to insurers therefore does not automatically mean the money disappears from the health care system. In some plans, the cost may instead shift to beneficiaries through higher monthly premiums.

The Medicare Part D Subsidy Was Designed to Last Longer

The Biden administration created the demonstration in 2024 as major changes to Medicare Part D were about to take effect.

The Inflation Reduction Act capped beneficiaries’ annual out-of-pocket prescription spending and shifted more financial responsibility for expensive medications onto private insurers. CMS feared insurers would respond with sharp premium increases, especially in stand-alone plans used by people who remain in Original Medicare.

When CMS established the program, it described a one-year launch followed by at least two additional demonstration years. That structure would have allowed it to continue through 2027, with the subsidy terms adjusted annually as insurers adapted.

The Trump administration renewed the program for 2026 but reduced its support. The latest decision eliminates what would have been the third year.

The Program Reduced Premiums and Limited Increases

During the program’s first year, CMS reduced the base premium used to calculate plan prices by $15 per month. Participating insurers also agreed to limit monthly premium increases to $35 compared with the previous year.

For 2026, CMS reduced the monthly support to $10 and allowed increases of up to $50. The government also removed some of the additional financial protections previously offered to insurers.

The Government Accountability Office estimated that the demonstration would cost Medicare $9.8 billion across 2025 and 2026. That is a substantial public expense and provides the administration with a legitimate basis for reviewing whether the program should continue.

However, the GAO also found that the protection made a significant difference for beneficiaries. Without the demonstration, average monthly premiums for people remaining in their 2024 plans would have nearly doubled in 2025. About 37 percent could have faced increases exceeding $40 per month.

CMS officials warned that increases of that size could have caused widespread plan switching and disrupted access to medications.

Evidence Shows the Subsidy Stabilized Premiums

KFF found that the average monthly premium for stand-alone Part D coverage declined from $39 in 2025 to $36 in 2026.

According to the health policy organization, the additional subsidies reduced average monthly premiums by approximately $26 in 2025 and $16 in 2026. Enrollment in stand-alone plans also increased from 22.8 million people in 2024 to 24.9 million in 2026.

Those findings do not prove that every dollar was spent efficiently. They do show that the program achieved its stated purpose of moderating premiums while insurers adjusted to the redesigned drug benefit.

KFF also cautions that the underlying pressures have not disappeared. Rising drug prices, increased use of expensive specialty medications and growing demand for GLP-1 drugs continue to affect insurer costs.

Actual 2027 Premiums Remain Unknown

CMS has set the national base beneficiary premium for Medicare Part D at $41.33 for 2027, up from $38.99 in 2026.

That figure is not the amount every beneficiary will pay. It is a calculation used as the starting point for determining individual plan premiums, which vary based on each insurer’s bid, benefits and regional pricing.

The Inflation Reduction Act limits annual growth in the national base premium to 6 percent through 2029. That protection does not necessarily limit how much the premium for a specific plan can increase once the demonstration ends.

CMS plans to release finalized Medicare Advantage and Part D offerings in mid-to-late September. Beneficiaries will then be able to see what their current plan will charge in 2027 and whether their prescriptions, pharmacies or cost-sharing rules have changed.

The Change Targets Stand-Alone Drug Plans

The expiring Medicare Part D subsidy applies to stand-alone prescription drug plans, commonly called PDPs.

These plans are generally purchased by beneficiaries who receive their hospital and medical coverage through Original Medicare. People enrolled in Medicare Advantage often receive prescription coverage as part of a combined private plan.

The demonstration’s expiration is also separate from Medicare’s Extra Help program. Extra Help assists qualifying people with limited income and resources by paying some Part D premiums, deductibles and drug costs. CMS has not announced that the Extra Help program is ending.

That distinction is important because the broader Medicare Part D program is not being eliminated. The change affects the additional protection that kept stand-alone premiums from rising as quickly.

Higher Prices Could Push People Toward Medicare Advantage

Stand-alone Part D premiums already cost considerably more than drug coverage included in Medicare Advantage plans.

KFF estimates that the average stand-alone premium is $36 per month in 2026, compared with about $8 for the prescription portion of Medicare Advantage plans. Medicare Advantage insurers can use rebate payments to reduce or eliminate drug premiums, an option unavailable to stand-alone plans.

That difference could make Medicare Advantage appear more attractive if stand-alone premiums rise in 2027. However, switching is not simply a matter of replacing one drug plan with another.

Moving from Original Medicare to Medicare Advantage changes how a person receives medical coverage. It can introduce provider networks, referral requirements, prior authorization rules and different out-of-pocket limits. Beneficiaries should compare the entire health plan rather than choosing based solely on the prescription premium.

What Medicare Beneficiaries Should Do This Fall

People enrolled in stand-alone Part D plans should carefully review the Annual Notice of Change their insurer sends before open enrollment.

The notice will explain the plan’s 2027 premium, deductible, drug list and cost-sharing changes. Beneficiaries should confirm that their medications remain covered and determine whether their pharmacy is still considered preferred or in-network.

Comparisons should focus on estimated annual spending, not merely the monthly premium. A cheaper plan may become more expensive if it excludes a medication, charges a large deductible or requires higher coinsurance for specialty drugs.

Medicare Open Enrollment runs from October 15 through December 7. Coverage selected during that period takes effect January 1, 2027. Medicare’s official plan-comparison tool allows beneficiaries to enter their prescriptions and pharmacies to estimate costs under available plans.

Ending the Subsidy Does Not End the Cost

The Trump administration is correct that the program transferred billions in public money to private insurers. Congress and taxpayers have reason to question whether those payments should continue indefinitely.

But calling the Medicare Part D subsidy a bailout does not erase what it accomplished. The program prevented larger premium increases, stabilized enrollment and gave insurers time to adjust to a benefit redesign that shifted more drug costs away from patients.

CMS believes that transition period is over. KFF and GAO data show that removing the protection may still have consequences for beneficiaries.

The final impact will become clearer when insurers release their 2027 prices in September. Until then, the administration’s promise of modest increases remains a projection, while nearly 25 million people wait to learn how much ending the subsidy will cost them.