The Trump administration is ending a temporary subsidy program that has helped keep Medicare prescription drug costs down, a move that could lead to higher monthly premiums for millions of older Americans starting next year.
The Centers for Medicare and Medicaid Services announced Tuesday that it will discontinue the Part D Premium Stabilization Demonstration at the end of 2026, ending a program that has provided billions of dollars to insurance companies to hold down drug plan costs. Nearly 25 million Americans currently enrolled in standalone Medicare Part D plans could face steeper monthly bills in 2027 when they learn their new rates during fall enrollment season.
The subsidy program was introduced by the Biden administration in 2024 and was designed to address sudden premium spikes that followed major changes to Medicare Part D under the Inflation Reduction Act. That law capped seniors’ annual out-of-pocket spending on prescription drugs at $2,000 and gave Medicare the authority to negotiate drug prices, but these changes shifted more costs to insurance companies, which initially threatened to raise premiums substantially. The stabilization demonstration was created to prevent that from happening.
Over the past two years, the subsidies have been substantial. The government provided roughly $3.6 billion in subsidy payments this year alone to help cushion premium increases. The program reduced average monthly drug plan premiums by $26 in 2025 and $16 in 2026, according to Medicare data.
CMS Administrator Dr. Mehmet Oz said ending the subsidy program would prevent unnecessary spending. “We are stabilizing the market so this bailout is no longer needed,” he said in a statement Tuesday. “Premiums will go up by less than $10 for most Medicare recipients, with many even seeing lower premiums.” The administration has emphasized that other cost-control measures, including drug price negotiation programs and a new initiative offering certain obesity and diabetes medications for $50 a month, remain in place.
However, experts and lawmakers express skepticism about the administration’s rosy assessment. Administration officials acknowledge the impact will be uneven, with about 25 percent of beneficiaries seeing premiums decline or remain unchanged. But roughly 30 percent could face increases of less than $10 monthly, while about 45 percent might pay $11 to $20 more each month. Some beneficiaries could face even larger increases depending on their plan choice and region.
Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, a nonpartisan health policy research organization, noted the significance of these dollar amounts for seniors living on fixed incomes. “That might not sound like a lot of money to some people,” she said about the $16 monthly subsidy being removed. “To put it in context, the average premium now for drug coverage through standalone plans is $36. So people might have had to to pay nearly 50 percent more for drug coverage this year without this demonstration.”
For many older Americans, even small increases create difficult choices. Healthcare policy experts note that seniors on fixed incomes often struggle to balance medication costs against other essential expenses like housing, food, and utilities. Many Medicare beneficiaries take multiple medications, which compounds the impact of premium increases.
The decision is also politically sensitive ahead of the 2026 midterm elections. Older Americans, who tend to vote at higher rates than other demographic groups, will learn about their new 2027 rates in the fall just as they prepare to cast ballots. Democrats have already criticized the move, with Senate Minority Leader Chuck Schumer calling it “heartless, cruel, and completely by choice.” Healthcare advocacy groups have similarly expressed concern that ending the subsidy undercuts the benefits that the Inflation Reduction Act was meant to provide.
The Trump administration argues that insurance companies have now gained enough experience pricing plans under the new Inflation Reduction Act rules to operate profitably without additional government support. CMS said its analysis of insurers’ bids for 2027 showed they could accurately price their plans without the demonstration program. The administration official who spoke to media outlets suggested that the subsidies had actually created a perverse incentive, allowing insurers to raise premiums because the government would absorb much of the increased cost.
CMS also released preliminary information showing that the national average monthly bid amount for 2027 will be $296.05, up from $239.27 in 2026—a roughly 24 percent increase. The base beneficiary premium will be $41.33 in 2027, up from $38.99 this year. However, the Inflation Reduction Act caps annual increases in the base premium at 6 percent through 2029, so individual plan premiums will vary based on insurance company bids, regional factors, and supplemental benefits.
Beneficiaries will not receive final information about their 2027 plan options and rates until mid-to-late September, giving them about a month before open enrollment begins in mid-October. This timing means seniors will be learning about potential cost increases as the midterm elections approach.
The decision represents the latest in a series of changes to federal healthcare programs under the Trump administration, which has also cut subsidies under the Affordable Care Act and has proposed broader overhauls to Medicare physician payments. The administration has signaled that it plans to expand drug price negotiation through executive orders and voluntary deals with pharmaceutical companies rather than relying on the Inflation Reduction Act’s mechanisms.
For now, seniors concerned about their 2027 prescription drug coverage should know that those with limited income and financial resources may qualify for Extra Help, a federal program that reduces Part D premiums, deductibles, and prescription costs. The administration has indicated that different beneficiaries will face different outcomes depending on their current plans and regional market conditions, making plan comparison during open enrollment even more important than in previous years.