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The Trump administration will end a key subsidy for Medicare Part D prescription drug plans starting in 2027, a move that could result in higher premiums for millions of seniors and disabled Americans. The subsidy, which currently helps keep monthly premiums lower for Medicare’s prescription drug plans, is set to expire after 2026, according to the Centers for Medicare & Medicaid Services and administration officials.
The program provided insurance companies an estimated $3.6 billion this year to reduce average monthly premiums by about $16 for Medicare Part D enrollees, as reported by the Wall Street Journal. Medicare Part D serves roughly 25 million people, most of whom are older adults or individuals with disabilities.
CMS Administrator Mehmet Oz said the subsidy was ending because it primarily benefited large insurance companies. In a statement, Oz wrote on X: "Premiums will go up by less than $10 for most Medicare recipients, with many even seeing LOWER premiums." He added, "Every Medicare beneficiary still has access to low-cost plans, and we will continue to lower prescription drug prices for every American patient, from more MFN deals to our policy giving seniors access to GLP-1s for $50 a month," referencing "most favored nation" pricing deals. ABC News also reported that, according to administration estimates, about half of Medicare Part D recipients will see a premium increase of less than $10 or a premium decrease, while most will still have access to plans costing $10 or less per month.
However, some health policy experts and advocates warn that ending the subsidy could cause premiums to rise for many, and possibly up to $20 more per month for some, according to data cited by KFF, a nonprofit health policy group. The exact impact on premiums will become clear when insurance companies set their 2027 rates, with announcements expected this fall, as noted by The Washington Post.
The change comes as healthcare affordability remains a major issue for voters ahead of the midterm elections. Administration officials argue that other policies are still in place to help control Part D costs, even as the temporary subsidy ends. Seniors enrolled in Medicare Part D will learn their new premium rates later this year, and officials say low-cost options will continue to be available.