The Trump administration has announced plans to end a federal subsidy program that has helped keep premiums lower for Medicare Part D prescription drug plans, with the program set to expire after the 2026 plan year.

The decision was confirmed by the Centers for Medicare & Medicaid Services (CMS) following earlier reporting by The Wall Street Journal. CMS said insurers now have enough experience to price their Medicare drug plans without additional government support. Media outlet reported that the administration expects the Part D market to remain stable after the subsidy ends.

What the program did

The subsidy was introduced by the Biden administration to stabilize the Medicare Part D market after the Inflation Reduction Act shifted more financial responsibility for prescription drug costs onto insurance companies while capping seniors’ annual out-of-pocket drug spending at $2,000 beginning in 2025.

The program provided billions of dollars to insurers to prevent sharp premium increases for Medicare beneficiaries. Analysts estimate the subsidies reduced average premiums by roughly 27% in 2026 and by an even larger amount in 2025.

Impact on seniors

About 25 million Americans are enrolled in stand-alone Medicare Part D prescription drug plans in 2026. Major insurers participating in the program include UnitedHealth Group, Humana, and CVS Health’s Aetna.

CMS Administrator Dr. Mehmet Oz said most beneficiaries are expected to see premium increases of less than $10 per month, while some could experience no increase or even lower premiums. However, industry analysts warn that many seniors may still face higher monthly costs in 2027 once the subsidy is removed.

Current CMS projections show the 2027 national average monthly bid for Medicare drug plans at $296.05, while the base beneficiary premium is projected at $41.33. Under provisions of the Inflation Reduction Act, annual premium increases for many beneficiaries are capped at 6% through 2029.

Broader policy shift

The move is part of the Trump administration’s broader effort to reduce federal healthcare spending and reshape Medicare payment policies. Officials argue that continuing the subsidy could encourage insurers to rely on government assistance rather than setting sustainable premiums.

Consumer advocates, however, say the change could increase pressure on older Americans who already face rising healthcare and prescription drug costs. Some experts believe the policy may also encourage more beneficiaries to consider Medicare Advantage plans, which often include prescription drug coverage but may have narrower provider networks and additional restrictions.

Next steps

CMS said final 2027 Medicare Part D premiums and plan details will be released in September 2026. Beneficiaries will receive updated information before the annual Medicare open enrollment period, when they can compare plans and switch coverage if needed.

The announcement is expected to become a significant healthcare issue ahead of the 2026 U.S. midterm election season, with both parties likely to debate the balance between controlling federal spending and protecting seniors from higher prescription drug costs.

________________________________________________________________________________________________________________