The Trump administration has decided to end a temporary subsidy program that helped keep Medicare Part D prescription drug premiums lower for millions of seniors. The subsidy program will end after 2026, meaning it will no longer be available for Medicare drug plans in 2027. The program is expected to provide insurance companies with about $3.6 billion in subsidies during 2026 before it ends.
Medicare Part D is the part of Medicare that covers prescription drugs. Around 25 million Americans are enrolled in these plans, as reported by Wall Street Journal. Many seniors could face higher monthly premiums for their prescription drug coverage in 2027 after the subsidy ends. However, it is not yet certain how much premiums will rise or whether every Medicare beneficiary will be affected. Insurance companies still have to set their final rates. Medicare Part D premiums for 2027 will be officially announced in September.
Why is the Trump administration ending the subsidy?
A Trump administration official said the extra subsidy encouraged insurance companies to raise premiums because they knew the government would help pay the additional costs. The administration said the subsidy is no longer needed because other policies are already in place to help control Medicare Part D costs.
Mehmet Oz, Administrator of the Centers for Medicare and Medicaid Services (CMS), defended the decision. “We are stabilizing the market so this bailout is no longer needed,” said Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, in a posting on social media, according to Wall Street Journal.
{{/usCountry}}Mehmet Oz, Administrator of the Centers for Medicare and Medicaid Services (CMS), defended the decision. “We are stabilizing the market so this bailout is no longer needed,” said Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, in a posting on social media, according to Wall Street Journal.
{{/usCountry}}CMS also said it ended the subsidy because insurance companies now have enough experience under the updated Medicare program to estimate their costs without extra government support.
Will Medicare premiums increase?
Government officials expect premium changes to vary depending on the insurance plan. According to a Trump administration official, about 25% of Medicare Part D enrollees are expected to see their premiums stay the same or even decrease in 2027. Around 30% of enrollees are expected to see monthly premium increases of less than $10, as stated by Wall Street Journal.
The remaining 45% are expected to face increases that are mostly between $11 and $20 per month. The administration also said seniors who face higher premiums may be able to reduce their costs by switching to different Medicare Part D plans because cheaper options will still be available.
Why are Medicare drug costs rising?
Medicare Part D plans are becoming more expensive because more people are using costly GLP-1 drugs for weight loss and diabetes, along with other expensive medicines. Changes under the 2022 Inflation Reduction Act also increased costs for insurance companies because they now have to pay a bigger share of prescription drug expenses.
The law helped many Medicare users by reducing their out-of-pocket costs, but it also increased the financial burden on insurers, which has added pressure on premiums. Juliette Cubanski, Vice President at KFF, said these cost pressures are likely to continue in 2027, according to the Wall Street Journal.
How much did the subsidy reduce premiums?
The Medicare Payment Advisory Commission estimates that the subsidy lowered average Medicare Part D premiums by about 40% in 2025. In 2026, the subsidy is estimated to have reduced average premiums by around 27%. The Washington Post reported that the temporary subsidy reduced monthly Medicare Part D premiums by an average of about $16.
How much do Medicare Part D plans currently cost?
According to KFF, the average monthly Medicare Part D premium was about $36 in 2026. The National Council on Aging estimated the average monthly Part D premium at $34.50 in 2026, as noted by Washington Post. By comparison, the average Medicare Advantage premium was only about $8 per month, making it much cheaper than stand-alone Part D plans.
What happened to the subsidy money?
According to a Government Accountability Office report, the subsidy program has provided an estimated $9.8 billion to the Medicare Part D market. That includes approximately $6.2 billion in 2025 and $3.6 billion in 2026. A Trump administration official said that if the subsidy had continued into next year, more than half of the money would have gone to one company—UnitedHealth Group, according to Wall Street Journal.