Trump Ends Medicare Drug Subsidy, Raising Cost Concerns

The Trump administration is ending a Medicare drug subsidy program that has helped hold down prescription premiums, a change that could raise out-of-pocket costs for roughly 25 million seniors and disabled beneficiaries in 2027. AP News reports the decision lands in a midterm election year in which the cost of living is a top voter concern.

The Centers for Medicare & Medicaid Services (CMS) announced on July 28 that it will conclude the Part D Premium Stabilization Demonstration at the end of 2026. The temporary program, created by the Biden administration in 2024, provided federal subsidies to insurers offering stand-alone Medicare Part D prescription drug plans. It was designed to prevent steep premium swings during the rollout of the Inflation Reduction Act’s Part D redesign, which capped out-of-pocket drug spending and shifted more costs onto insurers. In announcing the decision, CMS said that plan sponsors now have “sufficient experience” under the redesigned benefit and that ending the demonstration will return the market to “traditional conditions” in 2027.

How the Program Worked

The demonstration reduced the base beneficiary premium by up to $15 and capped year-over-year premium increases at $35 in 2025. For 2026, CMS scaled the program back to a $10 premium reduction and a $50 maximum allowable increase, with no enhanced risk corridors. Nearly all plan sponsors opted to participate.

The subsidies delivered measurable results. Average stand-alone plan premiums for beneficiaries not receiving the low-income subsidy rose modestly from $42 in 2024 to $43 in 2025, according to KFF, a health policy research nonprofit, which noted the program reduced average monthly premiums by $26 in 2025 and $16 in 2026. Enrollment in stand-alone plans grew from 22.8 million in 2024 to 24.9 million in 2026.

The GAO found the program worked as intended, estimating that it would cost $9.8 billion across 2025 and 2026. Without the demonstration, premiums for beneficiaries who stayed in their 2024 stand-alone plans would have nearly doubled on average in 2025, with 37% facing increases of more than $40 a month.

Defenders and Critics

CMS Administrator Dr. Mehmet Oz defended the decision, saying most beneficiaries will see increases of less than $10 a month and some will see lower premiums. Newsweek reported that Oz described ending the program as halting a “bailout” that is “no longer needed,” pointing to alternative affordability measures including Medicare drug price negotiation and $50-a-month GLP-1 coverage.

Critics warn the change could hurt vulnerable beneficiaries. Senate Minority Leader Chuck Schumer called the decision “heartless, cruel, and completely by choice.” AARP warned it would be “unfortunate if this decision made Part D coverage less affordable,” and Leslie Dach, chair of the advocacy group Protect Our Care, said that for older Americans on fixed incomes, “even an extra $10 or $20 a month can mean choosing between filling their prescription, paying the electric bill, or buying groceries.”

Uncertain Impact

The full effect on consumers remains unknown. CMS will not release final 2027 premiums and plan details until mid-to-late September, as voters cast ballots in November’s midterm elections. KFF’s Juliette Cubanski warned that some enrollees, particularly those in stand-alone plans without low-income subsidies, could face larger premium jumps than in recent years. “What’s going to matter most for consumers is how much more or less they have to pay at the end of a month, and how much they have left after the bills are paid,” she said.

KFF also highlighted a structural imbalance: average premiums for stand-alone drug coverage in 2026 were more than four times higher than those in Medicare Advantage plans ($36 versus $8), because Medicare Advantage plans use rebates to buy down costs. Ending the temporary subsidy does not address that underlying issue, and broader cost pressures from rising drug prices and expensive specialty drugs are likely to continue.

What to Watch

Beneficiaries will get clarity in September, when CMS releases the final 2027 Medicare Advantage and Part D landscape. The change does not affect the Part D out-of-pocket cap — set at $2,100 in 2026 and projected to rise to $2,400 in 2027 — nor the Medicare drug price negotiation program. The key questions are how many of the roughly 25 million enrollees in stand-alone plans will see meaningful premium increases, and whether the issue becomes a flashpoint in the fall campaign.