CMS Ends Biden‑Era Part D Subsidy — What That Means for 2027 Premiums

Millions of Medicare enrollees could face slightly higher prescription drug premiums in 2027 after the Centers for Medicare & Medicaid Services (CMS) moved to end a temporary subsidy program created under the Biden administration. CMS officials say the demonstration was intended to offset changes from the 2022 Inflation Reduction Act (IRA) but is no longer needed because the law itself altered plan liabilities.

What CMS Announced

CMS said it will discontinue a temporary "demonstration project" that directed payments to prescription drug plans to hold down monthly premiums. Administrator Mehmet Oz announced the decision on social media, calling the prior payments "an unacceptable bailout" of insurers and saying the move will "stabilize the market."

Mehmet Oz, CMS Administrator: "The Biden admin gave billions of taxpayer money directly to big insurance companies. This is unacceptable. We are stabilizing the market so this bailout is no longer needed."

Impact On Premiums

CMS said most Part D enrollees should see increases of less than $10 per month in 2027, though some beneficiaries could face larger premium changes depending on plan choice and local market conditions. The agency will publish detailed premium figures in September for both stand‑alone Part D plans and Medicare Advantage plans that include drug coverage.

Background And Context

The demonstration was launched following the 2022 Inflation Reduction Act, which changed how prescription drug costs are shared between Medicare and plans. The IRA also established an annual out‑of‑pocket cap on prescription drug spending — $2,000 in 2025 and $2,100 in 2026 — which shifted more financial exposure to insurers and contributed to the policy response.

CMS said the demonstration cost the federal government about $9.8 billion across 2025 and 2026. Officials noted that, had the program continued, UnitedHealth Group alone would have received roughly $1.5 billion. UnitedHealth responded that it remains committed to helping seniors access affordable medicines.

Juliette Cubanski, KFF: "Some Part D recipients could see a larger premium increase for drug coverage next year than they've faced in recent years. This temporary demonstration appeared to work as intended to stabilize year‑over‑year premium increases and enrollment."

Enrollment And Market Size

As of February, roughly 25 million people were enrolled in stand‑alone Part D drug plans (often paired with traditional Medicare) and about 31 million were enrolled in Medicare Advantage plans that typically include prescription drug coverage. The demonstration coincided with an average monthly premium decline for stand‑alone plans from $43 in 2024 to $36 in 2026 and modest enrollment growth.

Other Cost Pressures

Insurers and employers have pointed to rising drug prices and increased use of medications as drivers of higher insurance costs. Separately, on July 1 Medicare began a pilot program covering popular GLP‑1 weight‑loss medications for millions of enrollees; beneficiaries in that pilot will pay a $50 monthly copay and Medicare will cover the remainder under the pilot.

What Beneficiaries Should Do

CMS will publish plan premiums in September. Beneficiaries can compare options and change plans during Medicare open enrollment from Oct. 15 to Dec. 7 for coverage starting Jan. 1, 2027. If you expect changes in your drug needs or plan costs, review plan formularies, pharmacy networks, and total expected yearly out‑of‑pocket costs before deciding.