The Trump administration has decided to end a Medicare premium-subsidy demonstration that helped stabilize premiums for standalone Part D prescription drug plans. The program — originally announced by the Biden administration in July 2024 — aimed to limit sharp premium swings and discourage insurers from leaving the Part D market. Its termination could lead to noticeably higher monthly costs for many Medicare beneficiaries when insurers set rates during the fall open-enrollment period.
Background
The Part D demonstration provided financial support to standalone prescription drug plans after a redesign of Medicare Part D, enacted as part of the Inflation Reduction Act, shifted more cost responsibility onto plan sponsors. That redesign introduced an annual cap on beneficiaries' out-of-pocket drug spending ($2,000 in 2025 and $2,100 in 2026) but increased insurers' exposure to drug costs. To ease that transition, the federal demonstration supplied about $9.8 billion in subsidies for 2025 and 2026 combined.
What the Program Achieved
The demonstration helped reduce average Part D plan premiums by roughly 40% in 2025 and an estimated 27% this year. About 25 million Medicare beneficiaries were enrolled in the standalone plans that benefited from the subsidies; those enrollees currently pay about $36 per month on average for drug coverage.
Projected Impact of Ending the Demonstration
The Centers for Medicare & Medicaid Services (CMS) says its bid analysis indicates plan sponsors have gained enough experience under the redesigned Part D to price their bids without the demonstration. CMS projects that in 2027 roughly 25% of Part D enrollees would see premiums remain flat or fall, about 30% would face increases of under $10 per month, and roughly 45% could see increases of $11–$20 per month.
CMS Statement: "Bid analysis indicates that Part D plan sponsors had sufficient experience under the redesigned Part D benefit."
Independent analysts warn that, without the subsidies, at least 11 million beneficiaries could face higher premiums, and some insurers might again exit the standalone Part D market. Plan exits and higher premiums could push more beneficiaries into Medicare Advantage plans, which are privately run and currently enroll over 54% of Medicare-eligible people.
What Beneficiaries Should Watch
The precise effect on individual enrollees will become clear when insurers submit final bids during the fall open-enrollment period. Beneficiaries should compare plan formularies, premiums, and total expected out-of-pocket costs when choosing coverage for the upcoming year. For help, consumers can consult Medicare.gov, their State Health Insurance Assistance Program (SHIP), or trusted financial and health advisers.
Reporting note: The Wall Street Journal first reported the administration's decision to end the subsidy demonstration.
