Trump Administration to End Medicare Drug Plan Subsidy
Program that held down premiums not renewed for 2027, resulting in higher costs for some seniors
- The Trump administration plans to end a subsidy program after 2026 that helped hold down premiums for Medicare Part D prescription drug plans.
- An administration official said about 45% of Medicare Part D enrollees will see monthly premium increases of $11 to $20 next year.
- Medicare drug premiums are rising due to growing expenses for GLP-1 medications, specialty drugs and Inflation Reduction Act changes
The Trump administration plans to end a subsidy program that helped hold down premiums for Medicare drug plans, a move that could leave many seniors facing higher rates for their prescription coverage next year.
The move will eliminate a program that is giving insurance companies an estimated $3.6 billion in subsidies this year to blunt increases in premiums for the Medicare prescription plans, known as Part D. The program will end after 2026, according to administration officials.
High drug costs are a perennial issue—especially for seniors on fixed incomes—and healthcare affordability is expected to be a focus in the midterm elections. Roughly 25 million people have Part D plans, and they will learn about their 2027 rates in the fall.
A Trump administration official said the extra subsidies encouraged insurers to raise rates, knowing the government would pick up the extra cost. He said the subsidies weren’t needed, and other policies that help hold down Part D costs also remain in place.
“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.
The Trump administration official said that if the program had remained in effect next year, more than half of the subsidy money would have flowed to one company, UnitedHealth Group. A UnitedHealth spokesman said the company is “committed to working with CMS, ensuring seniors have access to affordable prescription medicines.”
The average premium for a Part D plan was around $36 a month this year, according to KFF, a health-policy nonprofit.
The administration official said around 25% of Medicare Part D plan enrollees would see premiums for their plans stay flat or go down next year. Around 30% will have an increase of less than $10 to their monthly bill.
For the remaining 45%, he said, the increases are largely in the $11 to $20 range a month.
Seniors should be able to find lower premiums if they switch plans, he said, adding affordable options are still available.
Medicare drug coverage premiums are rising because the plans have been hit by growing expenses for GLP-1 medications and other specialty drugs. Changes implemented under 2022’s Inflation Reduction Act also have pushed up premiums. The law reduced many Medicare enrollees’ out-of-pocket expenses but required insurers to shoulder more of the costs.
Those pressures are expected to continue in 2027, said Juliette Cubanski, a vice president at KFF.
The Medicare Payment Advisory Commission, a federal watchdog agency, estimates the subsidy program, which was supposed to stabilize Part D, reduced the average Part D plan premium by about 40% in 2025. This year, it cut the average rate by an estimated 27%.
Part D plans offer stand-alone drug coverage alongside Medicare’s traditional medical benefits. Higher premiums for the Part D plans could push more Medicare enrollees into Medicare Advantage, the private-insurer version of Medicare, which generally wrap in drug benefits and often charge no premiums at all.
The subsidy program has pumped an estimated $9.8 billion into the market, $6.2 billion in 2025 and $3.6 billion in 2026, according to a Government Accountability Office report.
Despite the extra funding, the number of drug plans offered has dropped by about half in the last two years because insurers have pulled back.