The Trump administration has announced it will end temporary subsidies for Medicare Part D drug plans a year early, a move that could raise premiums for millions of beneficiaries in 2027. The decision, revealed by Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz, withdraws financial support designed to stabilise costs during a major overhaul of prescription drug coverage.
Why the subsidies were introduced
The subsidies were part of a demonstration project launched by the Biden administration to ease the transition under the Inflation Reduction Act of 2022. That legislation capped out-of-pocket drug spending at $2,000 from 2025 but shifted more of the financial burden to insurers, who initially struggled to price premiums accurately.
Without the subsidies, the average standalone Part D premium would have been nearly 50% higher this year, rising from $36 to $52, according to KFF, a nonpartisan health research organisation. CMS had estimated the subsidies would cost $9.8 billion across 2025 and 2026.
Who will be affected
Around 23 million people were enrolled in standalone Medicare Part D plans in 2025, according to a Government Accountability Office report. These beneficiaries—primarily those with traditional Medicare—will bear the brunt of the subsidy removal, as Medicare Advantage plans have greater flexibility to absorb costs.
Experts warn the change could accelerate a shift toward Medicare Advantage, which often has lower premiums but restricts provider networks. "One way to push more people into Medicare Advantage is to make traditional Medicare very expensive," said Stacie Dusetzina, a health policy professor at Vanderbilt University, referencing Project 2025, a policy blueprint linked to a potential second Trump term.
What happens next
CMS has not yet released detailed projections on how much premiums will rise, but analysts expect clearer figures in the autumn. Until then, beneficiaries are advised to review their coverage options during the next open enrolment period, weighing the trade-offs between lower premiums and network restrictions.
The early termination of the subsidies marks the latest twist in Medicare’s evolving drug pricing landscape, with further policy shifts likely as the 2027 deadline approaches.
