CMS will discontinue Part D subsidies for 2027
Medicare Part D prescription drug plans could be more expensive for about 25 million Americans next year as the Trump administration plans to end Medicare Part D subsidies.
The Centers for Medicare & Medicaid Services announced that it will discontinue the Part D voluntary premium stabilization program after 2026. CMS said that plan sponsors now have sufficient experience to price bids without the subsidy program.
CMS began the Part D Premium Stabilization Demonstration in 2025 in response to a spike in premiums CMS saw after the Inflation Reduction Act’s Part D redesign took effect. CMS found that the average total Part D beneficiary premium was projected to decrease by $7.45 in 2025 as a result of the program, with about 99% of enrollees in a participating standalone plan.
Under the stabilization program, a $15 direct subsidy was applied to the base beneficiary premium used in each plan’s premium calculation. CMS also imposed a cap limiting any plan’s year-over-year total premium increase to $35.
The program carried a price tag of more than $9.8 billion across 2025 and 2026, according to the Government Accountability Office.
How will it impact beneficiaries?
The national base beneficiary premium is set at $41.33, CMS said. Annual increases in that premium remain capped at 6% through 2029 under provisions of the Inflation Reduction Act — up from $38.99 this year. This cap is separate from the subsidy program and will stay in place. The agency added that it expects to finalize actual plan-level premiums in September.
About 25 million Americans have standalone Part D drug plans, and currently pay an average premium of about $36 a month. Without the $15 subsidy and $35 cap, plans will price bids to reflect their actual risk and cost trend.
The impact on Part D beneficiaries will be uneven, CMS said. Administration officials said that about 25% of Part D enrollees will see premiums decline or remain the same for 2027, while about 30% could face monthly increases of less than $10. The remaining 45% are projected to see premium increases of between $11 and $20 per month.
Impact on carriers
Losing the subsidy ends a financial cushion insurers had come to rely on for pricing stability.
CMS’s national average monthly bid amount — the figure used to calculate government subsidies for plans — will be $296.05 in 2027. Carriers use this as the baseline for setting their own bids without the subsidies.
Carriers’ final pricing decisions and plan offerings for next year are still to come. CMS said it will release final 2027 Medicare Advantage and Part D premiums and plan details in September.
Annual enrollment period for Medicare begins Oct. 15 and runs through Dec. 7.
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