The U.S. Centers for Medicare & Medicaid Services (CMS) has announced that it will end the temporary program that for two years kept Medicare Part D prescription drug premiums from rising sharply. The decision will affect about 25 million beneficiaries, who will find out their 2027 premiums in the fall of 2026, shortly before the U.S. midterm elections.
CMS Administrator Mehmet Oz said ending the subsidies would prevent billions of taxpayer dollars from being directed to insurance companies. The program cost the agency about $3.6 billion in 2026. According to Oz, premiums for most Medicare beneficiaries will increase by less than $10 per month. Democrats criticized the decision as representing part of a broader trend toward making healthcare more expensive, citing cuts to Medicaid spending and the expiration of Affordable Care Act health insurance subsidies as other examples.
A. Mark Fendrick, MD, a primary care physician and the director of the University of Michigan's Center for Value-Based Insurance Design has studied the effects of healthcare costs on patient behavior for four decades. As he told The Insider, the policy will primarily affect Medicare beneficiaries enrolled in stand-alone prescription drug plans rather than those in Medicare Advantage. He said higher premiums are likely to encourage some people to switch to Medicare Advantage plans:
“As was the case with the 2025 expiration of the enhanced subsidies for ACA marketplace plan that led to higher health plan premiums, the end of this temporary program, known as the Part D Premium Stabilization Demonstration, will require many of the roughly 25 million Medicare beneficiaries who enroll in stand-alone Medicare drug plans (those not associated with Medicare Advantage plans) to most likely pay more for their prescription drug coverage starting in January 2027.
The primary rationale is likely due to a desire to lower federal spending and the Administration's perspective that Medicare beneficiaries were not receiving the entirety of the subsidies — instead, the funds were going to the plans.
Any policy that raises premiums to a greater extent for stand-alone Part D plans than for those associated with Medicare Advantage plans would lead to a shift of people from traditional Medicare into lower cost Medicare Advantage Plans. The lower premiums, reduced copayments for medical services, and supplemental benefits (e.g. vision and dental coverage) provided by MA plans are an attractive feature for those on a fixed income. However, these lower costs may come at a non-financial price — such as fewer choices of clinicians plus prior authorization requirements for certain services.”
Premiums will not actually change until 2027, but in mid-to-late September CMS will release the 2027 plans, premiums, and drug formularies. Because the annual enrollment period runs from Oct. 15 through Dec. 7, many beneficiaries will learn about the higher premiums before Election Day in November.