CMS announces end to Medicare Part D prescription drug subsidies
As Medicare Part D plans begin looking toward developing options for 2027, President Donald Trump’s administration is making some major changes to a program designed to offset the costs of expensive prescription drugs.
The Centers for Medicare & Medicaid Services (CMS) announced this week that it is ending the Premium Stabilization Demonstration, put in place in 2025 to help reduce premiums for Part D members who experience “volatility and variation in standalone premiums” as part of the Biden-era Inflation Reduction Act.
CMS said the change will allow Medicare Part D to operate “under traditional market conditions” regarding the price of drugs, meaning insurers will need to adjust premiums to accommodate for the potential fluctuating costs of the expensive or unexpected pharmaceutical prescription needs of members.
The agency added that it is making the announcement now, ahead of its official 2027 Medicare Advantage and Part D landscape report, which it releases in September. That information typically guides plans as they make bids to provide privatized Medicare benefits in the coming year.
After running its analysis for 2027, CMS stated that it believes payers have “sufficient experience under the redesigned Part D benefit to support their assumptions in developing the prescription drug plan bids,” without the addition of the subsidies implemented as part of the Inflation Reduction Act.
In a statement posted to his X/Twitter account, CMS Administrator Mehmet Oz, MD, framed the Premium Stabilization Demonstration as a handout of “billions” of dollars of “taxpayer money [given] directly to Big Insurance companies.”
"We are stabilizing the market so this bailout is no longer needed," Oz wrote.
Premiums will rise
It’s unclear how the removal of the subsidies will entirely impact the cost of premiums or the benefits payers offer through their Medicare Part D plans, which American seniors opt into in addition to traditional Medicare specifically to cover the costs of medications. But, they will go up.
The public will know more in September once CMS releases its final report. It did confirm that premiums cannot increase more than 6% year-to-year until 2029, as that part of the Inflation Reduction Act is law and cannot be changed by administrative decree.
The base monthly premium for Medicare Part D plans in 2027 will be set to $41.33, before patients select the options that meet their needs.
For more, read the full statement by clicking here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.