By Marc Gilman
📞 Call (800) 927-9326 or email to talk through your Part D options before the fall enrollment period.
If you have a stand-alone Medicare Part D prescription drug plan, you may have seen headlines this week about the Trump administration ending a Medicare drug plan subsidy. Here’s what actually changed, who it affects, and what you should do about it.
Key Takeaways
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CMS is letting the Part D Premium Stabilization Demonstration expire after 2026 — three years earlier than the program’s original three-year minimum.
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This only affects stand-alone Part D drug plans, not drug coverage bundled into Medicare Advantage.
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The subsidy cut the average monthly PDP premium by $26 in 2025 and $16 in 2026 — that support goes away for 2027.
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CMS projects most beneficiaries will see premium increases of less than $10/month, but actual amounts vary by plan and won’t be final until September 2026.
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The $2,100 out-of-pocket cap and Extra Help program are not affected by this change.
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Review your ANOC letter and use Open Enrollment (Oct 15 – Dec 7) to compare plans if your costs rise.
What program is ending?
The Centers for Medicare & Medicaid Services (CMS) announced it will let the Part D Premium Stabilization Demonstration expire after 2026. This wasn’t a subsidy for individual beneficiaries directly — it was federal support paid to insurance companies to help limit sudden premium spikes and keep pricing more consistent across stand-alone Part D plans while insurers adjusted to the Inflation Reduction Act’s redesign of the drug benefit. The demonstration began in 2025 and was voluntary for insurers.
Notably, when CMS first introduced the demonstration in 2024, the agency said it could run for at least three years. Ending it after just two suggests CMS now believes plan sponsors have adjusted enough to the IRA changes to stand on their own — its own language points to insurers having gained “sufficient experience” with bid development.
How did the subsidy actually work?
The demonstration supported premiums in two specific ways:
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Reducing the base beneficiary premium — the benchmark figure CMS uses to calculate individual plan premiums.
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Capping the year-over-year premium increase any plan could pass on to enrollees.
In 2025, the program’s first year, the base premium was cut by $15 and increases were capped at $35. For 2026, those numbers were scaled back to a $10 base premium reduction and a $50 cap on increases.
Who does this affect?
This change only applies to stand-alone Part D prescription drug plans — the kind you’d pair with Original Medicare. If your drug coverage comes bundled into a Medicare Advantage plan (Part C), you were never part of this demonstration, so this announcement doesn’t directly change your situation.
Stand-alone plan enrollment grew from 22.8 million in 2024 to 24.9 million in 2026 while the subsidy was in place — a sign it succeeded in keeping people enrolled and premiums predictable during a period of real cost pressure on insurers.
How much more will I pay in 2027?
That’s the honest question, and the honest answer is: it depends on your specific plan, and we won’t know for certain until CMS releases final 2027 premiums and plan details in September.
CMS Administrator Dr. Mehmet Oz has said premiums are expected to rise by less than $10 a month for most beneficiaries, with some seeing lower premiums. For context, CMS set two national figures for 2027 planning purposes: the average monthly bid amount insurers submitted is $296.05, and the national base beneficiary premium — a benchmark used to calculate individual plan premiums, not what you’ll actually pay — is $41.33.
A more concrete way to think about what’s disappearing: according to MedPAC, the subsidy reduced the average monthly PDP premium by $26 in 2025 and $16 in 2026. That’s roughly the size of the cushion coming out of the market for 2027, even though CMS’s own “under $10” estimate suggests the net effect on most individual plans should be smaller than that cushion alone.
Not everyone will see the same result — your plan’s specific bid, formulary, and competitive position all factor in.
Why is this happening now, and what’s the bigger picture?
A few things are worth understanding as context, not as a reason to worry:
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The program was costly. It totaled $9.8 billion across 2025 and 2026 combined, according to GAO — and some members of Congress had questioned both its rationale and its cost even while it was running.
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PDPs are still the pricier option. Even with the subsidy in place, the average 2026 stand-alone Part D premium was more than 4 times higher than the average Medicare Advantage drug plan premium ($36 vs. $8). Medicare Advantage plans can use rebate dollars to buy down drug premiums in a way stand-alone plans can’t, which is part of why PDPs cost more to begin with.
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The subsidy was never a fix for the underlying cost pressure. Rising drug prices and increasing use of GLP-1s and other expensive specialty medications are pushing costs up regardless of this program, and that pressure is expected to continue into 2027 and beyond.
What to do next
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Don’t assume the worst — but don’t ignore your ANOC letter either. When it arrives this fall, compare your 2027 premium and formulary to this year’s.
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If you’re on a stand-alone PDP, price-check Medicare Advantage options during Open Enrollment (Oct 15 – Dec 7), especially if your current plan’s premium jumps meaningfully.
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If you receive Extra Help, this doesn’t change your subsidy — Extra Help and the $2,100 out-of-pocket cap are separate protections under the IRA and aren’t affected by the end of this demonstration.
We’ll have final 2027 numbers once CMS releases them in September, and we’ll keep you posted. In the meantime, if you want a second set of eyes on your specific plan once renewal notices go out, that’s exactly what we’re here for.
📞 Call (800) 927-9326 or email — we’re happy to walk through your options before Open Enrollment begins.
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