By Ashley Fredde
Key Takeways:
- A Medicare program that helped keep Part D prescription drug premiums stable will end after 2026, a year earlier than planned.
- Advocates worry the change could mean higher costs and fewer affordable drug plan options, especially for low-income beneficiaries.
- Experts say seniors should carefully review their coverage during Medicare open enrollment this fall because things may change significantly for 2027.
The Trump administration is ending a temporary federal program — created to soften the effects of Medicare’s biggest prescription drug overhaul in nearly two decades — a year earlier than planned. The move, experts say, could mean higher monthly premiums for some North Carolinians and create new hurdles for beneficiaries with limited incomes.
The Centers for Medicare and Medicaid Services announced last month it will end the Medicare Part D Premium Stabilization Demonstration subsidy program after the 2026 plan year instead of continuing it through 2027 as planned. The Trump administration said the change will save the Medicare program nearly $4 billion.
Monthly premiums for most beneficiaries will change. Some will go up by less than $10, and some will actually go down, according to CMS administrator Mehmet Oz in a social media post announcing the change.
“The Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies. This is unacceptable,” Oz wrote on the social media platform X. “We are stabilizing the market so this bailout is no longer needed.”
But advocates who help older adults navigate Medicare say the intent of the subsidy demonstration wasn’t to lower premiums. It was designed to give insurers time to adjust to sweeping changes Congress made to the Medicare prescription drug benefit through the Inflation Reduction Act.
“The whole point of it was to give these plans time to understand the new drug benefit design,” said Gina Upchurch, executive director of Durham-based Senior PharmAssist, which helps Medicare beneficiaries compare coverage and find ways to afford their medications.
“This was a three-year demonstration to help plans understand how the [medication] use was going to work and what their expenses were going to be.”
Why the program existed
The Inflation Reduction Act made several changes to Medicare’s prescription drug program.
The 2022 law capped annual out-of-pocket prescription drug spending for Medicare beneficiaries, expanded Medicare’s ability to negotiate prices for certain high-cost drugs, and required drug manufacturers to pay rebates when prices rise faster than inflation.
The cap for out-of-pocket spending was set at $2,000 in 2025 and increased to $2,100 in 2026.
The law also included a redesign of the Medicare Part D program, the prescription drug benefit used by millions of older adults and people with disabilities.
As of February, about 31 million Medicare beneficiaries received prescription drug coverage through Medicare Advantage plans. Those plans are run by private insurance companies, which receive extra payment from the federal government to administer them. Medicare Advantage plans typically bundle medical and drug coverage.
Meanwhile 25 million people chose traditional Medicare, which pays for medical coverage, and purchased standalone Part D plans.
When the Inflation Reduction Act passed, some policymakers worried that the redesigned benefit would make it difficult for Part D plan sponsors to accurately predict their costs during the transition, potentially driving up premiums and making those plans less competitive, according to Upchurch.
To stabilize the market and encourage insurance companies to participate in the Part D standalone program, CMS created the temporary demonstration program. The program subsidized those standalone Part D plans and limited how much premiums could increase from year to year.
“It’s given the standalone drug plans a little more level playing field so that they can offer a reasonable benefit as opposed to the Medicare Advantage plans, who were already getting extra funds so they could subsidize the drug benefit,” said Upchurch, who also serves on the federal Medicare Payment Advisory Commission, or MedPAC.
Upchurch said her perspective on the issue is informed primarily by what she sees in Durham as the head of Senior PharmAssist and that she is not speaking on behalf of MedPAC.
What the subsidies accomplished
In 2025, insurers received a $15 monthly subsidy per enrollee, and premium increases were capped at $35. In 2026 the parameters were scaled back, with the subsidy dropping to $10 per month while allowable premium increases rose to $50.
The extra subsidies appear to have worked as intended, helping stabilize year-over-year increases in Part D prescription drug plan premiums and preventing major changes in enrollment. The subsidies reduced the average monthly premium by $26 in 2025 and $15 in 2026, according to MedPAC. At the same time, enrollment in the standalone Part D plans increased from 22.8 million people in 2024 to 24.9 million in 2026.
But even with the subsidies, standalone Part D plans are significantly more expensive than drug coverage offered through Medicare Advantage.
In 2026, the average monthly premium for a standalone Part D plan was $36, compared with $8 for drug coverage through Medicare Advantage, according to MedPAC. Medicare Advantage plan administrators can use rebates to lower the cost of their drug coverage, giving them an advantage in competing for enrollees.
The temporary subsidies also did not address the broader costs facing Part D insurers, including rising drug prices and increased use of expensive specialty drugs and GLP-1 medications.
The program was expected to continue for another year before insurers assumed full financial responsibility under the redesigned benefit. Instead, the Trump administration is ending it after two years.
While the program is ending, the pressure for Part D insurers is expected to continue into 2027 and beyond, Upchurch said.
Concerns for beneficiaries
Part D premiums vary by insurer and change every year, meaning that some beneficiaries could see little change while others experience larger increases — depending on the plan they choose.
Upchurch said the real picture won’t emerge until insurers release their 2027 Medicare offerings this fall.
“We’re afraid of what we’re going to see come October,” she said.
She said one of her biggest concerns is the impact on lower-income beneficiaries.
“The premium stabilization program is for any Medicare beneficiary, regardless of income, regardless of age, in the standalone drug plans,” she said. “But many older adults and adults with disabilities are on limited, fixed incomes. With inflation, the anxiety around everything else, and the cost of everything else going up.”
She said it’s “really bad timing” for many of the people that seek help about their plans at Senior PharmAssist.
A number of safety net programs older adults rely on have recently been terminated or limited, she said, such as the Supplemental Nutrition Assistance Program and energy assistance programs.
Medicare beneficiaries who qualify for the federal Low-Income Subsidy — the amount Medicare contributes toward monthly premiums — can also expect that to shrink dramatically in North Carolina, according to Upchurch.
The benchmark premium used to determine how much assistance beneficiaries receive is expected to fall from $36.17 in 2026 to $13.25 in 2027.
That means many beneficiaries who previously paid no monthly premium could have to pay extra to stay in plans that cover all of their medications.
“These are people with incomes at or below 150 percent of the federal poverty guidelines. The people that are most vulnerable,” Upchurch said. “That is a major concern for us.”
Finding a plan that covers multiple prescription medications can already be challenging, she said. If fewer plans fall below the benchmark premium, beneficiaries with limited incomes could face fewer affordable options.
For some, the result may be skipping medications or stretching prescriptions to save money.
“We hear of lots of people taking less of the medicine than prescribed because they can’t afford it,” Upchurch said.
More than premiums
The subsidy program demonstration’s end comes as Medicare beneficiaries already are adjusting to broader changes under the Inflation Reduction Act. The annual cap on out-of-pocket prescription drug spending, which limits how much beneficiaries pay directly for covered medications, is still in place.
That protection has made expensive medications more affordable for many patients, Upchurch said, particularly those taking cancer drugs and other high-cost therapies.
But she said the changes have also made an already complex Medicare system even harder for beneficiaries to navigate.
“When beneficiaries have to go onto Medicare.gov, or when they’re making Medicare decisions, it is super complex,” Upchurch said. “It’s way too many choices. It needs to be more standardized.”
That complexity has pushed some people into Medicare Advantage plans. The benefits that are offered by the Medicare Advantage plans — and in traditional Medicare — like vision, hearing, dental, gym memberships, transportation money and cash cards to buy healthy foods can make the plan attractive to many beneficiaries, Upchurch said.
“What we hear about is people will be in a Medicare Advantage plan, and then they realize it comes with trade-offs,” Upchurch said. “And those trade-offs [are] that ‘the rehab facility that I want to go to will not see me because I’m in a certain Medicare Advantage plan,’ or ‘the hospital that I want to use will not see me.’”
“You pay as you go. If you’re in traditional Medicare with a Medigap [plan] and you go into the hospital, you don’t pay anything,” she said. “But if you’re in a Medicare Advantage plan, you’re going to pay $325 a day.”
Only about 30 percent of beneficiaries get help comparing Medicare plans each year, Upchurch said, even though formularies, premiums and cost-sharing can all change annually.
As more Medicare beneficiaries face changing premiums and plan options during open enrollment this fall, Upchurch said reviewing coverage will be more important than ever.
“What we don’t want is for people to be surprised because they didn’t understand what they were getting,” she said.
“People, as we age, I don’t know that having to be super attentive every year to every little detail of your health insurance is something that they look forward to. I think it’s criminal, honestly, that we do this. We don’t make a stable benefit that has some reasonable cost sharing for people.”
Beneficiaries can compare plans during Medicare open enrollment, which runs from Oct. 15 through Dec. 7, and free counseling is available through North Carolina’s Seniors’ Health Insurance Information Program.
KEEP UP WITH THE LATEST
Republish our articles for free, online or in print, under a Creative Commons license.
