The Trump administration has announced plans to terminate a subsidy program that has helped limit premium increases for Medicare prescription drug plans, known as Part D. The program, which is providing approximately $3.6 billion in subsidies to insurance companies in 2026, will end after this year, potentially leading to higher prescription coverage costs for many Medicare enrollees in 2027.
The subsidy program was designed to mitigate premium hikes for roughly 25 million Americans enrolled in Part D plans. According to administration officials, the decision to end the program reflects concerns that the subsidies encouraged insurers to raise premiums, knowing the government would cover part of the expenses. Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services (CMS), stated on social media that the subsidy was no longer necessary because other policies aimed at controlling Part D costs remain effective.
An administration official highlighted that if the subsidy were continued next year, more than half of the funds would have benefited a single company, UnitedHealth Group. In response, a UnitedHealth spokesperson reaffirmed the company’s commitment to collaborating with CMS to ensure seniors maintain access to affordable medications.
Premiums for Part D plans currently average around $36 per month, according to data from the Kaiser Family Foundation (KFF). The administration official projected that approximately 25% of enrollees will see their 2027 premiums remain unchanged or decrease, while about 30% may face increases of less than $10 per month. The remaining 45% are expected to experience premium hikes generally ranging from $11 to $20 monthly. Officials noted that seniors could find lower premiums by switching plans, emphasizing that affordable options will still be available despite the subsidy’s termination.
The upward pressure on premiums stems largely from growing costs associated with GLP-1 drugs and other specialty medications, as well as provisions in the 2022 Inflation Reduction Act. While the law reduced out-of-pocket expenses for many Medicare beneficiaries, it shifted a greater cost burden onto insurers, contributing to premium increases that are projected to continue into 2027. Juliette Cubanski, vice president at KFF, observed that these trends are expected to persist in the coming year.
The Medicare Payment Advisory Commission, a federal watchdog group, estimated that the subsidy program lowered the average Part D premium by approximately 40% in 2025 and about 27% this year. Its termination marks a significant change in the federal government’s approach to managing the affordability of prescription drug coverage for seniors.