Trump administration to end Medicare drug plan subsidies, raising premium concerns

The Trump administration will end Medicare Part D subsidies early, a move experts warn could increase prescription drug premiums for millions of seniors beginning in 2027.

WEBDESK – MEDIABITES

Millions of Americans enrolled in Medicare drug plans could face higher monthly premiums after the Trump administration announced it will end temporary subsidies designed to stabilize costs under the Inflation Reduction Act.

The Trump administration will end temporary federal subsidies for Medicare Part D prescription drug plans a year earlier than planned, a decision that could increase premiums for millions of Americans despite assurances that most beneficiaries will see only modest increases.

The subsidies were introduced by the Biden administration to help insurers adjust to major changes brought by the Inflation Reduction Act of 2022, which capped annual out-of-pocket prescription drug costs for Medicare beneficiaries at $2,000 beginning in 2025.

The reforms shifted a larger share of prescription drug costs to insurers, prompting concerns that premiums could rise sharply as companies adjusted to the new payment structure. To ease the transition, the Biden administration launched a temporary demonstration project that subsidized insurers and helped stabilize premiums through 2027.

The Trump administration has now decided to end those payments a year early.

Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz announced the decision on social media, criticizing the program as an unnecessary use of taxpayer money.

“The Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies,” Oz wrote on X. “This is unacceptable.”

According to the Government Accountability Office, the subsidies were expected to cost $9.8 billion over 2025 and 2026. Approximately 23 million people were enrolled in standalone Medicare Part D prescription drug plans in 2025.

Oz said the subsidies are no longer necessary and estimated that most Medicare beneficiaries would pay less than $10 more per month in premiums next year.

However, health policy experts say the actual impact could be significantly greater.

Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, said the subsidies lowered average standalone Part D premiums by about $16 per month this year.

“Without this demonstration, many beneficiaries could have faced nearly a 50% increase in average drug plan premiums,” Cubanski said, adding that the full impact will not be clear until CMS releases additional plan information later this year.

Health policy specialists also warn that ending the subsidies could disproportionately affect seniors enrolled in traditional Medicare, whose standalone drug plans rely more heavily on federal support than Medicare Advantage plans.

Stacie Dusetzina, a professor of health policy at Vanderbilt University School of Medicine, said the move could encourage more beneficiaries to switch to Medicare Advantage plans, which often offer lower premiums but typically come with narrower provider networks and additional coverage restrictions.

She noted that while Medicare Advantage may reduce monthly costs, beneficiaries should carefully consider long-term healthcare needs before changing coverage.

The administration’s decision marks another policy shift in implementing the Inflation Reduction Act’s Medicare reforms, highlighting ongoing debates over federal healthcare spending, insurer support, and prescription drug affordability for older Americans.