A Medicare Drug Subsidy Is Ending Under Trump - Here's How Much It Could Cost You in 2027

The Trump administration has announced that it plans to end Medicare subsidies that were designed to help enrollees save money in retirement, and certain Americans might end up paying the price. The temporary Part D Premium Stabilization Demonstration was designed to help stabilize stand-alone prescription drug plan premiums, capping out-of-pocket drug spending for lower expected costs and premiums.

As the administration announces the end of that program, it's important for affected enrollees to be prepared for the potential changes in 2027.

How the Premium Stabilization Demonstration worked

The Inflation Reduction Act of 2022 capped Medicare patients' out-of-pocket drug spending at $2,000 beginning in 2025, and was limited to stand-alone prescription drug plans. Insurers were responsible for more of the bill, but insurers weren't sure how to set premiums or how much they might be responsible for paying. The Biden administration created the Part D Premium Stabilization Demonstration to help make that transition easier for insurers. The program was temporary, and the subsidies were expected to last through 2027.

According to KFF, in 2025, the program reduced the base beneficiary premium by $15, while limiting the monthly premium increase to $35.

Centers for Medicare & Medicaid Services (CMS) isn't eliminating drug coverage or the out-of-pocket cap. It's allowing the program that subsidized costs for insurers to lapse.

What CMS says about the decision

CMS administrator Dr. Mehmet Oz posted the announcement on X. "The Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies," he wrote. "This is unacceptable."

He added that since the market is stabilizing, the bailout is no longer needed. "Premiums will go up by less than $10 for most Medicare recipients, with many even seeing LOWER premiums," wrote Oz.

Oz stated that every Medicare beneficiary may still access low-cost plans and the administration is going to continue lowering prescription drug prices.

How the change may affect Medicare enrollees

According to a Government Accountability Office report published in February 2026, approximately 23 million people were enrolled in standalone Medicare Part D drug plans in 2025. The report estimated that subsidies would cost approximately $9.8 billion in 2025 and 2026.

The program helped stabilize year-over-year PDP premium increases and prevent significant enrollment changes in PDP plans. Without those subsidies, some Medicare Part D stand-alone drug plan enrollees might see higher premium increases in 2027. At this time, insurers haven't yet released their premiums for 2027. The individuals affected are those who pair stand-alone Part D plans with original Medicare plans, not those who get drug coverage through a Medicare Advantage plan.

The effects may vary, too. Since insurers offer certain plans in certain areas, and premiums are calculated for each individual plan, some plans might have higher prices while the premiums for other plans might be relatively unaffected.

The concern about ending the subsidy

While Oz appears confident that most beneficiaries may see a cost increase of under $10 a month, others are more concerned about the potential impacts that ending the subsidy may have. Advocacy group Protect Our Care emphasized that small premium increases could still be too much for retirees on a fixed income to cover.

Stacie Dusetzina, professor of health policy at the Vanderbilt University School of Medicine, told NPR that the timing of the subsidies' end is concerning. She noted that the Heritage Foundation's Project 2025 was blunt about wanting to push more people onto Medicare Advantage plans. Making it expensive to remain on a traditional Medicare plan would be one way to accomplish that goal.

The costs that are known at this time

Limited cost numbers are currently known. The base premium for 2027 has already been set at $41.33, and thanks to the Inflation Reduction Act, the premium can't increase more than 6% per year through 2029.

The 2026 out-of-pocket drug spending cap of $2,100 also remains in place, meaning after Part D enrollees pay the $2,100 limit, they don't pay any additional copayments or coinsurance on covered drugs for the rest of the year.

Since final plan premiums aren't published until September, no one knows the exact 2027 plan costs yet.

Bottom line

Knowing that 2027 plan prices may increase more than normal means it's essential to carefully review your plan options during the fall open enrollment period, which occurs from October 15 through December 7. During open enrollment, you may change your Medicare plan and your drug plan, and those changes go into effect on January 1. Be sure to also check to see if you're eligible for Extra Help, assistance for enrollees with limited incomes to help reduce Part D premiums, deductibles, and drug costs.

This may also be a good time to check up on your retirement readiness and make sure your budget is prepared to handle unexpected price increases, such as higher insurance costs or unexpected medication expenses.