Medicare drug-plan premiums could rise as federal subsidies expire

Millions of Medicare beneficiaries could face higher prescription-drug insurance premiums next year after the federal government ends a temporary subsidy program created to stabilize the Medicare Part D market.

The Centers for Medicare & Medicaid Services said the Part D Premium Stabilization Demonstration will expire at the end of 2026. The program has provided extra federal payments and financial protections to insurers offering stand-alone Medicare prescription-drug plans.

CMS said insurers now have enough experience with Medicare’s redesigned drug benefit to price their 2027 plans without the additional assistance.

But the decision shifts more of the financial risk back to insurers—and potentially more of the cost to Medicare beneficiaries through higher premiums.

Don’t renew Medicare Part D on autopilot

Heads up! A federal subsidy for Medicare Part D is ending. Your premium may be affected.

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Nearly 25 million people were enrolled in stand-alone Medicare Part D plans in 2026, according to KFF data cited by Reuters. These plans are generally used by people enrolled in traditional Medicare rather than Medicare Advantage.

Subsidies prevented some premiums from nearly doubling

The stabilization program was introduced in 2025 as major changes to Medicare’s prescription-drug benefit took effect under the Inflation Reduction Act.

Among the most important changes was a new annual limit on what beneficiaries must pay out of pocket for covered drugs. That provided substantial protection to people who take expensive medications, but it also shifted a larger share of drug costs to insurance companies.

Insurers responded by proposing significant premium increases.

The Government Accountability Office found that, without the temporary federal program, average premiums for people who remained in the same stand-alone drug plan from 2024 to 2025 would have nearly doubled.

More than one-third of those beneficiaries—37%—could have faced monthly increases exceeding $40, the GAO found. Federal officials feared increases of that size could force large numbers of beneficiaries to change plans, potentially disrupting access to medications, GAO found.

Under the demonstration, CMS reduced premiums by as much as $15 a month in 2025 and limited how much participating plans could raise their premiums.

For 2026, the government reduced the monthly assistance to $10 and allowed plans to raise premiums by as much as $50, signaling that the program was already being phased down, according to the Centers for Medicare & Medicaid Services.

The GAO said CMS estimated that the demonstration would cost the federal government approximately $9.8 billion during 2025 and 2026.

Premiums remained relatively stable—but taxpayers paid the difference

The program appears to have achieved its immediate goal.

The average monthly premium paid by beneficiaries who did not receive Medicare’s low-income subsidy increased only slightly, from $42 in 2024 to $43 in 2025, according to the GAO.

Enrollment in stand-alone drug plans also increased by about 2%, rather than falling amid widespread premium increases and plan switching.

Critics, however, argued that the program amounted to an expensive subsidy for private insurers and weakened their incentive to control costs.

CMS Administrator Mehmet Oz characterized the program as a bailout that was no longer necessary. He said most beneficiaries would experience increases of less than $10 a month, while some could see their premiums decline.

Those estimates should be treated as preliminary. Actual increases will depend on the beneficiary’s plan, location, medications and pharmacy network.

CMS does not expect to release final 2027 Part D premiums and plan offerings until September.

The published base premium is not necessarily what consumers will pay

CMS said the national base beneficiary premium for 2027 will be $41.33, up from $38.99 in 2026.

The increase is limited to 6% under a provision of the Inflation Reduction Act that caps annual growth in the national base premium through 2029.

But the base premium is primarily a figure used in Medicare’s payment formula. It is not a cap on the premium charged by an individual plan.

Actual premiums can be considerably higher or lower depending on the plan’s bid, benefits and geographic market.

That means some beneficiaries could face increases larger than the change in the national base premium, particularly if they remain automatically enrolled in an existing plan without reviewing alternatives.

Higher premiums could push consumers toward Medicare Advantage

Rising stand-alone Part D premiums may also make Medicare Advantage plans appear more attractive.

Most Medicare Advantage plans include drug coverage, often without a separately advertised drug-plan premium. But consumers should not assume that a zero-premium Medicare Advantage plan is necessarily the least expensive or most suitable option.

Medicare Advantage plans generally use restricted networks and may require prior authorization for some medical services. Returning to traditional Medicare later can also be complicated because, in many states, consumers may not have a guaranteed right to purchase a Medigap supplemental policy after their initial enrollment period.

Consumers should therefore avoid switching their entire Medicare arrangement solely to save money on a Part D premium.

What Medicare beneficiaries should do

Beneficiaries will receive an Annual Notice of Change from their current plan before fall open enrollment. That notice should identify changes in premiums, deductibles, copayments, covered drugs and pharmacy networks.

Consumers should check:

• Whether every prescription they take will remain on the plan’s formulary;
• Whether the plan has moved any medications to a more expensive coverage tier;
• Whether preferred pharmacies have changed;
• The combined cost of premiums, deductibles and expected copayments;
• Whether prior authorization, quantity limits or step-therapy requirements apply;
• Whether they qualify for Medicare’s Extra Help program for people with limited incomes and resources.

Medicare’s annual open-enrollment period runs from October 15 through December 7. Changes selected during that period generally take effect January 1.

Beneficiaries can compare plans through Medicare’s online Plan Finder or obtain free, independent assistance from their State Health Insurance Assistance Program.

The most important rule is not to allow a plan to renew automatically without checking the details. A plan that was inexpensive in 2026 may have a substantially different premium, drug list or pharmacy network in 2027.

The bottom line

The federal subsidy program protected beneficiaries from abrupt premium increases while Medicare’s new drug-benefit structure took effect. It also transferred billions of dollars in additional costs to taxpayers.

Ending it will provide a clearer picture of what insurers believe the redesigned Part D benefit actually costs.

For consumers, however, that market adjustment could arrive in the form of higher monthly premiums and fewer inexpensive choices. The full impact will not be known until Medicare releases finalized 2027 plans and premiums in September.