The Trump administration has decided to end a temporary federal program designed to mitigate the impacts of the biggest Medicare overhaul in nearly twenty years, a year ahead of schedule. The decision, according to expert analysis, could result in higher monthly payments for beneficiaries and create new difficulties for those with limited income.
Last month, the Center for Medicare and Medicaid Services announced the end of the Medicare Part D subsidy program, known as Premium Stabilization Demonstration, after 2026. The benefit was initially expected to extend until 2027. The Trump administration justified the anticipation as a savings of almost $4 billion for Medicare.
In a post made on a social media platform, CMS administrator Mehmet Oz reported that monthly premiums for most beneficiaries are expected to vary. He said some may see increases of less than $10, while others may see reductions.
“The Biden administration has given billions of dollars of taxpayer money directly to large insurance companies. This is unacceptable,” Oz wrote in his X account. He added that the market is being stabilized, making the “bailout” unnecessary.
However, experts who assist seniors in using Medicare point out that the purpose of the subsidy was not to lower premiums. The initiative was intended to allow insurers time to adjust to the sweeping changes Congress had made to the Medicare prescription drug benefit through the Inflation Reduction Act.
“The intent was to provide time for these plans to understand the new drug benefit model,” said Gina Upchurch, executive director of Senior PharmAssist, an organization in Durham that guides Medicare beneficiaries in comparing plans and looking for options to pay for their care.
She detailed: “This was a three-year pilot project designed to help health plans understand how medication use would work and what the associated costs would be.”
What is the purpose of the temporary program?
The Inflation Reduction Act brought a number of significant changes to the Medicare prescription drug program.
The 2022 legislation placed a cap on annual prescription drug spending paid directly by Medicare beneficiaries. Additionally, the law expanded Medicare’s ability to negotiate prices for some high-cost drugs and required manufacturers to pay rebates if prices rose faster than inflation.
The ceiling for direct spending was set at US$2,000 for 2025, and is expected to rise to US$2,100 in 2026.
The law also restructured the Medicare Part D program, which is the prescription drug benefit used by millions of seniors and individuals with disabilities.
As of February, approximately 31 million Medicare beneficiaries had prescription drug coverage through Medicare Advantage plans. These plans are managed by private insurance companies, which receive additional funds from the federal government for administration. Generally, Medicare Advantage plans include both medical and pharmaceutical coverage.
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Meanwhile, 25 million people chose traditional Medicare, which covers medical expenses, and signed up for stand-alone Part D plans.
According to Upchurch, after the passage of the Reducing Inflation Act, there was concern among some lawmakers that the benefit redesign would make it difficult to accurately estimate the costs of Part D plans during the transition period. This could lead to increased premiums and reduce the competitiveness of these plans.
To stabilize the market and encourage insurer participation in stand-alone Part D plans, CMS instituted the temporary demonstration program. This initiative provided subsidies to stand-alone Part D plans and set a cap on annual premium increases.
“This gave independent drug plans a slightly more level playing field, allowing them to offer a reasonable benefit in contrast to Medicare Advantage plans, which already received additional funding to subsidize the drug benefit,” explained Upchurch, who also sits on the Medicare Payment Advisory Committee (MedPAC).
Upchurch clarified that his view on the topic derives mainly from his observations in Durham, where he serves as head of Senior PharmAssist, and that his speech does not officially represent MedPAC.
The impact of drug subsidies
For the year 2025, insurers received a monthly subsidy of US$15 per policyholder, with premium increases limited to US$35. In 2026, these parameters were adjusted, with the subsidy decreasing to US$10 monthly, while the limit for permitted premium increases rose to US$50.
The additional subsidies demonstrated the expected result, helping to stabilize annual premium adjustments for Part D prescription drug plans and preventing large variations in enrollment. According to MedPAC, the subsidies resulted in a reduction in the average monthly premium by $26 in 2025 and $15 in 2026. Simultaneously, the number of enrollees in stand-alone Part D plans grew from 22.8 million in 2024 to 24.9 million in 2026.
Even with the presence of subsidies, stand-alone Part D plans are still considerably more expensive than the drug coverage available through Medicare Advantage.
For 2026, the average monthly premium for a stand-alone Part D plan reaches $36, while Medicare Advantage drug coverage costs $8, according to MedPAC. Medicare Advantage plan managers have the prerogative to use discounts to make drug coverage cheaper, giving them a competitive advantage in attracting new customers.
The temporary subsidies also did not address the broader costs faced by Part D insurers, such as higher drug prices and the growth in the use of high-value specialty therapies and GLP-1 drugs.
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The expectation was that the program would extend for another year, before insurers assumed full financial responsibility within the new benefits model. However, the Trump administration decided to end the initiative after just two years.
Despite the program’s end, pressure on Part D insurers will likely persist through 2027 and beyond, according to Upchurch.
Impact on Medicare Beneficiaries
Part D premium amounts vary by insurer and are adjusted annually. This means that while some beneficiaries may not notice major changes, others may face significant increases, depending on the plan they choose.
Upchurch stressed that the real situation will only be clear when insurers present their proposals for Medicare 2027 during next fall.
“We are apprehensive about what we will see in October,” she said.
She expressed that one of her biggest concerns lies in the impact that the measure will have on low-income beneficiaries.
“The premium stabilization program is accessible to any Medicare beneficiary on independent drug plans without regard to income or age,” she explained. “However, many elderly people and adults with disabilities live on a fixed and limited income. In the face of inflation, general anxiety and the rising cost of living, this situation becomes even more delicate.”
She classified the current situation as “very unfavorable” for most people who seek help with their plans from Senior PharmAssist.
She mentioned that several social assistance programs, essential to seniors, have recently been discontinued or have been reduced in activity, including the Supplemental Nutrition Assistance Program (SNAP) and energy assistance initiatives.
According to Upchurch, Medicare beneficiaries who qualify for the Federal Low Income Subsidy, which is the amount Medicare contributes toward monthly premiums, can also anticipate a sharp decrease in that subsidy in North Carolina.
The benchmark rate used to calculate the value of assistance provided to beneficiaries is projected to fall from US$36.17 in 2026 to US$13.25 in 2027.
This reduction implies that many beneficiaries who previously did not pay monthly fees may be forced to pay an extra amount to maintain coverage for all their medications.
“These are people with incomes at or below 150% of the federal poverty guidelines. The most vulnerable individuals,” Upchurch highlighted. “This causes us great concern.”
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Finding a plan that covers multiple prescription drugs is already a challenge, she noted. As the number of plans falling below the benchmark premium decreases, beneficiaries with limited resources may have fewer financially accessible alternatives.
For certain individuals, the consequence may be stopping drug treatment or extending the use of prescriptions to save money.
“We are aware of many people who consume less medication than prescribed because they cannot afford it,” reported Upchurch.
Challenges beyond prize costs
The termination of the pilot subsidy program comes at a time when Medicare beneficiaries are already adjusting to broader changes brought about by the Inflation Reduction Act. The annual prescription drug spending cap, which limits the amount paid directly by beneficiaries for covered drugs, remains in effect.
This safeguard has made high-cost medications more affordable for many patients, according to Upchurch, especially for those using cancer drugs and other costly therapies.
However, she highlighted that the changes also further complicated the already intricate Medicare system, making it difficult for beneficiaries to use.
“When beneficiaries need to access Medicare.gov or make decisions about Medicare, the process can be extremely complex,” said Upchurch. “There are a lot of options. It needs to be more standardized.”
Such complexity has led some individuals to opt for Medicare Advantage plans. The benefits offered by these plans, as well as traditional Medicare, including coverage for vision, hearing, dental, access to gyms, transportation assistance and prepaid cards to purchase healthy foods, can make the choice attractive for many beneficiaries, according to Upchurch.
“What we see is that people join a Medicare Advantage plan and then realize the downsides,” Upchurch explained. “These disadvantages include situations where the desired rehab facility does not accept the Medicare Advantage plan, or the patient’s preferred hospital does not accept it.”
“Pay-as-you-go. If the beneficiary is on traditional Medicare with a Medigap plan and is hospitalized, there is no cost,” she said. “But in a Medicare Advantage plan, the patient will pay $325 per day.”
According to Upchurch, only about 30% of beneficiaries receive support to compare Medicare plans annually, even though lists of covered drugs, premiums and cost sharing may change each year.
With the growing number of Medicare beneficiaries who will face changes to premiums and plan options during the open enrollment period this fall, Upchurch stressed that reviewing coverage will be even more crucial.
“We don’t want people to be caught off guard by not understanding what they were getting,” she said.
“As we get older, I don’t know if people look forward to having to look at every detail of their health plan annually. Frankly, I think it’s absurd that we do that. A stable benefit with reasonable cost-sharing for individuals has not been created.”
Beneficiaries have the ability to compare plans during the Medicare open enrollment period, which runs from October 15th to December 7th. Additionally, the North Carolina Seniors Health Insurance Information Program offers free counseling.