Q: Is President Donald Trump really cutting Medicare subsidies?
A: The Trump administration recently announced that it is ending a temporary subsidy that has reduced premiums for Medicare Part D standalone prescription drug plans. The subsidy, originally slated to run through at least 2027, was put into place by the Biden administration to offset expected premium increases after major changes to the Part D benefit. Analysts say some Medicare beneficiaries could see higher Part D premiums as a result.
FULL ANSWER
We’ve received several questions from readers about whether the Trump administration is cutting or changing the Medicare Part D prescription drug benefit. The administration is not changing the benefit itself, but recently announced that it will end a temporary subsidy that had helped keep premiums for standalone Part D prescription drug plans down.
The change could lead to higher prescription-drug premiums for some Medicare recipients, though we won’t know the full impact until we get more detailed information about 2027 premiums this fall.
To understand what’s going on, it’s helpful to have some background on the different parts of Medicare and how the subsidy came about in the first place.
Broadly, Medicare coverage has three components: Part A covers inpatient hospital care; Part B covers outpatient medical services, and Part D is prescription drug coverage. Beneficiaries can access that coverage in one of two ways. They can enroll in what’s called traditional or original Medicare, which includes Parts A and B, and add a separate, standalone Part D prescription drug plan. Or they can sign up for what are called Medicare Advantage plans — subsidized plans offered by private insurers that bundle hospital, outpatient and, typically, prescription drug coverage together.
According to the nonpartisan health policy research organization KFF, more than 56 million people were enrolled in Part D coverage as of February — 44% in standalone prescription drug plans and 56% through Medicare Advantage plans.
The end of the temporary subsidy should not affect premiums for Medicare Advantage enrollees, as it was targeted specifically to the standalone prescription drug plans available to people with traditional Medicare.
Those standalone drug plans are offered by private insurers that contract with the government. The 2022 Inflation Reduction Act included a major overhaul of the Part D benefit, with several changes meant to make prescription drugs more affordable for seniors with standalone Part D plans. Among those changes was capping enrollees’ total out-of-pocket spending on prescription drugs for the first time, starting in 2025. The cap was $2,000 for that year.
Those changes, however, were expected to lead to higher premiums, as insurers adjusted to higher costs on their end.
One way policymakers tried to mitigate that was by limiting annual increases in something called the “base beneficiary premium,” which is used in calculating the premiums that people actually pay. The Inflation Reduction Act caps year-to-year base premium increases at 6% per year through 2029; that provision remains unchanged.
Separately, the Biden administration in 2024 created the temporary subsidy program, which was meant to further stabilize standalone drug-plan premiums starting in 2025 (hence its official name, the Part D Premium Stabilization Demonstration). The Trump administration renewed the subsidy at a lower level for 2026, then announced last month that it would no longer be in place for 2027.
The subsidy cost $9.8 billion over two years, according to the Government Accountability Office.
Juliette Cubanski, vice president and director of the program on Medicare policy at KFF, said the premium demonstration program appears to have worked as intended. In 2026, the subsidy reduced premiums for standalone Part D plans by an estimated $16 per month on average, according to the federal Medicare Payment Advisory Commission.
“To put that in context, the average standalone drug plan premium this year is $36 a month,” she said. “So without that additional subsidy, people might have had to pay nearly 50% more for drug coverage this year.”
By extension, some Medicare beneficiaries could see higher increases in their Part D premiums for 2027 now that the subsidy is ending, she said. But we won’t have a clear picture of how costs are changing until September, when the federal government releases information about premiums for specific plans.
Dr. Mehmet Oz, the head of the Centers for Medicare & Medicaid Services, the federal agency responsible for Medicare, has said most people will not see a large spike in premiums.
“The Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies,” Oz wrote in a July 28 post on X, referring to the subsidy. “This is unacceptable. We are stabilizing the market so this bailout is no longer needed. Premiums will go up by less than $10 [per month] for most Medicare recipients, with many even seeing LOWER premiums.”
We asked CMS what those figures were based on. In response, a spokesperson said bids submitted by insurers for 2027 plans show the subsidy demonstration is no longer needed because the market has adjusted.
“We understand that outside organizations without plan bid information have voiced concerns, however our data shows that plan bids have stabilized,” the spokesperson told us in an email. “[A]mong the roughly quarter of Medicare beneficiaries enrolled in plans the previous demo impacted, over 85% of beneficiaries will have access to a Part D plan that is either lower cost or less than a $10 increase next year.”
The spokesperson also said all of those beneficiaries “will have access to at least three prescription drug plan options with total monthly premiums of $50 or less.”
The spokesperson did not respond to our followup question about whether 85% of those beneficiaries could stay in their current plans without premiums rising more than $10, or if some would have to switch plans to keep costs below that level.
Again, we’ll get clearer data on this in September.
“It may well be true that plans have gained sufficient experience in managing drug costs under the revamped Part D benefit design,” Cubanski said. “But I think it’s also true that without this enhanced financial support, there are going to be some Medicare beneficiaries who will face deeper premium increases.”
She encouraged people with standalone Part D coverage to look at their plans carefully during this fall’s open enrollment period; in addition to changes in premiums, it’s possible that insurers could pare back which drugs they cover, increase cost-sharing or make other plan changes to keep their costs down.
If premiums do rise significantly, that could also have other effects on the market for standalone prescription drug plans.
Cubanski said the temporary subsidy was designed to not just stabilize premiums, but also to stabilize enrollment. She noted that standalone Part D plans already face “stronger financial headwinds” compared with Medicare Advantage drug plans, which are more heavily subsidized. If more people switch to Medicare Advantage, that could push up overall Medicare spending over time. The Medicare Payment Advisory Commission estimates the federal government is paying 14% more for Medicare Advantage enrollees compared to what they would have cost under traditional Medicare, a difference of $76 billion in 2026.
Standalone Part D plans are also important in many rural areas, where people have fewer Medicare Advantage options, Cubanski said.
“People still have about 10 prescription drug plans on average to choose from in 2026, so it’s not like this market [for standalone prescription drug plans] is on the verge of collapse,” Cubanski said. “But we have seen some, I think, concerning signs about the health of this marketplace relative to drug coverage through Medicare Advantage plans.”
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