The Trump administration announced Tuesday that it will end the Part D Premium Stabilization Demonstration after this year, removing the federal support that has kept prescription drug premiums from spiking for roughly 25 million seniors and people with disabilities enrolled in standalone Medicare drug plans.
The decision was disclosed in a routine CMS bid announcement rather than a press conference, and the agency’s justification was that its analysis of insurer bids showed plan sponsors now have enough experience under the redesigned drug benefit to price their own products without help. When the program was created in 2024, CMS said it could run for at least three years. It is ending after two.
Beneficiaries will not learn what they actually owe until September, when the agency publishes final plan offerings and premiums. Open enrollment begins October 15. The midterm elections follow in November.
What the program was doing
The Inflation Reduction Act capped what seniors pay out of pocket for prescriptions, set at $2,100 in 2026, and paid for that protection by shifting cost onto the private insurers who run Part D. Insurer liability in the catastrophic phase of coverage tripled, rising from 20 percent to 60 percent. Seniors got a hard ceiling on their drug spending. Insurers got a much larger bill, and the only place they can recover it is the monthly premium.
The Government Accountability Office found that without intervention, the average monthly premium for standalone plan enrollees not receiving low-income assistance would have climbed from roughly $43 to $81 in a single year. Nearly 4 million people, about 30 percent of that group, were on track for increases between $40 and $100 a month, and about 1 million faced increases above $100.
That did not happen. The demonstration cut premiums by up to $15 per member and capped year-over-year plan increases, and average standalone premiums instead went from about $42 in 2024 to $43 in 2025. KFF calculated that the subsidies reduced average monthly premiums by roughly $26 in 2025 and $16 in 2026. The program cost $9.8 billion across both years.
The administration’s own numbers contradict its own spin
CMS Administrator Mehmet Oz posted on X that the agency is “stabilizing the market so this bailout is no longer needed,” and told the public that premiums would rise less than $10 for most recipients with many seeing lower costs.
Administration officials gave a very different set of projections to the Wall Street Journal. About 25 percent of enrollees are expected to see flat or lower premiums. Roughly 30 percent face increases under $10. The remaining 45 percent are projected to see increases of $11 to $20 per month, which amounts to $132 to $240 per year for people who frequently live on fixed incomes.
Oz’s framing of the program as an insurance industry bailout deserves scrutiny on its own terms. The money did go to insurers because, by design, every dollar in Medicare Part D goes to insurers. But GAO found that approximately 97 percent of the 2025 spending was directed at reducing the premium charged to beneficiaries, with about 3 percent providing additional financial protection to the companies. Ending it does not remove insurers from the transaction. It changes who pays them, from the federal government to a retiree on Social Security.
There is a legitimate criticism buried in the administration’s position, and it is worth stating plainly: officials told the Journal that more than half of the 2027 funding would have flowed to UnitedHealth Group alone. Concentrating billions in subsidies into a single conglomerate is a real problem. It is not a problem this decision solves. It simply moves the cost onto patients while leaving the market structure that produced that concentration entirely intact.
Part D is the second bill, not the first
For context on what this lands on top of, Medicare Part B is projected to cost about $209.50 per month in 2027, roughly $2,500 a year, and it covers doctor visits and outpatient care rather than prescriptions. Drug coverage requires a separate purchase. The 2027 base beneficiary premium for Part D is set at $41.33, though what any individual pays depends on their specific plan, and the number of standalone plan options has already contracted sharply from 464 nationwide in 2025 to 360 in 2026.
The reason any of this is necessary
Americans pay 2.78 times what 33 other wealthy nations pay for the same prescription drugs, according to research RAND conducted for the Department of Health and Human Services. For brand-name drugs, the figure is at least 3.22 times higher even after accounting for the rebates manufacturers pay, and brand-name products account for only 7 percent of American prescription volume while consuming 87 percent of American drug spending.
Total health spending in the United States reached an estimated $14,885 per person in 2024, against an average of $7,371 across comparable wealthy countries.
That gap is not an accident of the free market. It is written into federal statute.
When Republicans under George W. Bush created Part D through the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, they included a provision known as the noninterference clause. It bars the Secretary of Health and Human Services from negotiating drug prices with manufacturers, and it separately bars the Secretary from requiring a particular formulary or setting a reimbursement price structure. The second prohibition matters as much as the first, because the ability to exclude a drug from coverage is the leverage that makes any negotiation credible. Congress removed both tools at once.
Medicare accounts for roughly 32 percent of all retail prescription drug spending in the country. The Department of Veterans Affairs negotiates prices and runs a national formulary. Medicaid receives mandatory manufacturer rebates.
Medicare, by an enormous margin the largest purchaser of the three, is the single program that was walled off. The Inflation Reduction Act finally amended the clause to permit negotiation on a limited set of high-spending drugs, phasing up to 20 per year.
Republicans in Congress objected to the stabilization program from the start. In August 2024, three GOP committee leaders asked GAO to review its legality, arguing it lacked a clear statutory basis. They have not, in the intervening two years, proposed repealing the noninterference clause that made the subsidy necessary.
What comes next
CMS will publish the 2027 landscape and final average premiums in mid-to-late September, and Medicare plans mail Annual Notice of Change documents to enrollees in the fall. Open enrollment runs October 15 through December 7, and it is the window during which beneficiaries can switch plans if their premiums increase.
This arrives after the administration allowed enhanced ACA subsidies to expire, and while employer family coverage has climbed to nearly $27,000 a year. The pattern is consistent. Federal support is withdrawn, underlying prices remain unchanged, and the difference falls on households.
Seniors did not create this pricing structure and cannot negotiate their way out of it. They were handed a system in 2003 that forbade their government from bargaining on their behalf, and on Tuesday they were told the workaround is being canceled too.
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