Public Health — News & Analysis

The Trump administration's move to end subsidies for Medicare drug plans could cost consumers (July 29, 2026)

WASHINGTON, July 29, 2026 — The Trump administration is ending the subsidies that have held down the cost of Medicare drug coverage, and millions of beneficiaries could face higher Part D premiums in 2027, Sydney Lupkin reports for NPR.

The subsidies exist because of a chain of consequences set off by the Inflation Reduction Act of 2022. That law capped Medicare patients' out-of-pocket drug spending at $2,000 beginning in 2025 and changed how insurers pay for drugs. Seniors paid less at the pharmacy counter and gained easier access to expensive prescriptions; insurers picked up more of the bill. Initially they had no way to know how much more, or where to set premiums accordingly. The Biden administration created temporary subsidies through a demonstration project to stabilize premiums during that transition. They were expected to run through 2027. They are ending a year early.

CMS Administrator Mehmet Oz announced the decision on X, characterizing the program as billions in taxpayer money handed directly to large insurance companies and calling that unacceptable. He said the subsidies are no longer needed and that most people with Medicare will pay less than $10 more in premiums next year. CMS estimated the subsidies would cost $9.8 billion across 2025 and 2026, according to a Government Accountability Office report published in February; roughly 23 million people were enrolled in standalone Part D drug plans in 2025.

The $10 figure may understate it. Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, notes that the subsidies cut the average drug plan premium by $16 this year — against an average standalone premium of $36, meaning enrollees would have paid nearly 50% more for drug coverage without the demonstration. How much more seniors actually pay will not be clear until CMS releases further information in the fall.

The burden will not fall evenly. Stacie Dusetzina, a professor of health policy at Vanderbilt University School of Medicine, says the subsidies were never meant to be permanent but that ending them now is concerning. They mattered most to standalone drug plans; Medicare Advantage plans have more flexibility to hold premiums down on their own. The people hit hardest, therefore, are those in traditional Medicare.

Dusetzina reads a policy direction in that asymmetry. Project 2025, the Heritage Foundation's blueprint for a second Trump presidency, was explicit about moving more people into Medicare Advantage, and one way to accelerate that is to "make it very expensive to stay in traditional Medicare." Beneficiaries facing higher drug premiums may well switch — but Medicare Advantage carries tradeoffs, including a narrower network of participating providers and hospitals, and a choice that requires anticipating one's own long-term health needs years ahead.