Administration to Pull Back on Premium Help for Part D Beneficiaries

On Tuesday, the Trump administration announced that it would end the Part D Premium Stabilization Demonstration at the end of 2026, a year earlier than originally envisioned. This program helped to keep premiums for standalone Part D plans in check as Inflation Reduction Act (IRA) Part D changes went into effect.

IRA Shifted Costs From Beneficiaries to Plans

The IRA restructured Part D, including by adding an inflation-adjusted out-of-pocket cap on enrollee spending ($2,000 in the first year, $2,100 in 2026) and shifting some Medicare cost liabilities onto plans, which responded by raising their proposed premiums. Some of this increase was expected, but many plan rates exceeded initial projections, resulting in sharply higher premiums.

Medicare Advantage plans that include Part D can use Medicare dollars to keep premiums low in ways that standalone Part D plans cannot.

Medicare Advantage plans that include Part D (MA-PDs) were not similarly affected. They can cover increased costs through overly generous rebates and other overpayment. This gives MA-PDs an unfair advantage—they can use Medicare dollars to keep premiums low in ways that standalone plans cannot. As a result, amid skyrocketing Part D premiums, many people could be drawn to an MA-PD’s lower drug plan rates, even if MA was not the best choice for them otherwise. Choosing between MA and Original Medicare is a complicated, highly personal consideration. Imbalances in premium-setting undermine that decision-making.

Part D Premium Stabilization Demonstration

Importantly, because Congress could foresee that plans would want to increase premiums to offset any additional costs, they included a mechanism in the IRA to protect enrollees from significant premium spikes under the restructuring. That safeguard limits increases in the Part D base premium to 6% growth each year. However, because this cap is an average, premiums for individual Part D plans can have more variation. 

The program was intended to help willing standalone Part D plans minimize financial risk and keep premiums down.

To address this, the Biden administration created a temporary program to further stabilize rates. The voluntary demonstration began in 2025 and was to run for at least three years. The program was intended to help willing standalone Part D plans minimize financial risk and keep premiums down—enabling more people to purchase affordable drug coverage, preventing plans from exiting the market, and positioning standalone plans to compete more effectively with MA-PDs.

Premium Subsidy Reduced in 2026, Eliminated in 2027

For 2026, the Trump administration kept the demonstration in place but scaled it back.

Now the Trump administration is eliminating the demonstration a year early. Unfortunately, this risks enrollees facing jumps in standalone Part D premiums, a worsening affordability crisis and, potentially, a less stable Part D market.

In some cases, any increased premiums may be relatively small. But plans will have to take into account the elimination of this subsidy while building their 2027 bids, and the ultimate impacts on limited beneficiary budgets could still be significant.

Risks for People With Medicare

At a time when people with Medicare are already struggling with rising costs, we at Medicare Rights are concerned this decision will unnecessarily erode beneficiary choice, health, and financial security. It is likely to make it harder for older adults and people with disabilities to access and afford needed care and may increase enrollment in MA-PD plans that carry increased exposure to administrative barriers like prior authorization.

Medicare Rights is concerned this decision will unnecessarily erode beneficiary choice, health, and financial security.

We urge the administration to reconsider this decision, and we continue to call upon policymakers to do more to help beneficiaries afford their care and coverage, including by limiting drug prices through extended drug price negotiation, increasing access to assistance programs, and adding an out-of-pocket cap to Original Medicare to help protect people from unexpected costs.

Read more about Medicare Rights’ priorities for Original Medicare and private plans and information needs.