Medicare ends Part D premium subsidy a year early, raising 2027 drug plan costs

The Centers for Medicare & Medicaid Services is ending the Part D Premium Stabilization Demonstration after the 2026 plan year, one year earlier than originally planned, a change expected to raise stand-alone Medicare drug plan premiums in 2027 ^[1]. The administration announced the decision in late July ^[1].

The demonstration was created during the Biden administration to cushion an unexpected side effect of the Inflation Reduction Act's 2022 drug pricing changes, which shifted more financial risk for high drug costs onto insurance companies and led them to raise Part D premiums ^[1]. The subsidy held those increases down while insurers adjusted. CMS says insurers have now had enough time to adjust their plans on their own, so the subsidy is no longer necessary ^[1].

The 2027 national base beneficiary premium is set at $41.33 a month, up about 6 percent from $38.99 in 2026 ^[1][2]. A separate Inflation Reduction Act provision limits increases in the national base beneficiary premium to no more than 6 percent a year through 2029, but that limit does not mean every plan's premium rises by exactly that amount ^[1]. The Part D national average monthly bid amount rose to $296.05 for 2027 ^[2].

CMS had not published the enrollment-weighted average premium for stand-alone Part D plans for 2027 as of early September 2026 ^[2]. Analysts at KFF, an independent health policy research organization, note that the subsidy had lowered the average drug plan premium to about $36 a month in 2026, which means some enrollees — particularly those in plans that relied heavily on the subsidy — could see increases larger than the administration's $10 estimate ^[1].

CMS Administrator Dr. Mehmet Oz has said most Medicare recipients will see premium increases of less than $10 a month, with some enrollees potentially seeing lower premiums ^[1]. That has not been confirmed with final 2027 plan-level premiums ^[2].

Roughly 56 million people are enrolled in Medicare Part D drug plans, and about 25 million of them are in stand-alone Part D prescription drug plans, the plans directly involved in the stabilization program ^[1].

Why it matters for patients

The change affects monthly premiums only. The $2,000 annual cap on out-of-pocket prescription costs created by the Inflation Reduction Act remains in place; the cap is $2,100 for 2026 and may rise to about $2,400 in 2027 ^[1]. So even if premiums go up, there is still a ceiling on what a beneficiary can spend at the pharmacy counter ^[1].

Increases will not be uniform. Part D premiums vary widely by plan and region, and insurers set their own final prices ^[1]. Enrollees in plans that received a larger subsidy to keep premiums competitive may notice a bigger bump ^[1]. For older adults on fixed incomes, even a modest increase in a monthly premium — layered on top of other rising costs — can matter ^[1].

For people who use Medicare Part D to fill prescriptions, including GLP-1 medications such as Ozempic, Wegovy, Rybelsus, Mounjaro or Zepbound when they are covered, the higher premium is a plan cost rather than a change in the price of any drug. The end of the demonstration applies to stand-alone Part D plans; any effect on other Medicare drug coverage programs has not been reported.

The Medicare Part D Low-Income Subsidy, also called Extra Help, helps cover Part D premiums, deductibles and copays for people with limited income and resources, and many eligible people do not realize they qualify ^[1].

What happens next

CMS typically releases final plan premiums and coverage details in its fall "landscape" announcement, usually in September ^[2]. The 2027 Part B premium and deductible have not yet been announced; those figures are typically released in mid-November, compared with a 2026 Part B premium of $202.90 a month and a deductible of $283 ^[2]. Medicare's Annual Enrollment Period runs from October 15 to December 7, 2026 ^[1][2].