CMS Will End The Medicare Part D Premium Stabilization Demonstration

Part D is the optional Medicare prescription drug benefit program available both in regular Medicare and Medicare Advantage plans.  It helps Medicare beneficiaries pay for self-administered prescription drugs.  Part D was enacted as part of the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. Under the program, drug benefits are provided by private insurance plans that receive premiums from enrollees and subsidies from the Centers for Medicare and Medicaid Services (CMS).

The Medicare Part D Premium Stabilization Demonstration (PSD) was launched in 2025 as a voluntary program to limit year-over-year premium increases for prescription drug plans to $ 35 in 2025 and $ 50 in 2026 by providing plan sponsors with additional subsidies to reduce beneficiary premiums.

CMS Administrator Dr. Mehmet Oz said in a statement on X that the PSD subsidies are ending because insurers no longer need them. He believes insurers now have enough experience pricing Medicare Part D plans that they do not need further, extra government assistance.  It is also clear that he and President Trump consider the PSD another giveaway to the insurance industry.

The TDS infused take from The Hill:

https://thehill.com/homenews/administration/6003940-trump-slashes-medicare-drug-subsidies-cutting-against-affordability-message/

Trump slashes Medicare drug subsidies, cutting against affordability message
By Mallory Wilson - August 1, 2026

The end of a subsidy program that helped keep costs down for Medicare drug coverage could leave millions of seniors with higher monthly costs, a move that undermines the Trump administration’s message of cutting drug costs.

President Trump often touts his push for access to cheaper drugs through the TrumpRx platform and making “most-favored-nation” deals with drug companies.

But healthcare advocacy and policy organizations have said the end of the subsidy program will raise premium costs and put a burden on seniors at a time when costs are already high.

“President Trump has had a lot of strong rhetoric on drug prices and negotiating deals with manufacturers to lower prices, and they’ve taken a lot of different steps to try to bring drug prices down,” Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, told The Hill.

“But it’s also true that this move to end these extra premium subsidies for some Medicare drug plans cuts in the other direction because it could translate to higher premium costs for millions of people with Medicare,” she said.

The Biden-era Medicare Part D subsidies will expire at the end of the year and won’t be offered in 2027, the Centers for Medicare and Medicaid Services (CMS) said — a decision that comes just months after Republicans in Congress allowed ObamaCare subsidies to expire.

Medicare Part D is optional insurance that helps cover brand-name and generic prescription drugs. It’s offered through private insurance companies as a stand-alone plan or as part of a bundled Medicare Advantage plan.

The program was restructured by the Biden administration to put a $2,000 annual cap on out-of-pocket spending on prescription drugs. It also allowed Medicare to negotiate prices for certain high-cost drugs.

When the subsidy program was created in 2024, in response to the effects of the 2022 Inflation Reduction Act, CMS said it could last for at least three years. That window is closing a year early, and three months before midterm elections in which “affordability” is a signature issue.

CMS has said new monthly cost estimates for Plan D coverage won’t be released until mid- to late-September. The national average monthly bid amount for 2027 — the estimated cost per patient for insurance companies — will be $296.05, up from $239.27 last year.

When announcing the end of the program, CMS Administrator Dr. Mehmet Oz wrote on social media that “the Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies. This is unacceptable.”

The program has cost a total of $9.8 billion in 2025 and 2026, a report by the Government Accountability Office said. About 23 million people were enrolled in the standalone Medicare Part D drug plans in 2025.

“We are stabilizing the market, so this bailout is no longer needed. Premiums will go up by less than $10 for most Medicare recipients, with many even seeing LOWER premiums,” he wrote.

Leslie Dach, founder and chair of Protect our Care, said saving would be incremental, while the impact on Medicare patients would be significant.

“This was a purposeful thing, and all these things are a choice they make,” she said. “It’d be like this costs $5 billion a year, you know, the war is costing us $100 billion, and so this is a choice they’ve made. It’s not fiscal responsibility.”

David Lipschutz, co-director of the Center for Medicare Advocacy, said he didn’t see the justification for cutting the program now, noting that it “has the impact of favoring enrollment in Medicare Advantage Plans, which some stakeholders are in favor of and the administration has seemed to express support for.”

But he also noted that Medicare Advantage “ends up costing the Medicare program more.”

“I think they will try to look at the savings that the government will have by not going through with this demo and claiming that that’s savings to the Medicare program, ‘look at everything we’re doing to root out waste, fraud and abuse, and here are some potential savings that we got,’” he said.

When asked for comment, the White House pointed to Oz’s social media posts.

A CMS spokesperson reiterated that the subsidies were only supposed to be temporary.

“We understand that outside organizations without plan bid information have voiced concerns, however our data shows that plan bids have stabilized; among the roughly quarter of Medicare beneficiaries enrolled in plans the previous demo impacted, over 85 percent 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 said.

“For most Medicare beneficiaries, premiums will go down, stay the same, or increase by less than $10,” the spokesperson said. “CMS remains focused on enacting policies to lower the cost of drugs and drug coverage, not directing billions of dollars in subsidies to insurance companies.”

But Cubanski said the program “had meaningful impact.”

“In 2026, the average premium reduction because of the subsidy program was $16 a month, and that might not sound like a lot, but to put it in context, the average standalone drug plan premium this year is $36 a month,” she said. “So, people might have had to pay nearly 50 percent more for drug coverage this year if the demonstration hadn’t been in place.”

“At the end of the day, I think what matters to people is how much more or less they have at the end of the month after all their bills are paid,” she said. “If their prescription drug plan premiums are going to be up for 2027, that just kind of puts more pressure on household budgets that are already being squeezed by higher gas prices and higher housing costs and higher food costs.”