- Trump administration ends Medicare Part D Premium Stabilization Demonstration, effective 2027.
- CMS Administrator Mehmet Oz says program gave "billions of taxpayer money" to insurance companies.
- Congressional Budget Office projects Inflation Reduction Act will increase federal deficit by $700 billion, contrary to original savings estimates.
- Most enrollees face premium increases of less than $10 monthly; some may see decreases.
- Decision comes as CBO confirms Part D costs rising 35% for 2026, far exceeding original 5% projection.
A Biden-era bailout ends
The Centers for Medicare & Medicaid Services announced Tuesday it will end the Part D Premium Stabilization Demonstration, a Biden-era program launched in 2025 to prevent sharp premium increases following the Inflation Reduction Act's sweeping changes to prescription drug coverage. Administrator Dr. Mehmet Oz called the program a direct taxpayer bailout to insurance companies that is no longer necessary.
The decision represents the most significant Medicare policy shift since the Trump administration took office, rolling back a key pillar of Democrats' 2022 health care law at a time when the Congressional Budget Office has dramatically revised its cost projections for the entire program.
Billions to insurers or stabilization?
CMS Administrator Mehmet Oz defended the decision in a social media post, asserting that "The Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies. This is unacceptable. We are stabilizing the market so this bailout is no longer needed."
The program had provided a $15 uniform cut to the base beneficiary premium, limited year-over-year premium increases to $35, and narrowed risk corridors for insurers. Oz claimed premiums would rise by less than $10 for most Medicare recipients, with many seeing lower costs. He also pointed to the administration's "most favored nation" drug pricing policy and a new program offering GLP-1 weight loss drugs at $50 monthly as alternative cost-saving measures.
CBO reverses course on deficit impact
The subsidy cut follows a stunning reversal from the Congressional Budget Office, which now projects the Inflation Reduction Act's Medicare Part D changes will increase the federal deficit by approximately $700 billion. This contradicts the agency's original 2022 estimate that the law would reduce deficits by $129 billion over a decade.
CBO attributed the reversal to "smaller-than-expected price reductions" from Medicare drug price negotiations, higher-than-expected spending on certain prescription drugs, and minimal rebate collections from manufacturers as inflation rose.
"Overall price inflation has increased more rapidly than CBO anticipated in 2022, which raised the benchmarks CMS uses to calculate manufacturers' inflation rebates," the agency explained. "That, in turn, lowered the amount of inflation rebates owed to Medicare and curtailed manufacturers' incentives to limit price increases."
Higher premiums ahead for seniors
KFF, a health policy nonprofit, estimates the subsidy's expiration could increase monthly premiums by as much as $20 for some enrollees. However, a Trump administration official confirmed that about half of enrollees would see increases of less than $10 or actual premium decreases.
The average national monthly bid submitted by insurers for 2027 plans has reached $296.05 — a 24% increase from last year. The base beneficiary premium will rise to $41.33, the maximum allowed by law, representing a 6% year-over-year increase.
CBO now anticipates Medicare Part D enrollees will face a 35% total increase in annual costs for 2026, drastically higher than the 5% increase originally predicted. House Budget Committee Chairman Jodey Arrington, R-Texas, issued a statement saying the American people were sold "a false bill of goods in the Inflation Reduction Act."
The broader context: Drug costs and political fallout
The subsidy decision comes as health care costs remain a top issue for voters ahead of midterm elections, with Affordable Care Act subsidies having already expired. The Congressional Budget Office's revised projections have created a political firestorm, with Republicans arguing the Inflation Reduction Act's drug pricing provisions have backfired spectacularly.
House Energy and Commerce Committee Chair Brett Guthrie, R-Ky., noted the "problematic design" of the law has led to "increased costs for taxpayers and instability in the Part D marketplace."
The Inflation Reduction Act represented the most significant expansion of federal drug pricing authority since Medicare Part D's creation in 2003. The law granted Medicare the power to negotiate prices directly with manufacturers for certain drugs — a policy Democrats had pursued for two decades. Proponents argued it would reduce prescription costs while reducing the federal deficit. The CBO's revised projections suggest those assumptions were substantially flawed.
What comes next
Enrollees will learn their new monthly costs later this fall when insurers release 2027 plan details. CMS has confirmed that every Medicare beneficiary retains access to low-cost plans, though specific plan availability by region remains unclear.
The administration's policy shift signals a fundamental rethinking of how the federal government should manage prescription drug costs — moving away from direct subsidies to insurers toward international pricing models and negotiated discounts. Whether this approach delivers the promised savings to seniors without disrupting coverage for 25 million beneficiaries remains the central question for policymakers and patients alike.
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