The end of Medicare drug-plan subsidies could lead to price increases of more than 40%
About 25 million people have standalone Medicare Part D plans, according to KFF.
Medicare Advantage plans could be the winners of a decision by the Trump administration to put an early end to a program that kept the cost of Medicare prescription-drug plans lower.
The move to stop the temporary program that curbed drug-plan costs could lead to sharply higher Part D premiums in 2027 and drive many budget-restrained older adults into Medicare Advantage plans.
Medicare Part D is an optional prescription-drug plan that helps lower the costs of medications. The Trump administration on Tuesday said it would end a temporary program that kept premium costs in check. Plans can be bought as a standalone plan in addition to traditional Medicare or get bundled inside a Medicare Advantage plan. Medicare Advantage is the private alternative to the government program of Medicare.
"This change will make standalone Part D costs higher. That will likely cause people to choose different plans and cause some people to shift to Medicare Advantage that otherwise would have stayed in traditional Medicare," said Matthew Fiedler, senior fellow at the Center on Health Policy at the Brookings Institution.
For older adults, many of whom live on fixed incomes, even small premium increases can seem overwhelming, said Shannon Benton, executive director of the Senior Citizens League, an advocacy group for older adults.
Halting the program could be a boon for Medicare Advantage plans, which have seen overall subscriber gains cool as the private insurers behind the program exit certain unprofitable markets or discontinue plans due to higher-than-expected medical expenses among subscribers and changes in government payments that have squeezed margins.
Medicare Advantage represents 51% of the total Medicare market of roughly 69.6 million subscribers. Growth rates for Medicare Advantage have risen about 3.2% in the past year, which is down from growth that ranged from 7% to 10% a year between 2017 and 2024.
"Some beneficiaries may decide to look at Medicare Advantage plans because they often have lower premiums and include prescription drug coverage. But that doesn't necessarily mean those plans are the best fit. Medicare Advantage plans can come with provider networks and other restrictions that people need to consider carefully before making a switch," Benton said. "Our concern is that rising costs could push people to change coverage for financial reasons rather than because it's the right choice for their healthcare needs."
The temporary program had cost the government $9.8 billion in 2025 and 2026, according to the U.S. General Accountability Office.
"The ending of the demonstration means that premiums for standalone PDPs (prescription drug plans) could increase by more than 40%, on average, though actual rates depend on plan-bidding behavior," said Spencer Perlman, director of healthcare research at Veda Partners.
"We think the reduced affordability of standalone PDPs could result in a relative shift in enrollment toward Medicare Advantage plans over time," Perlman said. "We think the declining affordability of standalone PDPs could sway seniors to select MA coverage and further increase MA penetration."
About 25 million people have standalone Medicare Part D plans, while about 31 million had their drug plan bundled inside a Medicare Advantage plan, according to health research and policy group KFF.
"Eliminating the demonstration will likely lead to many Part D sponsors increasing their premiums and/or reducing plan offerings, which will in turn likely drive more people to private Medicare Advantage plans," said David Lipschutz, co-director of the Center for Medicare Advocacy.
Jaimy Lee and Beth Pinkser contributed to this report.
-Jessica Hall
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