Medicare beneficiaries may face higher premiums next year for their Part D drug plans, as the federal government plans to end subsidies that helped mitigate price increases in the program.
The Trump administration will not continue the subsidies beyond 2026, The Wall Street Journal reported. About 25 million Medicare recipients are enrolled in a stand-alone Part D plan for their drug coverage. Insurers will send them notices this fall notifying them of any premium changes for 2027.
The Biden administration first announced the subsidies two years ago to stabilize the Part D market following certain changes to the program. The Inflation Reduction of 2022 Act capped seniors' covered prescription drug costs at $2,000 a year starting in 2025, shifting more costs from beneficiaries to drug plans run by private insurers. The subsidies aimed to cushion the impact and prevent plans from passing along their total increase to their members.
However, a Trump administration official said the extra subsidies encouraged insurers to raise rates, knowing the government would pick up the extra cost, the Journal reported.
Last fall, the Centers for Medicare and Medicaid Services projected that the average stand-alone Part D plan total premium would decrease to $34.50 a month in 2026, from $38.31 in 2025.
Part D enrollees who are notified of any price increases for next year will have an opportunity select a new Part D plan during the fall open enrollment period.
They will also have a chance to switch out of traditional Medicare and into Medicare Advantage, the privately run alternative that now enrolls more than half of all beneficiaries. Many Advantage plans bundle drug coverage at no extra charge, but leaving traditional Medicare is not a move to make lightly, since Medicare Advantage involves many more coverage restrictions.
Investors will be watching on Wednesday morning to see how the shares of UnitedHealth and other Part D insurers react to the news.
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