Medicare Will End Its Part D Premium Subsidy After 2026, Pointing to Higher Standalone Drug Plan Costs in 2027

The Centers for Medicare and Medicaid Services announced on July 28, 2026, that it will not extend the Part D Premium Stabilization Demonstration past contract year 2026. The program, launched by the Biden administration in January 2025, gave voluntary subsidies to standalone prescription drug plan sponsors to limit premium increases during the first years of the redesigned Part D benefit created by the Inflation Reduction Act. CMS said plan sponsors now have enough experience with the new benefit to set prices without it.

With the demonstration ending, plan sponsors will price their 2027 coverage under ordinary market conditions. CMS simultaneously published the 2027 national average monthly bid amount at 296.05 dollars and the 2027 base beneficiary premium at 41.33 dollars. The bid amount rose roughly 24 percent from the 2026 level, signaling that plans expect higher drug spending without the federal cushion. The 41.33 dollar base premium is the largest rise the law allows, since it caps yearly increases at 6 percent through 2029. The Medicare Rights Center warned that premiums for some plans could rise well above that cap, because the cap does not limit what each plan charges.

KFF estimated that the demonstration lowered average standalone plan premiums by about 16 dollars per month in 2026. Without a comparable program in 2027, standalone plan enrollees face the prospect of meaningfully higher monthly costs. CMS said it expects most enrollees will see increases of fewer than 10 dollars per month, though analysts noted that actual outcomes will vary by plan and geography.

About one in four Medicare beneficiaries who use drug coverage rely on standalone plans rather than getting coverage through a Medicare Advantage plan. The Medicare Open Enrollment period, October 15 through December 7, gives those enrollees the opportunity to compare 2027 options before the changes take effect. CMS said it would release the full list of 2027 plans and final average premiums in mid to late September.