Biden-era subsidy being cut 40% by Trump administration
of ConsumerAffairsJuly 30, 2025
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Medicare Part D premiums are set to rise sharply as a key federal subsidy is scaled back.
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The Trump administration plans to cut the subsidy program by 40% after it held premiums down in 2025.
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Officials and insurers brace for cost hikes driven by inflation, policy changes, and rising drug spending.
Millions of seniors enrolled in Medicare drug plans are likely to see substantial premium increases in 2026, as federal officials prepare to cut back a subsidy program that helped shield enrollees from escalating prescription drug costs this year.
The extra subsidylaunched by the Biden administration in 2025 to stabilize Part D drug plan premiumspumped $6.2 billion in federal funds into the program. That financial cushion helped keep monthly premiums for basic plans around $36, nearly 20% below what they would have been without the assistance, according to consulting firm Avalere Health, the Wall Street Journal reported.
But that buffer wont last.
The Trump administration, which is overseeing Medicares budget heading into 2026, is planning a 40% reduction in the subsidy, dropping monthly insurer support from $15 to $10 per enrollee, according to officials at the Centers for Medicare and Medicaid Services (CMS).
This is all about trying to maintain affordability against a massively increasing backdrop of expense, said Chris Klomp, head of the Center for Medicare. But maintaining the full subsidy would have benefited a handful of insurers and cost an enormous, excess amount of taxpayer money, he added.
Premiums may spike for stand-alone Part D plans
The premium impact will vary widely by plan, but analysts and CMS officials say 2026 could bring the biggest year-over-year increases in years, especially for seniors enrolled in stand-alone Part D drug plans. These plans are often purchased alongside traditional Medicare, rather than bundled with Medicare Advantage, which typically includes drug coverage.
With the updated subsidy program:
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The annual cap on premium increases will rise from $35 (2025) to $50 (2026)
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Insurers will shoulder more risk, as federal protections against large losses are eliminated
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Remaining subsidies will save enrollees just $13.50/month on average off the higher rates
Inflation Reduction Act adds pressure
Insurers are also grappling with rising drug costs and new financial burdens stemming from the 2022 Inflation Reduction Act, which redesigned the Part D program to reduce out-of-pocket costs for seniors.
That redesign, which took effect this year, limits how much seniors pay for medicationsbut it also shifts more liability onto insurers, who must now absorb a greater share of the total cost. Many insurers have flagged those changes in their 2026 bids to CMS, pushing up the baseline for premiums even before the subsidy cuts kick in.
Political and consumer impact
With tens of millions of seniors enrolled in Part D plans, the coming hikes could fuel political controversy in the run-up to the 2026 elections. Advocates worry the changes could push more seniors toward Medicare Advantage plans, where drug coverage is wrapped into a broader package but may include different provider restrictions and cost structures.
Medicare officials said they are working with insurers to temper increases where possible, but also acknowledged that cost pressures are intensifying across the board.
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