08/03/2026
I've received calls and emails regarding the headlines saying Medicare Part D costs are going up because federal subsidies are ending, here’s what you need to know.
The subsidies that are ending were NOT payments to Medicare beneficiaries. They were TEMPORARY payments to insurance companies designed to help offset the cost of major changes made by the Inflation Reduction Act.
Beginning in 2025, the law eliminated the Part D coverage gap (“donut hole”) and capped annual out-of-pocket prescription drug costs. Those changes shifted more financial responsibility to Part D plans/carriers, so CMS created a temporary demonstration program to help stabilize premiums while the market adjusted.
That demonstration program is ending after 2026.
What does that mean for you?
It means some Part D premiums could increase in 2027. It does NOT automatically mean your prescription drug costs will increase because the subsidies are ending. It also does NOT affect Medicare’s Extra Help program or eliminate the annual out-of-pocket protection that beneficiaries now have.
The reality is we don’t yet know what 2027 Part D premiums will look like. Carriers are still filing plans, and CMS is reviewing them. We’ll have a much clearer picture once 2027 plans are released this fall.
Until then, be cautious of headlines that suggest everyone will see higher drug costs. The situation is more nuanced than that.
As always, review your coverage during Annual Enrollment and pay attention to your Annual Notice of Change (ANOC). Every year is different, and 2027 will be no exception.
