Medicare beneficiaries ages 62 and up may encounter increased prescription drug plan premiums by the year 2026.
In 2022, the redesign of the Part D program aimed to limit senior citizens' medication costs, but it increased the total expenses that insurers must absorb. This shift has been reflected in the 2026 bids submitted by insurers to the Centers for Medicare and Medicaid Services (CMS), causing a rise in the baseline for premiums even before subsidy cuts kick in.
The Biden administration's extra subsidy, launched in 2025 to stabilise Part D drug plan premiums, injected $6.2 billion into the program. However, the Trump administration's plan to reduce the Medicare Part D monthly premium subsidy from $15 to $10 in 2026 is expected to lead to higher premiums for stand-alone Part D prescription drug plans. This reduction, about a 40% cut in the subsidy support, will likely result in a significant premium increase for beneficiaries enrolled in these plans.
As a result, the limit on monthly premium increases for Part D plans will rise from $35 in 2025 to $50 in 2026. While the overall national average premium is capped by law to a 6% increase, plan-specific premiums might increase substantially due to the lowered subsidy and the elimination of risk corridor protections that previously helped stabilise costs for insurers.
Chris Klomp, head of the Center for Medicare, stated that the decision to maintain the full subsidy would have benefited a handful of insurers and cost an enormous, excess amount of taxpayer money. Advocates worry that 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.
The premium increases are expected to be particularly significant for seniors enrolled in stand-alone Part D drug plans. Remaining subsidies in the updated Part D subsidy program will save enrollees just $13.50/month on average off the higher rates.
The coming premium increases for Part D plans could fuel political controversy in the run-up to the 2026 elections, particularly because tens of millions of seniors are enrolled in these plans. The premium impact will vary widely by plan, but analysts and CMS officials predict 2026 could bring the biggest year-over-year increases in years.
These changes are not solely due to the subsidy cuts. Factors such as inflation, policy changes, and rising drug spending also contribute to the anticipated premium hikes. The updated Part D subsidy program in 2026 will raise the annual cap on premium increases from $35 to $50.
In summary, the Trump administration's reduction of the Part D premium subsidy is anticipated to destabilise the stand-alone PDP market to some extent, shifting more costs to beneficiaries through higher premiums, reversing the premium-stabilising effects seen in 2025 under the prior demonstration program.
- The reduction in the Medicare Part D monthly premium subsidy by the Trump administration in 2026, a 40% cut from $15 to $10, is predicted to cause significant premium increases for beneficiaries enrolled in stand-alone Part D prescription drug plans.
- The science and health-and-wellness industry, particularly the pharmaceutical sector, may see a shift as a result of the increased costs for stand-alone Part D plans, with more seniors potentially enrolling in Medicare Advantage plans which might offer different provider restrictions and cost structures.
- The regulators in the banking-and-insurance industry, like the Centers for Medicare and Medicaid Services (CMS), are anticipating a rise in the baseline for premiums in 2026, due to factors such as the reduced subsidy, inflation, policy changes, and rising drug spending, which could impact the finance sector as well.
