The Centers for Medicare and Medicaid Services has announced it will discontinue a key program that helped keep prescription drug premiums affordable for millions of Americans.
The Part D Premium Stabilization Demonstration, launched in 2025, provided critical financial relief to beneficiaries enrolled in standalone Medicare prescription drug plans.
CMS released preliminary technical Medicare Part D bid information on July 28, 2026, helping plan sponsors prepare their offerings ahead of Medicare Open Enrollment for contract year 2027.
The agency determined that Part D plan sponsors now have sufficient experience under the redesigned benefit to develop prescription drug plan bids without additional federal support.
The demonstration was originally created in response to sweeping changes mandated by the Inflation Reduction Act, which significantly restructured the Medicare Part D drug benefit beginning in 2025.
The Inflation Reduction Act shifted a greater share of prescription drug costs away from beneficiaries and onto private insurance companies, creating significant financial pressure across the plan market.
Without the stabilization program, monthly premiums for beneficiaries in standalone drug plans would have nearly doubled on average in 2025, according to analysis from the Government Accountability Office.
The GAO also found that monthly premiums for 37 percent of standalone plan beneficiaries would have increased by more than $40 had the demonstration not been implemented.
CMS officials warned at the time that such steep increases would have triggered widespread enrollment changes and potentially disrupted beneficiaries’ access to their medications.
To prevent that outcome, the federal government spent $9.8 billion across 2025 and 2026 to subsidize premiums and absorb financial risk on behalf of insurance companies adjusting to the new rules.
The program worked by applying a $15 direct subsidy to base beneficiary premiums and imposing a $35 cap on year-over-year premium increases for standalone prescription drug plans.
With the demonstration ending, monthly base premiums for Medicare Part D beneficiaries are expected to climb from $38.99 per month to $41.33 in 2027.
The Inflation Reduction Act does include its own premium stabilization provision, capping annual growth in the base beneficiary premium at no more than 6 percent per year through 2029.
Rising spending on high-cost medications, including GLP-1 drugs such as Ozempic, Wegovy, and Rybelsus, continues to put upward pressure on overall plan costs and premium calculations.
CMS has selected those three GLP-1 drugs for negotiation under the Medicare Drug Price Negotiation Program, though negotiated prices are not scheduled to take effect until 2027.
Medicare Part D is a voluntary federal program covering outpatient prescription drugs for approximately 54 million beneficiaries nationwide, with around 23 million enrolled in standalone drug plans.
