07/29/2026
https://www.wsj.com/health/healthcare/trump-administration-to-end-medicare-drug-plan-subsidy-76d255d1?mod=Searchresults&pos=2&page=1
This Wall Street Journal article covers an announcement that the Trump administration plans to end a subsidy program in 2027 that helped hold down premiums for Medicare drug plans, a move that could leave many seniors facing higher rates and/or lower benefits for their prescription coverage next year.
Here is the background:
Medicare required that all prescription drug plans cap enrollee out-of-pocket expenses at $2000, starting January 1, 2025. This change was designed to help the very small percentage of enrollees who had annual out-of-pocket expenses higher than that amount. In other words, the change was designed to help those in greatest need.
This change would result in higher claims cost for the insurers. In order to prevent the insurers from pasing these incremental costs to enrollees in the form of higher premiums and/or benefits cuts, Medicare created a fund that would subsidize these new costs, in the form of payments to the insurers.
The estimated cost for 2026 is $3.6 billion dollars.
Mehmet Oz, Medicare administrator, states:
The subsidy fund is not necessary.
Around 25% of Medicare Part D plan enrollees would see premiums for their plans stay flat or go down next year. Around 30% will have an increase of less than $10 to their monthly bill.
For the remaining 45%, he said, the increases are largely in the $11 to $20 range a month.
Seniors should be able to find lower premiums if they switch plans, he said, adding affordable options are still available.
I am skeptical. It seems that the administration believes that the insurers are making so much money that they will be able to absorb the costs that have been subsidized. In general, I believe that when the Federal government cuts financial support for Medicare, those costs will be shifted to seniors in the form of higher premiums and/or reduced benefits. Specifically, I am concerned about the impact on stand-alone PDP plans, and also the impact on Medicare Advantage Plans which incorporate prescription drug coverage.
The rubber hits the road when 2027 Medicare plans are rolled out for Annual Enrollment Period on October 1.
Program that held down premiums won’t be renewed for 2027, resulting in higher costs for some seniors.
