Medicare Part D drug plan premiums set to rise

The Wall Street Journal – Monday, July 28, 2025
By Anna Wilde Mathews and Liz Essley Whyte

Premiums for Medicare drug plans are set to increase sharply next year for some seniors, due to rising costs, regulatory changes and cutbacks to a subsidy program.

The subsidy program, which sent extra federal funds to the private insurers that offer the drug benefit—known as Part D—had largely shielded seniors from rising monthly bills in 2025.

It pumped an extra $6.2 billion of federal payments into the Part D plans this year, according to a Medicare official. The Trump administration is set to cut spending on that program by about 40% in 2026.

Officials with the Centers for Medicare and Medicaid Services, which falls under the umbrella of the Department of Health and Human Services, said they are seeking to blunt the impact of increases in negotiations with insurers about the companies’ bids for next year’s Part D plans. And they are maintaining part of the subsidy initiative, which was launched by the Biden administration and had come under criticism by Republicans.

Medicare officials said program costs are expected to go up “a lot.”

“This is all about trying to maintain affordability against a massively increasing backdrop of expense,” said Chris Klomp, the head of the Center for Medicare. But, he said, the Trump administration felt that maintaining the full subsidy program would have benefited a handful of insurers and cost an “enormous, excess amount of taxpayer money.”

The premium increase, which will vary widely depending on the plan, will hit a politically sensitive constituency of millions of seniors who purchase the plans, which cover drugs, alongside the traditional Medicare medical benefits. It may also push more Medicare enrollees into Medicare Advantage plans, the private-insurer version of Medicare, which wrap in drug coverage.

Medicare officials didn’t release expected average premium costs, but said the subsidies that remain would save Medicare enrollees with drug plans $13.50 a month on average off of the higher rates.

Insurers have been flagging higher patient drug spending as an issue across all of their lines of business, and their higher bids for the Part D plans likely reflect that rising expense. But insurers also are facing higher costs and more risk on the Medicare drug plans because of a Part D program redesign mandated by the 2022 Inflation Reduction Act. The redesign reduced some Medicare enrollees’ out-of-pocket costs for medications, among other changes that largely kicked in this year, but required insurers to shoulder more of the costs.

This year, the extra subsidies to stabilize stand-alone Part D plan premiums, which was billed as a way to help plans gradually shift to the redesign, added an extra $15 a month in federal payments to insurers per Part D plan. And it capped the year-over-year overall average premium increase at $35 for 2025, along with limiting the insurers’ risk of losses.

For 2026, the slimmed-down subsidies program will add just $10 a month in subsidies, cap the year-over-year increase at $50, and get rid of the new limits on insurers’ risk of losses, Medicare officials said.

The extra subsidy program took effect in 2025 and was originally supposed to last three years. Without the extra federal subsidies, average monthly premiums for basic Part D plans would have been between $42 and $46.50 this year, according to an estimate from consulting firm Avalere Health. Instead, the average premium for those plans was around $36, the firm calculated—roughly an 18% difference.

“Premiums would have spiked pretty substantially” this year without the project, said Kylie Stengel, a principal at Avalere.

With the extra subsidies in place, average premiums—for all stand-alone Part D plans, not just the skinnier basic ones—were roughly flat between 2024 and 2025, according to KFF, a health-research nonprofit.

Access this article at its original source.