The government is ending a Medicare Part D subsidy program that helped stabilize prescription drug coverage costs.
The Centers for Medicare and Medicaid Services announced that the Trump administration will end the temporary Medicare Part D subsidy program this year. The Biden-era program, included in the Inflation Reduction Act, provided federal support to lower costs for standalone Medicare prescription drug plans. The temporary subsidy was set to last three years; however, the Trump administration will end it a year early in December.
About 25 million Americans are enrolled in these standalone prescription drug plans, according to KFF. The subsidy lowered premiums for beneficiaries while giving plans greater financial stability. Federal payments were made to insurers to help limit premium increases for beneficiaries and stabilize the standalone Part D market.
Analysts project that the changes will result in higher premiums in 2027. Health systems and physician practices are anticipating changes in payer policies, formularies and utilization management. This shift could ultimately translate to higher administrative work for clinical teams.
Health Systems And Patients Face Higher Drug Costs
Patients taking specialty-tier medications or managing conditions, such as cancer, HIV, diabetes, heart failure and COPD, are more likely to face significant prescription costs.
CMS reported premiums will increase by less than $10 per month for most beneficiaries after the program ends. However, KFF estimates the subsidy reduced average standalone Part D plan premiums by $15 per month in 2026. KFF reports that some beneficiaries could face higher premium increases depending on their plan.
Some advocacy groups are already calling for federal intervention to prevent premium increases before the changes take effect next year. AARP has called for federal intervention, citing affordability challenges and strained budgets among millions of older Americans.
“Older Americans are already stretched thin by rising health care costs,” said AARP’s senior vice president of government affairs Bill Sweeney in response to the subsidy termination.
CMS will provide additional information about 2027 premiums in September. The agency already set the 2027 national base beneficiary premium at $41.33 per month, serving as a benchmark for the Part D program. It does not represent the premium individual beneficiaries pay.
How Changes Affect Coverage, Costs And Access
While the impact will vary by plan, clinicians and health systems with large Medicare populations should prepare for changes.
With the subsidy ending, insurers are building their 2027 standalone Part D plans without premium stabilization support. Changes could include higher premiums, increased cost-sharing and adjustments to formularies.
Amber Gilbert, president of market access at Lumanity, tells HealthStack these changes could create additional administrative work for health systems.
“Complexity will flow directly to clinical teams as they help patients navigate more nuanced coverage criteria, aggressive cost sharing, and a growing range of options outside traditional insurance,” she says.
Drug Pricing Impact
Plans are also facing pressure from rising prescription drug costs. Part D covers many beneficiaries who rely on specialty medications to manage chronic conditions, which can carry significant costs. Gilbert says broader federal pricing changes are also forcing drugmakers to rethink how they approach pricing and commercialization.
“Pharmaceutical companies can no longer set launch price without incorporating pressures that impact different stages of the product lifecycle,” Gilbert shares.
Greater price transparency also means pharmaceutical companies will need to better communicate the value behind their pricing decisions.
“Price is increasingly public and visible, which means it needs to be defensible, not just competitive,” Gilbert says. “This opens opportunities for companies to lean into the growing transparency and position launch price as a deliberate reflection of clinical and economic value rather than something to be quietly managed.”
Changes in plan design and drug pricing could benefit checks, medication reviews and prior authorization requests to ensure reimbursement. The scope of those changes will hinge on how individual plans structure their 2027 offerings.
Preparing For 2027 Medicare Plan Changes
Health systems and physician practices can begin preparing now for changes in Medicare.
“The most important thing health systems, clinicians, and providers can do is to take action in spite of uncertainty,” Gilbert says. “Start by building genuine acumen around how coverage is shifting across populations and geographies.”
Technology can help health systems reduce some of the administrative friction associated with those changes. EHR registry reports, for example, can help care teams identify patients who may be particularly vulnerable to changes in coverage or cost-sharing.
“There are already many AI-powered tools emerging to help automate prior authorization workflows and provide better visibility into patient costs at the point of care,” Gilbert says. “I expect the pace of innovation to continue and extend into broader areas supporting health-related financial literacy.”
These tools can also help health systems manage administrative tasks, including prior authorization workflows and identifying patients with chronic conditions who are enrolled in Part D coverage.
Gilbert cautions that access to those tools typically vary across health systems. Less-resourced providers may have fewer financial, staffing and time resources to implement new technologies. She recommends that health systems incorporate those disparities into quality frameworks as a social determinant of health and track their impact on patients and providers.
“My concern on this front is the extent to which these supportive new technologies will be accessible to less-resourced providers and health systems,” Gilbert says. “Implementing new technologies requires financial, time and people investments that many systems aren’t easily able to invest.”
Patients Should Remain In Focus
These influx of changes to Medicare make proactive conversations between clinicians and patients increasingly important, particularly for patients who rely on high-cost medications or have limited financial flexibility.
Physicians and care teams can begin discussing potential changes in prescription costs before the new plan year begins. This gives clinicians an opportunity to explain how changes could affect patients’ medications and identify alternatives or financial assistance when needed.
“Above all, surround the patient with respect and care,” Gilbert shares. “The providers who will navigate this best are those who use this moment of disruption to deepen trust with the patients they serve. That’s both a fundamental responsibility and an opportunity to travel faster to a brighter future together.”
For health systems, making affordability discussions part of routine care could also help clinicians identify coverage-related barriers before they become barriers to treatment.
For patients facing higher out-of-pocket costs, care teams can also screen for Medicare’s Extra Help program, which helps eligible beneficiaries with prescription drug costs.
Health systems can work with social workers, care managers and financial navigators to identify additional sources of assistance, including manufacturer patient assistance programs and state or foundation pharmaceutical assistance programs.
Starting these conversations and assistance applications before January could help patients avoid disruptions in medication access as they transition to new coverage.
