Potential Rise in Medicare Prescription Drug Costs by 2027

The expiration of a subsidy program may raise monthly premiums for older adults on Medicare prescription drug plans by 2027. The Centers for Medicare & Medicaid Services (CMS) announced the end of a program designed to lower Medicare Part D prescription drug costs. Originally initiated by the Biden administration in 2024, the program aimed to offset rising costs following the 2022 Inflation Reduction Act.

Federal officials claim the financial impact on Medicare beneficiaries will be small, but the decision might carry political risks as the midterm elections approach. Older adults, who vote in high numbers, may be affected. Approximately 25 million Americans enrolled in Medicare Part D are expected to receive details about their 2027 rates during the fall elections.

Critics, including Senate Minority Leader Chuck Schumer, have strongly opposed the conclusion of the subsidy program. Schumer stated that the Trump administration’s decision leads to increased prescription drug costs for seniors. He called the move “heartless” and “cruel.” The news was initially reported by The Wall Street Journal.

CMS Administrator, Dr. Mehmet Oz, defended the decision, citing a need to prevent taxpayer dollars from benefiting insurance companies. The subsidy program cost an estimated $3.6 billion in 2026. Dr. Oz indicated that most beneficiaries would see less than a $10 monthly premium increase. In some cases, premiums might decrease.

Beneficiaries have access to low-cost plans, and initiatives to lower drug prices continue. The government negotiates with pharmaceutical companies to reduce prices for expensive drugs, an effort endorsed by Congress in 2022. The recent decision does not affect the current out-of-pocket cap for prescription drugs, which is projected to rise from $2,100 in 2026 to $2,400 in 2027.

Research by KFF shows that Part D beneficiaries paid an average of $36 a month for prescription drug premiums this year. The subsidy offset was $16 on average according to MedPAC. The exact impact of the change on Americans and the additional costs they may incur remains unknown. Consumers can compare and select new plans each year, and prices vary widely.

Juliette Cubanski, a Medicare policy expert at KFF, emphasized the impact of these changes on everyday expenses. The rise in premiums, coupled with increased costs for groceries, gas, and housing, may challenge some households. She noted that managing monthly budgets will be crucial for many affected consumers.