Medicare ends temporary Part D subsidy, drug plan premiums could jump in 2027

The Centers for Medicare & Medicaid Services is ending the temporary subsidy that has kept stand-alone Medicare Part D drug plan premiums from rising as fast as they otherwise would, a decision that carries extra weight in Kerr County given nearly a third of the county’s residents are 65 or older.

In a July 28 memo, CMS set the calendar year 2027 Part D national average monthly bid amount at $296.05 and the base beneficiary premium at $41.33, up from $38.99 this year. Included in the same announcement: confirmation that the Part D Premium Stabilization Demonstration, which has softened drug plan premium increases since 2025, will not continue into 2027. CMS said its review of 2027 bids shows drug plan sponsors now have enough experience under the redesigned Part D benefit to operate without the extra support.

CMS created the demonstration in 2024 to help stand-alone prescription drug plans, known as PDPs, adjust to the Inflation Reduction Act’s rework of Part D, which capped how much enrollees pay out of pocket for drugs each year but shifted more financial risk onto the insurance companies that sell the plans. The subsidy worked by trimming the base beneficiary premium used in plan pricing and by capping how much any plan’s premium could increase year over year: $15 off and a $35 cap in 2025, scaled back to $10 off and a $50 cap this year.

The subsidy did what it was designed to do. According to a KFF analysis of MedPAC data, it cut the average monthly PDP premium by $26 in 2025 and $16 in 2026, and is credited with holding nationwide PDP enrollment steady — it actually grew, from 22.8 million enrollees in 2024 to 24.9 million this year. The program cost $9.8 billion combined over its two years, a price tag some policymakers had already questioned before CMS moved to end it.

KFF’s Juliette Cubanski, who tracks Part D policy for the organization, wrote July 29 that ending the subsidy without a replacement could translate into unusually sharp premium increases for some enrollees heading into 2027, though the size of those increases won’t be clear until CMS posts plan-level pricing this fall.

The distinction that matters locally: this affects people enrolled in Original Medicare plus a separate Part D drug plan, not the drug coverage bundled into Medicare Advantage plans. The average monthly premium for stand-alone plans was about $36 in 2026, more than four times the roughly $8 average for Medicare Advantage drug coverage, according to KFF, because Advantage insurers can use other rebate dollars to buy down drug costs. Beneficiaries who chose Original Medicare specifically to avoid an Advantage plan’s network restrictions are the ones most exposed to whatever comes next.

Kerr County’s exposure is real by the numbers. An estimated 16,200 county residents — about 30% of the population — are 65 or older, according to Census Bureau estimates, compared with 18% nationally and 14% statewide. [The Kerr County Lead] does not have county-level data on how many of those residents are on stand-alone Part D plans versus Medicare Advantage, but the county’s outsized senior population means a national pricing shift is likely to land here harder than average.

The numbers that matter to individual households are still months away. CMS gave Part D sponsors until Aug. 6 to finish “rebate reallocation,” the process by which insurers adjust their bids, and until Aug. 11 for plans to decide whether to opt into a separate program that keeps some low-income enrollees from being automatically reassigned to a new plan. Actual 2027 premiums for specific plans typically won’t appear in Medicare’s Plan Finder tool until shortly before Medicare’s open enrollment period, which runs Oct. 15 through Dec. 7.

Kerr County falls under the Alamo Area Agency on Aging’s 12-county service region, run through the Alamo Area Council of Governments, which offers free Medicare benefits counseling through the state’s HICAP program. Counselors can’t recommend a specific plan but can help beneficiaries understand how a premium increase would affect their coverage once 2027 numbers are final.