The Trump Administration has eliminated a critical Medicare Part D subsidy, and the modest premium numbers being celebrated by its apologists cannot conceal the damage already inflicted on the program and on the seniors who depend on it.
With open enrollment for Medicare about to begin, the Centers for Medicare and Medicaid Services has published Part D premium details for the coming year. Average premiums for stand-alone Part D prescription drug plans will rise by less than $1 a month to $36. Most low-income beneficiaries receive subsidies that fully cover their premiums. Ninety-three percent of other beneficiaries will have access to at least one plan that costs less than $6 a month.
Those figures are being used to declare the subsidy cut a success. They tell only part of the story. Insurers, facing political heat, have scrambled to keep headline premiums low in the short term — often by narrowing formularies, raising deductibles, and shifting more costs onto the sick. The sticker price is calm; the underlying coverage is being hollowed out.
Average prescription drug premiums for Medicare Advantage plans — which enroll about half of beneficiaries — are expected to fall by 38 percent to $7 a month. That number is misleading in its own right. Insurers can only subsidize Part D through Medicare Advantage because the program pools rebates, hospital savings, and provider leverage that stand-alone plans cannot match. Stripping the subsidy pushes more seniors into narrow networks, whether they want to be there or not.
Prescription drug prices have fallen 2.9 percent over the last year, according to the Labor Department’s consumer price index. That is real progress, secured under the Inflation Reduction Act, and the subsidy cut now puts it at risk.
Senator Schumer warned earlier this year that the move would double prescription drug costs for millions of seniors. He was closer to right than his critics are willing to admit. The modest headline premiums reflect one year of insurer scrambling; the structural damage is just beginning.
The Biden Administration established a “demonstration program” to stabilize Part D premiums after the IRA’s benefit enhancements — including eliminating the coverage “donut hole” and imposing a $2,100 annual cap on out-of-pocket costs — drove insurer costs sharply higher. Insurer bids for providing basic Part D benefits surged to $179.45 a month for the 2025 plan year, up from $34.71 in 2023. The IRA provided subsidies through 2029, but utilization surged beyond projections, and the demonstration program bridged the gap.
That bridge has now been demolished. Some insurers extracted more from the program than was ideal — that is what happens when the government asks private plans to absorb volatile costs. The answer to imperfect subsidies is better-designed subsidies, not elimination.
The deeper problem is what the IRA’s redesign was always going to require: a public Part D option to anchor the market. The Trump Administration is eliminating the subsidies, blocking the public option, and pretending the market will sort itself out. It will not. The number of Part D plans has already shrunk by 60 percent over the past five years. Former Biden CMS official Kristi Martin, a key architect of the IRA’s Part D changes and price controls, recently warned in Health Affairs that the Part D market is “headed to a death spiral.” Her warning is being vindicated in real time.
The Congressional Budget Office revised up its cost projection for Part D by some $700 billion through 2035 largely due to the IRA — but that projection assumed the subsidies would hold. Without them, costs will rise further and coverage will fall further. Separate IRA subsidies for Part D plans end after 2029, which “raises significant cause for concern around unsustainable premium increases and continued market exits in the near-term,” Martin wrote. The Trump Administration has effectively pulled that trigger early.
To forestall the spiral, Martin proposes a “federally-facilitated” Part D plan with government “negotiating power” to force lower prices from drug makers. Critics call it government control. Supporters call it the only responsible answer to a market the administration has deliberately broken. Private plans will indeed struggle to compete with a public option that does not have to turn a profit for shareholders. That is a feature, not a bug.
Seniors who like their prescription drug plan should not expect to keep it under continued Republican control of Washington. They are losing them now — quietly, one formulary cut and one subsidy elimination at a time.
