Part D Premiums Could Rise in 2027 as Federal Support Ends

Millions of Medicare beneficiaries with standalone Part D prescription drug plans may see higher monthly premiums in 2027 after the Centers for Medicare & Medicaid Services announced it will end a temporary premium stabilization program a year earlier than planned.

The program was created in 2024 to ease the transition to major changes in Medicare Part D under the Inflation Reduction Act.

CMS has estimated that without the program, an average beneficiary enrolled in a standalone Part D plan could see monthly premiums increase by about 10% in 2027. Actual premium changes will vary by plan.

Why the program was created

The Inflation Reduction Act made some of the most significant changes to Medicare prescription drug coverage in years. Among the most important for beneficiaries were:

• Elimination of the Part D "donut hole," or coverage gap.

• A new annual $2,100 cap on out-of-pocket prescription drug costs for covered medications.

• Greater financial responsibility for Part D insurers covering high-cost medications.

While these changes have provided important financial protection for Medicare beneficiaries who use many medications, they have also increased costs for insurers offering standalone Part D plans. To prevent sharp premium increases while insurers adjusted to the new benefit structure, CMS launched the temporary Part D Premium Stabilization Demonstration.

The program helped keep premiums in check by reducing the base beneficiary premium used to calculate plan costs and limiting annual premium increases. Many beneficiaries therefore saw smaller premium increases than they otherwise would have.

CMS now says insurers have gained sufficient experience operating under the new Part D rules and no longer need the additional federal financial support. As a result, the agency will end the demonstration after the 2026 plan year.

What beneficiaries can expect

Once the program ends, standalone Part D plans will no longer receive the extra subsidies that helped hold down premiums. Final 2027 premiums will not be announced until later, but standalone drug plan beneficiaries should prepare for potentially higher monthly costs.

Premium changes will vary by plan. Premiums for some plans may increase more than others, while some could remain stable depending on enrollment, drug costs, and business strategy.

However, higher-cost specialty medications, including GLP-1 therapies, and continued growth in prescription drug spending and prices are expected to keep financial pressure on many Part D plans, potentially affecting premiums.

Medicare Advantage may be less affected

Medicare Advantage plans that include prescription drug coverage may see less of an impact.

Unlike standalone Part D plans, MA insurers can often use rebate funds generated by their medical plans to offset prescription drug premiums. This financial flexibility allows many MA plans to keep drug premiums lower than those for standalone Part D plans, even as prescription drug costs rise.

Review your coverage

The Annual Open Enrollment Period (Oct. 15 to Dec. 7) remains the best opportunity to review your prescription drug coverage.

If your premium is slated to increase substantially, we can help you compare other standalone Part D plans available in your area or evaluate whether an MA plan that includes drug coverage would better meet your health care and prescription needs.

Be sure to compare premiums, formularies, pharmacy networks, deductibles, and estimated out-of-pocket costs for the medications you take.

Because every beneficiary's situation is different, reviewing your options each year can help ensure you have coverage that best matches your health needs and budget. Call us for assistance.