Let’s Keep the End of (Temporary) Medicare Part D Subsidies in Perspective
The recent announcement by the Trump administration that Medicare Part D subsidies introduced in late 2024 by the Biden Administration will not be continued has caused a stir.
Our advice is for people to calm down. Yes, in all, 2027 Part D premiums are likely to increase because of the elimination of these voluntary subsidies to insurers but we expect the Part D marketplace to remain competitive. Also these subsidies were political gamesmanship of the worst kind.
The Inflation Reduction Act, which passed without a single Republican vote, created an out-of-pocket maximum for Part D of $8000 in 2024, reduced to $2000 in 2025. This was a radical change in benefit design. From 2006 when Medicare Part D launched through 2023, if you took many drugs or expensive drugs, you reached a catastrophic level where copayments plummeted, but there was NO out-of-pocket maximum.
The introduction of an $8000 out-of-pocket maximum in 2024 didn’t significantly disrupt the Part D marketplace because the percentage of Americans affected was relatively small. But that changed when the out-of-pocket maximum was reduced to $2000 the following year. When the Biden administration saw premium proposals in 2024 for 2025 showing significant premium increases which would be made public the month before the presidential election, they offered billions of dollars in subsidies to Part D Plan insurers to keep premiums artificially low.
The fact that in some markets there are zero premium Part D plans underscores how heavily the U.S. taxpayer subsidizes Medicare Part D.
Anyway, it may be a year you want to review Part D options but specifics won’t be available until early October because the Medicare 2027 annual open enrollment period doesn’t begin until October 15th. And, remember, the objective in selecting a Plan is to cover as many of one’s drugs as possible at the lowest overall cost, not to shop for a low premium.
Medicare has become increasingly complex over the years and certainly far more expensive for higher income Americans but it remains good coverage for most Americans enrolled in the program. For a good dose of perspective, remember that Medicare had no outpatient drug benefit for the first forty years of its existence. We’ve come a long way.
