The Trump administration’s recent decision to end a temporary Part D subsidy program in 2027 attracted much press attention, and some criticism. The California Democratic Party claimed on X that “25 million people, mainly seniors, count on Medicare Part D to afford their prescriptions. Donald Trump is putting their health on the line by ending the program.”
This is absurd—and false. The Trump administration is not ending the Part D program (established by Congress in 2003) and couldn’t do so even if it wanted to. However, it is ending a temporary and extralegal bailout program that provided billions of dollars in subsidies to insurers. That’s because Democrats made changes to the program that have cost far more than they claimed.
The Bailout, Explained
In summer 2024, the Biden administration announced a unilateral “premium stabilization demonstration.” The Centers for Medicare and Medicaid Services (CMS) noted the new program would start at the2025 plan year. This was just in time for premium announcements to land in seniors’ mailboxes just prior to the November 2024 election.
The program came into effect largely due to Democrats’ Inflation (Reduction) Act. That law shifted and restructured costs Part D insurers had to pay. It also reduced seniors’ out-of-pocket expenses on prescription drugs. The latter change will, all else equal, result in higher spending, because seniors will consume more and more costly drugs if they have to pay for fewer or none of their own costs.
The IRA already included one “stabilization” mechanism in a statute running through 2029, intending to minimize any premium increases. But, after seeing preliminary plan bids for 2025, CMS effectively admitted this lone bailout would be insufficient to prevent large spikes in premiums or insurer exits.
So it conjured a second, unilateral bailout to minimize any potential disruptions. Of course, as I noted at the time, this also amounted to using taxpayer funds to prevent Kamala Harris from suffering a big political controversy in the days leading up to the presidential election.
Unsustainable Costs
As the Washington Post wrote in a recent editorial, these “subsidies have helped keep premiums down but simply by shifting more of the cost on to the federal government,” rather than lowering costs. Indeed, while seniors traditionally paid 25.5 percent of Part D benefit costs via premiums, this year seniors are paying only about half that amount, or 13 percent. Taxpayers foot the bill for roughly seven in eight dollars of program spending (87 percent).
The IRA bailouts resulted in $40 billion in additional taxpayer spending in 2025 and 2026, and the costs will add up even more in coming years. I noted recently that this year’s Medicare trustees report increased the long-term cost of the Part D program by roughly one-third, or $5 trillion, compared to the 2025 trustees report.
Justifiable Action
Given these skyrocketing costs, it makes perfect sense to end the Biden administration’s unilateral bailout. Because the IRA’s major changes took effect in January 2025, insurers now have enough actuarial information (i.e., plan claims) to price their products without uncertainty leading to major variations in premiums.
Eliminating one bailout—remember, the statutory bailout remains in effect through 2029—may increase Part D premiums slightly. But CMS noted that the majority of enrollees will either face no change or a decline in premiums (25 percent), or an increase of under $10 per month (30 percent). Given that taxpayers will still pay a greater share of Part D costs than before the IRA and premiums have fallen by more than one-third in inflation-adjusted terms over the past 15 years, Part D still represents a good value for seniors.
By ending the Biden administration’s unilateral insurer bailout, the Trump administration served as a smart steward of scarce taxpayer dollars, while restoring more of a competitive balance to Part D. False scaremongering by the left aside, the action will help to preserve a Medicare program that faces significant solvency concerns.
