The Subsidy Propping Up Medicare Drug Plans Is Going Away.

What Is Ending, and When

The administration plans to end a subsidy program that helped hold down premiums for Medicare drug plans, a move that could leave many seniors facing higher rates for their prescription coverage next year. The move will eliminate a program that is giving insurance companies an estimated $3.6 billion in subsidies this year to blunt increases in premiums for the Medicare prescription plans known as Part D. The program will end after 2026, according to administration officials.

Roughly 25 million people have Part D plans, and they will learn about their 2027 rates in the fall. The average premium for a Part D plan was around $36 a month this year, according to KFF, a health-policy nonprofit. The Medicare Payment Advisory Commission, a federal watchdog agency, estimates the subsidy program — which was supposed to stabilize Part D — reduced the average Part D plan premium by about 40% in 2025, and cut the average rate by an estimated 27% this year.

A Trump administration official said the extra subsidies encouraged insurers to raise rates, knowing the government would pick up the extra cost; he said the subsidies weren’t needed and that other policies which help hold down Part D costs also remain in place. “We are stabilizing the market so this bailout is no longer needed,” said Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, in a posting on social media. The official said that if the program had remained in effect next year, more than half of the subsidy money would have flowed to one company, UnitedHealth Group. A UnitedHealth spokesman said the company is “committed to working with CMS, ensuring seniors have access to affordable prescription medicines.”

On the size of the coming increase, the administration official said around 25% of Medicare Part D plan enrollees would see premiums stay flat or go down next year; around 30% will have an increase of less than $10 to their monthly bill; and for the remaining 45%, the increases are largely in the $11 to $20 range a month. Seniors should be able to find lower premiums if they switch plans, he said, adding that affordable options are still available. That last clause is the entire planning instruction, and it is doing a lot of work.

The underlying pressure is not political. Medicare drug coverage premiums are rising because the plans have been hit by growing expenses for GLP-1 medications and other specialty drugs, and because changes implemented under 2022’s Inflation Reduction Act reduced many enrollees’ out-of-pocket expenses but required insurers to shoulder more of the costs. Those pressures are expected to continue in 2027, said Juliette Cubanski, a vice president at KFF. High drug costs are a perennial issue — especially for seniors on fixed incomes — and healthcare affordability is expected to be a focus in the midterm elections.

The Insurer Side of the Same Sentence

Humana cut its earnings outlook for the year as the company continues to face headwinds from lower Medicare Advantage star ratings for 2026. The health insurer now expects earnings of at least $6.52 a share for the year, down from a previous forecast of at least $8.36. The quality ratings, on a scale of one to five stars, are tied to bonuses paid to insurers — which is why a ratings change reads on the income statement like a rate change.

For the second quarter, Humana posted a profit of $694 million, or $5.73 a share, compared with $545 million, or $4.51 a share, a year earlier. Total revenue jumped 26% to $40.87 billion. The company’s benefit ratio, which measures the proportion of premium revenue paid out to cover medical costs, was 91.2%, roughly in line with analysts’ views. Shares fell 5.9% to $365.86 in New York trading.

Health insurers’ profits have been pressured by higher medical costs, driven by factors including more utilization of medical services and higher costs of pharmaceuticals. Older people in particular have been using medical services to a greater extent, which increases costs for Humana more than for other insurers, given its reliance on Medicare Advantage plans. For the year, the company still forecasts individual Medicare Advantage membership growth of about 25%, driven by new sales, improved retention and changes to its customer-service approach.

Devices, and the End of a Decade of Talc

Boston Scientific cut its full-year outlook after two of its core heart-disease products faced unexpected challenges in the second quarter. Revenue from the Watchman heart implant, used to reduce the risk of stroke, slowed sharply and unexpectedly; the electrophysiology business, which focuses on treating heart-rhythm disorders, is also struggling to keep up with fiercer competition. The company posted a second-quarter profit of $907 million, or 61 cents a share, compared with $797 million a year earlier, and said earlier in the week it planned to lay off staff under a restructuring plan expected to bring pretax charges of about $700 million to $800 million.

Johnson & Johnson said Monday it has agreed to settle the remaining suits accusing the company’s talcum powder of causing ovarian cancer. The company has offered to pay $5.5 billion to cover some 76,000 claims, nearly all the remaining cases in federal multidistrict litigation and related cases in state courts. The agreement depends on the participation of 95% of the remaining plaintiffs, J&J says. The litigation has dragged on for more than a dozen years; of 20 individual ovarian cases the company litigated to a verdict, it lost one, and in 17 it either won, earned a mistrial, or had the verdict reversed on appeal.

For a holder, that is the shape of a resolved overhang: a large, known, dated number replacing an unbounded, undated one. That trade — certainty for cash — is almost always worth making.

The Only Instruction That Matters This Fall

Strip out the politics and the earnings and what is left is a date. Medicare open enrollment runs from October 15, and the administration’s own framing of the change — that seniors should be able to find lower premiums if they switch plans — converts a passive default into an active decision for the roughly 45% of enrollees who will see a real increase.

Part D is not a set-and-forget product. Formularies change, preferred pharmacies change, and the plan that was cheapest for a given prescription list last year routinely is not this year. Re-shopping is unglamorous, takes under an hour, and this fall it is the highest hourly-rate work available to anyone on or near Medicare.