Every so often a policy change arrives dressed as a footnote and lands as a line item in ten million household budgets. This is one of those.
What’s ending, and when
The administration plans to end a subsidy program that helped hold down premiums for Medicare drug plans. The program hands insurers an estimated $3.6 billion this year to blunt premium increases in the prescription plans known as Part D. It ends after 2026.
Roughly 25 million people have Part D plans. They learn their 2027 rates in the fall. The average premium was around $36 a month this year, according to KFF, a health-policy nonprofit — and the subsidy did heavy lifting to keep it there. A federal watchdog estimates it cut the average premium about 40% in 2025 and 27% this year.
The administration’s case: the subsidies encouraged insurers to raise rates, knowing the government would cover the difference. “We are stabilizing the market so this bailout is no longer needed,” said Mehmet Oz, who runs Medicare. An official added that, had the program continued, more than half the money would have flowed to one company — UnitedHealth Group.
The damage estimate, from the same official: about 25% of enrollees see premiums flat or down next year. About 30% see less than $10 a month more. The remaining 45% face increases largely in the $11 to $20 a month range. He added that seniors should be able to find lower premiums if they switch plans. That last clause is the entire planning instruction, and it is doing a lot of work.
The pressure underneath is not political. Plans are being hit by growing expenses for GLP-1 drugs and other specialty medications, while 2022’s Inflation Reduction Act shifted more costs onto insurers. Those pressures continue into 2027, said Juliette Cubanski of KFF.
The insurer side of the same sentence
Humana showed what those costs look like from the other side of the counter. It cut its full-year outlook to at least $6.52 a share, from at least $8.36, on lower Medicare Advantage star ratings — the quality scores tied to government bonus payments. Quarterly profit was $694 million on revenue that jumped 26% to $40.87 billion, but the shares fell 5.9%.
Boston Scientific cut its outlook too, after its Watchman heart implant slowed sharply and its heart-rhythm business hit fiercer competition.
And Johnson & Johnson closed a very long chapter: it agreed to pay up to $5.5 billion to settle some 76,000 remaining talc claims, contingent on 95% of plaintiffs joining. After more than a dozen years of litigation, that swaps an unbounded, undated risk for a large, known, dated number. Trading certainty for cash is almost always worth it.
Your October 15 homework
Strip out the politics and what is left is a date. Medicare open enrollment starts October 15, and this change converts a passive default into an active decision for the 45% facing a real increase.
Part D is not a set-and-forget product. Formularies — the lists of covered drugs — change every year. Preferred pharmacies change. The plan that was cheapest for your prescriptions last year routinely is not this year.
Re-shopping is unglamorous and takes under an hour. This fall, it is the highest hourly-rate work available to anyone on or near Medicare.