CMS is ending its Medicare Part D Premium Stabilization Demonstration at the end of 2026, bringing standalone drug coverage back to “traditional market conditions,” per the agency.
After the Inflation Reduction Act redesigned Part D to lower drug cost-sharing, Part D sponsors responded by increasing premiums. The voluntary demonstration, launched in 2025, included a $15 direct subsidy for base beneficiary premium calculations, other subsidies to cap year-over-year premium increases at $35 and tighter risk corridors.
In 2026, CMS scaled back the program: The premium discount dropped from $15 to $10, the capped premium increase rose to $50 and the narrowed risk corridors were cut. According to a February 2026 U.S. Government Accountability Office report, CMS officials estimated the demonstration would cost $9.8 billion across 2025 and 2026, and nearly all plan sponsors opted in.
After analyzing prescription drug plan bids for 2027, CMS determined the sponsors “had sufficient experience under the redesigned Part D benefit,” despite the program originally being slated to run through 2027.
Now, Medicare Advantage enrollment is underway, and there are some unanswered questions about what the demonstration’s fallout could look like.
CMS said Sept. 28 that the average premium for standalone Part D plans is projected to rise by less than $1 per month in 2027. An Oct. 30 analysis from KFF found the average standalone Part D premium would increase by $17 per month if beneficiaries did not switch plans. KFF said that CMS did not explain its methodology for the under-$1 calculation, but the agency may have assumed switches to lower-cost plans.
KFF also determined that three-quarters of PDP enrollees without low-income subsidies will face a higher monthly premium in 2027, if they do not make changes during open enrollment. That is up from the 56% of enrollees who saw higher premiums for their same plan in 2026.
An Oct. 2 KFF analysis said the demonstration’s conclusion “did not result in substantially higher across-the-board PDP premiums but still likely affected premium levels for 2027.”
David Lipschutz is the co-director of law and policy at the Center for Medicare Advocacy, an organization that advocates for comprehensive Medicare and the traditional program. He acknowledged that many parties, including the Center for Medicare Advocacy, expected steeper Part D premium increases as a result of the unwinding.
“At least for this year, the ending of this Premium Stabilization Demonstration did not seem to have as bad of an impact as many anticipated,” he told Becker’s.
Mr. Lipschutz said there are several factors people base coverage decisions on, including premiums. According to KFF, private insurers can keep some of the difference between the estimated costs of Medicare Parts A and B services and the maximum MA payment rate, a rebate to lower benefits costs. Citing the Medicare Payment Advisory Commission, KFF said MA sponsors were projected to put more than $600 per enrollee in rebates toward enhanced Part D coverage in 2026.
“The ending of the Part D premium stabilization demo is taking away something from Part D plans that essentially Medicare Advantage plans continue to enjoy by virtue of the way that they’re paid: a cushion to help mitigate increase in costs,” Mr. Lipschutz said.
Another factor: broker commissions. Centene, for example, ended broker commissions for Part D plans in 2025 while continuing to pay them for MA plans. Commission payments and MA advertising, along with premiums, all have the potential to shape future transitions to MA, Mr. Lipschutz said.
“The increase in the Part D premiums can certainly play a role in beneficiary decision-making to enroll in a Medicare Advantage plan. Some of our concern is that when making such decisions, people aren’t largely doing a cost-benefit analysis of what that means for them,” he said. “What does it mean to leave traditional Medicare and to go into Medicare Advantage? Because there are certainly positives and negatives for such choices.”
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