The Trump administration’s elimination of the demonstration in an election year is a mystery.
During an election year, it is hard to understand exactly why the Trump administration decided to end the standalone Part D (PDP) premium stabilization demonstration pilot in 2027. In fact, this has been a program I have been entirely critical of.
The reason for the program itself goes back to the Inflation Reduction Act (IRA) of 2022, where Democrats did their usual conspiring to pass misguided, political provisions that essentially upend the financial underpinnings of Medicare Part D. In that bill, numerous changes were included that would lower or cap cost-sharing for a subset of Part D beneficiaries. The problem – it was largely unfunded and forced greater costs and risks on Part D plans. Medicare Advantage (MA) plans offering Part D found ways to limit the destruction, although the IRA changes did contribute to the ongoing diminution of benefits, coverage, and MA’s footprint. The standalone PDPs, which largely pair with the Medicare fee-for-service (FFS) program, had few alternatives but to pass on costs to consumers to “pay” for the cost-sharing reductions – in premiums, in cost-sharing, in tighter formularies, and fewer offerings. As usual, in the Democrats’ world of winner and loser politics, a subset of individuals benefit, while the majority suffer.
Many of the changes went into effect in 2025, with impacts that were to be made public right around the 2024 election. As bids came in from plans in 2024 for the 2025 year, the Centers for Medicare and Medicaid Services (CMS) quickly determined that massive premium spikes in standalone Part D PDPs would occur. CMS took the extraordinary step of quickly putting together a 3-year demonstration project to limit premium spikes by spending about $5 billion a year to limit the impact. While CMS does have demonstration authority, I believe the project was clearly extra-legal. But no one complained as it saved standalone PDP plans and offered relief to consumers. Indeed, as usual, big health plans with PDPs enthusiasically endorsed and hopped on the gravy train.
That was for premiums in 2025. When the Trump administration returned to office in 2025, tit extended the program for 2026. How could you blame them. But now, Trump 47 will abandon the massive expenditure. Few would have blamed it if it continued for at least one more year as originally planned. But the sunset of the demonstration now opens up the prospects of a major premium hike and more benefits cuts for PDP enrollees. It could also further impact plan choice and offerings.
In 2025, the program ensured the base beneficiary premium was reduced by $15, with the monthly premium increase limited to $35. In 2026, the base premium reduction was $10, with the premium increase limited to $50. MedPAC says that overall premium subsidies provided under the demonstration reduced the average monthly PDP premium by $26 in 2025 and $16 in 2026.
By any calculation, the sunset of the program pulls about $5 billion from the coffers of PDP plans. By my simple math, the change could on average increase premiums and/or reduce benefits by about $17 a month on average. That does not appear major, unless you are a fixed income senior battling rising prices across the board. The move makes unaffordability in healthcare even worse. Further, all this is before factoring premium hikes and other fallout from aggressive trends in the drug world. And with fewer plans available, it may be hard for many to explore feasible alternatives. For sure, fewer $0 premium plans will result as has been the trend over the past few years. The impact of the sunset on certain PDPs could be severe, leading to more retrenchment in certain markets.
Healthcare policy group KFF seems to agree with me and notes that the average monthly PDP premium in 2026 is more than four times the average premium for drug coverage in Medicare Advantage plans ($36 vs. $8) because MA Part D (MA-PD) plans can use their Part C rebates to buy down drug coverage premiums and costs.
In the end, the 2022 politically motivated changes added to the increasing financial peril and instability of the PDP program. So, again, I am shocked that CMS did all this during an election year where it will be felt so clearly by consumers. But perhaps, the Trump administration was not thinking politically here but is actually concerned with the financial mess that is Medicare overall. While it will have fallout, just maybe this is good governance. The conservative Paragon Health Institute has called for the unraveling of these putrid changes before they do more damage. That is spot on.
#medicareadvantage #partd #pdp #medicare
— Marc S. Ryan
