The Inflation Reduction Act had very significant impacts on Part D prescription drug coverage and costs. One of the biggest was the implementation of a $2,000 cap on out-of-pocket costs for covered medications. (That cap will be $2,400 in 2027.) No matter the cost of the drug, no one with Part D would pay more in out-of-pocket costs than the cap.
Because Medicare beneficiaries would pay less, Part D plans would have to pay more. There were concerns that plans would increase monthly premiums as a way to limit their costs. To control this, the Centers for Medicare and Medicaid Services introduced the Voluntary Part D Premium Stabilization Demonstration. This allowed stand-alone prescription drug plans to receive subsidies to lower plan premiums.
This demonstration had three elements but the most visible one was the limit on plan premium increases. In 2025, plans could not increase premiums by more than $35 and, in 2026, that increased to $50.
Then, on July 28, CMS announced the end of the subsidies. The Part D market was stabilizing and CMS believes that 2027 premiums will go up by no more than $20 for most Medicare recipients.
Any time there is a major shift in policy, the internet lights up with posts. Those doing the postings don’t always have a clear understanding of the issues and/or just run with someone else’s ideas. The end of the Part D premium subsidies has fostered two big prominent themes; one is a falsehood and the other presents a big risk.
The Falsehood: Part D Is Going Away
Here’s a sample of what I read on the internet.
“They’re cutting Part D.”
“Seniors will die because Part D is ending.”
“Americans are losing Part D.”
This falsehood is relatively easy to correct. Read the CMS memo. Only the Part D premium subsidies are ending. Part D is not going away.
The Big Risk: Medicare Advantage
After discussing the potential for higher premiums, several posts offered the same solution.
“Shop around for a lower priced plan or switch to Medicare Advantage.”
Simply drop your current coverage and sign up for Advantage, just like, if you can’t find the right pair of brown shoes, opt for black.
This is simple, straight-forward and possibly perilous for those who don’t understand what they are giving up and getting. Here’s a brief look at important points for those considering Medicare Advantage.
Lower premiums: It is true that Advantage plans offer lower premiums for drug coverage. The average monthly premium for Advantage plans (healthcare and drug coverage) is $8. However, Advantage plans get help that stand-alone plans don’t. In 2026, Medicare paid Advantage plans $2,660 per beneficiary per year in rebate payments. Of that, on average, plans allocated $600 per member to Part D benefits, including reducing monthly premiums.
Supplemental benefits: Plans can use the rebates to fund supplemental benefits that run the gamut from popular ones, like dental and vision care and gym membership, to meals, transportation, and physical exams. However, those benefits may be losing some of their appeal. In a recent survey, 70% of Medicare Advantage executives expect the benefits to be less generous with not one leader predicting any richer benefits next year.
Networks: Every plan is network-based. Seeing physicians in-network saves money but finding those physicians can be challenging. Plus, more health systems are dropping out of the networks. When that happens, a plan member must either find a new physician in-network or pay the full cost of services.
Prior authorization: There have been many news stories about the difficulties associated with this coverage rule. Those who switch need to know this is a fact of life for Advantage members, which can lead to delays or denial of medical care.
Out-of-pocket costs: Zero-premium does not mean zero costs. Medicare Advantage is pay-later coverage; there are copayments or coinsurance attached to just about every medical service. Members write checks until reaching the plan’s out-of-pocket maximum. This year, the maximum for in-network services is $9,250 and, for in- and out-of-network combined, $13,900, with the averages being $5,421 and $9,825, respectively.
No turning back: Those who give up a Part D drug plan must also give up their Medicare supplement when electing Medicare Advantage. (It is illegal to sell an Advantage plan to someone with a supplement.) There is one 12-month trial period that applies the first time someone switches to Advantage. But, once that period ends, getting back a supplement depends on state of residence and health status.
I know one of the driving factors behind a switch to Medicare Advantage is the fact that some beneficiaries cannot afford the monthly premiums. As long as they don’t need medical care, Medicare Advantage can save money. But when health changes, they face out-of-pocket costs and may end up not receiving care. Unfortunately, there are no simple solutions to this dilemma.
Subsidies Gone, Don’t Overreact
The Voluntary Part D Premium Stabilization was a demonstration project, a temporary response to the Inflation Reduction Act. Hopefully, you’ll think through the issues before taking action. Remember two important points:
- Part D is not going away but it may cost more.
- If we believe CMS’s prediction is accurate, premium increases will be about $250 next year. But, if there’s any doubt (which most likely there is), premiums could increase by more than that. But, either way, before making a switch to save money, consider carefully what you’ll get with Medicare Advantage and the impact on you.
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