CMS announced that it was ending a subsidy program that capped Medicare premiums despite having funding for another year
Just ahead of the open yearly enrollment period for Medicare, the Centers for Medicare and Medicaid Services (CMS) announced that it was ending a subsidy program for Medicare Part D that helped cap drug premiums.
This spending cut is in line with other budget cuts that President Donald Trump’s Administration and Congress have made on healthcare spending. However, it is also happening as groups on the island, such as the Chamber of Commerce and the Medicaid and Medicare Advantage Products Association of Puerto Rico, are advocating for parity in Medicaid and Medicare funding (see column by Puerto Rico Hospitals Association President Jaime Plá, p. 22).
The Part D Premium Stabilization Demonstration was a $9.8-billion program created in 2024 that was funded and expected to run until the end of 2027. This program gives the subsidy to the insurance companies that provide standalone drug plans for beneficiaries of Medicare Part A and Part B, also known as Original Medicare. The insurance companies, in turn, would use this subsidy to cap how much beneficiaries would need to pay for drug premiums.
The subsidy didn’t apply to Medicare Part C, also known as Medicare Advantage (MA), which bundles drug coverage as part of regular coverage and does not require additional standalone drug plans. Some critics of CMS’s decision to eliminate the subsidy argue that this could lead to people having to forgo needed medication or move to an MA plan despite it not being their best option.
“Amid skyrocketing Part D premiums, many people could be drawn to an MA’s lower drug plan rates, even if MA was not the best choice for them otherwise. Choosing between MA and Original Medicare is a complicated, highly personal consideration. Imbalances in premium-setting undermine that decision-making,” argued Julie Carter, Senior Federal Policy Associate at Medicare Rights Center.
CMS Administrator Dr. Mehmet Oz argued that the problem with the program was that it gives the money to insurance companies, not the people.
“The Biden admin gave billions of taxpayer money directly to Big Insurance Companies. This is unacceptable. We are stabilizing the market so this bailout is no longer needed. Premiums will go up by less than $10 for most Medicare recipients, with many even seeing lower premiums,” Oz wrote in a post on X, formerly Twitter.
Oz continued to argue, “Every Medicare beneficiary still has access to low-cost plans, and we will continue to lower prescription drug prices for every American patient, from more MFN deals to our policy giving seniors access to GLP-1s for $50 a month.”
The CMS administrator was referring to the Most Favored Nation Model drug policy framework, unveiled this past May, one of the Trump administration’s strategies to reduce the price of prescription drugs. As Oz alluded, access to GLP-1 drugs, which are originally for treating type 2 diabetes but have become popular as an effective weight loss drug, will not be affected because it’s funded through a different subsidy.
CMS’s decision comes after the Congressional Budget Office (CBO) published a report detailing how major increases in healthcare spending drive the growth in the federal deficit, and that “Medicare spending accounts for most of the projected growth in spending in major healthcare programs.” The CBO also published a report revisiting previous projections about Medicare Part D and concluded that “evidence now indicates that the spending reductions attributable to drug price negotiation and inflation rebates have been smaller than CBO originally estimated.”
