The number of stand-alone Medicare Part D prescription drug plans available to the average beneficiary has fallen from 30 in 2021 to just 14 in 2025, and the federal program that had kept a lid on their premiums is being retired. The Centers for Medicare & Medicaid Services confirmed on July 28, 2026, that it will not renew the Part D Premium Stabilization Demonstration for 2027, a decision that could mean sharper premium increases for the millions of people who get drug coverage through a stand-alone plan in traditional Medicare rather than through Medicare Advantage. The change lands hardest in rural areas, where stand-alone plans remain the dominant way older Americans get Part D coverage, and it arrives just as CMS prepares to publish the full 2027 plan lineup ahead of this fall’s Open Enrollment.
A Market Cut in Half Since 2021
Stand-alone prescription drug plans, or PDPs, are the only route to Part D coverage for people who stay in Original Medicare instead of joining a private Medicare Advantage plan. An analysis of Centers for Medicare & Medicaid Services plan files by KFF found that the number of PDPs available to the average beneficiary dropped from 30 in 2021 to 14 in 2025, and that premium-free “benchmark” plans reserved for low-income enrollees fell even further, from 8 down to 2. Over the same period, the number of Medicare Advantage drug plans climbed from 27 to 34 on average.
The researchers behind that analysis describe the shift as structural: fewer PDP choices combined with higher PDP premiums could eventually leave traditional Medicare enrollees with little practical option besides switching into Medicare Advantage, a type of plan that typically trades a lower or zero drug premium for a narrower network of doctors and more prior-authorization requirements.
The Subsidy That Kept Premiums Under $40
The plan count collapsed even as premiums stayed relatively calm, because CMS created the Part D Premium Stabilization Demonstration in 2024, ahead of a 2025 redesign of the drug benefit that shifted significantly more of the cost of covering high drug spending onto insurers under the Inflation Reduction Act. The voluntary demonstration paid participating stand-alone plans a uniform premium subsidy, capped how much any single plan’s premium could rise in a year at $35, and narrowed the financial risk plans carried.
The result: the average monthly PDP premium held at under $40 through 2025, even as the total number of PDPs sold nationwide fell from 709 to 464. Enrollment in stand-alone plans stayed essentially flat over the same stretch — evidence, the analysis argues, that the subsidy prevented a more disruptive collapse of the market. The subsidy carried a real price tag: the Congressional Budget Office estimated it would cost the federal government about $5 billion in 2025 alone, and some Republican lawmakers argued it shifted costs from plan sponsors and enrollees onto taxpayers. The Government Accountability Office nonetheless found the demonstration legally sound under the HHS Secretary’s authority to run Medicare payment demonstrations, even though that finding didn’t require the Trump administration to keep funding it.
Free retirement updates: Social Security and Medicare change every year, and nobody sends you a memo. Our free Retirement Shield newsletter breaks down what changed and what to do. Get it free in your inbox.
CMS Ends the Demonstration for 2027
That cushion disappears heading into 2027. In a July 28, 2026 fact sheet, CMS said its review of insurers’ bids showed that Part D plan sponsors now have sufficient experience under the redesigned Part D benefit to price their own coverage without the subsidy, and confirmed the demonstration will lapse at the end of 2026. The agency set the 2027 national base beneficiary premium — the statutory starting point used to calculate what many stand-alone plan enrollees pay — at $41.33, a 6% increase and the maximum yearly rise allowed under the Inflation Reduction Act’s premium cap. The national average bid insurers submitted for 2027 coverage came in at $296.05, a 24% jump from the prior year.
CMS Administrator Dr. Mehmet Oz framed the decision as a correction, saying the outgoing subsidy had sent billions of taxpayer dollars directly to insurance companies, and telling beneficiaries that most should see premium increases of less than $10 a month, according to Healthcare Dive’s reporting on the announcement. CMS has said it will publish the finalized 2027 Medicare Advantage and Part D plan landscape, including plan-by-plan premiums, in mid-to-late September — the information beneficiaries need to compare plans before Open Enrollment opens October 15.
What Traditional Medicare Enrollees Are Weighing
Fewer plan choices combined with a higher base premium narrows the options for the roughly 23 million people in traditional Medicare who depend on a stand-alone plan for drug coverage. The KFF analysis warns that continued erosion of the PDP market raises the odds that more of those beneficiaries end up in Medicare Advantage by default rather than by preference, because the stand-alone alternative has gotten thinner and pricier, not because it stopped fitting their needs. Medicare Advantage plans typically charge no separate drug premium beyond the standard Part B premium, in part because insurers apply federal rebate dollars — averaging more than $500 per Medicare Advantage drug-plan enrollee in 2025 — to offset the cost, producing an average monthly premium of $7 for Medicare Advantage drug plans versus $39 for stand-alone plans that year.
The Rural Divide
The stakes fall unevenly. The same KFF review found that nearly six in ten Medicare Part D enrollees living in the nation’s most rural areas are enrolled in a stand-alone plan rather than Medicare Advantage, well above the urban share, and that rural beneficiaries generally have far fewer Medicare Advantage plans to switch to even if they wanted one. For those enrollees, a smaller PDP market with a higher base premium isn’t a distant possibility — it describes the coverage many of them are already using, with fewer nearby alternatives than beneficiaries in cities and suburbs have.
The Programs That Require a Call
A shrinking stand-alone drug plan market means more retirees are being pushed to compare Medicare Advantage against a smaller, pricier group of Part D options with less cushioning than before. The same gap shows up elsewhere in Medicare and Social Security: assistance that is available but goes unclaimed because the program is opt-in and nobody sends a notice.
The Benefits Checklist lays out all 11 of those covered programs across 69 pages, including the 2026 income limits and a 50-state phone directory for enrolling.
Compare the coverage options above against every program a retiree may be leaving unclaimed in The Benefits Checklist.
This article was assisted by AI tools and reviewed for accuracy before publication.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
