The Trump administration will cut a Biden-era program that funneled billions in taxpayer money to insurance companies under Medicare Part D, a move that comes as the Congressional Budget Office now admits the Inflation Reduction Act's drug pricing overhaul will add roughly $700 billion to the deficit instead of saving $129 billion.
Centers for Medicare and Medicaid Services Administrator Mehmet Oz announced that the Premium Stabilization Demonstration program will no longer be available starting in 2027. Oz framed the decision as ending a corporate handout disguised as senior care, posting on social media that the Biden administration had sent "BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies." He added that CMS is "stabilizing the market so this bailout is no longer needed."
The announcement landed alongside a CBO report that rewrites the fiscal story Democrats told the country when they passed the Inflation Reduction Act in 2022. Back then, CBO projected the law's Medicare Part D changes would trim $129 billion from the federal deficit over a decade. Now the nonpartisan budget office says those same provisions will increase the deficit by approximately $700 billion, a swing of more than $800 billion from the original estimate.
For seniors on Medicare Part D, the numbers are just as stark. CBO originally forecast a modest 5% rise in annual enrollee costs for 2026. The revised projection: a 35% increase.
The budget office did not blame external market forces alone. In its written report, CBO acknowledged that it "significantly underestimated the increase in per-enrollee costs" driven by the IRA's drug pricing redesign. The law restructured how costs are shared between enrollees and their prescription drug plans, and the result was predictable to anyone who understands insurance markets: private insurers submitted higher bids than CBO anticipated.
CBO stated that it "expected the redesign to shift some of the costs of prescription drugs from Part D enrollees to their prescription drug plans, resulting in higher bids from private insurers." That expectation proved correct in direction but wildly off in magnitude.
Inflation compounded the problem. The budget office explained that "overall price inflation has increased more rapidly than CBO anticipated in 2022, which raised the benchmarks CMS uses to calculate manufacturers' inflation rebates." Higher benchmarks meant drug companies owed smaller rebates to Medicare, which in turn "curtailed manufacturers' incentives to limit price increases." In plain terms: the mechanism Democrats built to hold drug prices down did the opposite once real-world inflation outpaced the models.
The CBO summed up the damage bluntly: "Bids from Part D prescription drug plans have been higher than CBO expected earlier and the budgetary costs have been much larger than originally estimated...the redesign was the leading driver of those higher bids."
House Energy and Commerce Committee Chair Brett Guthrie, a Kentucky Republican, did not hold back in response to the CBO findings. Guthrie said the report showed "how the problematic design of the Inflation Reduction Act has not led to the savings CBO originally projected but has instead led to increased costs for taxpayers and instability in the Part D marketplace."
Guthrie also stressed the stakes for the people who depend on the program most:
"The Part D program is critical to meeting seniors' needs and requires durable regulatory policies to ensure the long-term affordability and availability of prescription drug plans for these beneficiaries."
House Budget Committee Chairman Jodey Arrington, a Texas Republican, went further. He accused Democrats of deliberately misleading the public when they passed the IRA, a charge that gains weight now that the fiscal projections have collapsed so dramatically. The broader pattern of Democratic leadership struggling to hold its own coalition together only sharpens the question of who will be held accountable for the law's failures.
Arrington issued a statement Wednesday tying the Medicare cost overrun to another fiscal miscalculation embedded in the same law:
"We have once again confirmed that Democrats, with CBO's analysis in hand, sold the American people a false bill of goods in the Inflation Reduction Act. Combined with the Joint Committee on Taxation's $600 billion miscalculation of the cost of the Green New Deal tax credits, we now know the IRA cost Americans $1.3 trillion more in new deficit spending. Today, taxpayers are left holding the bag due to Democrats' failed experiment."
The administration moved to preempt criticism that ending the Premium Stabilization Demonstration program would harm Medicare beneficiaries. Oz claimed that "premiums will go up by less than $10 for most Medicare recipients, with many even seeing LOWER premiums." He added that "every Medicare beneficiary still has access to low-cost plans, and we will continue to lower prescription drug prices for every American patient."
Those claims remain unverified by independent analysis in the CBO report. But the administration's framing puts the burden of proof on defenders of the status quo: if the subsidy was propping up insurer profits rather than meaningfully reducing senior costs, ending it is a correction, not a cut. That distinction matters, and it is one Democrats will have to address with numbers rather than slogans.
The IRA required the Department of Health and Human Services to negotiate drug prices directly with manufacturers for certain medications and mandated that drugmakers pay Medicare if their prices outpaced inflation. On paper, both provisions were supposed to save money. In practice, the CBO now says the law's Part D redesign was "the leading driver" of higher-than-expected insurer bids, meaning the government's intervention into the market produced exactly the cost spiral it was designed to prevent.
Arrington's $1.3 trillion figure combines two separate fiscal miscalculations baked into the IRA. The first is the roughly $800 billion swing on Medicare Part D, from a projected $129 billion in savings to a projected $700 billion in added deficit spending. The second is the Joint Committee on Taxation's $600 billion undercount on the cost of the IRA's green energy tax credits, which Arrington described as a "miscalculation."
Together, they paint a picture of a law sold to the American public as deficit-reducing legislation that has become one of the largest drivers of new federal spending in recent memory. Democrats marketed the IRA as a responsible, pay-for-itself package. The CBO's own revised numbers say otherwise. The Trump administration has shown a willingness to pursue accountability against officials whose claims do not match the record, and the IRA's architects may soon face similar scrutiny.
No Democratic responses to either the CBO report or the Trump administration's decision to end the subsidy program appeared in the reporting. That silence is itself notable. When a signature legislative achievement turns into a fiscal liability seven times larger than promised, voters deserve an explanation, not quiet exits from the debate.
The broader context of fractures within the Democratic Party suggests that defending the IRA's record may not be a fight every member of the caucus wants to take on. Some Democrats have already broken with party leadership on other high-profile issues, and a law that adds $1.3 trillion in unplanned deficit spending is not an easy hill to defend.
Guthrie's call for "durable regulatory policies" signals that congressional Republicans intend to push for structural reforms to Medicare Part D rather than simply ending one subsidy program. Whether that effort gains traction will depend on whether the administration and Congress can agree on a replacement framework before the 2027 plan year begins, and whether Democrats choose to engage on the substance or retreat into messaging about Republican "cuts" to Medicare.
The CBO report leaves several questions unanswered. It does not specify which drugs or drug categories drove the higher-than-expected spending. It does not detail projected costs beyond 2026. And it does not explain how the end of the Premium Stabilization Demonstration program will specifically affect insurer bids for the 2027 plan year. Those gaps matter, and they deserve answers from both the administration and Congress as seniors plan for the year ahead.
Democrats passed the Inflation Reduction Act promising it would save taxpayers money and protect seniors from rising drug costs. The CBO now says it will do neither. When the bill arrives $1.3 trillion over budget, the people who wrote the check owe the taxpayers more than silence.
