U.S. healthcare costs projected to rise as federal subsidies end

Healthcare costs in the United States are projected to rise significantly following policy shifts regarding federal subsidies. The Centers for Medicare and Medicaid Services (CMS) announced it will terminate the Part D Premium Stabilization Demonstration at the end of 2026, returning Medicare Part D prescription drug premiums to ‘traditional market conditions’. This program, launched in 2024 under the Biden administration, utilized billions in payments to insurers to offset volatility caused by the Inflation Reduction Act.

CMS Administrator Dr. Mehmet Oz characterized the decision as a rejection of government intervention, stating that the previous administration gave ‘BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies’. Republican lawmakers, including Senator Pete Ricketts, argued that the subsidy program merely covered up cost spikes triggered by the Inflation Reduction Act.

Separately, projections indicate that ACA marketplace insurance premiums could increase by 15% or more in 2027. This follows the decision not to extend enhanced ACA premium tax credits. Recent data shows average marketplace deductibles reached a record high of $3,786 in 2026. As open enrollment approaches, nearly 60% of employers plan to implement cost-cutting changes to health benefits, such as increasing deductibles.