What do you do as a politician if the law you passed angers a large segment of your electorate right before an election? A Biden-Harris administration would spend over $10 billion of taxpayer money to cover up the problem until after the vote.
The laughably misnamed Inflation Control Act (IRA) made major changes to Medicare Part D, which covers prescription drugs. (Americans can thank a Republican Congress and President George W. Bush for this monstrosity, which, when it was created, was the biggest new entitlement in nearly 40 years.) These changes have caused Part D premiums to skyrocket, so the Centers for Medicare and Medicaid Services (CMS) announced a three-year “premium stabilization” demonstration program, just in time to prevent any pre-election rate hikes.
This is especially important for Vice President Kamala Harris, the presumptive Democratic presidential nominee, because about 67.3 million Americans were enrolled in Medicare as of April, 80% of whom were covered by Part D, according to CMS. Seniors are the nation's most reliable voters: 72% of them voted in the 2020 presidential election, and Harris cannot afford to incur their anger.
Premium Danger
The most significant change to IRA Part D is the new $2,000 annual limit on out-of-pocket costs per beneficiary. Once that limit is reached, private insurers must cover 60 percent of the additional costs. Medicare and drug companies cover the rest.
“IRA provisions significantly increase insurance companies' financial liabilities,” wrote Jackson Hammond, a senior policy analyst at the medical research group Paragon Health Institute. “What will insurers do when plan costs rise? Of course they will raise premiums.”
The average monthly premium for a stand-alone Part D plan in 2025 ($179.45) is nearly three times what it was in 2024 ($64.28). Taxpayers are forced to foot the bulk of Part D premiums, but beneficiaries will still see their premiums increase by about 280%. This is something that is unlikely to be forgotten or forgiven on Election Day.
Enter the CMS “demonstration.” Hammond said:
Concerned about the increased premiums that the IRA redesign would impose on Part D plans, CMS launched a new voluntary nationwide demonstration program that is neither a demonstration nor optional. Unlike the larger subsidy program, the demonstration is limited in nature and tests alternative features of the program design. Insurers that do not participate are expected to become uncompetitive on price or suffer large losses as a result of the IRA changes, but insurers have few options.
Deceptive demonstrations
The demonstration has three parts that, taken together, “would represent a massive transfer of taxpayer funds to compensate insurance companies for lowering premium increases for Part D,” Hammond argued.
First, it would cut beneficiary base premiums for all participating plans by $15 a month, with taxpayers paying the difference by $180 per beneficiary per year. “This demonstration component alone would cost $7.2 billion over three years,” Hammond calculated.
Second, it would prohibit total individual Part D premiums from increasing more than $35 per year.
The third would use “risk corridors” to reduce insurer losses at taxpayer expense. Hammond explained:
Part D risk corridors essentially put caps on both a plan's profits and losses. If a plan's revenues exceed its projected targets (reflected in the plan's bid) by a certain percentage, the government receives a percentage of the profits. Similarly, if revenues fall short of its projected targets by a certain percentage, the government covers a portion of the losses.
Under the current risk corridor design, the rule of thumb is “up as down,” meaning Medicare subsidizes losses below a plan's expected target at the same level it receives from profits above the expected target. Under the new demonstration, CMS will use risk corridors to significantly reduce insurer losses. Going forward, taxpayers will bear more risk at lower levels of losses, but the (Medicare) standard level for insurer profits will be maintained. Essentially, insurers will be able to mitigate losses sooner and more extensively than before, with no change on the profit side.
Ballot Box Relief
All of this adds up to more than $10 billion in federal spending over three years, and it also “provides insurance companies with an election year bailout to avoid politically damaging premium increases on programs that are critical to seniors,” Hammond said.
Joe Grogan, who served as a presidential adviser under the Trump administration, agrees.
“They've destroyed Part D premiums,” Grogan told Fox News Digital. “I don't know if it would stand up to legal scrutiny if someone sues. Objectively, this shouldn't be done. They're just interjecting $5 to $10 billion of taxpayer money, with taxpayers paying for it 85 days before an election. It's disgusting.”
Hammond also believes the CMS demonstrations are illegal. The Obama administration used a similar tactic to hide the Medicare changes of Obamacare before the 2012 election, spending an estimated $8.3 billion on the demonstrations, which Hammond notes “was more expensive than the previous 85 demonstrations combined,” and “was condemned as illegal by the Government Accountability Office.”
But that didn't stop President Barack Obama, and it's unlikely to stop his vice president, or the current president.
Hammond concluded:
The Biden Administration supported bad policies two years ago, and now in an election year they are asking taxpayers to bail them out and their insurance companies. So far all they have shown is how to plunder taxpayer money to cover up their failed policies.
