Medicare Part D in 2027: The New $2,400 Drug Cap and Other Changes

Prescription drug coverage under Medicare has changed more in the last few years than in the previous two decades. The biggest change — an annual cap on out-of-pocket drug costs — continues in 2027, at a slightly higher level. Here’s what you need to know before choosing a plan during Medicare Open Enrollment (October 15 – December 7).

How the out-of-pocket cap works

Before 2025, Part D had a “donut hole” and no hard ceiling on what you might pay. Now the structure is simpler:

1. Deductible: you pay full price for covered drugs until you meet your plan’s deductible (no more than $700 in 2027; some plans have $0 deductibles).
2. Initial coverage: you pay copays or coinsurance for each prescription.
3. Catastrophic coverage: once your out-of-pocket spending on covered drugs reaches $2,400, you pay nothing more for covered drugs that year.

What counts toward the cap: your deductible, copays and coinsurance for drugs on your plan’s formulary, plus certain payments by others on your behalf (like Extra Help). Your monthly premium and drugs your plan doesn’t cover don’t count.

Spread costs over the year: the Prescription Payment Plan

If you take expensive drugs, hitting the cap in January can mean a large bill at once. The Medicare Prescription Payment Plan lets you pay your out-of-pocket drug costs in monthly installments throughout the year instead, at no extra charge. It doesn’t lower your total cost, but it smooths your cash flow. You can opt in through your Part D or Medicare Advantage plan.

Who benefits most

People who take high-cost medications — for cancer, multiple sclerosis, rheumatoid arthritis, or brand-name diabetes and heart drugs — see the biggest savings from the cap. If you take only a couple of inexpensive generics, the cap may never matter to you; your premium and copays matter more.

How to choose a Part D plan for 2027

1. List every drug and dose you take.
2. Use the Medicare.gov Plan Finder and enter your drugs and preferred pharmacies. It estimates your total yearly cost, not just the premium.
3. Check the formulary tier of each drug and any restrictions — prior authorization, step therapy or quantity limits.
4. Compare preferred pharmacies and mail-order options, which can lower copays.
5. Read your Annual Notice of Change if you’re already enrolled. Plans change premiums, deductibles and drug lists every year.

Don’t skip Part D just because you’re healthy

If you go 63 days or more without Part D or other creditable drug coverage after your Initial Enrollment Period, you’ll generally pay a late enrollment penalty added to your premium for as long as you have Part D. A low-premium plan can be cheap insurance against both future drug costs and the penalty. See our Medicare at 65 checklist.

Frequently asked questions

Does the $2,400 cap apply to Medicare Advantage drug plans?

Yes. It applies to standalone Part D plans and to Medicare Advantage plans that include drug coverage.

Does the cap include my monthly premium?

No. Premiums are separate. The cap covers what you pay at the pharmacy for covered drugs.

Is insulin still capped at $35?

Yes. Covered insulin products cost no more than $35 for a month’s supply under Part D, and you don’t have to meet your deductible first.

Will the negotiated drug prices lower my copay?

For many people, yes — especially if you pay coinsurance (a percentage of the drug’s price) or haven’t met your deductible. The exact effect depends on your plan’s design.

Can I change Part D plans during the year?

Generally only during Medicare Open Enrollment, unless you qualify for a Special Enrollment Period — for example, if you move, qualify for Extra Help, or lose other coverage.

Related: Medicare Advantage vs. Medigap · How to save on prescription drugs

Sources: CMS 2027 Part D parameters; Medicare.gov; Associated Press (October 2026). Smart Premium Guide is not affiliated with Medicare or any government agency. For education only — not insurance advice. Last reviewed October 2026.