Medicare Part D Is Changing in 2027 - Here's the Good News and the Bad

If you're a Medicare beneficiary who takes prescription drugs, you have an important decision coming up.

The rules surrounding Medicare Part D are changing (again) in 2027, so the plan that helped you get ahead financially this year might not be the best choice next year. If you're living on a fixed income, even a relatively small change in monthly costs deserves a closer look.

Not every change to Part D affects your wallet in the same way. Some affect what you must pay for coverage, while others impact what happens when you pick up your prescriptions.

With Medicare's annual open enrollment period approaching, here's what you need to know before deciding whether to stick with your current plan or shop around.

The bad news: Part D premiums could rise

In July, the Centers for Medicare & Medicaid Services (CMS) announced it would end the Part D Premium Stabilization Demonstration at the end of 2026. The program reduced the average monthly premium for standalone plans by about $26 in 2025, and another $16 in 2026, according to the Kaiser Family Foundation. The average standalone Part D premium was $36 per month in 2026, and without the demonstration, it could have been 50% higher.

That protection ends on January 1, 2027.

CMS says the change should be relatively modest. The agency's 2027 calculations put the national base beneficiary premium at $41.33. Most beneficiaries should see premium increases of less than $10 a month, although final plan-specific premiums won't be available until September.

However, $41.33 isn't necessarily what you will pay. The base beneficiary premium is a benchmark used in calculating individual Part D premiums. What you actually pay depends on the specific plan you choose and where you live.

The good news: The drug cap is staying

Medicare's annual cap on out-of-pocket spending for covered Part D drugs isn't going away. In 2025, the first year of the new Part D benefit, the annual out-of-pocket limit was $2,000. It rose to $2,100 in 2026. Next year, it's expected to rise again to $2,400. CMS has finalized this threshold as part of the 2027 benefit parameters.

In a major change from the old Part D system, once you reach the applicable out-of-pocket threshold for covered Part D drugs, you no longer pay cost-sharing for these medications for the rest of that calendar year.

What happened to the "donut hole"?

Before 2025, Medicare Part D had a coverage gap commonly known as the donut hole. People with high prescription drug costs could move through different stages of coverage and eventually reach a gap where they had to shoulder a significant share of their drug costs before qualifying for catastrophic coverage.

The Inflation Reduction Act eliminated that gap, replacing it with a straightforward annual out-of-pocket limit. The change has a large impact on people taking expensive specialty drugs or multiple brand-name medications.

The Department of Health and Human Services' Office of the Assistant Secretary for Planning and Evaluation (ASPE) estimated that roughly 11 million Part D enrollees would reach the $2,000 cap in 2025, with those beneficiaries saving an average of about $600 each because of the new limit.

Premiums vs. drug costs

Think of Part D as having two separate price tags. Your premium is the monthly payment for your insurance plan. Regardless of how many prescriptions you fill in any given month, you have to pay it.

Your drug costs are what you pay when you pick up covered prescriptions. Those costs vary based on the drugs you take, your plan's cost-sharing rules, your pharmacy, and your position in the plan's benefit structure.

The Premium Stabilization Demonstration affected the first price tag: monthly premiums. The $2,400 out-of-pocket cap impacts the second: what you spend on covered Part D drugs during the year.

For example, if you pay $30 a month for a Part D plan in 2026, that's $360 over the year before paying anything for prescriptions. If your premium rises to $45, your new annual premium is $540 (a $180 increase). This $180 increase only affects the cost of maintaining coverage. Your prescription costs are calculated separately and remain subject to the annual Part D out-of-pocket limit.

Don't wait till January to find out what your plan costs

The biggest mistake you could make is looking only at the monthly premium when 2027 plans become available. Having the lowest premium doesn't always translate to the cheapest plan for someone taking several prescriptions.

You should compare the total estimated annual cost of each plan based on the medications you actually take. Medicare's Plan Compare tool lets you enter prescriptions and preferred pharmacies to estimate your costs under different plans.

When comparing plans, check monthly premiums, annual deductibles, your specific medications, drug tiers, preferred pharmacies, and the estimated annual cost.

CMS expects to publish the final 2027 Medicare Advantage and Part D plan offerings, including final premiums, in September.

What you should do

The headlines may sound scary, but there's no reason to panic about the end of the premium subsidy yet. Medicare Open Enrollment runs from October 15 through December 7, and changes take effect January 1.

Before October, make a list of every prescription you take, including the dosage and how often you refill it, and your preferred pharmacies.

Then, once the 2027 plans are available, enter that information into Medicare's Plan Compare tool rather than renewing your plan. Your current plan may remain your best option, but if premiums rise, a different plan could offer a better deal.

Also, don't ignore the other half of the story. The annual protection against runaway covered-drug costs is not going away. If you take expensive medications, that $2,400 ceiling could impact your budget far more than paying a few dollars extra on your monthly premium.

Bottom line

Medicare Part D premiums and prescription drug costs aren't the same thing. Monthly premiums could rise in 2027, but the annual out-of-pocket cap for covered Part D drugs remains in place and is expected to rise to $2,400. That protection is especially important for seniors who take expensive or multiple medications.

To preserve your financial fitness, don't automatically renew your current Part D plan. Once 2027 plan information becomes available, use Medicare's Plan Compare tool to check all your estimated costs side by side. A plan with a higher monthly premium could still mean you pay less overall.

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