Medicare Part D’s Out-of-Pocket Drug Cap Climbs to $2,400 in 2027, Up $300 From This Year

This year, the most a Medicare enrollee can be charged at the pharmacy counter for covered prescriptions is $2,100. Next year that ceiling moves to $2,400, according to Medicare’s own guide to drug coverage costs, which also shows the highest allowed plan deductible rising from $615 to $700. For retirees who fill expensive prescriptions every month, the change means roughly $300 more could leave their budgets in 2027 before catastrophic coverage takes over.

The new numbers arrive in the middle of Medicare’s open enrollment period, which runs from Oct. 15 through Dec. 7, the window when enrollees can switch drug plans for the coming year.

Where the $2,400 figure comes from

The out-of-pocket cap was created by the 2022 prescription drug law, the Inflation Reduction Act, which put a hard ceiling on what Part D enrollees pay for covered drugs each year, AARP’s Tony Pugh reported in September. The cap is indexed, so it climbs from year to year.

The Centers for Medicare & Medicaid Services spelled out the method in its final 2027 rate announcement, dated April 6, 2026. The agency said it would update both the standard deductible and the annual out-of-pocket threshold by multiplying the 2026 amounts by the program’s annual percentage increase for 2027.

Medicare.gov now lists the results plainly. Once an enrollee’s own spending on covered drugs “reaches $2,100 in 2026 ($2,400 in 2027),” the person automatically moves into catastrophic coverage for the rest of the calendar year. The same page says no Medicare drug plan may set a deductible above $700 in 2027, up from $615 this year.

Premiums are a separate bill

The cap rises at the same time CMS expects drug-plan premiums to stay close to flat on average. In a Sept. 28 release, CMS projected the average monthly premium for a stand-alone Part D plan would move from $35.09 in 2026 to $36 in 2027. “CMS is fighting to keep high-quality care options affordable and accessible,” CMS Administrator Dr. Mehmet Oz said in that release.

The figure underneath many premiums is going up, though. CMS set the 2027 Part D base beneficiary premium at $41.33 in its July 28 bid announcement, compared with $38.99 for 2026. The agency also said it is ending the Part D premium stabilization demonstration at the close of 2026. That program had used federal money to soften premium increases for stand-alone plans after the 2022 law redesigned the benefit.

Medicare Advantage members who get drug coverage through their health plan see a different picture. AARP, citing CMS data, reported that the drug portion of those plans’ premiums is projected to average $7 a month in 2027, down from $11.32. The same CMS figures show 88% of enrollees who do not get Extra Help can find a basic stand-alone drug plan for $10.30 a month or less.

Fewer plans will be on the menu, too. AARP, citing KFF data, reported that the number of stand-alone Part D plans is falling from 360 in 2026 to 312 in 2027, a drop of about 13%. Juliette Cubanski, a KFF vice president and director of its program on Medicare policy, told AARP that “it will pay to shop around” during open enrollment.

Who feels the higher cap

The change does not touch every enrollee’s wallet the same way. Someone who takes a handful of low-cost generics will likely never come near $2,400 in a year. The higher ceiling matters most for people on costly brand-name or specialty drugs, who are the enrollees most likely to reach the cap at all.

For those households, the math is direct. Someone who hit the $2,100 limit by spring in 2026 should expect to pay up to $2,400 in 2027 before catastrophic coverage begins, with the extra spending landing early in the year. A plan with the maximum $700 deductible puts the first chunk of that cost on the enrollee in January and February.

Plan choice can change how fast that happens. Drug plans can place the same medication in different cost-sharing tiers and set different deductibles up to the $700 limit. Medicare’s Plan Finder on Medicare.gov lets enrollees enter their exact prescriptions and pharmacies to compare estimated yearly costs, premiums included, across the plans in their ZIP code.

Spreading the cost across the year

A separate feature can keep a $700 deductible or a large January copay from landing all at once. The Medicare Prescription Payment Plan requires every Part D plan to let enrollees pay their out-of-pocket drug costs in monthly installments over the year instead of at the pharmacy counter, according to KFF’s open-enrollment guide. Enrollees can opt in at any time by contacting their plan, and the plan then sends a monthly bill.

KFF notes the installment plan does not lower total drug costs. It changes when the money is due, not how much. KFF’s guide states that in 2027, annual Part D out-of-pocket costs will be capped at $2,400, the same figure Medicare lists.

Drug costs are one piece of a larger health bill for many older households, a pressure that has pushed some Americans to delay retirement over health insurance costs. Federal funding fights add another layer of worry each year, and the site has covered what a funding lapse means for Medicare coverage.

Enrollees who are happy with their current plan do not have to do anything to keep it, but plans change their formularies, pharmacy networks and premiums every January. The annual notice of change that plans mail each fall lists those changes, and Dec. 7 is the last day to switch for coverage that begins Jan. 1, 2027.

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This article was produced with AI assistance and edited for accuracy against the sources linked above.

Image: U.S. Air Force photo by Airman Trevor Calvert – Public domain/Wikimedia Commons