Medicare Part D in 2027: What's Changing and How to Pick Your Drug Plan

Prescription drug costs can make a big difference in your retirement budget. That is why reviewing your Medicare Part D coverage each year is important: even if you are happy with your current plan.

For 2027, Medicare Part D will continue the major benefit changes that began in recent years. The annual out-of-pocket limit will be higher than it was in 2025 and 2026, insulin costs will remain limited, and the old coverage gap: often called the “donut hole”: will remain gone.

This guide explains the key changes and gives you a simple way to compare plans during Medicare Open Enrollment.

Important: We do not offer every plan available in your area. For help comparing all available options, visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227).

What is Medicare Part D?

Medicare Part D is prescription drug coverage offered through private insurance companies approved by Medicare. You can get Part D in one of two main ways:

• A standalone Part D prescription drug plan with Original Medicare
• Drug coverage included in a Medicare Advantage plan, also called an MA-PD plan

Medicare Part D generally helps pay for prescription drugs you pick up at a pharmacy, receive by mail, or obtain through certain specialty pharmacies. Each plan has its own list of covered drugs, called a formulary.

Your plan may change its premiums, drug list, pharmacy network, and copayments from one year to the next. That is why automatic renewal is not always the best choice.

What is changing for Part D in 2027?

The annual out-of-pocket limit will be $2,400

Under the current Medicare Part D rules, the annual out-of-pocket limit for covered Part D drugs is changing over time:

• 2025: $2,000
• 2026: $2,100
• 2027: $2,400

The Centers for Medicare & Medicaid Services finalized the 2027 Part D benefit parameters in its CY 2027 Rate Announcement.

In simple terms, once your qualifying out-of-pocket spending for covered Part D drugs reaches $2,400 in 2027, you will pay $0 for covered Part D drugs for the rest of the calendar year.

This limit does not mean all Medicare costs stop. It generally does not include:

• Your monthly plan premium
• Drugs your plan does not cover
• Most over-the-counter medicines
• Medical services covered under Part A or Part B
• Certain costs that do not count toward your Part D out-of-pocket total

The limit can still provide important protection if you take expensive medications or need several prescriptions during the year.

The coverage gap, or “donut hole,” is gone

The traditional Part D coverage gap has been eliminated. You no longer move into a separate “donut hole” phase where you may have faced confusing changes in drug costs.

Instead, Part D is easier to understand:

1. You may pay a deductible, depending on your plan.
2. You pay your plan’s share of covered medications and your required cost-sharing amount.
3. Your qualifying out-of-pocket costs count toward the annual limit.
4. After you reach the 2027 limit, covered Part D drugs cost $0 for the rest of the year.

The standard Part D deductible for 2027 is scheduled to be $700, although individual plans may use different deductible structures or waive the deductible for some tiers.

Covered insulin remains limited to $35 per month

If you use covered insulin under Part D, your cost will be no more than $35 for a one-month supply of each covered insulin product. The Part D deductible does not apply to covered insulin.

A three-month supply generally cannot cost more than $105 per covered insulin product, although you should confirm the details with your plan and pharmacy.

Medicare’s insulin coverage page explains how insulin may be covered under Part B or Part D. The rules can depend on whether you use an insulin pump and what type of insulin or supplies you need.

The Medicare Prescription Payment Plan continues

The Medicare Prescription Payment Plan allows people with Part D coverage: including drug coverage through Medicare Advantage plans: to spread their out-of-pocket prescription costs across the calendar year.

Instead of paying the full amount at the pharmacy, you may receive a monthly bill from your Medicare drug plan. There is no additional cost to participate.

This option may be helpful if:

• You have high prescription costs early in the year
• You take expensive specialty medications
• You prefer predictable monthly payments
• A large pharmacy bill would be difficult to manage

The payment plan does not reduce your total drug costs. It only changes when you pay them. You will still have to pay your plan premium, if applicable, and your prescription costs will still be subject to the annual Part D out-of-pocket limit.

You can learn more from Medicare’s Prescription Payment Plan information.

How Part D works with Medicare Advantage plans

Medicare Advantage plans replace Original Medicare for your Part A and Part B benefits. Most Medicare Advantage plans include prescription drug coverage, so you usually do not enroll in a separate Part D plan.

When comparing Medicare Advantage plans, review the medical and drug benefits together. A plan may have a low medical premium but higher prescription costs. Another plan may have a higher premium but better coverage for the medications you take.

Pay attention to:

• Your plan’s drug deductible
• Copays and coinsurance
• The plan’s formulary
• Pharmacy networks
• Mail-order options
• Prior authorization requirements
• Step therapy requirements
• The plan’s overall rating
• Your medical provider and hospital network

Generally, you should not enroll in a separate standalone Part D plan while enrolled in a Medicare Advantage plan that includes drug coverage. Doing so could affect your Medicare Advantage enrollment.

How standalone Part D works with Original Medicare

If you have Original Medicare, you may enroll in a standalone Part D plan to help cover prescriptions. You can also purchase Medicare Supplement Insurance separately to help with certain Part A and Part B costs.

A standalone Part D plan focuses on prescription coverage. When comparing these plans, look closely at the medicines you take, the pharmacies you use, and your total yearly cost.

You will want to consider Part D along with your broader health coverage. The lowest prescription premium is not always the lowest overall choice.

How to compare Part D plans during Open Enrollment

Medicare Open Enrollment runs from October 15 through December 7 each year. Changes made during this period generally take effect on January 1 of the following year.

Use this checklist to compare plans.

1. Make a complete medication list

Write down:

• The name of each prescription
• The dosage
• How often you take it
• Whether it is a tablet, injection, inhaler, or specialty drug
• The amount you currently pay
• Whether you use a 30-day or 90-day supply

Include every regular prescription. Leaving out one expensive medication can make a plan comparison inaccurate.

2. Check the formulary

A formulary is the plan’s list of covered medications. Plans commonly place drugs into tiers, such as:

• Tier 1: preferred generics
• Tier 2: non-preferred generics or preferred brands
• Tier 3: non-preferred brands
• Specialty tiers: high-cost medications

Your drug may be covered by one plan but excluded by another. Even when two plans cover the same medication, the copay or coinsurance may be different.

Also check whether the plan requires prior authorization, quantity limits, or step therapy. These rules can affect how easily you receive a prescription.

3. Check your pharmacies

A plan may have preferred, standard, and out-of-network pharmacies. Your preferred pharmacy may offer lower costs than another pharmacy across town.

Check:

• Whether your current pharmacy is in-network
• Whether it is a preferred pharmacy
• Whether mail order is available
• Whether a 90-day supply costs less
• Whether your local pharmacy’s prices differ from mail order

If you spend part of the year in another state, confirm that the plan’s pharmacy network works where you travel.

4. Compare total yearly costs

Do not compare plans by premium alone. Look at the estimated total cost, including:

• Monthly premiums
• Deductibles
• Copays
• Coinsurance
• Costs at your preferred pharmacy
• Mail-order costs
• Your likely spending before reaching the annual limit

A plan with a $0 or low premium may cost more overall if your prescriptions are placed on expensive tiers.

5. Review the Annual Notice of Change

Your current plan should send an Annual Notice of Change before Open Enrollment. This document explains changes to your plan for the next year.

Review changes to:

• Premiums
• Deductibles
• Drug tiers
• Pharmacy networks
• Covered medications
• Utilization rules
• The plan’s service area

Do not assume that your coverage will remain the same just because your plan has worked well this year.

A simple example

Suppose you take several medications and one of them becomes much more expensive in the middle of the year. Under the 2027 Part D structure, your qualifying out-of-pocket costs can continue counting toward the $2,400 limit.

If you reach that limit, covered Part D drugs should cost $0 for the rest of the calendar year. If you choose the Medicare Prescription Payment Plan, your eligible out-of-pocket costs may be spread into monthly payments instead of being paid all at once.

Your actual costs will depend on your plan, prescriptions, pharmacy, and eligibility for assistance programs.

Plan ahead before October 15

Before Open Enrollment begins, gather your medication list, pharmacy information, and current plan documents. Then use Medicare.gov Plan Compare to review your available options.

Mackey Tax and Financial Services provides year-round help reviewing Medicare options, including Medicare Advantage plans, alongside tax planning. Your health coverage choices can affect your monthly budget, retirement income, and tax picture, so it can be helpful to review them together.

We can help you organize the questions to ask and understand how your Medicare decisions fit into your larger financial plan. We do not offer every plan available, so you should also compare all available plans through Medicare.gov or by calling 1-800-MEDICARE.

For year-round assistance, visit mackeytaxes.com or call 828-351-7205.