Medicare Part D 2027: $2,400 Out-of-Pocket Cap, $700 Deductible

Every fall, the Medicare open enrollment window arrives with a stack of plan comparisons and a set of federal numbers most people never see spelled out. For 2027, two of the most important were locked in months before most beneficiaries heard about them: the annual deductible for Part D prescription drug coverage is rising to $700, and the ceiling on what anyone pays out of pocket for covered drugs in a year is rising to $2,400. Both come from a Centers for Medicare & Medicaid Services rate announcement dated April 6, 2026 — not a projection, but the final numbers plans built their 2027 bids around.

Where these numbers come from

The figures above aren’t an outside estimate of what Medicare might do next year. They’re published in Table V-6 of CMS’s Announcement of Calendar Year (CY) 2027 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies, the document CMS uses every spring to tell plan sponsors the coming year’s benefit parameters so they can prepare bids. For the defined standard Part D benefit — the baseline every plan’s coverage has to match or beat — that table lists the deductible phase at 100% beneficiary cost sharing up to $700, and an out-of-pocket threshold of $2,400. The prior year’s version of the same document set the 2026 deductible at $615 and the threshold at $2,100, which followed a $590 deductible and $2,000 threshold in 2025.

A plan is allowed to charge less than the maximum deductible, and some do, but $700 is the ceiling. No Part D plan sold for 2027 can require a beneficiary to pay more than that before cost sharing in the initial coverage phase begins.

How CMS gets from $615 to $700

CMS doesn’t pick these numbers by feel; it runs a fixed formula. The deductible is updated by taking the prior year’s amount and multiplying it by what CMS calls the annual percentage increase, then rounding to the nearest $5. The out-of-pocket threshold gets the same multiplication, rounded to the nearest $50 instead.

That shared percentage is 13.65% for 2027, built from a 9.37% trend factor reflecting projected drug spending growth, compounded with a 3.92% prior-year revision reflecting how far off an earlier estimate turned out to be once claims data came in — multiplying (1 + 9.37%) by (1 + 3.92%), not simply adding them, is what produces 13.65%. Running $615 through that increase and rounding to the nearest $5 lands on $700; running $2,100 through it and rounding to the nearest $50 lands on $2,400, matching CMS’s table (the tiny remaining gap is CMS’s own rounding of the API to two decimals before publishing). The upshot: the deductible rose $85, the cap rose $300, and both trace to the same growth rate landing on two different starting numbers.

No coverage gap, and zero cost sharing after the cap

One structural feature of Part D is easy to lose track of amid the dollar figures: the “donut hole,” or coverage gap phase, that used to sit between the initial coverage phase and catastrophic coverage no longer exists. It was eliminated starting with the 2025 plan year under the Inflation Reduction Act’s benefit redesign, and CMS’s fact sheet on the CY 2027 final rule describes the agency as now “codifying these changes for 2027 and beyond, including eliminating the coverage gap phase, establishing a reduced annual out-of-pocket threshold, removing cost sharing for enrollees in the catastrophic phase, and incorporating the Manufacturer Discount Program that replaced the Coverage Gap Discount Program on January 1, 2025.” That’s now permanent structure written into regulation, not something CMS re-approves every year through separate instructions.

The practical shape of the 2027 benefit is three phases, not four. A beneficiary pays 100% of drug costs up to the $700 deductible (unless their plan waives some of it). From there through the initial coverage phase, they share 25% of the cost of covered drugs. Once their own out-of-pocket spending — what they’ve personally paid, not what the plan or a manufacturer discount has covered — reaches $2,400, they enter the catastrophic phase, where their cost sharing for covered Part D drugs drops to zero for the remainder of the year.

Extra help for low-income beneficiaries also moved

Beneficiaries enrolled in the Low-Income Subsidy program, sometimes called Extra Help, pay fixed copayments instead of the standard percentage cost sharing, and those ceilings are adjusted in the same rate announcement. For full-benefit dual eligibles (people who also have full Medicaid) living outside an institution at or below 100% of the federal poverty level, the maximum copayment for a generic or preferred multi-source drug rises from $1.60 in 2026 to $1.65 in 2027, and the ceiling for other covered drugs rises from $4.90 to $5.00. Between 100% and 150% of the federal poverty level — and for full-subsidy enrollees without full Medicaid at any income up to 150% — the generic ceiling rises from $5.10 to $5.80, and the ceiling for other drugs rises from $12.65 to $14.40. Small amounts individually, but they compound for someone filling several prescriptions a month under LIS.

What premiums are doing, and a demonstration program that’s ending

Separately, CMS released the national numbers behind the Part D premium on July 28, 2026, in a memo from the agency’s Office of the Actuary. The national average monthly bid amount for CY 2027 — what plan sponsors, on average, bid to provide the basic benefit — came out to $296.05. From that figure, CMS calculates a base beneficiary premium using two methods and takes whichever is lower, a structure the statute uses to cap how fast the premium can rise. One method multiplies the prior year’s base premium, $38.99, by 1.06 — the 6% annual growth cap the Inflation Reduction Act wrote into law for 2024 through 2029 — producing $41.33. The other, tied to the national bid amount, produced $94.06. Taking the lesser of the two, the CY 2027 base beneficiary premium is $41.33. (An individual plan’s actual premium can be higher or lower depending on its own bid; this is a national benchmark, not what every enrollee pays.) The same memo set the annual “de minimis” amount — how far a plan’s premium can sit above the low-income subsidy benchmark and still be waived voluntarily by the plan, which then cannot have its low-income enrollees reassigned elsewhere by CMS — at $2.

The same announcement confirmed the end of a temporary program: the Part D Premium Stabilization Demonstration, in place since 2025 to smooth premium volatility while sponsors adjusted to the redesigned benefit. CMS wrote that “for CY 2027, CMS analysis of the bids submitted indicates that Part D plan sponsors had sufficient experience under the redesigned Part D benefit to support their assumptions in developing prescription drug plan (PDP) bids,” and that it would “discontinue the demonstration at the end of CY 2026 to return the program to operating under traditional market conditions in CY 2027.” One of the props that kept premiums predictable during the redesign’s first two years comes out from under the program in 2027.

Paying the cap in installments: the Medicare Prescription Payment Plan

For a beneficiary who hits several hundred dollars in drug costs in one month — filling a new specialty prescription right after the deductible resets in January, say — the $700 deductible and the climb toward $2,400 can land as a large bill all at once. Since 2025, Medicare has offered an alternative: the Medicare Prescription Payment Plan, or M3P, which lets a beneficiary spread yearly Part D out-of-pocket costs into monthly installments billed by their plan, rather than paying the full cost-sharing amount at the pharmacy counter.

The math is set out in CMS operational guidance implementing section 1860D–2(b)(2)(E)(iv) of the Social Security Act. For the first month someone opts in, the cap is the annual out-of-pocket threshold minus whatever Part D costs they’d already incurred that year, divided by the months left in the plan year, counting the enrollment month itself. For every month after, the cap is any unbilled balance from earlier months plus that month’s new costs, again divided by the months remaining. A plan must bill the lesser of actual costs or the cap, so anything above it just carries forward.

Here’s a hypothetical using the 2027 threshold of $2,400 (CMS’s own published examples still use the older $2,000 threshold from 2025, since the formula itself hasn’t changed — only the input numbers have). Say someone had already spent $300 on drugs in the first three months of 2027 and opts into the program in April, with nine months left in the plan year including April. Their first-month cap is $2,400 minus that $300, divided by nine: $233.33. If their actual April costs come to $400, the plan can only bill them the $233.33 cap that month — the other $166.67 carries forward. In May, with eight months left and $150 in new costs added to that carryover, the cap works out to $39.58. Opting in doesn’t change how fast spending counts toward the $2,400 threshold — CMS’s guidance is explicit that “the total incurred costs and the timing of TrOOP accumulation do not change” — it only changes when the plan collects the money. A rule finalized in 2025 also made M3P enrollment automatically renew each year unless a beneficiary opts out.

Two costs the deductible never touches

Two categories of Part D-covered products are exempt from the deductible in both 2026 and 2027, because Congress wrote the exemption into the Inflation Reduction Act rather than leaving it to CMS’s rate-setting. Covered insulin products carry no deductible, and the cost-sharing for a month’s supply cannot exceed the lesser of $35, 25% of the drug’s negotiated Medicare price, or 25% of the price negotiated by the beneficiary’s own plan. Adult vaccines recommended by the CDC’s Advisory Committee on Immunization Practices carry zero cost sharing and no deductible. Both provisions took effect for plan years beginning in 2023, and CMS’s rate-setting tables confirm they continue unchanged into 2027 with no scheduled expiration.

What’s still missing: 2027 IRMAA

One number this page deliberately does not give a 2027 dollar figure for is the Part D income-related monthly adjustment amount, or IRMAA — the added surcharge higher-income beneficiaries pay on top of their plan’s base premium. CMS had not published 2027 Part A, B, or D premium and IRMAA figures as of late September 2026; the agency’s usual pattern is to release the whole package in a single fact sheet in mid-November of the prior year. The 2026 figures, for comparison, were published November 14, 2025.

The confirmed 2026 Part D IRMAA table, still the one in effect through the rest of this year, is below. It’s built on modified adjusted gross income from two years prior, so 2026 amounts are based on 2024 tax returns.

CMS notes that roughly 8% of people with Medicare Part D pay any IRMAA surcharge at all. Any 2027 dollar figure circulating before CMS’s own November announcement is a projection, not a CMS number, and this page will update once the agency publishes the real one. Readers tracking the broader picture can follow this site’s tracker on the 2027 IRMAA brackets and its companion piece on how the 2027 Social Security COLA nets out after Medicare.

What the $2,400 cap is actually worth to someone with high drug costs

Numbers on a CMS table land differently once run against an actual year. Take a hypothetical enrollee with genuinely high drug costs — someone on a specialty medication whose costs would otherwise run well past $2,400 in a normal year. They pay the first $700 entirely out of pocket, in the deductible phase. From there, they share 25% of covered costs until their cumulative spending — deductible included — reaches $2,400. The moment it does, cost sharing stops completely for the rest of the year. Compare that to 2026, where the identical enrollee’s costs stop at $2,100: the $300 difference is the entire practical impact of the increase for someone always going to blow past the cap — they reach zero-cost-sharing $300 later in the year, and the deductible accounts for $85 of that gap on its own.

For someone whose costs are modest and never approach the cap, none of this changes anything material. The cap matters for the smaller group of enrollees whose annual spending is high enough to blow through it, and for them, $2,400 is the number that determines how much of the year they pay nothing at all for prescriptions.

When to actually use this during enrollment season

None of this changes the calendar most Medicare enrollees already have marked: the fall open enrollment period, when beneficiaries can switch Part D or Medicare Advantage plans for the coming year. What changes is what a plan comparison should account for. Every stand-alone Part D plan and every Medicare Advantage plan with drug coverage works within the limits described here — a deductible of no more than $700 and the same $2,400 out-of-pocket threshold — which protect beneficiaries rather than describe what every plan charges, but plans still differ sharply in premiums, formularies, and which pharmacies count as preferred. A beneficiary weighing plans for 2027 is choosing among options that share the same worst-case ceiling; the figures here bound how bad a high-cost year can get, while premium and formulary differences separate one plan’s ordinary-year cost from another’s. Readers following the broader retirement-income picture can also see this site’s tracker on the 2027 Social Security cost-of-living adjustment.

Sources

• CMS, CY 2027 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies, April 6, 2026 — cms.gov
• CMS, Final CY 2026 Part D Redesign Program Instructions, Appendix — cms.gov
• CMS Fact Sheet, Contract Year 2027 Medicare Advantage and Part D Final Rule, April 2, 2026 — cms.gov
• CMS, Annual Release of Part D National Average Monthly Bid Amount, July 28, 2026 — cms.gov
• CMS Fact Sheet, Medicare Part D 2027 National Average Monthly Bid Amount Information, July 28, 2026 — cms.gov
• CMS, Medicare Prescription Payment Plan Part 1 Guidance — cms.gov
• CMS Fact Sheet, Contract Year 2026 Policy and Technical Changes… (CMS-4208-F), April 4, 2025 — cms.gov
• CMS Fact Sheet, 2026 Medicare Parts A & B Premiums and Deductibles, November 14, 2025 — cms.gov
• finbarrow, 2027 IRMAA brackets and Medicare projection
• finbarrow, 2027 COLA net increase after Medicare and Social Security COLA 2027 tracker