Medicare Part D: What Changes in 2027

From subsidy cuts and premium increases to the updated out-of-pocket cap and future PBM reforms, here is everything Medicare beneficiaries need to know about Part D in 2027.

The Big Picture

The Medicare Part D prescription drug benefit is heading into 2027 with the most significant set of changes in years. Some of these changes are the result of the Inflation Reduction Act (IRA) continuing to roll out. Others stem from a Trump administration decision to end a major federal subsidy program. Taken together, they will affect premiums, out-of-pocket costs, and plan options for tens of millions of Medicare beneficiaries.

This guide walks through every major change, explains who is affected, and lays out the steps you can take now to protect yourself.

1. The Part D Premium Subsidy Is Ending

The single biggest change for 2027 is the end of the Part D Premium Stabilization Demonstration. This federal program, created under the Biden administration, used roughly $9.8 billion in government funding to keep Part D premiums artificially low. The Centers for Medicare & Medicaid Services (CMS) under the Trump administration announced it will not renew the program, meaning that subsidy disappears on January 1, 2027.

The subsidy was designed to cushion the premium impact of IRA-mandated benefit improvements. Without it, insurers will need to recalculate premiums based on their actual costs.

Who Is Affected?

Approximately 25 million people enrolled in standalone Medicare Part D plans will feel this change most directly. If you have a standalone Part D plan (not bundled with Medicare Advantage), your monthly premium is likely to increase.

People enrolled in Medicare Advantage plans that include drug coverage (MA-PD) are generally less affected. Medicare Advantage plans have other revenue streams and cost structures that partially offset the subsidy loss, though some MA-PD plans may still raise premiums modestly.

How Much Will Premiums Go Up?

Estimates vary depending on the source:

• CMS estimates: Most enrollees will see premiums increase by about $10 per month on average.
• Kaiser Family Foundation (KFF) estimates: Some beneficiaries could see increases of up to $20 per month, depending on their plan and region.

That translates to an additional $120 to $240 per year in premium costs. The actual increase will vary by plan. Some plans may absorb part of the cost; others may pass it through entirely. You will not know your specific increase until plans publish their 2027 premiums in the fall.

2. The Out-of-Pocket Cap Continues (With an Adjustment)

One of the most popular provisions of the Inflation Reduction Act was the introduction of an annual out-of-pocket spending cap for Part D. This cap, which took effect in 2025 at $2,000, was the first time Medicare set a hard limit on what beneficiaries pay for prescription drugs in a given year.

For 2026, the cap was adjusted to $2,150. For 2027, CMS is expected to set it at approximately $2,400, reflecting standard inflation adjustments built into the law.

This is good news despite the increase. Before the IRA, there was no cap at all. Beneficiaries who took expensive specialty drugs could face $5,000, $10,000, or more in annual out-of-pocket costs. The cap remains in place regardless of what happens to the subsidy.

How the Cap Works

Once your total out-of-pocket spending on covered Part D drugs reaches the cap in a calendar year, you pay $0 for the rest of that year. The cap includes your deductible, copays, and coinsurance. It does not include premiums.

Beneficiaries can also spread their out-of-pocket costs over the year through the Medicare Prescription Payment Plan, which lets you pay in monthly installments instead of large lump sums at the pharmacy counter.

3. Medicare Drug Price Negotiation Expands

The IRA authorized Medicare to negotiate prices directly with drug manufacturers for the first time. The first round of negotiated prices (covering 10 drugs) took effect in 2026. A second round of negotiations is underway for an additional batch of high-cost drugs, with those prices set to take effect in 2027 or 2028.

If you take any of the drugs selected for negotiation, you may see lower costs at the pharmacy. The full list of negotiated drugs is published on Medicare.gov.

4. PBM Reform: 100% Rebate Passthrough Starting 2028

Starting in 2028, a major pharmacy benefit manager (PBM) reform takes effect: Part D plans will be required to pass 100% of manufacturer rebates directly to beneficiaries at the point of sale. Currently, PBMs and insurers retain a portion of these rebates, which can keep list prices high even when the plan is getting discounts behind the scenes.

While this change does not take effect until 2028, it is worth understanding now because it will reshape how Part D plans are structured. Plans may adjust their 2027 offerings in anticipation of the 2028 rule, potentially affecting formularies and tier placement.

5. Extra Help and the Low-Income Subsidy

If you have limited income and resources, the Extra Help program (also called the Low-Income Subsidy, or LIS) can significantly reduce your Part D costs. This program is not being cut. It continues in 2027 and covers:

• Part or all of your Part D premium
• Part or all of your deductible
• Reduced copays for covered drugs

In 2025, the IRA expanded Extra Help eligibility so that beneficiaries with incomes up to 150% of the federal poverty level qualify for full benefits. This expanded eligibility remains in effect for 2027.

You can apply for Extra Help through the Social Security Administration at ssa.gov, or by calling 1-800-772-1213.

What You Should Do Now

The most important thing you can do is shop your plan during Open Enrollment. Medicare Open Enrollment runs from October 15 through December 7, 2026. Any changes you make take effect January 1, 2027.

Step-by-Step Action Plan

1. Review your Annual Notice of Change (ANOC). Your current plan will mail this document by September 30. It details every change to your plan for the coming year, including premium increases, formulary changes, and pharmacy network updates.
2. List your medications. Write down every prescription drug you take, including dosages and quantities. You will need this to compare plans accurately.
3. Use the Medicare Plan Finder. Go to Medicare.gov/plan-compare and enter your medications. The tool will show you the total estimated annual cost for each available plan in your area, including premiums, deductibles, and copays.
4. Check if your pharmacy is in-network. Switching plans may mean switching pharmacies. Confirm that your preferred pharmacy participates in any plan you are considering.
5. Ask about Extra Help. If your income is limited, check whether you qualify. Even partial Extra Help can save hundreds of dollars per year.
6. Compare prices on RxGator. Use our free tool to compare cash prices and discount card prices for your medications. Sometimes paying out of pocket with a discount card is cheaper than a copay under certain plans.

Summary of 2027 Part D Changes

The Bottom Line

The 2027 Part D landscape is a mix of bad news and good news. Premiums are going up for most standalone Part D enrollees because a $9.8 billion federal subsidy is ending. But the out-of-pocket cap that protects you from catastrophic drug costs is still in place, drug price negotiation is expanding, and Extra Help remains available for those with limited incomes.

The single most effective step you can take is to compare plans during Open Enrollment. Do not auto-renew without checking. A plan that was the cheapest option in 2026 may not be in 2027, especially with premiums shifting. Take 30 minutes with the Medicare Plan Finder, and you could save hundreds of dollars next year.