Medicare Part D costs rise in 2027 as subsidies end

The federal subsidy that held down Medicare Part D premiums for two years ends Dec. 31, leaving enrollees to absorb a deductible cap that climbs to $700 and an out-of-pocket ceiling that reaches $2,400 in 2027, according to the Centers for Medicare & Medicaid Services.

"Without these extra subsidies in place for 2027, some Part D stand-alone drug plan enrollees could face a larger premium increase for drug coverage next year than in recent years, though plan-specific premium amounts are not yet known," said Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF.

The $700 deductible maximum is $75 above the 2026 level of $615, while the $2,400 out-of-pocket cap is $300 higher than the $2,100 limit this year. The federal government's IRA premium stabilization demonstration, which cut monthly premiums by an estimated $16 per person in 2026, is not being extended. A 65-year-old retiring in 2026 can expect to spend $185,500 on healthcare through retirement, up 7 percent, or $13,000, from the 2025 estimate, according to Fidelity.

Open enrollment runs Oct. 15 through Dec. 7, and CMS will release standard Part B premiums and Part A and Part B deductibles in late October or early November. Beneficiaries who review their Annual Notice of Change and shop plans can blunt part of the increase, though the shrinking menu of stand-alone drug plans narrows the choices.

Fewer drug plans, higher deductibles

The landscape for stand-alone prescription drug plans keeps consolidating. Five years ago beneficiaries could pick from an average of 30 plans; by 2026 that selection had dropped to 11, a 22 percent decline in a single year, according to KFF. Enrollees can no longer assume their current plan will stay available or remain price-competitive into next year.

For those subject to a Part D deductible, the mechanics are unchanged: beneficiaries pay 100 percent of gross covered prescription drug costs until the deductible is met, then a flat 25 percent coinsurance on both generic and brand-name drugs until out-of-pocket spending reaches the $2,400 statutory maximum. The higher cap means enrollees are liable for an extra $300 in drug costs over the year.

Negotiated prices and telehealth offer some relief

Not all of 2027 is costlier. Fifteen medications — including Ozempic, Trelegy Ellipta, Xtandi and Linzess — get lower negotiated prices starting in 2027 under the Medicare Drug Price Negotiation Program. Ozempic's negotiated price for a 30-day supply falls to $274 from $959, a 71 percent savings, while Linzess drops to $136 from $539, a 75 percent cut. How much beneficiaries ultimately pay still depends on their Part D policy terms.

Telehealth coverage, meanwhile, remains intact through Dec. 31, 2027. Under the Consolidated Appropriations Act of 2026, Congress extended core Medicare telehealth flexibilities for another year, keeping virtual care reimbursable after years of short-term patches. Medicare Advantage plans can also now offer select federally legal hemp products under updated guidelines for Special Supplemental Benefits for the Chronically Ill, though high-THC marijuana stays prohibited.

The cost picture for 2027 is not yet complete. CMS has set the Part D deductible and out-of-pocket maximum, but standard Part B premiums and Part A and Part B deductibles land only in late October or early November. With the subsidy gone and plan options thinning, the open-enrollment window from Oct. 15 to Dec. 7 is the main lever beneficiaries have to contain next year's bills — reviewing the Annual Notice of Change that arrives in October is the first step before deciding whether to keep or switch coverage.

This article is for informational purposes only and does not constitute investment advice.