Medicare Part D changes in 2025, 2026 and 2027

The most anyone in a Medicare drug plan will pay out of pocket for covered drugs in 2027 is $2,400, CMS set in its CY 2027 Rate Announcement³. That is $300 more than the 2026 cap of $2,100, a rise of about 14 percent, after a $100 increase the year before. The maximum deductible climbs from $615 to $700.

Both numbers are products of the Inflation Reduction Act of 2022, which gave Part D its largest redesign since the program began. The biggest changes arrived on Jan. 1, 2025, when the annual cap took effect and the coverage gap disappeared. Since then the structure has held still and the dollar amounts have moved.

Open enrollment for 2027 coverage runs from Oct. 15 to Dec. 7, 2026, according to Medicare's guide to what is new in 2027⁷. Generics are handled differently from brands in each phase of the benefit, and the Extra Help copays for low-income enrollees rise again in 2027.

How the cap is set each year

For 2025, the first year, CMS set the cap at $2,000¹. Each later year the law indexes it to what it calls the annual percentage increase in Part D spending, which the 2027 announcement³ quotes from the statute as "the annual percentage increase in average per capita aggregate expenditures for covered Part D drugs" over the 12 months ending the previous July. CMS multiplies the prior year's cap by that factor and rounds to the nearest $50; the deductible is rounded to the nearest $5.

Figures for 2025 come from CMS's 2025 redesign fact sheet¹, for 2026 from its draft 2026 program instructions² and for 2027 from the rate announcement³.

Once an enrollee's countable spending reaches the cap, they pay nothing more for covered Part D drugs for the rest of the calendar year.

What counts is what CMS calls true out-of-pocket costs, or TrOOP: spending on covered drugs by the enrollee or by certain third parties on their behalf. Premiums do not count. Neither do purchases made outside the plan, such as with a discount card, a trade-off GxRadar covers in when the cash price beats the copay and how prescription discount cards work.

Three phases where there used to be four

Before 2025, Part D had a deductible, initial coverage, a coverage gap (the donut hole) and catastrophic coverage. CMS describes the new defined standard benefit¹ as three phases: an annual deductible, initial coverage and catastrophic coverage. The Coverage Gap Discount Program ended and a Manufacturer Discount Program replaced it. For enrollees there is no longer a stretch of the year where cost sharing jumps after initial coverage runs out.

Who pays inside each phase changed too. Manufacturer discounts apply to what the law calls applicable drugs, meaning brand-name drugs and biologics. Generics are not applicable drugs, so plans and Medicare carry more of their cost.

These splits follow CMS's description of the 2025 standard benefit¹. For some smaller manufacturers' drugs, CMS phases in the discount from 2025 through 2028 in initial coverage and through 2030 in catastrophic coverage, with plans covering the difference meanwhile. The wider effects of the law on generic makers are covered in the Inflation Reduction Act and generic drugs.

Generic tiers in real plans

Many plans do not use the standard design as written. Alternative designs replace the flat 25 percent coinsurance with tiered copays or coinsurance, and some reduce or waive the deductible on their lowest tiers. Generics usually sit on those lowest tiers, which some plans split into preferred generic and generic. Some plans also charge less at preferred network pharmacies, a distinction that matters for mail-order and retail fills alike.

Tiers, deductibles and preferred pharmacies can change every year, and the plan's Annual Notice of Change lists what is changing. For a sense of how little many generics cost the pharmacy, GxRadar's NADAC price pages show acquisition benchmarks for 47 common generics, such as atorvastatin and metformin, back to 2013.

The Medicare Prescription Payment Plan

Also new in 2025, section 11202 of the Inflation Reduction Act created the Medicare Prescription Payment Plan. CMS's fact sheet⁵ says every Part D plan and every Medicare Advantage plan with drug coverage must offer it, and that it is voluntary and free to join.

Participants pay nothing at the pharmacy counter for covered drugs. Instead the plan sends a monthly bill equal to that month's new out-of-pocket costs plus any prior balance, divided by the months left in the year, using the same formula at every plan. Total payments can never exceed what the person would have paid at the pharmacy, or the annual cap.

Medicare's own materials stress that the option spreads costs out without lowering them. Medicare's consumer guide⁶ says it tends to help people with high costs early in the year and is less useful for those with low or steady monthly costs, or for people who get Extra Help. Enrollment can happen at any point in the year by contacting the plan, and participation renews automatically unless the person changes plans or opts out. A missed payment can lead to removal after a reminder, but no interest or fees are charged.

Extra Help in 2026 and 2027

Extra Help, also called the Low-Income Subsidy, lowers Part D costs for people with limited income and resources. Medicare.gov lists⁸ a $0 plan premium and $0 deductible for people who qualify, and CMS caps their copays.

CMS published the 2026 amounts in its 2026 Low-Income Subsidy memo⁴ and both years in the 2027 rate announcement³; Medicare.gov's Extra Help page⁸ already shows the 2027 figures, along with the $2,400 cap. For 2026, Medicare.gov lists⁸ income limits of $23,940 for an individual and $32,460 for a married couple, with resource limits of $18,090 and $36,100; limits are higher in Alaska and Hawaii. GxRadar's explainer on patient assistance programs covers other help with drug costs.

Negotiated prices and what to check before Dec. 7

Medicare price negotiation, created by the same law, covers certain high-cost brand drugs without generic or biosimilar competition. Negotiated prices for the first 10 Part D drugs took effect Jan. 1, 2026, and prices for the next 15 take effect Jan. 1, 2027, according to Medicare's 2027 guide⁷. Generics are outside the program by design.

During open enrollment, the useful checks are whether each drug stays on the plan's 2027 formulary and on which tier, whether the deductible applies to generic tiers, which nearby pharmacies are preferred, and whether the payment plan or Extra Help applies. Medicare's plan finder estimates costs for a specific drug list at specific pharmacies, and questions about a particular drug, including whether a lower-tier alternative exists, belong with a pharmacist or prescriber. Coverage chosen by Dec. 7 starts Jan. 1, 2027, the same day the $2,400 cap begins.