In 2027, the Medicare Part D cap on out-of-pocket drug costs rises from $2,100 to $2,400. But your real cost depends on three things the cap doesn’t control: your premium, your plan’s drug list, and your pharmacy.
The market is also shrinking. KFF reports stand-alone drug plans drop from 360 in 2026 to 316 in 2027, with no $0-premium stand-alone plans for people without Extra Help. In 2026, about 28% of those enrollees paid no premium.
Open Enrollment closes December 7, and the plan you choose generally locks in your drug coverage for the year.
Key Takeaways
- The 2027 cap is $2,400, but premiums and uncovered drugs don’t count toward it.
- $0-premium stand-alone plans are gone for most people in 2027, per KFF.
- Compare total annual cost, not the premium alone.
- FEHB and TRICARE For Life coverage changes the decision. Check before you add a plan.
The rules for 2027
| 2026 | 2027 | |
|---|---|---|
| Out-of-pocket cap on covered drugs | $2,100 | $2,400 |
| Deductible | Up to $615 | Up to $700 |
| Insulin | $35 a month limit | $35 a month limit |
| Average stand-alone plan premium (CMS) | $35.09 | About $36 |
What counts toward the $2,400: your deductible, plus your copays and coinsurance for drugs your plan covers.
What doesn’t count: your monthly premium, drugs your plan doesn’t cover, and drugs given in a doctor’s office, which are usually billed under Part B.
Your real cost: one formula
Total annual cost = 12 months of premium + your expected out-of-pocket drug costs (capped at $2,400).
Hypothetical example. It assumes the standard 2027 design: a $700 deductible, then 25% coinsurance, for one covered brand-name drug that costs the plan $800 a month. Real plans set their own copays and tiers.
| Month | You pay | Running total |
|---|---|---|
| January | $725 | $725 |
| February to September | $200 each month | $2,325 |
| October | $75 | $2,400 (cap reached) |
| November and December | $0 | $2,400 |
A low premium can lose. A $10-a-month plan that puts your drugs on a high tier could total $1,920 for the year ($120 + $1,800), while a $60 plan that covers them better might total $1,320 ($720 + $600). Both are hypothetical.
Four traps to check
The premium subsidy is ending. CMS’s temporary subsidy to stand-alone plans ends after 2026. CMS projects the average premium moves only from $35.09 to about $36, but averages hide wide gaps. KFF found some widely used plans rising $50 a month or more in many states, while others go down.
The Prescription Payment Plan. Every plan offers it: a monthly bill that spreads your drug costs across the year instead of paying at the pharmacy. There’s no cost to participate, but it doesn’t lower your costs. It helps most if you expect a large bill early in the year. It generally renews automatically if you stay in the same plan. If you switch plans, you must opt in again.
The income-related surcharge. Higher earners may pay extra on top of their premium. For 2027, it’s generally based on your 2025 tax return. In 2026, it starts above $109,000 for individuals and $218,000 for joint filers; 2027 thresholds aren’t published yet. If your income dropped after a life-changing event such as retiring, you can ask Social Security for a new decision with Form SSA-44.
Negotiated drug prices. Negotiated prices take effect January 1, 2027, for 15 drugs, including Ozempic, Trelegy Ellipta and Xtandi. If your plan charges coinsurance (a percentage), a lower price may lower what you pay. With a flat copay, your cost may not change.
Your decision path before December 7
- List every drug and dose, including anything you may start next year.
- Run that list through the Medicare Plan Finder with the pharmacy you actually use. Prices vary by pharmacy.
- Check each drug’s tier and any restrictions, such as prior authorization or step therapy.
- Apply the formula to your top two or three plans.
- Decide whether the Prescription Payment Plan fits your cash flow.
If you have FEHB: OPM considers FEHB prescription coverage creditable, so you won’t pay a late penalty if you enroll in Part D later, as long as you keep your FEHB coverage. If FEHB ends and you go 63 days or more without creditable drug coverage, your Part D premium can go up at least 1% for each month without it. Some FEHB plans also automatically enroll eligible members in their own Medicare drug benefit. It can help to compare your FEHB plan’s cost for your actual drugs against a Part D premium plus the capped $2,400.
If you have TRICARE For Life: TRICARE pharmacy coverage is creditable, and you don’t need Part D to keep TFL. If you have both, Medicare pays first.
Where this fits in your retirement plan
I’ve sat across the table from many federal and military families at this time of year, and the drug plan is rarely the whole story. It touches three of the six areas we review in every retirement: medical, income and taxes, through the surcharge tied to your return. Market, protection and legacy are shaped by the same choices.
Join our complimentary Executive Retirement Briefing, “Is Your Retirement Actually Positioned?”, before Open Enrollment closes on December 7.
- See how your Medicare and drug plan choices fit your income and taxes before the window closes.
- Learn which retirement decisions are permanent and which you can still adjust.
Educational content only, not individual financial, tax, legal, or healthcare advice. Plan costs and coverage vary. Confirm your options on Medicare.gov or with your plan before making changes.
