Medicare Part D deductible and out-of-pocket cap rise sharply in 2027 as premium subsidy ends

Medicare's prescription drug program is entering 2027 with two simultaneous cost increases that are getting tangled together in coverage — and understanding which is which determines what you can do about it right now, and what you have to wait until October to find out.

The first change is already final. In 2027, the standard Part D deductible will climb to $700 from $615, a rise of 13.8%. The annual out-of-pocket cap will move to $2,400 from $2,100, an increase of 14.3%. CMS finalized both figures in its Contract Year 2027 rate announcement in April 2026. They will not change.

The second change is less predictable. On July 28, 2026, CMS announced it is ending the Part D Premium Stabilization Demonstration — a temporary federal program that has been suppressing premiums on standalone drug plans since 2025 — effective January 1, 2027. What that means for any individual enrollee's monthly premium will not be known until final 2027 plan pricing publishes in mid-to-late September.

The deductible increase is mechanical, not political. Both the deductible and the out-of-pocket cap are indexed by law to the annual percentage increase in average per-capita Part D spending — a measure that has nothing to do with general inflation or the Social Security COLA. CMS actuaries projected faster per-enrollee drug spending growth for 2027, so both thresholds moved sharply. Compared with the roughly 4% deductible increase between 2025 and 2026, the 2027 rise is more than triple that pace, according to Gentle Medicare Guide.

For anyone taking ongoing brand-name or specialty medications, the practical effect is straightforward: the point at which drug costs drop to $0 will arrive later in 2027 than it did in 2026, and the amount paid out of pocket to reach that point will be higher.

Until 2025, Part D imposed no ceiling on out-of-pocket drug spending, meaning a specialty medication could carry a five-figure annual cost with no limit in sight. The Inflation Reduction Act created the cap, shifting a large share of catastrophic drug costs from Medicare beneficiaries onto the insurers running Part D plans. Confronted with a benefit structure they had no prior experience pricing, insurers put forward plans that called for steep premium hikes. To head that off, CMS launched the Premium Stabilization Demonstration, which lowered the base beneficiary premium used in plan pricing and placed a ceiling on how much any individual plan's premium could increase from one year to the next. Nearly every standalone plan sponsor opted in, according to Gentle Medicare Guide, which is why ending it is a market-wide event.

According to CMS, the agency ended the program because its review of 2027 bids showed that insurers have accumulated enough experience with the redesigned benefit to set prices without federal assistance. Over its two-year run, the demonstration carried a cost of roughly $9.8 billion, according to Gentle Medicare Guide.

What happens to premiums as a result is where honest sources diverge. Looking at total average monthly premiums for standalone prescription drug plans, CMS puts the 2027 figure at $36, up from $35.09 in 2026 — a rise of under $1 — and characterizes the market as broadly stable. KFF's analysis of plan landscape files tells a more uneven story: many enrollees will see modest increases or even reductions if they stay in their current plan, but monthly premium increases greater than $50 are possible for some enrollees who do not switch. According to Gentle Medicare Guide, a February 2026 GAO report concluded that beneficiaries who remained in their 2024 plan would have faced premiums that nearly doubled had the subsidy not been in place.

CMS is fighting to keep high-quality care options affordable and accessible for the millions of beneficiaries who rely on Medicare Advantage and Part D prescription drug plans. By slashing handouts to big insurance companies, CMS is keeping premiums stable while ensuring that 97% of Medicare beneficiaries have access to 10 or more MA plans and that 93% of non-low-income beneficiaries can get an enhanced Part D plan for less than $6 a month.— Dr. Mehmet Oz, CMS Administrator

For the fourth year running, the number of standalone prescription drug plans available to the average beneficiary will decline, dropping from 11 in 2026 to 9 in 2027, according to KFF's analysis. The total number of standalone drug plans nationwide drops from 360 plans offered by 17 parent organizations to 316 plans offered by 15 parent organizations. The reduction is largely driven by Health Care Service Corporation withdrawing its HealthSpring Extra Rx plan from 22 regions, and CVS Health withdrawing its SilverScript Choice plan from 13 regions. Humana remains the only insurer offering three plans across all 34 PDP regions.

Who is and is not affected by the premium changes matters enormously. The roughly 25 million people on Original Medicare who buy a standalone Part D plan are the ones exposed to the premium shift. If you have Medicare Advantage with drug coverage built in, the change largely does not reach you — CMS projects the average Medicare Advantage drug plan premium will actually fall 38%, from $11.32 to $7 per month, because MA plans can use federal rebate dollars to offset premiums in ways standalone plans cannot. If you receive Extra Help, the low-income subsidy program, neither the premium change nor the deductible applies to you.

KFF notes that with 56% of all Part D enrollees now in Medicare Advantage drug plans, a majority of Part D enrollees will not be affected by standalone plan premium changes at all.

Working in the other direction: on January 1, 2027, a second round of Medicare-negotiated prices will take effect for 15 additional Part D drugs. Discounts range from 38% to 85%, according to Gentle Medicare Guide. Among those drugs, semaglutide — marketed as Ozempic, Rybelsus, and Wegovy — draws the most attention, with its negotiated price set at $274 for a 30-day supply against a list price of $959, a reduction of 71%.

Several things are not changing in 2027: the $35 monthly insulin cap, $0 cost-sharing on recommended vaccines, Extra Help eligibility and benefits, and the option to spread out-of-pocket costs through a payment plan.

Medicare Open Enrollment runs October 15 through December 7, 2026. Final 2027 plan pricing will be available at Medicare.gov when the plan landscape publishes in mid-to-late September. CMS also notes that even if a plan's premium is staying flat or falling, enrollees should check whether formularies, drug tier placements, deductibles, and cost-sharing requirements are changing — because plans under premium pressure may be reducing coverage generosity rather than raising the monthly price.

Why it matters — For the roughly 25 million people on Original Medicare with a standalone drug plan, 2027 brings a higher deductible, a higher cost ceiling, and an uncertain premium — all arriving at once — making this Open Enrollment the most consequential in years for that group.

Sources differ on Scale of 2027 standalone PDP premium increases following end of stabilization demonstration: Average standalone PDP premium rises less than $1/month to $36; broad pricing stability across the market (cms.gov) vs Mixed picture: many enrollees see modest increases or reductions, but monthly increases greater than $50 are possible for some enrollees who do not switch plans (kff.org)

Reported by cms.gov, kff.org, gentlemedicareguide.com