The $2,400 Part D Cap in 2027: What It Is and How You Reach It

For 2027, the Part D out-of-pocket cap is $2,400, up from $2,100 in 2026. It counts what you pay in deductible, copays and coinsurance for drugs your plan covers. Once you reach it, covered drugs cost nothing for the rest of the year. Premiums and drugs your plan won’t cover don’t count, so the cap limits your worst case, not your total yearly drug spending.

The word “cap” invites a misreading that shows up every fall. Many people hear that Part D now has a yearly limit and assume it means their drug costs for the year will top out at that number. It doesn’t, and the gap between those two ideas is exactly where people get surprised.

This post explains what the 2027 figure is, how the cap works, what counts toward it and what doesn’t, and how people actually reach it over the course of a year. It also covers the other changes in 2027 drug plans that matter just as much to your bill, because the cap is only one part of what you will pay.

The Number, in Context

Before 2025, Part D had no limit on what you could pay out of pocket for covered drugs in a year. The Inflation Reduction Act changed that, and the limit has risen each year since it began. AARP summarizes the schedule this way, and Medicare.gov shows the same 2026 and 2027 figures.

Year	Yearly out-of-pocket cap
2024	No cap
2025	$2,000
2026	$2,100
2027	$2,400

The increase from 2026 to 2027 is $300, a larger jump than the $100 step the year before. The amount is adjusted each year under a formula in the law, so you should expect the cap to move again. That is one reason this post is about a specific year rather than a permanent rule.

The cap applies to Part D coverage whether you buy a stand-alone drug plan alongside Original Medicare or get your drug coverage inside a Medicare Advantage plan. If you want a refresher on how the four parts of Medicare fit together, our explanation of Medicare Part D covers the basics.

What Counts Toward the $2,400

The cap is measured by what you personally spend on covered drugs, a figure the program calls true out-of-pocket cost. These count:

• The deductible you pay for covered drugs, if your plan has one.
• Copayments and coinsurance you pay for covered drugs.
• Certain payments made on your behalf. Medicare gives the Extra Help program as an example.

Notice what the list has in common: it is your share of the cost of drugs the plan covers. The full price of a drug and the amount your plan pays are not your share, so they don’t move you toward the limit. The cap tracks what you pay, plus those certain payments made for you.

What Does Not Count

This is the part that gets people. Premiums do not count toward the cap. Medicare describes a premium as a monthly amount you pay for coverage “whether you get covered drugs or not,” which is a good way to remember why: it is a separate cost that sits on top of whatever you spend at the pharmacy.

Spending on drugs that your plan doesn’t cover doesn’t count either, because the cap applies to covered Part D drugs. If a medication isn’t on your plan’s formulary, or your plan requires approval you haven’t received, the money you pay for it isn’t moving you toward the limit. In practice that can make a plan with a low premium and a poor formulary more expensive than it looks.

Put plainly, your maximum yearly cost is the cap plus your premiums plus anything you spend on drugs outside the plan. The cap is a ceiling on one slice of the bill.

The Stages Between January and the Cap

Part D coverage, in the standard design, moves through three stages in a calendar year. Plans may arrange cost-sharing differently, with flat copays or no deductible, but the structure below is the reference point.

• The deductible stage. You pay the full cost of your covered drugs until you meet the deductible. For 2027, Medicare says the maximum a plan can charge is $700, up from $615 in 2026, and some plans have no deductible at all.
• The initial coverage stage. After the deductible, you pay 25 percent of the cost of your covered drugs as coinsurance, and the plan pays most of the rest, until your out-of-pocket spending reaches the cap.
• The catastrophic stage. Once you reach the cap, you don’t pay anything out of pocket for covered Part D drugs for the rest of the calendar year.

The old coverage gap, sometimes called the doughnut hole, is gone. There is no stage where your cost suddenly jumps back up in the middle of the year, which is a significant change from how many people remember Part D working.

Doing the Arithmetic

It helps to see what reaching the cap looks like in dollars, with one caution: this is arithmetic using the standard design, not a prediction, and your plan may differ.

Suppose a plan uses the maximum $700 deductible and 25 percent coinsurance. You would pay the first $700 yourself. To reach $2,400 you would need to pay another $1,700, and since you pay a quarter of each drug’s cost in this stage, that corresponds to about $6,800 in drug prices. Together, that means total drug prices of roughly $7,500 over the year before you stop paying anything for covered drugs.

Many people’s drug costs are nowhere near that figure, so a lot of people will never reach the cap, and for them what matters is the premium, the deductible and the copays on the tier their drugs sit on. The cap earns its keep for people with expensive medications, such as certain cancer, multiple sclerosis or rheumatoid arthritis drugs, where one prescription alone can blow through the threshold.

Three Pictures of How People Reach It, or Don’t

These are illustrations, not cases, and they use no real person’s numbers.

Picture a retiree prescribed a single specialty drug with a very high monthly price. The deductible is satisfied with the first fill, and 25 percent of the next fill or two carries the person to the cap within the first few months. From then until December 31, the drug costs nothing. For this person, the cap turns what used to be an open-ended obligation into a known amount that arrives early in the year.

Picture someone who takes four or five brand-name drugs of moderate price. Their spending builds steadily, and they may reach the cap in the fall, after which the remaining months are free. Their year is front-loaded with costs but ends with relief, and their monthly budget will look uneven.

Picture someone who takes a handful of generic drugs. Their spending may stay well below the cap all year. For them the cap is a safety net they never use, and what actually matters is the plan’s premium and whether the pharmacy is in network.

Spreading Out the Cost: The Medicare Prescription Payment Plan

Because costs can bunch up early in the year, Medicare offers a payment option called the Medicare Prescription Payment Plan. It works alongside your existing drug coverage and spreads what you owe across the calendar year rather than charging it all at the pharmacy counter. You choose whether to use it.

Medicare is careful to point out what this arrangement does not do: it doesn’t save you money or lower your drug costs. It changes when you pay, not how much. If a large first fill would strain your budget in January, it can smooth the bumps. If you are mostly concerned about the total, the cap and your plan’s formulary are what matter. Ask your plan how to sign up if you are interested.

What Else Is Changing for 2027 Drug Plans

The cap isn’t the only 2027 change, and for some people it won’t be the biggest one.

CMS has said it will end the Part D premium stabilization demonstration at the end of 2026, which was a temporary program that helped hold down stand-alone drug plan premiums. AARP’s summary notes that the program is ending after two years and that the number of stand-alone Part D plans is falling from 360 to 312. KFF has cautioned that ending the temporary subsidies could mean larger premium increases for some beneficiaries. CMS projects that the average premium for stand-alone drug plans will rise by less than a dollar a month, but an average hides a wide range, and your own plan’s change could be bigger or smaller. CMS also projects that the average drug premium inside Medicare Advantage plans will fall.

If you are in a stand-alone plan, read your Annual Notice of Change for the premium, deductible and formulary changes, and confirm your plan is continuing at all. If you’re still deciding what to do before the window closes, our open enrollment checklist walks through the review in order, and our post on plans that are shrinking or leaving covers what to do if your plan is ending.

What the Cap Means When You Compare Plans

A cap changes how you should compare drug plans, but it doesn’t make comparison unnecessary. A few habits help.

• Compare total yearly cost, not premium alone. Add the premium for twelve months to your expected deductible and copays or coinsurance.
• Check each of your drugs against the formulary and note the tier, because a drug on a higher tier costs more before you reach the cap.
• Check for prior authorization or step therapy, because a drug the plan won’t pay for can fall outside the cap entirely.
• Confirm your pharmacy. A preferred pharmacy often means lower costs.
• If you have limited income, ask whether you qualify for Extra Help, which lowers what you pay and counts toward the cap.

Medicare’s Plan Finder lets you enter your drugs and pharmacy and compare estimated yearly costs for your area. For a more detailed look at choosing a plan, see our post on how to find the best drug plan. And if your drug coverage comes through an Advantage plan, compare it as part of the whole package, not as an afterthought.

Frequently Asked Questions

Does the $2,400 cap apply to Medicare Advantage plans?

It applies to Part D coverage, including the drug coverage built into Medicare Advantage plans that include it. Medicare Advantage plans also have a separate yearly limit on what you pay for medical services, which is a different number.

Do my premiums count toward the cap?

No. Premiums are a separate monthly charge and don’t count. Only what you pay for covered drugs, such as the deductible, copays and coinsurance, counts, along with certain payments made on your behalf.

What happens when I reach the cap?

Once your out-of-pocket spending on covered Part D drugs reaches it, you don’t pay anything out of pocket for covered drugs for the rest of the calendar year.

Does the cap reset every year?

Yes. The count restarts with each calendar year, so your deductible and cost-sharing begin again in January.

Does Extra Help change any of this?

Extra Help lowers what you pay for premiums and drugs if you qualify, and payments made through it count toward the limit. Eligibility depends on income and resources, so it’s worth checking.

Wondering how the 2027 cap fits into your own drug costs? Talk with our independent team, by phone or video wherever you live, with no cost and no obligation.