Changes to Medicare Part D: What They Mean for You

Over the last few years, Medicare prescription drug coverage has changed significantly. With more developments on the horizon, recent headlines about what’s to come may sound alarming: Administration to Pull Back on Premium Help for Part D Beneficiaries; Major Insurers Scale Back Medicare Advantage and Part D Plans for 2026; and This Medicare Part D Subsidy Is Expiring. A temporary program that helped stabilize premiums will end after 2026, and some beneficiaries could face higher premiums and prescription drug costs. At the same time, provisions that limit annual out-of-pocket expenses will continue. A closer look at these developments provides useful context for what beneficiaries may pay in 2027.

What Changed With Part D Premium Subsidies?

The Inflation Reduction Act of 2022 introduced a series of Medicare prescription drug changes that have taken effect over several years. In 2025, the law significantly redesigned Part D by eliminating the coverage gap, capping annual out-of-pocket prescription costs, and shifting a greater share of drug expenses to insurers and manufacturers.

To ease the transition and reduce the potential for sharp premium increases, the Centers for Medicare & Medicaid Services (CMS) introduced a temporary Part D Premium Stabilization Demonstration for stand-alone prescription drug plans.

In 2025, participating plans received a $15 reduction in the base beneficiary premium calculation, and CMS limited year-over-year premium increases to $35 per month. For 2026, CMS reduced the adjustment to $10 and raised the allowable monthly increase to $50.

The program appears to have moderated premiums. KFF reports that the average monthly premium for stand-alone Part D plans declined from approximately $39 in 2025 to $36 in 2026. MedPAC estimates cited by KFF indicate that the demonstration lowered average premiums by about $16 per enrollee per month in 2026.

The Temporary Program Ends, but Part D Continues

CMS will discontinue the Premium Stabilization Demonstration after 2026. The agency determined that insurers have gained sufficient experience with the redesigned benefit to price their 2027 plans under standard program rules.

The Inflation Reduction Act also limits the annual increase in the national Part D base beneficiary premium to 6% through 2029. The base premium will rise from $38.99 in 2026 to $41.33 in 2027.

After the program ends, stand-alone plans will no longer receive the additional base-premium reduction or be subject to the demonstration’s separate limit on year-over-year premium increases. KFF reports that some beneficiaries could therefore see larger premium increases in 2027.

Prescription Drug Costs in 2027

Premiums represent only one component of prescription drug spending. The Part D cost structure will also change in 2027, while several recent provisions will continue. Here is what beneficiaries can expect: 

• The standard Part D deductible increases from $615 to $700.
• The annual out-of-pocket threshold rises from $2,100 to $2,400.
• After reaching that threshold, beneficiaries pay no additional out-of-pocket costs for covered Part D drugs for the remainder of the calendar year.
•  The former coverage gap, or “donut hole,” remains eliminated.
• Recommended adult vaccines covered under Part D continue with no cost sharing.
• Federal cost-sharing limits for covered insulin remain in effect.

For beneficiaries who reach the annual threshold, the increase from $2,100 to $2,400 could mean paying up to $300 more out of pocket in 2027. The $2,400 threshold will continue to place a firm annual limit on out-of-pocket costs for covered Part D drugs. Before the Part D redesign took effect in 2025, beneficiaries had no such annual limit. 

Consider the Full Cost of Coverage

With premiums and other Part D costs changing in 2027, beneficiaries should review their coverage during Medicare Open Enrollment. What individuals pay can vary considerably based on the medications a plan covers, its pharmacy network, deductible, and cost-sharing requirements. Comparing anticipated annual costs across available plans can provide a more accurate estimate of prescription drug expenses.

Healthcare expenses also intersect with other financial decisions. Increased prescription plan costs can affect monthly cash flow, portfolio withdrawals, and taxable income. A financial plan that incorporates those expenses can help households accommodate higher medical costs while continuing to fund travel, hobbies, family time, and other priorities.

At SHP Financial, healthcare planning is one of the five worlds of retirement planning. SHP helps clients consider medical expenses across their income strategy, investment plan, and tax picture, including changes that could affect future spending. With a coordinated plan and guidance from an SHP Financial advisor, you can understand Medicare changes and prepare for potential portfolio impact. Contact SHP Financial today for a complimentary review of your finances.