Medicare Drug Cost Limit Rises to $2,400 in 2027, but Premiums Still Continue Afterward

Medicare’s annual out-of-pocket drug cap is designed to shield retirees from overwhelming prescription costs, but reaching it comes with a catch many people do not notice until the bill shows up.

Imagine a 70-year-old retiree who relies on an expensive brand-name medication. She reviews her plan’s Annual Notice of Change and begins planning for next year’s expenses. The maximum Part D deductible increases from $615 to $700 in 2027, and the annual out-of-pocket cap rises from $2,100 to $2,400. The Centers for Medicare & Medicaid Services finalized both amounts in April. She expects to reach the cap, but wonders whether that also stops her monthly premium payments. It does not. Any premium charged by her plan continues even after covered drugs stop costing her at the pharmacy.

Open enrollment ends soon, so there is still time to use these figures when comparing plans.

Your Plan’s Deductible May Be Far Below $700

The $700 amount is only a ceiling. No drug plan can charge more, and some plans set no deductible at all. Under the standard Part D benefit, you pay 25% of covered drug costs after the deductible. Actual plans may use different copays or coinsurance, so it is important to check what your prescriptions will cost. Once your out-of-pocket spending on covered Part D drugs reaches $2,400, catastrophic coverage begins and you owe nothing more for covered drugs for the rest of the calendar year. Some payments made on your behalf, such as Extra Help, also count toward that threshold.

Your deductible payments are included in the $2,400 total. Treating the deductible and cap as separate and adding them together would overstate your exposure. In 2027, the most you can pay for covered drugs is $2,400, which is $300 more than in 2026.

Four Costs That Can Continue After You Reach the Cap

• Your plan premium. You must pay it whether or not you use covered drugs. Catastrophic coverage does not change it, and premiums never count toward the $2,400 limit.
• The Part D income surcharge. Enrollees with higher incomes pay an income-related monthly adjustment amount, or IRMAA, in addition to the plan premium. In 2026, it ranges from $14.50 to $91 a month, beginning above $109,000 of income for individual filers and $218,000 for married couples filing jointly. Medicare uses adjusted gross income plus tax-exempt interest. For 2027, Social Security generally looks at a 2025 tax return, but the 2027 brackets and surcharge amounts determine the amount owed.
• Drugs excluded from your plan. A prescription that is not on your plan’s covered drug list generally does not count toward the cap unless coverage is approved through an exception. Purchases made with a discount card outside Part D coverage usually do not count either.
• Costs outside Part D. The standard Part B premium was $202.90 a month in 2026, or $2,434.80 for the year, and the Part B deductible was $283. CMS has not yet released the 2027 amounts.

IRMAA surcharges are one more example of Medicare costs that can appear after the headline premium. A free Medicare guide can help explain the surcharges, coverage gaps, and premium traps before open enrollment ends.

Heavy Users Feel the Extra $300, While Light Users Mostly Notice the Premium

Consider two hypothetical enrollees whose plan charges a $45 monthly premium and applies the full $700 deductible before 25% coinsurance begins. Neither receives Extra Help or other assistance, and drug prices stay unchanged throughout the year.

Heavy user: Her covered brand-name drug has a negotiated pharmacy price of $1,500 a month. In January, she pays the $700 deductible plus 25% of the remaining $800, for a total of $900. She then pays $375 a month from February through May, reaching the $2,400 cap. From June through December, she owes nothing for covered Part D prescriptions, but her premium payments continue.

Light user: His two generic drugs cost $360 a year. He never gets beyond even the older $615 deductible, so neither 2027 increase affects him.

The better value depends on the medications involved. If the heavy user expects to reach the cap under every plan she compares, a lower premium can reduce her yearly cost. Even then, she still needs to confirm that the plan covers her drug, works with her pharmacy, and does not impose access restrictions she cannot satisfy. Any income surcharge would be added on top.

Three Steps to Take Before Enrollment Ends

1. Use Medicare Plan Finder with your actual drug list. Enter every drug, dose, and pharmacy, then sort by estimated total yearly cost, which combines premiums and drug spending. If you do nothing, you stay in your current plan’s 2027 version, including any formulary or pharmacy changes.
2. Review each medication against the 2027 formulary. If a drug is missing, compare other plans or ask whether your prescriber can help request a coverage exception. If the drug moved to a higher-cost tier, ask whether a tiering exception is available to reduce your share. Also check prior authorization and step therapy rules.
3. Spread out the bill if January will be expensive. If you expect high drug costs early in the year, ask about the Medicare Prescription Payment Plan before your first costly fill. If you enroll, you pay the plan in monthly installments instead of paying the pharmacy up front. It changes when you pay, not how much, and installments for earlier prescriptions can continue after you reach the cap.