10 Things You Should Know About Medicare Part D Plans
Enrolling in Medicare Part D isn’t a “one-and-done” decision. Leaving your plan on autopilot during open enrollment (October 15-December 7) could cost you hundreds in unexpected premiums and out-of-pocket fees. A different plan might offer a much better deal — especially if you’ve started new medications or your current drugs have transitioned to generic over the past year.
Between major legislative redesigns — like the permanent end of the infamous “donut hole” — and routine plan changes, the Medicare Part D coverage landscape shifts every year. Even if your health hasn’t changed, your insurer’s formulary tiers, preferred pharmacy networks and deductibles likely have.
To make sure you aren’t overpaying, use the official Medicare Plan Finder tool to compare coverage in your area. By entering your specific medications, dosages and preferred pharmacies, you can see your true costs for 2027.
Here are 10 critical Medicare Part D rules and changes you need to know before enrolling.
1. Part D is offered by private insurers — not the government
Unlike original Medicare (Parts A and B), which is administered directly by the federal government, Medicare Part D prescription drug coverage is managed by private insurers. Similar to Medigap and Medicare Advantage (Part C), the government sets baseline rules and benefit structures, while private carriers set the actual plans, premiums, pharmacy networks and formularies.
Because private insurers compete for your business, shopping around during open enrollment is critical — two plans in the same zip code can carry wildly different monthly premiums and out-of-pocket costs for the exact same set of prescriptions.
2. Don’t rely on premium costs alone when choosing a plan
For starters, there isn’t a single “standard” Part D premium — rates vary widely by plan. The Centers for Medicare & Medicaid Services (CMS) establishes a standardized base beneficiary premium, but that figure is only a benchmark used to calculate late enrollment penalties and IRMAA surcharges. For 2027, the base premium is $41.33. Keep in mind that the cheapest plan by monthly premium is rarely the most cost-effective option overall.
When shopping via the Medicare Plan Finder tool, always sort plans by “lowest drug + premium cost.” This calculates your total estimated out-of-pocket costs (premiums + deductibles + copays) based on your specific drug list and preferred pharmacies, giving you the actual bottom-line cost
3. Formularies and preferred pharmacies change every year
Even if your medications haven’t changed, your insurer’s formulary and tier structures likely have. Look over their list of covered drugs and which tier your medication falls into — generic, preferred brand or non-preferred brand — because this affects your costs. Additionally, plans regularly change their “preferred pharmacy” networks. Filling a drug at a standard pharmacy versus a preferred one can double or triple your copay.
4. Your deductible depends on your plan
Your deductible can vary, and you may not have to pay one at all. However, if you are subject to a Part D deductible, there is a maximum that no policy may exceed.
If your plan has a deductible, you pay 100% of your gross covered prescription drug costs until the deductible is met. For 2027, the federally mandated maximum deductible a Part D plan can charge is $700, $85 more than the 2026 amount of $615.
You pay all out-of-pocket costs until you meet your plan’s full deductible. After that, you’ll pay 25% coinsurance for both generic and brand-name drugs. This continues until your total out-of-pocket spending on covered Part D drugs reaches $2,400 for 2027.
5. The ‘donut hole’ is gone
The infamous coverage gap or “donut hole,” in which beneficiaries faced steep out-of-pocket costs after reaching a certain limit, was officially eliminated as of January 1, 2025.
Under the Inflation Reduction Act(IRA), the absolute limit you will spend out-of-pocket on covered formulary drugs in 2027 is $2,400, a $300 increase over the 2026 limit of $2,100. Once you hit the $2,400 out-of-pocket cap, your copays and coinsurance drop to $0.
6. There are no spousal discounts
Most spouses don’t take the same medications. One plan may have much better coverage for your drugs while another may be better for your spouse’s needs.
You should each look up your drugs and dosages using the Medicare Plan Finder to estimate out-of-pocket costs for the plans in your area.
Before you and your spouse sign up for plans with different preferred pharmacies, consider if you are willing to go to more than one pharmacy to fill your monthly prescriptions. Some plans only give you the best rates if you use their network.
7. You can opt into the Medicare prescription payment plan
This optional, fee-free program allows you to spread your drug costs out into capped monthly installments over the year instead of paying a massive chunk all at once at the pharmacy counter. You can directly opt in to the Medicare prescription payment plan through your Part D plan sponsor.
If you opt into the Medicare Prescription Payment Plan, you won’t pay at the pharmacy counter; your plan will be notified automatically. Instead, your insurer will send you a monthly bill detailing what you owe for your prescriptions with instructions on how to pay.
If you used this program last year and stayed with the same plan, your enrollment automatically renews; however, if you switch Part D plans during open enrollment, you must manually opt in again with your new insurer.
8. The options for stand-alone plans are shrinking
Over the last five years, the number of stand-alone plans available to the average Medicare beneficiary decreased from 30 in 2021 to 11 in 2026, according to KFF, a health information organization formerly known as the Kaiser Family Foundation.
From 2025 to 2026, plan availability decreased by 22%. With fewer plans to choose from, you cannot assume your current plan will remain competitive or even exist.
9. Premium subsidies will end this year
An IRA premium stabilization demonstration, established in 2024 to prevent substantial premium increases due to the Part D benefit redesign, subsidized and stabilized average monthly premiums in 2025 and 2026. The demonstration has ended, and no subsidies will be paid to offset premium increases in 2027. CMS scaled back that support earlier this year, stating in a memo that reducing federal subsidies is intended to help the Part D program “return to operating under regular market conditions.”
The federal government provides roughly $190 in annual premium subsidies per enrollee under the stabilization demonstration in 2026, based on a projected $16 per member per month premium reduction, according to KFF.
“Without these subsidies in place for 2027, some Part D stand-alone drug plan enrollees could see a larger premium increase for drug coverage next year than they’ve faced in recent years, though plan-specific premiums are not yet known,” says Juliette Cubanski, vice president and director of the Program for Medicare Policy at KFF.
10. Avoid the permanent late enrollment penalty
If you don’t enroll in Part D when you are first eligible, and you go 63 consecutive days or more without “creditable” drug coverage (coverage deemed as good as or better than Medicare’s standard), you will face a permanent late enrollment penalty when you eventually sign up. The penalty is assessed per month for each month you went without coverage and is added directly to your monthly premium for as long as you hold a Part D plan.
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
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