Are You Prepared for the Medicare 2027 Plan Year?
The Medicare landscape is changing and 2027 looks to be another disruptive year for both Medicare Advantage plans and stand-alone Part D prescription drug plans (PDPs). Here I will explain major changes to be watching for and offer suggestions on how to prepare.
Medicare Part D Subsidies Will End as of January 1st, 2027
You may recall that the Inflation Reduction Act of 2022 (IRA2022) did away with the coverage gap (donut hole) in prescription drug costs and added an annual out-of-pocket gap for prescription drugs. The costs of those changes fell to some extent on the PDP carriers so the government put in place temporary subsidies to allow time for the carriers to adjust to the new PDP changes. Those subsidies where always designed to terminate, and terminate they will come January 1st, 2027.
What does that mean for you? If you have a standalone Part D PDP, you could see a higher monthly premium on your PDP for 2027. CMS (Centers for Medicare and Medicaid Services) has stated that they expect most beneficiaries to see a monthly increase of less than $10 a month. Some could see little to no change; some could see a higher jump in their monthly premium. We won't know actual premiums until the 2027 PDPs are released to the public on October 1st.
If you have a standalone Part D prescription drug plan, do not set it and forget it for 2027. You should anticipate that there will likely be significant changes to your drug plan, and you want to actively shop your coverage starting in October. You can make plan changes from October 15th to December 7th, but you can start looking at the plans starting October 1st. And I'm going to link a video in the description below that shows you how to use the government Medicare website to find and enroll in the best Part D plan for you and your specific medications.
For more information about how Medicare drug plans work in 2027, see my article: How Medicare Part D Drug Plans Work in 2027
Medicare Part D Annual Out-of-Pocket Cap Increasing to $2,400
In 2025, when the prescription drug spending cap was first introduced, the annual cap was set at $2,000 a year. This meant that for any Medicare beneficiary, as long as their prescription was covered by their PDP, they would never spend more than $2,000 a year on prescription drugs. In 2026, that cap increased to $2,100 a year. And now in 2027, it's going to increase to $2,400 per year. This means that someone taking expensive medications could potentially have to pay up to $300 more next year for their drugs. Once you reach the $2,400 cap in 2027, your covered drugs for the remainder of the year are zero cost to you. A few important things to remember:
Your monthly premiums for the PDP do not accrue towards the $2,400 cap.
Money you spend on drugs NOT covered by your plan does not accrue towards the $2,400 cap.
Not all of the $2,400 is your money. Money spent by your plan toward your drug costs do accrue, along with your costs, towards the $2,400 cap.
Expect Continuing Medicare Advantage Plan Disruption
Expect more Medicare Advantage plan disruption in 2027. Medicare Advantage plan carriers continue to face increasing financial pressures. When a Medicare Advantage plan carrier sees that a particular plan in a particular county is not profitable, here are the kinds of things they can do:
reduce benefits
deny agents and brokers from being able to sell that plan
shrink the network
raise co-pays
stop offering the plan altogether (plan termination or service area reduction)
We won't know the everything about 2027 plan changes until the information is released on October 1st, but not to worry. If your plan is no longer available in 2027, you have options. But you will need to take action.
If your plan is not going to be available in 2027, your carrier is required to notify you before September 30th. So, watch your mail for notifications from your plan carrier. You may be notified that even though your plan won't be available the carrier is going to automatically enroll you in another one of their plans. This is called "crosswalking". So, if you do nothing, you will end up in a plan your carrier thought might work for you. And it might. But if not, you can still use the annual open enrollment period between October 15th and December 7th to choose a different Medicare Advantage plan or to return to traditional Medicare. But if you do nothing, you will be crosswalked to that new Medicare Advantage plan.
If the carrier is not going to crosswalk you to another of their plans, then you will get a notice of plan termination or service area reduction (SAR). In this case, if you take no action, you'll be on traditional Medicare parts A and B as of January 1st with no supplemental coverage and no prescription drug coverage. Not smart, and not recommended, so take action and don't let that happen to you. Here are your two options for coverage in the new plan year:
You can choose a new Medicare Advantage plan. To do that, you must examine the the plan's provider networks, co-pays, maximum out-of-pocket (MOOP) limit, and the cost of your drugs on that plan. As an independent agent I have tools that allow me to compare your doctors and drugs to all Medicare Advantage plans available in your county. Contact me so I can make this all much easier for you.
You can return to traditional Medicare and add a Medicare supplement (Medigap) plan and a standalone Part D PDP. When your Medicare Advantage plan is terminated or no longer available in your area, that is considered an "involuntary disenrollment", which gives you a guaranteed issue right to a Medicare supplement. This means that the Medicare supplement carrier must sell you the policy without underwriting, meaning no medical questions or screening. Read more about guaranteed issue rights in my article: You May Have a Guaranteed Issue Right to a Medicare Supplement for 2027!
What You Can Do to Prepare for Medicare Plan Year 2027
Here's what you should be doing right now:
Watch your postal mail for your annual notice of change (ANOC) document. Your carrier is required to get the ANOC to you by September 30th. Don't miss it! Anyone on either a Medicare Advantage plan or stand-alone PDP gets an ANOC. For more information about this important document, see my article: Knock, Knock: It's ANOC!
If you're going to be shopping for a new Medicare Advantage plan, make a complete list of your prescriptions and your doctors and have this information readily available so that I can assist you in finding a plan that is the best fit for your medical and financial needs.
Please don't hesitate to contact me to discuss your Medicare coverage for 2027: contact me here
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