Medicare Part D

Daly City Medicare: Donut Hole & 2027 Cap

DALY CITY, Calif. — Starting Jan. 1, 2027, Medicare's Part D prescription drug benefit continues the structure that took hold in 2025 and 2026. The out-of-pocket ceiling for covered drugs rises to $2,400, the old "donut hole" coverage gap stays gone, and enrollees can choose to spread their drug costs over the year instead of paying big bills at the pharmacy counter.

For the roughly one in five Daly City residents on Medicare, these changes arrive during a busy stretch: Medicare's Annual Enrollment Period runs Oct. 15 through Dec. 7, 2026, and any Part D plan changes you make now will kick in Jan. 1, 2027.

The $2,400 cap, in plain English

Once your out-of-pocket spending on covered Part D drugs hits $2,400 in 2027, you pay nothing for the rest of that calendar year on those medications. This is a hard cap set by Medicare, and it applies whether your drug coverage comes through a stand-alone Part D plan or through a Medicare Advantage plan that includes drugs.

The cap resets each January. It's a program-wide rule, so it works the same way in Daly City as it does anywhere else in the country.

Also worth knowing: the maximum Part D deductible any plan can charge is $615 in 2026 and $700 in 2027. Plans can charge less, but not more.

Goodbye, donut hole

For years, Part D had a confusing middle phase called the coverage gap, where enrollees paid a higher share of drug costs after hitting a spending threshold. That phase was eliminated in 2025 and remains gone in 2027.

Part D now has just three phases:

1. Deductible phase — you pay full negotiated price until you meet your plan's deductible (up to $700 in 2027). 2. Initial coverage phase — you pay a copay or coinsurance until your out-of-pocket total reaches $2,400. 3. Catastrophic phase — you pay nothing for covered drugs the rest of the year.

Simpler math, and a real ceiling on what you can be asked to spend.

The Medicare Prescription Payment Plan

Hitting a $2,400 cap is a relief, but paying a big chunk of it in January or February is still hard on a fixed income. That's where the Medicare Prescription Payment Plan comes in.

This is a free, optional program. Instead of paying the pharmacy directly when you fill a prescription, your Part D plan bills you monthly, spreading your out-of-pocket drug costs across the remaining months of the year. You don't pay more overall — you just pay it in smaller pieces.

You can sign up before the plan year starts or at any point during the year. If you take expensive medications early in the year, opting in sooner generally gives you more months to spread costs across.

What this looks like in San Mateo County

Daly City is in San Mateo County, where Medicare beneficiaries typically have a range of stand-alone Part D plans and Medicare Advantage plans with drug coverage to choose from during Annual Enrollment. The specific 2027 lineup is detailed in each plan's Annual Notice of Change and on Medicare.gov's Plan Finder. Every plan must follow the $2,400 cap and the three-phase structure — those are federal rules, not plan-by-plan extras.

What still varies from plan to plan: the monthly premium, the deductible amount (up to the $700 max in 2027), which drugs are on the formulary, and which pharmacies are in network. That's why comparing your specific medications on Medicare's Plan Finder matters more than picking based on a brand name.

A quick note on higher incomes

If your income is above $109,000 as a single filer (or $218,000 married filing jointly) based on your 2024 tax return, you'll pay an income-related monthly adjustment amount, or IRMAA, on top of your Part D premium in 2026. Social Security notifies you by mail if this applies. You can appeal if you've had a life-changing event like retirement or the loss of a spouse.

Dates to circle

• Oct. 15 – Dec. 7, 2026: Medicare Annual Enrollment Period. Join, switch, or drop a Part D or Medicare Advantage plan for 2027.
• Jan. 1, 2027: New coverage — and the $2,400 cap — takes effect.
• Jan. 1 – March 31, 2027: Medicare Advantage Open Enrollment. If you're in a Medicare Advantage plan, you get one chance to switch to another MA plan or return to Original Medicare.