Medicare Part D

How Part D Works in 2027 in Sunnyvale, Calif.

SUNNYVALE, Calif. — If you take prescription drugs and rely on Medicare, 2027 brings some of the friendliest news the Part D program has offered in years. There is now a firm yearly limit on what you pay out of pocket for covered drugs, the coverage gap is gone, and the rules are simpler to explain than they used to be. Here is a plain-language walk-through of how Part D will work in 2027 in Sunnyvale.

What Part D actually is

Part D is Medicare's prescription drug coverage. It's sold by private insurance companies that follow rules set by the Centers for Medicare & Medicaid Services (CMS). You can get it two ways: as a stand-alone drug plan that sits next to Original Medicare, or built into a Medicare Advantage plan.

Sunnyvale is in Santa Clara County, where Medicare beneficiaries have a wide selection of stand-alone Part D plans and Medicare Advantage plans that include drug coverage. Plan availability is set at the county level, so two neighbors in Sunnyvale generally see the same menu of options.

The three phases in 2027

Since 2025, Part D has had three phases instead of four. Here's what each one means for your wallet.

1. Deductible phase. You pay the full negotiated price for your drugs until you hit your plan's deductible. In 2027, no Part D plan can charge a deductible higher than $700. Some plans set it lower, and some drugs on lower tiers may skip the deductible entirely.

2. Initial coverage phase. After the deductible, you and your plan share the cost. You'll pay a copay (a flat dollar amount) or coinsurance (a percentage) for each prescription. This is where most people spend most of the year.

3. Catastrophic phase. Once your out-of-pocket spending on covered drugs reaches $2,400 for the year in 2027, you're done paying for covered prescriptions for the rest of the year. That's the annual cap, and it applies whether you have a stand-alone plan or drug coverage through Medicare Advantage.

The old "coverage gap" — the donut hole where people used to pay a bigger share in the middle of the year — no longer exists.

The Part D cap, explained

The cap only counts spending on drugs your plan covers. Costs for drugs not on your plan's formulary don't count toward it, and neither do your monthly premiums. If you're on expensive medications, you can reach the cap early in the year and then pay nothing for covered refills through December.

Smoothing payments across the year

If a big pharmacy bill in January would strain your budget, the Medicare Prescription Payment Plan lets you spread your Part D out-of-pocket costs into monthly installments across the calendar year. It doesn't lower what you owe overall, and there's no fee to use it. You have to opt in through your plan — it isn't automatic. You can learn more at medicare.gov or by calling your plan directly.

A note on higher-income enrollees

Most people pay only their plan's premium. But if your income is above $109,000 as a single filer (or $218,000 filing jointly) based on your 2024 tax return, you may owe an income-related monthly adjustment amount, known as IRMAA, on top of your Part D premium. Social Security will notify you if this applies.

Dates to remember

The Annual Enrollment Period runs October 15 through December 7 each year. That's when anyone with Medicare can join, switch, or drop a Part D plan for the following year. If you're in a Medicare Advantage plan, you also have the Medicare Advantage Open Enrollment Period from January 1 through March 31 to make one change.