Medicare Part D

Before Jan. 1: Part D's $2,400 Cap in Michigan City

Michigan City, Ind. — Starting January 1, 2027, no one enrolled in a Medicare Part D drug plan will pay more than $2,400 out of pocket for covered prescriptions in a calendar year. The Part D out-of-pocket cap is $2,100 in 2026 and $2,400 in 2027, and the update lands right in the middle of Annual Enrollment, which runs through December 7.

For older adults here in La Porte County who take expensive medications, the new cap replaces a system that used to leave some people with thousands of dollars in yearly drug bills. Here is what actually changes, and what to do before the deadline.

What the $2,100 cap actually means

Once your out-of-pocket spending on covered Part D drugs hits the annual cap, you pay $0 for the rest of the year on those covered prescriptions. The cap is $2,100 in 2026 and $2,400 in 2027. That total includes your deductible and any copays or coinsurance you pay at the pharmacy. Monthly plan premiums do not count toward the cap.

The maximum Part D deductible any plan can charge is $615 for 2026 and $700 for 2027, according to CMS. Some plans set theirs lower, but none can go higher.

The coverage gap is really gone

For years, Part D had four phases, and the third one — the "donut hole" — is where people got hit with surprise bills. That phase was eliminated in 2025 and stays gone in 2027.

Part D now has 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 share of the cost (a copay or coinsurance) until your out-of-pocket total hits $2,400 in 2027. 3. Catastrophic phase — you pay $0 for covered drugs for the rest of the year.

That is it. No more falling into a gap partway through the year.

The Medicare Prescription Payment Plan

Even with the $2,400 cap in 2027, $2,400 in January is still a lot to pay at once. That is why Medicare offers the Medicare Prescription Payment Plan, sometimes called "M3P" or drug cost smoothing.

Here is how it works: instead of paying the pharmacy the full amount when you pick up a prescription, your Part D plan bills you monthly, spreading your out-of-pocket costs across the remaining months of the calendar year. There is no interest and no extra fee. You still owe the same total — you just pay it in installments.

The program is optional. You have to opt in through your Part D plan, and you can do it before the year starts or at any point during the year. It tends to help most for people who fill high-cost prescriptions early in the year.

What this means during Annual Enrollment

Annual Enrollment for 2027 coverage runs October 15 through December 7, 2026. This is the window to:

• Join a stand-alone Part D drug plan.
• Switch from one Part D plan to another.
• Move between Original Medicare and Medicare Advantage.
• Change Medicare Advantage plans, including ones that include drug coverage.

Michigan City is in La Porte County, where residents can compare the Part D and Medicare Advantage plans available in their ZIP code using the Plan Finder at medicare.gov. Plan formularies (the list of covered drugs), pharmacy networks, and premiums can all change from year to year, so it is worth checking even if you like your current plan. Your plan's 2027 details are in its Annual Notice of Change.

If you miss December 7, there is still the Medicare Advantage Open Enrollment Period from January 1 through March 31, but that window has narrower rules — it does not let you switch from Original Medicare into an Advantage plan for the first time.

A quick note on higher-income enrollees

If your income is above $109,000 as a single filer (or $218,000 filing jointly) based on your 2024 tax return, you may pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of your Part D premium in 2026. This is separate from the $2,100 cap and does not affect it. Social Security notifies you by mail if IRMAA applies to you.