What Counts Toward the $2,400 Part D Cap in 2027, and What Quietly Does Not

Why the definition matters more than the number

The $2,400 figure is the easy part. Medicare states it plainly: once out-of-pocket spending on covered Part D drugs reaches $2,400 in 2027, you pay nothing out of pocket for covered Part D drugs for the rest of the calendar year. CMS set the figure in Attachment V of the CY 2027 Rate Announcement (opens in a new tab), raising the 2026 threshold of $2,100 by the statutory annual percentage increase of 13.65% and rounding to the nearest $50.

The hard part is what the running total is made of. The accumulator has a formal name, true out-of-pocket costs, and a definition in 42 CFR 423.100 (opens in a new tab) that is considerably narrower than "money you spent on medicine".

Two people can each be $1,500 out of pocket on drugs by June, and one of them can be most of the way to a free second half of the year while the other has moved nowhere at all. The difference is not how much they spent. It is what they spent it on.

The three phases, in order

The structure for 2027 is the one the Inflation Reduction Act left behind after the coverage gap was abolished. There are three phases and no doughnut hole.

Both figures are ceilings on what a plan may impose rather than descriptions of every plan. Medicare states that no Medicare drug plan may have a deductible of more than $700 in 2027, up from $615 in 2026, and plenty of plans charge less than that or nothing. The $2,400 is the point at which the statute takes over.

A consequence worth sitting with: the cap resets on 1 January. Someone who reaches it in October gets two free months and starts again. What CMS published for 2027 covers the rest of the year's figures.

What counts

The regulation counts costs you incur for covered Part D drugs that are not paid for by the plan because of the deductible or other cost-sharing rules. In plain terms:

• Your deductible, from the first dollar.
• Your 25% coinsurance in the initial coverage phase, and any copayments your plan charges in its place.
• Any price differential you are responsible for at an out-of-network pharmacy under the limited circumstances that permit using one.
• Nominal cost sharing you pay on a drug otherwise supplied by a patient assistance program outside the Part D benefit, provided you give your plan the documentation it asks for.

And it counts those costs whether you paid them or somebody specific paid them for you:

• You, or another person paying on your behalf who is not being reimbursed by insurance, a group health plan or another third-party arrangement. Paying from a health savings account or a flexible spending account falls on this side, because the regulation treats those as personal health savings vehicles rather than insurance.
• Extra Help, the low-income subsidy, and the related payments the regulation lists.
• A State Pharmaceutical Assistance Program. Medicare.gov confirms these contributions may count.
• The Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization.
• An AIDS Drug Assistance Program.

The 2025 change that is still not widely known

Here is the one that has quietly improved a lot of people's positions and is rarely mentioned.

Before 2025, having other drug coverage on top of Part D was a mixed blessing. If a retiree wrap plan or an employer group health plan reimbursed part of your cost sharing, that money did not count toward your true out-of-pocket total. You were better off in cash and worse off in progress toward the ceiling.

The regulation now provides that for 2025 and subsequent years, costs reimbursed through insurance, a group health plan or certain other third-party payment arrangements do count. Two things are carved out of that: what your own Part D or Medicare Advantage prescription drug plan pays as basic coverage, and any manufacturer payment under the Manufacturer Discount Program.

What does not count

Five categories, in rough order of how much money they cost people.

Drugs that are not on your plan's formulary. This is the expensive one. A covered Part D drug means a drug that is on your plan's formulary, or treated as being on it following a coverage determination or appeal, and obtained at a network pharmacy or at an out-of-network pharmacy under the narrow rules that allow it. Pay cash for something your plan does not cover and you have bought medicine, not progress. The route back in is the appeal: a drug treated as on formulary through a successful coverage determination counts like any other.

Drugs payable under Part A or Part B. The definition of a Part D drug excludes any drug for which payment is available to you under Part A or Part B, even where a deductible applies, and even if you are eligible for Part A or Part B but have not enrolled. Infusions and injections given in a clinical setting commonly fall here. They are a separate budget with its own rules, and Original Medicare has no out-of-pocket limit of its own, which is one of the structural points behind the choice between Original Medicare and Medicare Advantage.

Your premium. The cap is a ceiling on cost sharing for drugs, and a premium is paid whether or not you fill anything. It never counts, and reaching the cap does not stop it. This is the same distinction that applies on the commercial side, where the out-of-pocket maximum excludes premiums by definition.

What the plan pays, and the manufacturer discount. Covered above.

Medical foods, and drug classes excludable under Medicaid rules. Both are carved out of the definition of a Part D drug, with smoking cessation agents expressly excepted from the second.

The running total, in one table

What to check before 7 December

The cap is federal and identical in every plan. Everything that decides how fast you reach it is not.

1. Check the formulary against every drug you take, for the 2027 plan rather than the 2026 one. A drug that moves off formulary costs you twice: the full price, and no credit toward the ceiling.
2. Check the tier, not just the presence. Coinsurance on a specialty tier gets you to $2,400 quickly, which is unpleasant and then suddenly is not.
3. Check the deductible your plan actually charges. The $700 is a ceiling. The difference between a $0 deductible and a $700 one is real money in January, though both count in full once spent.
4. Check your pharmacy is in network. Out-of-network spending counts only in the limited circumstances the regulation permits.
5. If something is excluded, ask about a coverage determination rather than paying cash. A drug treated as on formulary through an appeal counts; the same drug bought quietly does not.
6. If you have other drug coverage, the 2025 change is in your favor. Check that your plan is accumulating it, because this is newer than many people's assumptions.
7. If the cost is front-loaded, the Medicare Prescription Payment Plan spreads it across the year without changing the total or the accumulation.

The comparison that decides this is the formulary, and it is the one most people skip because it is tedious rather than difficult. What else to check during Open Enrollment covers the rest of it, but if you only do one thing with the window, do this one.

Sources

• 42 CFR 423.100: Definitions, including incurred costs, covered Part D drug and Part D drug (opens in a new tab)
• CMS: Announcement of Calendar Year 2027 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies, Attachment V (opens in a new tab)
• Medicare.gov: Costs for Medicare drug coverage (opens in a new tab)
• CMS: Contract Year 2027 Medicare Advantage and Part D Final Rule fact sheet (opens in a new tab)
• Medicare.gov: Medicare Prescription Payment Plan (opens in a new tab)
• Medicare.gov: Costs of Medicare (opens in a new tab)

This article is general information for a United States audience and reflects the 2027 Part D figures published by CMS and the federal definitions in force at the date of review. It is not insurance, tax or financial advice, and it does not recommend any plan or insurer. Formularies, tiers, deductibles and pharmacy networks are set by individual Part D sponsors and differ across thousands of plans, which is what decides how quickly any individual reaches the threshold. Confirm your own position against your plan documents, the Medicare Plan Finder or 1-800-MEDICARE before enrolling or switching. Last reviewed 18 October 2026.