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Medicare Part D
Prescription Drug Coverage 2027
Medicare Part D Coverage Phases 2027: Three Stages and No Donut Hole
Reviewed by Russell Noga, Licensed Medicare Insurance Broker (all 50 states) — Last updated October 30, 2026
Medicare Part D has three coverage phases in 2027: the deductible (up to $700), initial coverage (about 25% of drug costs), and catastrophic coverage, where you pay $0 for covered drugs once your out-of-pocket costs reach $2,400. The old donut hole, or coverage gap, no longer exists; it was removed starting in 2025.
2027 by the Numbers
3
Part D coverage phases in 2027, down from four before 2025 (CMS)
$2,400
out-of-pocket spending that moves you into the $0 phase (CMS)
$7,500
total yearly drug cost that reaches the cap under the standard design (our math)
$625
monthly drug cost that reaches the cap by December (our math)
Every Part D plan moves you through the same stages each calendar year, starting over on January 1. Where you are in those stages decides what you pay at the pharmacy counter. In 2027 the stages are simpler than they were a few years ago, but the dollar limits are higher than in 2026.
This page walks through each 2027 phase, who pays what, and how much drug spending it takes to reach the cap. For the full list of 2027 rules, see our Medicare Part D plans 2027 guide, and for premiums, which sit outside the phases, see Medicare Part D premium 2027.
Key Takeaways
- Phase 1 is the deductible: you pay full price for covered drugs until you have paid up to $700, depending on the plan.
- Phase 2 is initial coverage: you pay about 25% of the cost, or a tier copay, until your spending reaches $2,400.
- Phase 3 is catastrophic coverage: $0 for covered Part D drugs through December 31, 2027.
- Under the standard design it takes about $7,500 in covered drug costs to reach the 2027 cap.
- The coverage gap, often called the donut hole, ended in 2025 and does not return in 2027.
How the 2027 Part D Phases Split the Cost
The share each party pays changes as you move through the year. The table shows the standard design that CMS uses as the benchmark. Real plans may swap coinsurance for flat copays, as long as the coverage is worth at least as much.
| Phase | Your share | Plan | Drug maker | Medicare |
|---|---|---|---|---|
| 1. Deductible (up to $700) | 100% of the plan’s price | 0% | 0% | 0% |
| 2. Initial coverage (to $2,400) | 25% | 65% | 10% | 0% |
| 3. Catastrophic (after $2,400) | 0% | 60% | 20% | 20% |
Standard benefit for brand-name drugs under the Part D redesign. Generic drugs and some smaller drug makers follow slightly different splits. Your plan’s actual cost sharing depends on the plan.
You only feel the first column, but the others explain why plans manage costly drugs so closely. Since 2025 plans carry a larger share of catastrophic costs than they did under the old design, which is one reason premiums and drug list rules keep shifting.
Phase 1: The Deductible, Up to $700
Your plan year starts in the deductible. You pay the plan’s negotiated price for covered drugs until your payments reach your plan’s deductible. For 2027 the most a plan can set is $700, but plans can set less or none. Details are on our Part D deductible 2027 page.
Drugs that usually skip the deductible
✔
Covered insulin, at $35 or less for a month’s supply
✔
CDC-recommended adult vaccines such as shingles, at $0
✔
Generic tiers in many plans, depending on the plan
✔
Any drug in a plan that has no deductible
Phase 2: Initial Coverage at About 25%
Once the deductible is met, you share each covered drug’s cost with the plan. Under the standard design you pay 25%. Most plans instead list a flat copay for lower tiers and coinsurance for higher tiers, so your share depends on the drug’s tier and on whether you use a preferred pharmacy.
Coinsurance follows the price: if your plan charges a percentage for a brand or specialty tier, your cost moves with the drug’s price. A drug with a new 2027 negotiated price, such as Ozempic or Xtandi, may cost you less in this phase if your plan bills coinsurance, depending on the plan.
Everything you pay in phases 1 and 2 adds up toward the $2,400 limit. There is no separate gap stage waiting for you after this one.
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Phase 3: Catastrophic Coverage at $0
$2,400
your out-of-pocket total that opens this phase in 2027
$0
what you pay for covered Part D drugs after that
Dec 31
the date this phase ends before the cycle restarts
Before 2024, people in catastrophic coverage still paid about 5% of their drug costs with no upper limit. That charge is gone. Once you reach $2,400 in 2027, covered drugs cost nothing at the counter for the rest of the year. Drugs your plan does not cover, or drugs bought outside its rules, still cost you full price. More detail is on our Part D out-of-pocket maximum 2027 page.
What Happened to the Donut Hole?
Before 2025
✔
Four phases: deductible, initial coverage, coverage gap, catastrophic
✔
In the gap you paid 25% of the drug’s price
✔
Drug maker discounts counted toward your limit, which hid how much it cost to get out
✔
No firm dollar cap on yearly spending until 2024
2027
✔
Three phases: deductible, initial coverage, catastrophic
✔
No gap stage at all
✔
A firm $2,400 cap on what you pay for covered drugs
✔
Drug maker discounts are paid in phases 2 and 3 but do not count toward your cap
People still search for the donut hole because it was part of Part D for years. In 2027 it is a term from the past. If a plan or website talks about a coverage gap for 2027, it is out of date.
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Our Math: How Much Drug Spending Reaches the 2027 Cap
We worked out when someone reaches catastrophic coverage under the standard 2027 design: a $700 deductible, then 25% coinsurance until $2,400. The math is $700 plus $1,700 divided by 25%, or $7,500 in total covered drug costs at plan prices. In 2026 the same math gave $6,555.
| Covered drug cost per month | What you pay in January | Month you reach $2,400 | Your 2027 total |
|---|---|---|---|
| $3,000 | $1,275 | March | $2,400 |
| $1,000 | $775 | August | $2,400 |
| $625 | $681.25 | December | $2,400 |
| $400 | $400 | Not reached | $1,725 |
Our calculation from CMS 2027 standard-benefit parameters, with the same drug cost every month and the full deductible on every drug. Plans with copays or a lower deductible will differ. Premiums are not included.
Rule of thumb: if your covered drugs cost more than about $625 a month at your plan’s price, you would likely reach the 2027 cap before the year ends under the standard design.
What Counts Toward the $2,400 Cap
Counts toward the cap
✔
What you pay for covered drugs in the deductible and initial phases
✔
Payments made for you by family members or most charities
✔
Help from Extra Help and State Pharmaceutical Assistance Programs
✔
Payments by AIDS Drug Assistance Programs and the Indian Health Service
Does not count
✔
Your monthly Part D premium
✔
Drugs your plan does not cover, unless an exception is approved
✔
Drugs bought outside the plan’s network or rules
✔
Drug maker discounts paid in phases 2 and 3
If you spread your costs with the payment plan, the amount still counts in full when the drug is filled, not when you pay the bill. Our Medicare Prescription Payment Plan 2027 page explains how those monthly bills are set.
The Bottom Line
The Bottom Line
Part D has three coverage phases in 2027: a deductible of up to $700, an initial phase at about 25%, and $0 catastrophic coverage after $2,400. The donut hole is gone, and under the standard design about $7,500 in covered drug costs, or roughly $625 a month, gets you to the cap.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY 1-877-486-2048) to get information on all of your options.
Frequently Asked Questions
➤ What are the Medicare Part D coverage phases in 2027?
There are three: the deductible, the initial coverage phase and the catastrophic phase. You move through them in order each calendar year, and they reset on January 1.
➤ Is there still a donut hole in 2027?
No. The coverage gap was removed starting in 2025. In 2027 you go straight from initial coverage to catastrophic coverage once your out-of-pocket costs reach $2,400.
➤ When do I reach catastrophic coverage in 2027?
When your out-of-pocket spending on covered drugs reaches $2,400. Under the standard design that takes about $7,500 in total drug costs at plan prices.
➤ Do I pay anything in the catastrophic phase?
No, you pay $0 for covered Part D drugs for the rest of the year. You still pay your monthly premium and full price for drugs the plan does not cover.
➤ Do all plans use 25% coinsurance in initial coverage?
No. 25% is the standard design. Many plans use flat copays for some tiers, and the amount depends on the plan, the drug’s tier and the pharmacy.
➤ Does my premium count toward the $2,400?
No. Only what you or certain helpers pay for covered drugs counts. Premiums are a separate cost.
➤ What happens to my phase if I switch plans mid-year?
Your out-of-pocket total generally carries over to the new Part D plan for the same year, so you do not start the phases again. Ask the new plan to confirm it has your prior spending.
➤ Why did Part D change from four phases to three?
The Inflation Reduction Act redesigned Part D. It removed the coverage gap in 2025 and added a yearly cap on out-of-pocket drug costs that rises with costs each year.
ZRN Health & Financial Services, LLC, a Texas limited liability company.
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