Medicare’s 2027 Annual Enrollment Period Brings Major Shifts In Part D And Advantage Plans

Watch For Your Annual Notice Of Change

Insurers and plans must send current beneficiaries an Annual Notice of Change in the mail by the end of September. The ANOC lists every adjustment to a plan or policy for 2027, including premiums, deductibles, copayments, the list of covered drugs and the provider network.

Read the notices thoroughly. I expect many policies and plans will change materially from 2026 to 2027. A beneficiary does not have to do anything if satisfied that current plans and policies will meet their budget and needs for providers and medications.

Expect Major Shifts In Part D Premiums

Expect major changes in Part D prescription drug policies because the premium stabilization subsidy for these policies ends in 2027.

The Inflation Reduction Act of 2022 limited annual out-of-pocket prescription drug spending for each Part D beneficiary to $2,000 in 2025 and $2,100 in 2026. It will be indexed for inflation after 2026. The law also limited annual increases in the monthly premiums to no more than 6%.

Savings from other changes in the law were expected to cover most of the cost of the ceiling on out-of-pocket spending, with insurance companies absorbing the rest of the cost.

But the cost savings to the government were not as high as anticipated, and the cost of the out-of-pocket limits has been higher than projected. Also, insurers had no experience with the change.

Insurers initially said they would increase Part D premiums substantially for 2025. To avoid that, the government created the Part D Premium Stabilization Demonstration program. The program gave participating insurers additional payments from Medicare when they agreed to limit premium increases. The subsidies continued in 2026 but were reduced.

The subsidies reduced the average Part D premium by $26 per month in 2025 and $16 in 2026, according to the Medicare Payment Advisory Commission. The Centers for Medicare and Medicaid Services estimated the subsidies reduced premiums by 40% in 2025 and 27% in 2026.

Even so, the number of Part D policies available decreased by about 50% over the last few years. CMS initially said the subsidy could last three years but recently decided to end it after 2026. CMS concluded that insurers have enough experience with the program to price their policies accurately, and it said the subsidy appeared to encourage insurers to raise their rates.

The government will continue the reinsurance and direct subsidies that support the program. Only the temporary additional premium subsidy is ending.

The subsidy was about $16 per policyholder per month. Until ANOCs are issued, that amount can be an estimate of how much 2027 premiums might change.

CMS estimates that about 25% of policyholders will see their premiums stay the same or decline from 2026 to 2027.

Another 30% will see increases of less than $10 a month. The remaining 45% will see increases of more than $10 a month, with most of those increases in the $11 to $20 range. The average monthly premium in 2026 was around $36.

How Medicare Advantage Fits Into the Picture

Medicare Advantage plans also offer prescription drug coverage, but they are not affected by this change. Their reimbursements from the government are handled differently.

The average prescription drug premium under an Advantage plan is estimated to be $8 monthly, substantially lower than the $36 average for Part D policies. That means the initial cost gap between original Medicare with a Part D prescription and a Medicare Advantage program is likely to increase.

Some analysts argue that these changes in the Part D program are another way to push beneficiaries into Advantage plans, a goal of many government officials.

Beneficiaries need to review what is available to them during AEP. Study premiums, deductibles, copayments and the medications covered.

Advantage plans often have lower initial annual costs. But only treatments from providers in the plan’s network receive full coverage. Many treatments require prior approval from a plan.

Also, out-of-pocket costs are higher than under original Medicare for Advantage plan members who need significant care during the year.

Expect Fewer Advantage Plan Disruptions — But Stay Alert

Medicare Advantage plan members are likely to see fewer changes than in the last few years but still should be alert.

In the last few years, the CMS increased reimbursements to Advantage plans at lower rates than insurers expected, and it tightened some reimbursement rules. Some insurers left the market, while others cut the number of plans they offered, raised members’ costs or reduced benefits.

There should be less upheaval in 2027.

CMS initially projected that payments to insurers for each Advantage plan member would be essentially unchanged from 2026 to 2027, a forecast that briefly wiped out roughly $100 billion in insurers’ stock values.

But CMS said new data caused it to set 2027 payments 2.48% higher than for 2026, or about $13 billion more than in 2026.

Insurers are also in better financial shape than they were a year ago, as the surge in medical demand that followed the pandemic has eased and their 2026 costs have been lower than expected.

Still, some changes in Advantage plans are likely.

The CMS is moving ahead with eliminating certain billing practices it believes some insurers used to inflate their payments, and bipartisan pressure to slow Medicare’s cost growth is not going away.

Advantage members could still face higher premiums, copayments, and other costs, along with reduced supplemental benefits such as dental, hearing and vision coverage. Some insurers may leave the market or drop specific plans, which would force affected members to find new coverage.

Cost Pressures Will Likely Shape All Medicare Options

Cost pressures will continue on all aspects of original Medicare and Medicare Advantage plans.

The pressures will lead to more changes and make it more important to review coverage changes and alternative coverage each year.

Steps To Take Before The 2027 AEP Begins

Before the 2027 AEP begins, consider the following steps.

• Read the ANOC. It arrives by late September and explains exactly what is changing in the current plans and policies.
• Check for changes in medication coverage. This should be done whether coverage is through a Medicare Advantage plan or a Part D policy. Verify that current prescriptions remain on the formulary. Beware that some medications might be moved to a different cost tier.
• Medicare Advantage members should examine changes to providers and benefits. Look for changes to doctors and hospitals in the network. Verify with current providers that they will remain in the network. Review details about supplemental benefits, such as dental, vision and hearing care.
• Review other coverage options. The Medicare website will have details about the other plans and policies available. The details usually are available before the AEP begins on Oct. 15. Local insurance agents who specialize in Medicare will also have details.
• Compare total expected cost, not just the premium. Add up deductibles, copayments and the out-of-pocket maximum based on anticipated care and medications. The plan with the lowest premium is not always the least expensive.
• Consider prior authorization requirements. These might be a detriment when an illness or injury requires specialized care. Consider reviewing a plan’s record on approvals and denials with the state insurance commissioner.
• Get free, unbiased help. Use the Medicare Plan Finder at Medicare.gov. Or contact the State Health Insurance Assistance Program (SHIP) for personalized counseling at no charge.
• Remember the second window for change. Medicare Advantage members have another opportunity to switch Advantage plans or return to original Medicare between Jan. 1 and March 31, 2027.