Medicare open enrollment begins October 15 and runs through December 7, giving millions of Americans a chance to review their 2027 health care coverage. This year’s enrollment period comes with changes to prescription drug costs, insurance premiums, and Social Security benefits that could affect retirement budgets.
On October 14, the Social Security Administration announced a 3.6% cost-of-living adjustment (COLA) for 2027, increasing benefits by approximately $75 per month for the average retiree. While that is welcome news, higher Medicare premiums and other health care expenses could offset some of the increase.
With more information about 2027 Medicare costs still to come, retirees should stay informed about potential changes to premiums and coverage. Even those satisfied with their current plans should review their options, compare costs, and make any necessary coverage changes by December 7 to avoid unexpected expenses in 2027.
Understand Your Medicare Options
Medicare offers several coverage options, each with different benefits and costs.
Original Medicare includes Part A for hospital care and Part B for doctor visits, outpatient services, and preventive care. Part A is generally premium-free, while Part B requires a monthly premium.
Medicare Part D provides prescription drug coverage through private insurers. Premiums, covered medications, and out-of-pocket costs vary.
Medicare Advantage (Part C) is an alternative to Original Medicare that often includes prescription drug coverage and additional benefits, such as dental, vision, and hearing services. Provider networks and other restrictions may apply.
Medigap (Medicare Supplement Insurance) helps cover certain out-of-pocket expenses under Original Medicare, including deductibles and coinsurance. It cannot be used with Medicare Advantage.
What’s Changing for 2027?
Several developments are worth noting as retirees evaluate their coverage.
Social Security benefits are increasing 3.6%. The increase takes effect in January 2027. However, many beneficiaries have Medicare Part B premiums deducted directly from their Social Security payments. The actual increase in their monthly deposits will depend partly on those premiums, which have not yet been finalized for 2027.
Prescription drug costs are changing. The annual out-of-pocket limit for covered Medicare Part D prescription drugs will increase from $2,100 in 2026 to $2,400 in 2027. The maximum deductible will also rise from $615 to $700. Some plans have lower deductibles or none at all, making it important to compare coverage.
Medicare Advantage premiums are projected to decline. Federal officials estimate that the average monthly Medicare Advantage premium will decrease from $14.37 in 2026 to $12 in 2027. However, individual premiums, provider networks, and benefits may change. A lower monthly premium does not necessarily mean lower overall health care costs.
As additional Medicare premium and coverage information becomes available, these figures and individual plan costs should be reviewed for updates.
What to Review Before December 7
Your Medicare Advantage or prescription drug plan should provide an Annual Notice of Change explaining what will be different in 2027.
Pay particular attention to:
• Changes in monthly premiums, deductibles, and copayments.
• Whether your prescriptions remain covered and what they will cost.
• Whether your doctors, specialists, and hospitals remain in the network.
• Changes to dental, vision, hearing, and other supplemental benefits.
• New restrictions or authorization requirements for medical services or medications.
A lower-premium plan may have higher out-of-pocket expenses. Compare the estimated annual cost, not just the monthly payment.
Your Income Could Increase Your Medicare Premiums
One lesser-known Medicare rule is that higher-income retirees may pay more for Parts B and D through an income-related monthly adjustment amount, commonly called IRMAA. These additional premiums are generally calculated using income reported on your federal tax return from two years earlier. For 2027, that generally means your 2025 income.
This can create an unexpected expense for retirees who make large withdrawals from traditional IRAs, convert retirement savings to Roth accounts, or sell appreciated investments. These transactions may increase income enough to trigger higher Medicare premiums two years later.
There is another important consideration. If your income has declined because of retirement, the death of a spouse, or certain other life-changing events, you may be able to request a reduction in your Medicare premium adjustment rather than continue paying an amount based on previous income.
Medicare Doesn’t Cover Everything
Original Medicare generally does not cover routine dental care, eyeglasses, hearing aids or long-term custodial care, such as assistance with bathing and dressing. Coverage outside the United States is also limited.
Some Medicare Advantage plans offer additional benefits, but coverage varies. Consider these potential expenses when planning retirement income and savings.
Shopping Around Could Save Money, but There Is a Catch
Medicare Supplement premiums can vary widely among insurers, even when policies offer the same standardized benefits.
However, switching Medigap policies is not always straightforward. After your initial enrollment period, insurers in many states may review your medical history before approving a new policy or determining its cost.
The annual Medicare open enrollment period does not automatically let you switch Medigap policies without medical underwriting. Before canceling existing coverage, confirm that a replacement policy is available and understand the restrictions.
Some eligible Original Medicare beneficiaries are also receiving a one-time $90 Medicare Part B premium rebate in October 2026. This is an automatic payment for those who qualify, not a permanent reduction in premiums.
Sal’s Bottom Line: Look Beyond Your Monthly Medicare Premium
Medicare decisions should be part of your overall retirement and tax planning. The lowest monthly premium isn’t necessarily the best financial choice, especially if you take expensive medications, see specialists regularly, or expect additional medical expenses.
I encourage retirees to review their coverage before the December 7 deadline and consider how the 2027 changes may affect their budgets. With Social Security benefits increasing 3.6%, it is also a good time to evaluate how much additional income you’ll have after Medicare premiums and other expenses.
Just as important, consider the potential Medicare consequences before making large retirement account withdrawals, Roth conversions, or investment sales. These decisions can affect both your taxes and future health care costs.
Keep in mind that Medicare premiums, coverage details, and other costs may change as additional information is released. Review the latest information at Medicare.gov before making enrollment decisions.
At Lawson, Rescinio, Schibell & Associates, we help individuals and business owners understand the financial and tax implications of retirement decisions. If you have questions about how Medicare premiums, retirement income, or tax planning may affect your finances, contact me at (732) 539-7328 or salschibell@lrscpa.com.