On A Budget? This Medicare Change Might Help You in 2025

Key takeaways

  • The Medicare Prescription Payment Plan is a budgeting program for Part D and MA-PD beneficiaries that goes into effect in 2025.
  • These individuals can spread out their prescription cost-sharing requirements in monthly installments, instead of paying it all at once at the pharmacy.
  • This is most likely to benefit individuals that have a $600-plus cost-sharing obligation according to their plan.
  • Individuals can enroll for the 2025 plan year, or at any point during 2025.

Some of the most significant changes to Medicare Part D began in 2024, including drug price negotiations and the elimination of the 5% coinsurance during the catastrophic coverage phase. However, in 2025, the out-of-pocket maximum for prescription drug plans will be capped at $2,000 and the Centers for Medicare & Medicaid Services (CMS) will introduceis introducing a new feature: The Medicare Prescription Payment Plan.

What is the Medicare Prescription Payment Plan?

At its heart, this new feature is essentially a voluntary budgeting system for Part D and Medicare Advantage with prescription drug coverage (MAPD) beneficiaries. It allows these beneficiaries to have the option to pay out-of-pocket prescription drug costs in capped monthly payments, instead of all at once at the pharmacy. 

Again, this is voluntary — beneficiaries will have to opt-in to enroll, and eligibility is not based on any income requirements, meaning it’s available to all individuals who have a standalone prescription drug plan, or a Medicare Advantage plan with prescription drug coverage.

Who will benefit from the Medicare Prescription Payment Plan?

While this program is available to all aforementioned beneficiaries, it will likely most benefit individuals with high cost-sharing for prescription drugs, as they can spread out the payment over multiple months. Specifically, CMS believes this will most benefit those with high-cost sharing requirements early in the year.

CMS, in its “Medicare Prescription Payment Plan Final Guidance Part One” from Feb. 2024, believes that 98% of individuals who have a $600 single prescription point-of-sale – meaning a 600-dollar charge to fill a prescription(s) at the pharmacy – will benefit the most from this. 

What does the Medicare Prescription Payment Plan look like?

While everyone’s cost-sharing obligation changes based on the plan in which they’re enrolled, CMS has provided a table about a hypothetical scenario, and what the monthly payments would be. Remember, there is a $2,000 out-of-pocket cap going into effect in 2025, so every beneficiary’s max OOP payment will be no greater than that amount.

There are multiple scenarios that CMS discusses, but we’ll stick to two in this section. The first is essentially for individuals who know they’ll hit the $2,000 OOP cap at some point later in the year. If they opt into the program before January, that $2,000 maximum will be spread out in 12 even installments – or $166.67 per month.

In the second scenario, an individual has no OOP costs in January, but then fills a prescription in February for the rest of the year at a $1,030.37 cost. Instead of paying that at the time of fulfillment, the beneficiary will spread that out over 11 monthly payments at $93.67 per month. 

In both cases, the benefit is clear: If you know you’ll have high cost-sharing for prescriptions in 2025, by enrolling in the program, you can avoid the shock factor of one costly payment, and better budget for the entire year.

For more scenarios on how this plan hypothetically comes to life, please visit the CMS website. The link discusses scenarios in which beneficiaries have multiple prescriptions, some high cost and some low, refilled at different intervals, which results in shifting monthly payments under this payment plan.

Also, keep in mind: This new program does not lower out-of-pocket costs anymore than the new $2,000 limit. The purpose is to allow individuals to better prepare for and budget their prescription costs. In addition, the Kaiser Family Foundation believes that “it is possible” that premiums and drug prices could rise because of some of the other cost-limiting changes going into effect in 2024 and 2025; this new program could help better spread out any cost increase, if that proves true.

RELATED: Medicare Part D: Prescription Drug Savings

How can I enroll in the Medicare Prescription Payment Plan?

You’ll be able to enroll in the Medicare Prescription Payment Plan at the beginning of the plan year, or in any month during a plan year. However, there’s no specific guidance on how you opt in; you’ll have to do so directly with your prescription drug plan carrier (insurance company). 

Interestingly, CMS says it is “committed” to exploring how beneficiaries can opt-in to the plan in real time at point-of-sales systems; however, no clear timeline for this is given. Carriers are required to notify pharmacies when a beneficiary incurs an out-of-pocket cost on covered prescriptions that make it likely they’d benefit from the program; the beneficiary in this case would receive a notice from the pharmacy and could opt-in with their carrier at a later time.

Individuals who enrolled in the plan are also allowed to opt-out through their carrier at any time.

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