What Agents Need to Know About the Medicare Prescription Payment Plan
The Medicare Prescription Payment Plan was created to help lower drug costs and strengthen the Medicare program for the future. In this post, you'll find how the plan works, how the bill is calculated, and more. With this knowledge, you as a licensed insurance agent can help educate your clients on the plan.
What is the Medicare Prescription Payment Plan?
The Medicare Prescription Payment Plan is a new payment option in the prescription drug law that works with a consumers' current drug coverage to help them manage their out-of-pocket Medicare Part D drug costs by spreading them across the calendar year (January-December). Starting in 2025, anyone with a Medicare drug plan or Medicare health plan with drug coverage (like a Medicare Advantage Plan with drug coverage) can use this payment option. All plans offer this payment option and participation is voluntary.
If they select this payment option, each month they’ll continue to pay their plan premium (if they have one), and they’ll get a bill from their health or drug plan to pay for their prescription drugs (instead of paying the pharmacy). There’s no cost to participate in the Medicare Prescription Payment Plan.
How it works
With this program, when someone fills a prescription for a drug covered by Part D, they will not pay their pharmacy (including mail order and specialty pharmacies). Instead, they'll get a bill each month from their health or drug plan.
Even though they will not pay for their drugs at the pharmacy, they're still responsible for the costs. If they want to know what the drug will cost before they take it home, they can call their plan or ask the pharmacist.
This payment option might help manage monthly expenses, but it does not save money or lower drug costs.
How is the monthly bill calculated?
The monthly bill is based on what the consumer would have paid for any prescriptions they get, plus the previous month's balance, divided by the number of months left in the year. All plans use the same formula to calculate their monthly expenses.
The payments might change every month, so they may not know what their exact bill will be ahead of time. Future payments might increase when they fill a new prescription (or refill an existing prescription) because as new out-of-pocket costs get added to the monthly payment, there are fewer months left in the year to spread out the remaining payments.
In a single calendar year (Jan - Dec), they'll never pay more than:
- The total amount they would have paid out of pocket to the pharmacy if you weren't participating in this payment option.
- The Medicare drug coverage annual out-of-pocket maximum ($2,000 in 2025).
Who is most likely to benefit from this?
Those with high drug costs earlier in the year are most likely to benefit from the Medicare Prescription Payment plan. Starting earlier in the year gives more months to spread out the drug costs.
This payment plan might not be the best option for those with low yearly drug costs, drugs that cost the same each month, or those eligible for Extra Help from Medicare.
Examples
| Example 1: Start participating in January with high drug costs early in the year | |||
| Month | Drug costs (without this payment option) | Monthly payment (with this payment option) | Notes |
| January | $500 | $166.67 | This is when they started participating in this payment option. The first month's bill is based on the "maximum possible payment" calculation. They calculate the bill for the rest of the months in the year differently. |
| February | $500 | $75.76 | |
| March | $500 | $125.76 | |
| April | $500 | $181.31 | This month they reached the annual out-of-pocket maximum ($2,000 in 2025). They'll have no new out-of-pocket costs for the rest of the year. |
| May | $0 | $181.31* | *They'll still get their $500 drugs each month, but because they've reached the annual out-of-pocket maximum, they won't add any new out-of-pocket costs for the rest of the year. You'll continue to pay what they already owe. |
| June | $0 | $181.31* | |
| July | $0 | $181.31* | |
| August | $0 | $181.31* | |
| September | $0 | $181.31* | |
| October | $0 | $181.31* | |
| November | $0 | $181.31* | |
| December | $0 | $181.31* | |
| Total | $2,000 | $2,000 | They'll pay the same total amount for the year, even if they don't use this payment option. |
| If a consumer is concerned about paying $500 each month from Jan to April, this payment options can help them manage their costs. If they prefer to pay $500 each month for 4 months and then pay $0 for the rest of the year, this payment option might not be right for them. | |||
| Example 2: Start participating in January with consistent drug costs throughout the year | |||
| Month | Drug costs (without this payment option) | Monthly payment (with this payment option) | Notes |
| January | $80 | $80 | This is when you started using this payment option. Remember, your first month’s bill is based on the “maximum possible payment” calculation. We calculate your bill for the rest of the months in the year differently. |
| February | $80 | $7.27 | |
| March | $80 | $15.27 | |
| April | $80 | $24.16 | |
| May | $80 | $34.16 | |
| June | $80 | $45.59 | |
| July | $80 | $58.93 | |
| August | $80 | $74.92 | |
| September | $80 | $94.93 | |
| October | $80 | $121.59 | |
| November | $80 | $161.59 | |
| December | $80 | $241.59 | |
| Total | $960 | $960 | They'll pay the same total amount for the year, even if they don't use this payment option. |
| Depending on a consumer's specific circumstances, they might not benefit from using this payment option due to the higher payments that start in September. | |||
| Example 3: Start participating in April with varying costs throughout the year | |||
| Month | Drug costs (without this payment option) | Monthly payment (with this payment option) | Notes |
| January | $4 | $4* | *Payments made directly to the pharmacy before they started participating in the Medicare Prescription Payment plan |
| February | $4 | $4* | |
| March | $4 | $4* | |
| April | $617 | $220.89 | This is when they started using this payment option. The first month's bill is based on the "maximum possible payment" calculation. They calculate the bill for the rest of the months in the year differently. |
| May | $4 | $50.01 | |
| June | $4 | $50.59 | |
| July | $124 | $71.25 | This month, they need a drug that's $120, in addition to the $4 drug. Following the same formula as May, the payments increase because they're added drug costs during the year, but there are fewer months left in the year to spread the payments across. |
| August | $4 | $72.05 | |
| September | $4 | $73.05 | |
| October | $124 | $114.39 | This month, they need a drug that's $120, in addition to the $4 drug. Following the same formula as May, the payments increase because they're added drug costs during the year, but there are fewer months left in the year to spread the payments across. |
| November | $4 | $116.39 | |
| December | $4 | $120.38 | |
| Total | $901 | $901 | They'll pay the same total amount for the year, even if they don't use this payment option. |
| Depending on the consumer's specific circumstances, they might not benefit from using this payment option due to the higher payments that start in September. | |||
How consumers can sign up
Consumers can sign up by visiting their health plan's website or by calling their plan. They can start participating in this plan at any time.
Remember, this payment option may not be the best choice if they sign up late in the calendar year (after September). This is because as new out-of-pocket drug costs are added to their monthly payment, there are fewer months left in the year to spread out the payments.
After they sign up, their health or drug plan reviews the participation request, and they'll send the consumer a letter confirming their participation in the Medicare Prescription Payment plan. Then, once they get a prescription for a drug covered by Part D, they plan will automatically let the pharmacy know that they're participating in this payment option and they won't pay the pharmacy for the prescription.
Each month, their plan will send them a bill with the amount they owe for their prescriptions, when it's due, and information on how to make a payment. They will get a separate bill for their monthly plan premium (if they have one).
How consumers can leave
Consumers can leave the Medicare Prescription Payment Plan at any time b y contacting their health or drug plan. Leaving will not affect their Medicare drug coverage and other Medicare benefits.
However, if they still owe a balance, they are required to pay the amount they owe, even though they are no longer participating in this payment option. They can choose to pay the balance all at once or be billed monthly. After leaving the Medicare Prescription Payment plan, they will pay the pharmacy directly for new out-of-pocket drug costs.
What happens if they change health or drug plans?
If they leave their current plan, or change to a new Medicare drug plan or Medicare health plan with drug coverage (like a Medicare Advantage plan with drug coverage), their participation in the Medicare Prescription Payment Plan will end.
They will need to contact their new plan if they'd like to participate in the Medicare Prescription Payment Plan again.
Source: Medicare.gov, https://www.medicare.gov/publications/12211-whats-the-medicare-prescription-payment-plan.pdf