What Is the Medicare Prescription Payment Plan?
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People with Medicare Part D have a new way to pay out-of-pocket costs such as copays, coinsurance and deductibles for prescription drugs starting in 2025: the Medicare Prescription Payment Plan. The plan works similar to a “buy now, pay later” option for covered prescription drugs.
The Medicare Prescription Payment Plan allows Medicare beneficiaries to spread out-of-pocket costs for covered prescription drugs over the course of the remaining calendar year. It might be a compelling option, especially for Part D beneficiaries who incur significant out-of-pocket costs early in the year.
Who’s eligible for the Medicare Prescription Payment Plan?
The Medicare Prescription Payment Plan is optional for all Medicare Part D enrollees, including people who receive the Extra Help low income subsidy. Insurance companies are required to participate. All Medicare Part D plans must offer the Medicare Prescription Payment Plan in 2025.
There’s no minimum amount of out-of-pocket spending required to enroll, and plans can’t limit participation based on the drugs you take.
How does the Medicare Prescription Payment Plan work?
After you’ve enrolled in the Medicare Prescription Payment Plan, you’ll stop paying your coinsurance, copay or deductible for covered Medicare Part D prescription drugs to the pharmacy. Instead, your Medicare Part D plan will send you a bill each month for your out-of-pocket costs.
The bill for out-of-pocket costs is separate from your bill for monthly premiums. You’ll have two separate monthly bills for which you’re responsible. Over time, you’ll be billed for the full amount of out-of-pocket costs you incur over the plan year (through December).
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What does the Medicare Prescription Payment Plan cost?
The amount of your out-of-pocket costs doesn’t change when you enroll in the Medicare Prescription Payment Plan. You don’t owe any more or less — you’re just changing when and how you pay those costs. Plans can’t add extra fees or interest charges because you participate.
The Medicare Prescription Payment Plan caps the amount you can be charged each month. That cap is calculated based on the out-of-pocket costs you’ve incurred, the total out-of-pocket cap for the year ($2,000 in 2025) and the number of months left in the year.
Each month, your Medicare Part D plan will bill you for a portion of the out-of-pocket costs you’ve incurred over the course of the year. The bill can’t be higher than your monthly cap (unless you also owe past-due balances from previous months).
How do Medicare Prescription Payment Plan bills work?
In your first month enrolled in the Medicare Prescription Payment Plan, your Medicare Part D plan bills you for the lesser of these amounts:
Your actual out-of-pocket costs for covered Part D drugs for the month.
Your first month’s monthly cap.
So if you have $400 in out-of-pocket costs for the month, but your monthly cap is $166.67, you’d be billed for the lower amount: $166.67. The rest of that $400 would be split up and billed over the remaining months in the year.
But if you have relatively low out-of-pocket costs, you might get a bill for the full amount in that first month. For example, if you have $80 in out-of-pocket costs, but your monthly cap is $150, you’d owe $80 in your first month in the program.
After the first month in the program, your costs — remaining costs you haven’t yet paid, plus any new out-of-pocket costs from the current month — are split up and billed over the months remaining in the year. Each bill can’t be higher than the monthly cap.
There are two different calculations for your monthly cap under the Medicare Prescription Payment Plan: one for the first month you’re enrolled, and one for every month after the first. Each person has their own monthly cap based on the out-of-pocket costs for their medications.
What happens when you reach the annual cap?
You stop incurring out-of-pocket costs once your total out-of-pocket costs for the year reach the annual cap ($2,000 in 2025). Whether you’re paying at the pharmacy counter or being billed under the Medicare Prescription Payment Plan, your annual out-of-pocket costs can’t exceed the cap.
You’ll be able to track your progress toward the cap using Explanation of Benefits (EOB) documents from your plan. When you receive an EOB, it will show information about how much you’ve spent out of pocket, your current drug payment stage and what comes next.
Your actual out-of-pocket costs might be cut off at a lower total than the annual cap if you’re among the roughly 75% of Part D beneficiaries with an “enhanced” plan. Enhanced plans have lower cost-sharing requirements (copays, coinsurance and/or deductibles) than basic plans.
Enhanced plans get credit toward the annual out-of-pocket cap as if they were a basic plan. So if your enhanced plan has a $50 copay where a basic plan would have a $200 copay, you’d accumulate $200 toward the cap of $2,000 in 2025.
After 10 of those $50 copays, you’d accumulate $2,000 toward the cap and stop incurring new out-of-pocket costs, even though you only paid $500 in copays for the year. (But remember that enhanced plans have higher premiums than basic plans, so you’re paying more elsewhere.)
Who is most likely to benefit from the Medicare Prescription Payment Plan?
People who reach the out-of-pocket cap ($2,000 in 2025) can spread their costs more evenly throughout the year by enrolling in the Medicare Prescription Payment Plan. Especially for those on a fixed income, it might be easier to budget for roughly $167 per month ($2,000 / 12 months in the year).
“While this program is available to anyone with Medicare Part D drug costs, Part D enrollees incurring high [out-of-pocket] costs earlier in the plan year are generally likely to benefit,” according to a February memorandum from the Centers for Medicare & Medicaid Services. But others might want to participate, too.
Some people might want to smooth out costs that vary from month to month. For example, if you get prescriptions as 90-day supplies, you might prefer to spread the bills out rather than pay the full out-of-pocket cost every third month.
Medicare Part D plans are required to reach out to enrollees whom they assess as likely to benefit from the Medicare Prescription Payment Plan, including (but not limited to) enrollees who hit the prior year’s annual out-of-pocket cap before the end of September.
If you’re likely to benefit from the Medicare Prescription Payment Plan according to your Part D plan, you might be notified at the point of sale at the pharmacy. Your plan might reach out in other ways, such as by email, mail or phone.
How do I sign up for the Medicare Prescription Payment Plan?
Your Part D plan must offer these options for beneficiaries to opt into the Medicare Prescription Payment Plan:
A form included when your plan ID card is issued after you enroll in a new plan.
A paper form that can be mailed.
A toll-free phone number.
An online application process on their website.
Government guidance documents “encourage” — but don’t require — Part D plans to offer a real-time or point-of-sale enrollment mechanism. So while you might be informed at the pharmacy that you’re likely to benefit from the Medicare Prescription Payment Plan, you may not be able to sign up there.
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