Starting in 2025, people with Medicare Part D have a new way to pay out-of-pocket costs for prescription drugs: the Medicare Prescription Payment Plan. This plan functions similarly 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 remaining calendar year, providing a compelling option for those who face significant early-year expenses.
All Medicare Part D enrollees, including those receiving Extra Help low-income subsidies, are eligible to opt into the Medicare Prescription Payment Plan. Insurance companies are mandated to participate, and all Medicare Part D plans must offer this plan in 2025.
Enrollment in the Medicare Prescription Payment Plan does not have a minimum spending requirement, and plans cannot restrict participation based on the drugs taken.
After enrolling in the Medicare Prescription Payment Plan, beneficiaries will no longer pay coinsurance, copays, or deductibles for covered prescription drugs at the pharmacy. Instead, they will receive a monthly bill from their Medicare Part D plan for out-of-pocket costs.
The bill for out-of-pocket costs is separate from the monthly premium bill, with beneficiaries receiving two separate bills for which they are responsible. Over time, they will be billed for the full amount of out-of-pocket costs incurred throughout the plan year.
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When enrolled in the Medicare Prescription Payment Plan, the amount of out-of-pocket costs remains the same. Plans cannot add extra fees or interest charges due to participation in the plan.
The plan caps the monthly amount that can be charged, calculated based on incurred out-of-pocket costs, the total yearly cap ($2,000 in 2025), and the number of months remaining in the year. Beneficiaries are billed for a portion of these costs each month, with the bill not exceeding the monthly cap.
The first month enrolled in the Medicare Prescription Payment Plan, beneficiaries are billed for the lesser of two amounts: their actual out-of-pocket costs for covered drugs or their first month’s monthly cap. Subsequent bills will include remaining costs and new expenses, split and billed over the remaining months in the year.
There are two different calculations for the monthly cap under the plan: one for the first month enrolled and another for all subsequent months.
Each individual has their own monthly maximum based on the out-of-pocket expenses for their medications. For individuals on a fixed income, planning to allocate approximately $167 per month ($2,000 / 12 months) could make budgeting simpler.
According to a February memo from the Centers for Medicare & Medicaid Services, Medicare Part D enrollees facing high out-of-pocket expenses early in the plan year are likely to benefit from the Medicare Prescription Payment Plan. However, other enrollees may also find it advantageous.
Some individuals may prefer to even out costs that fluctuate monthly. For instance, those receiving prescriptions in 90-day supplies might opt to spread out payments instead of covering the full out-of-pocket amount every three months.
Medicare Part D plans are mandated to identify and reach out to enrollees who are deemed suitable for the Medicare Prescription Payment Plan, including those who reach the previous year’s out-of-pocket limit before September’s end.
If your Part D plan suggests that you could benefit from the Medicare Prescription Payment Plan, you may receive notifications at the pharmacy during purchase. Alternatively, your plan might contact you via email, mail, or phone.
To enroll in the Medicare Prescription Payment Plan, your Part D plan must offer several opt-in options, such as a form included with your plan ID card, a paper form for mailing, a toll-free phone number, or an online application on their website.
While government guidelines encourage real-time or point-of-sale enrollment mechanisms, they are not obligatory for Part D plans. Therefore, while you may be informed of the plan’s benefits at the pharmacy, signing up on the spot may not be feasible. following sentence: “The cat quickly ran across the street.”
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