What legislative action introduced the Medicare Prescription Payment Plan?

In August 2022, President Biden signed the Inflation Reduction Act of 2022 into law. This legislation aims to provide financial relief to Medicare beneficiaries by expanding benefits, lowering drug costs, and strengthening the Medicare program.

When did the implementation of the Medicare Prescription Payment Plan begin?

Work towards implementing the Medicare Prescription Payment Plan started in July 2023. CMS issued the first part of draft guidance for the program, including beneficiary payment calculations, program election requirements, and interaction with other prescription drug programs, in August 2023. They released the second part of draft guidance on February 15, 2024, and then, the final part one guidance on February 29, 2024. CMS released the final part two guidance on July 16, 2024.

How can clients opt into the Medicare Prescription Payment Plan?

Clients enrolling in Medicare Part D coverage can opt into the Medicare Prescription Payment Plan for the exising plan year at any time. Existing Part D enrollees can opt in prior to and throughout the plan year by contacting their Part D sponsor and completing the election process.

Does the Medicare Prescription Payment Plan reduce the out-of-pocket cost amount for prescription drugs?

No, the Medicare Prescription Payment Plan does not reduce the out-of-pocket cost amount for prescription drugs. Instead, it makes the payment more manageable by allowing beneficiaries to spread the cost throughout the plan year.

What Insurance Agents Need to Know About the Medicare Prescription Payment Plan Program

Q: What is the Inflation Reduction Act's Medicare Prescription Payment Plan?

The Inflation Reduction Act's Medicare Prescription Payment Plan is a program designed to help ease the burden of high out-of-pocket prescription drug costs for Medicare Part D beneficiaries. Beneficiaries can pay their Medicare Part D out-of-pocket costs over the course of the year.

Q: How does the Medicare Prescription Payment Plan work?

Beneficiaries who opt into the program will not pay upfront and in-full at the pharmacy for their covered Part D prescription drugs. Instead, their Part D plan sponsor will bill them monthly for any cost-sharing amount incurred. If a beneficiary opts out, the sponsor must continue to send monthly bills until the balance is paid, with an option for a lump-sum repayment.

Q: Who qualifies for the Medicare Prescription Payment Plan?

The Medicare Prescription Payment Plan is available to anyone with Medicare Part D, including those in the Extra Help program. Enrollees with high cost-sharing earlier in the plan year, such as those paying for brands and non-preferred drugs, are likely to benefit the most from the program.

Since January 1, 2025, the Inflation Reduction Act’s Medicare Prescription Payment Plan (MPPP) has allowed beneficiaries to pay Medicare Part D out-of-pocket costs over the course of the year.

This is also known as the M3P plan and the Part D smoothing provision.

Become familiar with this program today, so your clients can benefit from it as soon as the 2025 Annual Enrollment Period (AEP)!

M3P Program Overview

All Medicare Part D prescription plans — except for Part D plans that exclusively charge $0 cost-sharing for coved Part D drugs — must offer beneficiaries the option to pay for their prescription drugs in capped monthly payments.

In August 2022, President Biden signed the Inflation Reduction Act of 2022 into law. Part of this law provides financial relief for millions of Medicare beneficiaries.

MPPP is a voluntary Part D option that lets beneficiaries spread high out-of-pocket drug costs over the year in monthly installments. Instead of paying one large lump sum, they can have a more affordable way to cover the costs.

The program includes both stand-alone prescription drug plans (PDP) and Medicare Advantage Prescription Drug (MAPD) plans.

It’s most important to note that this program does not reduce the out-of-pocket cost amount your clients will pay for their prescription drugs. Rather, it will make paying the amount more manageable by spreading the cost throughout the year.

How to Enroll in the Medicare Prescription Payment Plan

Beneficiaries can opt in and opt out of the voluntary program at any time during the calendar year. Your clients can contact their specific health or drug plan directly to make changes to their op-in status by phone, through their website, or an online portal.

Your clients’ participation in the program renews yearly unless they opt out or change plans. If they change to a different Part D plan, they must opt in to the program again under the new plan.

While you, as their agent, can’t submit the application before or after AEP, you can still provide guidance with enrollment forms and links for them to complete the process. Be sure to have a discussion with your clients about whether this plan is right for them and their specific circumstances.

Be sure to have a discussion with your clients about whether this plan is right for them and their specific circumstances.

The earlier a client who is right for the program opts in, the better, as it gives them more time to spread out the drug costs.

How Does the Medicare Prescription Payment Plan Work?

Beneficiaries who opt into the M3P will not pay upfront and in-full at the pharmacy when they pick up their Part D prescription drugs. Instead, their Part D plan sponsor will bill them monthly for any cost-sharing amount incurred. Part D plan sponsors must promptly reimburse pharmacies for the cost-sharing amount that’s normally paid by a beneficiary.

If a beneficiary would like to opt out of the M3P program, Part D sponsors cannot require them to pay a lump-sum repayment or any cost-sharing incurred. The sponsor must continue to send monthly bills until the balance is paid.

It is possible for a beneficiary to pay off their remaining cost-sharing balance in one lump sum should they choose to do so. After opting out of the program, the individual will pay any new out-of-pocket costs directly to the pharmacy.

Howthe Medicare Prescription Payment Program Works

This program does not reduce out-of-pocket prescription drug costs but makes the payment more manageable by spreading it out over the plan year.

Note: Pharmacies cannot opt out of the M3P program unles they opt out of accepting Part D plans.

Why Is the Medicare Drug Payment Program Important for Clients to Know?

Some of your clients may be feeling the burden of high drug costs in recent years. Informing your clients about the Medicare Prescription Payment Plan allows your clients to:

Use cost smoothing — Spreads costs across the year.
Prevent coverage gaps — Integrates with Medicare drug plans, Medicare Advantage, etc.
Enroll at no extra cost — Participation is optional and has no additional costs.
Budget throughout the year — Easier budgeting for monthly expenses without surprise costs.

Letting your clients know about this option will also build trust between you and give full transparency.

Who Qualifies for the Medicare Prescription Payment Plan?

This program is available to anyone with Medicare Part D, including those in the Extra Help program. Enrollees with high cost-sharing earlier in the plan year will likely benefit the most from the program. An example is those paying for brands and non-preferred drugs versus generic.

The Part D smoothing provision is also most beneficial for beneficiaries who might hit the out-of-pocket cap ($2,100 for 2026) early in the year. If someone who takes lower-cost prescriptions opts in, it may make their costs throughout the year more unpredictable and unmanageable. The cost of refills compounding the monthly payments directly causes this.

Part D plan sponsors are required to review their current Part D enrollees’ prescription drug costs from the current year. They must also reach out to those who reached the maximum out-of-pocket cap between January 1 and September 30. During the plan year, Part D plan sponsors must also perform targeted outreach to enrollees they identify as likely to benefit from the program.

If a Part D enrollee meets a $600 out-of-pocket threshold based on a single prescription, Part D sponsors will be responsible for notifying pharmacies at the point of sale. Upon receiving this notification, pharmacies should then provide information on the program to the beneficiary.

Part D sponsors are no longer required to base their identifying criteria on prior authorization processes specifically. Rather, they can develop their own procedure.

Required Education on the Medicare Prescription Payment Plan

Part D plan sponsors are required to include information about the program in current Part D communications materials, including:

Their websites
Member ID cards or separate mailings
Notices to enrollees (e.g., Evidence of Coverage, Annual Notice of Change, and Explanation of Benefits documents)

They also must include information on their websites regarding the low-income subsidy program. This includes information on the recent expansion of eligibility and how to enroll in the program. This should enhance awareness of the program to your clients.

Part D plan sponsors are required to include information about the Medicare Prescription Payment Plan in current Part D communications materials.

Additionally, CMS has released resources that cover the M3P. Updates have also been made to the Medicare & You Handbook.

Partners will be able to access resources and materials on Medicare.gov, including a cost preview feature in the Medicare Plan Finder and a fact sheet.

How to Educate Your Clients on Medicare Prescription Payment Plans

Informing your clients about these plans is crucial. There are a few ways to explain these plans to your clients much easier:

Simplify the message — Focus on using relatable language so your clients can grasp the concept more easily.
Use clear and consistent communication — Use visual aids, plain language, and use multiple channels to reinforce the message.
Understand client needs — Ask questions to your clients to identify if they would benefit from these plans and address their concerns on the complexities of Medicare.
Leverage resources and tools — Use the official Medicare.gov website information and develop “Medicare 101” webinars to better inform your clients.
Highlight key dates and actions — Explain when your clients can opt in and opt out of these plans.
Build trust and support — Act as a guide, not just a salesperson, to help them make informed decisions and leave time for them to ask any questions.

Doing your research and understanding these plans fully will allow you to do the same for your clients and build rapport for your business.

● ● ●

The Part D smoothing provision is an exciting budgeting opportunity for Medicare beneficiaries that will hopefully relieve some stress from financial insecurity many are facing. With uncertain times, having something stable and reliable is a great security blanket for many of those struggling.

If you want to stay up to date on the more of the latest insurance info, complete a quick registration with Ritter to gain our sales support and first-rate resources!

Interested in learning more about selling Part D prescription drug plans? Download our guide!