In 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA touches on many things, like changing tax laws, investing in energy infrastructure, creating jobs, and fighting climate change. The IRA also impacts the Medicare program by helping to reduce Medicare members’ out-of-pocket costs for prescription drugs, and expanded coverage for a number of recommended vaccinations. Improvements to Medicare will continue to roll out over time.
Before the IRA, Medicare beneficiaries could get low-income subsidies (or "Extra Help") if their household income was up to 135 percent of the federal poverty limit. Thanks to the IRA, people earning up to 150 percent of the federal poverty limit may be eligible. For 2024, this means an enrollee's annual income must be below $22,590 for an individual or below $30,660 for a couple. Resources like stocks, bonds, and checking or savings accounts are also limited to below $17,220 for an individual or below $34,460 for a couple.
The IRA also ensures that "Extra Help" recipients have a $0 monthly Part D premium and a $0 plan deductible, and do not need to pay a Part D late enrollment penalty if they receive one. Additionally, it caps your costs for a single prescription at up to $4.50 for generics and $11.20 for brand-name drugs.
To see if you may qualify for Extra Help, use our Tax Credit and Subsidy Calculator.
Effective January 1, 2025, total out-of-pocket spending for members with Part D prescription drug coverage will be capped at $2,000 for the year. That means members will never pay more than $2,000 in out-of-pocket costs for covered drugs in 2025.
Starting in 2025, there are only three Part D prescription drug coverage stages: deductible (depending on your plan), initial coverage and catastrophic coverage. No more "donut hole", no coverage gap.
Medicare members with Part D coverage can spread their prescription drug out-of-pocket costs into monthly payments over the course of the plan year. These costs will be billed to members by their plan. Certain Medicare members with high drug costs early in the plan year may benefit from this new payment plan, but it's important to know this program does not lower prescription drug costs.
The Medicare Prescription Payment Plan (M3P) is a new program created under the Inflation Reduction Act that requires Part D plan sponsors to provide their enrollees with the option to pay out-of-pocket prescription drug costs in the form of monthly payments over the course of the plan year instead of all at once to the pharmacy.
Learn more about the program here - Fact Sheet: Medicare Prescription Payment Plan Final Part One Guidance (cms.gov)
Being able to pay high-cost sharing amounts in the form of monthly payments instead of all at once to the pharmacy will improve access to — and affordability of — prescription drugs for some people with Medicare Part D. This option can help program participants who face high-cost sharing for prescription drugs manage these costs by spreading them out over the course of the plan year. While this program is available to anyone with Medicare Part D, enrollees with high cost sharing earlier in the plan year are more likely to benefit from the program. For Medicare enrollees with Part D who are eligible for the Low-Income Subsidy (LIS) (also known as Extra Help), enrollment in Extra Help is more advantageous than the Medicare Prescription Payment Plan. The final part one guidance includes detailed examples of the monthly payment calculation, including for mid-year plan switches.
No, this program does not reduce the amount of money that an individual pays in out-of-pocket costs; it helps individuals with high costs spread those costs out throughout the plan year. The Medicare Savings Programs and Medicare’s Part D Low Income Subsidy program (also called “Extra Help”) are programs that help reduce costs for individuals who qualify based on income and resource limits, and we strongly encourage individuals to check their eligibility for these programs before they consider participating in the Medicare Prescription Payment Plan.
- Anyone with Medicare Part D benefit can participate in this program, everyone is eligible
- If you have high out-of-the pocket cost sharing, you are likely to benefit from the program
- You will receive a “likely to benefit” notice letter, if you have spent over $2,000 out-of-pocket cost earlier in the calendar year (e.g. between Jan through September)
- This payment option might help you manage your monthly expenses, but it doesn’t save you money or lower your drug costs
- When you get a prescription for a drug covered by Part D, we’ll automatically let the pharmacy know that you’re participating in this payment option, and you won’t pay the pharmacy for the prescription (including mail order and specialty pharmacies). Even though you won’t pay for your drugs at the pharmacy, you’re still responsible for the costs. If you want to know what your drug will cost before you take it home, call ATRIO Member Services.
The Extra Help program, for those who qualify, is more advantageous than participation in the Medicare Prescription Payment Plan. At the same time, Part D sponsors must provide all Part D enrollees with the option to participate in the Medicare Prescription Payment Plan, including those in the Extra Help program. CMS recognizes, however, that Part D enrollees incurring high out-of-pocket costs earlier in the plan year are generally more likely to benefit from the Medicare Prescription Payment Plan, as well as Part D enrollees who are not already receiving assistance to pay for their Part D prescription drugs through the Extra Help program or other financial assistance programs.
There are three ways to opt into the M3P with ATRIO:
You can leave the Medicare Prescription Payment Plan at any time by calling Member Services. Leaving won’t affect your ATRIO Health Plans coverage.
Starting with plan year 2025, any Part D enrollee may opt into the program prior to the beginning of a plan year or in any month during the plan year. Part D enrollees or their legal representative will be able to opt in directly with their Part D plan sponsor via several different mechanisms. When Part D sponsors receive a request to opt into the program before the plan year begins, they must process the request within 10 calendar days of receipt. When a request is received during the plan year, they must process it within 24 hours of receipt.
Yes, Part D plan sponsors must have a process in place to allow their program participants to opt out at any point during the plan year. Part D plan sponsors will continue to send monthly bills after someone opts out, and, though they cannot require it, they can also give the Part D enrollee the option to repay their outstanding balance as a lump sum. After opting out, the individual will pay any new out-of-pocket costs directly to the pharmacy. If a participant fails to pay the amount, they are billed by the Part D sponsor, their participation in the program may be terminated following a required two-month grace period. Importantly, the Part D plan sponsor is not permitted to terminate the individual’s enrollment in the Part D plan due to failure to pay Medicare Prescription Payment Plan bills. Part D plan sponsors must also have a reinstatement process in place to allow individuals to resume participation in the Medicare Prescription Payment Plan in the same plan year.
While the Medicare Prescription Payment Plan helps to manage your costs, it doesn’t lower your costs. If you have limited income and resources, find out if you’re eligible for one of these programs:
Many people qualify for savings and don’t realize it. Visit Medicare.gov/basics/costs/help, or contact your local Social Security office to learn more. Find your local Social Security office at ssa.gov/locator/.
Your monthly bill is based on what you would have paid for any prescriptions you get, plus your previous month’s balance, divided by the number of months left in the year.
Your payments might change every month, so you might not know what your exact bill will be ahead of time. Future payments might increase when you fill a new prescription (or refill an existing prescription) because as new out-of-pocket costs get added to your monthly payment, there are fewer months left in the year to spread out your remaining payments.
In a single calendar year (Jan – Dec), you’ll never pay more than:
Please note: We’ll send you a reminder if you miss a payment. You won’t pay any late fees or interest even if your payment is late. If you don’t pay your bill by the due date listed in that reminder, you’ll be removed from the program.
*The following examples should be used for demonstration purposes only. Your monthly payments may vary.
If you opt into the M3P in January 2025 and you fill one Rx with OOP cost sharing = $1,030.37
Step 1. Calculate maximum monthly cap for the first month in which the program is effective
- ($2000 - $0) /12 = $166.67
Step 2. Calculate the maximum monthly cap for the following month (February) & months remaining in the plan year (assuming no Rx filled for all the months remaining in the plan year)
If you opt into the M3P during open enrollment, based on the existing prescription for a high-cost drug.
Step 1. Calculate maximum monthly cap for the first month in which the program is effective
- ($2000 - $0) /12 = $166.67
Step 2. Determine additional OOP costs incurred - $1966 (assuming payment was made in full for Jan, Feb, March)
Step 3. Calculate the maximum monthly cap for the following month (April) & months remaining in the plan year (assuming no Rx filled for all the months remaining in the plan year) $1966/11= 218.44
In April 2025, after opting into the program, the participant fills a new prescription for a 90-day supply. Prior to April, the participant has filled low-cost monthly maintenance drugs, so they have not yet reached their deductible. The total OOP cost sharing for the prescription in April, including the remainder of the $545 deductible, is $617.00
Step 1: Determine the previously incurred costs. The participant has filled multiple, low-cost generic drugs from January through March 2025; the TrOOP Accumulator is $12.00.
Step 2: Calculate the maximum monthly cap for the first month. The month is April; months remaining in the plan year equals 9 ($2,000 - $12.00)/9 = $220.89
Step 3. The plan will bill $220.89 for April, since the OOP incurred amount of $617.00 is higher than the maximum monthly cap.
Step 4: Determine the remaining costs owed by the participant. The participant incurred $617.00 in April and was billed $220.89. $617.00 - $220.89 = $396.11
Step 5: Determine the additional OOP costs incurred by the participant. The participant refills only their generic maintenance drugs during this month. Additional OOP costs incurred = $4.00. The month is May; months remaining in the plan year equals 8 (includes May). ($396.11 + $4.00)/8 = $50.01 If the participant continued this pattern of 90-day fills (with a $120 copay after meeting the deductible in April) and monthly generic fills ($4 copay), their maximum monthly cap would update as shown below.
Last updated Sep 18, 2024
