Here’s a topline look at what it does and potential next steps for organizations
The Inflation Reduction Act of 2022 was signed into law in August of that year. It includes a section that modifies the Medicare Part D plan by expanding benefits and lowering drug costs with an aim to improve the sustainability of Medicare. These are among the most significant changes to the Part D program ever enacted.
Starting in 2025, the law requires all Medicare prescription drug plans (Part D), including stand-alone plans and Medicare Advantage plans with prescription drug coverage, to offer Part D enrollees an option to pay out-of-pocket prescription drug costs in monthly installments rather than all at once at the time of purchase.
It’s called the Medicare Prescription Payment Plan, and it is intended to especially help people with high cost-sharing earlier in the plan year by spreading expenses over the entire plan year. It’s available to everyone with Part D coverage but may not benefit every enrollee. That’s why it’s recommended that benefits managers work closely with their insurance broker to make sure they’re appropriately maximizing the benefits from the new law.
Here’s an overview of how the new program works, per the details of the new law:
The payment plan (also referred to as “copay smoothing” or “M3P”) may not be the most effective option for members unless their average monthly Part D costs are greater than $167. (That said, the plan is still an option for all Part D members).
Out-of-pocket maximums on prescription drug costs will go down from $8,000 a year to $2,000.
Part D members will have the option to pay prescription costs in monthly installments.
All Part D members are eligible to opt into the program as of 1/1/2025 regardless of low- income status and/or prior challenges with premium payments.
Those opting in will pay $0 at point of purchase and the financed member cost share immediately will contribute to Part D accumulators.
Pharmacy reimbursement doesn’t change. Pharmacies will be paid in full, and the plan sponsor funds the member cost share.
What else will the new law mean for 2025?
In 2024, the new law eliminated member cost share within the catastrophic phase, expanded low-income subsidies to provide full benefits for members up to 150% of the federal poverty level, and limited annual Part D premium increases to 6%.
In 2025 the new law will also provide that:
- Government Reinsurance in catastrophic phase will be reduced from 80% to 20%
- Manufacturers will pay 10% rebate on prescriptions in the coverage period and 20% during the catastrophic phase
