Medicare Prescription Payment Plan: New Option Starting in 2025

Medicare Prescription Payment Plan: New Option Starting in 2025

In August 2023, the Centers for Medicare & Medicaid Services (CMS) announced a new feature set to roll out in 2025: the Medicare Prescription Payment Plan. This initiative is designed to make prescription costs more manageable by allowing Medicare beneficiaries to spread their out-of-pocket drug costs over 12 months, rather than paying large sums upfront. This option will be available to enrollees in all Medicare prescription drug plans, including Medicare Advantage plans.

How Will the Medicare Prescription Payment Plan Work?

The goal of this new payment plan is to ease the financial burden that many seniors face when affording prescription medications. According to surveys, approximately one-third of seniors report difficulty in paying for their medications, and one in five have admitted to skipping doses to stretch their prescriptions.

Under the current system, Medicare Part D enrollees typically pay out-of-pocket for prescriptions at the pharmacy when they pick up their medications. However, starting in 2025, beneficiaries will have the option to defer these payments. Instead of paying the full cost at the pharmacy, enrollees who opt into the new plan will be billed in smaller, monthly installments by their insurer, making their medication costs more manageable.

It’s important to note that while this plan provides flexibility in how you pay, it does not reduce your overall prescription costs. It simply spreads the payments over time, allowing enrollees to better budget their expenses.

How to Enroll in the Payment Plan.

Starting in 2025, Medicare Part D and Medicare Advantage enrollees can opt into the payment plan by contacting their plan sponsor and completing the election process. This option will be available to all Part D beneficiaries, regardless of whether they are enrolled in traditional Medicare or a Medicare Advantage plan.

Once enrolled, beneficiaries will no longer pay at the pharmacy when picking up their medications. Instead, their insurer will bill them for the costs, broken down into equal monthly payments over 12 months.

Missed Payments and Grace Periods.

While the payment plan is designed to help Medicare beneficiaries manage their drug costs, it’s important to be aware of the terms surrounding missed payments. If an enrollee fails to pay their billed amount, they may be removed from the payment plan. However, CMS guidelines require plan sponsors to follow several steps before termination:

1. Issue Notices for Missed Payments: The plan sponsor must notify enrollees when a payment has been missed.

2. Provide a Grace Period: A grace period of at least two months must be given to allow enrollees to catch up on payments.

3. Reinstatement Opportunity: Beneficiaries who can show good cause for missing payments will have the opportunity to be reinstated in the program.

Also, even if a beneficiary is removed from the payment plan for failure to pay, they cannot be dropped from their Part D plan. The payment plan only affects how they pay for their prescriptions, not their overall coverage.

Is the Payment Plan Right for You?

While the Medicare Prescription Payment Plan will be a great tool for many, it may not be the best fit for everyone. If you have relatively low out-of-pocket prescription costs, this program may offer little benefit. Additionally, if spreading payments out over the year still doesn’t provide enough relief, other financial assistance programs, such as Medicare Savings Programs or Medicare Part D Low-Income Subsidy (Extra Help), may be better options. These programs are designed to help individuals with limited income afford their healthcare costs, though eligibility requirements do apply.

What’s Next?

As 2025 approaches, it is expected that CMS will gather additional feedback from the public and other stakeholders to refine the Medicare Prescription Payment Plan. For now, the plan offers a significant step toward helping Medicare beneficiaries—especially those with high prescription costs—manage their expenses more effectively.

In the meantime, enrollees should begin considering whether this payment plan will be a good fit for their personal financial situation. As with any Medicare option, it’s important to review the details of the plan and consult with a healthcare advisor to determine the best way to manage prescription drug costs.

Conclusion

The Medicare Prescription Payment Plan coming in 2025 represents an important new option for beneficiaries struggling to manage high drug costs. By spreading out-of-pocket expenses over the year, this plan aims to make medication costs more predictable and easier to manage. While not a cost-reduction tool, the payment plan offers relief for seniors who face significant upfront prescription costs, ensuring they can maintain access to the medications they need without breaking the bank. However, it’s essential to weigh this option against other available programs and personal financial needs to make the best decision for your healthcare.