5 Things to Know About the New Medicare Prescription Payment Plan

Starting in 2025, Part D enrollees can spread their medication costs throughout the year

Rachel Nania,

AARP

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Published October 11, 2024

Photo Collage: AARP (Source: Shutterstock; Adobe Stock)

A few big changes are coming to Medicare Part D in 2025, and one of them will affect how some people pay for their prescription medications when it comes time to fill them.

People with a Medicare prescription drug plan won’t pay more than $2,000 in out-of-pocket expenses for their prescription drugs in 2025 — a historic change backed by AARP that’s expected to benefit more than 3 million older Americans next year. Still, for those taking medications with out-of-pocket costs that near or exceed this cap at the beginning of the year, coming up with a few thousand dollars all at once isn’t easy.

Starting Jan. 1, people with a Medicare prescription drug plan — including Medicare Advantage plans with prescription drug coverage — will have the option to spread their prescription drug costs throughout the year, instead of paying them all at once. This means a $2,000 bill in January could become a $167 monthly payment.

New Rx Spending Limit Takes Effect in 2025

Starting Jan. 1, people with a Medicare prescription drug plan will not have to pay more than $2,000 in out-of-pocket prescription drug expenses in 2025. The new cap, which is part of the prescription drug law that AARP fought for, is expected to benefit nearly 3.2 million older Americans next year and more than 4 million by 2029, according to AARP research.

Read more about the Part D prescription drug cap at aarp.org.

The program, called the Medicare Prescription Payment Plan, won’t save people money on their medication expenses, says Meena Seshamani, M.D., who directs the Center for Medicare. But it may address the “cash flow issue” that many people face when it comes time to pay for their medications.

People “experience sticker shock if they have one prescription that has a very high cost and they have to pay all of that in one lump sum,” Seshamani says. The new payment plan “enables these people to spread their out-of-pocket costs out over the remainder of the year, so they don't have this sudden spike of having to pay all of this money up front.”

Here are five things to know about the new program and how it works.

1. You won’t pay for your prescriptions at the pharmacy counter

If you’re used to paying for your meds at the pharmacy counter, things will look a little different under this new program.

Instead of paying when you pick up your prescriptions (or when you order them online), you’ll get a bill each month directly from your drug plan. (Your plan will let the pharmacy know that you’re participating in this payment option.)

This bill will be separate from the monthly bill for your plan premium, if you have one.

2. Your bill could look different every month

Because of how the monthly bill is calculated — the formula 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 — what you owe may change every month, especially if your doctor prescribes a new medication midway through the year.

“That's going to add on to their monthly payments,” Seshamani says.

It’s important to know, however, that the sum of these monthly bills will never exceed what you would have paid out-of-pocket by the end of the calendar year if you weren’t participating in the program. And you won’t have to pay more than the $2,000 out-of-pocket maximum for 2025.

Medicare.gov has three examples of how a bill might look for someone participating in the payment plan, based on three different situations.

3. The program won’t be a great fit for everyone

“I really cannot emphasize enough that this plan might not make sense for everyone in Medicare,” Seshamani says.

People who have high drug costs earlier in the year are more likely to benefit from it, “because it will enable you to spread out those costs” over several months, Seshamani says.

It makes less sense for someone with low or manageable monthly medication expenses. It’s also less likely to help people who enroll later in the year when there are fewer remaining months to spread out the payments.

Seshamani’s advice: Talk to your health plan to see whether this program is right for you.

“That is the best place to go for advice on whether someone is likely to benefit from this program, because your health plan will understand your unique needs, what pharmacies you use, your prescriptions and your overall benefits,” Seshamani says.

Medicare.gov also has a tool that can help you determine whether the program is right for you. And you can use a new cost preview feature in the Medicare Plan Finder to compare your monthly costs with and without the program.

4. You can enroll during open enrollment — or any time next year

To enroll in the program, contact your health or drug plan.

If you already know you want to participate in the Medicare Prescription Payment Plan for 2025, you can sign up during open enrollment (which starts Oct. 15) through your health or drug plan. If you decide to join after Jan. 1, you can enroll anytime during the year.

“If you don't have a high-cost drug now and then you get one during the course of the year, you can always see at that point, also, if enrolling in the Medicare Prescription Payment Plan would benefit you,” Seshamani says.

There’s no cost to participate in the program.

5. There are other ways to lower your drug costs

The payment plan will not lower your prescription drug costs, but you may be eligible for other programs that do, Seshamani says, including Medicare’s Extra Help program, which was recently expanded under the 2022 prescription drug law, and Medicare Savings Programs.

“So look into those avenues first, because those programs actually lower your drug costs,” Seshamani says.

It’s also important to remember to compare drug plans, especially with open enrollment running Oct. 15 through Dec. 7. For example, if you take specific medications, look at plans that include your prescriptions on their formulary; then compare costs across the plans.

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