How Medicare’s Prescription Payment Plan Works?

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The Medicare Prescription Payment Plan – Smooths Out Part D

If you’re on Medicare and take expensive medications, you know the struggle. The dreaded Coverage Gap (a.k.a. the Donut Hole) used to sneak up on you—usually around the same time—leaving you wondering, “Why did my drug costs suddenly triple?”

I can’t tell you how often I’ve gotten frantic calls from clients asking, “What the heck just happened?!” Their voices carried the shock of someone who had just been handed a $600, $800, or even $2,000 pharmacy bill. It was like getting run over by a semi-truck—except instead of an 18-wheeler, it was a sack of overpriced pills.

Well, I have good news—things are changing in 2025! 🎉The Medicare Prescription Payment Plan program smooths out the big Part D deductible and the massive out-of-pocket costs.

Thanks to the Inflation Reduction Act, Medicare beneficiaries will see a cap on out-of-pocket prescription drug costs—no matter how expensive the medication is. If you take Eliquis, Trulicity, Jardiance, Januvia, or any other high-cost drug, this might just be your hallelujah moment! 🙌

But before we celebrate, let’s break down how the Medicare Prescription Payment Plan (M3P) works—also called “smoothing”— and what you need to know about the deductible on your Part D prescription drug plan.

How Did Part D Work Last Year?

Your Part D prescription drug plan had four cost phases in 2024:

1️⃣ Deductible Phase
You pay the full cost of your medications until you met your annual Part D prescription drug plan deductible (which couldn’t exceed $545 in 2024).
2️⃣ Initial Coverage Phase
You paid copays or coinsurance once you met your deductible while your plan covered the rest.
3️⃣ Coverage Gap (Donut Hole) Phase
If your total drug costs exceed a set amount, you paid more out-of-pocket until you qualified for catastrophic coverage.
4️⃣ Catastrophic Coverage Phase (Gone in 2024!)
Previously, once you reached this phase, you paid only 5% of drug costs. But good news!—this phase was eliminated in 2024, meaning you will never pay more than $2,000 per year in covered prescription costs starting in 2025. 🎉

How Does “Smoothing” Work?

Medicare Prescription Payment Plan medicare prescription payment plan

Medicare Presription Payment Plan medicare prescription payment plan

Medicare knows many people can’t afford to pay thousands of dollars upfront when picking up their prescriptions. That’s where M3P (Medicare Prescription Payment Plan) comes in!

Instead of a large lump-sum payment, you can spread your out-of-pocket costs over 12 months.
This makes paying for medications more predictable and budget-friendly.
It’s a game-changer for people on fixed incomes who need expensive medications.

Essentially, M3P “smooths out” the cost of your prescriptions so you don’t face sticker shock at the pharmacy counter during the first months of the year.

Key Benefits of “Smoothing”

No more giant, upfront payments for expensive medications
Out-of-pocket costs capped at $2,000 per year (starting in 2025)
Predictable, affordable monthly payments instead of surprise bills
More financial flexibility—less stress when budgeting for drugs

How to Enroll in Medicare Prescription Payment Plan

Enrollment in M3P is optional, but if you have high prescription costs, it could be a lifesaver. Here’s how to sign up:

Talk to your Part D prescription drug plan provider to learn how to enroll.
Opt into M3P if you’d rather make smaller, manageable payments instead of one big bill.
Review your payment schedule so you know what to expect each month.

What Is The Benefit of Smoothing?

No more Donut Hole Panic
No more shockingly high pharmacy bills
No more choosing between your drugs and other expenses

The Bottom Line: M3P IS Big Win for Medicare Beneficiaries! 🎉

The new Medicare Prescription Payment Plan (M3P) and the $2,000 out-of-pocket cap will make managing prescription drug costs easier than ever.

If you take expensive medications or worry about affording your prescriptions in retirement, the Medicare Prescription Payment Plan is for YOU! 💙

👉 Need help choosing the right Medicare Advantage or Medicare Part D plan for 2025? Contact us today at 402-614-3389 to speak with a licensed insurance agent for expert guidance! 📞