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The 2025 prescription payment plan is available to Medicare Part D beneficiaries. It lets them pay high out-of-pocket prescription costs over the course of months instead of all at once. The other name for The prescription payment plan is Smoothing. The payment plan is part of an effort to make prescription drugs more affordable for Medicare beneficiaries.

How the prescription payment plan works

Any Part D plan enrollee can participate in the prescription payment plan as long as they have high-cost prescriptions that are on their plan’s formulary. Beneficiaries have the chance to divide their out-of-pocket prescription costs into manageable monthly payments.

Eligible beneficiaries can contact their Part D insurance provider to opt into the program. The plan provider will calculate the payments to spread out evenly over the course of the year. The beneficiary can contact their insurance Part D provider if they need to add prescriptions to their current arrangement and have it adjusted.

Enrollees do not pay a cost to participate in the payment plan. Beneficiaries do not pay interest or penalties on their medication costs.

How to join the prescription payment plan

It should be fairly simple to enroll in the plan. In some instances, the Part D plan provider may contact beneficiaries who are known to have high-cost prescriptions. Beneficiaries who are interested in the plan should contact their plan provider for instructions to opt in.

Why enroll in the plan

There are many reasons to enroll in this program. Enrollment may help beneficiaries manage their budget by spreading out their prescription costs. This is a great way to avoid a large bill at the pharmacy.

Knowing there is an alternative to a large bill, may help ensure beneficiaries fill their necessary prescriptions without having to face financial stress. In some cases, beneficiaries have had to go without needed medications due to budget concerns. This help eliminate that issue. The plan also provides peace of mind with the safety of predictable monthly costs.

Click here to learn about the $2,000 annual cap on Out-of-Pocket prescription costs

Watch a YouTube video on the drug cap for 2025

Each year, Medicare makes changes to the plans beneficiaries are offered. This is why both agents and beneficiaries need to stay up to date on all changes that place. Knowing all the choices available helps beneficiaries receive the coverage they need and plan for their year ahead. A licensed insurance agent can provide advice to ensure beneficiaries choose a plan that suite their needs and budget.

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Understanding Medicare Part D Costs in 2025

Medicare Part D, the part of Medicare that covers prescription drugs for millions of Americans, provides significant savings but comes with costs that beneficiaries need to plan for. Each year, adjustments are made to premiums, deductibles, and other costs associated with Part D. There will be some significant changes to the Medicare Part D costs 2025. We will discuss the Part D costs, what changes to expect, and tips to manage these expenses.

Watch a YouTube video on the Part D drug cap

Key Cost Components of Medicare Part D

Medicare Part D plans are offered by private insurance companies. Each plan has varying costs depending on the specific plan chosen. In 2025, the cost structure will include four main components:

Monthly Premiums

Medicare Part D premiums vary significantly, depending on plan and location. The average monthly premium for 2025 is around $40. Keep in mind, premiums for individual plans may be as high as $150 or as low as $0. Additionally, some beneficiaries qualify for the Medicare Extra Help program, which can help reduce premiums and other Part D costs.

Annual Deductible

In 2025, Medicare Part D’s standard annual deductible is capped at $590, though not all plans charge the maximum deductible. In general, plans use tiered pricing, meaning they might charge no deductible for lower-tiered drugs.

Initial Coverage Phase

Once the enrollee meets the deductible, they enter the initial coverage phase. During this phase, enrollees are responsible for a copayment or coinsurance for each prescription. In 2025, the initial coverage limit will be set at $2,000. This means that once the amount spent by the plan and the beneficiary reaches this threshold, enrollees transition to the catastrophic phase.

Catastrophic Coverage

In past years, after reaching the coverage gap or donut hole, beneficiaries would enter the catastrophic phase, with Medicare covering the bulk of prescription costs. A major shift in 2025 is the elimination of coverage gap/donut hole phase, meaning enrollees won’t have to pay coinsurance or copayments after reaching the catastrophic coverage limit of $2,000 in true out-of-pocket costs. This limit provides significant relief, especially for those needing high-cost medications.

Changes and Reforms Affecting Part D Costs in 2025

The Inflation Reduction Act (IRA) of 2022 brought changes to Medicare Part D in an effort to improve cost predictability and help enrollees manage high prescription drug expenses. Here’s a breakdown of the key IRA-related reforms that apply in 2025:

$2,000 Annual Out-of-Pocket Cap
Starting in 2025, Medicare Part D beneficiaries will have an out-of-pocket cap of $2,000 per year on prescription drugs. This landmark change helps beneficiaries with high drug costs avoid excessive spending and will particularly benefit those with high-cost prescriptions as long as they are on their plan’s formulary.

Monthly Payment Options
Medicare will introduce a “smoothing” option for beneficiaries with high prescription costs. This allows enrollees to spread out payments over the course of the year, rather than facing steep costs in any one month.

Managing Medicare Part D Costs in 2025

Compare Plans Carefully

Each Part D plan varies in terms of premiums, deductibles, and formulary (the list of covered drugs). Enrollees should review all available options carefully each year during the Medicare AEP (October 15 – December 7). A licensed Medicare agent can help to ensure beneficiaries choose a plan that best meets their needs and budget.

Use preferred pharmacies

Most Medicare Part D plans have preferred pharmacy networks where beneficiaries can get lower costs. Using these pharmacies can reduce copayments and coinsurance expenses. If enrollees use an out of network pharmacy, prescription drugs will usually cost more.

Ask your provider about lower-cost options

In some cases, when a beneficiary has a high-cost medication that is not on their plan’s formulary, they may want to ask their healthcare provider if there are generic or alternative medication that may be more affordable. Sometimes, a small change in medication can lead to considerable savings. If there is no generic available, their provider may need to ask for a formulary exception. When this is the case, the PDP plan provider agrees to pay for a non-formulary medication.

Evaluate Extra Help Options or patient assistance programs

Those who have a limited income and resources, may qualify for Medicare’s Extra Help program, which can help cover premiums, deductibles, and copayments. This program offers significant savings and could reduce costs drastically.
Additionally, many pharmaceutical companies offer assistance programs that provide discounts on high-cost drugs. Checking for available assistance can be a good strategy, especially for high-cost or specialty medications.

Preparing for 2025 and Beyond

The changes coming to Medicare Part D in 2025 are a step towards making prescription drugs more affordable for Medicare beneficiaries. The introduction of an annual out-of-pocket cap and the smoothing program can help provide Medicare enrollees better predictability of their prescription drug costs.

Anyone who relies on Medicare Part D, should review plan details and explore resources to manage these costs effectively. By understanding the structure of Part D and the recent changes, beneficiaries can maximize savings and access their medications without breaking the bank.

Medicare drug price negotiations

Because of the high cost of some prescription drugs for Medicare beneficiaries, the CMS has announced the first 10 drugs that will be subject for Medicare drug price negotiations.  The negotiations are part of the Inflation Reduction Act.  Up until recently, Medicare has been able to negotiate prices for medical care beneficiaries receive but this did not include the costs of medications.  This is about to change when the negotiated prices go into effect as of 2026.

Watch a quick video on the Medicare Part D changes 

Medicare will negotiate with drugmakers over the cost for the some of the most expensive medications and does not apply to drugs that have a generic alternative.  The first 10 medications chosen for negotiations are:

1. Eliquis (a blood thinner)
2. Enbrel (for rheumatoid arthritis)
3. Entresto (for heart failure)
4. Farxiga (for diabetes, heart failure & chronic kidney disease)
5. Fiasp & Novalog (for diabetes)
6. Imbruvica (for blood cancers)
7. Januvia (for diabetes)
8. Jardiance (for diabetes)
9. Stelara (for psoriasis & Chron’s disease)
10. Xarelto (a blood thinner)

According to the CMS, the 10 drugs above accounted for 20% of the Medicare Part D spending ($50.5 billion) during the period from June 2022 through the end of May 2023.  Part D of Medicare covers prescriptions taken by beneficiaries at home.  It does not cover medications administered by medical providers in medical facilities for treatment of things like cancer or other health conditions.  In these situations, Medicare Part B covers the necessary drugs.

Click here to read the drug price negotiation fact sheet 

Medicare beneficiaries spend billions of dollars for prescription drugs

Because of the high cost of some essential medications, beneficiaries sometimes have to either limit basic needs or go without the drugs that help maintain their quality of life.  All the while, drug manufacturers rake in record setting profits.

These 10 drugs are just the beginning

This list of 10 drugs is just the starting point.  In 2027 Medicare hopes to add 15 more drugs and even more in the years that follow.  This list will grow each year as long as the drug manufacturers are unsuccessful in their attempts to stop the drug cost negotiations.

Find out about the Medicare prescription payment program.

What will drug manufacturers do

If the drug companies do not agree to the negotiations, they face possible tax penalties.  Drug manufacturers can avoid the tax penalty if they remove their drug from the Medicare market.  However, if they do that, they will take lifesaving drugs from Medicare beneficiaries as well as lose a large part of their market share.

Some large drug companies are seeking legal counsel to stop the drug price negotiations.  They argue that the loss in income will affect their ability to fund necessary research and development and that in turn will reduce their ability to produce new medical treatments.

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Medicare Prescription Payment Plan Program

As of January 1,2025, the Medicare Prescription Payment Plan Program will go into effect. This program is one of the changes CMS is making to the Medicare Part D prescription program.  The new plan design is part of the Inflation Reduction Act.  As part of the Biden administration’s effort to reduce the cost seniors pay for prescription drugs, they will have the option to spread their out-of-pocket costs out over 12 months.

CMS released draft guidance documents that outline the voluntary Medicare prescription payment plan program.  The program begins January 1, 2025.  This program provides beneficiaries the opportunity to enroll in a monthly payment plan that will spread the cost of their prescription out of pocket costs out over the course of the year.  This is an effort to provide relief for Medicare beneficiaries who struggle with high upfront costs for prescriptions and ensures they have access to the life-saving medications they need.

More about the changes for 2025

Beginning in 2025, seniors can choose to pay their out-of-pocket drug costs through a capped monthly installment plan and do not have to worry about paying all at once at the pharmacy.   This is especially helpful to beneficiaries who have a higher cost share at the start of the year.  They can spread the cost out over the course of.  This will also go into effect in 2025.the year.

Learn more about the Medicare drug cap

Click here to watch a quick video on potential changes to Medicare commission payments for 2025

In addition to the Medicare Prescription payment plan program, the Inflation Reduction Act will put an annual cap of $2,000 on out-of-pocket drug costs under Part D

Click here to read the CMS fact sheet on the program.

The CMS includes instructions on how prescription drug plans can identify patients who may benefit from the program.  It also offers ways to notify them about the program with the use of their own pharmacy.  There are also rules that ensure prescription drug plan carriers reimburse pharmacies promptly for the cost sharing amount beneficiaries would normally have to pay up front.

If a beneficiary decides to enroll in the new program, they can simply notify their insurer starting in 2025.

There are still some key pieces of information missing. CMS must specify how the new program impacts the insurers plan bids for 2025. CMS says the information will be available early in 2024 as part of the second draft guidance.  The second draft guidance will also include details on beneficiary outreach as well as how insurance plans will be tracked and enforced.   Please note: CMS normally does not release its bid guidance until spring.

The current guidance document provided by CMS enacts the drug pricing reforms passed under the Inflation Reduction Act. The $35 monthly insulin cap for Medicare beneficiaries has already been implemented by CMS.  and the agency must release the first 10 drugs subject to Medicare and drugmaker price negotiations by Sept. 1.

Find out about the first 10 drugs subject to Medicare and drug manufacturer price negotiations.

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