Who should, and shouldn’t, sign up for the new Medicare Prescription Payment Plan

Like so many things about Medicare, making the decision is not simple.

“It’s complicated and it’s nuanced,” says Amy Niles, chief mission officer of the PAN Foundation, a health care affordability and accessibility nonprofit. “Generally speaking, it is a very good reform, but it is not for everybody.”

Why the Medicare Prescription Payment Plan was created

The Medicare Prescription Payment Plan—or M3P as it’s been dubbed—was put into the Inflation Reduction Act of 2022 to help Medicare beneficiaries avoid being socked with steep drug costs during certain months of the year.

Beneficiaries can encounter that problem either when they take expensive brand-name drugs or have high out-of-pocket costs early in the year because they haven’t yet reached their Part D plan deductible.

A 2023 study published in JAMA Network Open found that 20% of Medicare beneficiaries didn’t take or get their prescriptions because they couldn’t afford them. The health research group KFF estimates that 5 million Medicare beneficiaries with Part D plans had out-of-pocket prescription drug costs of $2,000 or more in at least one year between 2012 and 2021.

How you’ll pay for prescriptions with the Medicare Prescription Payment Plan

If you sign up for M3P with the Part D prescription plan you choose for 2025—a stand-alone plan or one that’s part of a private insurer’s Medicare Advantage plan—you won’t pay for medications at the pharmacy. Instead, you’ll get a monthly bill for them from your Part D plan as well as its monthly premium, if there is one.

The promise of M3P is “smoothing” out monthly prescription costs throughout the year for people who could use the help to afford their medications.

“The result of the Medicare Prescription Payment Plan is going to be more seniors being able to pick up their prescriptions next year,” says Brian Whorley, CEO of Paytient, a company handling the software for about 40% of the nation’s Part D plans. “This is going to expand access, improve affordability, and people are going to be more adherent.”

The public seems unaware of the new payment program

That assumes people know about the program. Many apparently don’t.

“We went to a pharmacy in my hometown of Columbia, Missouri, and asked folks: ‘Have you heard of this thing called the Medicare Prescription Payment Plan?’ And no one knew anything about this,” says Whorley.

Medicare’s new Medicare & You 2025 booklet for beneficiaries doesn’t mention M3P until page 83, and only for two paragraphs there.

Some Medicare beneficiaries may mistakenly believe enrolling in the program will reduce their drug costs.

“This is not a cost-reduction program. It’s a cost-shifting program,” says Casey Schwarz, senior counsel for education and federal policy at the Medicare Rights Center.

As Medicare’s site says in bold type: This payment option might help you manage your expenses, but it doesn’t save you money or lower your drug costs.

“Some people may see a significant benefit from the ability to shift their costs throughout the year. Others won’t see as much of a benefit,” Schwarz says. “And it may even be worse for their financial planning, depending on how they encounter their drug costs throughout the year and their expected financial situation through the year.”

As Georgia Gerdes, a senior training specialist at the AgeOptions Area Agency on Aging in the Chicago suburbs, says, “My key takeaway is the Medicare Prescription Payment Plan is not a one-size-fits-all program.”

The payment plan’s payment formula

To understand who should or shouldn’t consider signing up for M3P and how enrolling could even make your monthly out-of-pocket expenses rise at the end of 2025, you need to understand how the “smoothing” formula will work.

Since Medicare will cap out-of-pocket Part D prescription costs at $2,000 in 2025 (the cap doesn’t apply to prescriptions not covered by your plan; Part B medications received at a doctor’s office; or Part B medical devices like continuous glucose monitors), you might think that M3P would just even out your maximum outlay at $167 every month, which is $2,000 divided by 12.

You’d be mistaken.

Instead, the rolling formula all Part D plans will use for monthly bills of people with M3P is this: What you would have paid for any prescriptions that month plus your previous month’s balance divided by the number of months left in the year.

That means your monthly cost will vary depending on which prescriptions you’ve taken, how regularly, when you started them, whether you stopped them and how much they cost.

In other words, despite the program’s “smoothing” tag, you likely won’t be spending exactly the same amount every month.

Worries about surprise bills at year-end

“The concern I have is folks who have relatively stable drug costs signing up for the payment program. It will, in fact, make them less stable. And we don’t want to see folks with a surprise increase in costs as the year goes on,” says Schwarz.

Stacie Dusetzina, a professor of health policy at Vanderbilt University, believes large surprise bills at the end of the year may be an unintended consequence of M3P.

The Medicare site has a useful section explaining the Medicare Prescription Payment Plan, and its Plan Finder tool lets you see what your monthly prescription costs would be with M3P for any Part D plan where you live.

Here’s how: After plugging in your prescriptions and preferred pharmacies, you look up a plan and go to “Plan Details.” After “Yearly Drug Costs By Pharmacy,” you’ll find an explanation of the Medicare Prescription Payment Plan, details about it, and what your drug costs might look like if you use it.

You may find that your monthly costs with the plan will differ from one Part D plan to another depending on how much each charges for your prescriptions, says Gerdes.

Medicare’s Plan Finder also has a new tool to help you determine whether M3P would help you. It asks five simple questions about your drug costs and then explains whether the payment program would likely help you.

Who should and shouldn’t consider the Medicare Prescription Payment Plan

The types of people who would be most likely to benefit by signing up for M3P are:

• Those who will have more than $2,000 in out-of-pocket Part D prescription costs in the first nine months of 2025
• Those who will owe more than $600 in a single Part D prescription cost in any month
• Those who have high Part D deductibles and want to smooth them out over the year

An analysis by Dusetzina also found M3P could be useful for people with out-of-pocket costs of $250 a month for chronic-disease medications starting in January.

“This is the type of person who would be least likely to have any downside from enrolling in the plan,” Dusetzina tells Fortune. “You’ll hit that out-of-pocket maximum of $2,000 early enough in the year that you never barely go over $250 with the payment plan.”

The types of people who’d be least likely to benefit by signing up for M3P are:

• Those whose yearly drug costs are low
• Those whose out-of-pocket Part D prescription costs are the same every month (since there’s nothing for them to smooth out)
• Those who can manage their monthly out-of-pocket Part D prescription costs
• Those who get Part D subsidies through Medicare’s Extra Help plan for people with limited income (under roughly $23,000; $31,000 for married couples) and resources, or Medicare Savings Programs or similar programs from drug companies and groups like the PAN Foundation
• Those who sign up after September 2025

“If you take a bunch of fairly low-cost generic pills and you’re nowhere near the $2,000 cap, as long as you have money in your bank account and budget, the payment plan is probably not worth it at all,” says Niles.

If your Part D plan sees that you incurred $2,000 or more in out-of-pocket prescription costs in 2024, it must let you know that you’re likely to benefit with M3P.

What could happen at the drugstore

And if you will owe $600 or more for a prescription at the drugstore and haven’t enrolled in M3P, your pharmacy is supposed to tell you about the payment plan and give you a “Likely to Benefit Notice.”

But, Dusetzina says, “pharmacists are very, very busy, and it’s very difficult for them to spend a lot of time with you.”

And if your conversation with the pharmacist persuades you to sign up for M3P, get ready for this: You’ll probably need to leave without the medication, go home to fill out the form, and then return to the pharmacy to pick up the prescription.

You can sign up for the Medicare Prescription Payment Plan any time, but you get the most help from it by doing so during Open Enrollment. That way, your out-of-pocket costs will be smoothed out throughout the entire year.

The payment plan could work against if you begin enrolling late in 2025 and haven’t yet spent $2,000 in Part D costs.

That’s because with the M3P formula, says Schwarz, “every month you have not hit your out-of-pocket maximum of $2,000 and you’re adding to your drug costs, you are adding to the amount that is then spread over the remaining months of the year and that number of remaining months is getting shorter.”

Says Dusetzina: “One of the things that’s going to be really annoying is if your prescription drugs’ price ends up going up to a couple of hundred dollars or $300 or more toward the end of the year as you’re getting into the holidays and maybe want to spend a little of that money to travel and see family or buy people gifts.”

If you are filling prescriptions and you’re on the payment plan and didn’t hit the $2,000 cap, it could have a really weird effect where you keep adding money to your outstanding balance. So some consumers taking one or two brand-name drugs every month might actually find themselves having bills that look like they’re going up.

Two prescription plan bills, not one

Another wrinkle in M3P: Since you won’t be paying for the prescriptions at the drugstore or by mail order, you’ll get a bill for them each month from your Part D plan. That’s in addition to the bill you’ll likely get from the insurer for its Part D premium.

“If an individual is having a hard time paying two bills, we’re advising to always pay your premium bill first, because you want to protect your coverage,” says Niles. A two months’ late M3P payment will take you off that program but won’t boot you off your Part D plan.

Where to get help

To get help deciding whether to sign up for the Medicare Prescription Payment Plan or get financial assistance elsewhere, you could ask a free, objective Medicare expert at your State Health Insurance Assistance Program (SHIP).

You could also talk with your pharmacist or your Medicare broker, if you use one. “The pharmacist is going to be able to help you think about the many ways you could address the problem of having difficulty affording your medicine,” says Dusetzina.

The PAN Foundation’s website has a useful section explaining the Medicare Prescription Payment Plan, too.

Experts expect the rollout of the smoothing payment plan will not be smooth.

“It’s going to be rocky, and we’ll just do the best we can with it and learn from it,” said Niles.

More on Medicare:

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• If you are denied coverage by Medicare, you have the right to appeal the decision. Here’s how