For 2024, the Medicare prescription benefit (Part D) has implemented an out-of-pocket cap (OOP) for beneficiaries. Once they spend $8,000, they have $0 cost sharing. For patients on branded medicines, this can bring the total annual OOP to about $3,300. But in 2025, the Part D redesign (courtesy of the Inflation Reduction Act) gets much more exciting. There is a $2,000 OOP cap and the ability to “smooth” the cost sharing over the course of the year. This program is called the Medicare Prescription Payment Plan (M3P).
Groups like the PAN Foundation, Alliance for Aging Research and MAPRx have been pushing for an OOP cap and smoothing for years. They saw the need for not only an OOP cap but the ability to spread those costs over the course of the year so that patients were no longer liable for $2,000+ in one month. Given the limited resources of many beneficiaries, this is just not affordable, and patients may abandon prescriptions at the point of sale.
Earlier this year, but after I put out my first take on this, Medicare released final guidance on the math of the M3P. So, while what I put out there was directionally correct, the formula I used was different than the final. Can’t have that. 😊
Below is visual of the math for different examples of monthly OOP ($200, $500, $600, $1000 and $6230+)
Takeaways
According to Medicare, about 3 million beneficiaries have single day OOP expenses of $600+ so this program, while cool, may not be necessary for all beneficiaries.
The MPPP works out really well for an expensive product that hits the OOP cap in one month which is a product that costs over $6,230 per month.
Amount owed by beneficiary: $2,000 ($590 deductible + $1410 initial coverage limit)
The beneficiary can choose to use the MPPP program and spread the cost out over the course of the year ($2000/12) and pay $166.67 per month.
It is a nice-to-have for those who are in the $600/month camp because it spreads costs a little bit but not in a super easy to understand way. It feels like a surprise what you’d pay each month. And for those under $600/month, that feels especially true.
Of course, no one knows for certain what their OOP will be for the year. Life happens. Beneficiaries can enroll in the M3P at any point in the year so that should help beneficiaries that are hit with unexpected prescription drug costs.
That is if they know about the M3P program. The communication of the program does not seem to be a Medicare priority. That’s a problem.
And all of this should be caveated with that, at least in 2024, many beneficiaries have supplemental coverage in Medicare Part D where they might pay a copay instead of coinsurance and if that copay is less than 25% (the standard benefit design) then they actually get the OOP credit of the full 25%.
(Say drug is $500 and standard benefit design would say that a beneficiary should owe $125 but their copay is $60. They will pay $60 but their OOP spending will reflect the full $125. Confusing? Yes.)