As I wrote about previously, in 2025, the Medicare prescription drug benefit (Part D) gets a $2,000 out-of-pocket (OOP) cap for beneficiaries and the ability to “smooth” the cost sharing over the course of the year. This program is called the Medicare Prescription Payment Plan (M3P).
Last week I created slides showing the month expenditures for patients but there was a request for more of a step-by-step on the math so here goes …
Example 1:
A patient is on a $200/month drug.
Month 1
In January, the patient faces 100% of the cost because they have a deductible of $590. They are enrolled in the M3P program so instead they pay $166.67.
This is calculated by taking the $2,000 annual OOP max minus any payments made in this plan year ($0) divided by the number of months left in the year (12).
($2,000 – $0)/12 = $166.67
This is where a lot of people get tripped up thinking the OOP is the total owed divided by 12. It is NOT. CMS has a ceiling on the OOP for the first month a beneficiary is enrolled in the program. If the amount owed is less than the ceiling, the beneficiary pays that amount. If it above the ceiling, as it is in this example, they pay the ceiling price.
Month 2
The beneficiary gets the $200 drug again. They are still in the deductible phase so, again they owe $200. But their OOP for the month will be $21.21.
This is calculated by taking the sum of the remaining amount owed ($33.33) plus the new amount owed ($200) and dividing it by the number of months left in the year (11).
($33.33 + $200)/11 = $21.21
Month 3
Again, the beneficiary gets the $200 drug. They have $90 left in the deductible phase and then owe 25% of the rest.
$190 + 25% of ($200 – $190) = $190 + 25% of $10 = $192.50
Because of the M3P program, the beneficiary pays $40.46.
This is calculated by taking the sum of the remaining amount owed from previous months ($212.12) plus the new amount owed ($192.50) and dividing it by the number of months left in the year (10).
Previous months balance = ($200 + $200) – ($166.67 + $21.21) = $212.12
So ($212.12 + $192.50)/10 = $40.46
Month 4 onward
The beneficiary is out of the deductible phase so each month when they get their $200 drug, they owe 25% ($50).
Their actual OOP because of the M3P program continues to be calculated as:
(Previous balance + new balance)/# of month left in the year
| Patient responsibility | M3P Amount Owed (actual OOP) | |
| April | $50.00 | $46.02 |
| May | $50.00 | $52.27 |
| June | $50.00 | $59.41 |
| July | $50.00 | $67.74 |
| August | $50.00 | $77.74 |
| September | $50.00 | $90.24 |
| October | $50.00 | $106.91 |
| November | $50.00 | $131.91 |
| December | $50.00 | $181.91 |
Example 2:
Let’s do the $600/month drug.
Month 1
In January, the patient first faces the deductible of $590. They are responsible for 100% of that and then 25% of the remaining $10 so their total responsibility is $592.50.
They are enrolled in the M3P program so instead they pay $166.67.
This is calculated by taking the $2,000 annual OOP max minus any payments made in this plan year ($0) divided by the number of months left in the year (12).
($2,000 – $0)/12 = $166.67
The remaining amount ($425.83) gets rolled over into the following months.
Month 2
The beneficiary gets the $600 drug again. They are responsible for 25% ($150) but, because of the M3P, their OOP for the month will be $52.35.
This is calculated by taking the sum of the remaining amount owed ($425.83) plus the new amount owed ($150) and dividing it by the number of months left in the year (11).
($425.83 + $150)/11 = $52.35
Month 3 until Month 11
Each month the beneficiary gets the $600 drug and is responsible for $150. The sum of the remaining plus the new amount divided by the months remaining …
| Patient responsibility | M3P Amount Owed (actual OOP) | |
| March | $150.00 | $67.35 |
| April | $150.00 | $84.02 |
| May | $150.00 | $102.77 |
| June | $150.00 | $124.19 |
| July | $150.00 | $149.19 |
| August | $150.00 | $179.19 |
| September | $150.00 | $216.69 |
| October | $150.00 | $266.69 |
Month 11 and 12
At the end of the 10th month, the beneficiary paid $1,409.11 OOP through the M3P program although they have been responsible for $1,942.50 so far. Because there is a $2,000 OOP cap, the patient responsibility for November is $57.50. The remaining amount they would owe ($150 – $57.50) gets paid by the plan, manufacturers and the government as part of the catastrophic coverage.
Through the M3P program, the patient is billed $295.45. This is calculated like all other M3P months past the first one – the sum of the remaining amount owed ($1942.50 – $1409.11) plus the new amount owed ($57.50) and dividing it by the number of months left (2).
(($1942.50 – $1409.11) + $57.50)/2 = $295.45
That same amount is owed in December because there is $0 in new patient responsibility (they are in catastrophic) so ($295.45 + $0)/1 = $295.45.
And, while I am pretty sure I got my math right, let me know if you see something off. 🙂