Pay your Medicare Prescription Costs Monthly starting in 2025

Starting in 2025 Medicare beneficiaries will have the option to enroll in a plan that will allow prescription cost to be paid monthly as opposed to a large payment when a drug is purchased.

A new name for smoothing

The Centers for Medicare & Medicaid Service (CMS) are using a new name to describe “smoothing.” It will now be the Medicare Prescription Payment Plan.  

Medicare Prescription Payment Plan timeline

Beginning in 2025, anyone with a Medicare Part D prescription drug plan will have the option to enroll in the monthly payment plan, either before the beginning of the plan year or in any month during the plan year. The opportunity to enroll is not income-based. 

The Medicare Prescription Payment Plan only applies to out-of-pocket costs for prescription medications. Payments will not include premiums.   

Monthly payments under the Medicare Prescription Payment Plan

While CMS has not finalized how the Medicare Prescription Payment Plan will operate in 2025, preliminary guidance suggests the following: 

• The Medicare Prescription Payment Plan is completely voluntary; patients will need to “opt-in” to the program.  
• Participants will not have any monthly bills until they opt into the program AND have out-of-pocket prescription costs. 
• Once a participant has out-of-pocket prescription costs, they will be billed on a monthly basis. This will continue as long as they remain part of the Medicare Prescription Payment Plan. 
• All out-of-pocket costs will be billed monthly, including costs during the initial deductible phase. In other words, participants will not need to spend a certain amount out-of-pocket before they can join the program.  

In 2025, people with Medicare Part D will have a $2,000 annual cap on out-of-pocket costs, but determining what a participant in the monthly plan owes each month is not as simple as $2,000 divided by 12 months.  

Monthly bills will be calculated by starting with the annual out-of-pocket maximum, which in 2025 will be $2,000. First, the plan will subtract any Part D costs the participant paid out of pocket before joining the monthly program. Then, the plan will divide the remaining costs across the remaining months in the plan year. CMS will be developing monthly calculators to help patients know what their monthly costs will look like, and to determine if enrolling in the Medicare Prescription Payment Plan makes sense for them.  

Source: Pan Foundation