Could a Medicare Prescription Payment Plan Help You?
Key Takeaways
- If you have Medicare Part D prescription drug coverage, a Medicare prescription payment plan lets you pay over time for the out-of-pocket costs of covered drugs.
- For many people who have trouble meeting the costs of Part D coverage and prescriptions, the Extra Help program might be a better option.
About nine in 10 U.S. adults over 65 take at least one prescription medication, according to the most recent data from the National Center for Health Statistics. Even if you have Medicare Part D prescription drug coverage, the out-of-pocket costs can pile up. A KFF analysis found that 1.5 million people with Medicare drug coverage spent $2,000 or more on prescriptions in 2021.
Recent changes in federal policy have limited those expenses and made them easier to manage. Starting in 2025, a Medicare prescription payment plan is one of the tools you’ll have available to control your drug costs.
Medicare Part D Prescription Drug Coverage
The federally administered Original Medicare program (also known as Medicare Parts A and B) doesn’t cover most prescription drugs. To help with the costs of medications, private insurance carriers offer Medicare Part D prescription drug plans.
People enrolled in Medicare may also choose to switch to a Medicare Advantage plan from a private insurance carrier. These plans substitute for Original Medicare, matching the coverage you would get from Medicare Parts A and B at minimum. Plans may include Part D coverage and other additional benefits.
What Medicare Part D Plans Cover
Whether you have a standalone plan or a Medicare Advantage plan, Part D coverage starts to help with the costs of medication after your spending reaches your plan’s annual deductible. These vary by plan and can be as low as $0. However, there are still other costs that you pay, such as copayments (a fixed amount you pay to have certain prescriptions filled) or coinsurance (a percentage of a drug’s total cost).
Every Part D plan is required to cover certain types of drugs, like treatments for cancer and HIV. Otherwise, what drugs are covered and how much you’ll pay depends on your plan’s formulary, which is a list of medications that’s organized into tiers.
You’ll be charged the lowest copays for drugs on Tier 1, which includes most older drugs that are available in a generic version. However, you’ll pay higher out-of-pocket expenses if you’re prescribed upper-tier, specialized drugs that aren’t available in a generic version yet.
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What Is the Medicare Prescription Payment Plan?
Beginning in 2025, all standalone Medicare Part D prescription drug plans and Medicare Advantage plans with Part D prescription drug coverage are required to offer payment plans. That means you’ll have the option to make capped monthly payments to your insurance carrier instead of paying the full amount to the pharmacy when you fill your prescription.
The payment plan will be most useful if you need to fill a prescription for a covered drug with high cost-sharing early in the year. Using this option won’t make your medication cheaper, but you can spread out that expense over time so it’s more manageable.
Medicare Prescription Payment Plan vs. Medicare Extra Help
A payment plan allows you to budget for your spending on medication, but if you qualify, Extra Help may be a better choice to save on the costs of Part D coverage and prescriptions.
In 2024, Extra Help lowered Part D plan premiums and deductibles to $0 and limited out-of-pocket costs at participating pharmacies to no more than $4.50 for a generic drug or $11.20 for a brand-name drug. If your total covered drug costs under Extra Help reach $8,000, you’ll pay $0 out-of-pocket for covered medications for the rest of the year.
As of 2024, you could be eligible to access Extra Help if you:
- Made less than $22,590 in annual income as an individual or $30,660 as a married couple.
- Had less than $17,220 in resources (such as savings, stocks, and bonds) as an individual or $34,360 as a married couple.
These limits may be adjusted each year.
People who receive Extra Help are still able to use a payment plan if needed.
Other Big Changes in Medicare Coverage for Prescription Drugs
Under the Inflation Reduction Act of 2022, the federal government took several other steps to make drugs more affordable for people on Medicare. The Centers for Medicare and Medicaid Services (CMS), the agency that administers Medicare, established the following:
- Cap annual out-of-pocket expenses for all drugs covered under Part D plans, starting at a $2,000 limit for 2025. This limit can be adjusted each year.
- Make a range of vaccines that are covered by Part D, such as for shingles and respiratory syncytial virus (RSV), available with no out-of-pocket cost.
- Set a $35 cap on the cost of a monthly supply of insulin that’s covered either by Part D or by Part B, with no deductible.
- Expand the availability of the Extra Help program, also called the Low-Income Subsidy, which makes Part D plans more affordable for people with limited incomes and resources.
What a Medicare Prescription Payment Plan Means for You
Even with insurance, drug costs can be an obstacle to getting the healthcare you need. With the Medicare prescription payment plan, you have more flexibility to access the medications you rely on while controlling your budget.