IRA Smoothing Provision

“Smoothing” Paying Out-of-Pocket Prescription Drug Costs in Monthly Payments in 2025

Beginning in 2025, the prescription drug law requires all Medicare prescription drug plans (Medicare Part D plans)—PDP and MAPD—to offer Part D enrollees the option to pay out-of-pocket prescription drug costs in the form of capped monthly payments instead of all at once at the pharmacy.

Individuals on Medicare are usually on a fixed monthly income. CMS devised a plan to give beneficiaries with high drug costs more predictable costs throughout the year, such as the option of “smoothing” their Part D out-of-pocket costs starting in 2025. In contrast to the current Part D benefit design, where out-of-pocket costs are typically frontloaded at the beginning of each calendar year, the “smoothing” option will allow Medicare beneficiaries to spread their out-of-pocket prescription costs more evenly with monthly installments.

During AEP, Medicare Part D enrollees will be able to opt into the Medicare Prescription Payment Plan for the 2025 plan year. Part D enrollees will also have the opportunity to opt in throughout the year.

CMS is developing a model, “Medicare Prescription Payment Plan Participation Request Form” for Part D sponsors that Part D enrollees can use to initiate the request to opt into the program.

NOTE: Carriers will be referring to this “Smoothing Provision” as the Medicare Prescription Payment Program or M3P this fall.