If you’re an older adult who relies on expensive drugs to stay healthy, you may benefit from spreading out the costs of your prescriptions using the Medicare Prescription Payment Plan, also known as M3P.

“While the $2,100 out-of-pocket spending cap for Medicare Part D prescriptions helps lower costs, having to pay a lot of money upfront can be painful,” said Ryan Ramsey, NCOA Associate Director of Health Coverage and Benefits. “Fortunately, the Medicare Prescription Payment Plan can help make these costs more manageable.” 

Read on to learn how the Medicare Prescription Payment Plan works and how monthly payments are calculated.

What is the Medicare Prescription Payment Plan (M3P)?

People with Medicare can now use a monthly payment plan to pay out-of-pocket costs for expensive prescription drugs instead of having to pay the full cost upfront at a pharmacy.¹

Who is eligible for the Medicare Prescription Payment Plan?

Older adults enrolled in Medicare are eligible for the payment plan if they have a Medicare Part D prescription plan. This can either be a standalone Medicare Part D coverage or Part D coverage that is part of a Medicare Advantage plan.¹

People with Medicare who qualify for Medicare’s Low Income Subsidy program, also known as Extra Help, are also eligible for the payment plan. Because Extra Help offers a discount on prescription drugs, Medicare enrollees who qualify may benefit more from Extra Help than the Medicare Prescription Payment Plan.¹

How do I enroll in the Medicare Prescription Payment Plan?

You can contact your Medicare health care plan or drug plan about enrolling. The earlier you enroll, the more you will be able to spread out the cost of more expensive drugs over time.² You should receive a letter to confirm your enrollment and Medicare will notify your pharmacy that you’re participating in the payment plan.²

How does the Medicare Prescription Payment Plan work?

When you go to your pharmacy to pay for a prescription, they will say you owe $0 at the checkout register. What will follow is a bill from your Medicare health or prescription plan.²

If you start your payment plan in January, here are steps to find out how much your first bill will be:²

Step 1: Find out your maximum possible payment for the first month

Divide your $2,100 out-of-pocket spending maximum (in 2026) for prescription drugs by the number of months left in the year.

In this case, that means dividing $2,100 by 12 months which equals $166.67.

Step 2: Compare your monthly drug cost to your maximum possible payment

For example: If your drugs will cost $400 a month, you must compare that to $175.

Step 3: Pay the lowest of the two costs

This means you will pay $175 in January.

Step 4: Subtract the lowest amount from your monthly drug cost for your balance

For example: $400 - $175 = $225.

For future monthly payments, continue to add your monthly drug cost to your balance and divide it by the remaining months in the year.

For example: $400 + $225 = $625.

So:

$625 ➗ 11 months =  $56.81 monthly payment

After your monthly drug cost reaches your $2,100 out-of-pocket maximum, you no longer have to add it to your balance. For each month on, you’ll continue to divide your balance by the months left in the year to get your monthly payment.

Is my Medicare Prescription Payment Plan bill the same as my Medicare premium?

No. Your bill for the Medicare Prescription Payment Plan is a separate bill from any premium you pay for your Medicare health care or prescription drug benefit. If you fail to pay your bill, you risk being disenrolled from the payment plan.²  

If you have questions about affording your prescriptions, talk with your plan provider or with your State Health Insurance Assistance Program (SHIP) about your options. You can find contact information for your SHIP online or call 1-877-839-2675. A trained Medicare counselor can help you figure out whether the payment plan is right for you. They can also tell you if other resources like Medicare’s Extra Help program or one of the Medicare Savings Programs better suits your financial needs.

Sources

1. Centers for Medicare & Medicaid Services. Fact Sheet: Medicare Prescription Payment Plan Final Part One Guidance. Found on the Internet at https://www.cms.gov/files/document/fact-sheet-medicare-prescription-payment-plan-final-part-one-guidance.pdf

2. Medicare.gov. What’s the Medicare Prescription Payment Plan? Found on the Internet at https://www.medicare.gov/publications/12211-whats-the-medicare-prescription-payment-plan.pdf