Inovaare Blog - Medicare Prescription Payment Plan (M3P) Implementation: Key Considerations for Part D Plan Sponsors and PBMs

The upcoming Medicare Prescription Payment Plan (M3P), set to launch in January 2025, marks a significant shift in Medicare’s approach to prescription drug coverage. This initiative, introduced under the Inflation Reduction Act of 2022, aims to smooth out-of-pocket costs for beneficiaries over the year. Let’s explore the implications of M3P for Part D plans and Pharmacy Benefit Managers (PBMs) and provide a strategic roadmap for effective adaptation. 

Understanding the Medicare Prescription Payment Plan  

M3P introduces a novel approach to managing prescription drug costs for Medicare beneficiaries. For the first time, all Medicare prescription drug plans, including standalone Part D plans and Medicare Advantage plans with prescription drug coverage, must offer enrollees the option to pay out-of-pocket costs in capped monthly payments instead of paying the entire amount upfront at the pharmacy. 

Features of the M3P that stand out 

  1. Monthly Installments 
  1. Under the M3P, beneficiaries can choose to spread their out-of-pocket costs over the course of a month. This shift from immediate payment at the point of service aims to alleviate financial strain on seniors and enhance affordability. 
  1. The capped monthly payments provide predictability and stability, allowing beneficiaries to budget effectively for their prescription needs. 
  1. Operational Considerations 
  1. Part D plan sponsors play a pivotal role in implementing the M3P. They must identify enrollees likely to benefit from the program and facilitate the opt-in process. 
  1. Data collection becomes critical for evaluating the program’s effectiveness. Sponsors need to track participant behavior, adherence, and overall impact on cost-sharing. 

How M3P Payments are Calculated 

Under M3P, payments are calculated using a formula defined by the Centers for Medicare and Medicaid Services (CMS). For example, a beneficiary who reaches the $2,000 maximum out-of-pocket (MOOP) in January would pay $166.67 monthly rather than $2,000 upfront.

The initial payment for the first month of participation is based on dividing the MOOP by 12 months. Subsequent payments are recalculated each month, considering the new unpaid balance and the remaining months in the year. Although the cost sharing paid by the member is smoothed, M3P does not impact member progression through the Part D benefit and the accumulation of drug costs to the MOOP.

Implications for Part D Plans and PBMs 

1. Enhanced Regulatory Requirements: M3P introduces stricter regulatory requirements to ensure that Part D plans and PBMs adhere to the highest standards of transparency and accountability. These requirements include: 

  • Detailed Reporting: Plans must submit comprehensive data on prescription drug pricing, utilization, and patient outcomes. 
  • Compliance Audits: Regular audits will be conducted to ensure adherence to M3P guidelines, with penalties for non-compliance. 
  • Price Transparency: Increased transparency in drug pricing to enable beneficiaries to make informed decisions. 

2. Reporting Standards: To comply with M3P, Part D plans and PBMs must implement robust reporting mechanisms. Key reporting standards include: 

  • Real-Time Data Submission: Plans must submit real-time data on prescription drug transactions, ensuring up-to-date information is available for regulatory review. 
  • Outcome Metrics: Reporting on patient outcomes, including medication adherence and health improvements, will be required to assess the effectiveness of prescription drug coverage. 
  • Cost Reporting: Detailed reporting on the cost of drugs, including rebates and discounts, to ensure pricing transparency. 

3. Operational Adjustments: Implementing M3P will necessitate operational adjustments for Part D plans and PBMs. These adjustments include: 

  • System Upgrades: Investing in advanced data management systems to accurately capture and report required data. 
  • Staff Training: Providing comprehensive training for staff on new regulatory requirements and reporting standards. 
  • Process Optimization: Streamlining processes to ensure efficient data collection, analysis, and submission. 

Ensuring Smooth M3P Implementation: Key Responsibilities of Plan Sponsors 

The operational complexity of M3P requires plan sponsors to undertake several responsibilities to ensure smooth implementation and compliance: 

  1. Member Outreach and Enrollment: Plan sponsors must provide clear information about M3P and conduct targeted outreach to beneficiaries likely to benefit from the program. All beneficiaries should be allowed to opt into M3P during the standard open enrollment period or throughout the year. CMS has proposed that, by 2026, beneficiaries should be able to enroll in M3P in real-time at the pharmacy counter, requiring plan sponsors to set up a telephone line or web-based app for enrollment and payment information. 
  1. Billing and Claims Processing: Plan sponsors must supply bills to participants monthly, manage bad debts without charging late fees or interest, and ensure financial reconciliation for billing corrections. Additionally, pharmacies will need additional bank identification numbers to process M3P payments separately from traditional cost sharing. 
  1. Reporting Requirements: New annual reporting requirements for prescription drug event files are mandatory. Plan sponsors must report data related to M3P’s operational costs, utilization, accessibility, performance, and other measures to CMS, beneficiaries, and the public. 

Ensure M3P Compliance and Success: Key Strategies 

While the M3P enhances affordability for beneficiaries, it poses significant operational and financial challenges for plans and PBMs.  
They must develop financial projections and cash flow models that account for potentially increased utilization of high-cost speciality treatments due to lower monthly payments. This includes estimating bad debt, a new expense under M3P, and incorporating it into financial projections and premiums. Cash flow modelling is essential to ensure adequate capital is available to support the timing shift in cost-sharing collections. Additionally, plan sponsors should start incorporating M3P information into their marketing materials for the 2025 plan year, ensuring that compliance and marketing teams stay current with CMS guidance to meet all marketing and outreach requirements. Finally, sponsors must closely monitor forthcoming CMS guidance, expected in early 2024, to maintain compliance and readiness for M3P implementation. 

To successfully navigate the implementation of M3P, Part D plans, and PBMs should consider the following strategies: 

1. Invest in Technology 

Implementing advanced data management and reporting systems is critical for meeting M3P requirements. Leveraging technology will ensure accurate data capture, real-time reporting, and compliance with regulatory standards. 

2. Enhance Collaboration 

Collaboration between Part D plans, PBMs, and other stakeholders is essential for successful M3P implementation. By working together, stakeholders can share best practices, streamline processes, and ensure a smooth transition to the new regulatory framework. 

3. Focus on Training 

Comprehensive training programs for staff will be crucial to ensure understanding and adherence to new M3P requirements. Regular training sessions and updates will help maintain compliance and operational efficiency. 

4. Monitor and Adapt 

Continuous monitoring of M3P implementation and outcomes will enable Part D plans and PBMs to identify areas for improvement and adapt strategies accordingly. This proactive approach will ensure ongoing compliance and success in the evolving regulatory landscape. 

The M3P represents a seismic shift in how we approach prescription drug costs within Medicare. As leaders, our role is to adapt, educate, and optimize. By understanding the nuances of the M3P and proactively preparing our organizations, we can ensure a smoother transition and better outcomes for the seniors we serve. 

Remember, the M3P isn’t just about numbers; it’s about empowering beneficiaries and reshaping the healthcare landscape. The only, and probably the best, way forward is to accept this change and pave the way for a more accessible and equitable system. 

Inovaare Healthcare Compliance Solutions: Your Partner in Navigating M3P 

As you prepare for the launch of M3P, partnering with Inovaare can provide the expertise and tools needed to ensure seamless compliance and operational efficiency, ultimately improving the quality of care for your beneficiaries.  

Stay ahead of the curve—prepare for M3P implementation today and ensure your organization is ready to meet the new challenges and opportunities in Medicare prescription drug coverage. 

Contact us today to learn how Inovaare can support your organization in this new era of Medicare prescription drug coverage.