President Biden's Inflation Reduction Act Aims to Alleviate Medicare Part D Drug Costs

Revised High Upfront Drug Costs

Summary:

The Centers for Medicare & Medicaid Services (CMS) has released draft guidance for public comment outlining the upcoming Medicare Prescription Payment Plan, a central provision of President Biden’s Inflation Reduction Act. While the program is designed to ease beneficiary affordability concerns, it also introduces meaningful operational and financial considerations for Medicare Part D sponsors, delegated entities, and risk-bearing organizations. Beginning in 2025, the program will allow beneficiaries to smooth out-of-pocket prescription drug costs across the calendar year, altering traditional payment timing, member billing behavior, and pharmacy reimbursement workflows.

The guidance, released in two parts, outlines implementation requirements that will directly impact plan operations, data reporting, and member communications. For health plans, MSOs, and PACE organizations, this policy signals a shift toward more predictable member cost-sharing—but also greater responsibility for accurate enrollment, billing coordination, and compliance oversight.

What the Bill Aimed to Accomplish

Health and Human Services (HHS) Leadership

Health and Human Services Secretary Xavier Becerra has described the Medicare Prescription Payment Plan as another step toward lowering healthcare costs and expanding access to essential medications. CMS Administrator Chiquita Brooks-LaSure has similarly noted that recent prescription drug reforms—such as insulin caps and no-cost recommended vaccines—are already delivering tangible benefits to Medicare beneficiaries.

For plans and delegated organizations, these statements underscore CMS’s expectation that affordability initiatives be supported by a strong operational infrastructure. Accurate member identification, timely pharmacy coordination, and consistent communication will be essential to translating policy intent into measurable outcomes without introducing administrative friction.

Revised High Upfront Drug Costs



High upfront prescription drug costs have long posed challenges not only for Medicare beneficiaries but also for plans tasked with managing member experience, adherence, and cost predictability. The Medicare Prescription Payment Plan aims to reduce early-year financial strain by allowing eligible beneficiaries to spread out-of-pocket costs through fixed monthly payments. From an operational standpoint, this may influence medication adherence patterns, utilization timing, and member engagement throughout the benefit year.

For Part D sponsors and risk-bearing entities, the program introduces new considerations around forecasting, reconciliation, and coordination with pharmacy partners. Payment smoothing may reduce member attrition and complaints, but it also requires precise execution to prevent billing discrepancies, member confusion, or downstream compliance risk.

Key Payer Related Stakeholders

CMS has emphasized stakeholder engagement as a critical component of the program’s rollout, inviting input from health plans, Medicare Advantage organizations, pharmacies, providers, pharmaceutical manufacturers, and consumer advocates. This feedback process is intended to surface operational challenges, identify unintended consequences, and refine safeguards before final guidance is issued.

For health plans, MSOs, and PACE organizations, participation in the public comment process serves not only as an opportunity to influence policy design but also as a proactive risk management step. Early engagement can help mitigate future compliance exposure, operational inefficiencies, and member service issues once the program becomes mandatory.

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  References: Beck Payer Publications, CMS Release Article
  

Opt-in for Out-of-pocket to avoid donut holes

The draft CMS guidance details the opt-in process that allows Medicare Part D enrollees to participate in the Medicare Prescription Payment Plan, enabling members to spread out-of-pocket prescription drug costs across the year and reduce the financial shock historically associated with coverage gaps, commonly referred to as the “donut hole.” While participation is voluntary, accurate opt-in execution is critical to ensuring members receive the intended financial protections without experiencing billing errors or access disruptions.



For health plans, MSOs, and PACE organizations, the opt-in mechanism introduces important operational and compliance considerations. Enrollment status must be clearly documented, communicated, and reflected across billing and pharmacy systems to avoid member confusion, misapplied cost-sharing, or reconciliation issues. As CMS increasingly focuses on transparency and consumer protection, organizations will need strong internal controls and audit-ready processes to demonstrate that opt-in elections are properly applied and consistently administered throughout the benefit year.

CMS two-part Guidance on Part D cost reduction

Recognizing the scope and complexity of the program, CMS is issuing guidance in two phases. The initial phase focuses on operational readiness, while the second phase—expected in early 2024—will address beneficiary outreach, plan bid considerations, and compliance monitoring. CMS also plans to introduce tools, such as cost calculators, to support beneficiary understanding and decision-making.

For organizations administering Part D benefits, this phased approach provides a narrow window to align systems, workflows, and internal controls before full implementation in 2025.

Summary of Biden's Inflation Act

The Medicare Prescription Payment Plan represents more than a beneficiary affordability initiative—it marks a structural change in how prescription drug costs are billed, managed, and monitored under Medicare Part D. By smoothing out-of-pocket expenses across the year, CMS aims to improve access and adherence, while placing increased emphasis on operational accuracy, data integrity, and member communication.

Health plans, MSOs, and PACE organizations that prepare early—by strengthening enrollment processes, pharmacy coordination, and billing oversight—will be best positioned to reduce friction, minimize compliance risk, and deliver a smoother member experience as these reforms take effect in 2025.