Medicare Prescription Reforms: Considerations for RWHAP and ADAP Clients

The Inflation Reduction Act (IRA) was a sweeping piece of federal legislation signed into law by President Biden in 2022, and contains a number of landmark provisions intended to reduce prescription drug costs under Medicare Part D and other Medicare plans providing prescription drug coverage. Some of the changes taking effect in 2024 and 2025 will significantly reduce out-of-pocket (OOP) costs and premium prices for millions of Medicare prescription drug coverage beneficiaries, including those served by the Ryan White HIV/AIDS Program (RWHAP).

Helping RWHAP and AIDS Drug Assistance Program (ADAP) clients navigate the Medicare Part D reforms under the IRA is expected to be a priority for many RWHAP case managers and other RWHAP staff in the coming months. This includes understanding new programs like the Medicare Prescription Payment Plan (MPPP), which may actually be of very limited value for many ADAP clients.  

Additionally, Medicare Part D changes currently being implemented may have important fiscal considerations for RWHAP providers, notably ADAPs. See 340B and AIDS Drug Assistance Programs: Getting the Best Price, which describes how ADAPs can collect rebates on cost-sharing paid on behalf of Medicare beneficiaries enrolled in their programs. Consequently, substantial reductions in cost-sharing requirements can also mean fewer rebate opportunities, which have the potential to impact state RWHAP Part B and ADAP budgets.

Expanding Eligibility for Full Low-Income Subsidy (Extra Help)  

As authorized by the IRA, the Centers for Medicare & Medicaid Services (CMS) expanded eligibility for the full Low-Income Subsidy (LIS) benefit, also known as “Extra Help.” Under these regulations, the full LIS benefit is available to eligible Medicare enrollees with incomes up to 150% of the federal poverty level (FPL) and assets below a specified limit. This change took effect on January 1, 2024. 

Learn more in Financial Help for Medicare: Medicare Savings Programs and the Extra Help Program for RWHAP Clients.

With the full LIS benefit, both the Medicare Part D deductible and premium requirements are waived. This benefit has historically been limited to Medicare beneficiaries with incomes below 135%, but is now available to Medicare beneficiaries with incomes between 135% and 150% who are not dually enrolled in Medicaid and have historically qualified for the partial LIS benefit. Under the IRA changes, the partial LIS benefit has been eliminated; clients eligible for partial LIS under the outdated rules were automatically transitioned to the full LIS as of January 1, 2024. 

Fiscal Implications for RWHAP ADAPs 

With more Medicare beneficiaries qualifying for the full LIS benefit, RWHAP or ADAP payments toward Part D premiums and deductibles are no longer necessary for most Medicare clients with incomes up to 150% FPL. Prescription drug cost-sharing may still apply, with reduced copayments in 2024 of up to $4.50 and $11.20, respectively, for generic and brand-name drugs.  

These changes may reduce partial-pay rebates that have historically been generated in association with ADAP-funded insurance program support of clients receiving the partial LIS benefit. They should not, however, impact program income generation by other RWHAP providers purchasing drugs at 340B-discounted prices on prescription drugs subject to usual-and-customary reimbursement by Medicare Part D plans or other Medicare health plans with drug coverage (e.g., Medicare Advantage Plans).  

Out-of-Pocket Spending Caps  

Prescription drug cost-sharing requirements during the catastrophic coverage phase of Part D coverage are now a thing of the past, and OOP savings are on the immediate horizon. 

In 2024, the 5% coinsurance requirement during the catastrophic phase of the Medicare Part D benefit was eliminated, effectively establishing an OOP spending cap of approximately $3,300 for Part D beneficiaries. Beginning January 1, 2025, an OOP spending cap of $2,000 goes into effect. In short, once a Part D beneficiary – or RWHAP provider or ADAP on their behalf – pays $2,000 in prescription drug cost-sharing, the individual will no longer have to pay any OOP costs for the rest of the year.  

Fiscal Considerations for RWHAP ADAPs

These changes will be associated with significant cost savings for many Medicare beneficiaries. However, where ADAPs have historically made cost-sharing assistance payments and generated partial-pay rebate claims on prescriptions for Medicare beneficiaries throughout the year, OOP spending caps are expected to be associated with reduced Part D cost-sharing expenditures and, consequently, rebate generation opportunities. 

No significant changes to 340B program income generation are expected among other RWHAP programs serving clients enrolled in Medicare Part D. 

Medicare Prescription Payment Plan

In addition to the $2000 OOP cap on prescription medications, Medicare Part D beneficiaries will have the option to enroll into a program that allows them to pay their OOP prescription drug costs in monthly payments, instead of all at once. The new program will begin in January, 2025 and is known as the Medicare Prescription Payment Plan (MPPP). The MPPP will not save Medicare Part D beneficiaries money or lower their total out-of-pocket costs. Rather, it serves as an installment plan for high copayments or coinsurance amounts up to the $2,000 OOP spending cap. The MPPP is also often referred to as the “MP3” or “Medicare smoothing” program. 

Once enrolled in the MPPP, Medicare Part D Plan or Medicare Advantage beneficiaries will pay $0 at the pharmacy when filling new or existing Medicare Part D-covered prescription drugs. Beneficiaries will instead receive a monthly bill from their Part D or Medicare Advantage Plan with the monthly amount due, due date, and instructions for payment. This monthly amount will be billed separate from their monthly premium bill. 

The MPPP might not be a good option for Medicare beneficiaries who: are taking prescription drugs that are typically associated with low cost-sharing requirements (e.g., preferred generic drugs); are not expected to reach the $2,000 OOP cap; or enroll in Medicare Part D late in the plan year. 

Importantly, RWHAP clients that expect all of their Medicare Part D cost-sharing to be paid for by the state ADAP, including those associated with high-cost medications likely antiretrovirals, probably should not enroll in the MPPP. Even if the client needs to access medications not on the ADAP formulary, they should keep in mind there is a $2,000 annual OOP maximum for Medicare Part D starting in 2025. As a result, it will often be the case that Medicare Part D cost-sharing payments made by ADAP on behalf of a client will reach the $2,000 OOP maximum threshold fairly early in the plan year. Cost-sharing for non-ADAP formulary drugs filled after the OOP cap has been reached will have a $0 cost-sharing payment.

Learn more about MPPP in FAQs: Medicare Prescription Payment Plan, developed by HRSA's ACE TA Center and NASTAD.

RWHAP case managers are strongly encouraged to discuss whether enrollment in the MPPP is right for clients and remind clients which prescription drugs can be covered by the ADAP formulary for those who are receiving, or are eligible for, Medicare Part D cost-sharing assistance from ADAP.