Copay Smoothing and Medicare Part D Changes: What You Need to Know

Copay smoothing is a Medicare Part D program that helps lower-income beneficiaries manage their prescription drug costs. It's a vital tool for those who need medication to stay healthy.

The program works by capping the amount a beneficiary pays for their prescription drugs at 5% of their income. This is a significant reduction from the standard 25% copayment.

For example, if a beneficiary's income is $1,000 per month, their copay would be capped at $50 per month. This means they won't have to pay more than $50 for their prescription drugs, even if the actual cost is higher.

For another approach, see: What Is Copay Assistance Program

The current system can be a significant financial burden for patients, especially those relying on costly specialty medications, as they're responsible for 5% of the total drug cost even after reaching the catastrophic phase of coverage.

This can lead to patients not filling their prescribed medications, which is a major concern for those who need these medications to manage their health.

Prior to the implementation of the IRA's standard benefit design updates, patients had to pay through a deductible, a coverage phase, and a coverage-gap phase before reaching the catastrophic phase of coverage.

The low-income-subsidy (LIS) program helps low-income patients afford branded medications, with monthly co-pays kept around or below $10 for most qualified patients.

This results in an LIS population that represents a high proportion of Part D utilization for many specialty brands, often higher than 65%, despite only representing around 27% of all lives in Part D.

Providers often won't consider high-cost pharmacy-benefit brands for their Medicare patients due to the high cost-sharing requirements, instead favoring alternatives covered by Part B or generic medications.

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Medicare Part D has a complex pricing system that can be challenging for patients to navigate. Prior to changes, patients had to pay through a deductible, a coverage phase, and a coverage-gap phase before reaching the catastrophic phase of coverage.

The standard benefit design has a 5% coinsurance even after entering the catastrophic phase, which can be a significant financial burden for patients relying on costly specialty medications. This burden can lead to patients not filling their prescribed medications.

Low-income patients, however, are generally able to afford branded medications due to the low-income-subsidy program, which keeps monthly co-pays around or below $10 for most qualified patients.

As the new guidance on M3P is released, it's essential to prepare for the opportunities and challenges that come with it. The Medicare Prescription Payment Plan, also known as M3P or copay smoothing, is a complex system.

PBMs and vendors are sharing additional guidance on M3P, which is a significant development. The release of this guidance is a positive step forward, providing more clarity on the expectations of the M3P program.

It's time to take another look at the expectations of M3P, and the new guidance offers a fresh perspective. The industry is adapting to the changes, and it's crucial to stay informed to capitalize on the opportunities that arise.

With the release of more detail from PBMs and vendors, it's clear that there's a lot to consider when it comes to M3P. The industry is evolving rapidly, and it's essential to stay up-to-date to navigate the challenges and opportunities that come with it.

The Inflation Reduction Act (IRA) is making significant changes to Medicare Part D, affecting both beneficiaries and stakeholders. The IRA will lower prescription drug cost-sharing for pharmacy benefit drugs in two phases, starting in 2024 and 2025.

Beneficiaries will no longer pay any cost-sharing in the catastrophic phase beginning in 2024. This phase was previously capped at 5 percent cost-sharing.

The IRA also caps out-of-pocket (OOP) costs at $2,000 annually for all Part D beneficiaries, effective January 1, 2025. This will benefit the 1.5 million enrollees who currently exceed this maximum.

Part D sponsors must allow beneficiaries to spread their OOP costs out over the year through copay smoothing, starting in 2025. This means beneficiaries will pay $0 at the pharmacy counter and their plans will bill them separately each month.

As a result of these changes, plans will absorb the 5 percent cost-sharing in the catastrophic phase in 2024. In 2025, plans and manufacturers will be responsible for 60 percent and 20 percent, respectively, of catastrophic spending in Part D, while CMS liability reduces from 80 percent to 20 percent.

Plans may increase premiums as a result of increased liability, with increases to patients' portion of premiums capped at 6 percent per year. Taxpayers will subsidize the remainder.

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Medicare beneficiaries can enroll in Medicare Part D at annual enrollment or prior to the plan year, and can also enroll during the year if they receive a new prescription for an expensive medication.

CMS recognizes that a new prescription could occur at any time, so patients can enroll at any point in the calendar year.

From a plan perspective, Part D plans are responsible for educating potential enrollees about the out-of-pocket smoothing benefit.

Plans must notify patients' pharmacies if they fill a prescription for an expensive drug and could benefit from smoothing.

The pharmacy must notify the patient upon receipt of the plan's communication and communicate out-of-pocket financials to patients.

Plans must accurately calculate patients' annual deductibles, taking multiple prescriptions copays and out-of-pocket expenses into consideration.

The plan must transmit this information to the pharmacy during the adjudication process.

If the patient is eligible for smoothing and chooses to accept the plan's smoothing option, the pharmacy may be responsible for enrolling the patient.

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The pharmaceutical industry is a trillion-dollar market that relies heavily on copay smoothing to manage costs.

Many pharmaceutical companies offer copay cards or coupons to patients, which can save them thousands of dollars on medication costs.

These copay cards are often tied to a patient's insurance coverage and can be used to lower out-of-pocket expenses.

In 2020, a survey found that 75% of patients used copay cards or coupons to reduce their medication costs.

The pharmaceutical industry spends billions of dollars on marketing and advertising each year, but copay smoothing is a key strategy for reaching patients directly.

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Specialty pharmacies are a type of pharmacy that focuses on providing care and support to patients with complex or chronic conditions.

These pharmacies often have specialized staff who can help patients navigate the complexities of their treatment plans.

They may also have more advanced equipment and technology to manage and administer certain medications.

In fact, some specialty pharmacies have dedicated teams to handle patient interactions and support.

Patients who use specialty pharmacies often have higher medication costs due to the complexity of their treatment plans.

According to the article, the average patient in a specialty pharmacy program spends around $50,000 per year on medications.

This is often due to the need for expensive medications that are not covered by standard insurance plans.

Specialty pharmacies can help patients manage these costs through programs like copay smoothing.

This program can help reduce the financial burden of medication costs for patients.

The reimbursement process for copay smoothing is a bit murky. Plans are required to ensure that enrolling in the program doesn't affect the amount paid to pharmacies or the timing of those payments.

Pharmacies may have to act as creditors, fronting the full out-of-pocket cost to the pharmacy on behalf of their members, with plans then billing and collecting payment from enrollees. Plans have the option to remove patients from the out-of-pocket smoothing benefit if they fail to pay their share of the costs.

If a patient misses a payment, they may be removed from the smoothing benefit for the rest of the plan year and possibly even prevented from participating in the program the following year.

The PBM market is in a state of tremendous fluctuation, with payors looking to decouple pharmacy benefit management services from their traditional vertically integrated business models.

One reason for this change is the increasing use of non-vertically integrated big 3 PBM models. This shift is being driven by regulatory pressure and the evolving drug market.

Payors are now considering using claims processing and mail service from separate companies, rather than relying on a single PBM provider. This decoupling of services is expected to have a significant impact on the rebate management landscape.

The volatility in the rebate management market is further complicated by the need to adapt to changing regulatory requirements and evolving market conditions.

Plans may act as the creditor, fronting the full out-of-pocket cost to the pharmacy on behalf of their members, which could impact cash flow. This means plans will have to implement processes to bill and collect payment from enrollees who opt into the smoothing program.

If a patient fails to pay an out-of-pocket smoothing cost billed by their plan, the plan may remove them from the out-of-pocket smoothing benefit for the rest of the plan year and preclude participation in the subsequent year.

Pharmacies are unlikely to voluntarily agree to a scenario where they act as creditor, with the plan reimbursing them over the course of the year, due to declining reimbursement rates.

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Copay smoothing can be a cost-effective option for individuals with high medical expenses.

The average annual out-of-pocket medical expenses for a family of four can range from $6,000 to $12,000, depending on the type of insurance plan.

This can be a significant financial burden, especially for those with chronic conditions or disabilities.

Some insurance plans offer copay smoothing as an alternative to traditional copays, which can be a more manageable option for those with high medical expenses.

In fact, studies have shown that copay smoothing can reduce out-of-pocket medical expenses by up to 50% for some individuals.