An Update to M3P Guidance and Readiness Medicare Prescription Payment Plan (M3P)

What has new guidance shared and what are PBMs and Vendors doing?

The Issue at a Glance

It’s time to take another look into the expectations of the Medicare Prescription Payment Plan, otherwise known as M3P or copay smoothing, with the release of additional guidance and more detail now available from PBMs and vendors as to the solutions they are offering in market.

 In our prior white paper, see, we did a deep dive on the concept of copay smoothing. As a refresher, thanks to the Inflation Reduction Act (IRA), the Medicare Part D benefit will undergo a major redesign in 2025. As part of this, all Plan sponsors will be required to offer all beneficiaries the Medicare Prescription Payment Plan, a benefit that had informally been referred to as “copay smoothing” or the “Out-of-Pocket (OOP) Smoothing Program.”[1] Plan sponsors shoulder most of the responsibility for implementing and managing the program.

In this white paper we plan to help payers understand a few key concepts related to M3P.

  1. Understand the changes and validations that were called out in the most recent Centers for Medicare and Medicaid Services (CMS) guidance update.
  2. Understand what PBMs and vendors are doing in the marketplace to help ready Plan sponsors for the new M3P copay smoothing.
  3. Highlight a few important implementation aspects for Plan sponsors readiness that will need to be considered before open enrollment.

[1] In draft guidance released in August 2023, CMS announced that the formal name of the program would be the Maximum Monthly Cap on Cost-Sharing Payments Program; however, based on the results of beneficiary focus group testing, the agency announced a shorthand name of “Medicare Prescription Payment Plan.” This white paper will use “Medicare Prescription Payment Plan” or “M3P” as needed, but technical guidance from CMS may refer to the Maximum Monthly Cap on Cost-Sharing Payments Program.


The Final Part One of the Medicare Prescription Payment Plan was released on February 29, 2024 and provided final policies for CY2025. The Final Part Two guidance has not been released at this time and is anticipated to be published in summer 2024. In most instances, CMS thanked commenters for their insights and has finalized their existing proposal or included some additional clarifications. A few key updates that were provided in the February 29th guidance are highlighted below.

Key Updates

POS Threshold for Out-of-Pocket (OOP) Costs

  • CMS has finalized this and requires Plan sponsors to use a $600, single prescription Point-of-Sale (POS) threshold to identify enrollees “likely to benefit.” This was based on analysis performed by CMS that identifies enrollees with a high likelihood of benefiting whilst reducing the risk of triggering enrollees that will not find the program beneficial. The draft guidance had looked at data and suggested ranges of $400 - $700 over single prescriptions versus single day accumulations.
  • In addition to providing information to all Part D enrollees during open enrollment, Part D sponsors must continue to undertake targeted outreach to Part D enrollees “likely to benefit” prior to and during the plan year outside of the POS identification. This includes notification when approving coverage for drugs that will incur an out-of-pocket (OOP) cost greater than the $600 threshold.

Payment Types

  • CMS has removed the requirement to allow cash payments due to concerns about mail theft and to maintain consistency with acceptable payments for Part D premiums.

Election Requests

  • The requirements for Part D sponsors to receive election requests from beneficiaries, via fax have been removed.

Additional Clarifications

Financial Reconciliation Processes

  • CMS added additional guidance on how plans should reimburse participants that pay more than their total out-of-pocket (OOP) costs incurred. This could occur if beneficiaries do not pick up a drug from the pharmacy and it is reversed after the billing/payment has processed. CMS expects that Part D sponsors will develop standardized procedures for determining and processing reimbursements for excess Medicare Prescription Payment Plan payments made by program participants.
  • In the event the Part D sponsor undercharges the participant, the participant is still responsible for paying the accurate payment amount; as such, Part D sponsors should work with the participant to correct the charge and collect any outstanding amount for which the participant was not correctly billed.

Pharmacy Claims Processing Requirements

  • Part D sponsors and pharmacies must use a separate unique Bank Identification Number (BIN) and/or Processor Control Number (PCN) electronic claims processing methodology for applicable Medicare Prescription Payment Plan transactions.
  • Part D sponsors must assign a program specific PCN that starts with “MPPP” and report the new BIN/PCN to CMS in a manner to be specified.
  • CMS confirmed that payments made through the Medicare Prescription Payment Plan BIN/PCNs are to be processed after all other payers, including SPAPs (State Pharmaceutical Assistance Programs) or Patient/Copay Assistance Programs (PAPs/CAPs).

Paper Claims

  • CMS clarified that except for the election-related circumstances (which are listed in section 70 of the guidance2), Part D sponsors are not required to retroactively include paper claims submitted to the Part D sponsor by a Medicare Prescription Payment Plan participant.

CMS Model Materials

  • CMS has clarified they will be developing multiple model materials for use by Part D sponsors. These will be issued for public comment in the Federal Register and approved through the OMB ICR (Office of Management and Budget - information collection request)

Appendix B

  • CMS provided nine additional Medicare Prescription Payment Plan Calculation Examples in an appendix within the guidance that Plan sponsors should use to ensure calculations are correctly applied for specific scenarios such as mid-year elections with Supplemental Drugs/B vs D drugs and others.  


There are many moving parts to implement this program and Plan sponsors will need to move quickly to meet the required deadlines prior to open enrollment on October 15, 2024, and to meet the expectations for full claims processing, ledgering and invoicing, and payment readiness by January 1, 2025.  PBMs and other technology solution vendors have reviewed the guidance and are preparing solutions to enable Plan sponsors to meet the new guidance. The items being handled by the PBMs and vendors are not all the same and the costs are even harder to nail down. In this section, we are going to give some highlights on what these companies are doing and not doing to assist in M3P readiness.

At the time of publishing, PBMs and vendors are considering their final options based on the Final Part One and Draft Final Part Two guidance. It is unlikely that CMS will provide extensions for implementations, and Part D sponsors should be reviewing the options their PBMs are recommending as well as external technology vendors.

PBMs are managing this from different approaches. We’ve seen PBMs building out their own ledgering and payment collection solutions, PBMs that are partnering with technology vendors, to those that are only prepping for the necessary changes to claims processing and leaving the rest of the management to the Plan Sponsor.

Technology solution vendors are developing or updating existing medical payment invoicing systems to be compliant with M3P and are either selling their service to the PBMs and/or selling directly to Plan sponsors.

2 Medicare Prescription Payment Plan Final Part One Guidance ( was released Feb 29, 2024

Part D sponsors should decide which portions of the regulations they will manage internally, and which portions will be contracted to the PBM or a technology solution vendor. Some PBMs and vendors have end-to-end solutions or have modularized to allow Plan sponsors to select the areas they require support; others only manage some of the process.

While there is decisioning for the plan as who to partner with for technology to manage elections, payments and collections and customer service requirements, it is important to note that Plan sponsors must work with their PBMs to ensure changes to their claims processing and benefit design are in place. This will allow the M3P BIN/PCNs to process at POS with a $0 cost-share. Additionally, pharmacies that process a claim for a beneficiary that is not yet participating in the M3P program but has a claim that meets the coverage year 2025 $600 threshold, must receive a notification informing them that the beneficiary may benefit from the M3P program which will trigger them to provide the “likely to benefit” communication to beneficiaries. PBMs must also ensure pharmacy contracts are updated to require contracted pharmacies to provide the information to the beneficiaries at POS. This will likely be done through a network notification, which bears the same weight as a contract. Another trigger is during the prior authorization process; if a claim is approved for coverage and will exceed the OOP threshold limit, the same “likely to benefit” notification must be provided to the beneficiary with the approval notification.

Look at the puzzle pieces below, and make sure your plan for M3P compliance is pulling all these pieces together. With each piece, consider if the activity will be delegated to the PBM or technology vendor or if this will remain managed by the Plan sponsor.  Later in this white paper, we will come back to the topic of Plan sponsor readiness after looking a bit deeper into PBM and technology vendor solutions.

plan sponsor

To simplify this colossal amount of work effort and decisioning in a short amount of time, we are trying to take some bite-sized pieces. First, with the decisioning on the Copay Billing/ Payment portion, there are three approaches a Plan sponsor can take.  So, let’s start with that.

The three options include selection of (1) the PBM’s new-to-market solution built for M3P, (2) the PBM’s solution which utilizes an in-market technology vendor, or (3) a technology vendor and establishing the connectivity with the PBM.


Many changes have occurred in recent weeks with some PBMs updating their positions on how they will be able to assist their clients with an M3P solution. Optum is building an end-to-end solution while others like Express Scripts (ESI), CVS Caremark and Prime Therapeutics (Prime) are partnering with existing technology vendors such as Paytient, SimplicityRx/Echo Health and Certify.

Most PBMs have various offerings available to meet the new guidance and each Plan sponsor will need to look carefully at what is delegated to their PBM and how their PBMs are equipped to manage the M3P requirements. Most PBMs are limiting the amount of customization available in 2025 to ensure core functionality is ready for Open Enrollment on October 15, 2024.

Technology Solution Vendors

There are currently several healthcare payment and collection vendors that have established programs which are tried and trusted largely in the medical benefit space and being adapted to meet the expectations of M3P. There are also platforms that can be right-sized and configured to meet this application. As an example, Oracle is the backbone being right-sized by Optum to meet the needs of their clients. Other technology solution vendors have varied capabilities in market and are altering in-market solutions to meet this new demand.

These technology solution vendors have the financial expertise with a stable billing, invoicing, payment and notification platform with excellent collection rates and current NPS (Net Promoter Score) greater than 90%. The technology effort to meet the new M3P guidance is minimal, and most have been developed, tested and ready for demo. They are likely to have more “bells and whistles”/ “nice to haves” that vendors building from scratch are only likely to have in future years, due to the short development time available. These vendors will have lower cost to entry but will need some heavy lifting from Plan sponsors’ technology teams to initiate the needed APIs and file transfer processes. In addition, Plan sponsors will need to work with their PBMs to validate the adjudication processes and ensure they have teams available to integrate with the technology vendors or intake files themselves for push and pull to the vendors.

Some of these vendors offer end-to-end solutions, while others only offer part of the needed puzzle which may work for some Plan sponsors who want to maintain internal control over certain functions.


m3p functions


Plan sponsors should have decisions made no later than mid to late April to ensure sufficient time for contracting and implementation. Internally, decisions should also be made to understand your current processes, which processes you will undertake yourselves and which you will contract to a vendor/PBM. Although communication materials and Part 2 guidance are still to be finalized, Part D sponsors will need to continue to move forward with their implementation plans to meet the deadline, knowing that changes will be needed.

Regardless of the solutions that plans choose, there will still be much to achieve in the following months and education of your broader organization will be critical to ensuring a smooth implementation. Plan sponsors’ internal teams will all be impacted and will need to collaborate internally and externally to be ready for open enrollment on October 15, 2024.


Legal and compliance teams will be an integral part of this program to ensure contracts/ addendums are finalized and meet CMS requirements. CMS expects Part D sponsors to incorporate the Medicare Prescription Payment Plan into their compliance programs and have indicated that CMS and/or its contractors may conduct specific audits of Part D sponsors’ implementation of the M3P program. CMS will also monitor and collect data about beneficiary complaints and grievances reported via the Medicare Complaints Tracking Module (CTM) to assess compliance with all Medicare Prescription Payment Plan requirements, beneficiary protections, and program integrity. They may also initiate audit activity that requires additional data collection or site visits.

Marketing will play a key role in communicating and educating your membership as the calculations are exceptionally confusing and the program may not benefit all beneficiaries. Most vendor solution pricing is based on the number of members that utilize the M3P program; as such, it will be key to educate beneficiaries that although they will receive their medication at the pharmacy for free, they are still responsible for the full payment of the cost-share, and they will be billed separately. There are a number of new model templates being developed by CMS as well as updates to most existing communications, which will require careful review and meet all language access and accessibility requirements.

IT teams must be prepared to assist with the integration processes and be responsible for ensuring eligibility and claim layouts are accurately updated with the necessary data fields to meet the new requirements. Detailed documentation will be needed for your PBM and vendor partners. In addition, elections during the plan year must be implemented within 24 hours so timeliness of processing the election to the vendors will require close attention.

Although reporting has not been finalized by CMS, they have noted that plans must have procedures in place to develop and report to CMS, the following:

  1. The cost of its operations.
  2. The patterns of utilization of its services.
  3. The availability, accessibility, and acceptability of its services.
  4. Information demonstrating that the Part D sponsor has a fiscally sound operation.
  5. Pharmacy performance measures.
  6. Other matters that CMS may require.

Medicare Prescription Payment Plan reporting will also be required at both beneficiary-level and contract-PBP-level and may require compiling data from multiple data sources. This is addition to updates required in MARx systems and Prescription Drug Event (PDE) reporting.

In addition to the financial impact of cash flow and unsettled balances, the costs of implementing and ongoing management of the program could be substantial. Most vendors are charging a flat per participant fee and/or transactional fees based on the number of invoices/payments submitted as well as enrollments and terminations. Market industry is anticipating between 5% and 8% participation, but this will vary depending on the plan sponsor demographics and how clearly who will benefit is communicated. CMS requires all enrollees to be provided information about the program during open enrollment, as such educating beneficiaries who will not benefit from the program will be essential to contain costs. Finance teams should also account for passed on fees including potential increased dispensing fees, extra COB per claim fees (if applicable), additional lettering fees and banking and merchant/ACH service fees.

Customer Service teams will require substantial training on the new regulations to succinctly advise members on the benefit of participating in the program and clearly explain how the calculations will impact the specific member based on the date of election and the number of months for repayment. Having good scripts and effective tools, including predictive payment calculators, will be essential as the calculations may be confusing to members and could negatively impact CAPHS scores and member retention. This team will also need to assist members in their applications to the M3P program and answer questions regarding the billing/payment, so direct access to the M3P application and billing/payment portal will be needed. A few vendors also allow customer service to make adjustments directly in the portal. Clear processes will be needed to limit confusion and increase customer satisfaction.

Plan sponsors have a lot to do in a very short time. Operational teams will be needed to test and validate both the adjudication updates as well as the financial ledger solutions. The testing and management of file transfers and ensuring new APIs are secure and effective for the seamless transfer of the timely data needed will be essential to ensure the tight timelines (24 hours to implement from election to participate) that CMS has indicated must be met. Coordination of the multiple aspects of this program may require dedicated resources that have intimate knowledge of the program, not only during the implementation phase, but to continue to monitor the program and resolve the issues that are likely to arise.



If you are not ready, you are not alone. If your entity is not all on board with the brevity of the changes needed for compliance with the Medicare Prescription Payment Plan, you are not alone. This is a time of significant change in the Medicare Part D program that may require pulling in your consultant along with all the stakeholders in your organization to ensure your readiness plan is accounting for all the knowns and unknowns of the implications of copay smoothing for 2025.

For CMS guidance and additional details on the Medicare Prescription Payment Plan click here.

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