Medicare Prescription Payment Plan: how each monthly bill is calculated

The Medicare Prescription Payment Plan is an optional way to pay Part D drug costs that every Medicare drug plan, including Medicare Advantage plans with drug coverage, has had to offer since January 1, 2025. Medicare.gov describes it in one sentence: you get a bill from your plan instead of paying the pharmacy. The interesting part is how that bill is sized, because the formula is written into the Social Security Act and produces bills that can rise, fall or stay flat depending on when your costs arrive.

Labeled, hypothetical numbers below let you predict your own bills. Money is the only subject: whether a drug is right for you belongs with your prescriber, and which plan to choose is yours.

The formula, in two lines

Section 1860D-2(b)(2)(E)(iv) of the Social Security Act sets two different calculations. CMS explained them in its final part one guidance of February 29, 2024, and for 2026 and later years they are written into regulation at 42 CFR 423.137(c).

For 2027 the out-of-pocket threshold is $2,400, set by CMS in its CY2027 Rate Announcement. Our separate guide to the Part D out-of-pocket cap explains what counts toward that threshold. Here the threshold matters for one reason only: it is the starting number in the first-month formula.

Three consequences follow directly from the two lines. Your first bill is never more than the threshold, less what already counts toward it, divided by the months left. Months with no new prescriptions still produce a bill if you owe a balance, because the balance is spread forward. And the bills add up to your out-of-pocket costs for the year, with December's amount billed and paid early in the following year, as the CMS guidance notes.

Three sign-up scenarios, worked month by month

The inputs below are invented for the arithmetic and are not prices for any drug. Each scenario uses the 2027 threshold of $2,400. Amounts are rounded to cents, and in real bills a plan's rounding can shift a cent or two between months.

Scenario A: joined during open enrollment, large cost in January

Hypothetical inputs: you opted in before January 1, and your January fills alone bring your out-of-pocket costs to the full $2,400. You have no further out-of-pocket costs that year, because you reached the cap.

Twelve bills of $200 equal the $2,400 paid. Without the program, the same person would have paid $2,400 at the pharmacy in January. This is the case the program was built for.

Scenario B: joined in July, large cost starting in July

Hypothetical inputs: no Part D costs from January to June, then fills in July that reach the $2,400 cap. You opt in during July.

The same $2,400, but spread over six bills of $400 instead of twelve of $200. A later start halves the number of months and doubles the size of each bill. That is not a penalty; it is the formula running out of calendar.

Scenario C: joined in July after paying the pharmacy in the spring

Hypothetical inputs: you paid $1,000 at the pharmacy between January and June without the program, then opt in during July, when new fills cost you the remaining $1,400 to reach the cap.

Here the first-month formula subtracts what you already paid toward the threshold. The $1,000 paid in the spring stays paid; the program only spreads the $1,400 that remains.

The largest first bill, by the month you join

Because the first-month formula divides the yearly threshold by the months left, the worst case for a first bill can be worked out for every month of the year before you have a single receipt. It is the bill you would get if your costs that month were large enough to fill the whole threshold and you had paid nothing toward it yet. The chart sets 2026 beside 2027, using the $2,100 and $2,400 thresholds from the CMS rate announcements.

Show the maximum first bill for every month

Month you join	Months left	2026 maximum first bill	2027 maximum first bill
Jan	12	$175.00	$200.00
Feb	11	$190.91	$218.18
Mar	10	$210.00	$240.00
Apr	9	$233.33	$266.67
May	8	$262.50	$300.00
Jun	7	$300.00	$342.86
Jul	6	$350.00	$400.00
Aug	5	$420.00	$480.00
Sep	4	$525.00	$600.00
Oct	3	$700.00	$800.00
Nov	2	$1,050.00	$1,200.00
Dec	1	$2,100.00	$2,400.00

Read the chart from left to right and the program's design shows itself. Up to about midsummer, the largest possible first bill stays within a few hundred dollars, because there are enough months left to absorb a full year's threshold. After that it climbs steeply: an October start can carry a first bill of $800 in 2027, a November start $1,200, and a December start the entire $2,400 in a single bill. Joining in December changes who bills you and pushes the payment into the next month, but not the amount.

The 2027 columns are about 14 percent higher than the 2026 columns in every month, because the threshold itself rose from $2,100 to $2,400. CMS explains the jump in the same announcement: the threshold is indexed by the annual percentage increase in Part D spending, which for 2027 was 13.65 percent, combining a 9.37 percent annual trend with a 3.92 percent revision for the prior year (the announcement calls it a multiplicative update), and the result is rounded to the nearest multiple of $50. For a January start, the ceiling on the first bill moves from $175 in 2026 to $200 in 2027, before any change in the drugs themselves.

Two cautions keep the chart honest. A column is a ceiling, not a forecast: if your costs in the joining month are lower than the column, your first bill is your actual costs, as Scenario C and the uneven-costs table below show. And the ceiling only holds for the first month. From the second month on, every new fill is added to the balance and spread again, so a person who joins in January and then has a large fill in September can see a September bill well above $200.

When costs arrive in pieces, the bill moves

The three scenarios above put all the cost in one month, which makes the bills flat. Fills do not always line up that neatly, and the subsequent-month formula reacts to every new cost. A short, hypothetical run shows the effect: you join before January, then incur $600 in January, nothing in February, and $600 in March.

The February bill drops sharply because there were no new costs to add, and March rises again when a new fill arrives. Neither month is a mistake. If you budget for a fixed monthly payment, this is the pattern to expect when prescriptions are filled irregularly: the bill tracks your fills, smoothed over the months left.

Deciding whether to join: a quick framework

The framework leaves out one personal factor that matters: whether a predictable bill from your plan is easier for your household to manage than an unpredictable charge at the pharmacy. Neither option changes the total.

Signing up, and what happens to a fill on the day you ask

You opt in through your drug plan, not through Medicare or the pharmacy. 42 CFR 423.137(d), which codified the CMS final part one guidance for 2026 and later years, sets processing deadlines that matter if a costly prescription is waiting.

• During the year: the plan must process your request within 24 hours and tell you whether it is approved and when you start. Fills after that point are billed through the program.
• An urgent fill you already paid for: if you paid the pharmacy for a prescription because you believed waiting the 24 hours could seriously jeopardize your life, health, or ability to regain maximum function, you can ask for a retroactive start. The request must come within 72 hours of when that claim was processed. Once your election takes effect, the plan must refund what you paid for that fill, and for covered fills between it and your start date, within 45 calendar days, and move those costs into the monthly billing.
• Incomplete requests: if the plan needs more information, you have 21 calendar days to provide it. A denial must come with the reason and a description of the grievance process.

The first scenario above assumed you joined before the year started. In that case the first-month formula applies to your first month of coverage, with 12 months to spread over and nothing yet paid toward the threshold, which is why the January bill in that case is capped at $200.

If you change drug plans during the year

A balance you built up under one plan stays with that plan. Under 42 CFR 423.137(d)(8), if you switch plans mid-year or CMS reassigns you, the old plan must offer you the option to pay the balance in one lump sum, and if you keep paying monthly it keeps billing you for costs you incurred while you were in its program; it cannot require full immediate repayment. The new plan is not permitted to sign you up automatically, but it must let you opt in, and it calculates your first month with the first-month formula. The new plan may refuse you only if both conditions in the rule are met: the old and new plans are offered by the same Part D sponsor, and you were removed from the program for not paying and still owe an overdue balance.

In practice, a mid-year switch can mean two monthly bills for a while: one from the old plan for the old balance and one from the new plan for new fills. Keep both statements, because each plan only knows its own part of your year.

Disputing an amount

If you think the cost sharing behind a monthly bill is wrong, for example because a drug was charged at the wrong tier, 42 CFR 423.137(h) requires plans to handle that through their standard Part D coverage determination and appeal procedures. Disputes about any other aspect of the program, such as a late notice or a mishandled payment, go through the plan's Part D grievance procedure. In both cases, start with the plan's member services number and ask for the decision in writing.

Missed payments, leaving early, and the next year

The rules for what happens when a bill goes unpaid are where the program differs from a credit product, and they come from 42 CFR 423.137(f) and (g), which codified the CMS final part one guidance.

• No fees or interest. Plans may not charge late fees, interest, or fees for a particular payment method.
• A grace period of at least two months. If you miss a due date, the plan must allow at least two months to pay the overdue amount and remain in the program.
• Removal after the grace period. If the overdue amount is still unpaid, the plan ends your participation. It keeps billing what you owe, in monthly amounts no larger than the formula allows. From then on, you pay new costs at the pharmacy.
• Reinstatement. The plan must reinstate you if you show good cause for missing the payment and pay what is overdue. It may also reinstate you at its discretion if you pay.
• Your drug coverage is safe. A plan cannot disenroll you from Part D, or refuse future Part D enrollment, because you did not pay a payment-plan bill. Unpaid premiums are a different matter and follow the plan's premium rules. A late enrollment penalty is part of the premium, so the payment plan does not spread it; the penalty table by number of uncovered months shows the monthly amounts.
• The following year. A plan sponsor may refuse to let you opt in for a later year only while you owe that sponsor an overdue balance; a plan from a different sponsor cannot refuse you on that ground. If you stay with the same sponsor and the balance stays unpaid, the refusal can last beyond the next year. If you missed a payment with fewer than two full months left in the year, the grace period carries into the next year, and the plan must let you opt in for that year while it runs.

Leaving voluntarily works the same way as removal, without the overdue step: you tell the plan you want out, it sends a notice, you pay the pharmacy for new fills, and it continues to bill what you already owe in capped monthly amounts. The rule requires the plan to offer a lump-sum payoff and forbids it to require one.

Participation carries into the next year on its own. Under 42 CFR 423.137(d)(9), your plan must automatically renew your participation for later plan years, notify you of the renewal, and remind you that you can opt out at any time. If you no longer want monthly billing in the new year, use the plan's opt-out process after you receive that notice.

Checking a bill from the program

A monthly bill from a payment plan is still a bill, and it is worth checking against your own records the same way you would check a medical bill. Three numbers should line up: the new out-of-pocket costs the plan says you incurred this month, which should match your fills; the balance carried from earlier months; and the months left in the year. With those three, you can reproduce the bill with the formula above. If your number and the plan's differ by more than rounding, call the plan with the fill dates and ask for the calculation in writing.

Two details trip people up. A 90-day supply is counted in the month you fill it, not spread over three months: 42 CFR 423.137(c)(5) says costs for an extended day supply are attributed to the month the prescription was filled and are not pro-rated. So a single 90-day fill raises that month's new costs, and the bill, more than a 30-day fill would. And the payment plan does not change how quickly you reach the $2,400 cap: 42 CFR 423.137(c)(4) says participation must have no impact on true out-of-pocket cost accumulation, and costs are treated as incurred on the date each claim is adjudicated. The cap is reached on the date of the fill that crosses it, even though you will still be paying for that fill in later monthly bills.

Pharmacy and plan statements are the drug-cost equivalent of the medical paperwork covered in our guides to checking an itemized bill and reading an explanation of benefits. The habit is the same: match each charge to an event, then match the total to the rule.

A one-page worksheet for estimating your own bills

You can predict your bills before opting in with four inputs and the formula. Write them down for the year you are planning:

1. The threshold: $2,400 for 2027.
2. Already paid toward it: zero if you join before January; otherwise the year-to-date out-of-pocket total from your plan statement.
3. Months left: count the month you join as the first.
4. Expected costs by month: from your current fills, noting any 90-day supplies, which count in the month they are filled.

The first-month cap is input 1 minus input 2, divided by input 3. Your first bill is that cap or that month's costs, whichever is lower. From there, carry the unpaid balance forward, add each month's new costs, and divide by the months left. If the largest bill in your worksheet is still more than you can manage, that is useful to know before January: it is the point at which to check Extra Help eligibility and to ask your plan about lower-cost covered alternatives, a conversation that belongs with your prescriber and the plan.

How this fits with the rest of your health costs

The payment plan covers Part D drugs only. Hospital and doctor bills under Part B, and hospital stays under Part A, are billed by providers on their own schedules; our guide to observation status versus inpatient status explains one of the larger Medicare cost questions on that side. Pre-tax money from a health savings account built before Medicare can pay qualified drug costs, as our HSA and FSA guide explains, and that is true whether you pay the pharmacy or pay the plan's monthly bill. If a monthly bill is hard to meet, a hospital's financial assistance policy is the wrong door, because the bill comes from your drug plan, not a hospital; the plan's grace period and the Extra Help program are the relevant levers. The prescription cost topic page lists every drug-cost guide on this site.

Card purchases sit outside both the plan and the monthly payment option; do drug discount cards count toward your deductible explains what that does to the deductible and the cap.

Questions about monthly drug billing

Before deciding whether spreading costs helps, estimate the total itself: our walk-through of what counts toward the 2027 Part D cap shows how quickly a steady prescription bill reaches $2,400.

Documents behind this guide

• Social Security Act section 1860D-2(b)(2)(E), the statutory monthly cap formula, as set out and applied in CMS, Medicare Prescription Payment Plan: Final Part One Guidance (February 29, 2024), sections 30 (calculations), 40 (no fees or interest), 60.2.3 ($600 likely-to-benefit threshold), and 80 (voluntary and involuntary termination, two-month grace period, reinstatement, preclusion, no Part D disenrollment). Checked October 28, 2026.
• Electronic Code of Federal Regulations, 42 CFR 423.137 (90 FR 15912, April 15, 2025), current as of October 26, 2026: (a) program required for plan years from January 1, 2026; (c) first-month and later-month caps, extended day supply, no effect on true out-of-pocket accumulation; (d) 24-hour processing, 72-hour retroactive request, 45-day refund, 21-day information window, plan switching, automatic renewal; (e) likely-to-benefit criteria for 2026 and later; (f) grace period, reinstatement, preclusion, no Part D disenrollment; (g) no fees or interest, lump-sum option; (h) coverage determination and grievance procedures. Checked October 28, 2026.
• CMS, Medicare Prescription Payment Plan program page, listing the final guidance documents, which the page says apply to the first program year, 2025, and the CY2026 rule; no 2027 guidance update was listed when checked. Checked October 28, 2026.
• CMS, Fact sheet on the final part one guidance: $0 at the pharmacy, no reduction in total costs, Extra Help more advantageous for eligible enrollees. Checked October 28, 2026.
• CMS, CY2027 Rate Announcement (April 6, 2026), 2027 out-of-pocket threshold of $2,400. Checked October 28, 2026.
• CMS, CY2027 Rate Announcement, Table V-1 (13.65 percent annual percentage increase: 9.37 percent trend and 3.92 percent prior-year revision) and Table V-2 (out-of-pocket threshold $2,100 for 2026 and $2,400 for 2027), used for the join-month chart. Checked October 28, 2026.
• Medicare.gov, Medicare Prescription Payment Plan: no cost to participate, bill from the plan instead of paying the pharmacy, does not lower drug costs. Checked October 28, 2026.

Billing arithmetic with hypothetical drug costs. Not medical, legal or financial advice, and not a recommendation of any drug or plan. Your plan's program terms and billing statements control; confirm any amount with the plan in writing.