Medicare Prescription Payment Plan Implementation Looms; Payers’ Program Operations to be Tested

Conduent advising payers on possible pitfalls of implementing compliance tools and processes

Leading up to 2024 open enrollment, Medicare Plan D sponsors have been educating members about benefits that will limit their out-of-pocket costs for prescription drugs. 

Payers have spent nearly three years adapting to provisions in the Inflation Reduction Act (IRA). This year, payers are rolling out programs to cover the law’s requirements for communications, eligibility, operations, participant invoicing, terms, and collection stipulations around the Medicare Prescription Payment Plan (M3P).

Starting in January 2025, the M3P gives Medicare Part D enrollees new ways to pay for their prescription drugs. For payers, the program’s implementation may feel like the launch of a completely new, and perhaps unrelated, business operation. 

Operationalizing the MP3 requires a new set of skills

The M3P will take payers’ operations into the arena of billing and invoicing as they extend credit, keep track of balances, and collect payments as Part D members opt to spread out the costs of their prescription drugs over the year. Payers may find that their M3P operations model more closely resembles that of a credit lending organization as the funder to pharmacies.  

With Conduent’s expertise in payer operations and finance and billing plus extensive experience in data collection and workflow management, there are three areas that are most likely to create challenges for payers when operationalizing M3P:

Finding the right balance of outsourcing and internal responsibilities.

The ability to scale operations in near real-time to support the M3P will be key to navigating the unknowns in the first year. Payers will be forecasting the member’s utilization of the plan, managing the complexity in determining the monthly calculations of costs, and experiencing the actual volume of invoicing and collecting of member payments. For example, payers have little insight into the propensity of eligible members to opt to spread costs over the year. The lack of historical data on the claims experience of these members translates into a number of new data variables flowing into operations. Payers may need to adjust their forecasts and operations several times during the first year to accurately predict costs.

Leveraging a patchwork of vendors to stand up the operations.

Multiple operational components will be involved in administering the M3P. Some functions, like the role of “bookkeeper” tracking the patient’s balance due, payments to the pharmacy and payments received by the member, add complexity. Plan sponsors already have sophisticated customer experience operations to support member engagement around eligibility and coverage. However, the new “bookkeeper” must deliver a customer service experience closer to a financial services interaction. 

In addition, payers will have a new role of collections if a member fails to pay their bill. The resulting bad debt will become the payer’s liability. Since the Centers for Medicare and Medicaid (CMS) guidelines on collections prohibit the selling of bad debt, payers will face two choices:

1) write off bad debt or 2) standup new, CMS-compliant operations focused on member collections.

Risks from taking a wait-and-see approach.

Payers that have spent the last few years adjusting operations to enact provisions in the IRA know that transforming existing, or creating new business processes, is a heavy lift. With the M3P, some payers may want to take a wait-and-see approach to: 

• determine how their initial capabilities perform, 
• look for signs of how competitors are adjusting and
• evaluate the members’ program utilization and experience. 

As the year begins, payers will quickly know if their M3P implementation model is delivering. If performance—in any aspect of operations or the member experience—is lackluster, it will be critical for payers to adjust quickly. For many, this will include finding experienced partners to help design new processes and member experiences and to fill operational gaps. The wait-and-see approach will result in delaying performance improvements while new vendors get up to speed.

A time of trial and error

After studying the CMS guidelines, considering several operating models, then standing up an M3P program implementation which involved vendors across multiple functions, a major payer and Conduent client identified an issue with electronic intake of new member applications. Electronic intake sets the foundation of the enrollment business process operation, inclusive of Medicare Part D. Following all the planning in the lead up to open enrollment, a challenge with electronic intake threatened to derail the full M3P implementation for this top-five payer. Conduent engaged additional vendors and was able to integrate into the payer’s network of providers. We built the workflows and coordinated the data flow among the providers intake to solve the issue. The short runway to diagnose and fix the issue demonstrated the need for payers to be ready for a period of trial and error and the criticality of experienced vendor partners to help quickly reset for smoother M3P operations. 

The Medicare Prescription Payment Plan presents new challenges and opportunities for payers. The challenges will include adjusting to new inputs (data and costs) and adapting to enhanced customer experience needs that will reflect the payer’s role as bookkeeper, creditor and collections agent. The opportunities will include adapting the business model to accommodate the unanticipated impacts of the M3P on the member and the organization and strengthening the ability to respond with experienced vendor partners that can deliver solutions and results.