Prescription drug costs have gotten insane. Learn how to get protection from the increasing prices of prescription drugs.
Prescription Drug Costs Key Takeaways
- $2,000 Cap on Part D Costs: Max out-of-pocket limit under Medicare Part D.
- Enrollment Timing: Enroll during the Initial Enrollment Period to avoid penalties.
- IRMAA Awareness: Understand how income affects Medicare Part D premiums.
- Discount Programs: Utilize discount cards and manufacturer discounts to reduce costs.
The good news: new Medicare rules, effective in 2025, set a cap on out-of-pocket prescription drug costs at $2,000 for those enrolled in Medicare Part D prescription drug insurance plans.
More good news: beginning in 2025, Part D beneficiaries have an option to spread out-of-pocket costs throughout the year, rather than paying a deductible or copay all at once when you pick up your medications.
This can help you manage a big prescription drug copay without having to go into debt by putting your drug copay on a credit card.
The bad news is, well, health care costs are still tremendously expensive overall, and every little bit of protection will help in retirement.
Here’s the skinny:
Without prescription drug insurance or other assistance, drug costs continue to rocket into the stratosphere.
For example, medications for conditions such as rheumatoid arthritis, multiple sclerosis, and certain cancers can cost thousands of dollars per month without insurance. And today’s modern drugs often only come to market after drug companies have invested billions into research and development. These costs must be recovered in order for future drugs to be developed. But that leads to some extremely high prices in the short run:
For instance, the cost of Zolgensma, used for spinal muscular atrophy, is approximately $2.1 million per dose. And Myalept, for lipodystrophy, .
Additionally, a typical course of chemotherapy following a cancer diagnosis can range from $10,000 to $200,000 or more in out-of-pocket costs without insurance.
All told, prescription drug costs account for about 20% of all medical costs in retirement, according to Commonwealth Fund data.
Too often, these high pharmaceutical costs force Medicare beneficiaries to make heartbreaking choices between essential medication and basic necessities like food and shelter.
Owning a Medicare Part D policy that caps your out-of-pocket costs at $2,000 per year. It easily pays for itself many times overall for a very reasonable premium, considering the devastating risks of going without it.
But to benefit from the lowered caps, you must own a Medicare Part D policy––either as a stand-alone drug plan or as part of an affordable Medicare Advantage plan. Each of these options helps provide critical assistance in paying hospital, rehabilitation, physicians’ charges, lab fees, and durable medical equipment costs under Medicare Parts A and B.
Learn More: How To Choose the Best Medicare Part D Prescription Drug Plan
Seniors can explore various strategies to reduce prescription drug costs effectively. Here’s a detailed look at several methods:
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1. Use Prescription Drug Discount Programs
All MediGap Advisors clients enjoy free membership in a terrific drug discount membership card program.
This can be a great resource that allows you to access hundreds of commonly-prescribed generic drugs at up to 80% off retail prices.
You can get access to this program simply by contacting a Medigap Advisors Personal Benefits Manager and enrolling through us. There’s no additional charge, and no one has lower premiums than we do. It’s just one of a number of exclusive benefits available to our valued MediGap Advisors clients.
Additionally, other excellent discount programs such as GoodRx or SingleCare offer significant savings on prescription medications. These programs negotiate with pharmacies to provide lower prices on many drugs, which can be especially beneficial for medications not covered by insurance. They are free to use, and you can easily compare prices across different pharmacies to find the best deal.
Just have your doctor send your prescription to the pharmacy that gives you the best pricing.
2. Ask About Generic Drugs
Generic drugs are chemically equivalent to their brand-name counterparts but are typically available at a fraction of the cost. Always ask your doctor or pharmacist if there is a generic version of any prescription medication you use.
By law, generics manufactured in the United States must meet the same quality and performance standards as brand-name drugs, making them a cost-effective choice.
3. Enroll on Time to Avoid the Part D Late Enrollment Penalty
The best time to enroll in Medicare Part D is during your Initial Enrollment Period (IEP), which typically coincides with your 65th birthday.
This period starts three months before the month you turn 65, includes your birthday month, and extends three months after that month.
How Much is the Medicare Part D Late Enrollment Penalty?
Additionally, you can enroll or make changes during the Annual Election Period from October 15 to December 7 each year. If you miss these periods, you might face a late enrollment penalty unless you have other creditable prescription drug coverage.
The Medicare Part D penalty is calculated as 1% of the national base beneficiary premium per month of delay in enrollment, multiplied by the number of months you were without creditable prescription drug coverage.
For instance, if the base premium is $32.74 and you delay 30 months, your penalty would be 30% of $32.74, totaling around $9.82 monthly. This amount is then permanently added to your Part D premium.
To avoid this penalty:
- Research and enroll in Part D as soon as you’re eligible.
- Ensure any other drug coverage you have is deemed “creditable.”
- Enroll in Part D within 63 days after losing creditable coverage.
- Check if you qualify for Extra Help.
- Consider a Medicare Advantage Plan with built-in drug coverage to meet Part D requirements.
Learn More: Medicare Penalties and How to Avoid Them
4. Maintain a Healthy Lifestyle
Preventing diseases through a healthy lifestyle can reduce the need for certain medications. Eating a balanced diet, staying physically active, and managing stress effectively can help keep chronic conditions like high blood pressure and diabetes at bay, potentially reducing your dependence on medications.
Take advantage of your Medicare preventative care benefits, such as free screenings and a free annual wellness visit with your doctor to prevent serious medical conditions and to nip emerging health problems in the bud.
5. Consider Using the Mark Cuban Cost Plus Drug Company
The Dallas Mavericks owner isn’t just a sports franchise investor. He also started an online pharmacy that aims to provide transparency in drug pricing. The Mark Cuban Cost Plus Drug Company offers many medications at substantially lower prices by bypassing traditional markups.
The Mark Cuban Cost Plus Drug Company operates an online pharmacy that can be an affordable option for purchasing prescription medications.
6. Use Income Timing Strategies to Reduce Tax and Avoid IRMAA
Medicare beneficiaries with higher incomes may pay a higher premium on Medicare Part B and Part D plans, known as the Income-Related Monthly Adjustment Amount (IRMAA).
In a nutshell, your IRMAA is the amount of Medicare premium you will pay out of pocket, after the Social Security Administration takes your income into account.
Here’s how it works:
If your income is above a certain threshold (for example, because you’ve diligently worked, saved, and invested all your life), the government effectively penalizes you by slapping you with an additional charge, over and above the normal Medicare Part D and Part B premiums.
This IRMAA provides money to subsidize everyone else – including assistance to very low income individuals.
The extra amount you pay is due to having a high modified adjusted gross income is your IRMAA.
But by keeping your taxable income below certain thresholds, you can avoid these extra charges. Strategies might include timing the withdrawal of retirement funds or investing in tax-advantaged accounts. The use of annuities, permanent life insurance dividends and cash value withdrawals, Roth IRAs and municipal bond interest for income can help reduce your taxable income, which in turn potentially reduces both IRMAA and taxes on Social Security income.
You can also reduce your taxable income by making the most of allowable deductions, such as home mortgage interest and business expenses, by making judicious investments that offset ordinary income, and by taking advantage of tax incentives such as accelerated depreciation on investment properties.
7. Request Doctor’s Samples
Many doctors receive samples of prescription drugs from pharmaceutical sales representatives. If you’re prescribed a new medication, ask your doctor if they have samples you can use to start your treatment, potentially saving you the cost of your initial prescription.
8. Utilize Manufacturers’ Discount Programs
Some pharmaceutical companies offer discount programs for their medications, especially for more expensive or specialty drugs. These programs may provide discounts or even free medications to patients who qualify based on income or insurance status.
Learn More: Navigating Medicare Prescription Drug Savings Programs in 2024
9. Consider Mail Order Pharmacies
Mail order pharmacies can offer convenience and big cost savings, especially for filling 90-day supplies of chronic medications. Many insurance plans, including some Medicare Part D plans, have preferred pricing with mail order pharmacies that can be lower than what you would pay at a retail location.
10. Explore Overseas/Foreign Pharmacies
Purchasing drugs from overseas or foreign pharmacies can sometimes result in cost savings. However, there are significant risks and legal considerations. The FDA warns that drugs bought from foreign countries may not meet the same standards for safety, efficacy, and quality as those bought in the U.S. There are also legal restrictions on importing certain medications, so it’s crucial to understand these before considering this option.
Each of these strategies requires careful consideration to ensure they align with your health needs and financial situation. It’s also beneficial to consult with healthcare professionals and financial advisors to make informed decisions about managing prescription drug costs.
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For Further Reading: What To Do When You Receive Your Medicare Annual Notice of Change Letter|Medicare Supplement Plan G versus the Medi-Share 65+ Health Sharing Plan
Whitney Kline is one of your Personal Benefits Managers at Medigap Advisors. She loves working for Medigap Advisors especially helping clients choose the right Medicare plan.