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Editor’s note: This story originally appeared on The Penny Hoarder.
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Health care costs are a big expense in retirement — and prescription drugs are often at the top of the list.
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About 5.8 million Medicare beneficiaries struggled to afford essential medicines in 2019, according to a 2022 report from the US Department of Health and Human Services.
Early retirees can use prescription discount cards and apps like GoodRx to save money on drugs.
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But most of these programs cannot be combined with Medicare Part D drug plans, leaving many retirees searching for ways to cut costs.
In this guide, we’ll explain how the Medicare Part D program works, its average cost, and how to compare prescription drug plans to make sure you’re getting the best deal.
We’ll also discuss assistance programs that can cut drug costs out of your pocket, as well as a nonprofit organization that can help you find the right Part D coverage for you.
What is Medicare Part D?
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Medicare Part D is a voluntary prescription drug plan, administered through private insurance companies approved by the federal government.
Medicare beneficiaries can choose to receive Part D coverage in one of two ways:
A standalone Part D plan that supplements Original Medicare (Part A and Part B). A Medicare Advantage plan (Part C) that bundles all benefits together, including prescription drug coverage.
You generally cannot combine a Medicare Advantage plan with a standalone Medicare Part D plan. Either you are enrolled in Original Medicare with a standalone Part D plan or you are enrolled in an “all-in-one” Medicare Advantage plan with built-in Part D coverage.
If you’re in the market for a new Part D plan, there are several options to choose from.
In 2022, there are more than 760 stand-alone Medicare Part D plans, according to the Kaiser Family Foundation, a nonprofit organization focused on health care policy.
There are also hundreds of Medicare Advantage plans available with prescription drug coverage at the local level.
How much does Medicare Prescription Drug Coverage cost?
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The total cost of Medicare drug coverage includes your premium, deductible, and out-of-pocket expenses you pay at the pharmacy.
It’s important to consider all of these expenses when choosing the best coverage for your budget:
Premium: The amount you pay every month for the drug plan. Deductible: The amount you pay out of pocket each year before you start paying your share for drugs covered by your insurance plan. Drug costs: Medicare Part D insurers often change which drugs are covered and the coverage amount each year.
If you enroll late, have an expanded gap in drug coverage, or have higher taxable income, your Medicare prescription drug costs will be even higher.
You can switch Part D or Medicare Advantage plans during Medicare’s open enrollment period, which runs from October 15 through December 7 each year. The changes will be effective from January 1.
Plan Cost: Premiums and Deductibles
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According to the Centers for Medicare and Medicaid Services (CMS), the average basic monthly premium for Part D coverage is projected to be about $31.50 in 2023.
Meanwhile, according to the Kaiser Family Foundation, the standard Part D deduction in 2022 is $480, although some plans have a lower deductible.
Generally, plans with lower premiums have higher deductibles.
If you don’t regularly take prescription medicines, you can look for plans with low or no monthly premiums. These plans generally come with higher deductibles.
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Since Part D coverage is administered through private insurance companies, the precision medicines that are covered vary by plan. So can reimbursement — or the amount you pay out of pocket — for each covered drug.
Medicare Part D plans also have preferred pharmacies. If you go to an out-of-network pharmacy, you will pay more for your medicines.
When you’re looking for the right Part D plan, remember:
No plan covers every drug. The cost of the same medicine may be more or less depending on the plan. Premiums, deductibles and copays can change from year to year. What is a formula?
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A formulary is basically a drug list of the medicines covered.
Private insurance companies regularly revise their formulary at least once a year. That’s why it’s so important to review your Medicare Part D coverage every year.
Medicare formularies generally group drugs into different tiers based on cost. The formulary of a plan usually consists of three to five levels.
Generally, the lowest grade drugs are the cheapest. Generic drugs fall in the first category.
The highest tier drugs are usually specialty brand-name drugs. These drugs have the highest out-of-pocket cost.
How to Research and Compare Plans with the Medicare Plan Finder Tool
The best way to find a drug plan best suited to your needs is to use Medicare.gov’s Plan Finder tool.
This interactive tool helps you compare costs and coverage between stand-alone Medicare Part D and Medicare Advantage plans in your area.
You can get a customized estimate of your monthly costs based on the drugs you take and the pharmacies you use.
See here how it works.
Step 1: Go to medicare.gov/plan-compare and either log in to your Medicare account or continue as a guest. Step 2: Enter your ZIP code and the type of coverage you are interested in. (You can choose from stand-alone Part D plans, Medicare Advantage plans, or supplemental insurance Medigap policies.) Step 3: Select other coverage you may have, such as Medicaid or Social Security income (SSI) benefits. Step 4: Next, you can add your prescribed medicines and up to five preferred pharmacies for personalized cost information. Make sure you keep the name, dosage, quantity and frequency of each medicine you use ready on a regular basis. Step 5: After entering this information, you can narrow down your search results. You can filter plans by insurance carrier and star rating. The plans with the lowest monthly premium + drug cost will appear first. Step 6: You can select up to three plans on the result page to compare plan details side-by-side including your estimated monthly premium, deductible and counter-pay or co-insurance for each drug.
The most convenient way to log in or create a Medicare account is to use the Medicare Plan Finder tool.
You can save your medicine list and favorite pharmacies to your account so that you can easily compare plans later. Also, you can get details about the scheme in which you are currently enrolled.
CMS has this helpful step-by-step video on how to use the Medicare Plan Finder tool online.
5 ways to get help paying for prescriptions
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Even if you find a good plan, you may still struggle to pay your prescriptions or monthly premiums.
Here are five ways you can potentially lower your Medicare drug costs.
1. Additional Support
The Social Security Administration oversees a drug assistance program called Extra Assistance for Medicare beneficiaries with limited income and resources.
This federal program helps pay your Medicare prescription drug plan premiums, annual deductibles, and reimbursements.
The extra help can significantly reduce your out-of-pocket drug costs. It is estimated that those enrolling will save about $5,100 per year.
If you are eligible and enroll in Additional Assistance, you are guaranteed that you will pay no more than $3.95 for each generic drug or $9.85 for each covered brand-name drug.
You can complete the Additional Assistance Application online or by calling the Social Security Administration at 1-800-772-1213.
2. Patient Assistance Program
Patient assistance programs may provide free or subsidized medications to those who qualify. These programs are operated by pharmaceutical companies.
Eligibility for each program is based on a number of factors, including your income level, medical insurance status, and location.
Medicare has a convenient tool you can use to find pharmaceutical assistance programs.
Simply enter a drug, and available programs will appear in the search results, along with the program description and contact information for the manufacturer.
If you take pricey name-brand drugs, it’s worth contacting the drug company to see if they offer any manufacturer discounts or coupons for your drugs.
3. Save Money on Insulin
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The Part D Senior Savings Model is a collection of Medicare plans that offer copies of $35 or less for a 30-day supply of insulin purchased at in-network pharmacies.
The low-cost insulin program launched in early 2021, and more than 2,150 Part D plans now participate.
When the program began, beneficiaries could identify Part D plans by selecting the “Insulin Savings” filter on the Medicare Plan Finder tool.
Unfortunately, the filter was removed in 2022, which makes it more difficult to understand exactly which plans are participating. For detailed enrollment information, see this guide from the Association of Diabetes Care and Education Specialists.
GoodRx, a popular app that helps people save money on prescriptions, cannot be used in conjunction with Medicare.
However, you can use GoodRx as an alternative to Medicare. This can help you save money on your prescriptions in certain situations.
It makes sense to use GoodRx instead of Medicare if:
Your medicine is not covered by Medicare. GoodRx prices are less than your Medicare copay. You won’t reach your annual deductible this year.
If you decide to use GoodRx instead of Medicare, ask the pharmacist to run the order as a self-pay or cash transaction. Then present the GoodRx coupon on your phone to receive the discount.
5. State Prescription Assistance Program
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Some states offer prescription assistance programs that Medicare beneficiaries can sign up for.
Use this search feature on Medicare’s website to see if your state offers a drug assistance program.
Keep in mind that these programs are often limited. When we checked, most states only offer one or two programs. Almost all programs have eligibility restrictions, and discounts are generally only available at a limited number of participating pharmacies.
Where can I get help choosing a Part D plan?
Finding the best Medicare Part D plan for your budget can be time-consuming and confusing. If you need help applying for a plan or comparing your options, there are nonprofit volunteers who can help.
The State Health Insurance Assistance Program (SHIP) is a network of trained nonprofit volunteers that provides face-to-face counseling about Medicare to beneficiaries and their families.
All ship advice and consultation is completely free. The program is federally funded and is not associated with insurance companies or health plans, so the advice you get is unbiased.
These volunteers can use the Medicare Plan Finder tool to help you find a Part D plan, see if you qualify for money-saving programs, and answer any questions you may encounter along the way. .
To get started, call your state’s ship information line. Click “Ship Locator” on the organization’s home page for a list of phone numbers for each state.
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