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Tips for Lowering Your Prescription Drug Out-of-Pocket Costs

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Summary:  To lower your prescription drug costs under Medicare, it generally helps to:

  • Sign up for prescription drug coverage as soon as you are eligible.
  • Understand more about generic prescription drug alternatives.
  • Get your prescription drugs from your plan’s network pharmacies or mail-order service.

No matter how you get your Medicare Part D prescription drug benefits, here are some simple tips for keeping your costs down. We’ll also go over why it’s important to shop around every year — even if you’re content with your current coverage.

Sign up for Medicare prescription drug coverage as soon as you’re eligible

One of the easiest ways to lower your prescription drug costs from the start is to sign up for Medicare Part D coverage as soon as you’re eligible. Most people are first eligible during their Initial Enrollment Period (IEP). This period starts three months before you’re first eligible for Medicare Part A and/or Part B, includes the month you became eligible, and continues for three more months. Your IEP lasts a total of seven months.

If you have Original Medicare (Part A and Part B), you can get prescription drug coverage through a stand-alone Medicare Prescription Drug Plan. You only need to be enrolled in Part A or Part B.

Or, you can enroll in a Medicare Advantage Prescription Drug plan that includes your Part A, Part B, and Part D benefits wrapped into one plan. You need to be enrolled in Part A and Part B.

What happens if you don’t get Part D and your Initial Enrollment Period has passed? For starters, you could owe a late enrollment penalty if you don’t have creditable prescription drug coverage (insurance that’s as good as the Part D benefit). You could pay a penalty any time that you wait to get Part D after you’re first eligible or have a gap in prescription drug coverage for longer than 63 days in a row or more. This penalty is added to your monthly Part D premium, and you’ll have to pay it for as long as you have Medicare prescription drug coverage.

Ask your doctor about generic prescription drug alternatives

If you’re taking an expensive brand-name medication, ask your doctor if your prescription has a generic option. Brand-name prescription drugs usually have higher costs than generic medications, this could save you money.

Here’s how it works. Each Medicare prescription drug plan has a formulary, which is a list of covered prescription drugs. If your medications aren’t on the plan’s formulary, you’ll generally have to pay for the full cost of the prescription drugs out of pocket.

Once you’ve checked that your Medicare plan covers your prescription drugs, find out which “tier” your medications fall under. Plan formularies put their covered prescription drugs in different cost tiers, and higher tiers have higher copayments and coinsurance costs. Usually, brand-name prescription drugs are on higher tiers, while generics are on lower tiers.

Get your prescription drugs from network pharmacies

Some Medicare prescription drug plans may have lower costs if you use network pharmacies. If you use a non-network pharmacy, your Medicare plan may not cover your prescription drugs – or, if it does, you could have to pay more. Also, keep in mind that within your plan’s network of pharmacies, you may have even lower cost sharing if you use “preferred” pharmacies.

You can check if your Medicare plan uses network pharmacies and preferred network pharmacies by calling the number on the back of your membership card.

Your Medicare prescription drug plan should send you Evidence of Coverage and an Annual Notice of Change documents every fall. These documents list out plan benefits, costs, and any changes for the coming plan year.

Save on prescription drug costs with a mail-order service

Some Medicare plans offer prescription drug savings if you sign up for a mail-order delivery service. This type of service mails you your prescription drugs. Find out if your Medicare plan has this benefit.

Find out if you qualify for Extra Help

The Medicare Extra Help program helps low-income beneficiaries with the cost of prescription drugs. Also known as the Low-Income Subsidy, the program may help you with copayments, coinsurance, deductibles, and plan premiums. Eligibility is based on income and assets. You can contact your state Medicaid program or Social Security office for more information and to apply.

Shop around for Medicare Part D prescription drug coverage

If you’re worried about your out-of-pocket prescription drug costs, here’s a simple and important tip: shop and compare plan options, every year. Do this even if you think you’re all set with your current prescription drug coverage.

Here’s why: because the cost-sharing tier structure varies so widely from plan to plan, you may be able to get your same prescription drugs covered by a different plan for less. Also, because plans may update benefits and costs every year, it’s a good idea to look around and compare options annually.

The Open Enrollment Period for Medicare Advantage and Medicare prescription drug coverage runs from October 15 to December 7 every year. This is your yearly chance to browse and compare coverage choices – and possibly find prescription drug savings with a new plan. Even if you end up staying with your current coverage, you’ll know you did your due diligence and have prescription drug coverage that fits your needs and budget.

You can also switch Medicare Advantage plans during the Medicare Advantage Open Enrollment Periods. It goes from January 1 – March 31 every year. For example, you can switch from a Medicare Advantage plan that doesn’t include prescription drug coverage to one that does. If you drop a Medicare Advantage plan during this period, you can enroll in a stand-alone Medicare Part D prescription drug plan.

If you’re ready to explore plan options, you can do so right now. Simply enter your zip code into the tool on this page to get started. To find plan options that cover your specific prescription drugs, just type in your medications to narrow your search.

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