Minimize Your Drug Costs

published 23 October 2006

I have Medicare prescription-drug coverage and just hit the doughnut hole. Because my Part D plan won't cover my drugs for a while, are there any other ways I can lower my costs?

Quite a few people with Medicare prescription-drug coverage will come up against the doughnut hole this fall, and it's always a big surprise. In many cases, they will be used to co-payments of $30 or so for brand-name drugs and even less for generics but suddenly have to pay the full price themselves. That's because most Part D plans cover most of the drug costs up to $2,250 (including any deductible, your co-pays and the insurer's share of the cost). But after that, you hit the coverage gap (or doughnut hole) and generally have to pay 100% of your drug bills until your total out-of-pocket costs for the year reach $3,600 -- unless you pay extra for a policy that provides some coverage through the gap. After that, the plan covers 95% of your drug bills (those thresholds will rise to $2,400 and $3,850 in 2007).

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Ask your doctor about generics. You can save money in the doughnut hole and get better coverage within your plan beforehand. Many plans, for example, charge only a $5 co-pay for preferred generic drugs but increase the co-pay to $30 for preferred brand-name drugs, or $60 for non-preferred brand name drugs until the total drug costs reach $2,250. And most plans that provide coverage in the doughnut hole cover only only generic drugs while in the coverage gap and require you to pay the full price for everything else.
Try different medications. Even if your drug doesn't have a generic equivalent, another medication that treats the same condition could cut your costs. If your plan has enlisted PartDOptimizer (several of the big Part D plans are included), you can compare the costs for similar drugs. Ask your doctor if you can safely switch drugs.
Buy in bulk. Many plans give you a discount if you buy a three-month supply of drugs at once.
Find a cheaper pharmacy. Wal-Mart and Target have announced that they will sell many generic drugs for $4. Your plan also may offer special discounts for preferred mail-order pharmacies. Also, check DestinationRx.com, which compares drug prices at various pharmacies. Make sure these pharmacies are included in your Part D network. Otherwise, the purchase may not count toward reaching the end of the doughnut hole.
Consider Canada. Buying drugs from Canada doesn't count toward the $3,600 to reach the end of the coverage gap, but it can lower your drug costs. Two new rules have eased the restrictions on drug imports. Americans now can carry a 90-day supply of drugs from Canada without being stopped by customs agents. And government officials recently announced that they will no longer seize mail-order prescription drugs from Canada.
Get help. If your income is below a certain level, you can get extra help paying for your prescription drugs. For more information, see Bridging the Coverage Gap at Medicare.gov. Also see the resources at the Medicare Rights Center's Help Paying For Prescription Drugs.

Calculate whether it's worthwhile to fill in the doughnut hole next year (open enrollment for 2007 plans runs from November 15 to December 31). Several companies are expanding their policies and filling in the coverage gap next year. Run your numbers through the Medicare prescription drug plan finder to see whether the extra coverage is worth the extra premium for you. Be sure to run the out-of-pocket costs based on the drugs you take; a plan that only covers the doughnut hole with generic drugs won't do you much good if your drug doesn't have a generic equivalent. For more information about shopping for a Medicare prescription drug plan -- which everyone should do again this fall -- see my column about your 2007 Part D choices

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Ask Kim

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.