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How to Save Money on Prescriptions Part 1

How to Save Money on Prescriptions Part 1

Most Medicare drug plans (Medicare drug plans and Medicare Advantage Plans with prescription drug coverage) have their own list of what drugs are covered, called a formulary. Plans include both brand-name prescription drugs and generic drug coverage. The formulary includes at least 2 drugs in the most prescribed categories and classes. This helps make sure that people with different medical conditions can get the prescription drugs they need. All Medicare drug plans generally must cover at least 2 drugs per drug category, but plans can choose which drugs covered by Part D they will offer.

The formulary might not include your specific drug. However, in most cases, a similar drug should be available. If you or your prescriber (your doctor or other health care provider who’s legally allowed to write prescriptions) believes none of the drugs on your plan’s formulary will work for your condition, you can ask for an exception.

A Medicare drug plan can make some changes to its drug list during the year if it follows guidelines set by Medicare. Your plan may change its drug list during the year because drug therapies change, new drugs are released, or new medical information becomes available. 

Under the standard drug benefit, once you and your plan spend $5,030 combined on drugs (including deductible) in 2024, you’ll pay 25% of the cost for your plan’s covered brand-name prescription drugs until your out-of-pocket spending is $8,000. The gap where you start paying 25% is often referred to as “the donut hole.” The $8,000 cap is referred to as the “catastrophic coverage” level.

Although you'll start paying 25% of the price for the brand-name drug, almost the full price of the drug will count as out-of-pocket costs to help you get out of the coverage gap. What you pay and what the manufacturer pays (95% of the cost of the drug) will count toward your out-out-pocket spending.

Of the total cost of the drug, the manufacturer pays 70% of the price for you. Then your plan pays 5% of the cost. Together, the manufacturer and plan cover 75% of the cost. You pay 25% of the cost of the drug. There’s also a dispensing fee. Your plan pays 75% of the fee, and you pay 25% of the fee.

What the drug plan pays toward the drug cost (5% of the cost) and dispensing fee (75% of the fee) aren't counted toward your out-of-pocket spending.

As of this writing, the donut hole is going away in 2025 and the cap on prescription costs will be $2,000 annually. This will affect both stand-alone prescription drug plans and Medicare Advantage plans. It’s always important to review the changes in plans every year during the Annual Election Period, October 15 th through December 7 th , but it will be especially important to understand how this new law will affect you personally in 2025.

"Extra Help" is also known as the Part D Low Income Subsidy (LIS.) This is a Medicare program to help people with limited income and resources pay for Medicare drug coverage (Part D) premiums, deductibles, coinsurance, and other costs. You also won't have to pay a Part D late enrollment penalty while you get Extra Help. Some people qualify for Extra Help automatically, and other people must apply.

You'll get Extra Help automatically if you get: Full Medicaid coverage, help from your state paying your Part B premiums (from a Medicare Savings Program,) or Supplemental Security Income (SSI) benefits from Social Security. You'll get a letter about your Extra Help. It tells you things like how much you'll pay, and your new Medicare drug plan, if you don't have one already.

If you don’t automatically get Extra Help, you can apply for it at or call Social Security at 1-800-772-1213. TTY users can call

1-800-325-0778. You can also contact your local State Health Insurance Assistance Program (SHIP) to get free help applying.

Who should apply for Extra Help?

In most cases, to qualify for Extra Help, you must have income and resources below a certain limit. These limits may go up each year.

What counts as resources are money in a checking, savings, or retirement account, stocks, and bonds. States DO NOT count your home, one car, a burial plot, up to $1500 for burial expenses if you have put money aside for that, furniture, other household and personal items. What counts as income is your Social Security and any other income you receive.

The Income and Resources limits for 2024 for an individual are $22,590 in income and $17,220 in resources; for a married couple they are $30,660 in income and $34,360 in resources.

If you qualify for extra help, you’ll pay $0 for the drug plan premium, $0 deductible, up to $4.50 for generic drugs, and up to $11.20 for brand name drugs. Once your total drug costs (what both you and your plan pay) reach $8,000, you’ll pay $0 for each covered drug.

Next month we’ll review options for saving money on your Prescription Drugs for those that do not qualify for Medicaid or Extra Help.

Remember to not eat too many donuts, and stay away from the “donut hole!”