Sticker shock and inflation have been all-too-familiar over the past year. From the gas pump to the checkout line or a nice meal out, you’ve been paying more—and often getting less in return.
Health care costs are a particularly painful example of this, especially when it comes to medication. The average American spends over $1,300 per year on prescription drugs—more than any other developed country. For seniors, the impact can be even harder to stomach. Over 40% of seniors take at least five prescription drugs, and with many living on a fixed income, there’s little room to absorb price increases.
Relief may be on the horizon, though. The Inflation Reduction Act of 2022 included a series of key changes to manage health care costs. Additionally, there are two new private ventures that aim to disrupt the traditional prescription drug pricing model and improve affordability for consumers.
Read on to understand the impact these new initiatives could have on prescription drug prices, and how you might use them to help reduce health care costs for yourself and your loved ones.
Existing Options for Prescription Drug Coverage
Traditionally, there have been two prescription drug options for those nearing or in retirement—private insurance and Medicare. With private insurance, prescription drug prices and coverage can vary widely by plan. Some plans offer generous benefits to reduce deductibles and copays, while others have significant out-of-pocket expenses.
For those 65 and older, Medicare Part D plans can either replace or supplement private insurance. However, they’re often complex to navigate—sometimes even more so than private insurance. Different Part D plans provide different benefits based on what drugs they cover, the tiers they place certain drugs into, and yearly deductibles.
Additionally, if you’re coupling Part D with private insurance, you’ll need to work with your benefits administrator to determine if the coverage is creditable and how it affects your eligibility.
New Ways to (Potentially) Reduce Your Prescription Drug Costs
Two new private programs on the scene could help lower health care costs for retirees—and others—by providing flat fees for prescription drugs without insurance. And a new government initiative works with insurance companies to lower prescription drug prices for Americans.
Mark Cuban’s Cost Plus Drug Company
Billionaire entrepreneur Mark Cuban is famous for financially backing disruptive innovations, and in early 2022 he set his sights on prescription drugs. In contrast to the opaque and complex health insurance industry, Cuban’s new Cost Plus Drug Company (aka Cost Plus Drugs) offers a simple, transparent model. They work directly with manufacturers to negotiate prices for generic drugs, then offer them directly to consumers for 15% above cost, plus a $3 pharmacy fee and $5 shipping.
The idea holds promise for many consumers. The list of medications on offer at Cost Plus Drugs includes many widely prescribed drugs, and the prices are generally reasonable. And, there’s no need for insurance—whether you don’t have insurance or your price through your plan would be more expensive, you can opt for the cheapest available price.
There are a couple of drawbacks, though. First, they only offer generic drugs, so you’ll need to look elsewhere for specialized treatments. Second (assuming you have the time and patience for coupons) you can find some of the less common drugs cheaper elsewhere. As with anything, shopping around and comparing options can help limit your costs.
While Amazon.com has offered an online pharmacy since 2020, they recently launched RxPass, a subscription model for generic drugs. For $5 per month, Amazon Prime members can get as many eligible generic prescription drugs as they need. Shipping is included, and there are no hidden fees or limitations.
One of the biggest perks is the convenience, especially if you’re a caregiver for aging parents. Amazon’s platform is easy to use, and knowing that the prescriptions will show up at your doorstep in a matter of hours makes life easy. The flat monthly fee can also provide significant savings if you or your parents are taking several common drugs.
The program isn’t perfect, of course. RxPass only includes approximately 50 generic drugs, so you’re likely to need to secure some of your prescriptions elsewhere. Additionally, the most common drugs are often the cheapest through insurance, so $5 per month—as cheap as it is—might not save much money. And don’t forget, you have to be an Amazon Prime member to reap the benefits, at a current cost of $139 per year.
The Inflation Reduction Act of 2022
President Biden signed the Inflation Reduction Act of 2022 into law last August, which includes a wide range of provisions to help reduce health care costs. There are a few key pieces of the legislation that impact prescription drug prices for seniors:
Retirees with Medicare Part B or D plans will only have to pay $35/month for insulin
Expanded vaccine cost coverage under Part D
In 2024, low-income subsidies for Part D will increase
As of 2025, there will be a $2,000/year cap on out-of-pocket expenses for Part D
Starting in 2026, the government will begin negotiating price caps for the most common drugs covered by Part D
While all of these changes are beneficial for retirees over 65, there are a couple of drawbacks. First, the changes will take place over the course of several years, limiting the immediate impact. Second, many experts speculate that drug companies will find ways around the negotiated price caps either by offering new generic drugs or by recouping profits through higher costs to private insurance companies.
A Personalized Solution to Prescription Drug Costs
Finding the right medication to treat a condition often takes some experimentation, iteration, and ongoing work with your doctor. Managing prescription drug costs is a similar process. To find the best solution for you and your family, evaluate what drugs you need and compare the potential costs depending on how you have the prescriptions filled.
None of these new initiatives is a perfect solution. However, they are a promising start and give you more tools to keep your prescriptions affordable for yourself and your family.
Health care costs are one of the biggest uncertainties for retirees and the family members who care for them. If you’re one of the nearly ten million adults over the age of 50 caring for their aging parents, download our Aging Parents Guide today. The free guide provides advice to help you reduce stress, prepare for emergencies, and maximize retirement benefits for your parent.
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