Medicare drug costs are about to go up… Here’s how to save

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Paying for health care is one of the most complicated and challenging expenses that older Americans face, and rising prices are about to make it even more difficult.

Rising cost of Medicare Part D drug plans

According to a new Avalere study of data from the Centers for Medicare & Medicaid Services, Medicare beneficiaries will likely see their Part D premiums increase ‘significantly’ next year. The average American who uses Medicare Part D for prescription drug coverage paid an average of $466 in annual premiums during 2015. But in 2016, that annual cost is expected to jump by more than 6% to $496.

And people enrolled in some of the country’s most popular plans will see even bigger increases in premium costs in 2016. According to the study, the 3.5 million Americans on the AARP MedicareRx Preferred Plan will face a 21% premium increase to $749 a year, up from $602 in 2015. Participants of another AARP plan will see an even bigger increase of 26% in their premium costs.

Read more: 7 senior scams and how to combat them

According a USA Today report, increased premiums reflect the higher expenses that the Medicare program has been facing for prescription drugs, especially for specialty medications and as drugmakers continue to seek ways to increase profits.

A recap of Medicare Part D

Medicare beneficiaries pay for health coverage in a few different ways. ‘Original Medicare,’ which is government provided insurance coverage, includes Part A and Part B — your main health care costs, such as hospital and outpatient care. (Here’s more on Medicare Part A and Part B.

Medicare beneficiaries then pay for prescription drug coverage separately, known as Medicare Part D. The Part D plans are provided by private insurance carriers. Each plan has its own list of approved drugs (also known as formularies) and beneficiaries should carefully review each plan’s list to ensure that their medications are covered. 

Read more: How to get more out of your Medicare

How to save in the midst of rising prices

Despite the fact that many older Americans will face rising premium costs for Medicare prescription drug coverage, there are still ways to save (check out medicaredrugsavings.org). There are different options that you can adjust to make sure your plan best fits your medical and financial situation.

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First, during open enrollment, which begins October 15, review your plan and make sure you are enrolled in a plan that offers the best balance of premium costs and coverage options. Certain plans can provide much more financial coverage for your drug costs, depending on your specific prescriptions, and getting the right amount of drug coverage can save you a lot in the long run. But at the same time, you also have to consider copayments and deductibles. Sometimes paying a higher premium makes more sense if it saves you from paying higher out-of-pocket costs when you go to get your prescriptions.

One option available in Part D coverage is the mail order program, which allows you to obtain a 90-day supply of certain medications. This option is both convenient for the patient and can also result in increased cost savings.   

Read more: 5 ways to get lower prescription drugs

Another way to save is by getting generic drugs. Almost 80% of prescription medications have a generic alternative, which costs four times less on average than brand name drugs. You can also comparison shop pharmacies to make sure you’re getting the best price on that generic prescription. Also, ask your doctor or pharmacist if your medication is safe for splitting higher-dose pills, which can also save you money over time.

Medicare Advantage Plans

Another option is Medicare Advantage, which is a plan you get through a private insurance company, instead of traditional Medicare coverage that’s provided by the government. Medicare contracts with these private insurers that offer a few different types of plans to older Americans. Medicare Advantage plans provide all Medicare benefits, and 86% of the plans offered in 2015 include prescription drug coverage.

According to the Avalere study, the average Medicare Advantage premium will actually drop by 1% in 2016 to an annual cost of $391. And according to the Kaiser Family Foundation, the average premium for people enrolled in Medicare Advantage Prescription Drug plans will be $38 per month in 2015 (which you can compare to the average Part D premiums above). 

Read more: Clark’s Health Savings Account Guide

But again, a lower premium isn’t the only thing to consider. Each individual plan offers different premiums, different costs for services, and different types of coverage. Since out-of-pocket costs can vary a lot depending on your specific health care needs, it’s important to compare the costs associated with each plan.

According to Medicare.gov, here are a few things to know about Medicare Advantage Plans:

  • If you join a Medicare Advantage Plan, the plan will provide all of your Medicare Part A and Part B coverage. 
  • Medicare Advantage Plans must cover all of the services that Original Medicare covers except hospice care. (Original Medicare covers hospice care even if you’re in a Medicare Advantage Plan.)
  • In all types of Medicare Advantage Plans, you’re always covered for emergency and urgent care. Medicare Advantage Plans must offer emergency coverage outside of the plan’s service area (but not outside the U.S.).
  • Many Medicare Advantage Plans also offer extra benefits such as dental care, eyeglasses, or wellness programs.
  • Most Medicare Advantage Plans include Medicare prescription drug coverage (Part D).

You can get more information on Medicare Advantage plans here.

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