Prescription drug pricing can be more than a little confusing. Drugs can also be costly, especially for clients who have chronic illnesses. Choosing the right Medicare Part D plan, however, can save clients a considerable amount of money on their prescriptions. CPAs are well-equipped to help clients understand the intricacies of Part D and weigh all the factors that will determine how much they will pay for drugs. With the Part D Annual Enrollment Period now open, it's a good time to review your clients' Part D elections.
Here are a few ways to help clients save money on drugs:
Comparison shopping. The price for the same drug can vary widely from pharmacy to pharmacy. This is true whether a prescription drug is purchased for cash (without insurance) or using Part D prescription drug coverage.
For example, say a client is paying cash for losartan potassium (the generic version of Cozaar, prescribed to lower blood pressure). At local pharmacies in the western suburbs of Chicago, this drug can cost anywhere from $7 for 90 tablets of the 100 mg dose to a high of almost $70 for the same dosage and number of tablets.
Clients who are paying cash for prescriptions can use sites such as GoodRx to see what drugs cost at different pharmacies and make the best choice for them. They should check drug prices frequently, as they can change on a daily basis.
Choosing the right combination of pharmacy and Medicare Part D plan. What if the client is enrolled in a Medicare Part D plan? In this case, the price differential for the same drug may even be higher at different pharmacies. To know how much they will spend on drugs, clients need to take into account both the specifics of their plan and the pharmacy they use. In some cases, they may discover ways they can purchase the same drug for less money.
For example, say a client is enrolled in a Medicare Part D plan. The monthly premium for this plan is $26.80, which is not out of line with most of the plans in her geographic area. The client purchased the Part D plan based on name recognition and its relatively low monthly premium. However, neither is a good proxy for value.
The client uses a favorite local pharmacy that is not in the plan's network. A drug she needed, losartan, is on the plan's formulary, but the plan will not pay for it because she is using an out-of-network pharmacy. She faces paying the full cost of the drug, which was $262.40 for a three-month supply.
There are two ways out of this dilemma. The client could pay cash for the drug at a different pharmacy selling the same dosage and number of tablets for just $7. She could also use the mail-order pharmacy associated with her current Part D plan. In that case, the cost of the losartan would be $0.
But the client had used the same retail pharmacy for years and received personal attention. She was also nervous about using mail order.
She decided to ask her doctor to send her prescription to the pharmacy offering to sell the three-month supply for just $7. During the next Annual Enrollment Period, though, the client switched to a plan that had her preferred retail pharmacy in its network. The cost of her losartan was now $0 for a 90-day supply from that same pharmacy. She was very happy that she could still use her favorite pharmacy.
Weighing all the factors when choosing a Part D plan. As this example illustrates, clients need to consider more than cost when choosing a Part D plan. Before selecting one, the client should think about several questions:
- Is your prescription drug(s) on the plan's formulary? Note that in our example, the drug was on the plan's formulary, but the client's favorite local pharmacy was very expensive.
- Is your favorite local pharmacy in-network, a preferred pharmacy, or out-of-network? Plans may offer what's called a preferred pharmacy, which is an in-network pharmacy that offers better pricing than other in-network pharmacies. In-network pharmacies will have lower prices than out-of-network pharmacies.
- What is your out-of-pocket cost if you use the local pharmacy versus using mail order?
- Are you comfortable using mail order?
Once these questions are answered, the client should consider the plan's annual deductible, the co-payments and co-insurance, its drug tiers, and any drug restrictions.
Cost sharing. Cost sharing may take the form of either a co-payment or co-insurance. A co-payment is a flat dollar amount; for example, $20 for a 90-day prescription. Co-insurance is a percentage of the cost; for example, 15% of the drug cost. A drug costing $200 with a co-insurance of 15% would cost the client $30. A client taking costly drugs may be better off paying a co-payment rather than a co-insurance amount, so it's important to see which form of payment a plan requires for your client's medications.
Drug tiers. Part D plans place prescription drugs in different cost-sharing tiers depending on the type of drug (brand name versus generic) and whether the drug is a "preferred brand" or a "preferred generic." The cost of the drug depends on which tier the drug is placed.
Drug restrictions. Drug restrictions take many forms. For example, a plan might limit the quantity of a drug that may be dispensed for any one prescription. For certain medications, a plan may require patients to obtain prior authorization from the insurance company before their doctors prescribe a drug. Plans might also require step therapy for certain conditions, meaning the patient would need to take less expensive drugs to determine their effectiveness before being prescribed more expensive alternatives.
Clients' concern about health care in retirement goes well beyond finances. It does not matter if the dollars being discussed are large or small. Health care is a very personal issue unlike any other that you may discuss. If you can demonstrate a knowledge of the topic and help your client and their families make better decisions regarding their Medicare coverage, you can create a stronger bond with them while delivering a valued service.
James Sullivan, CPA/PFS, is a financial planner in Wheaton, Ill. He specializes in working with clients, and the families of clients, suffering from chronic illness. To comment on this article or to suggest an idea for another article, contact Courtney Vien, a JofA senior editor, at Courtney.Vien@aicpa-cima.com.