Overview
Prescription drugs are a major component of the overall cost of caring for the elderly. By some reports, persons sixty-five and older spend an average of over three percent of their income on prescription drugs. That percentage is even higher when over-the-counter medications are included. While Medicare Part D pays for some medications for those enrolled in a plan, it is reported that over sixty-five percent of seniors’ prescription costs are out-of-pocket.
There are three ways by which seniors can better afford the cost of prescription drugs. First is make sure one understands their insurance’s prescription benefits, be that Medicare, Medicaid or Medicare supplementary insurance (Medigap). The second is to find financial assistance that helps pay for medication or for insurance premiums, co-pays and deductibles. Finally, the third and frequently overlooked option, is to lower one’s costs through a variety of methods described further down this page.
Did You Know? According to the Kaiser Family Foundation, more than 50% of elderly individuals (65 years of age and older) take a minimum of 4 prescription medications.
Insurance Benefits
Medicare
Medicare is a federal health insurance program for persons aged sixty-five and older which is composed of multiple parts: Medicare Part A, Part B, Part C (Medicare Advantage), and Part D. Prescription drugs are covered by Medicare Part D. Part D plans are sold by private insurance companies either as a standalone plan known as a Medicare Prescription Drug Plan (or PDPs) or as part of a Medicare Advantage Plan (or MA-PDs) which groups Parts A, B and D coverage into a single plan. Medicare Part D’s contributions for 2019 are outlined in the table below.
Medicare Extra Help
Extra Help is a program that provides additional financial assistance to seniors with limited income and assets to help them pay for prescription drug costs. Seniors are eligible if their total assets (not including their home, vehicle, and other personal items) are valued at less than $14,390 for individuals or $28,720 for married couples. The 2019 income limit is $18,735 for a single applicant and $25,365 for a married couple.
Medicare Supplemental Plans
One cannot be concurrently enrolled in Medicare Part D and a Medicare Supplemental Insurance plan for prescription coverage. Supplemental plans are sold by private companies and have different coverage depending on the type of plan. Tracking those benefits is beyond the scope of this article.
Medicaid
Medicaid is a state run, health insurance program for low income and disabled individuals. The definition of “low income” changes by state and constituent group (meaning seniors, pregnant women, and healthy adults all have different eligibility criteria). In most states in 2019, an elderly individual must have monthly income of less than $2,313 and assets, not including their home, valued at less than $2,000. All 50 states and Washington DC’s Medicaid programs cover the majority of the cost of prescription drugs for participants. Program participants are usually required to make small co-payments (also referred to as share of cost) for their medications. Per prescription co-payments range from as low as $.50 per prescription to about $8.00. Some states have limitations on the number of brand name drug prescriptions they will cover per month or per year. This limit typically lies between 2-6 prescriptions per month. Read more about qualifying for Medicaid and Medicaid Prescription Drug benefits in your state.
Financial Assistance
State Based Programs
Medicare wraparound programs provide financial assistance to cover the cost of prescriptions not paid for by Medicare Part D.
In addition to the federal Extra Help program, many state governments provide seniors with financial assistance to help with the cost of medications. These programs provide assistance as Medicare Wraparound Programs. This means they help seniors pay the extra costs that their Medicare Part D plans don’t cover. Alternatively, they provide assistance making Medicare Part D premium payments instead of paying for the extra prescriptions costs. Unfortunately, not every state offers assistance. A list of states that have programs is in the table below. Note that with the launch of the Affordable Care Act and the closing of the Donut Hole for brand name drugs and the projected closing for generic drugs, more and more of these programs are being cancelled.
Pharmaceutical Company Assistance
Patient Assistance Programs, or PAPs for short, are programs run by nearly all the major pharmaceutical companies. In these programs, assistance is offered to low income individuals by providing them with reduced cost or free medications. These programs are typically open to both individuals with insurance and those that do not have insurance although sometimes the pharmaceutical companies maintain two different programs for these two groups.
To participate in a PAP, applicants are usually required to show proof of income (usually a tax return will suffice), their doctor’s prescription for the required medication and documentation of any insurance coverage they have.
Other Options to Lower Costs
Coupons
Many pharmaceutical companies make discount coupons available online for their brand name drugs. Often these coupons will discount the cost of a brand name drug so that it equals the cost of the generic version. One can search for drug coupons by medication name here. Most coupons can simply be printed from a webpage and brought to the pharmacist. Be wary of any website that asks you to pay to receive the discount coupon and any websites that request excessive personal information to provide you with the discount coupon.
Drug Discount Cards
NeedyMeds.org, a non-profit organization, offers a free Prescription Drug Discount Card which can save up to 80% off the cost of prescription medications. The card is accepted at most major pharmacies including Walgreens, CVS, Walmart, and RiteAid.
Tax Deductions
The out-of-pocket costs paid for prescription drugs are considered tax deductible under the Medical and Dental Expense Tax Deduction. In order for this deduction to be relevant to an individual tax filer, the total sum of their medical and dental expenses must be greater than 7.5% of their adjusted gross income. Fortunately for seniors, the range of items and services that can be considered a medical or dental expense is quite broad and because most seniors have fixed incomes, it is common for their expenses to exceed 7.5% of their adjusted gross incomes. In addition to our analysis of the medical and dental expenses tax deduction, one can read the IRS’ webpage on the subject. It is worth noting that over-the-counter medications are not considered tax deductible.
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