The rising cost of prescription drugs is enough to make anyone queasy. In the ten years through 2016, the per-person annual cost of medication increased more than 25% after adjusting for inflation. With the per-person cost now above $1,000 a year, one in four respondents to a national survey report they have a tough time paying for prescription meds.
The good news is that there are plenty of ways you may be able to reduce your pharmacy costs. From asking your doctor if you might be a good candidate for switching to a less expensive generic brand of your medication, to using a health savings account (HSA) that effectively can net you a big discount on medications and other approved expenses, all it takes is a little bit of time to scope out your best options:
Review your insurance plan’s medication program annually. Your health insurance plan sorts drugs into various tiers. Meds in Tier 1 have a lower out-of-pocket than meds in Tier 2 or Tier 3. Where it gets tricky is that from year to year your plan might shift your medication to a higher tier. During open enrollment confirm the price tier for a medication for the next year.
Ask your doctor if there are good alternatives. If you find your drug is now in a new tier, or the cost has gone up, ask your doctor to review what’s available in your plan; there might be a generic drug that would be a good fit for you. If you’ve got a chronic condition, switching to a 60 or 90 day prescription might be a way to save on any co-pays.
Shop Around…and include Big Box Stores. There is no uniform drug pricing among pharmacies in the same town. Prices for the same exact drug can vary by 10% to 20% or more. And the pharmacy that was a great deal three years ago when you first filled your prescription may no longer be the best deal. You can use free online services such as WeRx or GoodRx to find the best price on specific medications in your area, and if the manufacturer is offering any discount coupons. Shopping tip: big-box discounters have built a rep for often having the best prices.
Pay Cash. If you don’t want to switch pharmacies, have a chat with your pharmacist on how you might be able to reduce your out-of-pocket costs. You may be surprised that paying cash gets you a better deal than going through your health insurance plan.
Pay with Triple-Tax Free Dollars. If you enroll in a High Deductible Health Plan (HDHP) you may be able to lock in a discount of 15% to 25% or more on medications and other pharmacy purchases.
When your insurance is an HDHP you are eligible to contribute to a health savings account (HSA). Money you contribute to your HSA is tax deductible on your federal tax return, and there is no tax due for HSA contributions that grow in value. You can use your HSA at any time to pay for approved medical costs, including plenty of pharmacy purchases.
In addition to prescription medications, other approved pharmacy purchases you can pay for from your HSA account include Band-Aids kid’s sunscreen, cold packs and contact lens solution.
Because of all the tax breaks, using HSA dollars at the pharmacy is the equivalent of getting a discount on your bill. For instance, if you are in the 15% federal income tax bracket, you will effectively be getting a 15% discount on your pharmacy purchases. If you’re in the 25% tax bracket, you’re pocketing a 25% discount. Higher tax bracket? More savings.
Paying your pharmacy bills with HSA dollars can go a long way to taking some of the pain out of taking care of yourself.
If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.