Reducing Drug and Healthcare Costs
Reducing Drug and Healthcare Costs
By: Stacey Nickens
October is Breast Cancer Awareness month. As we celebrate those who have survived breast cancer and remember those we have lost to breast cancer, I believe it’s important to consider the steep healthcare costs that many of us face. An average American pays $1,200 for medications each year, and drug costs can increase steeply from there. Medications for more intensive illnesses can cost upwards of $10,000 per month, and some drug therapies cost nearly $80,000. While health insurance and Medicare Part D may cover some of these costs, you may still be facing out-of-pocket expenses. In order to manage some of these costs, consider the steps below.
Compare Part D plans each year. Before the end of 2020, shop around and see if you can find a Medicare Part D plan that better fits your needs. Perhaps you are seeking out a lower premium, though keep in mind that lower premiums may come with higher out-of-pocket costs. You may also be looking for a plan that covers specific medications. Keep in mind that some plans limit your monthly dosages of certain medications, and other plans request that patients try a more inexpensive medication before switching to a costlier medication.
Review generic alternatives. Americans saved $293 billion using generic drugs according to a 2019 report written by the Association for Accessible Medicines. The report also notes that Americans who used generic drugs saved nearly $2 trillion over the previous decade. These numbers point to the cost benefit of using a generic drug. Indeed, most generic prescriptions costs $20 or less; however, brand-name prescriptions tend to be filled for more than $40.
Seek in-network healthcare. The cost of healthcare and medications often rise when you go out of network. Review your in-network options and seek out one of those whenever possible. Many health insurance companies now offer online tools to search and see if a provider is considered in- or out-of-network.
Discuss custom medications with compounding pharmacies. Compounding pharmacies may be able to make a medication for you that fits your specific needs. Compared to the original medication you were taking, a compounding medication may be much more affordable.
Contribute to and use Health Savings Accounts (HSAs) and Roth IRAs. If you don’t yet qualify for Medicare, consider creating an HSA. You can contribute pre-tax dollars and thus reduce your taxable income. For 2021, single filers can contribute up to $3,600 to an HSA, and joint filers can contribute up to $7,200. Each person in the household over the age of 55 can also make an additional $1,000 catch-up contribution.
However, keep in mind that spending HSA funds on non-medical expenses could result in taxes and penalties. For those younger than 65, doing so would require you to pay income tax on the withdrawn amount as well as a 20% penalty. For those 65 and older, doing so would require you to just pay income taxes on the amount withdrawn. While HSA contributions are exempt from federal taxes, they are not exempt from state taxes in all places.
Those who decide to contribute to a Roth IRA should understand a few rules as well. For one, at the age of 72, you will be required to start taking Minimum Required Distributions. Additionally, if you are at least 59 1/2 years old and have owned your Roth IRA for at least five years, you can take distributions without facing federal taxes on them.
Visit your doctor regularly. The best way to reduce medical costs is to get ahead of illnesses. The earlier you begin treatment and the more preventative care you employ, the better off you will likely be. Additionally, those in retirement might want to consider seeking out a doctor that is younger than them. Doing so will ensure your doctor can assist you all the way through retirement. Consistency of care will only further improve your situation.
