Navigating the Medicare Part D Drug Plan cesspool

Navigating the Medicare Part D Drug Plan cesspool

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This article was first posted January 1, 2021.

Back in October, I outlined my plans for Medicare health insurance post age 65. A few readers asked for more details on how I analyzed my Medicare Part D Drug Plan choices. Here goes.

I've found insurance company price gouging in generic prescription drugs to be particularly obscene. I can get a year's supply of the 3 generic drugs I currently take at Costco for less than $300/year if I buy them in one fill. Getting the same three drugs in four 90-day fills and billing it to my private, for-profit health insurer would cost $800 to $1,000 per year out-of-pocket since I have a $5,000 annual deductible. There appears to be immense savings in keeping a for-profit health insurance CEO out of your business.

My approach to Medicare Part D

First, you need to establish the "cash price" for your prescriptions. The amount you'd pay if you don't involve the insurance company. I've found that and are good sources of prices as well as Costco and the list of $4 cheap generic drugs at Walmart ($4 for a 30-day supply, $10 for 90-days.) See Column 1 in the table below.

Next, go to the Medicare website and click on the Part D "Find Health & Drug Plans" shopping app. Enter the medication names and doses for the prescriptions you take and select both a mail order and local pharmacy.

In my Washington State zip code, 29 drug plans are offered with premiums ranging from $6.30/month to $124.50/month. The shopping app identified the 10th least expensive premium plan ($29.50/month) as the most economical for the list of drugs I take. See Column 2 in the table below.

Finally, starting with the lowest premium plan, compare the insurance company drug price with the "cash price". It may be that you'll realize substantial savings by purchasing some of your drugs for the "cash price" rather than using the insurance coverage. See Column 3 and 4 in the table below.

As it happens, the cheapest premium plan had a zero copay for the two cheapest drugs I take, but then charged more than triple the cash price for the more expensive medication. By substituting the cash price for the more expensive drug, the cheapest premium plan also offered the lowest overall cost. (Column 4.)

Medicare Part D Drug Plans
Comparison of the "Cash Price" with Insurance Company Price
. (Column 1)


(Column 2)
Medicare Part D
Drug Plan
Selection App
(Column 3)

Lowest Premium
Part D Plan

(Column 4)

Lowest Premium Plan
Drug Source
(Ins. or Cash)
Annual Part D Premium N/A $354.00 $75.60 $75.60
Drug #1 Annual Cost
(Tier 1)
$40 $24 $0 Ins. $0
Drug #2 Annual Cost
(Tier 1)
$25 $24 $0 Ins. $0
Drug #3 Annual Cost
(Tier 3)
$280 $325 $859 Cash $280
Annual Total
(Premium + Drug Costs)
. $727.00 $934.60 $355.60

One caveat is that when you buy a prescription without involving the insurance company, it doesn't count towards your annual deductible and out-of-pocket limit. So it doesn't work for those with big drug bills. Also, any changes to the list of drugs you take will likely make a different Part D drug plan the most economical. You really need to go through the shopping exercise each year to guaranty that you're getting the best plan with the best price to you.

Resources for additional information.

Mergers between health insurers and pharmacy benefit managers could be bad for your health

How GoodRx Profits from Our Broken Pharmacy Pricing System

The Price May Not Be Right: The Value of Comparison Shopping for Prescription Drugs

True Cost of Health Care, by David Belk MD
You need to read this first. Dr. Belk exposes all the lies health insurers tell you about traditional fee-for-service Medicare and how much it will actually cost you out-of pocket.

Medicare website

2020 Trustees Report on Medicare

Medicare Advantage Wikipedia

October – December 2020 Approved Medicare Supplement (Medigap) plan premiums (WA state)

National Association of Insurance Commissioners -- 2018 Medicare Supplement Loss Ratios

Comparing Medicare Supplement (Medigap) and Medicare Advantage plans

State Averages for the 2020 Medicare Advantage Monthly Capitation Payments

Medicare Advantage Plans Overbill Taxpayers By Billions Annually, Records Show

Proportion of branded versus generic drug prescriptions dispensed in the United States from 2005 to 2019

Walmart's $4 Prescription Program

An Overview of the Medicare Part D Prescription Drug Benefit

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