The American Retirement Advisor
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Hosted by Ian Schaeffer, author of Medicare Made 123Easy, COO of ARA, and founder of 123Easy Studios. Articles read by Betty.
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The American Retirement Advisor
Same pill, same plan, different counter: preferred pharmacy math
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Healthcare in Retirement, part 9. Medicare's own words: preferred pharmacies may save you money because they have agreed to charge less than other pharmacies in your plan's network. Same drug, same plan, two prices. Here is the arithmetic on three prescriptions at two counters, when mail order wins and when it does not, the cash-price rule, and how to check your pharmacy for 2027 before you pick a plan.
Read the full article: https://news.americanretirementadvisors.com/hir-same-pill-same-plan-different-counter/
American Retirement Advisors helps families in Arizona and Nevada navigate healthcare, retirement income, and inheritance planning. Want to reach out? Text us at (602) 281-3898, email support@americanretire.com, or visit https://americanretirementadvisors.com.
Welcome to the American Retirement Advisor, coming to you from One to Three Z Studios. Real stories, real strategies, and straight talk about healthcare, retirement income, and inheritance planning. I'm Ian Schaefer, joined with Eddie and Betty. Let's get into it.
SPEAKER_06Welcome back to the American Retirement Advisor. I'm Betty, and Eddie's here with me in the studio today, which means we're about to get into some numbers. And I'm glad he's here for this one, because today we're talking about something that trips up a lot of people on Medicare drug coverage. Specifically, why two people on the exact same plan can walk out of two different pharmacies having paid two completely different prices for the same medication. This comes from a piece by Ian Schaefer, our company's COO. And I'll tell you, when I read it, I had one of those moments where I thought, I bet a lot of our listeners have experienced exactly this and had no idea why it was happening.
SPEAKER_03He actually opens with a caller who was told the numbers at the pharmacy counter were two in three times which she was seeing on her computer. And the instinct is to assume someone made a mistake, the register, the insurance, something. But it was not a mistake.
SPEAKER_06Right. And he also mentions another caller who was so confused by her plan document that she called in asking whether anyone knew which pharmacy was the preferred one on her plan anymore. And then there's the one who tried to do everything right and, in her own words, kind of discombobulated the whole thing, trying to figure out retail versus mail order.
SPEAKER_03Aaron Powell, which is such a relatable way to put it because this stuff is genuinely confusing. The reason it's confusing is that Medicare allows something called differential cost sharing for preferred pharmacies. That's the regulatory term Ian Schaefer cites from 42 CFR 423.120A9. What it means, in practice, is that your plan has a preferred network inside its network. A standard pharmacy is still in network, your drugs are still covered, you were just paying more there. So it's not like going out of coverage entirely where you're really in trouble. Correct. And that's worth separating out. There are actually three tiers of pharmacy here. You have the preferred in-network pharmacies, the standard in-network pharmacies, and then outside the network entirely. If you go out of network, Medicare's own language is that you'll probably have to pay full cost for the drugs. You can save your receipt and ask the plan for a partial refund, but you won't get back the out-of-network share, so that's the floor you really don't want to fall through.
SPEAKER_06What does the middle tier look like in terms of actual dollars? Because I think people hear you'll pay a little more and they picture a few pennies.
SPEAKER_03Ian Schaefer does the arithmetic in the article, and it is clarifying. He uses made-up copies just to show the shape of the thing, so these are not real plan numbers, but the structure is real. Take three prescriptions: a tier one generic for blood pressure, a tier two generic for cholesterol, and a tier three brand drug. At the preferred pharmacy, the total comes to $47 a month. At the standard pharmacy, it comes to $77 a month. That's $30 a month, $360 a year for the same three bottles under the same plan.
SPEAKER_06That's real money, just for filling at the pharmacy you've always used.
SPEAKER_03And here's the part that surprised me when I read it. Look at where the gap actually lives in that example. The brand drug barely moves between the two counters. It goes from $42 to $47. The spread on the generics is where the difference lives. The blood pressure generic goes from zero at the preferred pharmacy to $10 at the standard one. The cholesterol generic goes from $5 to 20. People assume that cheap drugs cost nothing anywhere, but that's where the gap is widest.
SPEAKER_05That is backwards from what most people would guess. You'd think the expensive brand drug is where you'd want to be at the right pharmacy.
SPEAKER_03It's counterintuitive, and it's worth pointing out that Ian Schaefer is an engineer. He says so up front. He's not an advisor, and he didn't take this on faith when the comma reported it. He went and found the rule, then did the arithmetic. That's the whole structure of the piece, and it's why I find it persuasive.
SPEAKER_06Now, where does someone even find out which pharmacies are preferred on their plan? Because I feel like this is information buried somewhere most people never look.
SPEAKER_03So the annual notice of change, the letter your plan sends you every fall, is where you'd start. Ian Schaefer points to a specific section, section 1.4 of the government template, that every plan's notice follows. The language in there is pretty direct. It says the amounts you pay for your prescription drugs can depend on which pharmacy you use, and your specific copay tables are in section 1.7. So if you've gotten that letter and set it aside, that's actually where you'd go. Which I think most people have done with it, I mean. It's pretty much been set aside, which is why getting someone to run the numbers with you matters so much, and we'll get there. But first, let's talk about the pharmacy piece, because that's really a whole separate conversation.
SPEAKER_00Let's dig into it because I know a lot of our listeners use mail order or have been told they should.
SPEAKER_03It's essentially a fourth type of counter in this framework. Medicare allows plans to offer a program where you get up to a three-month supply of a covered drug sent directly to your home. For a stable daily medication, it's often the lowest copay on the list. That 90-day supply can make real sense.
SPEAKER_00So why doesn't everybody just do mail order for everything?
SPEAKER_03Two reasons from the rules themselves, as Ian Schaefer lays them out. The first one is about access versus price. You are entitled to a 90-day supply at a retail pharmacy. The plan cannot take that away from you. But the regulation specifically says a plan may require you to pay higher cost sharing at a retail pharmacy compared with mail order. So you can get 90 days at your local pharmacy, you just might not get the mail order price there.
SPEAKER_04So you have the right to the convenience, but not necessarily the right to the same rate.
SPEAKER_03Exactly the distinction. And the second reason is more practical. Mail order is a bad fit for a drug whose dose is still being adjusted. If your doctor is titrating something, you do not want a 90-day box of the wrong dose sitting on your doorstep. And Ian Schaefer also flags it as a logistics problem for anyone who splits the year between two addresses, which is a lot of our Arizona listeners. He mentions the article we'll pick that up in a piece specifically about snowbirds. A 90-day box shipped to the wrong house in November is not a savings, as he puts it.
SPEAKER_06That image is so specific and so real. You're in Phoenix, the box goes to your place up north, and now you have no medication and a three-month supply you can't get to.
SPEAKER_03Exactly. So mail order is a tool, not a default. You want it working for you, not against you.
SPEAKER_06Okay, I want to talk about something Ian Schaefer calls the thing your pharmacist is allowed to tell you, because that section of the article really stopped me. Most people have no idea this exists.
SPEAKER_03It is buried in the regulation, and he says almost nobody knows it. A plan cannot prohibit a pharmacy from telling you that the cash price for a medication is lower than what you'd pay using your Part D plan. The plan cannot penalize the pharmacy for telling you either. So you can walk up to the counter and just ask, is the cash price lower than my copay? And they are allowed to tell you yes.
SPEAKER_06That seems almost too simple. Why wouldn't everyone just ask that every single time?
SPEAKER_03Because most people don't know they can. That's the whole thing. And for a lot of drugs, especially common generics, the cash price can be surprisingly low, so it is genuinely worth asking.
SPEAKER_06But there's a catch to it, right? Because Ian Schaefer is pretty careful about this one.
SPEAKER_03He is, and this is where the engineer in him shows up. The 2026 out-of-pocket cap on covered Part D drugs is $2,100. But that cap only counts what you spend through the plan. If you pay cash and the plan never sees the claim, it generally cannot count that spending towards your cap. So here's the real trade. If you're someone on a handful of cheap generics who will never get close to that cap anyway, paying cash for a couple of them is probably fine. But if you have one expensive brand name drug and you're on track to hit the cap by June, paying cash for your cheap generics in January might actually slow down the clock on the protection that covers you in July.
SPEAKER_06So you save $5 there and cost yourself more in July.
SPEAKER_03That is the real arithmetic. And Ian Schaefer is explicit, this is the kind of question worth an hour with an advisor rather than a guess at the counter. I'd add, when you're at the pharmacy and you're trying to figure out whether to pay cash or run it through the plan, that's exactly the kind of question I'd write down and bring to one of our advisors. The specific mechanics of how the plan tracks the claim matter there, and getting that wrong has real consequences.
SPEAKER_06Let's talk about a few things that don't change based on which pharmacy you use, because there are some protections in there that I think people will be glad to hear about.
SPEAKER_03Three of them in the article. The first is insulin. Regardless of counter, regardless of preferred or standard, a one-month supply of each Part B and Part D covered insulin product is capped at $35. No deductible either. That's a fixed protection.
SPEAKER_06That's significant for a lot of people.
SPEAKER_03The second is vaccines. You pay nothing out of pocket for Part D adult vaccines recommended by the Advisory Committee on Immunization Practices. Ian Schaefer specifically calls out the shingles shot, zero out of pocket. And the third is the Medicare prescription payment plan, which is a spreading mechanism for people whose drug bills bunch up early in the year. Instead of paying a large amount in January or February, you can spread those costs across the calendar year.
SPEAKER_06Which sounds like it saves you money.
SPEAKER_03It does, but Medicare's own language is direct. It doesn't lower your drug costs or reduce what you owe overall. It changes when you pay, not how much. So it's a cash flow tool. For someone on a fixed income who would otherwise have a brutal February, that's genuinely helpful. But it is not a discount.
SPEAKER_06That's such an important distinction. I could see people enrolling in it thinking they're getting some kind of savings and then being confused when the total is the same.
SPEAKER_03Which is why Ian Schaefer includes the caveat directly from Medicare rather than glossing over it.
SPEAKER_06There's a section in the article about geography that I want to make sure we don't skip because our listeners are spread out and some of them are in pretty rural parts of the state.
SPEAKER_03This one matters a lot outside the metro area. The rules require that at least 90% of a plan's urban members live within two miles of a network retail pharmacy. For suburban members, it's 90% within five miles, but for rural areas it drops 70% within 15 miles, 7.0, not 9.0. Ian Schaefer mentions Kingman and Par Rump as examples. If you're in that kind of area, the plan is structurally allowed to be thinner where you are. The nearest pharmacy might not be a preferred pharmacy, it might not even be in-network.
SPEAKER_06So someone could be doing everything right, choosing a plan, going to their local pharmacy, and still be at a disadvantage just because of where they live.
SPEAKER_03Right. And it's not a bug, it's a rule, which means you need to know it up front, not after you're already paying the higher price.
SPEAKER_06Alright, so how do you actually check this before you commit to a plan? Because open enrollment is real, and the decisions you make stick with you.
SPEAKER_03Medicare's Plan Finder is the tool. You can enter your own pharmacies, your actual drugs, and see what each one costs at each pharmacy. Ian Schaefer notes that next year's plans are available in the tool from October 1st, each year. The tool lets you manage a list of preferred pharmacies in any prescription drugs, and it gives you an estimate of out-of-pocket costs. The key is to enter the pharmacy you actually use, not the one that's technically closest to your house. Then put in the other one, run both. That difference, the $360 in the example, becomes visible before you sign anything.
SPEAKER_06And that's the do-it-yourself version. What does it look like when you work with someone who does this professionally?
SPEAKER_03Ian Schaefer describes what a certified Medicare planner does in a way that I thought was really useful. The first question they ask is not, which plan do you want? It's which pharmacy do you use? Because the plan that is cheapest at one counter is not the cheapest at another. They run your specific prescriptions through the plan finder at your pharmacy and at the preferred one, and they give you the actual number. They know when mail order is the right call and when it becomes, as he puts it, a box on the wrong porch. And they know about the cash price rule and all the cap trade-offs we talked about. They know it and they recheck it every single fall, which is the part people don't always realize. Preferred networks can change from one plan year to the next. A pharmacy that was preferred last year might not be preferred this year. That's exactly why section 1.4 exists in that document we were just talking about, that fall letter from your plan. They're required to spell it out for you, but only if you actually read it.
SPEAKER_06Which goes back to that caller who was asking whether anyone knew what the preferred pharmacy was on her plan anymore. She wasn't being careless. This stuff changes, and it's hard to keep up with on your own.
SPEAKER_03And that's a completely reasonable thing to need help with. One of the things I appreciate about Ian Schaefer's approach in this piece is he's not making people feel foolish for not knowing this. Like we mentioned, it wasn't obvious even to him. He had to dig into it himself, do the arithmetic, confirm it was actually real. Most people don't have time to do that, and they shouldn't have to guess.
SPEAKER_06The advisors are at 602-281-3898. I also want to mention there are some workshops coming up if you want to sit down in person and work through this. October 2nd, Foothills Library in Glendale at 1030 in the morning, and Mustang Library in Scottsdale at 230 in the afternoon. There's no cost to attend. You can register at 123 Easy Medicare.com slash Medicare Workshop. Or call 877-220-1089 to sign up.
SPEAKER_02And those workshops are a good place to bring your plan letter and your prescription list and actually work through the numbers for your situation. That's the kind of thing where seeing your specific drugs and your specific pharmacy in the tool makes everything concrete.
SPEAKER_06Let me just pull together what we've covered because there's a lot here, and I want it to be clear for people when they walk away from this episode. You might be paying more at your pharmacy than a neighbor on the same plan pays at a different pharmacy. And that is legal. It is the design. The difference can be real money, and Ian Schaefer's example showed us exactly that. Same coverage, same medications, $30 more every single month just because of where you fill your prescriptions. That $30, Eddie walked us through, when you let it run all 12 months, it adds up to something that would genuinely surprise most people. And the biggest spread is often on the generics people assume are cheap everywhere. Mail order can save you money on stable medications, but it's not automatic and it's not right for everyone. Your pharmacist can tell you if the cash price is lower than your copay, but paying cash has consequences for how your out-of-pocket spending counts toward the cap. And that's a conversation for an advisor. And every fall, the landscape can shift.
SPEAKER_02That's the summary I'd want someone to tape to their refrigerator before open enrollment. And if any part of it made you think of a specific situation you're in, that's the sign to make a call.
SPEAKER_06The number again is 602-281-3898. The advisors there ask the right questions in the right order, starting with which pharmacy, because that's where the real picture starts. Thank you so much for spending this time with us today. And we mean it when we say this stuff matters. A few phone calls and one conversation with someone who knows the roles can make a real difference in what you spend every single month.
SPEAKER_03A quick note before we wrap up: today's episode is for educational purposes only. It is not sponsored, endorsed, or otherwise representative of Medicare or the Federal Medicare program. American Retirement Advisors is not a government agency. For official Medicare information, visit Medicare.gov or call 1-800-Medicare.
SPEAKER_06This is Betty with the American Retirement Advisor. Thanks for listening. If this episode helped you think differently about your retirement, share it with someone who needs to hear it. You can read the full article and browse hundreds more at AmericanRetire.com. Want to reach out? You can text us at 602-281-3898. Or email support at AmericanRetire.com. Be sure to subscribe so you never miss an episode. We publish daily. See you next time.
SPEAKER_01Thanks, Eddie. Thanks, Betty. Until next time. This is Ian Schaefer coming to you from 123 Easy Studios. I hope you've enjoyed this recording of the American Retirement Advisor, where we make healthcare, income, and inheritance planning 23 Easy.
