THE BLOG
12/02/2013 12:18 pm ET Updated Feb 01, 2014

Don't Pay Too Much for Your Medicare Part D Drugs

Don't leave $4,000 a year on the table when you pay for your medications.

That's the value of "Extra Help," a government program for low-income seniors under Part D, Medicare's prescription drug program. More than two million people are eligible, but haven't signed up.

They are paying a lot more than they need to for the drugs they take each year to deal with their health problems.

"Full" Extra Help means you will have no monthly premiums and no deductibles in the Part D plan. You will pay just $2.65 for a generic prescription and $6.60 for a brand name drug. A single person qualifies for full extra help with a monthly income of $1,293 or less and financial assets of $8,580 or less. The limit for a married couple is income is income of $1,745 a month and assets of $13,600.

You can qualify for a lesser amount of Extra Help at slightly higher income and asset levels, according to the Social Security Administration.

"Your annual income must be limited to $17,235 for an individual or $23,265 for a married couple living together. Your resources [financial assets] must be limited to $13,300 for an individual or $26,580 for a married couple living together. Resources include such things as bank accounts, stocks and bonds. We do not count your home, car and any life insurance policy as resources."

Details on income and asset and benefit levels are available from the Medicare Rights Center drug help chart.

You can apply for extra help through the Social Security Administration website.

If you need help with the application, call Social Security toll-free at 1-800-772-1213 (TTY 1-800-325-0778).

Even if you have too much income and assets to qualify for Extra Help, here at we can offer some valuable advice on saving money. Remember, open enrollment for Part D ends December 7. You need to pick the best plan for you for 2014.

Consumers are confused, with dozens of plans to choose from in many markets. Inertia takes over, and millions of people stay for next year with the plan they had this year. That can be a big mistake, because the plans are changing all the time. Companies change their monthly premiums, starting very low when they enter a particular market, and then boosting the premium as they acquire market share.

They will change the formularies, the list of drugs covered by the plans. Drugs are added and drugs are removed from the approved list.

Terms of payment may change. Drugs can be switched among tiers of payment. Some tiers may have a specific price for a prescription. Other higher tiers will have a co-payment share, such as 25 percent of the drug's price. For these medications, the bills can be very substantial. A $500 a month medication with a 25 percent co-payment will cost you $125 a month out of your own pocket.

Confusion and inertia combines to block consumers from getting the best deal.

"We find that consumers are willing to give up more than $600 worth of premiums to remain in the same plan," according to Massachusetts Institute of Technology economists Jason Abaluck and Jonathan Gruber, writing in a June 2013 article, for the National Bureau of Economic Research. Experience doesn't mean anything. People who have been in Part D for years are no better than beginners at picking the best plan."We find that there is little improvement in the ability of consumers to choose plans over time; we identify and estimate little learning at either the individual or cohort level over the years of our analysis."

Tips for your Part D search

1-Look for the total cost. Don't be fixated on the monthly premium. Go to Medicare.gov, click on Find health and drug plans, enter all of your medications, and click through to the plans in your area. You want to focus on the total estimated annual costs for your medications. not just the monthly premium offered by the plan.

2- Make sure that all your medications are on the plan formulary. Check and see the tier of payment for each medication. Look for plans with a fixed price for your medications, rather than a higher percentage co-payment.

3-Look for preferred pharmacies. Prices will be lower at these pharmacies, and you want to make sure the plan has one within a convenient walking or driving distance from your home.

4-Don't worry about dis-enrolling if you decide to switch Part D plans. The new Part D plan where you enroll will take care of switching you from the old plan.

The Medicare Rights Center offers guidance on Part D enrollment.

Scroll down to Part 6.