Part nine of Healthcare in Retirement. The usual disclosure: I am not an advisor. I am an engineer, so when a caller told us the numbers she was quoted at the counter were "two and three times what the figures were on the computer," I did not take it on faith. I went and found the rule that makes it possible, and then I did the arithmetic. Here is the work.
The situation
You have a drug plan. You have three prescriptions. You fill them at the pharmacy you have used for twenty years. Your neighbor is on the same plan and fills the same drug for less, at a different store. You assume one of you is wrong. Neither of you is. One caller last fall, about a plan document she did not understand: "You wouldn't know what the preferred pharmacy is on that one anymore, do you?" Another, who had tried to do everything right: "I thought you wanted both my retail pharmacy and my mail order pharmacy and I kind of discombobulated the whole thing."
The rule that makes two prices legal
Medicare says it in one sentence. "If your plan has 'preferred in-network pharmacies,' they may save you money on your out-of-pocket drug costs (like a copayment or coinsurance) because they have agreed to charge less than other pharmacies in your plan's network."
Read the last clause. Other pharmacies in your plan's network. A standard pharmacy is in the network. It covers the same drugs under the same plan. You just pay more there. The regulation that allows it, 42 CFR 423.120(a)(9), calls it "differential cost-sharing for preferred pharmacies," and the letter you got this month says it too. The government template every plan's Annual Notice of Change follows puts it in Section 1.4: "Amounts you pay for your prescription drugs can depend on which pharmacy you use." So the difference is not an error at the register. It is the design.
Then there is the third kind of counter, the one outside the network entirely. Medicare: "If you buy your drugs at an out-of-network pharmacy, you'll probably have to pay full cost for the drugs." Save the receipt and ask the plan for a partial refund, but the same page warns you will not get back the out-of-network share.
Showing the work: three prescriptions, two counters
The copays below are made up to illustrate the shape of it. They are not any plan's numbers. Yours are in Section 1.7 of your own letter.
| Prescription | Preferred counter | Standard counter | Difference per month |
|---|---|---|---|
| Tier 1 generic, blood pressure | $0 | $10 | $10 |
| Tier 2 generic, cholesterol | $5 | $20 | $15 |
| Tier 3 brand | $42 | $47 | $5 |
| Total | $47 | $77 | $30 a month, $360 a year |
Same plan. Same three bottles. Three hundred sixty dollars a year, which is the price of loyalty to a counter. And notice where the money is. The brand drug barely moved. The generics, the ones people assume cost nothing anywhere, are where the spread lives. That is the shape of what our caller heard at the counter.
Mail order: when it wins, and when it does not
Mail order is a fourth counter. Medicare: "Some plans may offer a mail-order program that allows you to get up to a 3-month supply of your covered drugs sent directly to your home." For a stable daily medication it is often the lowest copay on the list. But two cautions from the rules themselves.
First, you are entitled to a 90-day supply at a retail pharmacy too, but not necessarily at the mail-order price. The regulation says a plan "may require an enrollee obtaining a covered Part D drug at a network pharmacy that is a retail pharmacy to pay any higher cost-sharing applicable to that covered Part D drug" compared with mail order. Access, yes. Price parity, no.
Second, mail order is a poor fit for a drug whose dose is still being adjusted, and it is a logistics problem for anyone who lives at two addresses part of the year. A 90-day box shipped to the wrong house in November is not a savings. Monday's article on snowbirds picks that up.
The thing your pharmacist is allowed to tell you
This one is buried in the regulation and almost nobody knows it. A plan "may not prohibit a pharmacy from, nor penalize a pharmacy for, informing a Part D plan enrollee of the availability at that pharmacy of a prescribed medication at a cash price that is below the amount that the enrollee would be charged to obtain the same medication through the enrollee's Part D plan." In plain English, the pharmacist can tell you the cash price is lower than your copay, and the plan cannot stop them. So ask.
Now the engineer's caveat. The 2026 out-of-pocket cap is $2,100 on covered Part D drugs. It counts what you spend through the plan. As a rule, if the plan never sees the claim, it cannot count it, so ask the pharmacy whether it will still run the claim through your plan. For someone on a few generics that will never matter. For someone with one expensive brand who will hit the cap by June, paying cash for the cheap ones in January might slow down the meter that protects them in July. That is a real trade, and it is the kind of thing worth an hour with an advisor rather than a guess at the counter.
Three things that do not depend on the counter
Insulin: "The cost of a one-month supply of each Part B- and Part D-covered insulin product is no more than $35, and you don't have to pay a deductible for insulin." Vaccines: "You pay nothing out of pocket for Part D adult vaccines recommended by the Advisory Committee on Immunization Practices," the shingles shot included. And if the bills bunch up, the Medicare Prescription Payment Plan spreads them across the year. Medicare's own caveat: "it doesn't save you money or lower your drug costs." It changes when you pay, not how much.
How far the nearest counter has to be
A detail for readers outside the city. The rules require that at least 90 percent of a plan's urban members live within 2 miles of a network retail pharmacy, 90 percent of suburban members within 5 miles, and, in rural areas, 70 percent within 15 miles. Seventy, not ninety. If you live outside Kingman or Pahrump, the plan is allowed to be thinner where you are, and the nearest preferred counter may not be the nearest counter.
How to check before you pick a plan for 2027
Medicare's plan finder lets you enter your own pharmacies and see what each drug costs at each one. Its calendar says next year's plans are there from October 1, and describes the tool as letting you "Manage a list of preferred pharmacies and any prescription drugs they take" and "Get an estimate of their out-of-pocket costs." Put in the pharmacy you actually use, not the one closest to your house. Then put in the other one. The difference is your $360.
What a Certified Medicare Planner® does differently
They ask which pharmacy before they ask which plan, because the plan that is cheapest at one counter is not the cheapest at another. They run the year's prescriptions through the plan finder at your pharmacy and at the preferred one, and they tell you the number. They know when mail order is a savings and when it is a box on the wrong porch. They know the cash-price rule and the cap trade-off that comes with it. And every fall they re-check, because preferred networks change with the plan year, which is why Section 1.4 exists. The advisors are at 602-281-3898.
Friday, October 2. Foothills Library, Glendale, 10:30 AM. Mustang Library, Scottsdale, 2:30 PM. No cost. Register at 123easymedicare.com/medicare-workshop or call (877) 220-1089.
Next in Healthcare in Retirement: three nights in a hospital bed that did not count. Observation versus inpatient, the notice the hospital has to hand you, the three-day rule that decides whether Medicare pays for rehab, and the arithmetic on what happens when it does not.
This event is presented by 123EasyMedicare, a brand of American Retirement Advisors, an independent, private organization. It is not sponsored by, endorsed by, or affiliated with Medicare, the Centers for Medicare & Medicaid Services, the Social Security Administration, or any government agency. The libraries are not sponsors of, and are not affiliated with, this event. Educational only; not tax, legal, or insurance advice.
Disclaimer: This article 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 (1-800-633-4227).