Cash or Copay: Be Savvy When Paying for Prescriptions

  • Don’t assume that paying for your medications outright is cheaper than paying your copay – many factors can affect this decision.
  • Understand how your insurance plan works and check your options first.

Cash is king – or is it? Patients are often advised to pay cash to save money on their prescriptions. Popular savings tools, like prescription discount cards, discounted generic programs, or 6-month supplies from Amazon Pharmacy all require patients to pay cash instead of using their insurance. But are patients trading short-term savings for long-term financial burdens? In some cases, using your insurance can offer cheaper medications now and later.

It’s no secret that American healthcare is expensive. According to the Bureau of Labor Statistics, in 2018 Americans spent an average of 8% of their household income on healthcare. However, spending varies greatly by the age, income, and condition of the patient. For example, half of Medicare patients spend 12% and families with at least one member in poor health spend up to 15% of their income on health services. That amount of money is a significant burden, especially for low- or fixed-income people.

Healthcare Costs

What are we even paying for? Let’s clarify where healthcare dollars go.

  • Premiums: A monthly payment to your insurance provider.
  • Deductible: The amount you pay each year for covered health services before the plan begins paying for care.
  • Copays: A flat fee paid each time you receive covered healthcare services or buy a prescription. (Different healthcare services may have different copay amounts.)
  • Coinsurance: A percentage paid for covered healthcare services after you’ve met your deductible.
  • Out-of-pocket maximum: The highest amount you will pay for covered healthcare services in a year. Once you meet the maximum, insurance will pay 100% for covered services.

Not all plans have all of these. High deductible plans may not have copays, and may or may not include coinsurance. If this seems confusing, bear in mind that this is only the tip of the iceberg.

  • Premiums can be greatly reduced if the patient qualifies for tax credits.
  • Deductibles can range wildly in amount and can be difficult to meet. For example, copays rarely contribute to deductibles and preventative care doesn’t either.
  • Out-of-pocket maximums can be as high as $8,550 ($8,700 in 2022) for an individual, but no higher.

The further you dig into healthcare costs, the murkier it gets. Consider the vagueness of the term “covered services.” You’d think that most medical procedures would be covered and non-essential procedures – let’s say a Botox injection – would not. But it isn’t that easy.

For example, a woman we’ll refer to as Paula had a baby who required life-saving surgery. However, because the child was so young, the surgery was categorized as “experimental.” Paula’s insurance company does not deem experimental surgeries a covered service. Paula spent months acting as go-between for the hospital and insurer before the child’s surgery was recategorized and eventually covered. If the surgery had not been covered, Paula would’ve had to pay the entire bill and none of that cost would have contributed to her deductible or out-of-pocket maximum.

While negotiating the price of care with hospitals and doctors can be a nightmare, reducing your costs on prescription drugs can be more manageable. Let’s see how.

Prescription Costs

Prescription coverage isn't exactly straightforward either. Most commercial and Marketplace plans combine medical and prescription coverage, but the member may still have separate deductibles (luckily, this is rare). Medicare is a different ballgame, requiring members to decide whether they want a combined plan – Medicare Part C – or to keep their prescription coverage separate through Medicare Part D.

Regardless of the situation, all insurers have formularies or prescription drug lists (PDLs), which define which brand and generic drugs they are willing to cover. Medications are divided into tiers by how expensive or risky they are. Tier 1 drugs might be completely paid for by insurance, while Tier 4 drugs might only be partly paid for, even if the patient absolutely needs it.

As with medical coverage, prescription coverage can be mysterious.

For example, a patient we’ll call Mara takes three medications: a generic birth control, a generic SSRI, and a generic drug for inflammatory bowel disease called balsalazide. Mara has commercial insurance through her employer and has not met her deductible or out-of-pocket maximum for the year.

  • Thanks to the Affordable Care Act, Mara’s birth control is completely paid for by insurance. Mara pays nothing.
  • The SSRI is not paid for at all. Mara pays the entire cost of the medication, which fluctuates from month to month. That cost is counted towards her out-of-pocket max, but not towards her deductible.
  • The balsalazide generally costs $250 for a 30-day supply, but Mara only pays a $10 copay each time. The plan covers the rest. The $10 is counted towards her out-of-pocket max, but not towards her deductible.

Mara’s plan doesn’t count any medical or prescription copays towards her deductible, so she knows there is no chance to meet the $2000 amount for the year. She knows she won’t meet her $6000 out-of-pocket max, either. As a result, she doesn’t need to take those into account when deciding how to pay for her medications.

Check Your Options

Mara isn’t worried about the price of her birth control, since she pays nothing. But she wants to know if she can save anything on her other two prescriptions by paying cash.

Mara checks her statements. The SSRI has fluctuated from about $5 to $13 for a 30-day supply. She’d like to pay as little as possible, and she wouldn’t mind a 90-day supply. She’s also curious about her balsalazide prescription. Could she get it for less than $10 a month?

Mara begins searching.

  • ScriptHero, a prescription pricing tool (unrelated to ScriptDrop), shows her SSRI for $4 at a local pharmacy. She could even get a 90-day supply for under $10, if she’s willing to travel to a pharmacy a few miles away.
  • GoodRx shows a range of options, including another price just over $4 for a 30-day supply.
  • Amazon Pharmacy’s prices are absurd in comparison: about $18 with a Prime membership and almost $35 without.

She’s intrigued by the $4 option at a nearby pharmacy, but Mara decides to ask the pharmacist at her regular pharmacy about their cash price for her SSRI. She’d rather get all of her meds from the same place if she can.

Next up: balsalazide.

  • This one is an easy choice. Regardless of where she looks, Mara finds that balsalazide is very expensive without insurance. The cheapest prices are in the $70-100 range and the most pricey in the $300 range. $10 a month doesn’t look so bad now.

Learn About Your Benefits

No amount of finagling with your medications will help you reduce your premium, copays, or coinsurance. Ultimately, in order to decide whether to pay for medications outright or use your copay, it comes down to this: you need to understand your own insurance plan. Read through your Explanation of Benefits carefully or call your plan’s customer service line to find out the following:

  • Are your current prescriptions covered by insurance? If not, does your doctor need to switch you to a generic or different drug or complete a prior authorization for your current medication?
  • How much is the copay or coinsurance for prescriptions? Do those costs contribute to your deductible or out-of-pocket maximum?

Then, to determine whether you can expect to meet your deductible or out-of-pocket maximum, ask yourself:

  • How many doctor’s appointments do you or your family expect to have during the year?
  • Will those appointments be largely preventative in nature and/or fall under the ACA’s essential health benefits?
  • Or will you have urgent needs or hospitalizations (due to chronic illness, pregnancy, etc.)?
  • What is your cost-sharing for preventative care versus emergency care?

If your prescription copays contribute to your deductible or out-of-pocket max and you believe you will meet those amounts, stick with your insurance copay for prescriptions. They’ll help get you to 100% coverage more quickly.

But if you know you’ll never meet your plan’s max costs, consider paying cash. Be sure to weigh your options, though. As we saw in Mara’s example, not all medications are cheaper with cash payments.

You can also seek out other ways to save money. Patients with Medicare Part D coverage can apply for the Extra Help program, and patients with commercial insurance can seek out manufacturer copay cards to pay for brand-name prescriptions. Patient Assistance Programs can also be helpful for patients with chronic, complex, or rare diseases.

Get your prescriptions delivered regardless of how you pay! Ask your local pharmacy about ScriptDrop delivery today.