Money Management

Pharmacy visits could soon cost less for millions of Americans. Keep reading for all the details. 

In the United States, prescription drugs are a half-trillion dollar industry. This may come as no surprise to some readers, given Americans spend over 2.5 times more on prescription drugs than residents of other high-income countries. Especially in today’s inflation-driven economy, the rising price of prescriptions is putting serious strain on the personal finances of millions. Read on to learn more about why patients in one of the most advanced medical systems in the world are paying so much for drugs — and what Washington is doing about it.

What is the MEPA bill?

One of the bills meant to lower drug costs is the Modernizing and Ensuring PBM Accountability Act (MEPA), which is progressing through the Senate. This bipartisan legislation doesn’t actually go after drug manufacturers, but instead targets middlemen known as pharmacy benefit managers or PBMs.

Most employer-sponsored health insurance and government programs contract a PBM to negotiate prescription drug prices on their behalf. However, only three pharmacy benefit managers control about 90% of the market, and they are not subject to strict oversight or transparency requirements. This means that many Americans and their employers are left in the dark about how PBMs are negotiating, and whether they are actually getting a good deal on prescription prices.

MEPA would change that, largely by adding additional reporting and auditing requirements to PBMs. In its current form, the bill mainly focuses on PBMs serving Medicare Part D recipients. But lawmakers appear to have an appetite for extending such accountability measures to some 160 million Americans covered by employer-sponsored health insurance.

Will it pass?

The ultimate fate of MEPA is not guaranteed, but it is gradually making its way through the Senate. Meanwhile, members of the House of Representatives have put forth a similar proposal that has garnered strong support. The bills must be reconciled before they can be passed into law, but it is likely that lawmakers will be able to find common ground.

MEPA passed through the Senate Committee on Finance late last month, with nearly unanimous support from a closely split body of senators. The proposal may include additional mark-ups before being passed by the Senate, but wide support in the testing ground of the Finance Committee bodes well for the bill.

Similar legislation was introduced in the House in the form of the Better Deals and Lower Prices Act by Representative Arrington, a Texas Republican. The bill was touted by the House Ways and Means Committee Chairman Jason Smith (R-MO), and is expected to gain the approval of others on the committee. If both the Senate and the House can agree on final wording of the bill, it is likely to pass in what has otherwise been a largely gridlocked Congress.

What should you do?

If the bill passes, individual Americans will not need to take any action to benefit from lower drug prices. Thanks to greater transparency, those covered by employer-sponsored health insurance or Medicare Part D may see lower costs the next time they visit the pharmacy.

In the meantime, supporters of prescription drug transparency bills may consider getting in touch with their Congressional representatives. Constituents’ opinions inform policy decisions, and a quick email or call to your senators or representative is a great way to share your thoughts.

One factor in rising prescription drug costs is a lack of accountability within healthcare administration. Two bills in Congress would target drug price negotiating middlemen and require greater transparency for insurance providers. Proponents of such legislation may consider expressing their support to their representatives — after all, like personal finances, civic engagement is not a spectator sport.

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Food insecurity rates are higher in BIPOC households than in white ones. Learn why there’s concern that food benefits aren’t reaching people who need them. 

Food insecurity remains a problem in America. According to the USDA, around 10% of U.S. households were food insecure at some point in 2021. That’s around 13.5 million households who don’t have enough food. Not having enough to eat can impact people’s lives in many ways — including how effective people are at work or how much children learn in school. It is also associated with health issues such as diabetes and high cholesterol.

The good news is that America’s food stamps program, known as SNAP, or Supplemental Nutrition Assistance Program, goes a long way to helping people put food on the table. According to a recent study, “SNAP participation reduces the risk of food insecurity in low-income populations by approximately 30%.” Unfortunately, the study also found racial disparities in food insecurity among households that do not participate in SNAP.

Black and multiracial households have higher rates of food insecurity

The Johns Hopkins University study looked at almost 5,000 SNAP eligible households to understand the impact SNAP plays in addressing racial disparities in food insecurity. Overall, the study found that entirely Black and multiracial households had a higher risk of being food insecure. However, those racial disparities were not present in households that participate in SNAP.

According to the report, “Black and multiracial households had higher rates of food insecurity than White households in adjusted analyses.” When studying non-SNAP households, it showed that those that were entirely Black had a 52% higher risk of food insecurity than entirely white households.

On the one hand, the research suggests that SNAP works in reducing hunger. On the other, it is concerning that some households, particularly Black and multiracial households, aren’t accessing the food benefits they’re entitled to. “There is an urgent need to address the root causes of racial disparities, including structural and systemic racism in economic systems and food systems,” it said.

The researchers suggest there could be systemic barriers to accessing SNAP benefits. The report also pointed to evidence of racially segregated food environments that contribute to food insecurity. These include higher food costs in predominantly Black communities and less access to fruits and vegetables.

How to claim SNAP benefits

According to the report, less than 55% of eligible households participate in SNAP across all racial groups. One reason is a “cumbersome” enrollment process. It says people with disabilities or limited internet access may also find it harder to navigate the red tape involved in signing up.

SNAP benefit amounts depend on several factors, including your location, income, and household size. The maximum monthly SNAP benefit for a family of four is currently $939 in most of the U.S. While a lot of households don’t receive the maximum, getting even part of that cash could reduce the pressure on your bank account.

There are a few variations, but broadly speaking, eligibility depends on your income and the amount of money you have. For a family of four, if your gross monthly income is less than $3,007 (130% of the federal poverty level) and your net monthly income is less than $2,313, you’d meet the current SNAP income requirement. In terms of assets, a household can have $2,750 in the bank (more if one member of your household is over 60).

RELATED: Personal Finance Guides and Advice

The application process varies by state. You’ll need to fill in forms and may also need to be interviewed. It can all seem quite daunting — especially when the eligibility requirements are filled with confusing terms and talk of percentages. Don’t worry too much about the numbers. Instead, reach out to your local SNAP office and try to talk to someone. You may need to persevere, but it is worth doing because you’re entitled to that money.

Application help is available

If you think you might be eligible, but the idea of filling out forms or being interviewed feels like too much, think about the difference that extra cash could make to your day-to-day life. Importantly, you don’t have to do it alone.

For example, you might ask a friend or family member to help you with the paperwork. If that’s not an option, try your local food pantry or soup kitchen. Even if staff there can’t do anything, they may be able to point you in the right direction. There’s also an NGO called mRelief whose sole mission is to help people sign up for their food benefits. Sign up online or text “Food” to 74544.

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Eager to pay the IRS less? Read on to see how. 

Many people dislike the IRS for one key reason — it’s the agency that takes away some of their money in the form of taxes. But like ’em or hate ’em (and yes, you probably fall into the “hate” category), taxes are a part of life. And it’s pretty hard to get out of paying them entirely.

That said, there are definitely things you can do to pay less tax. Shrinking your 2023 tax bill could result in a larger refund in 2024.

One move in particular that might help you eke out a larger 2024 tax refund is maxing out your retirement plan contribution for 2023. But whether that’s really feasible might hinge on the type of tax-advantaged savings plan you have access to.

When you’re able to shield some earnings from taxes

The benefit of maxing out a traditional IRA or 401(k), or even just contributing to one of these plans, is that you can shield some of your income from taxes. Let’s say you put $2,000 into a traditional 401(k) this year and fall into the 22% tax bracket based on your income. This means that not paying taxes on $2,000 of income results in a savings of $440 for you.

Now, the IRS isn’t going to send you a $440 check this year for putting $2,000 into your retirement plan. Rather, that savings will come to you by not being taxed on that income, which could increase your tax refund.

Is maxing out a retirement plan feasible?

If you earn a pretty average salary, then maxing out a 401(k) plan may not be doable. That’s because 401(k) plans max out this year at $22,500 for workers under age 50 and $30,000 for those 50 and over.

Forbes reports that the average salary nationwide is $59,428. If you’re 51 and were to contribute $30,000 to your 401(k) this year, you’d be socking away half of your salary. That’s certainly impressive, but it’s probably not a reasonable goal to set. After all, you can only live so frugally.

Even if you’re younger and can only sock away up to $22,500 this year in a 401(k), doing so would mean parting with close to 40% of your earnings if your annual salary is somewhere in the ballpark of $59,428. That, too, is frankly a lot of money to allocate to retirement, and it doesn’t leave you with a lot to pay bills with.

But maxing out an IRA may be more doable. This year, the limit is $6,500 if you’re under 50 and $7,500 if you’re 50 or over. On a salary of $59,428, the former would mean saving about 11% of your income, while the latter would mean saving closer to 13%.

Even these aren’t easy thresholds to meet. But they’re more reasonable than maxing out a 401(k) on a typical wage.

But remember, if your goal is to pay the IRS less and enjoy more tax savings, maxing out an IRA or 401(k) isn’t your only option. Any amount of money you contribute to one of these plans guards some of your income from taxes and has the potential to lead to a higher refund the following year.

So if contributing $6,500 to your IRA isn’t in the cards this year but you can swing $1,000, do that. You can always ramp up in the future if your income rises or if other circumstances change that give you more leeway with your money (for example, finding a cheaper home to rent or moving in with a significant other so you can split expenses and free up more cash).

Taxes are clearly not a favorite of most people. So you might as well do what you can to minimize yours.

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It’s hard to carve out money for college savings when you’re dealing with the costs of having a newborn. Read on to see why I did that anyway. 

I still remember the day I brought my son home from the hospital. It had been a tricky delivery and my body was in bad shape, but I was happy to be back in my house and dive into motherhood.

Those first few weeks were a total blur. I barely slept since my son nursed frequently, and as a new mom, I had so many worries.

Was he eating enough? Was he warm enough while he slept? And how on earth were we going to cover the many costs we suddenly had to grapple with, from diapers to daycare?

Thankfully, my husband and I had made a point to boost our emergency fund before our son entered the world. So we knew we had money in our savings account to tap in a pinch if needed.

But money was still a concern. Our costs were rising, our incomes were lower back then, and I wasn’t getting paid a dime during my maternity leave from work.

Despite that, we managed to sock away a little money from my husband’s paycheck in a brokerage account earmarked for my son’s college education when he was just a few days old. And while that wasn’t easy, I’m glad we did it.

A longer investment window can go a long way

I’ve been saving for retirement pretty steadily since my mid-20s. (Yes, I wish I’d started a year or two sooner, but I had education loans to pay off and no financial support, so I had to do things like build an emergency fund first.) But the thing about retirement is that many people get a good 40-year window or more to build themselves a nest egg.

With college savings, you only get about 18 years to accumulate money if you wait until your children are born (which is a reasonable thing to do). And that’s why I wanted to get started right away.

See, over the past 50 years, the stock market has delivered an average annual 10% return, as per the S&P 500’s performance. So if you manage to stick $2,000 into a college fund when your child is first born, in 18 years, that $2,000 could grow into more than $11,000.

Now clearly, $11,000 is not going to be enough to pay for four years of college. Heck, at today’s prices, $11,000 might pay for a single year of in-state tuition if you’re lucky.

The point, however, is that the more time you give yourself to invest your money, the more growth you might enjoy. And that’s why I made a point to pump money into my son’s college fund at a time when we had many other pressing priorities.

It wasn’t easy to take that money and set it aside when it could’ve bought us paid help around the house or takeout meals when we were too exhausted to think about cooking. But we invested that money regardless, and because of that, we feel we’re in a good place as far as our college savings are concerned (even though we’re not nearly done saving yet).

A sacrifice worth making

My husband and I have welcomed two daughters into the fold since having our son, and as such, we still have a lot of work to do on the college savings front. But we’re doing our best to cover our kids’ higher education costs as much as possible. And investing money for college shortly after the birth of each of our children is one of the smartest decisions we feel we’ve made.

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