Medicare Advantage OTC Benefits Underused Amid Plan Reductions and Inflation

Medicare Advantage plans offer over-the-counter (OTC) benefits that provide seniors with an average allowance of $400 annually to purchase health and wellness products. These OTC allowances cover a wide range of items beyond medicines, including toothpaste, sunscreen, personal care supplies, and incontinence products, helping seniors manage everyday health needs without out-of-pocket expenses. Despite their value, these benefits often go unused due to limited awareness, complex purchasing processes, and plan-specific restrictions, resulting in approximately $5 billion in unspent funds each year. As inflation drives up prices for consumer goods, OTC benefits have become increasingly important for seniors, many of whom live on fixed incomes. However, from 2024 to 2025, the availability of OTC benefits in Medicare Advantage plans declined from 85% to 73%, with projections indicating further reductions in 2026. This contraction underscores the importance for beneficiaries to utilize these allowances while they remain available. Barriers to OTC benefit utilization include confusing plan materials, multiple disbursement systems unique to each insurer, and the expiration of unused credits monthly or quarterly. Efforts to improve usage include reminders from health plans, third-party guides, and user-friendly OTC apps that assist seniors in navigating different programs. Pharmacies and caregivers also play a supportive role by helping seniors select eligible products and place orders. Beneficiaries can redeem OTC allowances at retail pharmacies, online stores, mail-order catalogs, and specialized OTC apps tied to their insurance plans. Due to varying carrier policies, seniors often face the challenge of adapting to new OTC systems annually during Medicare Open Enrollment periods. To maximize benefits, experts recommend tracking OTC balances regularly and purchasing non-perishable essentials before credits expire. Effectively using OTC benefits allows seniors to better manage health expenses without compromising funds for necessities like food and housing. In an inflationary context, leveraging these ancillary benefits contributes to both improved financial stability and health maintenance. Understanding plan details and actively using OTC allowances remain critical for seniors navigating Medicare Advantage coverage today.