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Medicare Drug Program News
Where Senior Citizens Live Makes Difference in
Medicare Drug Cost
Some seniors may pay thousands of dollars more for
medicines than others buying same drugs in other states
January 10, 2007 – Adding more confusion to the
Medicare prescription drug program (Medicare Part D) is a new study that
claims to find tremendous variation in what Medicare enrollees in
different states pay for the same medications, even with the lowest-cost
Part D plans.
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Two people taking the same drugs but living in
different states could face costs that differed by thousands of dollars
– even if each had chosen the lowest-cost plan available to them. And
within a state, the difference in a person's costs for the same drugs
could top $10,000 a year or more, depending on which plan he or she
chose, says the study by the University of Michigan Medical School.
Such wide variation in prices means that Medicare
prescription drug plans are substantially more affordable in some states
than in others, the authors conclude.
In all, depending on which medicines they're taking
and which plan they're in, people in one state might spend 10 percent of
their annual income to pay for prescription drug coverage premiums and
co-pays, while someone taking the same medicines in another state would
spend 20 percent of their income, the study finds.
The difference in plan costs appears to have little
to do with the cost of living in different states, the researchers
found. In fact, some of the states with the lowest
cost-of-living-adjusted average incomes had some of the highest drug
plan costs.
The researchers, led by U-M physician and health
care policy researcher Matthew Davis, M.D., M.A.P.P., made the findings
using Medicare's own Web-based calculator for prescription drug plan
costs. They analyzed every plan in every state for four real patients
who had typical ailments and medication regimens, and looked at what the
plans would cost, considering plan premiums, coinsurance, and copays
each time a prescription was filled.
The results, published in the January Journal of
General Internal Medicine, may help inform the Congressional effort to
reform the Medicare drug benefit, including bulk purchasing. Currently,
individual Part D plans offered by commercial insurers acquire their own
drug supplies at the prices they are able to negotiate with
pharmaceutical manufacturers and distributors, and set their own drug
lists, premiums and co-pays.
"The expected costs of even the least-expensive
plans in each state varied by hundreds and sometimes thousands of
dollars," says Davis, an associate professor of general internal
medicine and pediatrics at the U-M Medical School, and associate
professor of public policy at the Gerald R. Ford School of Public
Policy.
"This has implications for individuals' ability to
afford and keep taking their medicines, and for policy as the
prescription drug benefit is evaluated and changes are considered."
Davis, who is also a senior health researcher at
the Center for Studying Health System Change in Washington, DC, adds,
"No one doubts that the Part D benefit has helped many seniors by giving
drug coverage to those who previously had none, but the level of
variation among the lowest-cost plans is far greater than many seniors
and policymakers probably anticipated."
Davis and his co-authors funded the study
themselves, and have no financial interest in it or its outcomes. It's
the first study to look at variation in Part D costs across all 50
states and the District of Columbia, and is the first to use actual
patient scenarios to examine prices across states for the same drugs.
The four patients whose potential drug costs were
analyzed were: a 66-year-old man with high blood pressure, high
cholesterol, depression, and diabetes, both with and without insulin; a
72-year-old woman heart attack survivor taking medications for heart
failure and to prevent another heart attack; and a 78-year-old woman
needing drugs for osteoporosis, high blood pressure and chronic pain
from arthritis and a spine fracture caused by her osteoporosis. Their
drug costs were calculated based on the least expensive combination of
generic and brand-name medications.
For example, the 78-year-old woman might pay $4,113
out of her own pocket each year for her four medicines if she chose the
lowest-cost plan available in Michigan, while the same drugs would cost
her $16,856 if she lived just over the border in Ohio and had chosen the
lowest-cost plan there. On average across the United States, her plan
costs would be $8,146.
The same patient would also pay a lot more out of
her pocket depending on which plan she chose within Michigan or Ohio, or
any other state, Davis notes. In Michigan, the highest-cost plan would
cost her $13,806 more per year than the least expensive plan, while in
Ohio the difference between lowest-cost and highest-cost plans would
only be $1,079. The average difference between highest- and lowest-cost
plans within one state for this patient was $10,382.
The variations in costs were smaller for the other
three patients analyzed, but still sizable, with a $1,500 average
in-state difference between highest- and lowest-cost plans for the
non-insulin dependent diabetes patient (which went up to $1,700 average
difference for an insulin-dependent patient), and a $1,900 average
in-state difference for the heart-attack survivor.
"This shows just how high the stakes can be when a
senior is deciding which plan to choose, or deciding whether or not to
switch plans," as many seniors did before Dec. 31, 2006, says Davis. "It
is extremely important that Medicare beneficiaries use the online cost
calculator or get other assistance as they choose their plans," he adds,
"because choosing a plan based on a familiar name may not lead to the
lowest costs for a person's medicines."
One bright spot in the study came when the authors
examined a scenario under which a diabetic patient who did not need
insulin to control his blood sugar levels at the start of the year
suddenly needed insulin added to his drug regimen.
Because Part D participants can only switch plans
at the end of the calendar year, an unanticipated addition to their
medications can result in unexpectedly high out-of-pocket costs. But the
study found that in all but three states, the lowest-cost plan for
patients not taking insulin was also the lowest-cost plan for patients
who later needed insulin.
The researchers also assessed affordability of the
lowest-cost Part D plans for the four patients if they lived in each of
the 50 states and the District of Columbia, based on average income for
households with no wage earners (such as retirees) adjusted for the cost
of living in each state.
In two of the four cases, they found that the
expected costs of prescription drugs were comparatively higher in the
states with comparatively lower average incomes.
For example, the heart attack survivor would on
average pay 8 percent of her cost-of-living-adjusted median income for
her prescription drugs across the country. In Florida, where the
adjusted median income is higher than the national average, this
Medicare patient would pay $2,348 (about 7 percent of annual income) for
the lowest-cost plan. Across the border in Georgia, where the adjusted
median income is lower than the national average, the lowest-cost plan
for the same medicines would cost about $140 more per year – meaning
that the patient would end up paying about 12 percent of annual income
for those medicines.
"The people who can least afford to pay higher
prices were the ones facing those higher prices," Davis comments.
Editor's Notes:
In addition to Davis, the paper's authors are
Mitesh Patel, and Lakshmi Halasyamani, M.D., both of U-M. Reference:
Journal of General Internal Medicine, January 2007, Vol. 22, issue 1,
online at
http://www.springerlink.com/content/7177637783wu21wj/.
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