Medicare drug costs vary by state

A 78-year-old woman living in Michigan may pay $4,113 in annual out-of-pocket costs for prescription drugs covered under that state's least expensive Medicare drug plan. A woman of the same age in Ohio could enroll in the cheapest plan in that state and pay as much as $16,856 annually for the same drugs.

This difference in costs for plans under the Medicare Part D prescription drug benefit is the crux of a new study by the Center for Studying Health System Change.

HSC discovered differences of hundreds to thousands of dollars across every state and the District of Columbia for the most affordable Medicare Part D prescription drug benefit plans. The study, led by Matthew Davis, MD, a University of Michigan physician and HSC researcher, also found that drug costs for two beneficiaries in the same state can vary by as much as $10,000, depending on which plans they choose.

"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," Davis said.

The researchers looked at the costs of each Medicare drug plan, using the same four real patient examples to provide a basis for comparison. Davis said the results have implications for individuals' abilities to afford and keep taking their medicines and for policy regarding the drug benefit.

Income levels and costs of living in each state did not play a direct role in the drug cost differences, HSC noted. Some states with low costs of living and low average incomes were among those with the highest drug costs.

James Rohack, MD, director of the center for policy at Temple, Texas-based Scott & White Health Care System, said these differences highlight the power of negotiation that private plans have.

"If a private plan can guarantee a market share, they will get a better rebate from a pharmaceutical company," Rohack said. "Part of it depends on whether they pass that along to the consumer or not." When for-profit companies offer Medicare Part D plans and have the only plan in an area, they want to maximize their profit, he added.

Karen Ignani, president of America's Health Insurance Plans, maintains that the program is effective overall. "The Medicare prescription drug benefit continues to exceed expectations as seniors experience lower than expected premiums and lower out-of-pocket costs on their prescriptions," she said in a Jan. 9 press release.

HSC hopes members of Congress will consider the study as they look to reform the Medicare drug benefit. "No one doubts that the Part D benefit has helped many seniors by giving drug coverage to those who previously had none," Davis said. "But the level of variation among the lowest-cost plans is far greater than many seniors and policymakers probably anticipated."

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