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Updated 4:00 PM January 24, 2007




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Study: Senior Medicare drug costs vary widely among states

Recently, the U.S. House of Representatives approved a measure to require the Medicare system to negotiate lower prices for medicines taken by millions of seniors enrolled in Medicare Part D prescription drug plans. The Senate may soon vote on a similar proposal.

If approved, that change and others might save some seniors a lot of money, suggests a new study from the Medical School. It finds tremendous variation in what Medicare enrollees in different states pay for the same medications, even with the lowest-cost Part D plans in each state. The study also looks at the affordability of drug plans and finds that those who can afford the least often pay the most.

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.

Such wide variation in prices means that Medicare prescription drug plans are substantially more affordable in some states than in others, the study's 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 Dr. Matthew Davis, made the findings using Medicare's own Web-based calculator for prescription drug plan costs. He and Drs. Mitesh Patel and Lakshmi Halasyamani, also both of U-M, 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 co-pays 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, D.C, says the level of variation among the lowest-cost plans is far greater than many seniors and policy-makers probably anticipated.

The study is the first 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.

It found that 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 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. "It 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 says, as many seniors did before Dec. 31, 2006. He advises Medicare beneficiaries to use the online cost calculator or get other assistance as they choose their plans, because a familiar name may not lead to the lowest medicine costs.

One bright spot in the study came when the authors found that in all but three states, the lowest-cost plan for diabetes patients not taking insulin would still be the lowest-cost plan if those patients later needed insulin.

The researchers also assessed affordability of the lowest-cost Part D plans.

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.

"The people who can least afford to pay higher prices were the ones facing those higher prices," Davis says.

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