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Study Finds Medicare Drug Plan Costs Vary By State, Even Under Lowest-Cost Plans

By Matthew Sedlar, CQ HealthBeat Deputy Editor

January 19, 2007 -- Prescription drug plan costs can vary by thousands of dollars for seniors in different states, even under the lowest-cost Medicare drug plan available, according to a study published in the January issue of the Journal of General Internal Medicine.

Critics, however, said the findings were based on old data and that widely acknowledged problems reflected in that data have been fixed since the drug benefit's implementation.

Using December 2005 data from Medicare's Web-based calculator, researchers at the University of Michigan (UM) researchers looked at drug costs for four patients based on actual cases and found the results varied widely.

For example, under the lowest-cost plan available in Michigan, a 78-year-old woman in need of drugs for osteoporosis, high blood pressure, and chronic pain from arthritis and a spine fracture caused by osteoporosis would pay $4,113 for coverage under the lowest-cost plan, while in Ohio that same coverage would cost her $16,856. If that same woman picked the highest-cost plan in Michigan, it would cost $13,806 more per year, while the highest-cost plan in Ohio would only cost $1,079 more.

The study also found that depending on the type of prescriptions and the prescription drug plan, or PDP, seniors in some states might spend 10 percent of their cost-of-living-adjusted median income on premiums and copays, while seniors in another state fitting the same description might spend 20 percent.

"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," Matthew Davis, a UM physician and author of the study, said in a statement. "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."

Centers for Medicare and Medicaid Services (CMS) spokesman Jeff Nelligan said Thursday that "there can be [cost] variances in different states, given the different structures of distribution," such as pharmacies, "and different costs per state for drug manufacturers, pharmacies and insurers to work within." Nelligan added that geography, such as whether seniors live in urban or rural areas and the cost of living in those locations, could also explain cost variances.

According to the study, the availability of PDPs is specific to 34 CMS regions, which mostly cover individual states but in some cases, such as North Dakota and South Dakota, group states together. The study recommends further refinement of the Medicare drug benefit to "ensure nationwide balance in PDP affordability."

Nelligan on Friday said that CMS is continuing to review the study.

"The information that the researchers relied on is questionable in terms of accuracy and does not represent current findings," Mohit Ghose, vice president of communications for America's Health Insurance Plans, said in an e-mail Friday. In December 2005, "CMS was working with Part D sponsors to ensure that calculations produced by the tool were consistently reliable. The data used by the researchers reflects data problems that have since been addressed," Ghose added.

For example, Ghose said that for the case of the 78-year-old woman, the difference in annual premiums among PDPs offering the lowest-cost plans varied by less than $400 by state in 2006.

The patient cases used as an example in the study consisted of the 78-year-old woman; a 66-year-old man diagnosed with high blood pressure, high cholesterol, depression, and diabetes, with and without a prescription for insulin; and a 72-year-old woman taking medications for heart failure and to prevent a second heart attack. According to the study, costs were calculated based on the least expensive combination of generic and brand-name drugs available.

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