Variation in Estimated Medicare Prescription Drug Plan Costs and Affordability for Beneficiaries Living in Different States

BACKGROUND: Medicare Part D prescription drug plans (PDPs) implemented in January 2006 are designed to improve beneficiaries’ access to pharmaceuticals and use market competition to yield affordable drug costs. Variations in estimated PDP costs for beneficiaries living in different states have not previously been characterized. OBJECTIVE: To describe variations in the estimated costs of PDPs (plan premium, copays, and coinsurance) within and across states. DESIGN: To estimate PDP costs based on 4 actual patient cases that exemplify common conditions and prescription drug combinations for Medicare beneficiaries, we used the online tool provided by the Centers for Medicare and Medicaid Services. MEASUREMENTS: Principal study outcomes included (a) variation across states in the estimated annual cost of the lowest-cost PDP for each case and (b) variation in the estimated affordability of the lowest-cost PDPs across states, based on cost-of-living-adjusted median income for zero-earner households. RESULTS: For all 4 patient cases, we found substantive within-state and between-state differences in the estimated costs of Medicare PDPs incurred by beneficiaries. The estimated annual costs to beneficiaries of the lowest-cost PDPs varied across states by as much as $320 for medications in the least expensive scenario, and by as much as $13,000 for the most expensive scenario. On average across states, a beneficiary with cost-of-living-adjusted median income would expect to spend 3%–28% of annual income to pay for medications in the lowest-cost PDPs in the 4 patient cases. The affordability of the lowest-cost plans varied across states, and for 2 of the 4 cases the lowest-cost PDP estimates were negatively correlated with cost-of-living-adjusted median income. CONCLUSIONS: Substantive differences in estimated PDP costs are evident across states for patients with common Medicare conditions. Importantly, the lowest-cost plans were not proportionally affordable with respect to state-specific cost-of-living-adjusted median income. Refinement of the Medicare drug program may be needed to improve national balance in PDP affordability for beneficiaries living in different states. ELECTRONIC SUPPLEMENTARY MATERIAL: Supplementary material is available for this article at http://dx.doi.org/10.1007/s11606-006-0018-y and is accessible for authorized users.