Medicare Prescription Drug Plan Costs and Affordability—2007

Abstract

To the Editor:— In February 2007, we published estimated annual costs of Medicare Part D prescription drug plans (PDPs) that were implemented in January 2006.1 We found substantial variation in such costs across states and within states for identical combinations of medications. We sought to compare the patterns we found in 2006 PDPs—the first year of Medicare Part D—with PDPs newly available for 2007. Methods: As in our previous work,1 we compared the estimated annual costs for 4 prototypical patients with combinations of chronic conditions, using the Medicare Part D 2007 drug plan online calculator provided by the Centers for Medicare and Medicaid Services (available at: http://www.medicare.gov/). We also generated estimates of affordability with the most recent state data regarding median income for zero-earner households.2 Results: For all 4 patient cases, the mean estimated annual cost of the lowest-cost PDPs across the nation was lower in 2007 than in 2006 (Case 1—$676 vs $852; Case 2—$1,615 vs $1,878; Case 3—$1,725 vs $2,326; Case 4—$2,218 vs $8,146). In 2007, the estimated annual costs of lowest-cost PDPs varied across states by a maximum of $195 for Case 2 and a minimum of $49 for Case 3; all ranges of variation across states were narrower than in 2006. Importantly, the health plans that were the dominant low-cost options in 2006 were no longer the dominant plans in 2007 for any of the cases. When taking cost-of-living adjusted median income into account, the mean affordability for lowest-cost PDPs was 2.3% of annual income for Case 1, 5.5% for Case 2, 5.9% for Case 3, and 7.6% for Case 4. Although the mean lowest-cost PDPs were all more affordable in 2007 than in 2006, affordability across states for each case varied at least twofold (Table 1). Table 1 Affordability of Lowest-Cost Medicare PDPs in Each State, for Each Patient Case Within states, the mean difference between the lowest-cost PDP and highest-cost PDP for the same medications (i.e., fiscal risk of plan selection for beneficiaries) was $2,457 for Case 1, $2,769 for Case 2, $4,525 for Case 3, and $1,781 for Case 4. Conclusion: In 2007, the lowest-cost Medicare PDPs for 4 prototypical patients are less expensive and more affordable than in 2006. Affordability of lowest-cost PDPs living continues to vary, twofold or more for beneficiaries living in different states. Moreover, differences of thousands of dollars between the lowest-cost and highest-cost PDPs within a given state, and the changing dominance of specific plans as the lowest-cost options, continue to underscore how critical it is for Medicare beneficiaries to reconsider the choice of their PDP for each plan year.