Medicare Part D: Where you live can have a big impact on what you pay for drugs
Planning to move for retirement?
You may want to factor in how much more you'll pay for prescription drugs under Medicare in different locations.
New data from the Medicare startup Chapter shows the cost of prescriptions can vary widely from one state to another and even from one ZIP code to another. For seniors with chronic medical conditions, a difference in geography could mean paying thousands of dollars more per year out-of-pocket for the same medicine.
There are currently dozens of websites, including free tools from the federal government, that allow seniors to see how geography influences what they will pay for drugs under Medicare Part D. Entering the mix is Chapter, a startup Medicare advising company with backing from Silicon Valley investor Peter Thiel.
Chapter used proprietary pricing data on all active Medicare plans in order to examine the difference in cost for insulin as an example of how big an impact geography can have on price.
The analysis found one person receiving the same treatment may spend between $1,113 and $10,689 on insulin in a four-month period as a result of inconsistencies in geographic access and coverage.
Chapter, which has raised $42 million through three rounds of funding according to Pitchbook, makes money from contracts with Medicare plan carriers like other brokers.
But CEO and co-founder Cobi Blumenfeld-Gantz said they let the data guide their advice and don't limit their plan recommendations to those who pay them.
"Every day we enroll people in plans from which Chapter earns no revenue," he said. "Our adviser compensation never varies based on the plan that is recommended, even if Chapter earns no revenue."
The company's analysis was done before the Inflation Reduction Act of 2022 was signed into law in August. The law caps insulin copays to $35 per month for Medicare Part D beneficiaries starting in 2023. The law also caps the cost of all prescription drugs at $2,000 per year for seniors who have Medicare Part D.
Yet, for now, every drug – not just insulin – has similar price disparities, especially if there is no generic option, Blumenfeld-Gantz said.
"In this data study specifically, we found that some people are overpaying by tens of thousands of dollars every year for their medications," he said.
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And there are many Medicare plans that don't cover every type of insulin, despite more than 3 million beneficiaries using the life-saving drug, according to the Centers for Medicare & Medicaid Services.
Chapter's analysis found that among the most common forms of insulin, roughly 70% of plans had some coverage of it, and roughly 30% of plans had no coverage.
A spokesperson for centers said Medicare prescription drug plans are required to cover at least two insulin products on their formularies – the lists that detail which drugs are covered.
$5,000 savings from switching plans
Figuring out which Medicare plans cover specific prescriptions and which will be the lowest cost is a daunting task for those enrolling for the first time, senior advocates said.
While the privately funded Chapter is new to the market, the federal government at Medicare.gov has the "Medicare Plan Finder."
The free tool allows Americans to enter specific medications, including the doses and ZIP code to find their costs on different plans, said Jane Sung, a senior strategic policy adviser at the AARP Public Policy Institute.
But seniors with many medications and medical needs can find doing all the research themselves, even with that tool, to be difficult and time-consuming, said Vicki Sexton of Galax, Virginia.
When she was retiring from her job as a guardianship case manager last year, she needed to get coverage for herself and her husband, who is disabled.
"Even if you've got a computer, you don't know where to start," she told USA TODAY.
She eventually worked with the Virginia Insurance Counseling & Assistance Program, part of the network of State Health Insurance Assistance Programs that offer free, independent help to seniors.
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Lisa Miller of Wilmette, Illinois, qualified for Medicare for the first time last year and she'd heard horror stories from friends about the complicated process to pick a plan.
She worked with an adviser from Chapter to crunch the numbers on all the options available in her ZIP code and found the one that let her keep her doctors and covered her existing prescriptions.
"For me that was important," she said. "I did not want to change my providers."
Miller's mother is 89 and had been on a Medicare plan that didn't include Part D prescription benefits.
After reexamining all available plans, she was able to switch and save $5,000 a year on her prescriptions, Miller said.
Which states are most expensive?
Chapter's analysis found the state with the most expensive average cost on Medicare plans that fully cover insulin is Alaska at $1,891 for a four-month supply. The least expensive was Kansas with an average cost on covered plans of $1,113.
The most expensive state if someone chooses a plan that doesn't cover insulin is Connecticut at $10,689, while the least expensive was California at $7,221.
When taking into account differences in median income across the country, Pennsylvania stood out as the state where insulin would cost the highest percentage of median household income with Wisconsin and New Mexico not far behind.
In some states, the percentage of plans that fully cover insulin is as low as 26%, according to Chapter's analysis.
Vermont has the most coverage with 63% of available Medicare plans covering insulin fully.
"Factors such as limited access, additional health needs, and plan misinformation can result in a beneficiary selecting a plan with suboptimal insulin coverage," Chapter's report said.
Every drug, not just insulin, will potentially have different prices in different regions and on different plans, which can change annually.
"They may continue to cover a drug but move it to a different tier with higher cost sharing," said Tricia Neuman, executive director of Kaiser Family Foundation's Program on Medicare Policy. "And if their drug is no longer covered? That's a surprise nobody wants to see when they go to fill the prescription."
The nonprofit focused on health issues plans to keep an eye on whether Medicare plans change which insulins they cover once the cost-sharing cap goes into effect next year.
What to look at when picking a plan
Because of the proliferation of private insurers offering Advantage and Part D plans, some people can have over 100 options of plan combinations to choose from.
"It is very dictated upon the ZIP code that you live in, the county that you live in," said Marisa O'Neill, CEO of RetireMed, a Medicare brokerage that sells plans in Ohio, Indiana, and Kentucky.
The plans available to someone in suburban Cincinnati in Ohio will be different than those available to people in the suburbs next door in Indiana, she said.
"Obviously, these are very personal decisions and we don't want to say, you know, everyone moving to X state is better off than everyone moving to Y state, partially because it's actually at the ZIP code level," said Blumenfeld-Gantz of Chapter.
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Chapter said its analysis rolled up the data to the state level so it was more consumable. But the ZIP code level data shows differences of hundreds of dollars for the same medication because each ZIP code has different Medicare Advantage and Part D plans offered.
Given that range of differences, Blumenfeld-Gantz said it's worth looking at the ZIP codes where you may want to move and find out how much your prescriptions would cost there.
"And it might be that you can save hundreds of thousands of dollars being in ZIP code one versus ZIP code two and maybe they're across the street from each other," he said.
Meanwhile, the Medicare website's plan compare feature is typically the first stop for most people. But there are a few places where that site doesn't show the real costs a person could incur.
For example, many Medicare Supplement plans have what are called “household discounts,” when spouses sign up for the same plan. That savings can be up to 20% on premiums but those savings aren't reflected when searching those plans on Medicare.gov.
Medicare.gov also does not allow people to directly search if their doctors and specialists such as a cardiologist are in-network or not.
A Centers for Medicare & Medicaid Services spokesperson said their tool provides a link to each plan’s provider directory.
But when USA TODAY tested this feature, the links for several plans went to those plans' main web pages and additional searching was necessary to find the provider lists.
And certain plan benefits can be presented in a misleading way on the government website.
For example, Medicare.gov presents all hearing aid benefits by listing the co-pay. But many plans use a different structure, charging zero co-pays but covering only a fixed dollar amount above which the beneficiary must pay.
So, a plan with a $0 co-pay may look better than one with a $699 co-pay. But the latter plan may actually be cheaper if you read the full explanation of benefits.
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"The benefits displayed are based on user testing and feedback, and CMS continually evaluates the display to determine what enhancements would most benefit users when shopping for coverage," a centers spokesperson said in an emailed response to questions about the site.
Medicare advisers say it's crucial for each person to decide what's most important to them, whether that's keeping their doctors, or getting the absolute lowest premium, or having access to specialty drugs, and finding the plan that's going to deliver that.
"There are a lot of additional benefits that are associated with these Medicare plans now, things like over-the-counter... some of them include grocery cards. Some of them include gym membership," O'Neill said.
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This article originally appeared on USA TODAY: Medicare Part D drug prices vary widely between states
