The New Math
By: Patricia Barry; Source: AARP Bulletin Date Posted: 2006-01-06 10:22:00-05:00
People who have been buying low-cost prescription drugs from Canada could be in for a big surprise. Many who choose the least expensive Medicare drug plan in their area that covers all their drugs could pay less this year than getting those same drugs from Canada, according to an AARP Bulletin investigation.
That calculation takes into account all their out-of-pocket costs under a Medicare plan through 2006, including premiums, deductibles and payments for drugs.
How is this possible? Everybody knows that Canadian drug prices are usually far lower than American ones. That remains true. But Medicare drug coverage is insurance, so enrollees are charged copayments instead of full price, except in the coverage gap, also known as the "doughnut hole." And the private plans that provide it have been scrambling to win over customers with good deals for 2006. Many have eliminated deductibles and some offer full coverage in the gap. The unexpected results of the Bulletin analysis do not apply to everybody, but are widespread enough to underscore the importance of carefully doing the math—especially looking at the copays—when choosing among Medicare plans or comparing them with the cost of drugs from Canada.
All the people for whom we ran the numbers in December, before Medicare drug coverage took effect on Jan. 1, and who currently buy drugs from Canada, said they would probably sign up with a Medicare plan before the May 15 deadline, mostly for insurance protection against high costs in future.
At the same time, all were skeptical about the information they were receiving from Medicare and the drug plan sponsors. Fluctuating prices, errors and contradictory details given in the early weeks of the sign-up period increased their distrust of a program they already found confusing.
Running the numbers
Some comparisons of Canadian drug prices and Medicare plan costs can be misleading. PharmacyChecker.com, an independent website that rates online pharmacies and lists their prices, has calculated that "drug costs would have to exceed $8,000 [a year] for an individual to save more with the standard Medicare drug plan" than buying drugs from Canada.
But that math—as well as instant calculators displayed on some Canadian pharmacy websites—relies on the basic Medicare drug benefit that Congress designed in 2003. It ignores the much better deals that many Medicare drug plans are actually offering for 2006.
The first part of the Bulletin's analysis was based on real combinations of drugs taken by beneficiaries living in different parts of the country. In each case, we used the drug plan finder at www.medicare.gov to find the least expensive Medicare "stand-alone" plan that covered all the drugs used by that person. We then compared the plan's total costs for 2006 with what he or she now spends on those drugs from Canada. For an apples-to-apples comparison, we used the plans' 90-day mail-order options (usually cheaper than buying from a local pharmacy) because that's how these consumers routinely get their drugs from Canada.
[Note: People with lower incomes who are eligible for the Extra Help part of Medicare drug coverage were excluded from this analysis. So were Medicare Advantage plans that combine drug coverage and medical services in managed-care packages.]
Nearly all our interviewees would be better off financially, by varying amounts, under a Medicare plan—with those using the most drugs potentially reaping the greatest savings over the year.
|
* All annual costs based on 90-day supplies
Source: AARP Bulletin analysis, December 2005
Donna of Anaheim, California, for example, would pay $2,323.68 overall under the least costly Medicare plan in her area for coverage of her six drugs (five brands and one generic) in the year—nearly $1,400 less than the $3,718 charged by a low-cost Canadian pharmacy. (To put this in perspective, she would pay $5,475 for the same drugs from the American mail order pharmacy DrugStore.com, which has some of the lowest U.S. prices.)
This particular plan charges relatively high monthly premiums of $50.91 but has no deductible and gives continuous coverage for all her drugs through the gap. Her copays for each would range from $17.50 to $150 for each 90-day prescription.
Such a plan is not exceptional. Every state except Alaska, Hawaii, Maine and New Hampshire has at least one plan that covers brand-name and generic drugs in the gap, for premiums ranging from $38 to $104 according to state. All states have at least five plans covering only generics in the gap.
So how would Morgan do on a plan that didn't fill in the gap? In California, such a plan, with premiums of $5.41 a month and a $250 deductible, would be her second best option. Overall, this one would cost her much more than the full-coverage plan—$3,365 for the year, but still $353 less than the Canadian cost.
For Joyce, a retired nurse in Charlotte, North Carolina, the reverse is true. She uses only one drug, Premarin, that she buys from Canada for $134 a year. Under the least costly Medicare plan in her area, she'd pay 90-day copays of $21.03 for the same drug, but monthly premiums of $13.27 and an annual deductible of $250 would bring her total expense to $433.36 for the year, more than three times the Canadian cost.
So if people use only one drug, would Canada then prove less expensive? Not necessarily. The second part of the Bulletin analysis looked at what it would cost overall to buy—individually—six commonly used brand-name drugs under the least expensive Medicare plans in each of 21 states. We compared these costs (including premiums, deductibles and copays) with prices at GlobalDrugsDirect.com, which often charges the least among Canadian pharmacies listed by PharmacyChecker.com, and on its own website claims a "100% lowest price guarantee."
Of the six drugs, only one—Toprol-XL, for high blood pressure—had a Canadian price consistently lower than the overall costs of any Medicare plan. The Canadian price for Prevacid (heartburn) was lower than the least expensive Medicare plan costs in 13 states. But such plan costs were lower than the Canadian price in 15 states for Lipitor (cholesterol), 18 states for Fosamax (osteoporosis) and in all 21 states for Zoloft (depression) and Plavix (heart).
So, for example, a person using only Toprol-XL would pay $277.87 in 2006 in total costs under the least expensive Medicare plan in Nebraska—whereas just buying that drug from this Canadian pharmacy would cost $208 over the year. But a person in the same state using only Lipitor would pay $358.92 in total costs under a plan, compared with $516 from the Canadian pharmacy.
Plan details—how reliable?
The Bulletin analysis relies on the plan finder tool on the Medicare website. Plug in zip code, drug names (plus dosages and quantities) and almost instantly you see what your annual costs would be under each plan. Customer service agents at the Medicare hotline, (800) 633-4227, use it to extract the same information for beneficiaries who call them. And so does everyone helping a relative, friend or client to choose a plan.
But how dependable is this tool that everybody relies on? In the early weeks of enrollment, there have been numerous complaints about dollar amounts that don't add up; listed prices that change from week to week (as allowed by law); and Medicare website data conflicting with information given by the plans on their own websites, in their marketing materials or by sales reps.
Medicare officials say the tool is becoming more accurate and easier to use as the system is refined. But concern about how well it works may be deterring people from signing up right away.
Syd Gregory, a retired engineer in Pinehurst, North Carolina, has delved deeply in researching Medicare drug plans. He was surprised to find some costing less than he now pays at his Canadian pharmacy—but then became skeptical when some plans refused to confirm their charges in writing.
"If the [plan] numbers are correct, I'd go for it," he says. "But I don't feel comfortable yet that I'm getting the right information."
Medicare or Canada?
About 80 percent of Canadian mail-order pharmacies' customers are Americans 65 and older, according to Dave MacKay, an expert on the cross-border trade who is a paid consultant to many of those companies. It would be a blow to the $1 billion-a-year industry, he acknowledges, if those customers all find better deals in Medicare drug plans.
But the pharmacies aren't expecting that to happen. "They believe there's a better deal in Canada," MacKay says. And even if the pharmacies are wrong and the math turns out mostly to favor Medicare, MacKay predicts that "mass confusion" among older Americans having to choose between so many plans will still put Medicare at a disadvantage with Canada. "Simplicity," he says, "is always on our side."
The dilemma of some customers is encapsulated by the decision made by John of Muskogee, Oklahoma. He says he intends to join the lowest cost, $10-a month Medicare drug plan in his area mainly to avoid the penalty that would be imposed, in the form of higher premiums, if he signs up after the May 15 deadline. But he says he'll still buy all his drugs from Canada instead of using the plan—even though in 2006 the plan would cost him $300 less—because he doesn't trust health insurance companies and likes the straightforward process of ordering drugs from Canada.
"I'd be perfectly happy to continue to buy them in Canada [without joining a plan]," he says, "if I knew that I wouldn't be penalized when I'm 80 years old and having a humungous drug bill every month."
MacKay says that some Canadian pharmacies are helping customers figure out their Medicare options—even, on occasion, delving into the plan finder on the Medicare website on their behalf.
"We do try to give objective advice," he says. "If Medicare offers a better deal, we say great, go sign up, but if a drug isn't covered on the plan's formulary or you need cheaper drugs in the coverage gap, call us."
This is a concept the Canadian online pharmacies are now promoting, he adds: "Not Medicare or Canada, but Medicare and Canada."
According to the Bulletin analysis, going to Canada for drugs not paid for under a Medicare plan could save people money. But it's a tricky calculation. Spending on drugs from Canada does not count toward the $3,600 out-of-pocket spending limit that ultimately triggers very low-cost catastrophic coverage.
There are other drawbacks in buying from Canada, even from safe and reputable pharmacies. It's still illegal under American law. Deliveries are occasionally intercepted by U.S. authorities. And there's no guarantee that supplies won't dry up, as drug manufacturers step up pressure to cut off the cross-border trade.
Over the past five years more than a million older Americans a year have routinely ignored such issues in the quest for affordable drug prices via Canada. The question now is whether Medicare drug plans will satisfy that need at home.
Additional Related Links
Savings Are in the Details (December 2005)
A Better Bargain (November 2005)
Medicare Special Report: The Basics (November 2005)
Battle Lines Drawn on Rx Imports (July 2004)
Six Ways to Keep Rx Costs in Check (February 2004)
AARP Backs Prescription Drug Import Legislation (AARP.org)
The New Medicare Prescription Drug Plan (AARP Prime Time Radio)
preview