Why Using Current Medications to Select a Medicare Part D Plan May Lead to Higher Out-of-Pocket Payments

Abstract

While medications are one of the most stable categories of health care expenses, the actual composition of drug products used may be highly variable over time. Medicare beneficiaries selecting among Part D prescription drug plans (PDPs) are often advised to base plan selection on current medication lists. However, this approach may lead to higher out-of-pocket payments relative to payments under other plans if drug switches are common. This article uses a sample of Medicare beneficiaries from the 2003 Medical Expenditure Panel Survey to estimate how changes in actual drug use during a 1-year period affect estimated annual costs, given the initial choice of the lowest-cost PDP. While 57% of the sample had no difference in expenditure for plans selected based on initial versus end-of-the-year drug lists, 43% experienced average increases of $556 in annualized expenses due to drug switches. Implementable suggestions for improving the selection of Part D plans are provided.