Retire Better: Seniors will pay more — a lot more — for medications in some states
Articles on where to retire usually focus on things like weather, housing costs and taxes. But these aren’t the only things that wannabe retirees should consider. Another is the cost of prescription drugs.
I’ve mentioned before that seniors will need a small fortune to pay for medical costs that Medicare won’t: $300,000 for a couple retiring at age 65 is the latest estimate of this from Fidelity Investments, the Boston-based asset management giant. A big reason for this, says a separate study, is meds.
Read: What’s the safest place for retirees to keep an emergency fund?
How big? Try over $7,500 per year. That’s how much the average Medicare recipient spends on prescription drugs annually, according to MedicareGuide.com, which conducted the study.
Aside from that eye-popping figure, what’s interesting here is that this number appears to vary considerably among the 50 states and Washington, D.C. for a variety of reasons, such as state laws, distribution costs, and even the price of real estate.
Five cheapest states
Put all these factors together and the cheapest states for prescription drugs is Maine, followed by Missouri, Kentucky, Vermont and New Hampshire. Of these, it’s notable that New Hampshire doesn’t tax wages, but it does tax interest and dividends, according to the Tax Foundation.
The data can be sliced up further. Of these five states, Vermont (#4 overall) is the best state for Medicare Part B drug costs. This is important because monthly premiums that you pay for Part B are deducted from your Social Security benefits. Meanwhile, Missouri (#2 overall) has the best average annual Part D drug deductible.
Five most expensive states
At the other end of the spectrum, Tennessee—known for not taxing wages—has the unfortunate distinction of being the most expensive state for per capita prescription drug costs, according to MedicareGuide’s findings. Next priciest are Utah, Alabama, Illinois and Nebraska.
The methodology behind the findings is pretty complicated, and based, says Scott Lake, a MedicareGuide pharmaceutical expert, on ZIP Codes and counties where living costs can vary widely.
“Plans are designed to appeal to different demographics,” he says. “They target healthy and sick groups with varying lists of covered drugs, premiums and copays.”
MedicareGuide provides one mind-blowing example of what these price disparities can look like. Take Lidocane 5%, a widely prescribed topical analgesic. MedicareGuide found that two different insurance payments for a single fill ranged from $31.43 to $1,524.72 – almost a 5,000% difference.
Long-term prices have soared
Different regulations, different premiums, different copays, on and on and on. There’s no doubt that complexities like this help to drive up prices for consumers. No wonder an earlier MedicareGuide survey said that nearly three-fifths of Medicare recipients over age 65 are worried about healthcare costs, while half fear that a health crisis could lead to bankruptcy or debt.
Such fears are more than justified. Between 2006 and 2020, notes AARP, “retail prices for widely used brand name prescription drugs increased substantially faster than general inflation in every year.” For 65 chronic-use brand name drugs that had been on the market over that entire period, the average price increase was a whopping 276.8%.
Not surprisingly, soaring drug prices is an issue that cuts across partisan lines. A June survey by the Kaiser Family Foundation found that nearly nine-in-ten Americans want Medicare rules changed so that the federal government and/or states can negotiate for lower drug prices.
Pharmaceutical companies say that lower prices could lead to less research and development for new drugs. Ominously, three House Democrats—Oregon’s Kurt Schrader, California’s Scott Peters and New York’s Kathleen Rice—recently voted against a measure to allow the federal officials to negotiate lower drug prices. This is important because Republicans only need to flip five House seats to regain House control.
And it’s not like drug prices are the only concern that seniors have. There’s a battle going on right now here in Washington over so-called “above-the-neck” costs like eyeglasses, hearing aids and dental work—things that Medicare doesn’t cover. President Biden has proposed covering them in his “human infrastructure” social spending bill, but it’s held up in Congress by lawmakers worried about costs.
In addition to Republican opposition, two Senate Democrats—West Virginia’s Joe Manchin and Arizona’s Kyrsten Sinema—“are opposed to all three” of these things, as Biden noted last week in a CNN town hall. They’re still negotiating—Manchin, Majority Leader Chuck Schumer and Biden had breakfast togetherrecently—but without support of all 50 Senate Democrats, and the tiebreaker vote of Vice President Kamala Harris, the president’s bill won’t get passed.
Governing is about making choices, and as of this writing, it looks like seniors who need glasses, hearing aids or dental work will have to get additional insurance to pay for these things themselves.