A healthcare risk index is generated using a patient or individual's medical claims. The index may be used to explain and predict variation in pharmacy-related costs and variation in total healthcare costs or utilization. In particular, one example of such a method involves first generating a medical condition score using the individual's medical information for each medical condition possessed by the individual. From there, each medical condition score is modified according to a regression coefficient, to result in one or more modified medical condition scores. Finally, the risk index may be generated by summing the medical condition scores. This risk index is indicative of at least one of the individual's medical costs, chronic medical conditions, and variation in medical costs.