The American Journal of Managed Care March 2009
VHA Pharmacy Use in Veterans With Medicare Drug Coverage
Greater Medicare managed care benefit levels reduce both the likelihood and magnitude of Veterans Health Administration pharmacy use by Medicare dually enrolled veterans.
Objective: To determine how Medicare benefits affect veterans’ use of Veterans Health Administration (VHA) pharmacy services.
Study Design: Retrospective analysis of veterans dually enrolled in the Veterans Health Administration and Medicare healthcare systems.
Methods: We used VHA and Medicare administrative data for calendar year 2002 to examine the effect of Medicare HMO pharmacy benefit levels on VHA pharmacy use.
Results: In 2002, 64% of the VHA and Medicare dually enrolled veterans in our study sample received medications from the VHA. Use of VHA pharmacy services varied monotonically by the level of pharmacy benefits among Medicare HMO enrollees, with veterans enrolled in plans with both low and high pharmacy benefit levels significantly less likely to use VHA pharmacy services than veterans in plans with no pharmacy benefits (odds ratios = .83 and .53, respectively, versus plans with no benefits). Among VHA pharmacy users, enrollment in plans with high levels of benefits was associated with significantly lower annual pharmacy costs than enrollment in plans with no benefits or enrollment in traditional Medicare.
Conclusions: Our findings indicate that non-VHA pharmacy benefits affect both the likelihood and magnitude of VHA pharmacy use. This suggests that Medicare pharmacy coverage (Part D) may significantly reduce the demand for VHA pharmacy services, particularly in geographic regions previously underserved by Medicare managed care plans.
(Am J Manag Care. 2009;15(3):e1-e8)
To determine how Medicare benefits affect veterans’ use of Veterans Health Administration (VHA) pharmacy services, we did a retrospective analysis of veterans dually enrolled in the VHA and Medicare healthcare systems.
- In 2002, 64% of VHA and Medicare-enrolled veterans (5% of all Medicare enrollees) received some or all of their medications from the VHA.
- Medicare managed care plan pharmacy benefits appeared to reduce demand for VHA pharmacy services, with the effect on demand greatest in plans with the highest level of pharmacy benefits.
- Medicare pharmacy coverage through Part D may significantly reduce the demand for VHA pharmacy services, particularly in geographic regions previously underserved by Medicare managed care plans.
Copayments for prescriptions for veterans have historically been very low. Until 2002, the prescription copayment for veterans was $2 for each 30-day supply of medication; this copayment increased to $7 in February 2002 and to $8 in 2006.2 These low copayments have made the VHA an attractive source of pharmacy care for veterans.3 Research suggests that approximately 10% of VHA users come to the VHA primarily for pharmacy services,4 although the percentage of veterans who rely on the VHA as their primary pharmacy provider may be much higher.5
As an alternative source of care and pharmaceutical services, more than 50% of VHA users also are enrolled in Medicare, including more than 90% of those over the age of 65 years. In January 2006, Medicare implemented Medicare Part D as part of the Medicare Modernization Act (MMA). The MMA dramatically changed the health services environment in which the VHA has long operated. For the first time, Medicare is explicitly offering outpatient pharmacy coverage through Medicare prescription drug plans (PDPs), independent of the pharmacy benefits offered through Medicare managed care organizations, and has made PDPs (alone or in combination with managed care plans [MAPDPs]6) available across the United States.7
A recent survey of Medicare Part D enrollees indicated that, relative to Medicare beneficiaries who relied primarily on stand-alone PDPs or MA-PDPs, beneficiaries who relied on the VHA for pharmacy care reported lower out-of-pocket spending and were less likely to have delayed filling prescriptions due to cost.8 However, there is still little information to guide VHA policy makers on how Medicare pharmacy benefits might affect pharmacy expenditures within the VHA healthcare system, or on how Medicare plan benefits affect Medicare-enrolled veterans’ use of VHA pharmacy services. In the current study, we examined how Medicare HMO pharmacy benefit levels among veterans dually enrolled in the VHA and Medicare healthcare systems affected the likelihood and magnitude of VHA pharmacy use. Specifically, we addressed 2 questions:
1. Do greater Medicare health plan pharmacy benefits reduce the likelihood that veterans will use VHA pharmacy services?
2. Among veterans who do use VHA pharmacy services, do Medicare health plan pharmacy benefits reduce the magnitude of their use?
STUDY DATA AND METHODS
We used national VHA and Medicare administrative files from calendar year (CY) 2002 to examine how Medicare HMO enrollment status and pharmacy benefit coverage affected VHA pharmacy use. Our analyses focused on veterans who were enrolled in the VHA and in Medicare for at least 1 month during CY 2002. Each beneficiary’s Medicare enrollment and demographic information were obtained from the Medicare denominator file records and merged with the VHA Enrollment file to identify veterans who were dually enrolled in the VHA and Medicare healthcare systems.
Medicare HMO Plan Enrollment
Health maintenance organization plans vary substantially in the level of pharmacy benefits offered. Thus, for each managed care–enrolled veteran, we classified benefit levels associated with his or her HMO contract number. Contract numbers were obtained from the Centers for Medicare&Medicaid Services’ Medicare Enrollment Database. Because multiple HMO plans or benefit packages are allowed within a contract’s service area, we used the strategy described in the Commonwealth Fund report Medicare Choice 1999-2001: An Analysis of Managed Care Plan Withdrawals and Trends in Benefits and Premiums9 to assign a “basic” plan for each managed care contract active in a particular county. The benefits associated with the basic plan were assigned to each beneficiary enrolled in that county.
Also following the Commonwealth scoring algorithm,9 Medicare HMO–enrolled veterans were assigned to subgroups based on whether their HMO offered no additional pharmacy benefits, a “low” level of benefits, or a “high” level of benefits. Low-benefit plans were those that either offered only generic medications or had a cap of $750 or less on either generic or brand name medications. High-benefit plans were those with benefit caps of greater than $750 for both generic and brand name medications.
Veterans Health Administration pharmacy use data were obtained from the VHA Decision Support System, a national automated management information system that integrates data from clinical and financial systems for inpatient and outpatient care.10 The system creates an outpatient encounter for each day a patient fills a prescription, including all pharmacy costs for that day. For our analyses, encounters (costs) were aggregated within each person across the entire calendar year.
Access to Veterans Health Administration Medical Centers
The availability of Veterans Health Administration Medical Centers (VAMCs) was determined by recording the distance from the beneficiary’s zip code to the nearest VAMC or Community-Based Outpatient Clinic (CBOC). We also recorded VHA eligibility (priority code) from the VHA Enrollment file. We assigned a “home station” to all veterans to control for clustering and facility characteristics in our multivariate regressions. For VHA-Medicare dual enrollees who had any VHA pharmacy costs during the CY, the home station was where the majority of pharmacy services (according to cost) were obtained. Dual enrollees who did not use VHA pharmacy services were assigned to a home station based on proximity (ie, the closest VAMC). If their closest VHA facility was a CBOC, the VAMC associated with that CBOC was assigned as their home station.
In our multivariable models, we adjusted for patients’ health status using the Centers for Medicare&Medicaid Services Hierarchical Condition Category (HCC) risk-adjustment model for community-dwelling populations.11 The model adjusts for diagnoses, age, sex, Medicaid eligibility, and original entitlement of Medicare (disability, end-stage renal disease, or Old Age and Survivor’s Insurance). The risk score was created for each patient by using International classification of Diseases, Ninth Revision codes from the VHA administrative data files for CY 2002.
We assigned income level according to zip code, age (<65 years, >65 years), and race/ethnicity using the 5-digit zip Code Tabulation Area income data available in 2000 US Census Summary File 3. Veterans were classified as residing in metropolitan or nonmetropolitan counties using urban influence codes12 to group all 3141 counties in the United States according to the most recently revised federal definitions of metropolitan statistical areas (MSAs).13
The Medicare administrative files did not include an indicator for concurrent participation in the Medicaid program. However, we did classify veterans by whether they received state buy-in through Medicaid to offset their Medicare Part B premiums (Medicare state buy-in). This group included veterans who had their Part B premiums only paid or their Part B premiums and cost-sharing paid (eg, Specified Low-Income Medicare Beneficiaries [SLMBs] and Qualified Medicare Beneficiaries [QMBs], respectively), as well as veterans who received full Medicaid benefits in addition to being an SLMB or QMB enrollee.14
VHA Priority Levels
We grouped VHA enrollees into 3 sets of priority levels that broadly differentiated copayment levels and out-of-pocket maximums.15 These groupings are priority level 1, priority levels 2-6, and priority levels 7 and greater. Priority level 1 veterans generally had no copayments, while veterans with
priority levels of 7 or greater (7 ) paid the maximum VHA copayment of $7 ($2 prior to February 2002) for each of their VHA prescriptions.
We conducted all analyses using SAS version 9.1.2 (SAS Institute Inc, Cary, NC). We used a generalized-estimating-equations approach in our multivariable models of pharmacy use and costs to account for clustering of veterans within VAMCs. For our analysis of VHA pharmacy use, we performed a logistic regression using VHA pharmacy use versus no use as a binary outcome. For our analysis of total annual pharmacy cost, we used total cost as a continuous outcome measure. Because the distribution of pharmacy costs was asymmetric and highly skewed, we estimated a regression model assuming a gamma distribution for our outcome measure. This type of distribution has been shown to provide robust estimations in the presence of skewed data.16 Examination of the regression residuals indicated that our use of a gamma distribution was appropriate.
In CY 2002 there were 3.4 million dual VHA-Medicare enrollees. About half of all dual enrollees (52%) lived in areas with available Medicare managed care plans, with approximately 11% overall (22% of those living in HMO counties) actually enrolled in an HMO plan for all or part of CY 2002. Of the 388,633 veterans enrolled in HMO plans, 34% were in contracts whose basic plans did not offer pharmacy benefits, 51% had basic plans with low benefits, and 14% had basic plans with high benefits (Table 1).
Predictors of VHA Pharmacy Service Use
Approximately 64% of the 3.4 million Medicare-enrolled veterans (which accounted for 5% of all Medicare enrollees) received some or all of their medications from the VHA (Table 2). Nationally, the VHA pharmacy expenditures totaled $2.3 billion (or 68% of all VHA pharmacy costs) for providing pharmacy services to VHAMedicare dual users. Use of VHA pharmacy services varied monotonically by the level of pharmacy benefits among Medicare managed care enrollees (Table 2).
In our multivariable models, veterans enrolled in Medicare HMO plans with both low and high pharmacy benefit levels were significantly less likely to use VHA pharmacy services than veterans in HMO plans with no pharmacy benefits (Table 3; Figure 1).