Drug Coverage, Adherence, and Costs
I’m not yet sure if filling the Medicare Part D donut hole as the Affordable Care Act does by 2020 is a good use of taxpayer money. It will require a careful welfare analysis for me to form an opinion.
But it is clear that more complete drug coverage is of value to beneficiaries. It may even be good for their health. That’s the conclusion one reaches from the literature on cost-related adherence to drug regimens. The conceptual model is that lower drug costs lead to better adherence which, in turn, leads to better control of health conditions that might otherwise contribute to health complications and/or hospitalizations and the commensurate costs.
Two recent papers add to the growing body of work that supports one or another link in this causal chain. In a January 2010 article in the American Journal of Managed Care, Matt Maciejewski and colleagues studied the $2 to $5 Veterans Affairs (VA) copayment increase that went into effect in 2002. Their focus was on populations of VA patients with diabetes or hypertension, two conditions for which lack of adherence to medications can have severe consequences on mortality and morbidity.
The authors conclude that the copayment increase “adversely impacted medication adherence for veterans subject to copayments taking oral hypoglycemic agents, antihypertensive medications, or statins.” Depending on the condition and medication, long-term decline in adherence rates varied between 1.9% and 10.3% from the pre-copayment increase period. That is, even this modest copayment proved important for medication adherence in the population studied.
In a December 2009 Health Services Research article Vicki Fung and colleagues examined the effect of donut hole (or “gap”) coverage on drug costs and adherence among Medicare beneficiaries with diabetes. The authors found that donut hole coverage
resulted in lower total drug costs, but higher out-of-pocket spending and worse adherence compared with having no gap. Having generic-only coverage during the gap appeared to confer limited benefits compared with having no gap coverage.
Specifically, drug spending was 3 and 4 percent lower among beneficiaries without gap coverage and generic-only gap coverage, respectively, relative to beneficiaries with full gap coverage. Out-of-pocket spending was 189% higher for beneficiaries without gap coverage. Also, adherence levels were 4-8 percentage points lower for beneficiaries without gap coverage for diabetes, hypertension, and hyperlipidemia drugs.
None of these results are in any way surprising. Beneficiaries will use more of something when someone else is paying more of the bill. That may be good for the beneficiaries, but it is it good value for the “someone else,” which is to say, the taxpayer? That’s a tougher question.
“Controlling Prescription Drug Costs,” Frakt, Pizer, Hendricks (2008)
This post summarizes a 2008 article I coauthored with Steve Pizer and Ann Hendricks titled “Controlling Prescription Drug Costs: Regulation and the Role of Interest Groups in Medicare and the Veterans Health Administration” (Journal of Health Policy, Politics and Law 33(6), December).
Federal statute authorizes private plans offering a drug benefit under Medicare to negotiate with drug manufacturers for volume discounts, and it prohibits Medicare as a whole from doing so. While the prohibition on direct negotiation by Medicare has received considerable attention there is another important limitation imposed by law on the administration of the Medicare drug benefit: a minimum number of drugs in each class must be included on formularies (some classes must be open to “all or substantially all” drugs on the market).
Some have pointed out, correctly in my view, that providing Medicare the authority to negotiate directly with manufacturers would not lead to price reductions on its own. To achieve savings Medicare would also need the ability to exclude drugs from its formulary. This ability to tighten the formulary would provide the leverage to negotiate bargains.
Medicare’s inability to negotiate prices and to freely restrict drugs from its formulary is in stark contrast to another large public provider of prescription drug benefits, the Veterans Health Administration (VA), which negotiates directly with drug manufacturers and obtains very low prices.
This raises two interesting questions. First, why is Congress comfortable with the VA prescription drug benefit but not willing to authorize something similar under Medicare? Second, given the limitations on Medicare, is there a lower-resistance path to getting VA-like drug prices for more Medicare beneficiaries? Both questions are addressed in our “Controlling Prescription Drug Costs” paper, and the answer to the first question suggests one to the second.
The paper explains the differences between the two drug benefit designs by observing that Congress acts as an agent for multiple interest groups. We conclude that important limitations on the Medicare drug benefit probably arose from the advocacy of drug manufacturers and retail pharmacies, among others. Relative to Medicare policy, these interest groups are less involved in VA policy.
This suggests a practical approach to reducing the cost of providing a prescription drug benefit. A drug program that is more directly under the VA’s purview but that builds on the financing structure of the new drug-only Medicare plans may not immediately arouse the kind of effective interest group opposition that typically restricts the options of Congress with respect to Medicare. Moreover, a drug program of this kind is likely to receive the combined support of Medicare and VA beneficiary advocacy groups, which increases the political cost to opposition relative to policy proposals that receive the support of only one or the other of these groups. We develop this idea in more detail and show that a combination of VA and Medicare could achieve improved access and lower costs for some Medicare-enrolled veterans.
In particular, a VA-Medicare prescription drug plan (PDP) could be made available to certain Medicare-enrolled veterans. Such a plan has the potential to provide a rich drug benefit to a large number of beneficiaries. Of the 43 million Medicare beneficiaries, about 10 million are also veterans. While about 3 million Medicare-eligible veterans already receive drug and nondrug benefits from the VA, the rest do not. A VA-Medicare PDP would be another prescription drug coverage option for these beneficiaries, one that likely would be more comprehensive and less costly than any other available to them.
The VA-Medicare PDP discussed in the article would offer advantages to both programs and beneficiaries. Much as Medicare currently subsidizes private drug plans (whether employer offered or individually purchased), Medicare could subsidize the VA-Medicare PDP on a per-beneficiary basis. These funds would permit the VA to broaden the numbers and types of veterans it serves. Since the VA receives steeper discounts for prescription drugs than Medicare drug plans do, the per-beneficiary subsidy could be set lower than for private plans, producing savings to Medicare.
A VA-Medicare PDP would not be implemented without challenges, which are acknowledged and explored in the article. Of course, above all, it is political considerations that make prospects for this kind of integration uncertain.
Electronic Health Records and Multi-Provider Use: Lessons from the VA
This post originally appeared on The Health Care Blog on 17 August 2009.
With billions of dollars of stimulus funds available and the President and state governors promoting them, electronic health records (EHRs) are likely to become commonplace in the U.S. health care system. To be sure the transition will be complex and costly, but incentives provided by insurers and the federal government for quality improvement tied to EHR use will encourage providers to enter the brave new electronic world and bring their patients with them. While EHRs are praised for their promise to increase efficiency and safety, it is still an open question how much of those benefits will be realized or when.
There is one clear threat to the fruition of EHRs’ potential for quality improvement: the inability of various EHR systems to share information with one another. This potential limitation is highlighted prominently in a new Congressional Budget Office (CBO) report Quality Initiatives Undertaken by the Veterans Health Administration (August 2009), principally authored by Allison Percy of CBO’s National Security Division.
The Veterans Health Administration (VHA) is the largest U.S. integrated health care system. With over 200,000 full-time-equivalent employees, each year it treats 5.1 million of its 8 million enrollees at 153 medical centers, 931 ambulatory care and outpatient clinics, 232 readjustment counseling and outreach centers, 134 nursing homes, and with 50 residential rehabilitation treatment programs and 108 comprehensive home-based care programs.
Facilitating its care of veterans, the VHA uses health IT infrastructure known as VistA (Veterans Health Information System and Technology Architecture). This open source EHR architecture was developed in a collaborative effort involving clinicians and programmers. The CBO report documents the now well-known quality improvement in VHA care since the 1990s and the key role in that improvement played by VistA, which permits the tracking of nationally recognized and internally developed quality indicators.
However, the CBO report also highlights VistA’s blind spot, one that may also plague EHRs to be developed for other facilities and health systems. VistA cannot exchange data between the VHA and private providers due to incompatible protocols and lack of data-sharing agreements. The implication is that care cannot be easily coordinated across providers and quality measures cannot be based on a complete set of information relevant to patient care: only care known to the VHA can be incorporated into VA physicians’ medical decisions and VHA’s quality measures.
This lack of inter-provider electronic communication is relevant to VHA care because the vast majority (80%) of VHA enrollees have access to care from other sources. Multi-system use is a well-studied phenomenon among VHA enrollees and recent findings pertaining to its extent and effects on outcomes are documented in the CBO report. A similar phenomenon, multi-provider use, will be relevant to care of non-veterans in non-VHA settings since many individuals receive care from different providers that operate within different systems. Even if each individual provider’s EHR system is well implemented, the potential inability of them to communicate with one another threatens the realization of EHR benefits and the accurate measurement and tracking of quality indicators.
Will the collective system of EHRs likely to be implemented in the U.S. be a nirvana of seamless electronic integration or a Tower of Babel? Likely it will start closer to the latter and, one hopes, gradually move toward the former. But it will only evolve toward integration if incentives to do so are established.
Fortunately this problem is anticipated and one the VHA has already started to address. The VHA has initiated efforts to coordinate the exchange of electronic health records with the Department of Defense (DoD), though more work remains. Less progress has been made integrating VHA data with those from non-DoD systems. However, the VHA has participated in the development of the National Health Information Network (NHIN) and expects to be exchanging data with Kaiser Permanente this fall using NHIN open source software called CONNECT.
EHRs have great potential to monitor and increase quality and to solve some of the coordination problems that occur across provider boundaries. But the extent to which they can facilitate improvements in quality and coordination will be limited by the degree to which data can be exchanged between the various EHR systems likely to be implemented. So long as EHR information remains within provider silos they will not fulfill proponents’ claims of overcoming the fragmentation of our current system and the problems to which it leads.
The CBO report documents the lessons learned and limitations encountered by the VHA in developing, implementing, and employing an EHR system and in integrating that system with others. Those are important lessons not just for the VHA but for health IT practitioners and proponents in general. The path to optimal use of EHRs to enhance patient care may be long and hard, but the VHA is already several steps along it.
The VA’s Health Coverage Expansion
This post originally appeared on The Finance Buff.
Kaiser Health News (KHN) reports today on expansions in health coverage for veterans through the Department of Veterans Affairs (VA). Back in 2003, low-priority veterans were not permitted to enroll for VA care. By updating its income eligibility cutoff, the VA will soon provide access to an estimated 266,000 additional veterans. According to KHN, this is part of an effort by the Obama administration to fulfill his “campaign promise to bring all veterans into the VA’s system.”
In the same post, KHN cites Associated Press (AP) reporting on VA patient safety issues. According to AP, an inspector general report to be released today finds that “fewer than half of VA facilities selected for surprise inspections last month had proper training and guidelines in place.”
Non-Medicare Retiree Health Options: Medigap, Employer Plans, and Other Government Programs
This post originally appeared on The Finance Buff.
In my recent three-post series on Medicare’s structure and payment systems (part I, part II, part III), I deliberately did not discuss other sources of health benefits for retirees. These include individually purchased Medicare supplements (Medigap), employer-sponsored plans, and benefits from other government sources (e.g., Medicaid, Veterans Health Administration, and others).
With one caveat, none of these are formally part of Medicare in the sense that Medicare does not administer or finance the benefits. The caveat is that Medicare does pay a subsidy to employers who offer a qualified drug benefit. Also, employers can offer Medicare Advantage (MA) plans as their retiree health benefit which is subsidized by Medicare (as described in a prior post). Nevertheless, employer plans are conventionally thought of as outside Medicare proper.
Medigap
Of the additional sources of retiree health benefits listed above, Medigap is the only one available to every elderly Medicare beneficiary. Medigap policies supplement Medicare in the sense that they cover some of the FFS Medicare cost sharing (copayments, deductibles, and coinsurance). They also complement Medicare to the extent they provide benefits not offered by FFS Medicare. Medigap policies are standardized and identified by letters A through L, except in Massachusetts, Minnesota, and Wisconsin, which have their own standardization scheme (source).
Beneficiaries must be enrolled in both Medicare Part A (hospital insurance) and Part B (outpatient insurance) before purchasing a Medigap policy. One cannot enroll in both an MA and a Medigap plan. Since Medigap policies are not subsidized by Medicare, beneficiaries pay the full premium, which varies by insurer, plan type, and state, and can be several hundred dollars per month. Medigap policies are guaranteed renewable (can’t be canceled due to health problems) but are not always guaranteed issue (you can only buy them during open enrollment periods or after certain events). Since 2006, Medigap policies do not offer prescription drugs (source).
Employer Plans
Employer plans are another common, though not universally available, way retirees receive health benefits. Because employer plans vary in benefits and cost by employer, there is not much that can be said about them in general. Comprehensive information on such plans is not publicly available so they are not as widely studied as other sources of retiree health benefits (one source for further reading is the Kaiser/Hewitt survey).
Other Government Sources
The other major sources of health benefits for retirees are Medicaid and the Veterans Health Administration (VHA). The former is available for low income/low asset elderly individuals but the qualification levels and exact benefits vary by state. The latter is available for certain veterans with service-connected health issues or low incomes. Both Medicaid and VHA benefits are very low cost to the beneficiary. Medicaid programs for Medicare beneficiaries are widely studied (source for Medicaid). The VHA is less widely studied (here’s one source). Both can be important sources of financing of health care for qualified beneficiaries but the majority of Medicare beneficiaries are not eligible for either.
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