Veteran Demand for Prescription Drugs from VA

Insights from Two Recent Veteran Surveys and an Analysis of the Impact of the New Medicare Drug Benefit

Office of the Assistant Deputy Under Secretary for Health

April 2004

Recently, much debate has been focused on what veterans want from VA health care and the role that the lack of access to affordable prescription drugs plays in that demand. Are veterans seeking comprehensive health care focused on veteran health issues or simply access to prescription drugs? Interest has also been high in assessing the impact of the new Medicare drug benefit on demand for VA health care. This paper provides feedback from veterans on how they intend to use VA in the future and their interest in enrolling in a VA prescription-only benefit. It also provides input from VHA's actuary on how the new Medicare drug benefit may impact veteran demand.

Veteran Demand for VA Health Care and Prescription Drugs

In two recent VHA surveys, veterans indicated a strong interest in accessing VA for comprehensive health care. The 2003 VHA Survey of Enrollees asked enrollees how they intend to use VA in the future, while the Prescription-Only Benefit Survey explored veterans' interest in a VA prescription-only benefit.

In the 2003 VHA Enrollee Survey, enrollees were asked how they planned to use VA health care services in the future: as a primary source of care, as backup to non-VA care, for prescriptions only, other, no plans for VA use, or don't know.

* The major reason cited for planned future use of VA health care was as a primary source of care. o 49% of enrollees indicated that they intended to use VA as a primary source of care, another 21% as backup to non-VA care, 16% for prescriptions-only, while 9% have no plans to use VA health care.

* 60% of enrollees under age 65 report plans to use VA as a primary source of care, while only 7 percent intend to use VA for prescriptions only.

* 36% of enrollees age 65 and over report plans to use VA as a primary source of care, and 26 percent intend to use VA for prescriptions only.

* Enrollees planning to use VA as a primary source of care tend to report poorer health.

o As perceived health status declines, the percent of enrollees reporting plans to use VHA as a primary source of care rises. 41% of enrollees reporting excellent health plan to use VHA as a primary source of care compared to 63% reporting poor health.

o The more functional limitations reported by enrollees, the more likely they are to plan to use VHA as a primary source of care in the future.

* There is considerable variability in enrollees' responses across the VISNs.

o The percent of enrollees planning to use VA as a primary source of care varies geographically from a high of 59% in VISN 18 to only 33% in VISN 3.

o In general, more enrollees living in the Sunbelt states report plans to use VA as a primary source of care. Enrollees in the Northeast are least likely to plan to use VA as a primary source of care. These numbers are strongly correlated with both the higher percent of Priority 7 and 8 enrollees in the Northeast and the lower percent of uninsured veterans there.

In the Prescription-Only Benefit Survey, enrollee users, enrollee non-users, and non-enrolled veterans were asked if they would choose a VA prescription-only benefit if offered. The benefit, as described, would allow eligible veterans to have prescriptions written by their private doctors filled through VA's mail order pharmacy with a co-payment. Veterans opting for this benefit would not be eligible for VA health care and could not switch back and forth between benefits at their leisure. Non-enrolled veterans were also asked their likelihood of enrolling for VA health care.

* Again, veterans expressed more interest in comprehensive VA health care than a VA prescription-only benefit.

o 89% of enrollees would choose comprehensive VA health care over a prescription-only benefit.

o More non-enrolled veterans would choose comprehensive VA health care (42%) than a prescription-only benefit (19%).

* In fact, relatively few veterans would opt for the prescription-only benefit as described.

o When offered with a $10 or less co-payment, only 6% of enrollee users, 14% of enrollee non-users, and 15% of non-enrolled veterans are likely to enroll.

* There is no significant difference in interest in a prescription-only benefit between veterans under age 65 (15%) and those over 65 years of age (13%).

* 70% of the veterans who indicated they were interested in a prescription-only benefit are in Priorities 7 and 8.

* The VA prescription-only benefit would primarily serve a new group of veterans.

o 81% of those veterans who indicated that they would choose the prescription-only benefit are not currently enrolled.

o 10% of those veterans who indicated that they would choose the prescription-only benefit are enrollees who are not currently using VA health care.

* The publicity generated by prescription-only benefit could increase enrollment in VA health care.

o 29% of non-enrolled veterans say they are likely to enroll in VA health care, but not the prescription-only benefit.

o 13% of non-enrolled veterans express interest in both benefits. They could initially enroll in the prescription-only benefit, and then transition into comprehensive health care.

o Only 7 percent of non-enrolled veterans expressed interest in the prescription-only benefit, but not VA health care.

* However, a significant group of veterans (51%) are not interested in either the VA health care benefit or proposed prescription-only benefit.

VHA is currently conducting additional analyses, including matching survey respondents with their actual VA health care utilization data, to further understand the implications of these survey results for enrollment in the VA health care system and the cost of a potential prescription-only benefit. VHA will publish a report on the results of the analysis this summer.

Impact of the Medicare Drug Benefit

Milliman USA, the private-sector actuary that develops the actuarial projections used in the VA health care budget, assessed the impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (DIMA) on VA health care.

* The impact of DIMA on VA enrollment, utilization, and expenditures is expected to be minimal, and the changes are expected to occur at a relatively slow rate. The biggest impact would come from changes in employer-based prescription drug coverage. Based on two recent estimates of the number of retirees who would lose benefits, enrollment could increase by approximately 35,000, and nearly half (17,000) would be in Priority 7.

In addition, prescription drug reliance rates could increase by 3%, and the increase is likely to be largest in Priorities 7 and 8. However, the impact may not become significant until as late as 2016, because most recent retiree benefit cutbacks have typically been for future retirees only. Those eligible for retirement (over age 55) have been grand fathered into employer's current plan.

* Low-income subsidies will apply primarily to Priority 5 veterans, and the overall impact is expected to be small. Most DIMA low-income beneficiaries will be exempt from VA co-payments.

* Impact of a Prescription Drug Card is expected to be minimal. Beneficiary costs, even with discounted drug costs, will likely be much higher than VA co-payment levels. A small number of veterans could become less reliant on VA as a result of the Drug Card Program; however, the decreased reliance can be expected only on lower cost drugs. Most low-income veterans who would be eligible for the $600 subsidy would also be exempt from VA co-payments.

* The introduction of health savings accounts is likely to accelerate the recent trend toward more high-deductible plans. As a result, there may be an increase in enrollment or reliance for VHA enrollees under age 65 wishing to avoid the higher deductible amounts by using the VA Health Care System.

These estimates will be updated as more becomes known about employer responses to DIMA.

For Further Information

Additional details on the survey results and the impact of the Medicare drug benefit are available at http://vaww.va.gov/vhaop

Source: 2004 VHA Prescription-Only Benefit Survey

Weighted numbers represent the veteran population as of November 2003

Bruce G. Nitsche
Veterans Liaison to the Secretary
Nitsche, Bruce G.

bruce.nitsche@mail.va.gov