VHA pharmacy use in veterans with Medicare drug coverage

To determine how Medicare benefits affect veterans' use of Veterans Health Administration (VHA) pharmacy services.

Retrospective analysis of veterans dually enrolled in the Veterans Health Administration and Medicare healthcare systems.

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.

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.

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.