Relationship of the use and costs of physician office visits and prescription drugs to travel distance and increases in member cost share.

BACKGROUND The prescription drug benefit is commonly designed and managed as a stand-alone health insurance product without consideration of how the design of other medical benefits may impact its use. OBJECTIVE To determine the effects of member cost (copayment/coinsurance) increases on the relationship between the use of physician office visits and the type/tier of prescription medication purchased in a commercially insured population. METHODS Our research model utilized managed care organization member costshare levels that were changed as part of the annual benefit renewal process to estimate the price.quantity.expenditure relationship between cost sharing and use of physician office visits/prescription drugs by benefit tier. The price.quantity. expenditure relationship was measured across a benefit copayment price change to determine the effect of a price increase on utilization/expenditures. We included the distance from the member.s residence to the physician.s office as a proxy for the time cost of an office visit. The study sample included 44,828 members who were fully insured for the full 12 months of 2002, continued coverage for the full 12 months of 2003, and whose benefit renewal occurred on January 1, 2003. We hypothesize that a relationship exists between office visit use and its expenditures and prescription drug use and its expenditures based on out-of-pocket cost. Hypotheses were tested using a least squares dummy variable regression model across claims records for years 2002 and 2003, containing consecutive yearly records for the same members. The unit of analysis was the member. Demand was estimated by benefit category and copayment tier to provide the study variables, price elasticity of demand, cross-price elasticity of demand, and distance elasticity. Expenditure is net health plan cost after subtraction of member cost share (including copayments, coinsurance, and deductibles). The expenditure categories in this study were pharmacy, medical office visits, and total health care costs. RESULTS Members with greater travel distance to a primary care physician (PCP) or specialty care physician (SCP) office experienced higher PCP and SCP visit utilization (distance elasticity = 0.164 and 0.202, respectively; P <0.01). Greater travel distance to a PCP was also associated with higher tier-1 prescription use (0.048, P <0.01) as well as higher total plan-paid (0.032, P <0.05) and PCP expenditures (0.141, P <0.01). Greater travel distance to an SCP was associated with higher use of drugs in all 3 pharmacy copayment tiers (0.085, 0.075, and 0.073 for tier 1, tier 2, and tier 3, respectively; P <0.01 for each tier). The price effects of an increase in tier-1 copayments were fewer PCP office visits (-0.118, P <0.01) but more SCP office visits (0.177, P <0.01); SCP visits were also higher with increased tier-3 copayments (0.118, P <0.01). Tier-2 prescription drug use decreased with higher office visit copayments (-0.105, P <0.05). Increased tier-1 copayments were associated with lower expenditures for PCP office visits (-0.146, P <0.05) but higher expenditures for SCP office visits (0.149, P <0.05). While increases in tier-2 copayments were associated with lower PCP (and -0.322, P <0.01) and SCP (-0.453, P <0.01) expenditures, increases in tier-3 copayments were associated with higher PCP (0.495, P <0.01) and SCP (0.197, P <0.05) expenditures. CONCLUSIONS A relationship exists between physician office visits and prescription drug use based on member cost share and time factors. Increases in office visit copayments were associated with decreased use of drugs in the tier-2 pharmacy benefit category. Increases in tier-2 pharmacy benefit copayment levels were associated with lower PCP/SCP expenditures, but increases in tier-3 pharmacy benefit copayment levels were associated with higher PCP/SCP expenditures. The distance to a physician.s office was directly proportional to the number of office visits. Separation of the management of pharmacy and medical benefits may have significant cost implications for consumers, employers, and health plans. Therefore, optimal management of medical and pharmacy benefits may require a coordinated strategy and tactics.