Increase Cost Sharing for Pharmaceuticals Under TRICARE

The TRICARE program provides health care for the military's uniformed personnel and retirees and for their dependents and survivors. In total, more than 9 million people are eligible to use TRICARE's integrated system of military health care facilities and regional networks of civilian providers under contract to the Department of Defense (DoD). Beneficiaries may take their prescriptions to military pharmacies, which fill prescriptions written by any qualified provider, whether military or civilian, in or outside of TRICARE's network. Beneficiaries who prefer not to use military pharmacies may take prescriptions to retail pharmacies in the TRICARE network or use TRICARE's mail-order pharmacy. In 2009, DoD spent more than $8 billion on outpatient pharmacy benefits.

Cost sharing for pharmaceuticals--in the form of a copayment for each prescription filled--varies not only by the type of drug but also by where the prescription is filled. Beneficiaries pay nothing for prescriptions filled at military pharmacies, although those facilities tend to be located on military bases and may be less convenient than a retail pharmacy for some beneficiaries. Military pharmacies carry only generic drugs and brand-name drugs in the TRICARE formulary (the list of drugs that the plan covers). Beneficiaries who fill their prescriptions at retail pharmacies pay $3 for a 30-day supply of generic drugs, $9 for the same supply of brand-name drugs in the TRICARE formulary, and $22 if the drug is not listed in the formulary. Alternatively, they may order a 90-day supply by mail; copayments for mail-order prescriptions are also $3, $9, or $22 for generic, formulary, or non- formulary drugs, respectively, but the beneficiary receives a 90-day supply for that copayment, compared with a 30day supply from retail pharmacies. Finally, beneficiaries who choose to fill prescriptions at retail pharmacies that are not part of the TRICARE network must meet a deductible (which varies by military rank) and bear greater cost sharing than beneficiaries who choose other alternatives.

This option would raise the copayments for pharmaceuticals under the TRICARE plan. Active-duty service members would continue to receive their prescriptions at no cost from those pharmacies, but all other beneficiaries would pay $3 for generics and $9 for brand-name pharmaceuticals on the TRICARE formulary when purchasing the drugs from military pharmacies. Prescriptions filled at participating network retailers would cost the beneficiaries $15, $25, or $45 for a 30-day supply of generic, formulary, or nonformulary pharmaceuticals, respectively. Prescriptions filled by mail order would cost $9, $27, or $45 for a 90-day supply of generic, formulary, or nonformulary pharmaceuticals, respectively.

The Congressional Budget Office estimates that this option would save about $10 billion over the period from 2012 to 2016 and about $26 billion over the next 10 years, relative to CBO's baseline projections. (Total savings would be greater, but some are already incorporated in the baseline. See the note to the above table.) About half of the savings would be attributed to pharmacy spending by beneficiaries eligible for Medicare and would be classified as mandatory. The other half of the savings would be subject to annual appropriation acts. DoD's outlays would be reduced, in part, because the increased cost-sharing payments would directly offset some of the government's cost for the pharmaceuticals. In addition, the higher copayments would induce some people who otherwise would have used the TRICARE program to rely instead on a civilian pharmacy benefit-- one available through their spouse's employment, for example.

A rationale for this option is that larger copayments would foster more disciplined use of medical resources and discourage low-value treatments. In an era of fiscal constraint, rapidly rising health care costs may result in fewer resources available for DoD to purchase and maintain weapon systems and other equipment. This option would begin to curtail the growth in health care costs, freeing those resources for other defense priorities.

An argument against this option is that the larger copayments might impose a financial strain on some beneficiaries, who might terminate their use of the TRICARE pharmacy benefit and risk harming their health. The health of people who continue to use the TRICARE benefit, moreover, might suffer if they are discouraged from treating their illnesses with pharmaceuticals in a timely manner or from completing a drug treatment regimen in the face of higher copayments.