Bundling medical and pharmacy benefits: Impact on medical costs

BACKGROUND: Employers are increasingly seeking strategies to manage rising health care costs, including bundling or carving out specific benefits like pharmacy coverage. Although some studies suggest that integrating medical and pharmacy benefits leads to reduced medical costs, the mechanism remains unclear. OBJECTIVE: To evaluate the impact of bundling medical and pharmacy benefits on medical costs and utilization among self-funded employer groups and explore the potential role of population health management programs (PHMPs) as a mechanism for driving savings. METHODS: This retrospective, propensity score-matched, longitudinal cohort analysis used administrative claims data from a large health plan in Southeastern Pennsylvania. Self-funded group plan participants were included in the analysis if they had integrated medical and pharmacy benefits in both 2022 and 2023 (integrated group) or if they lacked integrated benefits in either year (comparison group). We additionally required that these plan participants did not experience major changes to their population health management benefits. Doubly robust models, adjusting for concurrent risk scores, were used to compare changes in per-member per-month (PMPM) medical costs and per-1,000-members per-year utilization between the integrated and nonintegrated groups. Propensity score matching was employed to create balanced comparison groups. RESULTS: Members with integrated pharmacy benefits experienced a statistically significant reduction of $32.48 PMPM (7.5%) in total medical cost growth relative to the nonintegrated benefits group. This reduction was largely driven by lower inpatient ($13.27 PMPM, 13.5%) and emergency department ($1.35 PMPM, 4.7%) spending. For members with a PHMP benefit, integrated pharmacy was associated with greater estimated savings ($39.28 PMPM, 9.0%) compared with those without integrated pharmacy. Additionally, members with integrated benefits were estimated to have a greater probability (10.9%) of outreach by a PHMP nurse compared with those without integrated pharmacy. CONCLUSIONS: Bundling medical and pharmacy benefits was associated with reduced medical cost growth, particularly in inpatient and outpatient settings. Coordination activities like PHMPs, enabled by data integration from bundled benefits, may be a key mechanism for achieving cost savings. These results support the consideration of benefit integration strategies for employers seeking to optimize health care spending and improve care management.