Background

Long-term care (LTC) pharmacies are specialized pharmacies that help streamline medication management for complex patient populations and provide additional support to patients residing in long-term care facilities such as nursing homes, assisted living centers, and sometimes the home and community settings. To be designated as an LTC pharmacy and participate in Medicare Part D networks, pharmacies must meet minimum performance, service, and operational criteria, the latter of which include special packaging capabilities, the presence of on-call pharmacists, and 24-hour delivery services.

Historically, many LTC patients have been supported in institutional settings such as intermediate care facilities and nursing homes. Over time, there has been increased uptake of these services in home and community-based settings where patients can access care in their home or other residential settings rather than in a medical facility. These home and community-based services (HCBS) are largely accessed through state Medicaid waivers, with patient prescription medications primarily being covered under Part D.

Some stakeholders anticipate that the number of LTC pharmacy patients receiving services in the home and community will continue to increase due to factors such as growing patient preference, technological capabilities, and the overall cost effectiveness of home-based care compared to facility-based treatment. This analysis seeks to better understand trends in LTC pharmacy beneficiaries’ place of residence.

Analysis

To understand residential trends for patients serviced by LTC pharmacies, Avalere Health analyzed Part D spending and beneficiary data from 2018 through 2022. The analysis focused on five patient residence codes commonly associated with LTC pharmacy claims: nursing facility (long-term care facility), assisted living facility, intermediate care facility/intellectual disability, home, and group home. To assess spend and beneficiary counts, we analyzed changes in total drug spend and total beneficiaries by place of residence using Part D LTC pharmacy data.

Results

Our analysis of Medicare Part D spending and beneficiary data from 2018 through 2022 showed growth across all patient residence types within the scope of our study, with the exception of nursing facilities. When weighted by 2022 residence code spend, the average four-year compound annual growth rate (CAGR) for spending across the five residence codes was 5.8%. When weighted by 2022 residence code beneficiary counts, the average four-year CAGR for beneficiaries was 1.8%. The home residence category experienced the fastest growth, with spending and beneficiary count increasing at 16.9% and 11.2% CAGRs respectively. In contrast, nursing facilities saw marginal declines in both spending and beneficiaries over the same period, although they continued to see a higher portion of volume and spend than most other facility types over this period.

Figure 1. Total Medicare Part D Spend by Patient Residence Category, 2018-2022

Figure 1 shows trends in Part D spend from 2018 through 2022 by place of residence. Notably, in 2022, assisted living facilities surpassed nursing facilities as the highest spend residence category within the scope of the study. The group home growth rate aligned closely with that of the assisted living facilities, with each setting demonstrating growth rates of 9.2% and 10.5% respectively.

Figure 2. Total Medicare Part D Beneficiaries by Patient Residence Category, 2018-2022

Figure 2 shows trends in Part D beneficiary count from 2018 through 2022 by place of residence. Notably, the volume of beneficiaries in the home setting saw the fastest growth rate with a CAGR of 11.2%. In 2022, the number of beneficiaries in assisted living facilities edged closer to the number of beneficiaries in the nursing facility.

Discussion

Part D LTC pharmacy data from 2018 through 2022 showed variable growth across patient residence types. While assisted living and nursing facilities accounted for the largest share of Part D spending and beneficiaries, the home residence category experienced the fastest growth over this period. The group home residence category experienced significant growth in spending at a 9.2% growth CAGR, but more modest growth in beneficiaries. A potential driver of increased spending and beneficiary counts in home and group home settings could be the growth in uptake of HCBS waivers by Medicaid beneficiaries. When considering more traditional institutional settings, the changes in volume and spend demonstrated variable shifts by setting. Nursing facilities were the only residence type to show a decline in both spending and beneficiary count, indicating a gradual shift away from this setting. At the same time, assisted living facilities continue to demonstrate increasing spend and beneficiary count, indicating increases in volume across some institutional settings coinciding with the increases in the home and community settings.

Growth in home and community-based dispensing reflects the system-wide push for aging in place, HCBS expansion, and deinstitutionalization, as both Medicare and Medicaid policies increasingly encourage HCBS over institutional care to improve beneficiary quality of life and promote cost containment. Pharmacy, plan, and provider stakeholders may continue to shift care delivery models and medication management as these trends continue. While this study of LTC pharmacy trends allows us to make observations on place of residence dynamics for beneficiaries, a more detailed analysis of state Medicaid waiver spending trends on HCBS and broader policy and regulatory factors would be needed to reach more definitive conclusions on these trends.

Looking Ahead

Further research is needed to fully understand LTC pharmacy place of service dynamics. Insights from this analysis can help inform stakeholders about Medicare Part D spending and utilization  patterns and offer potential explanations for growth in home and community-based care.

To learn more about HCBS, LTC pharmacies, and other Part D trends, connect with us.