A provision in the Affordable Care Act changes states' incentives on drug plans and represents billions in potential savings for the states, and better coordination of prescription drug usage for Medicaid patients.
Since 1990, state Medicaid programs have not been able to receive federally allowed prescription drug rebates if they turned over their enrollees' drug benefit plans to Medicaid managed care organizations.
So 14 states carved out those drug benefit plans from their managed care plans, and administered the drug benefits themselves. They got the rebate money, but in many cases coordination of patient care involving prescriptions and, frankly, misuse or inappropriate use of some medications, flourished.
Now, a provision in the Patient Protection and Affordable Care Act that took effect last year is changing the states' incentives. It allows those states to still get those rebates even if they turn over Medicaid drug plan operations to those managed care plans, which some say take a tighter look at prescription appropriateness.
At least three states – New York, Texas, and Ohio – have converted or are in the process of converting, according to the Association for Community Affiliated Plans, which represents 58 nonprofit Safety Net Health Plans in 28 states that cover more than 8 million lives. The result, ACAP officials said in a statement, is billions in potential savings for the states, and better coordination of prescription drug usage for Medicaid patients.
"One of the greatest benefits of managed care is its ability to access and analyze pharmaceutical data to enhance care and control costs," ACAP said in a statement. One way that happens is to curb the inappropriate use of drugs, for example, the inappropriate prescribing of antibiotics for patients with viral colds.
For example, ACAP quoted CareSource, a leading plan in Ohio, which found that the use of the frequently abused pain killer Oxycontin by children and families enrolled in Medicaid increased "by a staggering 325% after the state 'carved out' prescription drug" plan management away from Medicaid health plans.
"Carving out prescription drug benefits effectively erects roadblocks to care integration, displaces financial responsibility and creates confusion among patients who must go to a separate entity to address concerns about their prescriptions," ACAP said in a statement.
A Congressional Budget Office report says the ACA provision will allow the federal government to realize savings of up to $11 billion over the next decade by avoiding inappropriate use of prescription drugs and better management of patient care.
Even though there was a strong incentive for states to keep those drug plans prior to the ACA, 27 states left some or all of the benefits to be managed by the MCOs. And, those states "were able to see savings almost immediately when the expanded rebate provision went into effect in April 2010, ACAP said.
According to a recent study by Health Management Associates, savings for some states that allowed Medicaid MCOs to administer drug benefits amount to nearly $770 million a year, about 6% of their total Medicaid managed care spending."
Now, some states are moving to move drug benefit programs over to managed care companies to run. For example:
- In New York, health officials adopted a provision in March that takes effect Oct. 1, and estimates it will save the state $100 million next year.
- In Texas, legislators will allow managed care programs to administer Medicaid drug benefits with $51 million in anticipated savings over two years.
- In Ohio, the governor's budget for 2012-2013 moved drug benefits to managed care plans effective Oct. 1. The Ohio Association of Health Plans estimates the move will save Ohio approximately $184 million over two years.
Legislatures in as many as 12 other states are likely to consider other moves, ACAP officials says, pointing to a Lewin Group report that found that if 14 states that now manage their own Medicaid drug programs were to move them to managed care organizations, they'd save $11.7 billion over 10 years.
Some hurdles remain in converting those states, ACAP's fact sheet says.
For example, under the new law, rebates from drug manufacturers are paid directly to the states rather than to the managed care organizations.
"Accordingly, many manufacturers have stopped paying health plans private rebates that some plans had previously negotiated on their own," ACAP says. This should result in an increase in the capitated rates for prescription drugs that states pay the plans. Yet one year after the ACA took effect, "many states had not yet adjusted health plans' rates to reflect the shift," the ACAP statement said.