DISCORD AT THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

Government healthcare reforms along with reducing prescription drug prices have been at the top of President Donald Trump's agenda. A quarrel in between the top health officials at HHS is prolonging the administration's healthcare initiatives.

Over the last year, tensions have been building between HHS Secretary Alex Azar and CMS Administrator Seema Verma. The drama between the two officials could be mistaken for an episode from the reality TV show, The Apprentice. The two health chiefs are in a power struggle over policy; moreover, both are claiming credit for the Trump administration's healthcare policy victories.

According to sources, the drama started when the previous HHS Secretary Tom Price resigned in the fall of 2017. Verma was a possible successor to Price but the president chose to nominate Azar for the job. From that point, the two officials became very competitive with each other to advance the president's healthcare agenda.

After Azar was confirmed, a meeting took place in the oval office where Azar went over his prescription drug-pricing proposal with President Trump and Administrator Verma. Verma emphatically opposed Secretary Azar's plan due to its possibility of raising federal spending and Medicare premiums in 2020. Subsequently, the White House ended up not backing Azar's drug pricing proposal.

At about the same time, Verma had spent months drafting an alternative to the Affordable Care Act (ACA). Secretary Azar struck down that proposal before Administrator Verma could present it to the president. Azar strongly believed that the proposal would have reinforced the ACA rather than abolishing it.

Sources also claim that there have been efforts to marginalize and limit Verma's influence by excluding her from policy meetings. In October, Azar allegedly attempted to keep Verma from traveling with the president to Florida for the introduction of a Medicare executive order which was composed largely in part by CMS. Verma purportedly complained to the White House and was eventually permitted on the plane. In addition, Azar has also been accused of meddling in staffing decisions affecting HHS and CMS.

Officials at the White House claim that the discourse between Azar and Verma has hit such a low that they are now resorting to leaking stories about each other to the media. One of the stories involves a stolen property claim submitted by Verma in 2018. While she was giving a work-related speech in California her jewelry and luggage were stolen from a rental car. She asked for reimbursement from the federal government and the claim was met with objection from Democrats as a waste of taxpayer dollars. The other leak revealed that Verma had hired consultants to boost her reputation utilizing taxpayer dollars. According to a CMS representative, "these recent leaks are part of a targeted campaign to smear the Administrator and undermine the accomplishments of CMS."

On December 11th, the White House chief of staff Mick Mulvaney called Azar and Verma to a meeting at the White House to settle the spat. President Trump was not present at the meeting and according to White House officials, the president still supports Administrator Verma but he also wants the two officials to put an end to the drama. One official said President Trump "doesn't care if they like each other, but they have a job to do." The source also stated that neither of their jobs are in jeopardy.

The tension between HHS Secretary Azar and CMS Administrator Verma has reached new heights and the Trump administration has had enough. Their failure to work together and get along with one another is not only postponing the president's healthcare policies but it has the potential to negatively impact the president's 2020 election campaign. Hopefully, the two chief health officials can set their quarrels aside and recognize that their decisions impact the healthcare of millions of Americans.

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MI MEDICAID PBM PHARMACY CARVE-OUT

To reduce costs in its Medicaid Health Plan (MHP), Michigan is carving out pharmacy benefit managers (PBMs) and transitioning to a fee for service (FFS) model for the delivery of prescription drugs. In October, the state's Department of Health and Human Services (MDHHS) revealed that outpatient prescription drug coverage will no longer be a MHP benefit. Beginning December 1, 2019, prescription drugs will be provided through a FFS model and the state will contract with a single PBM to bill its health department.

Michigan hopes to save about $10 million in general funds each year under the FFS model. According to MDHHS, these savings will be achieved "through a combination of increased pharmaceutical rebates and elimination of related MHP administrative capitation costs. The transition to a single formulary will also result in significantly streamlined administration for Michigan's health care providers and coverage consistency for program beneficiaries."

To allow for a smooth shift for recipients, "MDHHS will partner with MHPs and its PBM contractor by utilizing recent MHP PAs and paid claims data to create system edits. The intent of these edits is to continue the beneficiary's medication coverage that was provided by their MHP and to minimize and/or eliminate PA obstacles during the first three-months of the coverage transition."

In addition, the transition will apply coverage limitations and prior authorizations to all program beneficiaries. Members over the age of 21 will incur co-pays beginning the first of December. For Rx services, copays will be $1 for preferred and $3 for non-preferred medications.

Healthcare payers and PBMs oppose the move. They claim that such a move does not align with MHP's objective to provide whole-person integrated care. The decision will increase out of pocket costs and members will not have the necessary overview of their prescriptions.

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MEDICAID SPENDING TO EXCEED MORE THAN $1 TRILLION ANNUALLY

Over the past decade, Medicaid has turned into one of the fastest and largest growing items on state budgets. In 2015, the program made up 20 percent of state budget spending and in 2018 it had grown to 30 percent. Last month, a report from the Foundation of Government Accountability found that Medicaid had cost states over $603 billion in 2018. Moving forward states need to ensure eligibility and address fraud, waste, and abuse in the Medicaid program to decrease costs and protect the program's resources.

The FGA points out that, "ultimately, this means fewer dollars are available for education, corrections, transportation, and other important budget priorities." For example, as Medicaid has expanded, state education spending has dropped by 13 percent and items outside of core budget items have decreased by 12 percent.

In Ohio, Missouri, and Pennsylvania, Medicaid spending has reached as high as 40 percent of their budgets.

The report reveals that in Ohio, Medicaid spending increased 260 percent in eighteen years. In 2000, its Medicaid budget made up 19 percent ($7.3 billion) of the entire budget. Nine years later, it rose to 24 percent ($14 billion) and in 2018 it's grown to 38 percent ($27 billion). That is more than the state's entire general revenue in 2000.

Likewise, Louisiana spent $3.4 billion on Medicaid in 2000 and by 2009 it nearly doubled to $6.2 billion. Three years after program expansion under the Affordable Care Act, Louisiana's Medicaid budget grew again to over $11 billion in 2018. Presently, Medicaid spending in the state sits at 35 percent of the budget. The report cites Medicaid expansion as part of the problem claiming it "has blown the lid off of every state and third-party cost and enrollment projection."

The FGA predicts that in the next ten years Medicaid spending will exceed more than $1 trillion each year.

Nicholas Horton is the author of the report and research director at the FGA. He stated, "States are watching their Medicaid spending climb to extraordinary levels. Hopefully, state leaders will continue to recognize the need to rein in their Medicaid programs and implement commonsense reforms like work requirements and Medicaid expansion enrollment freezes."

The study also includes suggestions geared towards protecting Medicaid's integrity and freeing up resources for other important budget items. One of which is to implement work requirements for non-disabled adults enrolled in Medicaid. The FGA points out that there is evidence that this would aid beneficiaries in becoming more self-sufficient and less dependent on the state.

Groups in opposition to work requirements, like the Center on Budget and Policy Priorities (CBPP), argue that they would limit the access to care for people who rely on it.

According to the CBPP, "State proposals for Medicaid work requirements will cause many low-income adults to lose health coverage, including people who are working or are unable to work due to mental illness, opioid or other substance use disorders, or serious chronic physical conditions, but who can not overcome various bureaucratic hurdles to document that they either meet work requirements or qualify for an exemption from them."

Apart from work requirements, the report also advised that states make a concentrated effort to deal with fraud. The National Bureau of Economic Research found that over 500,000 people enrolled in the program as a result of expansion were ineligible because of their income. The study also mentioned that the states evaluated only represented 25 percent of the 37 states to expand Medicaid and that the number of ineligible members could be as much as three times more.

Improper payments have also been an enormous cost to the program in the last ten years. In the FY 2018 HHS Agency Financial Report the department discovered that Medicaid improper payments totaled $36.25 billion. DHHS recommended incorporating IT solutions at the state level to address the waste. They feel that by making use of technology solutions, Medicaid will have a more comprehensive data structure and improved oversight.

The Medicaid program is costing states billions of dollars and over the next ten years, that figure will climb to $1 trillion. As it expands, it is also pulling away from other necessary budget items such as education, infrastructure, transportation, and corrections. To remain fiscally solvent while providing healthcare to low-income people, state officials and plan administrators must implement reform and present-day technology solutions.

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A TIMELINE OF LEGISLATIVE INITIATIVES TO ADDRESS MEDICAID THIRD PARTY LIABILITY

Since Medicaid's inception in 1965, the program has expanded to become the largest provider of healthcare coverage in the country. As the size of the member population has increased, Medicaid third party liability (TPL) efforts and fiscal responsibility have been persisting concerns. To protect Medicaid's solvency, there have been several legislative efforts focused on curbing fraud, waste, and abuse. Unfortunately, these actions have done very little to preserve the program's integrity and Medicaid's improper payment rate has hovered around 10% for the last ten years.

Federal initiatives to fight improper payments fall under the following categories: assessing the risk of fraud; estimating the impact of TPL; requiring more reporting, which in turn creates administrative burden; and efforts to increase data-sharing. Here is a review of legislation aimed at strengthening TPL and decreasing improper payments.

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (ERISA)

ERISA was directed towards self-insured companies and mandated that they abided by the same health insurance criteria as other large group plans. This was important because self-insured plans were now subjected to Medicaid TPL stipulations.

IMPROPER PAYMENTS INFORMATION ACT OF 2002 (IPIA)

The IPIA concentrated on evaluating and reporting improper payments. It required that agencies, on an annual basis, identify programs and activities susceptible to substantial improper payments. In addition, agencies needed to estimate the amount of overpayments or underpayments and then report on steps being taken to decrease the payments.

DEFICIT REDUCTION ACT OF 2005 (DRA)

In an effort to rein in costs, Congress signed the DRA into law in 2006. It included key Medicaid provisions and broadened the list of entities regarded as third parties. In a similar way to ERISA, the DRA required all third parties to abide by Medicaid TPL processes and to supply beneficiary information to states so as to improve cooperation in data sharing.

The DRA also launched the Medicaid Integrity Program (MIP) under section 1936 of the Social Security Act. The MIP was the first comprehensive Federal effort to deal with fraud, waste, and abuse. It allowed contractors to review provider activities, audit claims, identify improper payments, and educate providers on integrity issues. It also provided assistance to states to address fraud and abuse.

QUALIFYING INDIVIDUAL (QI) PROGRAM SUPPLEMENTAL FUNDING ACT OF 2008

The QI changed state participation requirements for the Public Assistance Reporting Information System (PARIS). Under the legislation, states were required to have in operation a Medicaid eligibility determination system for data matching through PARIS and medical assistance programs operated by other states.

EXECUTIVE ORDER 13520

In 2009, President Barack Obama authorized Executive Order 13520 "to reduce improper payments by intensifying efforts to eliminate payment error, waste, fraud, and abuse in the major programs administered by the Federal Government, while continuing to ensure that Federal programs serve and provide access to their intended beneficiaries." A few of the order's notable plans involved identifying Federal programs with the highest dollar value of improper payments, developing reduction and recovery target rates for these programs, guidance for implementation of the order, and reporting on how agencies planned to meet the targeted rates.

IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2010

The Improper Payments Elimination and Recovery Act took several steps to further enhance data sharing, coordination between state agencies and third parties, and increase reporting requirements. These included:

• Amendment of the IPIA to require the agency leaders, such as the Secretary of HHS, to review and identify vulnerabilities in their programs that could lead to improper payments.
• Modifications of the criteria for improper payment estimations.
• Requirement of a statement from agencies as to whether it has "sufficient resources with respect to internal controls, human capital, and information systems and other infrastructure to prevent improper payments."

FRAUD REDUCTION AND DATA ANALYTICS ACT OF 2015

The Fraud Reduction and Data Analytics Act required the Office of Management and Budget to develop new guidelines for Federal agencies. Under the act, Federal agencies needed to "establish financial and administrative controls to identify and assess fraud risks," and they were also required to submit annual reports to Congress regarding their progress on these efforts.

FEDERAL IMPROPER PAYMENTS COORDINATION ACT OF 2015

After the Fraud Reduction and Data Act of 2015, Congress successfully passed the Federal Improper Payments Coordination Act. This authorized the judicial branch, legislative branch, and also state government agencies managing Federal programs to utilize the U.S. Treasury Department's Do Not Pay (DNP) Program. The DNP is a "no-cost robust analytics tool which helps Federal agencies detect and prevent improper payments made to vendors, grantees, loan recipients, and beneficiaries." Through the Fraud Reduction and Data Act and The Federal Improper Payments Coordination Act, Congress focused on administrative procedures, reporting requirements, and data-sharing; all of which were devised to improve cost-avoidance and address TPL.

CHIP REAUTHORIZATION ACT OF 2015 (MACRA)

MACRA included a variety of sections relating to Medicaid programs, including a section affecting TPL issues. Sec. 510 "requires the Secretary to study and detail incentives for states to work with the Secretary under the Medicare-Medicaid Data Match Program to coordinate appropriate actions to protect the Federal and state share of expenses under the Medicare and Medicaid programs."

TECH SOLUTIONS FOR MEDICAID THIRD PARTY LIABILITY

The identification of Medicaid third party liability has become difficult for program administrators and is costing plans billions of dollars in improper payments. Medicaid plans agree that cost avoidance makes more sense than pay and chase, but until now the ability to execute it successfully has not been widely available. With the help of Syrtis Solutions and their exclusive ePrescribing data, payers of last resort are now able to cost avoid pharmacy and medical claims on the front end. EPrescribing data surely was not originally intended for these purposes. However, its ability to mitigate the need for recovery and the associated expenses while cost avoiding payments is undeniable. Those involved in the process of Medicaid claims payments have been working with the best tools they had available. Now, they have new and superior tools through Syrtis.

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MEDICAID THIRD PARTY LIABILITY REVIEW FROM THE GAO

Identifying third party liability continues to be a challenge within the coordination of benefits for Medicaid. By law, plans are payers of last resort so whenever beneficiaries have other active coverage (OHI), those third parties should pay first. Presently, plans are required to incorporate new payment procedures to aid in ensuring that they do not pay more than they should. Despite the requirement, CMS is unsure as to whether or not plans have implemented the new procedures and the GAO is advising that the agency determines compliance.

The new payment procedures were enacted as part of The Bipartisan Budget Act of 2018. Before the legislation, Medicaid plans would regularly pay providers for services and then look for reimbursement from any liable third parties. This retrospective approach is known as Pay and Chase. Additionally, the law included a provision for the GAO to evaluate the potential impact of the legislation.

In August, the GAO released their report which included their discoveries and recommendations. They found that nine of the states reviewed are in various stages of implementing the law's third party liability changes. These changes affect whether providers must seek payment from a liable third party before the Medicaid plan pays for services. The new procedures apply to prenatal care services, pediatric preventive services, and services for children subject to child support enforcement. The report went on to point out:

"Officials from four of the nine selected states reported having fully implemented the changes for prenatal care services, which were required to be implemented starting in February 2018. Officials from the remaining five states were discussing the changes internally, researching how to implement the changes in their Medicaid payment systems, or waiting for additional guidance from the Centers for Medicare & Medicaid Services (CMS), the federal agency responsible for overseeing states' Medicaid programs."

"None of the nine states had implemented the changes to pediatric preventive services and services for CSE beneficiaries, which must be implemented starting in October 2019. Officials from six states told GAO that they were in the early stages of exploring how they would make the changes, while the remaining three states had not developed such plans."

The GAO also found issues with the guidance that CMS issued to states for implementation of the third party liability changes. CMS's guidance incorrectly informs plans that providers are not required to seek payments from OHI before plans pay for some prenatal services.

The report also reveals that CMS is not adhering to its oversight responsibilities. It specifies that the agency has not effectively determined whether plans are complying with the updated third party liability requirements. CMS expects plans to comply, yet it does not verify that the changes have been implemented unless informed of non-compliance.

The GAO also discussed the impact of the changes with Medicaid specialists and stakeholders. According to the stakeholders, the new requirements could possibly result in a reduction in beneficiary access to care because providers would be less willing to see Medicaid patients. The two primary reasons are:

1. "The changes may increase administrative requirements for providers by requiring them to identify sources of coverage, obtain insurance information, and submit claims to third-party insurers before submitting them to Medicaid."
2. "The changes may result in providers waiting longer to receive Medicaid payment for certain services to the extent that states require providers to seek third-party payments before paying the providers' claims."

Lastly, the GAO report featured two recommendations to CMS. One of which was to ensure that the agency's guidance on third party liability requirements reflects current law and the other was to figure out the extent to which plans are complying with third party liability requirements.

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CONCERNS RELATING TO CA's PHARMACY CARVE OUT

California's Governor, Gavin Newsom, signed an order at the beginning of 2019 to transition all pharmacy services for Medi-Cal from managed care to a FFS model. The consolidated purchasing power would make use of the state's population size to negotiate drug prices with pharmaceutical manufacturing companies. Private payers and insurance providers would also be allowed to participate in the public health system and negotiate prices.

The state's plan to take control of the pharmacy benefits for all of Medi-Cal's recipients has been controversial. There are concerns over its likely impact on MCOs, PBMs, pharmacies and the coordination of care. Currently, California's pharmacy benefit for Medicaid managed care is administered by ten separate PBMs. They are responsible for 90 percent of the state's Medicaid beneficiaries.

L.A. Care CEO, John Baackes, believes that the carve out will make coordinating care more challenging. He stated, "I think one of the advantages of a managed Medi-Cal plan like ours is that for people who are in very difficult circumstances health-wise, we do provide an element of care management that's important and if there's an element of the benefit that we don't control, then it's awkward."

In addition, critics are concerned about the impact that the pharmacy benefit carve out could have on pharmacies. While purchasing in bulk directly from manufacturers could drive down costs, it's unclear as to how drugs will be dispensed and how local pharmacies will maintain a profit.

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MEDICAID'S IMPROPER PAYMENT RATE FOR FY 2018

DHHS has published its annual Agency Financial Report for FY 2018. The report provides an overview of improper payments in the Medicaid program, root causes for the payments, and corrective actions. In line with the agencies goal of reforming, strengthening, and modernizing the nation's healthcare system, HHS cites improved processes and technology solutions to strengthen the integrity of Medicaid and lower the program's improper payment rate.

IMPROPER PAYMENTS REDUCED 

Each year DHHS has set targeted improper payment rates. Despite not achieving their goal in the previous two years, the review does indicate a reduction. The improper payment rate in FY 2017 was 10.10 percent and in FY 2018 it was lowered to 9.79 percent. HHS says that the reduced rate is a result of the department's implemented strengthened reduction and recovery efforts.

MEDICAID'S CALCULATIONS AND FINDINGS

The report estimates that Medicaid improper payments made by recipients of federal funding amounted to $36.25 billion in 2018. The root cause categories for payments made in error included the inability to authenticate eligibility and access data ($11.6 billion), administrative or process errors ($16.6 billion), and insufficient documentation ($7.6 billion).

• National Medicaid gross improper payment estimate = 9.79 percent ($36.25 billion)
• National Medicaid net improper payment estimate = 9.63 percent ($35.67 billion)
• Medicaid FFS improper payment rate = 14.31 percent
• Medicaid managed care improper payment rate = 0.22 percent

ELIGIBILITY DISCOVERIES AND CORRECTIVE ACTIONS

To prevent future improper payments and improve eligibility verification processes, states found vulnerabilities in their systems and procedures with Eligibility Review Pilots. After evaluating Medicaid plans, the pilots identified eligibility errors stemming from caseworker and system vulnerabilities. The most notable discoveries were that states did not properly establish income of beneficiaries and there was insufficient documentation to make eligibility determinations. Much of the documentation needed was missing.

The corrective actions to help resolve these program weaknesses concentrate on training, system solutions, and improved processes for managing documentation. Specifically, the efforts include:

• Conducting provider training sessions and meetings with provider associations
• Issuing provider notices, bulletins, newsletters, alerts, and surveys
• Implementing improvements and clarifications to written state policies highlighting documentation requirements
• Performing additional provider audits to determine areas of vulnerability and target solutions

PROVIDER DISCOVERIES AND CORRECTIVE ACTIONS

The department's financial report shows that errors as a result of non-compliance involving provider screening, enrollment, and national provider identifier (NPI) requirements have been a major contributor to Medicaid's improper payments. The majority appeared either in instances where the information required from a claim was absent or states did not enroll providers with the appropriate process.

However, state compliance has improved and the program's FFS improper payment rate lowered 2.06 percent last year. The report also found that improper payments cited on claims of revalidated providers who were not properly screened at revalidation was a new major contributor to the rate. HHS will measure all states for provider revalidation compliance in FY 2020.

In order to reduce these process or system errors, state corrective actions consist of:

• Implementing new claims processing edits
• Switching to a more advanced claims processing system
• Continuing to implement provider enrollment process improvements to make it easier for ordering and referring providers to enroll in the program

HHS CITES THE NEED FOR MEDICAID IT SOLUTIONS

In order to reduce Medicaid's improper payments, the report recognizes the value of implementing IT solutions at the state level. States will need to update and improve their program's systems in order to be more efficient and strengthen integrity. HHS has authorized federal funding in nine states to implement analytics technologies that will be integrated into the state Medicaid Enterprise Systems. The state systems workgroup will also routinely meet to review program vulnerabilities and how they affect measuring improper payments.

HHS has also established a plan to update the data systems for Medicaid to alleviate state burden and improve the quality of data. The agency's hope is that by making use of technology solutions, Medicaid will have a more comprehensive data structure and improved oversight.

One effort, specifically, is the development of the Transformed Medicaid Statistical Information System (T-MSIS). T-MSIS will obtain high-quality data and minimize data requests from states. The system will aid in the submission of timely claims data, expand the MSIS dataset, and enable HHS to review the quality of submissions in real-time. Since August 2018, 48 states, Washington D.C., and Puerto Rico have started submitting T-MSIS data.


While DHHS is working to reform, strengthen, and modernize the nation's healthcare system, their recent report identified vulnerabilities that compromise the Medicaid program's integrity. Improper payments are costing billions of dollars and continue to occur due to obsolete systems, processes, and low-quality data. To achieve reduced improper payment rates in the future, the Medicaid program will need to implement innovative technology solutions.

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CA RFP FOR FFS RX BENEFIT MANAGEMENT

In January, California's newly appointed Governor  Governor Gavin Newsom authorized an executive order to significantly reform health care in the state. Executive Order N-01-19 introduced a number of actions and budget proposals to decrease the cost of prescription drugs and health care. One proposal, specifically, shifts all pharmacy services for Medi-Cal managed care to a fee-for-service (FFS) model.

Pharmaceutical drugs are one of the key drivers of growing health care costs. Last year the state's individual market experienced a 10% increase in health care costs and reports suggested the drug manufacturers planned to increase pricing in 2019.

FFS RX BENEFIT

At the moment, Medi-Cal acquires drugs with the aid of public and private purchasers that negotiate with manufactures independently. Under the FFS model, California would become the largest single payer of pharmaceutical drugs and the state would have increased bargaining power to negotiate prices with manufacturers.

Governor Newsom stated, "We will use our market power and our moral power to demand fairer prices for prescription drugs. And we will continue to move closer to ensuring health care for every Californian."

RFP # 19-96125

In July, DHCS sent out a request for proposals for managing the FFS pharmacy benefit. RFP # 19-96125 is requesting proposals for the takeover, operation, and ensuing turnover of administration of the FFS pharmacy services. Entities including commercial businesses, nonprofit organizations, state or public universities that fulfill the qualification criteria are eligible for submission.

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COST AVOIDANCE TECHNOLOGY FOR MEDICAID

Aside from climbing health care costs and increased spending from the program's expansion, Medicaid is losing billions of dollars a year from improper payments. Protecting the integrity of the Medicaid program has become a top priority for the Centers for Medicare and Medicaid Services (CMS). CMS and individual states are looking to technology for cost avoidance solutions to protect the program from fraud, waste, and abuse.

T-MSIS  

Earlier in the year, CMS and the US Comptroller General met with the Senate Homeland Security and Governmental Affairs Committee to go over the agencies initiatives to curb fraud, waste, and abuse. Administrator Verma testified and presented a variety of solutions geared toward audits, but in addition, she emphasized the importance of data optimization.

According to CMS, enhancing data will "drive toward better health outcomes and improve program integrity, performance, and financial management in Medicaid and CHIP."

Verma went on to present the Transformed Medicaid Statistical Information System (T-MSIS). The system partners with states to implement advanced analytics and technologies in the collection of health services data. T-MSIS monitors submitted key information such as beneficiary eligibility, beneficiary and provider enrollment, service utilization, claims and managed care data, and expenditure data. This data will make it possible for states to operate more efficiently and reduce costs.

At the moment, states access federal databases for data matching and the identification of improper payments. However, the data is not current, available, complete, or accurate. While T-MSIS is still being developed and is years away from completion, Medicaid plans will continue to lose billions of dollars.

MAIS

Each state is required to pursue the recovery of erroneous payments but they lack the technology and data to do so. Rhode Island and Texas have resorted to technology to strengthen and improve their Medicaid programs. Both states have enrolled in the Medical Assistance Intercept System (MAIS).

States submit Medicaid recipient records into the MAIS database and they are then matched daily with personal injury and workers' compensation insurance claims. The system identifies and provides plans with matches and outreach services. States can then issue a lien to the insurer using the data from these matches. MAIS can also file with the insurers on the state's behalf. At the time of settlement, Medical claims are then collected by the state.

Rhode Island started employing MAIS in 2013 to intercept payments for reimbursement to it's Medicaid program. All insurance companies who do business in the state were required to participate in the program.

According to the state, "The MAIS program and Rhode Island's Executive Office of Health and Human Services (EOHHS) hit a new total of $25 Million in liens in April 2019. Achieving an exceptional increase of 25% since lien amounts were last reported [in September], MAIS has exceeded expectations and continues to grow in both scale and scope with a record single lien of $2.6 million."

This year, Texas became the second state to implement the MAIS program. It is using MAIS as a cost control initiative and expects to offset medical assistance costs in the state.

ProTPL 

Outside of government-sponsored programs, there are a number of recovery services; however, none of them effectively reduce improper payments. More than a decade ago, Syrtis Solutions recognized the need for cost avoidance in the Medicaid program and created ProTPL, a real-time, prospective TPL solution for payers of last resort.

Formerly, plans would attempt to maintain data of each beneficiary to coordinate claims correctly. The constant flux of member eligibility, the complexity of coordinating benefits (COB), and the lack of quality data made this extremely challenging. The result was that claims were regularly paid in error and plans had to turn to 'pay and chase' to recover funds. The recovery efforts of these improper payments were also very costly.

The ProTPL program minimizes the need for post-payment recovery with accurate, useful, and real-time ePrescribing eligibility data. The tool seamlessly integrates into Medicaid plans existing processes and immediately decreases improper claims and the need for 'pay and chase.'

Lawmakers, government agencies, and plan administrators are focused on protecting the integrity of the Medicaid program and are turning to technology solutions to do so. Even though recovery efforts are necessary, Medicaid plans recognize that cost avoidance makes more sense. The technology needed to successfully cost avoid is now available from Syrtis Solutions.

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MEDICAID COSTS PUT EMPHASIS ON RECOVERY EFFORTS AND COST AVOIDANCE

In 1965, Title XIX of the Social Security Act established the Medicaid program to provide health care coverage to low-income individuals. Over time it has developed into one of the nation's largest payers for health care, covering one out of five Americans. In FY 2017, the jointly funded program made up 9.5% of federal spending. Because of Medicaid expansion and climbing health care costs, the program has become an even greater component of state budgets. To ensure that the program meets its goals and objectives, legislatures and plan administrators are working to improve program integrity by resolving its vulnerabilities.

COB Challenges

There are presently 56 unique Medicaid programs and each state is responsible for administering its program while remaining compliant to federal guidelines. These broad requirements give states the flexibility to determine covered populations, services, delivery models, and methods of payment. Additionally, states can also test and implement approaches outside of federal standards by obtaining Section 1115 waivers.

While the ability to tailor individual programs helps states meet their individual needs, problems emerge in the Coordination of Benefits (COB) and Third Party Liability (TPL), which is "the legal obligation of third parties to pay part, or all of the expenditures for medical assistance furnished under a Medicaid state plan."

Factors including the complexity of COB and TPL, the continuous flux of the Medicaid population, and uncoordinated eligibility data between federal and state systems leave the Medicaid program vulnerable to improper payments.

Medicaid Expansion Creates Added Complexity

Medicaid expansion has experienced intense debate after the Affordable Care Act revised Medicaid eligibility in 2010. Two years later, the Supreme Court ruled expansion optional and since then 37 states have chosen to expand their eligibility requirements. While more individuals are eligible for coverage, the increased population size has also added to the complexity of the program and emphasized the need for improved program integrity and recovery processes. Existing vulnerabilities, such as improper payments, must be resolved with effective cost avoidance solutions to help ensure the program's sustainability.

$36.2 Billion In Improper Payments

A High-Risk Issue from the Government Accountability Office (GAO) reported, "Medicaid covered about 75 million people in fiscal year 2018, at an estimated cost of $629 billion--$ 393 billion of which was paid by the federal government. CMS has projected that Medicaid spending will grow at an average rate of 5.7 percent per year from fiscal years 2017 through 2026. In fact, Medicaid spending is expected to reach $1 trillion by fiscal year 2026."

The GAO estimated that improper payments represented 9.8 percent ($36.2 billion) of Medicaid spending in 2018.

Medicaid has been on the GAO's high-risk list since 2003 due to the lack of federal oversight, it's size, and the complexity of the program. As health care costs increase and program eligibility expands, it is becoming a significant expenditure for the federal government and state budgets. Plan administrators need to implement cost avoidance technology solutions in order to save their plans money.

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CMS AUDITS MEDICAID IMPROPER PAYMENTS

Recent reporting from the HHS OIG and the Louisiana Auditor General have indicated a high rate of Medicaid improper payments as a result of inaccurately determining Medicaid eligibility. The Senate Finance Committee wrote CMS on March 1st to inform the agency of their concerns over the apparent lack of effort in recovering misspent federal money within the Medicaid program. They emphasized, "that the government needs to do more to uphold Section 1903(u) and safeguard the integrity of the Medicaid program."

The letter declared, "The apparent lack of effort in recouping misspent federal money is problematic. Recent reviews by HHS OIG of beneficiaries made newly eligible by the Patient Protection and Affordable Care Act, also known as Obamacare, found more than seven percent of beneficiaries were potentially ineligible in Kentucky, more than 25 percent were potentially ineligible in California, and more than 30 percent were potentially ineligible in New York. In Louisiana, a state Department of Health audit found an astounding 82 percent of recipients ineligible in a random sample ... Furthermore, if states accidentally enroll an individual as an expansion enrollee instead of a traditional enrollee, states are perversely, and significantly, rewarded for their error, unless the federal government subsequently takes action to recoup those mistakenly paid funds."

As a result, CMS is in the process of carrying out audits on the Medicaid plans of California, New York, Kentucky, and Louisiana. While the agency will not have the power to recoup improper payments detected by the audits, the audits will, "determine whether beneficiary eligibility was adjudicated appropriately for the new adult group and whether services for beneficiaries in the new adult group were assessed the correct Federal Medical Assistance Percentage (FMAP)."

MEDICAID IMPROPER PAYMENTS RECOVERY INITIATIVES

In spite of not having the authority to recover payments made in error, there have been regulatory changes made recently that could allow for some form of recovery. CMS Administrator, Seema Verma, also stated that "CMS does have authority to issue disallowances, and, in certain circumstances, states are required to return overpayments." This authority is part of the Payment Error Rate Measurement program (PERM) that begins in 2022.

Additionally, CMS is also escalating its oversight in relation to eligibility determinations for expansion populations. The agency will seek states to provide, "documentation to clearly articulate how individuals in the Medicaid adult group are accurately determined, categorized, and claimed in state systems to ensure that claims are appropriately applied to the correct eligibility category and ultimately reported at the proper FMAP rate."

Medicaid improper payments are threatening the integrity of the Medicaid program and legislators are concerned. The Senate Committee on Finance reached out to CMS to address the problem. As a result, the agency is conducting a number of audits to ensure that the proper adjudication processes are in place and that states are compliant.

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LEGISLATION FAILS TO LOWER IMPROPER PAYMENTS IN GOVERNMENT-FUNDED PROGRAMS

Legislation like the Improper Payments Information Act (IPIA P.L. 107-300) and Executive Order 13520 looked to address improper payments in government-funded programs. IPIA ordered federal agencies to report on the number of improper payments occurring and lay out what measures are being taken to lower them. Order 13520 worked to pinpoint high-priority programs and increase transparency. Agencies were required to submit projected reduction estimates and specifics on how they would work to obtain them. Despite these pieces of legislation, government-funded programs continue to lose billions of dollars due to payments made in error.

According to the GAO, federal entities estimated about $141 billion in improper payments in 2017. The Congressional Research Service (CRS) also reported and discovered that the 20 high-priority programs identified as a result of Order 13520, accounted for 96% of the $141 billion. In the years ahead, the CRS anticipates that these programs will account for 90% of all improper payments.

STATUTE COMPLIANCE ISSUES

In their improper payment reporting, the GAO has regularly brought up the following four compliance issues:

• Federal entities struggle to collect accurate eligibility data.

• Agencies do not have reliable methods for identifying improper payments.

• Entities fail to steer resources towards compliance efforts mandated by law.

• Agencies go through the motions and see the compliance measures as a way to keep oversight at bay.

Surprisingly, while agencies struggle to comply with statues to report on improper payments, none of them require that agencies decrease payments made in error. Consequently, improper payment rates continue to rise and agencies engage in costly measures to report.

The CRS report specified, "nearly half of the high-priority programs have shown no improvement. Specifically, the error rates for seven programs have increased since they first began reporting data, and the error rate for one program has remained unchanged. Moreover, while the error rates for twelve programs have decreased, the decline has been less than 10% for five programs. In some cases, program error rates have not improved."

IMPROPER PAYMENTS LOWERED WITH QUALITY DATA

To reduce improper payments, the federal government will need to make a focused effort in targeting the root causes for these payments within high priority programs while at the same time implementing technology solutions.

CMS is one agency in particular that successfully implemented existing initiatives and innovative processes, such as its Fraud Prevention System, to deal with improper payments within its programs. Following the compliance efforts established in the Improper Payments Elimination and Recovery Act of 2010 (H.R. 3393), last year CMS reported its lowest improper payment rate in eight years.

The agency's Fraud Prevention System is an IT solution that takes advantage of data analytics to detect when mistakes or intentional behavior may result in improper payments or indicate fraud. CMS says that the system will yield a 20% savings increase.

According to the agency, "CMS employs multi-faceted efforts to target the root causes of improper payments, with an emphasis on prevention-oriented activities. Actions to prevent and reduce improper payments include: policy clarifications and simplifications; prior authorization initiatives that ensure applicable coverage, payment, and coding rules are met before services are rendered; a targeted probe and educate medical review strategy that focuses on outlier providers, limits the number of medical records requested, and puts emphasis on education and assistance in correcting claims errors; and provider education on Medicare policy."

Legislation has helped to bring the problem of improper payments into focus for agencies and government officials. Having said that, the statues directed by legislation are costly and primarily revolve around compliance and reporting as opposed to reducing improper payments. In order to stop improper payment rates from rising further, agencies need to look to innovate quality data solutions to identify and prevent fraud, waste, and abuse.

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HB 3388 SEES SIGNIFICANT CHANGES

2019 has been a busy year for healthcare legislation in Texas and one proposal, in particular, intended to carve out PBM's altogether. House Representative J.D. Sheffield (R) introduced HB 3388 on March 6th in an attempt to reform the delivery of prescription drugs to a fee-for-service model for Medicaid and various other public benefit programs. However, during its time in the House, it went through a series of significant changes.

INTRODUCED HB 3388

Initially, HB 3388 was directed toward the delivery of outpatient prescription drug benefits. It proposed extreme changes such as:

• Replacing the vendor drug program with a fee-for-service delivery model.

• HHSC would eliminate any requirement to pay fees included in the capitation rate or other amounts paid to MCOs related to the provision of outpatient prescription drug benefits.

• If HHSC contracts with a claims processor to administer the outpatient prescription benefit program, HHSC would then reimburse the claims administrator for the prescription drugs and a contracted administrative fee.

• HHSC would apply clinical prior authorization requirements state-wide and use prior authorizations to regulate unnecessary utilization.

• HHSC contracts with MCOs would be changed to prohibit the MCO from providing outpatient prescription drugs by December 31, 2019, and would restrict an MCO from developing, implementing, or maintaining an outpatient pharmacy benefit plan for recipients beginning on the 180th day after the date HHSC begins providing outpatient prescription drug benefits.

COMMITTEE SUBSTITUTE

During its time in the House, the bill's focus shifted and the committee's substitute did not include any provisions from the original. CSHB 3388 changed course and focused on the reimbursement of prescription drugs under Medicaid and CHIP rather than the delivery of drug benefits. Under the revised version:

• MCOs providing services under Medicaid or CHIP would be mandated to reimburse retail and specialty pharmacies a minimum of the lesser of the reimbursement amount for the drug in the vendor drug program, including a dispensing fee that is not less than the dispensing fee under the vendor drug program, or the amount claimed by the pharmacy or pharmacist, including the gross amount due or the usual and customary charge to the public for the drug.

• MCOs would be required to reimburse pharmacies that dispense a prescription drug at a discounted price under Section 340B of the Public Health Service Act not less than the reimbursement amount for the drug under the vendor drug program, including a dispensing fee that is not less than the dispensing fee under the vendor drug program.

• HHSC would perform a study every two years to analyze Texas pharmacies' actual acquisition costs and dispensing cost.

• Bill 3388 would take effect on March 1, 2020.

Supporters of the bill believe that pharmacies would get fairer reimbursement of prescriptions filled for Medicaid and CHIP. They point out that the bill would improve transparency since it would use NADAC as a pricing benchmark. It would also not affect which drugs the programs covered.

On the other hand, opponents say that the bill has the potential to raise state costs by changing reimbursement methodology. Their position is that PBMs help to negotiate the best possible deals and protect patients from being prescribed unnecessary medications. They are concerned that the bill would negatively affect patient outcomes while increasing ER visits and opioid prescription rates and decrease medication adherence.

HB 3388 was voted on in the House on May 4th and it has been referred to the Health and Human Services Committee. If the bill is approved it will surely impact healthcare within the state. While the revised bill does not include a pharmacy carve out, it's a clear indication that lawmakers are focused on rising healthcare and prescription drugs costs and what they can do to remedy the problem.

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THE IMPACT OF CALIFORNIA'S PHARMACY CARVE OUT

At the beginning of 2019, California's governor signed an executive order instructing DHCS to utilize a fee-for-service model for Medi-Cal. Under the order, The state of California would consolidate its purchasing power and leverage its population size to achieve lower drug costs by purchasing in bulk from pharmaceutical drug companies. Additionally, DHCS has been assigned with the task of producing a list of twenty-five of the most expensive drugs that would be included in the negotiations with manufacturers.

In between 2018 and 2019, spending on pharmacy services reached $8 billion in California and most of pharmacy spending took place under the managed care delivery model. According to the Legislative Analyst's Office (LAO), carving out managed care pharmacy services could lead to hundreds of millions in savings annually. That being said, the savings could come at a cost to stakeholders such as enrollees, pharmacies, providers, and MCO's. Just recently, the LAO released a report that assesses what the move could mean for the state and Medi-Cal's stakeholders.

The LAO's analyses identified the following possible impacts of the carve-out:

IMPACT ON NON-CONSUMER STAKEHOLDERS

Reduction in Retained 340B Earnings for Eligible Providers

"By transitioning Medi-Cal pharmacy services entirely to a FFS benefit, 340B eligible providers would no longer be able to generate earning on any pharmacy dispensed drugs paid for by Medi-Cal. Rather, these earnings would largely convert into state savings in the form of lower prescription drug expenditures."

Decrease in Backing for Medi-Cal Managed Care Plans

"Funding for Medi-Cal managed care plans would likely be reduced by between 15 percent and 20 percent under the carve-out. A portion of the reduction would likely come from existing Medi-Cal managed care plan funding for purposes such as administration, care coordination, reserves, and profits."

Minimal Impact on Pharmaceutical Manufacturing Industry

"The carve out is unlikely to have a major impact on earnings for the drug manufacturing industry overall, both in the state and nationwide. Selected drug manufacturers, however, may pay higher negotiated supplemental rebates to the state in exchange for greater utilization of their drugs in Medi-Cal through placement on a more widely applicable Medi-Cal wide preferred drug list."

Likely Increase in Funding for Pharmacies

"Pharmacies will potentially benefit from increased funding under the carve-out due to (1) (absent any changes) the higher dispensing fees paid by Medi-Cal FFS compared to Medi-Cal managed care plans and (2) the larger network of pharmacies serving Medi-Cal FFS compared to individual Medi-Cal managed care plans. A portion of the increase in funding may be offset by lower reimbursement for the drugs since Medi-Cal FFS, but not Medi-Cal managed care, pays pharmacies at close to pharmacies' costs in acquiring their drugs."

IMPACT ON BENEFICIARY ACCESS AND CARE

Statewide Standardization of the Medi-Cal Pharmacy Services Benefit

"While the standardization of the Medi-Cal drug benefit under the carve-out has potential to improve care from a beneficiary perspective in the long run, the transition to FFS could result in beneficiaries losing ready access to drugs they are currently taking. As such, the Legislature may wish to consider continuity of care protections for beneficiaries currently utilizing prescription drugs."

Expansion of the Pharmacy Network Where Beneficiaries Can Obtain Prescription Drugs

"According to the administration, Medi-Cal's FFS pharmacy network extends to almost all pharmacies throughout the state. Transitioning pharmacy services coverage to a FFS benefit could give Medi-Cal enrollees greater choice in where they obtain their prescription drugs."

Less Timely Prescription Drug Utilization Information for Medi-Cal Managed Care Plans

"While DHCS provides FFS prescription drug utilization data to managed care plans on behalf of their members for currently carved out drugs, it is our understanding is that this data does not arrive from DHCS in a timely enough manner to assist plans' care coordination activities."

Opioid Curtailment Programs

"These initiatives have likely contributed to dramatically reducing the number and potency of opioid prescriptions among Medi-Cal members. Under the carve-out, it is uncertain whether such initiatives by Medi-Cal managed care plans would continue."

At this point, California's administration has not published information on how the order will be carried out and they have yet to release any information on how stakeholders may be impacted. In order to help the state's legislators understand what the carve out could mean for the state, the LAO also specified outstanding details that should be addressed prior to the change. These include:

• Overall Fiscal Estimate
• What New State Resources Are Needed to Administer the Entire Medi-Cal Pharmacy Services Benefit?
• How Would State Information Systems Be Improved to Maintain or Improve Existing Managed Care Plan Care Coordination?
• Managed Care Plans' Continued Role in Coordinating the Medi-Cal Pharmacy Services Benefit in Conjunction With Their Members Overall Health Care

Reducing prescription drug prices is a major concern for states at this point and California's effort is merely one approach. Aside from transitioning to a fee-for-service model, there are also a variety of alternate methods. While the state sorts out the details of its transition, the analyses from the LAO also includes four alternative options that could be used in place of a complete carve out.

1. Universal Medi-Cal Preferred Drug List Spanning FFS and Managed Care.
2. Transfer Savings From 340B Drug Discounts in Medi-Cal to the State
3. Formalize the Use of Cost-Effectiveness Analysis for Preference of Drugs in Medi-Cal
4. Adopt a Medi-Cal Prescription Drug Spending Cap

At the end of the analyses, the report made two specific recommendations to state legislatures due to the uncertainty surrounding the order and its possible impact. First and foremost, the LAO recommended that strong oversight should be in place before the implementation. They also suggested that the state condition resources for implementation based off of key details provided by DHCS.

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LOWERING MEDICAID'S PRESCRIPTION DRUG COSTS

Since state Medicaid programs are responsible for the healthcare of a number of populations, increasing pharmaceutical drug costs have become a major budgetary concern. Currently, health care spending is dominating a number of their budgets and on a per capita basis, inflation-adjusted retail prescription drug spending has increased from $90 in 1960 to $1,025 in 2017.

As a result of the pressure from these rising costs, states are turning to a variety of approaches to rein in costs with the use of legislation and revised purchasing models. While the impact of politics and policy are unclear, both Medicaid enrollment and drug costs continue to rise. For that reason, it will be important for state Medicaid programs to examine every opportunity to improve efficiency.

CALIFORNIA TURNS TO SINGLE PURCHASER MODEL

In California, Medi-Cal alone uses 15% of the state's general funds, and over the last several years, the proportion of the population on Medi-Cal has reached 29%. With nearly one-third of the state's population enrolled in the program, California's Governor, Gavin Newsom, signed an executive order in January to consolidate the state's purchasing power in order to negotiate lower drug prices.

The order is part of the governor's "California For All" agenda and is scheduled for implementation on January 1, 2021. Having said that, in order for the change to go into effect, it will need approval from CMS and it is uncertain as to how they will react to the ambitious proposal.

OHIO: PASS-THROUGH PRICING

In 2018, Ohio announced that its managed care plans could no longer contract with PBMs that employ "spread pricing". The state's Medicaid department objects to the payment model since it lacks transparency and also because PBMs can profit from it by purchasing the medication from a dispenser at a lower rate than what they bill plan providers.

Starting in January, The Ohio Department of Medicaid required that MCOs use "pass-through" payment models to promote transparency and reduce costs. Under the new payment model, Medicaid plans are billed the same amount for pharmaceutical drugs that a PBM purchases them for. PBMs are then paid an administrative fee for each prescription filled.

WEST VIRGINIA: FEE-FOR-SERVICE

In West Virginia, employee health plans were paying 1% more for pharmacy claims than the PBMs paid the dispensing pharmacy. Lawmakers calculated that the 1% cost the state $10 million each year and made a decision to eliminate the use of PBM's completely.

Since then, West Virginia has returned to a fee-for-service model that employs the help of West Virginia University to identify which medications are offered. The Bureau of Medical Service's Office of Pharmacy Services (OPS) then purchases each prescription.

COST SAVINGS FROM IMPROPER PAYMENTS

Even though the state's administrative initiatives could alleviate some pressure, they also need to understand that there is a tremendous amount of opportunity for cost savings in relation to improper payments.

Improper claims payments in the Medicaid program have become a $37 billion dollar problem and a common misconception surrounding these payments is that they are primarily a consequence of fraud and abuse. While fraud and abuse do add to payments made in error, they only account for 43% of improper payments. The majority of these payments actually arise from Third Party Liability (TPL) identification issues.

Improper payments take place in government-funded health care systems for three reasons:

1. The Coordination of Benefits (COB) and identifying TPL is complicated. It requires timely data and the management of several data sources.
2. The Medicaid population has a high rate of churn and is in near-constant flux.
3. Eligibility data is not coordinated among federal and state systems and is often unreliable.

Up until now, there has been no reliable way to identify unreported primary health coverage. For the sole purpose of supporting the TPL needs of Medicaid programs, Syrtis Solutions offers a proactive cost avoidance approach to improper payments. By leveraging e-prescribing, the company has the ability to access active Rx coverage while identifying the corresponding medical coverage as well. This means that Medicaid plans can prospectively cost avoid pharmacy and medical claims accurately and timely. Additionally, their solution can target beneficiaries that are actually generating claims rather than trying to maintain data on each plan member.

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LEGISLATORS QUESTION OVERSIGHT OF MEDICAID IMPROPER PAYMENTS

Medicaid has been determined a high-risk program by the GAO since 2003 due to its size, growth, diversity and oversight challenges concerning improper payments, proper use of program dollars, and data. In fiscal year 2018, improper payments represented about 9.8% of the programs total spending of $36.2 billion. Just recently, members of the Senate Finance Subcommittee on Health Care have spoken out against these payments made in error. Republican Senators, Pat Toomey, and Chuck Grassley are behind the effort and are aiming to improve the program's oversight and integrity in order to reduce improper payments. This initiative comes after various bipartisan initiatives over the last seventeen years.

In a letter written to CMS administrator, Seem Verma, the senators stated, "To maintain public confidence in such a large commitment of national resources, it is essential to ensure these dollars are spent as Congress intended-namely, to provide specified health and long-term care services for low-income Americans, with a historical focus on the aged, disabled, children, and families. Unfortunately, governmental efforts to ensure Medicaid payments are spent prudently have fallen short." 

The senators, "believe that CMS' past actions have ignored its requirements under the law and are concerned that the July 5, 2017, final rule will perpetuate many of the weaknesses that characterized the previous enforcement regime."

Under the joint federal-state program, the federal government covers about 58% of the health care costs of Medicaid beneficiaries while the states are accountable for the remaining amount. Legislation, such as The Patient Protection and Affordable Care Act, was ruled into law to enact additional rights and protections that would increase coverage and make it more affordable. However, the legislation came at a higher cost to taxpayers and properly categorizing enrollees has proven to be difficult.

Due to the growth in enrollment, the risk of improper payments has increased and is more reason to efficiently oversee program funds. By law, Medicaid is a payer of last resort program, required by Congress to make every effort necessary to recover improperly spent dollars. Unfortunately, in the last twenty years, there has been little effort to recover payments made in error.

In their letter, the senators stated their interest in wanting to help resolve the problem with CMS. They explained, "Our offices would like to work with you on our shared goal of ensuring that the government complies with the intent and plain language of Section 1903( u) of the Social Security Act by discouraging systematic and routine errors in Medicaid eligibility determinations by states."

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HOW TRUMP’S 2020 BUDGET PROPOSAL AFFECTS MEDICAID

The Trump administration released its 2020 budget proposal on Monday and it gives some insight into the president’s priorities. The budget includes $1.9 trillion in cost savings for Medicaid and other safety net programs. According to the administration, A Budget For A Better America will balance the nation’s budget by 2030 and promote economic prosperity. Despite its major reductions for welfare programs and increases in defense spending, Congress will be the primary decision maker and the budget is unlikely to pass on Capitol Hill.

President Trump’s budget is the largest in federal history and includes spending increases for defense and border security while reducing costs of Medicaid, Medicare, and disability programs. The proposal will cut spending by $4.6 trillion over a ten-year period. That equates to 9% of the country’s $53.5 trillion projected spending over that time. 

The White House Chief of Staff, Mick Mulvaney, believes the proposal will favor taxpayers. He stated, “This is, I think, the first time in a long time that an administration has written a budget through the eyes of the people who are actually paying the taxes.”

Chris Edwards is the director of tax policy studies at the CATO Institute. Edwards evaluated the administration’s proposal and stated, “Cuts would reduce federal deficits, which have plagued the government since the turn of the century. The budget’s spending cuts are being called cruel and heartless, but chronic deficits are imposing huge costs on young Americans down the road, which is totally unethical.”

The proposal is finding support among conservative groups due to its focus on economic growth, increased Medicaid eligibility checks, and in that it promotes self-sufficiency versus dependence on government-funded welfare programs.

Kristina Rasmussen, Vice President of Federal Affairs at the Foundation for Government Accountability (FGA) commented, “With no real incentive in place for individuals to leave the program, the welfare system has transformed from a safety net originally intended to serve the truly needy into a trap for able-bodied adults, many of whom report no income.”

Critics, on the other hand, view the budget as extreme and harsh since it will prevent people, who rely on welfare programs, from accessing the support they need. They point out that the budget breaks key campaign promises as Trump approaches the 2020 elections.

Senator Amy Klobuchar, (D)-MN says, “The President has proposed a budget that cuts hundreds of billions of dollars from domestic programs like Medicare and environmental protections. But he still found billions of dollars for his wall. We need a smart budget, not one based on empty campaign promises.”

Senator Kamala Harris (D)-CA commented on the budget saying, “This would hurt our seniors and is yet another piece of evidence for why we need a new president.”

Despite their criticism, the administration denies that the president wants to cut from these programs. In addition, they point out that the previous administration reduced Medicare spending.

The Office of Management and Budget Deputy Director, Russ Vought, testified in front of the House Budget Committee. According to Vought, “The President doesn’t believe he’s breaking his commitment to the American people at all. There are no structural changes to Medicare. There is no cut to Medicare. Medicare continues to grow each and every year.“

In 2000, federal spending for the Medicaid program was at $118 billion. In almost twenty years, that amount has climbed to $389 billion. The cost is unsustainable and a driving factor in why Trump wants to cut $200 billion from Medicaid and $800 billion from Medicare.  Additionally, the budget also introduces block grants for states in an effort to save $610 billion in tax dollars over the next 10 years.

The budget could be a starting point to reduce debt and an opportunity for states to have more control and flexibility in managing their programs. Additionally, health consumers may have more control over their insurance to make it more affordable. In order to accomplish this, the budget includes association health plans and short-term plans for the uninsured.

Kristina Rasmussen says, “The Trump administration has outlined a plan to move government out of the way, take down nonsensical barriers to work, and promote a safety net that encourages upward mobility to empower more Americans to win.”

Salim Furth is a Former Research Fellow from Heritage’s Center for Data Analysis. He determined, “A restoration of growth will not, however, follow automatically from enacting the president’s agenda. A lot of other things have to go right as well as policy. So the president’s plan to eliminate the deficit and control the debt should not depend so much on things outside his control. Limiting the growth of entitlement spending would be a more certain path to balance than relying on historical forces.”

Currently, the nation’s debt is unsustainable and safety net programs are continuing to grow at accelerated rates. In an attempt to remedy the situation, the president has introduced his 2020 budget proposal, A Budget For A Better America. It aims to make major reductions that would significantly impact Medicaid and Medicare. Despite criticism over the president’s budget proposal, large reforms will be necessary as the debt continues to climb.

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STATES ACT TO LOWER MEDICAID PRESCRIPTION DRUG COSTS

In 2018's legislative session, 45 laws were passed by 28 states to focus on the problem of prescription drug costs. Aside from these legislative initiatives, administrative measures are also being taken to make improvements to the management of Medicaid pharmacy benefits spending. Ohio, West Virginia, and California are a few of the states exploring and implementing administrative efforts to reduce drug costs.

Medi-Cal Aims To Negotiate Prescription Drug Costs

California is looking to legislative measures to address drug costs. The state's governor, Gavin Newsom (D) authorized an executive order in January that would make Medi-Cal responsible for negotiating drug costs with pharmaceutical companies directly by 2021. The order would utilize a singular purchaser model and leverage the purchasing power of the state's Medicaid population of 13 million.

Despite turning to a singular purchaser model, the order also enables parties such as private payers, small businesses, self-insured employees, and local governments to collaborate in the negotiations with drug manufacturers.

Supporters view the order as a chance to reduce the cost of high priced drugs by making them more common. In addition, they believe that the model has the potential to be beneficial at the federal level. Critics on the other hand, are worried that the formularies would no longer be handled by managed care plans. Thereby leading to denied prescriptions and jeopardizing patient's access to care and provider satisfaction. At this point, the governor's order will need federal waivers before it can be implemented.

Ohio Medicaid Adopts Pass-Through Pricing Model

Last year, Ohio announced to its managed care plans that they could no longer contract with PBMs that use "spread pricing". The Ohio Medicaid Department objects to this payment model due to its lack of transparency and the fact that PBMs can profit from it by buying the medication from a dispenser at a lower rate than what they charge plan providers. A state investigation evaluated the payment model's impact and revealed that it contributed to an 8.8% markup on pharmacy claims; enabling PBMs to collect $5.70 on each drug filled.

Starting January 2019, The Ohio Medicaid Department has directed that MCOs adopt "pass-through" payment models that promote transparency in order to reduce the program's costs. Under the new payment model, Medicaid plans are billed the same amount for prescriptions that a PBM buys them for. PBMs are then given an administrative fee for each prescription filled. The fee is estimated to be between $0.95 and a $1.90.

West Virginia Carves Out PBMs

After an audit, West Virginia found that employee health plans were paying 1% more for pharmacy claims than the PBMs paid the dispensing pharmacy. Because of this, the state made a decision to eliminate the use of PBMs entirely. Lawmakers concluded that the 1% cost the state $10 million each year.

Rather than rely on managed care for state employee and Medicaid beneficiary pharmacy benefits, West Virginia has returned to a fee-for-service model. With the aid of West Virginia University, the state has identified which medications should be available and the Bureau of Medical Service's Office of Pharmacy Services (OPS) pays for each prescription. According to West Virginia's pharmacy board, the state saved $38 million in its first year after the administrative reform.

States are concerned over rising prescription drug costs and the lack of pricing transparency with PBMs. In response, lawmakers have taken legislative and administrative efforts such as alternate payment models to rein in these costs.

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