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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