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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