MEDICAID IMPROPER PAYMENTS REACH $86.49 BILLION

Medicaid is the single largest payer of health care in the country. As the program has increased in size and scope, it has dealt with fraud, waste, abuse, and improper payments. Over the years, there have been several federal initiatives to rein in costs; nevertheless, Medicaid has remained on the GAO's High-Risk List since 2003. Last month, CMS reported on fiscal year 2020 Medicaid estimated improper payments.

CMS recently announced, "the FY 2020 national Medicaid improper payment rate estimate is 21.36 percent, representing $86.49 billion in improper payments." Improper payments in the Medicaid program now account for more than twenty percent of federal Medicaid expenditures and one out of every four Medicaid dollars is spent improperly.

CMS estimated FY 2020 Medicaid improper payments with the PERM program by examining claims submitted between July 1, 2018 and June 30, 2019. They noted that the 2020 estimates are not comparable to previous years due to the reintegration of the PERM eligibility component. In the most recent report period, adjustments were made to include ACA requirements. The report revealed that eligibility errors are driving Medicaid improper payments. In many cases, program recipients are ineligible either because of their income or they are not lawful residents. The report cited the following as the primary contributors to the rise in improper payments:

• Eligibility errors from insufficient documentation to confirm eligibility determinations and non-compliance with redetermination requirements.
• Non-compliance with provider revalidation of enrollment and rescreening.
• Non-compliance with provider enrollment, screening, and NPI criteria.

While reporting on improper payments brings the problem into focus, it does nothing to mitigate them. States and Medicaid plans must find ways to strengthen program oversight to minimize payments made in error.

It is important to note that improper payment rates are not necessarily indicative of fraud. Actually, many improper payments are the result of low quality data and outdated methodologies. This is evident when states attempt to coordinate benefits but struggle to identify liable third parties of pharmacy and medical claims. Currently, the majority of the data that states access for TPL discovery is not current, available, complete, or correct. Without reliable, complete, and accurate data, Medicaid plans cannot help but make claims payments in error.

Syrtis Solutions (Syrtis) saw the need for a remedy to reduce the improper payment rate within the Medicaid program. Syrtis is unique in that it uses e-prescribing eligibility data to provide the payer of last resort market with a technology-based solution to prospectively cost avoid pharmacy and medical claims. By implementing ProTPL, Medicaid plans can maximize the efficiency of their adjudication processes while saving valuable resources.

Millions of Americans are looking to Medicaid for health care because of the pandemic driven recession. Simultaneously, improper payments are costing the program billions of dollars when resources are needed most. Moving forward, accurately identifying claims before they are paid, and cost avoidance measures will be critical steps to maximizing program efficiency.

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NOVEMBER MEDICAID NEWS RECAP

Syrtis Solutions distributes a monthly Medicaid news summary to help you stay informed. The monthly summary concentrates on developments, analysis, and legislation that relates to Medicaid integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a summary of last month's noteworthy Medicaid news.

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MEDICAID MANAGED CARE FINAL RULE

Medicaid's Managed Care Final Rule, CMS-2408-F, was finalized in November. The new rule implements recommendations from the Notice of Proposed Rule Making from last November. Provisions from the policy will begin taking effect as early as December 14, 2020.

According to Medicaid enrollment data from 2018, 66 million people are enrolled in managed care, making managed care arrangements the primary delivery system for Medicaid benefits. To assist these programs, the rule cuts back administrative burdens on Medicaid managed care plans and provides states more flexibility to determine capitation rates and appropriate payment rates.

These regulations were last finalized by the Obama administration in 2016. Shortly after the Trump administration transitioned into office it started a "full review of managed care regulations to prioritize beneficiary outcomes and state priorities." The administration sent letters to state governors for input on how to more effectively manage the Medicaid program and improve health outcomes.

In response, states pointed out that the 2016 regulations added cost and additional administrative burdens to Medicaid programs. With the support of state Medicaid directors and the National Association of Medicaid Directors (NAMD), CMS determined the problematic areas from the 2016 regulations. In the Notice of Proposed Rule Making in 2018, the group proposed methods to improve federal oversight, state flexibility, beneficiary protections, fiscal integrity, and the delivery of quality care.

According to CMS, "This rule finalizes many of those proposals and helps ensure that state Medicaid and CHIP agencies are able to work efficiently and effectively to design, develop, and implement Medicaid and CHIP managed care programs that best meet each state's local needs and populations."

CMS-2408-F makes changes in the following managed care regulations: setting actuarily sound capitation rates, pass-through payments, state-directed payments, network adequacy standards, risk-sharing mechanisms, quality rating system appeals and grievances, and requirements for beneficiary information.

That being said, the new rule does not fully revise the 2016 regulations. The most notable revisions appear in capitation rates and payments, network adequacy standards, requirements for beneficiary information, and quality ratings and oversight.

Capitation Rates and Payments-
States are authorized to set capitation rate cell ranges as opposed to a single rate per cell. States are restricted from changing capitation rates based upon the amount of federal aid for a population that would raise federal costs. States cannot add or adjust risk-sharing mechanisms after the beginning of a rating period. The rule establishes two minimum fee schedules for directed payment arrangements from plans to providers. States transitioning a population from FFS to managed care are authorized to make supplemental pass-through payments for up to 3 years.

Network Adequacy Standards-
States are no longer obligated to create and enforce enrollee travel time and distance standards. Alternatively, states can set a quantitative adequacy standard.

Requirements for Beneficiary Information- 
Mandated taglines are only necessary for materials that are critical to receiving services instead of all written materials. Provider directories are to be updated quarterly rather than month-to-month. Managed care plans can issue notice of provider terminations to the later of 30 days before the effective date of the termination or 15 days after the receipt or issuance of a termination notice.

Quality Rating System (QRS)-
The rule only requires that states alternative managed care quality rating systems (QRS) secure information comparable to the CMS QRS whenever it is feasible. States can now expand the definition of disability in regard to health disparities within their quality strategy, however, they are not obligated to. On a yearly basis, states must post which plans are exempt from external quality review.

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OCTOBER MEDICAID NEWS RECAP

Syrtis Solutions publishes a monthly Medicaid news summary to help you stay informed. The monthly summary focuses on developments, analysis, and legislation that pertains to Medicaid integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a summary of October's notable Medicaid news.

Read it here. 

MEDICAID ENROLLMENT SPIKED 5.7%

Data from the federal government shows that more than 4 million individuals enrolled in the Medicaid program this spring due to the pandemic driven economic downturn. The 5.7% spike came after the swell in unemployment and the loss of corresponding employer-sponsored healthcare. In response to the Coronavirus and the economic decline, the CARES Act was passed in March. The bill restricted states from disenrolling beneficiaries and scaling back program eligibility during the course of the public health crisis.

Prior to the Coronavirus pandemic, there had been a decline in Medicaid enrollment since 2017. This year's rise in enrollment amounted to over 2.4 million adults and 1.4 million children. By June, CMS determined that 68 million people were enrolled in the Medicaid program, and 6.7 million children enrolled in CHIP.

Even with the considerable flux, healthcare analysts anticipated an even higher Medicaid enrollment rate. However, their predictions were not met since some employees were only temporarily laid off and retained their employer-sponsored coverage. Furthermore, Medicaid enrollment normally trails behind unemployment in an economic decline.

Unfortunately, these temporary furloughs are becoming permanent in many cases. The CBO predicts that in 2021 Medicaid and CHIP enrollment will grow by an additional 9 million people. Their estimate takes into account the stipulations of the CARES Act and the pandemic's economic impact.

Earlier this year, the federal healthcare exchange also experienced additional activity. Compared to 2019, enrollment rose by 46% in the first two quarters of 2020. Almost half a million people who lost health insurance turned to the exchange for coverage. State-run exchanges with special enrollment periods also had higher utilization.

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MEDICAID NEWS SUMMARY - SEPTEMBER 2020

Syrtis Solutions distributes a monthly Medicaid newsletter to help you stay informed. The newsletter focuses on legislation, insights, comments, and industry developments pertaining to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse. Here is a summary of last month's noteworthy stories.

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MEDICAID NEWS RECAP - AUGUST 2020

Syrtis Solutions publishes a monthly Medicaid newsletter to help you stay informed. The newsletter concentrates on legislation, insights, comments, and industry developments pertaining to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse. Here is a summary of last month's noteworthy stories.

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PRESCRIPTION DRUG COSTS LEAD TO CARVE-OUT IN OHIO

Aside from the pandemic driven economic recession and the consequential surge in Medicaid enrollment, rising prescription drug costs in the Medicaid program have caused tremendous fiscal pressure on state budgets throughout the years. In 2017, prescription drugs accounted for 5.1 percent of Medicaid benefit spending, and this expenditure continues to rise. States typically utilize managed care organizations and pharmacy benefit managers (PBMs) to deliver pharmacy benefits and lower prescription drug costs. That being said, a handful of states have opted to carve-out pharmacy benefits and move to fee-for-service (FFS) models. In July, Ohio became the most recent state to shift from its managed care model and released a RFP for a single pharmacy benefit manager (SPBM).

The carve-out approach reduces drug costs by centralizing a state's purchasing power, allowing it to take advantage of the size of its population to negotiate drug prices with pharmaceutical manufacturers directly. Right now, Tennessee, West Virginia, Wisconsin, and Missouri have carved-out their pharmacy benefits. Because of the potential savings from FFS models, some other states are now considering carve-outs and other methods to drive pharmacy costs down.

OHIO RFP FOR SINGLE PHARMACY BENEFIT MANAGER 

Over the last five years, there has been criticism of how Ohio Medicaid PBMs oversee the state's prescription drug program. After complaints of overcharging, double-dipping, anti-competitive practices, and transparency concerns, the state legislature mandated that the state selects a SPBM to manage prescription drugs. In addition, the SPBM would contract with the state directly to increase transparency.

Last month, the Ohio Department of Medicaid (ODM) released a request for proposal to change the agency's managed care program and carve-out pharmacy benefits. Ohio intends to improve and build on administrative efforts that will increase transparency and financial accountability. According to ODM, implementing a SPBM will help the Medicaid program by reducing costs, alleviating administrative burdens, and improving fiscal oversight.

CALIFORNIA Rx CARVE-OUT

California's governor authorized an executive order at the beginning of the year to move all of Medi-Cal's pharmacy benefits from managed care to a FFS model starting January 2021. According to the state, the carve-out is an economical way to negotiate prices and purchase medications. State officials believe that the new model will also standardize drug access for all Medicaid beneficiaries.

The state's FFS move has been controversial, and there are concerns over its possible effect on MCOs, PBMs, pharmacies, and the coordination of care. Critics contend that it will make the coordination of care difficult. While purchasing in bulk directly from manufacturers could drive down costs, it's uncertain how drugs will be dispensed and how local pharmacies will maintain profitability.

MICHIGAN CARVE-OUT TO SINGLE PDL

In October, Michigan's Department of Health and Human Services announced that outpatient prescription drug coverage would no longer be a Michigan Health Plan (MHP) benefit. MHP would change to a FFS model. The state anticipated saving $10 million in general funds under the FFS model through Rx rebates and the elimination of MHP administrative capitation costs.

At that time, healthcare payers and PBMs opposed the decision. They insisted that the move would impair the delivery of whole-person integrated care by increasing out-of-pocket costs, and members wouldn't have the proper overview of their medications.

A couple months later, the state decided against the carve-out and rather decided to implement a single Medicaid preferred drug list while also increasing MHP's dispensing fee to $3 for independent pharmacies.

State budgets are experiencing fiscal pressure from the public health crisis and skyrocketing prescription drug costs. Each year pharmacy spend accounts for a larger portion of state budgets. Because of this, some Medicaid plans are carving-out pharmacy benefits and transitioning to FFS models to lower costs. While this is one approach to save money, states should also look for opportunities to improve efficiency and cost avoid in their Medicaid plans.

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JULY MEDICAID NEWS ROUNDUP

Syrtis Solutions sends out a monthly Medicaid newsletter to help you stay up-to-date. The newsletter concentrates on regulation, insights, comments, and industry advancements pertaining to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse. Here is a recap of last month's noteworthy articles.

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CORONAVIRUS' EFFECT ON STATE BUDGETS AND MEDICAID

The COVID pandemic has had a devastating impact on the country's economy. As of June, the U.S. Bureau of Labor Statistics reported that the national unemployment rate reached 11.1 percent which translates to 17.8 million unemployed people. Many Americans that have lost employer-sponsored health insurance are now looking to Medicaid for healthcare coverage. According to the Georgetown University Health Policy Institute, Medicaid enrollment has increased by 5.8 percent in the last three months. In Florida alone, enrollment has nearly reached 10 percent. Due to the rise in unemployment and Medicaid enrollment and the reduction in revenue, states are experiencing severe budget gaps. As a result, some states have made considerable cuts to their Medicaid programs, the NGA is requesting additional federal funds, and Medicaid programs are likely to focus on cost containment reform to balance their budgets.

STATE BUDGET GAPS AND SPENDING CUTS

By law, states are required to comply with balanced budget requirements that prohibit states from carrying deficits into the upcoming fiscal year. These requirements combined with the increase in Medicaid enrollment are putting tremendous pressure on state budgets. Recently, a few states have made significant spending cuts because of this. In May, Georgia announced a 14 percent decrease in funding to all of its state agencies, Colorado made a $183 million spending cut to its Medicaid program, and Ohio decreased its Medicaid spending by $210 million. Additionally, Arizona and New Mexico have seen surges in Medicaid enrollment that far exceed their predictions. State officials are worried that they will also have to make major cuts if they do not receive further aid from the federal government.

FEDERAL ASSISTANCE INITIATIVES

On March 18th, the Families First Coronavirus Response Act (FFCRA) was put into law in response "to the COVID-19 (i.e., coronavirus disease 2019) outbreak by providing paid sick leave, tax credits, and free COVID-19 testing; expanding food assistance and unemployment benefits; and increasing Medicaid funding." The FFCRA specifically raised the Federal Medical Assistance Percentage (FMAP) to 6.2 percent. All states and territories are eligible for the increased FMAP provided that they abide by the maintenance of effort (MOE) protections and the following requirements:

a. Keep eligibility standards, methodologies, or procedures that are no more restrictive than what the state had in place as of January 1, 2020 (maintenance of effort requirement).

b. Not charge premiums that exceed those that were in place as of January 1, 2020

c. Cover, without impositions of any cost-sharing, testing, services, and treatments-- including vaccines, specialized equipment, and therapies-- related to COVID-19.

d.Not terminate individuals from Medicaid if such individuals were enrolled in the program as of the date of the beginning of the emergency period, or becomes enrolled during the emergency period unless the individual voluntarily terminates eligibility or is no longer a resident of the state (continuous coverage requirement).

However, the FFCRA did not take into account the massive swell in enrollment. To further protect public health and recover economic prosperity, the National Governors Association (NGA) is requesting that the Senate allocates an extra $500 billion to make up for lost revenue. Additionally, the NAG is requesting a temporary increase of FMAP from 6.2 percent to 12 percent. The increased percentage would be retroactive to January 1, 2020, and would remain in effect until the national unemployment rate dropped to below 5 percent.

To date, there have been no additional funds allocated and the FMAP has not been increased. On July 22, the NGA issued an additional statement urging the Senate to authorize their request.

The NGA says, "Governors have already cut budgets and reduced our payrolls by 1.5 million people, but without Senate action, we will need to make steeper cuts and reduce payrolls even more, at precisely the time when these services are needed most ... We need the Senate's strong support now, so we can fight the virus together and make an economic recovery a reality."

MEDICAID CUTS AND DELIVERY SYSTEM REFORM

Besides federal assistance and budget cuts, states normally control costs by reducing Medicaid benefits such as dental coverage or optional Rx benefits. However, in the current public health emergency, these methods are not necessarily feasible because of the MOE protections under the FFCRA. Additionally, slashing Medicaid spending would also decrease needed federal aid. At the moment, the federal government pays for about 60 percent of total Medicaid costs. That being said states will most likely turn their focus to modifying provider reimbursement rates, managed care profit margins, provider taxes, and managed care and delivery system reform to contain costs and balance their budgets.

The Coronavirus public health emergency's effect on the nation's economy and government-funded healthcare programs has states facing substantial budget gaps. Some have made tremendous spending cuts that will certainly impede Medicaid's ability to provide care when it is needed the most. Millions of Americans are relying on Medicaid for healthcare and states must do everything in their power to contain costs before reducing benefits or access to care. Along with federal support from the FFCRA and the NGA's request to increase FMAP, states should focus on further efficiency and cost-saving technology solutions in their Medicaid plans before reducing funding, access to care, and benefits.

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SYRTIS SOLUTIONS MEDICAID NEWS RECAP

Syrtis Solutions distributes a Medicaid newsletter on a monthly basis to help you stay informed. Here is a summary of June's Medicaid news, legislation, and industry developments pertaining to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse.

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ADMINISTRATIVE CHALLENGES IN THE MEDICAID PROGRAM

Medicaid has been designated as a high-risk government program by the GAO since 2003. The Medicaid program has struggled over the last seventeen years because of insufficient fiscal oversight and other administrative difficulties. These challenges will be exasperated as the program expands and enrollment climbs in the course of the COVID-19 pandemic. If Medicaid is expected to deliver on its goal to serve the health and wellness needs of our nation's most vulnerable low-income individuals and families, it is essential that these administrative problems be addressed.

In a recent report from the GAO, the agency analyzed federal Medicaid policies, state perspectives on challenges they encounter due to present policies, and what federal actions may be taken to resolve these problems. After speaking with Medicaid officials from 50 states and Washington D.C., the GAO was able to determine federal policies, laws, and regulations that caused difficulty to effectively administer the Medicaid program.

Four problematic areas cited by officials include coverage exclusions and care coordination, covered benefits and eligibility, Medicare and Medicaid alignment, and payment methods. In addition, administrative officials brought up reporting requirements and the inadequate guidance. There is also much consternation due to the lengthy delays when states are seeking approval to waive various statutory Medicaid requirements. CMS is already in the process of resolving these problematic areas and has released revised guidance, streamlined the waiver procedure, and is working with stakeholders to develop an updated reporting system.

Additionally, the GAO also found five relevant considerations that broadly apply to the reported areas of concern. They include targeting federal oversight to important areas, making use of program data, balancing oversight and flexibility for waivers and demonstrations, clarifying CMS policy, and responding to change.

IMPORTANT GAO CONSIDERATIONS

Targeting Federal Oversight To Crucial Areas

The GAO determined that program oversight tasks must support beneficiary accessibility to benefits and the proper use of federal expenditures to protect against improper payments. This consideration was based on the GAO's March report that estimated improper payments in the Medicaid program increased $21 billion in FY 2019. HHS stated that the surge was a result of inadequate documentation for eligibility determinations. Additionally, many improper payments resulted from noncompliance in screening and enrollment requirements.

Leveraging Program Data

Poor quality data has been another issue for Medicaid plans in recent times. Incomplete and outdated data make program oversight extremely problematic. The report stated that "accurate and complete data on key measures-- such as measures for beneficiary access and use of services and the costs of providing such services-- are critical for oversight, including ensuring proper payments, and for informing any evaluation of policies." Dependable quality data could help display the cost-effectiveness of expanding Medicaid coverage to other services. States and stakeholders agree that quality data will considerably aid in managing the Medicaid program.

Medicaid has been on the GAO's High-Risk List since 2003 due to poor oversight and other administrative issues. Over the last seventeen years, Medicaid officials have struggled to administer Medicaid due to laws, policies, and regulations. If the program is to become fiscally solvent while properly coordinating care, improving fiscal oversight and accessing quality data is essential.

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MEDICAID IMPROPER PAYMENTS IN 2019

Improper payments in the Medicaid program are payments full or partial claims payments paid in error or payments made to the incorrect party. Improper payments have been a major issue for Medicaid over the last few years and have cost the program's valuable resources. Across all federal programs, improper payments have been determined to total almost $1.7 trillion between 2003 and 2019. In March of this year, the Government Accountability Office (GAO) published its latest report, GAO-20-344, which estimated improper payments in federal agencies for FY 2019. The report indicates that federal agencies estimated improper payments amounted to a shocking $175 billion in 2019. The majority of the improper payments came from three programs: Medicaid, Medicare, and the Earned Income Tax Credit (EITC). Medicaid had a 14.9% improper payment rate, up nearly 5.1% from 2018, and represented 32.8% or $57.4 billion of the $175 billion in government improper payments. Unfortunately, understanding these payments and their impact continues to be a difficulty due to incomplete, unreliable, and understated estimates from government agencies. In addition, agencies are not complying with reporting and additional requirements from the Improper Payments Elimination and Recovery Act of 2010 (IPERA). For example, eight out of fourteen agencies failed to publish and meet targets for reducing improper payments in 2019.

From 2018 to 2019, Medicaid's improper payment rate increased by 5.1%. 

According to the Department of Health and Human Services (HHS), the five-point jump in payments made in error was due in part to the department's reintegration of the Payment Error Rate Measurement (PERM). In the prior four years, HHS did not estimate improper payments associated with eligibility and they also used a proxy estimate that was last reported in 2014. In addition, HHS was only able to estimate eligibility determination related improper payments for 17 states since the majority have not been measured since PERM was reintegrated. In the HHS FY 2019 agency financial report, the department cited that many of Medicaid's improper payments stemmed from states not complying with provider screening and enrollment requirements. Furthermore, eligibility errors identified by PERM were a result of insufficient documentation to confirm eligibility or noncompliance with the requirements for redetermining eligibility.

Improper payments are taking valuable resources away from the Medicaid program and other federal programs. These payments are reported as a monetary loss and they could have possibly been prevented or recovered. While reporting improper payments is helpful in understanding how prevalent they are, it does nothing to reduce them. This must be resolved, particularly in a time where unemployment has skyrocketed due to the Coronavirus pandemic. Millions of Americans are turning to the Medicaid program and every dollar counts.

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SYRTIS SOLUTIONS MEDICAID NEWS - MAY 2020

Syrtis Solutions distributes a Medicaid newsletter on a monthly basis to help you stay informed. Here is a summary of last month's Medicaid news, legislation, and industry developments relating to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse.

See the newsletter here. 

MEDICAID NEWS RECAP - MARCH 2020

Syrtis Solutions distributes a Medicaid newsletter on a monthly basis to help you stay informed. Here is a roundup of last month's Medicaid news, legislation, and industry developments relating to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse.

Read the March newsletter here. 

SECTION 1135 WAIVERS AID STATES AMID COVID-19

Soon after COVID-19 was declared a national emergency on March 13th, the Centers for Medicare and Medicaid Services (CMS) was able to waive stipulations in federally funded programs to support States responding to the pandemic. To date, CMS has authorized Medicaid Section 1135 Waivers for 23 States that give them the power to suspend pre-admission screening for nursing facilities. Additionally, Washington, Missouri, North Dakota, and Oregon also have the authority to adjust Medicaid rates, cost-sharing amounts, and premiums without informing the public.

According to the Centers for Disease Control (CDC), 122,653 individuals in the U.S. have been infected and 2,112 have died. The data includes both verified and presumptive positive cases of COVID-19 reports to the CDC or tested at the CDC since January 21, 2020. That being said, those numbers are most likely to increase as a result of the lack of available testing.

Apart from the Section 1135 Waivers, the Department of Health and Human Services (HHS) and CMS are also responding to the virus by expanding Medicare. Their initiatives are geared at removing regulatory barriers for States and Medicare restrictions. CMS is also calling for Medicare Part D and Advantage prescription plans to waive cost-sharing for COVID-19 testing and treatment. Furthermore, CMS is asking that hospitals delay elective surgical procedures to conserve resources.

Click here to see Syrtis Solution's most recent COVID-19 announcement.

SECTION 1135 WAIVERS 

CMS has authorized the most lenient Medicaid waivers to New Hampshire, New Jersey, Illinois, and Mississippi. Their waivers consist of the following provisions:

• Temporarily suspend Medicaid fee-for-service prior authorization requirements. Section 1135(b)( 1 )(C) allows for a waiver or modification of pre-approval requirements, including prior authorization processes required under the State Plan for particular benefits.
• Extend pre-existing authorizations for which a beneficiary has previously received prior authorization through the end of the public health emergency.
• Suspend Pre-Admission Screening and Annual Resident Review (PASRR) Level I and Level II Assessments for 30 days.
• Enable modification to the timeframe for State fair hearing requests and appeals.
• Temporarily enroll providers who are enrolled with another State Medicaid Agency and/or Medicare for the duration of the public health emergency.
• Provision of services in alternative settings permitting facilities to be fully reimbursed for services rendered to an unlicensed facility provided that the State makes a reasonable assessment that the facility satisfies minimum standards.

North Carolina asked for all of the Section 1135 Waiver provisions above except extending pre-existing authorizations. California, New Mexico, Louisiana, and Arizona also made similar requests.

At the moment, CMS is still working on additional waiver applications from New Hampshire, California, Illinois, Arizona, Louisiana, New Jersey, Mississippi, North Carolina, New Mexico, and Virginia.

California's governor, Gavin Newsom, has also requested federal assistance to supplement temporary housing for the homeless in the event that they are exposed to or test positive for COVID-19 and provisions to waive the cost of testing and treatment for particular Medi-Cal beneficiaries.

Due to the major impact of COVID-19, federal departments and agencies are working to minimize regulation and barriers through Section 1135 Waivers to help States respond to the pandemic. These waivers are effective as of March 1 and last for the duration of the public health emergency or any extension thereof.

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MEDICAID NEWS RECAP FROM SYRTIS SOLUTIONS - FEBRUARY 2020

Every month, Syrtis Solutions puts together a Medicaid newsletter to help you stay up-to-date. Here is a roundup of last month's Medicaid news, legislation, and industry developments pertaining to Medicaid integrity, cost avoidance, improper payments, fraud, waste, and abuse.

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MICHIGAN OPTS OUT OF RX CARVE-OUT

FROM CARVE-OUT TO SINGLE PDL

Back in September, Michigan proposed policy 1936-Pharmacy to carve-out the State's Managed Medicaid outpatient pharmacy drug coverage and move to a Fee-for-Service (FFS) model. That being said, plans to carve-out pharmacy benefits have recently been updated. After considering the plan, the State has made a decision to instead implement a single Medicaid Preferred Drug List (PDL). The single PDL was a recommendation in the Governor's Executive Budget and serves to maximize manufacturer rebates to increase savings. Along with the PDL, MDHHS is also advising raising MHP's dispensing fee to $3 for independent pharmacies. Currently, the department is preparing an updated policy and there will be an opportunity for public comment.

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MEDICAID MANAGED CARE RX BENEFITS HELP STATES

Medicaid prescription drug spending has been on the rise and some states have elected to carve out prescription drug benefits and shift to a Fee-For-Service (FFS) model. In theory, this delivery system helps states leverage their purchasing power to reduce costs and increase oversight. However, recent data reveals that when compared to FFS models, managed care prescription services save significantly more on brand name and generic drugs while also improving the quality of care.

In a 2018 report, the Association for Community Affiliated Plans (ACAP) studied Medicaid prescription drug spending between 2011 and 2017. The trade association focused on key expenditure trends and dynamics related to Medicaid's pharmacy benefits. Here is what the report discovered:

• Over a six-year period, managed care drug benefits produced significant savings despite the increase of prescription drug costs. "The average net (post-rebate) cost per MCO-paid Medicaid prescription during 2016 was $37, 73 percent of the average net cost of Medicaid prescriptions paid in the fee-for-service (FFS) setting during 2017, which was $50."

• The report also identified that managed care prescription services had higher usage of generic drugs which helped to minimize drug expenses. "In 2017, generic drugs represented 88.1 percent of MCO-paid Medicaid prescriptions versus 83.7 percent in the FFS setting."

• Six states that shifted to managed care prescription benefits only had a 1 percent increase in net costs per prescription between 2011 and 2014. Meanwhile, seven states that carved out pharmacy benefits saw a 20 percent surge in net costs per prescription during the same period. Compared to the six states that switched to a managed care model, these seven states missed out on an approximated $307 million in savings in 2014.

• Finally, including prescription drug services improves the quality of care. Since Medicaid health plans handle all of a patient's benefits, the plan can coordinate and communicate with providers more effectively. This makes care less complicated and also decreases unnecessary hospitalizations and emergency room use.

As a result of skyrocketing pharmaceutical drug costs and the increased size of the Medicaid population, some states have carved out pharmacy benefits and shifted to FFS models to rein in costs. However, data shows that Medicaid plans are able to save more when pharmacy and medical benefits are integrated together. Not only are plans able to save money on prescription drug costs, but they also improve the quality of care for their members. To preserve the program's resources and ensure its sustainability, states may want to reevaluate carving out benefits.

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SUPREME COURT TO WEIGH IN ON PBM REIMBURSEMENT RATES REGULATION

Recently, the Supreme Court announced that it would review the verdict from Rutledge v. PCMA, a case from Arkansas dealing with the state's legal right to regulate reimbursements from pharmacy benefit managers (PBMs). Their decision could significantly affect pharmaceutical drug costs and PBM business models. The initial briefing and oral arguments should occur between March and April.

The case under review is from the 8th U.S. Circuit Court of Appeals where the court ruled in favor of PBMs and denied Arkansas the regulatory authority (Arkansas Act 900) to raise reimbursement rates for prescription drugs. According to the Court of Appeals, the Employee Retirement Income Security Act of 1974 (ERISA) prevents states' from regulating PBM's reimbursement rates.

The Supreme Court's decision to review the case comes at a time when soaring health care costs are a major issue for states and PBMs have been criticized for adding to the problem. Critics argue that PBMs are benefiting from spread pricing by keeping the difference between what they charge plans for medications and what they reimburse to pharmacies. According to the petition to the Supreme Court, below-cost reimbursement rates have "driven more than 16% of independent rural pharmacies from the healthcare marketplace, and in many communities, nothing has replaced them".

The National Community Pharmacists Association's (NCPA) vice president, Mustafa Hersi is hopeful about the judgment. He stated, "We feel that this matter has national implications. PBMs have been relying on ERISA preemption to avoid meaningful oversight by states, and states like Arkansas have taken it upon themselves to draft well-tailored legislation-- that does not implicate or involve ERISA-- to regulate PBMs that operate within their state. The implications are that, if the court were to not only grant the request but rule in the favor of Arkansas, that states would be empowered to make more decisions to regulate PBMs and the role that they have in our health care system so that their citizens can make informed decisions with the respect to the choices that they have in health care."

The Pharmaceutical Care Management Association (PCMA) opposes the petition. In response to the Supreme Court's decision, the lobbying group stated, "The Employee Retirement Income Security Act (ERISA) has long enabled employers to provide consistent, nationwide health care benefits due to its preemption of state laws. We are committed to federal preemption, which is a vitally important issue to ensuring high quality health care for patients. Unique state laws governing the administration of pharmacy benefits are proliferating across the country, establishing vastly different standards. These inconsistent and often conflicting state policies eliminate flexibility for plan sponsors and create significant administrative inefficiencies. These inefficiencies divert funds from where they should be spent: providing access to the health care services on which employees of plans across the country rely. We are confident in the merits of our arguments in this case and look forward to presenting them before the U.S. Supreme Court."

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