To reduce pharmaceutical drug costs and increase Medicaid program transparency, New York's Governor, Kathy Hochul, and the New York Medicaid Redesign Team announced earlier in the year that the state would carve-out the pharmacy benefit from the Medicaid program. After being postponed for two years, the carve-out is set to go into effect on April 1. However, lawmakers in the New York State Senate repealed the move in the one-house budget resolution this month.
Since the state's announcement to move to a fee-for-service model, there has been an ongoing clash in between safety net providers and pharmacists. Both groups are concerned about the state's vulnerable populations but disagree on how to serve them most efficiently. The legislators behind the repeal fear that the carve-out will interrupt the delivery of benefits, specifically at a time when the state will be executing eligibility redeterminations. Alternatively, advocates see it as an opportunity to simplify the Medicaid program.
Assembly Speaker Carl Heastie was among the legislators behind the repeal. He fears the carve-outs impact on entities that serve the states most vulnerable populations. Heastie is looking to protect 340b provisions that safety net providers rely on.
Pharmacists in support of the transition think that the move is long overdue. They believe the switch will improve the Medicaid program's transparency and help expand access for program beneficiaries by giving them more choice in who fills their prescriptions.
Aside from the repeal, a legal challenge opposing the carve-out also started recently. Shortly after the one-house budget resolution was passed, safety-net providers Evergreen Health and Heritage Health and Housing filed a lawsuit against the New York State Department of Health to halt the April 1st carve-out. According to the suit, the state's decision is discriminatory and violates the ACA.
In recent months, New York's decision to shift from a managed care model to a fee-for-service model has been a significant source of contention. While the carve-out is set to begin on April 1st, it now faces a repeal effort from the New York State Senate and a lawsuit from providers. It's not clear how the carve-out will be affected at this point, but given the repeal, lawsuit, and upcoming eligibility redeterminations, there are undoubtedly numerous issues for the state to work through.
Changes in how pharmacy benefits are supplied under New York's Medicaid program are coming. Earlier this year, the state reported that to lower prescription drug costs, it would carve out its Medicaid pharmacy benefits and transition to a fee for service delivery model. On April 1, 2023, Medicaid members will start receiving their pharmacy benefits under the state's new delivery model, NYRx.
New York's carve out strategy is designed to decrease pharmaceutical drug costs by consolidating the state's purchasing power. In addition to lowering costs, the carve out is also geared to improve access to care and reduce restrictions by introducing a single drug formulary.
The decision to carve out, however, has not gone unnoticed. Over the past year, there has been a growing amount of criticism directed at the state's decision. The advocacy organization, Save NY's Safety Net, wrote the state's governor earlier this month and requested that she reverse the decision. They are concerned over its impact on the delivery of healthcare to the state's most vulnerable populations. They also warned the governor that the carve out would negatively affect the Medicaid program's provider network. According to the coalition, "many existing facilities will be forced to close completely, and hundreds of frontline community healthcare workers will lose their jobs."
Advocates of the carve out, like New York state Assemblyman John McDonald, disagree with the advocacy groups. He strongly believes that the shift will help more program recipients than it hurts.
According to the New York State Department of Health, "moving all Medicaid consumers under the FFS Pharmacy Program allows for a single, uniform list of covered drugs and standardized, consistent rules and regulations. Thus, New York State is able to offer an improved, simplified process for Medicaid consumers to get the medicines and supplies they need."
Each year prescription drug spend accounts for a larger percentage of state budgets. To reduce these costs, some states like New York have chosen to transition to fee for service models and carve out pharmacy benefits. While this is one approach to try and reduce costs, states should also identify opportunities to improve efficiency and cost avoid in their Medicaid plans.
