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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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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