THE IMPACT OF CALIFORNIA'S PHARMACY CARVE OUT

At the beginning of 2019, California's governor signed an executive order instructing DHCS to utilize a fee-for-service model for Medi-Cal. Under the order, The state of California would consolidate its purchasing power and leverage its population size to achieve lower drug costs by purchasing in bulk from pharmaceutical drug companies. Additionally, DHCS has been assigned with the task of producing a list of twenty-five of the most expensive drugs that would be included in the negotiations with manufacturers.

In between 2018 and 2019, spending on pharmacy services reached $8 billion in California and most of pharmacy spending took place under the managed care delivery model. According to the Legislative Analyst's Office (LAO), carving out managed care pharmacy services could lead to hundreds of millions in savings annually. That being said, the savings could come at a cost to stakeholders such as enrollees, pharmacies, providers, and MCO's. Just recently, the LAO released a report that assesses what the move could mean for the state and Medi-Cal's stakeholders.

The LAO's analyses identified the following possible impacts of the carve-out:

IMPACT ON NON-CONSUMER STAKEHOLDERS

Reduction in Retained 340B Earnings for Eligible Providers

"By transitioning Medi-Cal pharmacy services entirely to a FFS benefit, 340B eligible providers would no longer be able to generate earning on any pharmacy dispensed drugs paid for by Medi-Cal. Rather, these earnings would largely convert into state savings in the form of lower prescription drug expenditures."

Decrease in Backing for Medi-Cal Managed Care Plans

"Funding for Medi-Cal managed care plans would likely be reduced by between 15 percent and 20 percent under the carve-out. A portion of the reduction would likely come from existing Medi-Cal managed care plan funding for purposes such as administration, care coordination, reserves, and profits."

Minimal Impact on Pharmaceutical Manufacturing Industry

"The carve out is unlikely to have a major impact on earnings for the drug manufacturing industry overall, both in the state and nationwide. Selected drug manufacturers, however, may pay higher negotiated supplemental rebates to the state in exchange for greater utilization of their drugs in Medi-Cal through placement on a more widely applicable Medi-Cal wide preferred drug list."

Likely Increase in Funding for Pharmacies

"Pharmacies will potentially benefit from increased funding under the carve-out due to (1) (absent any changes) the higher dispensing fees paid by Medi-Cal FFS compared to Medi-Cal managed care plans and (2) the larger network of pharmacies serving Medi-Cal FFS compared to individual Medi-Cal managed care plans. A portion of the increase in funding may be offset by lower reimbursement for the drugs since Medi-Cal FFS, but not Medi-Cal managed care, pays pharmacies at close to pharmacies' costs in acquiring their drugs."

IMPACT ON BENEFICIARY ACCESS AND CARE

Statewide Standardization of the Medi-Cal Pharmacy Services Benefit

"While the standardization of the Medi-Cal drug benefit under the carve-out has potential to improve care from a beneficiary perspective in the long run, the transition to FFS could result in beneficiaries losing ready access to drugs they are currently taking. As such, the Legislature may wish to consider continuity of care protections for beneficiaries currently utilizing prescription drugs."

Expansion of the Pharmacy Network Where Beneficiaries Can Obtain Prescription Drugs

"According to the administration, Medi-Cal's FFS pharmacy network extends to almost all pharmacies throughout the state. Transitioning pharmacy services coverage to a FFS benefit could give Medi-Cal enrollees greater choice in where they obtain their prescription drugs."

Less Timely Prescription Drug Utilization Information for Medi-Cal Managed Care Plans

"While DHCS provides FFS prescription drug utilization data to managed care plans on behalf of their members for currently carved out drugs, it is our understanding is that this data does not arrive from DHCS in a timely enough manner to assist plans' care coordination activities."

Opioid Curtailment Programs

"These initiatives have likely contributed to dramatically reducing the number and potency of opioid prescriptions among Medi-Cal members. Under the carve-out, it is uncertain whether such initiatives by Medi-Cal managed care plans would continue."

At this point, California's administration has not published information on how the order will be carried out and they have yet to release any information on how stakeholders may be impacted. In order to help the state's legislators understand what the carve out could mean for the state, the LAO also specified outstanding details that should be addressed prior to the change. These include:

• Overall Fiscal Estimate
• What New State Resources Are Needed to Administer the Entire Medi-Cal Pharmacy Services Benefit?
• How Would State Information Systems Be Improved to Maintain or Improve Existing Managed Care Plan Care Coordination?
• Managed Care Plans' Continued Role in Coordinating the Medi-Cal Pharmacy Services Benefit in Conjunction With Their Members Overall Health Care

Reducing prescription drug prices is a major concern for states at this point and California's effort is merely one approach. Aside from transitioning to a fee-for-service model, there are also a variety of alternate methods. While the state sorts out the details of its transition, the analyses from the LAO also includes four alternative options that could be used in place of a complete carve out.

1. Universal Medi-Cal Preferred Drug List Spanning FFS and Managed Care.
2. Transfer Savings From 340B Drug Discounts in Medi-Cal to the State
3. Formalize the Use of Cost-Effectiveness Analysis for Preference of Drugs in Medi-Cal
4. Adopt a Medi-Cal Prescription Drug Spending Cap

At the end of the analyses, the report made two specific recommendations to state legislatures due to the uncertainty surrounding the order and its possible impact. First and foremost, the LAO recommended that strong oversight should be in place before the implementation. They also suggested that the state condition resources for implementation based off of key details provided by DHCS.

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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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LEGISLATORS QUESTION OVERSIGHT OF MEDICAID IMPROPER PAYMENTS

Medicaid has been determined a high-risk program by the GAO since 2003 due to its size, growth, diversity and oversight challenges concerning improper payments, proper use of program dollars, and data. In fiscal year 2018, improper payments represented about 9.8% of the programs total spending of $36.2 billion. Just recently, members of the Senate Finance Subcommittee on Health Care have spoken out against these payments made in error. Republican Senators, Pat Toomey, and Chuck Grassley are behind the effort and are aiming to improve the program's oversight and integrity in order to reduce improper payments. This initiative comes after various bipartisan initiatives over the last seventeen years.

In a letter written to CMS administrator, Seem Verma, the senators stated, "To maintain public confidence in such a large commitment of national resources, it is essential to ensure these dollars are spent as Congress intended-namely, to provide specified health and long-term care services for low-income Americans, with a historical focus on the aged, disabled, children, and families. Unfortunately, governmental efforts to ensure Medicaid payments are spent prudently have fallen short." 

The senators, "believe that CMS' past actions have ignored its requirements under the law and are concerned that the July 5, 2017, final rule will perpetuate many of the weaknesses that characterized the previous enforcement regime."

Under the joint federal-state program, the federal government covers about 58% of the health care costs of Medicaid beneficiaries while the states are accountable for the remaining amount. Legislation, such as The Patient Protection and Affordable Care Act, was ruled into law to enact additional rights and protections that would increase coverage and make it more affordable. However, the legislation came at a higher cost to taxpayers and properly categorizing enrollees has proven to be difficult.

Due to the growth in enrollment, the risk of improper payments has increased and is more reason to efficiently oversee program funds. By law, Medicaid is a payer of last resort program, required by Congress to make every effort necessary to recover improperly spent dollars. Unfortunately, in the last twenty years, there has been little effort to recover payments made in error.

In their letter, the senators stated their interest in wanting to help resolve the problem with CMS. They explained, "Our offices would like to work with you on our shared goal of ensuring that the government complies with the intent and plain language of Section 1903( u) of the Social Security Act by discouraging systematic and routine errors in Medicaid eligibility determinations by states."

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HOW TRUMP’S 2020 BUDGET PROPOSAL AFFECTS MEDICAID

The Trump administration released its 2020 budget proposal on Monday and it gives some insight into the president’s priorities. The budget includes $1.9 trillion in cost savings for Medicaid and other safety net programs. According to the administration, A Budget For A Better America will balance the nation’s budget by 2030 and promote economic prosperity. Despite its major reductions for welfare programs and increases in defense spending, Congress will be the primary decision maker and the budget is unlikely to pass on Capitol Hill.

President Trump’s budget is the largest in federal history and includes spending increases for defense and border security while reducing costs of Medicaid, Medicare, and disability programs. The proposal will cut spending by $4.6 trillion over a ten-year period. That equates to 9% of the country’s $53.5 trillion projected spending over that time. 

The White House Chief of Staff, Mick Mulvaney, believes the proposal will favor taxpayers. He stated, “This is, I think, the first time in a long time that an administration has written a budget through the eyes of the people who are actually paying the taxes.”

Chris Edwards is the director of tax policy studies at the CATO Institute. Edwards evaluated the administration’s proposal and stated, “Cuts would reduce federal deficits, which have plagued the government since the turn of the century. The budget’s spending cuts are being called cruel and heartless, but chronic deficits are imposing huge costs on young Americans down the road, which is totally unethical.”

The proposal is finding support among conservative groups due to its focus on economic growth, increased Medicaid eligibility checks, and in that it promotes self-sufficiency versus dependence on government-funded welfare programs.

Kristina Rasmussen, Vice President of Federal Affairs at the Foundation for Government Accountability (FGA) commented, “With no real incentive in place for individuals to leave the program, the welfare system has transformed from a safety net originally intended to serve the truly needy into a trap for able-bodied adults, many of whom report no income.”

Critics, on the other hand, view the budget as extreme and harsh since it will prevent people, who rely on welfare programs, from accessing the support they need. They point out that the budget breaks key campaign promises as Trump approaches the 2020 elections.

Senator Amy Klobuchar, (D)-MN says, “The President has proposed a budget that cuts hundreds of billions of dollars from domestic programs like Medicare and environmental protections. But he still found billions of dollars for his wall. We need a smart budget, not one based on empty campaign promises.”

Senator Kamala Harris (D)-CA commented on the budget saying, “This would hurt our seniors and is yet another piece of evidence for why we need a new president.”

Despite their criticism, the administration denies that the president wants to cut from these programs. In addition, they point out that the previous administration reduced Medicare spending.

The Office of Management and Budget Deputy Director, Russ Vought, testified in front of the House Budget Committee. According to Vought, “The President doesn’t believe he’s breaking his commitment to the American people at all. There are no structural changes to Medicare. There is no cut to Medicare. Medicare continues to grow each and every year.“

In 2000, federal spending for the Medicaid program was at $118 billion. In almost twenty years, that amount has climbed to $389 billion. The cost is unsustainable and a driving factor in why Trump wants to cut $200 billion from Medicaid and $800 billion from Medicare.  Additionally, the budget also introduces block grants for states in an effort to save $610 billion in tax dollars over the next 10 years.

The budget could be a starting point to reduce debt and an opportunity for states to have more control and flexibility in managing their programs. Additionally, health consumers may have more control over their insurance to make it more affordable. In order to accomplish this, the budget includes association health plans and short-term plans for the uninsured.

Kristina Rasmussen says, “The Trump administration has outlined a plan to move government out of the way, take down nonsensical barriers to work, and promote a safety net that encourages upward mobility to empower more Americans to win.”

Salim Furth is a Former Research Fellow from Heritage’s Center for Data Analysis. He determined, “A restoration of growth will not, however, follow automatically from enacting the president’s agenda. A lot of other things have to go right as well as policy. So the president’s plan to eliminate the deficit and control the debt should not depend so much on things outside his control. Limiting the growth of entitlement spending would be a more certain path to balance than relying on historical forces.”

Currently, the nation’s debt is unsustainable and safety net programs are continuing to grow at accelerated rates. In an attempt to remedy the situation, the president has introduced his 2020 budget proposal, A Budget For A Better America. It aims to make major reductions that would significantly impact Medicaid and Medicare. Despite criticism over the president’s budget proposal, large reforms will be necessary as the debt continues to climb.

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STATES ACT TO LOWER MEDICAID PRESCRIPTION DRUG COSTS

In 2018's legislative session, 45 laws were passed by 28 states to focus on the problem of prescription drug costs. Aside from these legislative initiatives, administrative measures are also being taken to make improvements to the management of Medicaid pharmacy benefits spending. Ohio, West Virginia, and California are a few of the states exploring and implementing administrative efforts to reduce drug costs.

Medi-Cal Aims To Negotiate Prescription Drug Costs

California is looking to legislative measures to address drug costs. The state's governor, Gavin Newsom (D) authorized an executive order in January that would make Medi-Cal responsible for negotiating drug costs with pharmaceutical companies directly by 2021. The order would utilize a singular purchaser model and leverage the purchasing power of the state's Medicaid population of 13 million.

Despite turning to a singular purchaser model, the order also enables parties such as private payers, small businesses, self-insured employees, and local governments to collaborate in the negotiations with drug manufacturers.

Supporters view the order as a chance to reduce the cost of high priced drugs by making them more common. In addition, they believe that the model has the potential to be beneficial at the federal level. Critics on the other hand, are worried that the formularies would no longer be handled by managed care plans. Thereby leading to denied prescriptions and jeopardizing patient's access to care and provider satisfaction. At this point, the governor's order will need federal waivers before it can be implemented.

Ohio Medicaid Adopts Pass-Through Pricing Model

Last year, Ohio announced to its managed care plans that they could no longer contract with PBMs that use "spread pricing". The Ohio Medicaid Department objects to this payment model due to its lack of transparency and the fact that PBMs can profit from it by buying the medication from a dispenser at a lower rate than what they charge plan providers. A state investigation evaluated the payment model's impact and revealed that it contributed to an 8.8% markup on pharmacy claims; enabling PBMs to collect $5.70 on each drug filled.

Starting January 2019, The Ohio Medicaid Department has directed that MCOs adopt "pass-through" payment models that promote transparency in order to reduce the program's costs. Under the new payment model, Medicaid plans are billed the same amount for prescriptions that a PBM buys them for. PBMs are then given an administrative fee for each prescription filled. The fee is estimated to be between $0.95 and a $1.90.

West Virginia Carves Out PBMs

After an audit, West Virginia found that employee health plans were paying 1% more for pharmacy claims than the PBMs paid the dispensing pharmacy. Because of this, the state made a decision to eliminate the use of PBMs entirely. Lawmakers concluded that the 1% cost the state $10 million each year.

Rather than rely on managed care for state employee and Medicaid beneficiary pharmacy benefits, West Virginia has returned to a fee-for-service model. With the aid of West Virginia University, the state has identified which medications should be available and the Bureau of Medical Service's Office of Pharmacy Services (OPS) pays for each prescription. According to West Virginia's pharmacy board, the state saved $38 million in its first year after the administrative reform.

States are concerned over rising prescription drug costs and the lack of pricing transparency with PBMs. In response, lawmakers have taken legislative and administrative efforts such as alternate payment models to rein in these costs.

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CVS-HEALTH MEGA-MERGER CREATES HEALTHCARE INNOVATION COMPANY

2018 experienced a wave of healthcare mega-mergers. One of the most noteworthy acquisitions was between CVS Health and Aetna for $69 billion dollars. The PBM announced its deal to merge with one of the nation's largest health insurance providers in December of 2017. After the announcement, the merger underwent an intense review from the DOJ and was completed on November 28, 2018.

"Today marks the start of a new day in health care and a transformative moment for our company and our industry," stated CVS Health President and Chief Executive Officer Larry J. Merlo. "By delivering the combined capabilities of our two leading organizations, we will transform the consumer health experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care. We are also leading change in healthcare by challenging the status quo with new technologies, business models and partnerships. In doing so, we will continue to deliver on our purpose of helping people on their path to better health."

Leading up to its finalization, industry groups like the American Medical Association(AMA) opposed the deal and pushed for regulators to prevent it. They were concerned as to how the merger would affect competition within existing care models.

Before a hearing with the California Department of Insurance, the AMA's President, Dr. Barbara McAneny, explained, "After very careful consideration over the past months, the AMA has come to the conclusion that this merger would likely substantially lessen competition in many health care markets, to the detriment of patients. The AMA is now convinced that the proposed CVS-Aetna merger should be blocked."

Marilyn Singleton, MD, the President of Association of American Physicians and Surgeons(AAPS) expressed her concerns saying, "CVS is in the position to steer patients covered by Aetna to receive their care from CVS-run clinics, instead of from their own trusted physician. Moreover, the patients in the name of convenience or coerced by a limited network would get their prescriptions from CVS." 

CVS-Health considers its merger with Aetna as a significant step to emerging as a "healthcare innovation company" in 2019. The new model will surely impact the industry and engagement between patients and providers.

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MEDICAID IN 2019

In 2018, there were numerous attempts to reform the Medicaid program. While initiatives at the federal level met resistance, several reform initiatives came about at the state level. These efforts included legislation, program expansion, demonstration waivers, eligibility restrictions, and work requirements. Some of these changes have been adopted and successfully incorporated while others are still waiting for approval. For 2019, it will be important to monitor the impact of these changes to understand how the Medicaid program will evolve.

Section 1115 Medicaid Waivers

In spite of the Trump administration's failed attempts to overturn the ACA and reform Medicaid, states have sought to make reforms by utilizing demonstration waivers. Section 1115 waivers provide states the flexibility to pursue test coverage models and forgo key provisions of federal law under the condition that the changes meet the objectives of the Medicaid program.

On January 11, 2018, CMS issued new guidance for the Section 1115 waivers that made it possible for states to impose work requirements on their program's beneficiaries. According to CMS, the decision was made to "support states helping Medicaid beneficiaries improve well-being and achieve self-sufficiency." In addition to the revised eligibility requirements, states also started considering provisions including time limits, lockout periods for unpaid premiums or untimely reporting, drug testing, and premiums. The guidance has been controversial with legislators and government officials.

As of January 9th, the federal government has approved waivers from seven states. Arkansas and Indiana introduced their waivers last year. Michigan, Kentucky, Maine, Wisconsin, and New Hampshire have obtained approval and are implementing the changes in 2019. Arizona, Mississippi, Ohio, Oklahoma, South Dakota, Tennessee, Utah, and Virginia have proposed waivers but are waiting for decisions from CMS.

Regardless of its approval from CMS, Kentucky's waiver was blocked from going into effect last year after a group of 16 Kentucky Medicaid enrollees filed suit against it. U.S. District Judge James Boasberg then ruled the legislation unconstitutional. He specified that "The Secretary never adequately considered whether Kentucky HEALTH would, in fact, help the state furnish medical assistance to its citizens, a central objective of Medicaid." 

Since then, a reworked demonstration waiver was resubmitted to CMS with minor technical changes that require Kentucky to submit implementation and monitoring protocols for the eligibility requirements.

The key components submitted for approval are:

• Premiums instead of copays 
• Cost Sharing measures that would pull from HSAs for non-emergency use of the ER.
• Health Savings Accounts 
• Work Requirements 
• A six month lockout period for the failure to report a change in circumstances such as household income and hours worked.

On November 20, 2018, Kentucky's revised waiver was approved by CMS; however, health advocates argued that it was nearly identical to the original. Recently, the National Health Law Program, Kentucky Equal Justice Center, and the Southern Poverty Law Center joined together to file a lawsuit against the law. Kentucky is set to have the waiver carried out in April of this year but Governor Bevin is ready to pull coverage if the waiver does not survive the lawsuit.

Arkansas was the first state to implement its work requirement. It's waiver called for enrollees to report 80 hours of work or community engagement activities each month in order to be eligible for coverage. Merely six months since the implementation 17,000 members have been disenrolled either because they did not comply or they had failed to be given an exemption. According to state officials, enrollees were not informed of the requirements or they misunderstood them. Furthermore, enrollees reported having difficulty getting enrolled and accessing support. States intending to implement equivalent waivers can learn from Kentucky's uncoordinated implementation. It will be extremely critical for states to proficiently communicate their intended program changes to their communities. At the moment, there is litigation challenging Arkansas's waiver and the state has not received approval for its work requirement evaluation process.

States Adopt Medicaid Expansion

In states that had previously expanded Medicaid under the ACA, research studies have revealed that the decision to do so has been economically beneficial; moreover, it has also improved coverage, access to care, and service utilization. Due to the success, Medicaid expansion was a popular issue at the ballot box for voters in the midterm elections.

After the polls closed, Washington D.C. and 37 states approved expansion of their Medicaid programs. Idaho, Nebraska, and Utah adopted expansion using ballot initiatives. Maine also successfully passed a ballot initiative in 2017 but the governor at that time, Paul LePage (R), refused to carry it out referring to it as it "fiscally irresponsible". Fast-forward to this year, newly elected governor, Janet Mills (D) signed an executive order that began the expansion. In states such as Wisconsin and Kansas, Governor Tony Evers (D) and Governor Laura Kelly (D) ran on expansion and will now be working with legislators to pursue it.

Apart from the 37 states that have expanded or are expanding in 2019, there are also developments in other areas of the country. Historically, Mississippi and Georgia have fought Medicaid expansion but they might possibly consider the option this year.

Montana pushed to continue funding for their Medicaid program with the I-185 ballot initiative. However, the attempt failed to secure the necessary votes and the state is now in a similar situation to Alaska where expansion is in the hands of law-makers.

Regardless of the nationwide momentum to expand Medicaid under the ACA, there has also been a recent effort in Texas that would overturn the law for the entire country. In December, U.S. District Judge Reed O'Connor found the ACA unconstitutional as a result of changes in federal tax law. While the court's ruling could possibly dismantle the health-care law, appeals have been filed and it will not be addressed until it arrives at the Supreme Court.

Reform Of Medicaid Payment And Delivery Models

Medicaid relies on risk-based managed care as the program's main delivery system. This year, states will be seeking to utilize alternative delivery systems and payment models. These efforts will work to improve MCO's while also addressing social determinants of health.

On November 8th, CMS submitted considerable regulatory revisions aimed towards updating the managed care regulatory framework from 2016. According to CMS, these changes "reflect a broader strategy to relieve regulatory burdens; support state flexibility and local leadership; and promote transparency, flexibility, and innovation in care delivery." CMS, the National Association of Medicaid Directors (NAMD) and State Medicaid Directors organized a group to develop the framework. The group serves "to identify opportunities to achieve a better balance between appropriate federal oversight and state flexibility, while also maintaining critical beneficiary protections, ensuring fiscal integrity, and promoting accountability for providing quality of care for Medicaid beneficiaries."

States will want to improve access to care within rural communities in 2019. Some of the components used to accomplish this include: e-Consult, telehealth, telemonitoring, and telemedicine. Additionally, there will probably be increases in funding for primary care residency programs and providers in these communities, increased SUD services, and the incorporation of multi-payer models. Additionally, the reduction of skyrocketing pharmaceutical drug costs will certainly be another issue on the new year's agenda. To lower this spending, states will look to implement cost containment initiatives that will maximize rebate opportunities and enact revised utilization controls.

Lastly, states are also focused on LTSS issues and expanding coverage within community settings this year by extending provisions from existing support programs. Money Follows the Person (MFP) and Spousal Impoverishment are two programs being considered by Congress. MFP helps states in rebalancing their Medicaid long-term care systems. The Spousal Impoverishment provision dates back to 1988 and serves to protect the financial resources of elderly couples when employing nursing home care. CMS has also reached out to State Medicaid Directors in a November letter "to announce opportunities to design innovative service delivery systems including systems for providing community-based services for adults with a serious mental illness (SMI) or children with a serious emotional disturbance (SED) who are receiving medical assistance." The invitation authorizes states to waive the federal IMD payment exclusion in order to improve care for beneficiaries.

2018 was a significant year for Medicaid, the largest public health care provider in the United States. A variety of attempts were made to reform the program at the federal and state levels. Some of these efforts have turned out to be beneficial while others have become contentious with legislatures and enrollees. In 2019, Medicaid expansion, Section 1115 waivers, and new payment and delivery models will be some of the key issues to keep an eye on.

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