Medicaid News in the States

By John Coster, RPh., Ph.D.

Economic downturns like the current one produce a double-whammy for federal and state Medicaid budgets: enrollment in the program grows as there’s less money to pay for it. That means more potential for provider reimbursement cuts – something NCPA is trying hard to avoid. Pharmacies can simply not withstand any more Medicaid reimbursement cuts, especially in light of last year’s AWP rollback. Here’s a rundown of some related state activity NCPA’s monitoring, along with federal efforts.

The 2009 stimulus bill increased the federal share of Medicaid financing temporarily through Dec. 31, 2010. That helped avoid significant state cuts that would have impacted patients and pharmacists, among other providers. There is bipartisan support for continuing that higher match rate or FMAP. A six-month extension, which NCPA strongly supports, was included in President Obama’s 2011 budget proposal. Some states have already assumed the extra federal help in their 2011 budget plans.

Even with the added federal assistance, states are struggling to balance budgets.

Our hope is that, as federal and state Medicaid policymakers contemplate potential changes, they recognize some important facts:

  • Community pharmacists can be a strong ally in keeping health care costs down by helping to maximize the use of lower-cost generic drugs. Local pharmacists are the most accessible providers and can help patients manage their conditions more cost-effectively than in emergency rooms or doctors’ offices.
  • Independent community pharmacies, in particular, are the backbone of the Medicaid drug benefit. They are often in underserved rural and urban areas where they are patients’ only pharmacy option.

If there’s a major Medicaid change in your state affecting pharmacy and it’s not included on this list, please feel free to post it in the comment section below. To see a similar state rundown of state activity related to regulating pharmacy benefit managers (PBMs) click here.

Alabama is investigating the use of actual acquisition cost (AAC) in reimbursement.

Alaska indicated interest in moving to an acquisition cost + % + dispensing fee formula for pharmacy compensation. The state conducted a cost of dispensing study in 2007 and released the results in 2009.

Illinois retained a new maximum allowable cost (MAC) contractor. Its current plan is to use the lowest wholesale acquisition cost (WAC) + 130%. The National Alliance of State Pharmacy Associations (NASPA) vigorously opposed the change and the state agreed to defer implementation.

Iowa reduced all Medicaid provider reimbursement by 5%. The $4.57 dispensing fee is being cut by 0.23.

New Jersey’s new administration has declared everything “on the table” in light of an $11 billion deficit for the 2011 fiscal year.

New York is trying to move from average wholesale price (AWP) minus to WAC plus formula in budget process

Ohio plans to carve out pharmacy from managed care and then cut dispensing fee to $1.80. NCPA wrote to federal Medicaid officials in opposition to the plan.

Tennessee proposes reducing MACs for a long list of generics. The product cost added to the $3.00 pharmacy dispensing fee would result in $4.00 prescriptions. MACs would result in reimbursement below costs for most of the products listed.

Texas – the Texas Pharmacy Business Council newsletter has the latest: Texas faces a $16 billion projected budget shortfall. An across-the-board 1% reduction has been proposed for all Medicaid providers.

Virginia is proposing Medicaid reimbursement for brand name drugs from AWP minus 10.25% to AWP minus 13.1% and reducing MAC calculation for multiple source drugs that only have two sources of supply rather than three.

Washington’s actions have garnered more attention than most states. In early January Bartell Drugs announced that 15 of its pharmacies could no longer afford to participate in the state’s Medicaid program due to inadequate reimbursement. Walgreens announced similar plans, though late last week the company delayed withdrawing stores from the state Medicaid program for one month.

West Virginia is still determining how to address reimbursement in the wake of the recent AWP rollback.

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