Skip to Content
s - Skip to Content
0 - Access key details
1 - Back to top
2 - Header search

Author: Grace

America’s Health Insurance Plans (AHIP) engaged The Menges Group to assess West Virginia’s Medicaid pharmacy carve-out impacts, analyzing the findings of another consulting firm’s report. Our analyses suggest that West Virginia’s carve-out has created increased Medicaid expenditures rather than savings. We also provide a large volume of evidence from states that switched to a carve-in approach (comparing their cost per prescription progression to states that maintained their carve out model). These results, taking into account all Medicaid pharmacy claims and rebates in 13 states and across a several year comparison timeframe, compellingly indicate that the carve-in model has yielded large-scale savings relative to the carve-out approach.

The Menges Group was asked to update an analysis of New York’s Medicaid prescription drug expenditure growth over the past several state fiscal years (SFY). Based on our analysis of year-over-year trends since SFY2014, we anticipate that single-digit annual growth is most likely to occur in the upcoming year. This is also in alignment with CMS nationwide estimates of Medicaid prescription drug expenditure trends.

Legislation has been proposed in Louisiana to take the Medicaid preferred drug list (PDL) content responsibility away from the MCOs and shift it to a single state-determined PDL. The Menges Group assessed the impact of this policy option and estimated by transitioning to a PDL, Louisiana would experience a 13.5% increase in Medicaid pharmacy expenditures, with State Fund costs growing by $23 million in FFY2019 and $121 million across the five-year timeframe FFY2019-FFY2023. The non-financial programmatic dynamics of MCO latitude relative to a uniform Medicaid PDL are also discussed.

Currently, Louisiana includes (carves in) the pharmacy benefit in its capitated contracts with Medicaid MCOs. During FFY2017, Louisiana had the nation’s most favorable Medicaid generic dispensing rate at 90.9% and the nation’s 8th best (lowest) cost per prescription. The Menges Group analyzed the impact of legislation proposing a carve-out of the prescription drug benefit. Based on our analysis, transitioning the Medicaid prescription drug benefit back to fee-for-service would be costly for the Medicaid program and Louisiana’s taxpayers. We estimate that Louisiana would experience a State Fund cost increase of $69.3 million in FFY2019 and $395 million across the five-year timeframe FFY2019-FFY2023. Our report also discusses the programmatic advantages of preserving the pharmacy carve-in model.

Over 90 percent of Louisiana’s Medicaid prescriptions are paid for by MCOs. The Louisiana Association of Health Plans engaged us to assess the impacts of a potential policy change to take the preferred drug list (PDL) content responsibility away from the Medicaid MCOs and shift it to a single state-administered and state-determined PDL. Our key finding is that this policy change would be costly to the State and its taxpayers – increasing overall annual Medicaid costs by $40 million and increasing annual State Fund expenditures by approximately $15 million. Our report provides evidence across dozens of states demonstrating that a focus on optimal management of Medicaid’s drug mix at the “front end” produces more favorable net costs than an approach that relies primarily on “back end” rebate maximization.

The Legislative Budget and Audit Committee of Alaska sought information and analyses with regard to other states’ experiences with Medicaid reform and expansion initiatives. This report describes opportunities for Medicaid savings and to reduce pharmacy costs. As well as recommendations for contracting, incorporating employment supports, improving and monitoring access to care, and reducing unnecessary emergency department utilization.

The Texas Association of Health Plans engaged The Menges Group to prepare an analysis of the impacts of switching from a statewide uniform Medicaid prescription formulary to a model that allows Medicaid MCOs flexibility to develop their own preferred drug lists (PDL). Currently, Medicaid MCOs in Texas must utilize a uniform formulary controlled by the state. In this report, we assessed a model in which Medicaid MCOs have the latitude to manage the covered mix of drugs through their own PDLs. We conducted this assessment using multiple analyses, including a cost per prescription analysis, therapeutic class analysis, and quantitative and qualitative survey of Texas MCOs. This approach is estimated to result in total annual Medicaid savings of $236 million and annual general revenue savings of nearly $100 million. For this reason, a policy change towards the PDL latitude model is recommended. In addition to the report, a presentation summarizing the findings can be found in the Executive Summary hyperlink.

We were asked by the Association for Community Affiliated Plans (ACAP) to estimate the Medicaid savings created by the capitated coordinated care model. The report estimates the savings each state is achieving with its existing capitation program, as well as the additional savings that will occur if remaining fee-for-service Medicaid spending in each state is transitioned to capitation through contracts with managed care organizations (MCOs). Savings estimates are provided within each state for each major Medicaid eligibility group. Nationwide savings from existing Medicaid MCO capitation programs are estimated at $2.1 billion in 2011, increasing to $6.4 billion in 2016.

This study examined 35 states and DC that used the Managed Care Organization (MCO) model in their Medicaid program and either included (carved-in) or excluded (carved-out) pharmacy benefits from coverage. The report found that carve-in states outperform carve-out states by a wide margin, saving Medicaid $2.06 billion in state and federal expenditures in 2014 alone.

Key findings of the report include:
Across 28 states using the carve-in model, the net cost per prescription was 14.6% lower than the average net cost per prescription in states not carving in pharmacy.

This 14.6% differential created a $2.06 billion net savings in state and federal expenditures in FFY2014 for states deploying the carve-in model.
The seven carve-out states had a 20% increase in net costs per prescription from FFY2011-FFY2014 — in stark contrast to the 1% increase in net costs per prescription experienced by the 6 states that recently switched from a carve-out to a carve-in model.
The seven carve-out states “missed” a total of $307 million in savings in FFY2014 which would have occurred had they used a carve-in model.

Prescriptions for a Healthy America (P4HA) released a report by the Menges Group examining how Medicaid Managed Care Organizations (MCOs) are combatting prescription drug nonadherence.

The report highlights the efforts of several Medicaid plans and their best practices for improving prescription drug adherence

In commenting on the report’s release, Joel White, President of Prescriptions for a Healthy America made the following statement: “We believe this report is another important contribution to the growing body of evidence that finds medication adherence saves money and improves health. What’s particularly exciting are the strategies outlined in the report can be adopted, today, by Governors across the country as they seek to improve Medicaid in ways that improve patient health, lower health costs and make the health system work better for everyday Americans. We encourage Governors to take notice.”

The report’s lead author, Joel Menges, noted that: “While a large segment of the Medicaid population takes medication daily, the poverty population’s life circumstances can diminish adherence in many ways. The supportive innovations occurring in this arena are of benefit to all stakeholders.”

Back to top