Tag: Pharmacy Carve Out
This report explores the fiscal and programmatic impacts that a switch to a prescription drug carve-out model, where the pharmacy benefit would be managed under a single-payer system within Medicaid using the fee-for-service payment methodology, would have on Virginia’s Medicaid program (Cardinal Care). Our key recommendations for the Medicaid program include preserving the current pharmacy carve-in, preserving the common core formulary (i.e., the preferred drug list), enhancing reimbursements to critical access pharmacies, increasing MCO policymaking representation, and exploring potential revisions to capitation rates for the pharmacy component.
This report explores which prescription drug model is best suited for Washington’s Apple Health (Medicaid) program: the current carve-in prescription drug model, under which managed care organizations (MCOs) pay for members’ prescriptions, or a carve out model, where prescriptions are managed by a separate company using a fee-for service (FFS) payment mechanism. Our overall recommendation is that Washington should preserve the carve-in pharmacy model for the Medicaid program
The Elevance Health Public Policy Institute engaged and worked with us to assess the degree to which quality scores on pharmacy-related measures were affected by the state’s Medicaid managed care program design features. The key issue assessed was whether quality scores were better in states where the prescription drug benefit was “carved-in” rather than “carved-out.” We created 34 group comparisons between the two settings, and consistently found the Medicaid MCO quality scores to be superior in the carve-in setting. This finding occurred across years, across a wide set of behavioral health and physical health HEDIS measures, and in different regions of the country.
The New Jersey Association of Health Plans enlisted the Menges Group to evaluate New Jersey’s Medicaid prescription drug costs and assess the potential impacts of a pharmacy carve-out approach, whereby the prescription drug benefit would be removed from the MCOs’ responsibility and paid for in the fee-for-service (FFS) setting. We also assess the impacts of two potential policy changes, including maintaining MCO responsibility for the prescription drug benefit but requiring the use of the same preferred drug list (PDL) and MCOs’ mandatory use of a single Pharmacy Benefits Manager (PBM) subcontractor.
We estimate that carving pharmacy benefits out of the MCO benefit package will cost the State of New Jersey $51 million in the first year, with cumulative state costs across the first five years of the carve-out totaling $454 million. Additionally, we find that due to a weakened ability to manage drug mix at the “front end,” moving to a uniform DHS-driven PDL will cost the State of New Jersey $3 million in the first year, with cumulative state costs across the first five years totaling $26 million. Finally, our analyses show that a policy approach of requiring all MCOs to use the same PBM is also unlikely to yield savings.
Some Virginia policymakers have indicated an interest in moving to a pharmacy “carve-out” within the Medicaid managed care program, whereby the state would instead manage the pharmacy benefit for MCO enrollees, including paying directly for drugs made available in the program. Virginia’s Association of Health Plans engaged The Menges Group to estimate the fiscal impacts of Virginia switching to a carve-out model as well as the programmatic advantages and disadvantages of this potential change. We estimate that a change to a pharmacy carve-out would result in a 20.2% increase in net (post-rebate) Medicaid pharmacy expenditures across the five year timeframe SFY2020 – 2024, increasing net state fund costs by $12 million in the first year of implementation and by $157 million over five years.
Policymakers are considering moving Medi-Cal to a pharmacy “carve-out” – that is, shifting the pharmacy benefit out of managed care to instead be administered by the state in fee-for-service (FFS). The carve-out proposal is motivated, in part, by the potential for the state to collect more drug manufacturer rebates. This report, commissioned by Local Health Plans of California, provides strong evidence that a pharmacy benefit carve-out will not achieve its intended cost savings and will have an adverse impact on the integrated, whole-person approach to care the Medi-Cal program has embraced.
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.
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.