Managed Medicaid set to gain new enrollees and drug rebates

May 1, 2010

Medicaid rolls will be expanded to include those earning up to 133% of the federal poverty level and adults without children.

Under the new healthcare law, Medicaid rolls will be expanded to include those earning up to 133% of the federal poverty level. In the United States, 48.5% of the uninsured earn 133% of the federal poverty level or less, according to the Kaiser Family Foundation. States will expand program eligibility by 2014 to include childless adults that are at or below the poverty level, and the federal government will pay 100% of the costs for the newly eligible individuals through 2016.

"That will have a tremendously positive impact on states and would not affect their budgets," says Don Hall, MPH, principal with Delta Sigma LLC, a national healthcare consulting practice based in Colorado.

Medicaid saw a record enrollment increase of 3.3 million people in 2009. The program currently covers about 47 million people overall-21.6 million of whom are in managed care plans.

A Kaiser Family Foundation survey reported that 44 states and the District of Columbia experienced higher than expected Medicaid program enrollment as a result of the recession, increasing state spending for fiscal year 2010. At least 29 states reported considering midyear cuts in provider rates and program benefits, despite the $87 billion in Medicaid relief gained through federal stimulus dollars.

REBATES FOR MANAGED CARE

One of the biggest gains in the new healthcare legislation allows states to collect drug rebates for enrollees in Medicaid managed care plans. Expanding the rebate is a long overdue correction, according to Margaret A. Murray, CEO of the Association for Community Affiliated Plans (ACAP), which represents not-for-profit Medicaid managed care plans.

"For states, it will [provide] substantial savings on prescription drugs, help them deal with their tight budgets, and allow them to make more rational decisions about their Medicaid programs," Murray says.

The Medicaid Drug Rebate Program requires pharmaceutical companies to provide rebates in order to receive federal reimbursement for outpatient drugs dispensed to Medicaid beneficiaries. The inability to get drug discounts for managed care enrollees has led 16 states to carve out all pharmacy benefits from managed care programs. States have had to choose between cost-effective management of the pharmacy benefit with a carve-in or the lower drug prices with a carve-out.

Equalizing the rebate program will improve plans' ability to manage pharmacy benefits and remove the incentive to carve out drug benefits, Murray says. States that bring the benefit back in-house should see savings from the rebates, but also additional savings through better benefits management.