Medicaid MCOs Face Challenges as Population Grows

San Diego—The Medicaid patient population is expected to grow under the Patient Protection and Affordable Care Act (ACA), leaving managed care organizations (MCOs) to face increasing challenges as they attempt to limit costs, particularly in the area of medication management. These challenges, current Medicaid trends, and future clinical issues expected to impact Medicaid MCOs were discussed at a Contemporary Issues session during the AMCP meeting.

The session, titled Medicaid: Managed Care's Biggest Challenge, was led by Nick Casale, PharmD, a clinical pharmacist with Gateway Health, and Ken Perrin, PharmD, MA, vice president of clinical pharmacy services for US Script.

During the last 15 years, many states have turned to MCOs for Medicaid benefits and have moved away from traditional fee-for-service (FFS) structures because of the benefits MCOs can offer to states who adopt the management structure.

One of these benefits is cost savings. A recent study by The Lewin Group found that if Pennsylvania expanded access to MCOs wherever the state currently had a FFS structure in place, they could save an estimated $375 million between 2012 and 2015.

MCOs can also improve access, increase quality outcomes, and foster competition.

They are also appealing to states because MCOs can limit a state's financial risk by bearing the financial burden and helping to alleviate fraud and abuse. According to the speakers, MCOs are clinically, financially, and administratively accountable for delivering quality services and are not limited by some of the problems that exist in state government.

Healthcare reform is another significant factor that is influencing the move away from FFS models, particularly because of the large number of people who will now be eligible to receive Medicaid services. It is estimated that by 2022, Medicaid will expand by 21.3 million people.

In 2011, total Medicaid expenditures were $413.9 billion, with 65.6% of the costs attributed to acute care.

Containing costs for this population is often a challenge, particularly in the area of prescription drug spending. According to data provided in the session, the number of prescriptions has increased 39% from 1999 to 2009. In addition to a growth in prescription volume, the cost of medications has also increased 3.6% from 2000 to 2009.

Other factors that drive prescription spending include changes in the types of drugs used and an increase in manufacturer advertising dollars. In 2012, 39 new drugs were approved by the FDA, the highest number of approvals in 16 years.

States have taken a variety of approaches to manage medication use and control costs in their Medicaid populations. In Pennsylvania, the Pennsylvania Department of Public Welfare's Prior Authorization Review Panel must approve all prior authorizations developed by MCOs before they are put into place. The state's FFS structure also limits pharmacy coverage to 6 prescriptions per month and many other states have placed prescription benefit limits on their Medicaid members as well. The presenters noted, however, that research has found that this may not represent a true cost savings because the savings in prescription drug costs are often offset by increases in hospitalization rates and emergency department visits.

Another cost-control approach is drug utilization review programs for outpatient drugs to determine whether medications are appropriate, necessary, and unlikely to cause adverse effects. These can be done in prospective or retrospective arrangements.

Cost sharing, which allows Medicaid MCOs to require nominal copayments for drugs, is another option; however, if a beneficiary cannot pay, he or she cannot be prevented from receiving the medication.

The session concluded by highlighting several key future clinical issues to consider including the ACA's expansion of the national eligibility to 138% of the federal poverty level. While not all states are required to implement the expansion, a significant increase in the patient population would mean that more clinical staff is needed to help manage patient caseloads.

In addition, specialty drug market spending is increasing by an average of 20% each year. Medicaid and Medicare account for nearly 40% of the specialty drug market, according to the presenters, making them susceptible to rising costs.