System Wide Strategies: Controlling Costs in Medicaid Brendan Krause National Governors Association Illinois Health Forum Wednesday, December 7, 2005

What’s causing Medicaid growth Increase in caseloads Slowdown in economy (after effects of recovery) Nursing homes and LTC Increase in Rx and medical technology utilization Expensive caseloads/Chronic Illness

Cost Containment Approaches Control Long-Term Care Costs Improve Administration/Management (purchasing strategies, brokerage models, purchasing pools). Enhance Fraud and Abuse Efforts Increase cost-sharing Decrease reimbursements Change Benefits, Eligibility Disease/Care Management/Prevention Rx Benefit-PDLs, Supplemental Rebates

Prescription Drug Trends—What’s Happening in the States and Why? Rx spending is about 11 percent of healthcare spending overall—a little more than 10 cents of the health care dollar Rx spending grew 9.1 percent in 2003 – (substantially lower than the 2002 increase of 13.2 percent and less than half the 1999 peak increase of 18.4 percent)—Health Affairs Role of Rx in Medicine increasing

Medicaid Rx Management Medicaid Rx Purchased through a Rebate Agreement between Medicaid and Rx Manufacturers) Medicaid gets the “best price” Limits to purchasing arrangements that Medicaid can form Limits to utilization management Limits to cost sharing for beneficiaries—amount and enforceability No closed formularies

What are the Tools? Prior Authorization Preferred Drug Lists and Supplemental Rebates (about half) Generally exemptions for mental health, cancer, HIV/AIDS drugs Evidence based PAL—Prescription Advantage List (ie. NC— list of prescriptions preferred by Medicaid— no PA)

What are the Tools? Generic Substitution (rebate caveat, mandatory vs. encouraged) When available, the average price of a generic is 70 percent less than that of a brand name drug. Cost Sharing (nominal rates $0-3 apply) Prescription limits and Drug Exclusions At least 40 states limit the amount of a medication dispensed to a patient at one time, 24 limit refills, 12 limit the number of monthly or annual prescriptions, and one uses a spending cap. Mail Order Pharmacy for Maintenance Medicines

Purchasing Strategies Multi- or Inter-State Across state Medicaid Programs MI, VT, AK, NH, NV, MN, HI, MT LA, MD, WV Across State Employee/Retiree Benefit Programs DE, MO, NM, WV Intra-State Across State Agencies and Programs Negotiated Discounts for Low-Income and/or Uninsured Residents Other

Disease/Care Management of the Chronically Ill Chronic disease as a cost driver Patients who have chronic illness Chronic disease changing face of primary care practice Lack of adherence to evidence based standards State role in convening, facilitating standard setting, measurement

State Options Make Build infrastructure, generally through PCCM model Buy Contract with a vendor for case management services, software Assemble A make/buy combination

State Models Indiana Chronic Disease Management Initiative with Diabetes, Asthma, and CHF. Future initiatives—hypertension,HIV/AIDS North Carolina Community Care of North Carolina (CCNC) Provider networks that manage asthma, diabetes, ER use, and Rx utilization for Medicaid patients statewide

What’s Next? The Medicare Modernization Act and the States Medicaid SPAPs Clawback/Phased Down State Contribution Retiree Benefit Subsidy More interest in multi-state purchasing and benefits management More focus on quality and outcomes—and purchasing accordingly