GOVERNMENT and LAW

Medicaid drug waiver programs growing at a cost to R.Ph.s

The law of unintended consequences is still working. Illinois is expanding Medicaid drug benefits from 50,000 low-income seniors to as many as 370,000 seniors. But the expanded benefit is being funded with $100 million pulled from pharmacy Medicaid reimbursements for the current fiscal year.

Medicaid reimbursement for Illinois pharmacies has plummeted from average wholesale price (AWP) minus 10% plus $3.60 to AWP minus 14% plus $2 to $2.40, depending on the contract. "We were encouraging and supportive of getting the program," said Terri McEntaffer, executive director, Illinois Pharmacists Association. "But we're not supportive of the way it's being administered."

Illinois calls its program Senior Prescription Assist. It is open to anyone 65 or older who is at or below 250% of the federal poverty level (FPL). Participants with household income below the FPL pay a $5 enrollment fee. They are eligible for any drug product, Rx or over the counter, ordered by a doctor, with no co-pay. Participants with income at or above the FPL pay a $25 annual enrollment fee. There is no co-pay for generics and a $3 co-pay for brand-name products. Once individual drug expenditures hit $1,750 for the year, McEntaffer said, the co-pay for both groups jumps to 20%.

"We haven't had any official status reports," McEntaffer said. "But reports from pharmacists are that usage is skyrocketing. Our members are reporting that co-pays are so low that patients are dropping private insurance coverage. We took a big financial hit to help fund a plan that is going to be out of money in no time at all."

Pharmacists in at least 20 other states could be facing similar problems. That's how many Medicaid agencies are considering the Pharmacy Plus program, according to the Centers for Medicare & Medicaid Services. Approved in January, Pharmacy Plus provides a waiver to standard Medicaid eligibility requirements under Section 1115 of the Social Security Act. States that accept the waiver get federal matching funds to extend Rx coverage to residents with annual incomes up to 200% of the FPL, currently $17,720 for an individual and $23,880 for a couple. Six states have already received waivers and expanded their drug benefits. Maryland, for example, is adding about 90,000 low-income seniors to its Medicaid drug benefit plan who would otherwise not qualify because of income limits. Illinois could add as many as 320,000 new Rx recipients.

Expanding Medicaid drug coverage has a price. States that accept the waiver and federal matching funds must also accept a cap on total federal Medicaid payments.

Under Pharmacy Plus, federal Medicaid spending cannot exceed the amount the state received before the waiver. For every dollar a state receives under the program, it must find another dollar of savings in other federal Medicaid contributions, noted Cindy Mann, senior fellow with Kaiser Commission on Medicaid and the Uninsured. "If they don't find corresponding savings under regular Medicaid, states will have to cut services or cap benefits to stay within the federal spending limit," she cautioned. "Putting your most expensive and most volatile group of recipients under a funding cap could be a significant financial risk for the states."

Maryland is already facing that risk. The Maryland Pharmacists Association reluctantly supported plans to expand the Maryland Pharmacy Assistance Program when it was being debated by the state assembly in 2001, said executive director Howard Schiff. Pharmacists lobbied successfully to add $1 to Medicaid reimbursement, got an official role for pharmaceutical care, and got the promise of a study on how the expanded drug benefit impacts retail drug pricing. But the current budget crunch is already pushing the state to cut Medicaid reimbursement. Schiff predicts a similar battle when the FY2004 budget comes up for debate next year. "There is real potential for budget problems when you cap funding for a high-cost, high-risk population," he said. "We're worried about what that will mean as soon as next year."

So is the American Pharmaceutical Association. APhA isn't taking a position for or against Pharmacy Plus, said Susan Winckler, general counsel and group director for policy and advocacy, but the group is advising states and state pharmacy associations to take a close look at the financial implications. When Medicaid programs run over budget, she noted, pharmacy reimbursement is one of the first places legislatures try to cut costs. At some point, reimbursement cuts will force pharmacies to close. "States seem incredulous that pharmacists might not want to provide services at a financial loss," she said. "You can't serve patients if you aren't open."

Fred Gebhart