Under the MMA, state Medicaid programs are likely to lose their clinical responsibility for the prescription management of their dually eligible members. Some states are pushing to have continued access to their clinical information through a relationship with the Medicare PDPs. This information is required to determine adherence as well as appropriate medication usage. The MMA has provided a process for Quality Improvement Organizations (QlOs) to oversee the Medicare PDPs. This is important because Medicare PDPs are solely responsible for Medicare Part D, not Medicare Part A or B. Consequently, there would be a financial incentive to move toward underutilization of medications within this population; the result would be an increase in expenditures for Medicare Part A and B as well as for state Medicaid programs. These increased expenditures could come from the underuse of cholinesterase inhibitors, resulting in premature placement of dual eligibles in nursing homes.

While the states are losing the clinical responsibility for the management of prescription utilization, they maintain direct financial liability for these 6.5 million Americans who are covered by Medicare plus Medicaid. The phased-down state contribution payment (“the Clawback provision”) represents each state’s financial responsibility for the care of the dual eligibles under Medicare’s prescription drug coverage. The phased-down state contribution payments are defined in the MMA to be the product of the annual per capita dual-eligible drug cost and monthly state enrollment of full dual eligibles times the monthly adjustment factor.
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The baseline from which the per capita costs have been derived is the enrollment and drug payment information reported by the state in calendar year 2003. This payment is phased down over time, starting at 90% in calendar year 2006 and decreasing by 1 2/3% until the reimbursement reaches 75% in 2015. These payments are designed to return to the federal government a significant share of the amount that the states would have spent on prescription drug coverage for dual eligibles under Medicaid if the MMA had not been enacted.

CONTROLLING COSTS

The Medicaid Commission, formed by provisions of the Congressional budget resolution as a way to achieve consensus on reducing federal Medicaid expenditures, issued its report in September 2005. Among the major proposals was a plan to reduce Medicaid pharmacy reimbursement by basing reimbursement on the average manufacturer price (AMP), which is the benchmark by which drug manufacturers pay Medicaid rebates. This plan differs from the Bush administration proposal, which endorsed the average sales price (ASP) as a reimbursement standard.

The Commission’s proposal is in line with the plan suggested by the National Governors’ Association. The net difference to pharmacy between the ASP and the AMP is believed to be about $1 billion over five years; the AMP saves less money than the ASP. Congressional appropriators will be examining all options and will make their own recommendations. In any event, it appears that Medicaid’s pharmacy reimbursement is headed downward.
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