Panel: Drug reform not enough to close hole in Medicaid
by Tim Lockette
Dec 13, 2013 | 3546 views |  0 comments | 47 47 recommendations | email to a friend | print
MONTGOMERY — Major reform of drug benefits for Alabama Medicaid customers won't save the program enough to balance the books long-term, said the leader of a state commission charged with finding solutions to the problem.

"This is not the solution to the $100 million hole in Medicaid," said Don Williamson, chairman of the Alabama Medicaid Pharmacy Study Commission. "I wish it were enough. I wish there wasn't a hole."

The commission, created earlier this year to find ways to cut costs in Medicaid's pharmacy program, held its final meeting Friday. While the commission didn't complete its final report — members are expected to vote on that by teleconference next week — the commission's consultants found that each of three proposed plans to reform the plan would save far less money than originally projected.

Alabama has spent the past two years looking for ways to change the way it delivers Medicaid, the state-and-federal program that provides health care for some people in poverty. The state's requirements to qualify for Medicaid are some of the toughest in the nation, but an influx of enrollees after the recession swelled the ranks of Medicaid patients, who now number more than 900,000.

In 2014, the state will pay $615 million for the program, the same amount it paid the previous year, though Medicaid officials say the cost is growing. The state has tried numerous methods to fill the hole, including raiding a state trust fund and raising certain co-pays and fees for Medicaid patients. Earlier this year, the Legislature passed a bill that would reorganize some of Medicaid's services into a managed care-like arrangement to limit growth in the program's cost.

State leaders had hoped to find major savings in Medicaid's drug program, but the panel's consultant found the program was already among the five most efficient in the country in terms of managing rising costs.

"Alabama's Medicaid program is an efficient and effective program," said Steve Schramm, director of Optumas, a consulting firm hired by the commission.

Earlier in the year, the panel heard three proposals for new ways to deliver drugs through the program. One would have turned management of the drug benefit over to the American Pharmacy Cooperative, a group that negotiates drug prices for independent pharmacists in Alabama. Another would have handed the program over to a pharmacy benefit manager — a private company that negotiates prices, often for chain pharmacies. The proposal didn't single out an individual PBM as a provider.

A third proposal would have given all of Medicaid's business to Wal-Mart, which said it would provide low rates in exchange for the privilege. Wal-Mart projected that it could save the state up to $120 million per year.

When Schramm analyzed all three proposals, all fell far short of initial projections. Wal-Mart's option would actually save between $19 million and $30 million, Schramm projected. The American Pharmacy Cooperative's plan would save between $9 million and $18 million, short of the group's predicted $48 million to $60 million. No PBM was likely to save more than $35 million, Schramm said.

From the beginning, the commission was dogged by a lack of reliable data. Differences between states made apples-to-apples comparisons between Medicaid programs difficult, commission members said. Schramm said the state would have to submit a request for proposals, and get detailed responses from potential pharmacy contractors, to get a good projection of savings from any change.

Commission members quizzed Schramm about the effect the reform plans might have on independent pharmacies — particularly in rural areas where there's no other option. Schramm said he'd found that cash and private-insurance customers made up a larger portion of pharmacies' profits than Medicaid. By his projection, a cut of 10 percent in the margin from Medicaid would lead to the closure of one to four independent pharmacies a year. Schramm said roughly 150 pharmacies close per month nationwide — and nearly as many open in the same period.

"For the pharmacies that close, it's a zero or one proposition," Schramm said.

Still, he said, the numbers suggested reform wouldn't shutter large numbers of rural pharmacies.

Williamson said the decision on what to do next lies with Gov. Robert Bentley, who would likely incorporate any changes into his proposed budget and legislative goals for the 2014 legislative session, which is about a month away.

But even major changes to the program, he said, won't make a large dent in Medicaid's overall cost.

"No matter what you do with Medicaid, you're not going to significantly change the program's shortfall," he said.

Capitol & statewide correspondent Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.

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