ack to Legislative Updates

Medicaid and the Preferred Prescription Drug List

Across the United States, Medicaid is a critical health care program for our country’s poor and disabled residents. Medicaid insures 47 million Americans, covering more people and spending more money than the better-known Medicare system for the elderly. Expenses surrounding about half of all births, and the care of as many as 40 percent of our children, are paid for by Medicaid, as well as the coverage of 50 percent to 75 percent of nursing home patients. Medicaid is the largest single payer of prescription drugs and the largest payer of mental health care.

West Virginia, being one of the poorer states in the nation, is likely even more dependant on Medicaid. About 288,000 West Virginians are currently enrolled in Medicaid, an increase of 11,000 from last year. Because both national and state changes to the program are currently being enacted or proposed, I thought now would be a good time to examine the latest developments.

In the past few months, in particular the last week or so, there has been a great deal of discussion among state officials regarding the condition of our budget. Legislators have been warned that balancing the 2004-2005 budget will be extremely difficult. While the depressed economy has widely been cited as the impetus for the downturn, Medicaid’s financial condition is also a major factor.  State Tax and Revenue Secretary Brian Kastick has said that $120 million will have to be transferred from other state agencies to pay for growing expenses in Medicaid, the state pension plans, the Public Employee Insurance Agency, and the Division of Corrections.

Medicaid spending, which grew to more than $1.5 billion in state and federal dollars this year, has risen rapidly since the mid- 1990s. The state receives $3 in federal funds for every $1 it spends, and West Virginia will allocate about $375 million toward the program this year. State officials are enacting administrative cuts. They are considering lowering reimbursement rates to hospitals and physicians, but there is concern as to whether the facilities can withstand the reduction. The federal government requires that states provide certain services through Medicaid, such as inpatient and outpatient hospital care, and court rulings obligate West Virginia to pay for other services related to behavioral health. So when it comes to making cuts, there are only a few optional services, one of which is the prescription drug program.

The state’s Medicaid drug program is drawing nearly $230 million out of Medicaid’s coffers this year, in large part because of the skyrocketing cost of prescription drugs nationwide. As was noted in a recent newspaper article, prescription drugs accounted for 6 percent of Medicaid’s expenditures in 1989; now they account for more than 15 percent.

To reduce expenses, West Virginia has joined several other states in enacting a preferred drug list. Last year, the preferred list saved Medicaid nearly $14 million. By restricting the prescription drugs covered by Medicaid, officials hope to steer participants away from name-brand drugs and toward generic equivalents, as well as toward the best-priced name-brand prescriptions. If a patient seeks a drug that is not on the preferred list, that person must gain the approval of a state-commissioned pharmacy group. Although state officials have said that 97 percent of the drugs requested in the past six months were automatically approved, some health care advocates, doctors and pharmaceutical representatives say the program is overly restrictive.

Those who support the cost-cutting measure note that it mirrors what is being done in the private sector, and that in the past, Medicaid only covered 10 prescriptions per month. Those who oppose the measure argue that those who suffer from the most serious illnesses are the most affected. Many of the newer drugs related to mental illness are not on the list, they point out. In addition, some doctors feel their ability to treat patients is being hindered.

This is a very difficult issue, and one that must be closely monitored. I don’t think many people would argue that the state shouldn’t attempt to reduce Medicaid costs, but we should be cautious. If well administered, a preferred list may help the state battle out-of-control prescription costs. But we all expect adequate medical care, and Medicaid patients are certainly no exception. Even if we overlook the human equation, the state must also be wary of the fact that if drug therapy is shortchanged, the potential health deterioration that might follow could cost the state even more money than the drug therapy would have.

Regardless of what happens to the prescription drug list, Medicaid will continue to be on our radar screen in the months and years to come. At the same time that Congress is considering reducing state grants and giving states more flexibility in spending, numerous states have eliminated or reduced some benefits, reduced reimbursement rates, or reduced eligibility. As we struggle with other budget concerns, West Virginia is going to have to get a handle on Medicaid’s growth, while remaining mindful of how important the system is to our state’s low-income residents.