Comparison Of Medicaid Pharmacy Costs And Usage In Carve-In Versus Carve-Out States

posted by The Menges Group

on February 19, 2016

Key Takeaways

14.6% lowerAcross 28 states using the carve-in model, the net cost per prescription was 14.6 percent lower than the average net cost per prescription in states not carving in pharmacy.


$2.06 billion savingsThis 14.6 percent differential created a $2.06 billion net savings in state and federal expenditures in FFY2014 for states deploying the carve-in model.


20% increaseThe seven carve-out states had a 20 percent increase in net costs per prescription from FFY2011 to FFY2014 — in stark contrast to the 1 percent increase in net costs per prescription experienced by the 6 states that recently switched from a carve-out to a carve-in model.


$3.07 million missedThe seven carve-out states “missed” a total of $307 million in savings in FFY2014 which would have occurred had they used a carve-in model.


States are increasingly relying on coordinated care models – and capitation contracting with managed care organizations (MCOs) in particular – to strengthen the performance of their Medicaid programs. These programs seek to create a system of coverage that optimally tracks and facilitates access to needed services, measures and improves quality, and achieves available cost savings.

States make their own determinations as to what form of Medicaid coordinated care model(s) they use. This paper examines 35 states and the District of Columbia that made use of the MCO capitation contracting model in their Medicaid program, transferring risk for medical costs to coordinate care for at least some of their Medicaid beneficiaries. Each state determines its own program design features regarding which populations are included in their capitated MCO program, how many (and which) MCO contracting partners are selected/approved, and which Medicaid covered services are included/excluded in the capitulated benefits package.

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