New Report: Allowing Medicaid Plans To Manage Pharmacy Benefits Leads To Cost-Savings For States

posted by Clare Krusing

on April 1, 2015

For Immediate Release

Washington, D.C. – States in which Medicaid plans manage prescription drug benefits are realizing large-scale savings, according to a new analysis by The Menges Group.

The study, “Comparison of Medicaid Pharmacy Costs and Usage in Carve-In Versus Carve-Out States,” examined 35 states and DC that used the Managed Care Organization (MCO) model in their Medicaid program and either included (carved-in) or excluded (carved-out) pharmacy benefits from coverage. The report found that carve-in states outperform carve-out states by a wide margin, saving Medicaid $2.06 billion in state and federal expenditures in 2014 alone.

With regard to significant cost savings in carve-in states, and in light of their better coordination of services, the authors conclude: “Our findings suggest that states that maintain prescription drugs as part of the MCO benefit are able to achieve cost savings while at the same time provide highly integrated care. The pharmacy carve-in model appears to resoundingly fulfill both objectives.”

Key findings of the report include:

  • Across 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.
  • This 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.
  • The seven carve-out states had a 20 percent increase in net costs per prescription from FFY2011-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.
  • The 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.

“Medicaid plans’ ability to provide coordinated care through pharmacy benefits is crucial for beneficiaries and critical to protecting taxpayers and state budgets,” said America’s Health Insurance Plans President and CEO Karen Ignagni. “Allowing health plans to coordinate health and pharmacy benefits is essential for improving and maintaining the health of Medicaid beneficiaries and protecting limited state resources.”

To view the full analysis, click here.

For more information on how carving pharmacy into Medicaid managed care organization (MCO) benefits is critical for beneficiary outcomes, click here.


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