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New Study: Medicaid Managed Care Saves Billions on Prescription Drugs for Taxpayers Every Year

Press Release

Published Feb 24, 2020 • by AHIP

Analysis by The Menges Group finds that Medicaid managed care plans saved over 25% more per prescription than traditional Medicaid fee-for-service and help keep Medicaid affordable and effective for enrollees and taxpayers

WASHINGTON, D.C. – Americans with Medicaid deserve high-quality coverage and care. Medicaid managed care plans are committed to ensuring this important safety net works for those who rely on it, and the hardworking taxpayers who pay for it. As part of this commitment, Medicaid managed care plans are saving taxpayers billions of dollars each year – consistently providing Medicaid enrollees with prescription drugs at lower costs than traditional Medicaid fee-for-service (FFS) programs. That’s according to new research from The Menges Group, conducted on behalf of America’s Health Insurance Plans (AHIP).

Medicaid managed care plans’ net costs per prescription (which factor in rebates) were roughly 27% below the net costs in traditional Medicaid FFS program. The lower costs yielded $6.5 billion in net savings for states and taxpayers during fiscal year 2018.

Other major takeaways from today’s study include:

  • Medicaid managed care plans consistently control prescription drug costs more effectively than traditional Medicaid. Over the 5-year period from 2013 to 2018, net costs per prescription increased 13% faster in FFS settings than in Medicaid managed care plans.
  • States continue to recognize the value and advantages of Medicaid managed care plans in delivering affordable health care and program savings. Medicaid enrollment in managed care plans more than doubled from 25.6 million people in 2010 (51% of Medicaid enrollees) to 56.5 million people (77% of enrollees) in 2018, and this trend is expected to continue.
  • With states significantly expanding the role of Medicaid managed care in Medicaid, the number and percentage of Medicaid prescriptions covered nationwide by Medicaid managed care grew dramatically. More than 70% of all Medicaid prescriptions nationwide were delivered through Medicaid managed care plans in 2018, compared to only 28% in 2011.
  • States that used Medicaid managed care to deliver integrated drug benefits instead of prescription drug carve-outs realized big savings—with upwards of 25% lower net drug costs. A comparison of states with integrated drug coverage versus carve outs showed higher generic dispensing rates and much lower growth rates in net costs per prescription.

Today’s announcement marks the first of a series of studies on the performance of Medicaid managed care plans conducted by The Menges Group for AHIP. Additional studies to be released throughout 2020 will examine key performance metrics, including quality performance and value; use of innovative programs; and technology.

Creating Value for Medicaid Enrollees

One in five Americans are covered by Medicaid, including millions of children, older adults, people with disabilities, and 2 million veterans. Two-thirds of Medicaid enrollees – more than 56 million people – are served by Medicaid managed care plans. These plans deliver real savings through patient-centered care coordination programs, high-quality and accessible provider networks, increased utilization of generic prescription drugs, and other effective solutions like programs focused on routine and preventive care.

Medicaid managed care plans are responsible stewards of taxpayer dollars. They perform a significant range of network management, care management, and operational functions for states, demonstrating how efficiently and effectively they serve Medicaid enrollees and hardworking taxpayers.

“Medicaid managed care plans ensure that the Americans who rely on this important health care safety net program have access to high-quality health care and prescription drug coverage,” said Matt Eyles, AHIP President and CEO. “When states rely on Medicaid managed care plans to provide integrated drug benefits to enrollees, they do even better and deliver more savings for taxpayers every day. This study shows that when the private and public sectors work together for better health care, everyone wins.”

From quality performance to innovation to prescription drug delivery, Medicaid managed care is focused on putting people with Medicaid first and delivering the quality and value they deserve.

Read the full study.