Georgia Officials to Reform Medicaid Program to Help Curb Rising Prescription Drug Costs

"Struggling to control" Medicaid prescription drug costs, the Georgia Department of Community Health plans this month to implement new measures that will "significantly change the way state Medicaid patients get their prescriptions filled," the Atlanta Business Chronicle reports. With drug spending likely to rise as much as 20% next year in the state's "spread-thin Medicaid program," the DCH has developed a new co-payment system and a preferred drug list for beneficiaries. The state also will encourage patients to use generic drugs by offering them lower costs for generics over "pricier" brand-name prescriptions. Under the plan, patients would have to pay $0.50 for drugs that cost the state $10 or less, $1 for treatments that cost up to $25, $2 for drugs that cost up to $50 and $3 for medicines that cost $50 or more. According to DCH Commissioner Russ Toal, the state needs approval from HCFA before "setting the new payment systems in motion," after which the plan will take effect "immediately" for Medicaid beneficiaries. On July 1, the state will enact similar "cost-saving measures" for the State Health Benefit Plan, which covers more than 250,000 state employees. However, the Medical Association of Georgia has "staunchly opposed" the reforms and will likely meet this month with the Georgia Pharmacy Association to discuss "how the measures will be put into effect." In 2001, Georgia's Medicaid program has "grappled" with an estimated $100 million shortfall and has asked the state for about $43 million in additional funding "just to cover prescription drug spending" this year.

Using the Loophole
In addition to the new co-payment system, Georgia Gov. Roy Barnes (D) has called on the DCH to begin using the Medicaid upper payment mechanism -- the so-called Medicaid "loophole" -- to "maximiz[e] the amount of revenue the state collects from federal matching fund programs and use those funds to cover state drug cost increases" (Bryant, Atlanta Business Chronicle, 4/23). Under the loophole, states pay city- or county-owned care facilities more than the actual cost of health services, receive additional matching funds from HCFA and then require the facilities to return a portion of the extra state funds. The state then sometimes pays the facilities a small fee for participating, and uses the extra federal funds for health and/or non-health-related items (Kaiser Daily Health Policy Report, 1/8). The Atlanta Business Chronicle reports that use of the loophole would provide a $130 million boost in Medicaid payments to Georgia hospitals and nursing homes (Atlanta Business Chronicle, 4/23). A plan agreed to last year by Congress and the Clinton administration said that no new states may take advantage of the loophole after mid-March 2001, and that those that have been using it be "weaned off the payments." Since September 2000, however, at least six new states have started using the loophole, and the Bush administration is "likely" to approve similar applications from several other states with applications that have been pending at HHS since before mid-March (Kaiser Daily Health Policy Report, 3/30).

Pharmacies Grab 'Big Bucks'
Meanwhile, the Atlanta Business Chronicle reports that some Georgia pharmacies have "reap[ed] millions from taxpayer-funded Medicaid coffers as drug costs continue to rise." In Georgia, Medicaid reimbursements for prescriptions have "soared" 74% in four years, jumping from $310 million in 1996 to $540 million last year, according to the DCH. State pharmacies, especially those supplying drugs to assisted-living facilities, receive "huge amounts of business" and "big bucks" through Medicaid. The 19 top "Medicaid-grossing pharmacies" in the state received $78.9 million in Medicaid reimbursements last year, or 15% of the state's expenditures on prescriptions, the DCH reports. On average, "consultant" pharmacies -- those without "recognizable storefronts" -- "generate" 60% of their revenue through Medicaid reimbursements, the "lifeblood of their business," Mary Jo Carden, assistant director of government affairs with the American Society of Consultant Pharmacists, said. Some traditional pharmacies, especially those located near hospitals with a "high volume" of Medicaid patients, also "commanded" millions in Medicaid reimbursements last year, the Business Chronicle reports (Schenke, Atlanta Business Journal, 4/23).