NCPA - National Center for Policy Analysis

Medicaid Reforms in Florida

November 14, 2013

Florida is moving aggressively to cover Medicaid enrollees in privately-administered managed care plans. The state should also continue to move enrollees to managed drug plans. Virtually all state Medicaid programs distribute some drugs on a fee-for-service (FFS) basis separately from any health plan, says Devon M. Herrick, a senior fellow with the National Center for Policy Analysis.

  • Integrating prescription drugs benefits with Medicaid managed care health plans improves quality and increases efficiency.
  • A Lewin Group analysis for Medicaid Health Plans of America, a trade association of managed care providers, found that integrating health plan and drug benefits in 14 states that currently carve out drug benefits would collectively save nearly $12 billion over a decade.

Medicaid managed care plans frequently contract with pharmacy benefit managers (PBMs), private firms that act as third-party prescription drug plan administrators.

  • PBMs process and reimburse claims, and negotiate drug prices and rebates with drug manufacturers. They also negotiate dispensing fees -- the amount paid to pharmacies for the service of filling a prescription.
  • Private health plans use a variety of techniques to control drug costs, including preferred-drug lists (PDL), formularies, required use of mail-order drug suppliers, negotiated prices with drug companies and drug distributors, and contracting with exclusive pharmacy network providers.

Numerous benefits flow from integrating drug benefits into enrollees' managed care health plans. For instance:

  • About two-thirds (67 percent) of drug prescriptions in Florida's FFS Medicaid are filled with generic drugs, whereas the national average for managed Medicaid drug benefits is about 80 percent.
  • Florida FFS pays pharmacies $3.73 to dispense a prescription, whereas the average for private Medicare Part D plans is just over half as much -- about $2.00.
  • The number of prescriptions per Medicaid enrollee is generally higher among enrollees in FFS Medicaid compared to managed care.

As Florida moves more Medicaid enrollees into managed care, it should also integrate drug benefits into enrollees' health plans. In addition, Florida legislators should avoid the temptation to enact protectionist regulations designed to limit competition among pharmacies participating in the Medicaid program.

Source: Devon M. Herrick, "Reforming Florida's Medicaid Drug Program," National Center for Policy Analysis, November 14, 2013.


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