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    Opinion: The Bad Politics of Carving-Out Medicaid Managed Care Drugs


    Benefits of managed care drug plans

    Medicaid managed care drug plans outperform state FFS drug programs in a number of ways. For example, FFS drug prices often differ unnecessarily from one pharmacy to the next. State FFS Medicaid programs arbitrarily pay much higher dispensing fees than would occur in a competitive market. State Medicaid FFS drug programs use low-cost, generic drugs less often than managed drug plans. In addition, unnecessary and redundant prescriptions are often higher under state-managed FFS drug programs.

    Using private firms to manage drug benefits is standard practice in virtually all other health plans. These are the same private drug plans that manage Medicare Part D drug plans for seniors as well as drug benefits for employee health plans and health insurers. This is important because insurers, employer health plans, and PBMs all have an incentive to hold down costs.

    By contrast, some politicians in Kentucky want to increase Medicaid spending by paying pharmacies hundreds of millions of dollars more. The Kentucky governor warned if the state Medicaid agency takes control of managing drugs, federal and state taxpayers’ costs would increase costs by $161 million.

    Furthermore, it makes sense that the health plan responsible for medical care should also manage drug therapies. Drugs often substitute for other more expensive medical treatments or lessen the use of hospitalization and emergency rooms. The ultimate goal should be to better manage Medicaid beneficiaries care, not increase pharmacy profits.

    Too often public programs like Medicaid are allowed to become state and local economic development programs, whose supporters hope to shift some of the costs to taxpayers in other states. This is a bad deal for both federal and state taxpayers. It is also a bad idea for Medicaid patients.

    Devon M. Herrick, PhD, is a health economist and policy advisor to the Heartland Institute.


    Devon Herrick, PhD
    Devon Herrick, PhD is a health economist and senior fellow at the National Center for Policy Analysis.


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