During the 2018 legislative session, 28 states passed 45 laws to curb the rising cost of prescription drugs. In addition to legislative solutions, states are taking administrative action to better manage state spending on Medicaid pharmacy benefits. Ohio, West Virginia, and Vermont offer examples of states taking innovative administrative approaches to rein in drug costs.
Ohio Medicaid Replaces Spread Pricing with More Transparency
In August, the Ohio Department of Medicaid announced it would require its five managed care plans to end contracts with pharmacy benefit managers (PBMs) that used “spread pricing.” Spread pricing is a payment model that allows PBMs to profit by charging insurance plan sponsors more for a prescription than the PBM pays the dispensing pharmacy. The lack of transparency in the spread-pricing model makes it difficult for states to identify how much spread pricing contributes to their overall drug costs.
Ohio investigated the impact of spread pricing and found it generated an 8.8 percent PBM markup on its Medicaid managed care pharmacy claims, a margin that enabled PBMs to pocket an average of $5.70 per prescription dispensed. In response, starting Jan. 1, 2019, Ohio will require managed care plans to use a transparent, pass-through payment model that requires PBMs to charge Medicaid exactly what they pay the dispensing pharmacy. To compensate PBMs under this pass-through pricing model, Medicaid managed care plans will pay PBMs an administrative fee estimated at 95 cents to $1.90 per prescription. To meet the deadline, managed care plans are working with PBMs to restructure contracts to comply with the pass-through requirement.
In contrast to Ohio’s administrative approach, Louisiana’s 2018 spread pricing law, Act 483, bans PBMs that contract with the state from retaining any revenue in excess of the amount the PBM paid to the pharmacy through spread pricing.
West Virginia Ends Use of PBMs
In 2017, West Virginia stopped using PBMs altogether after an audit revealed that public employee health plans were charged 1 percent more for prescription drug claims than PBMs were paying pharmacies. Lawmakers determined the 1 percent cost the state $10 million per year.
Instead of using PBMs to administer pharmacy benefits for state workers and Medicaid beneficiaries, West Virginia now acts as its own PBM under a fee-for-service model run by its Bureau for Medical Services’ Office of Pharmacy Services (OPS). In addition to managing the single state preferred drug list, which had previously been used across managed care plans, OPS developed a Preferred Diabetes Supply List. The state pharmacy board estimates that carving out pharmacy benefits from its Medicaid managed care program will save the state $38 million in the first year. Administrative cost savings and modifications to dispensing cost formulas helped achieve those savings.
Vermont Explores a Direct Relationship with a Wholesaler
The Department of Vermont Health Access (DHVA) released a Request for Information (RFI) in September to explore potential savings from establishing a direct relationship with a drug wholesaler. The RFI was in response to a legislative mandate in Act 193 that requires the state to identify opportunities for saving in the prescription drug supply chain. Under this model, payment for drugs would flow directly from DHVA to the wholesaler. Currently, pharmacies purchase drugs directly from wholesalers and are then reimbursed by DHVA. All publicly-funded prescription benefits in Vermont are reimbursed under a fee-for-service model, and pharmacy reimbursement rates are set by the state, not a pharmacy benefit manager. As a result, DHVA makes all payments to pharmacies directly, and not through a third party.
A direct relationship between a wholesaler and the state would allow DHVA to purchase drugs in a manner similar to the 340B Drug Pricing Program model, which may present savings opportunities. DHVA must report its findings to the Vermont legislature by Nov. 15, 2018.
Recent action, both administrative and legislative, reflects states’ growing demand for more transparent pricing and payment models. Learn more about all state action on curbing drug costs at the National Academy for State Health Policy’s Center for State Rx Drug Pricing, a warehouse of resources, including model legislation, new state laws, and legal analysis.
Each year, state Medicaid programs cover more than $1 billion to care for infants with neonatal abstinence syndrome (NAS) – a condition caused by opioid use during pregnancy. NAS often results in expensive hospital stays in order to treat the infant’s withdrawal symptoms, such as irritability, poor feeding, seizures, and respiratory distress.
Earlier this month, the Centers for Medicare & Medicaid Services (CMS) approved a new financing approach for these infants in West Virginia that may usher in an effective, lower-cost treatment option for state Medicaid programs struggling to cover the cost of NAS.
Infants born with NAS are typically treated in hospitals, including special care nurseries and neonatal intensive care units, and Medicaid payment for this treatment is costly. The average length of hospital stay for infants with NAS is 17 days, costing nearly $1.5 billion annually. About 80 percent of these hospital costs are covered by Medicaid.
Non-hospital settings can offer NAS treatment for infants with less severe symptoms at a lower cost — $600 compared to $2,600 in a special care nursery, or $4,000 in a neonatal intensive care unit. Until now, Medicaid coverage of NAS treatment has only included bundled payments to hospitals or fee-for-service payments to providers in non-hospital settings like neonatal withdrawal centers or outpatient follow-up clinics. West Virginia Medicaid recently received CMS approval to cover a new approach — a bundled payment for NAS services in non-hospital settings, referred to as NAS treatment centers.
West Virginia has been particularly hard hit by the opioid epidemic. According to the Centers for Disease Control and Prevention, West Virginia had the highest rate of deaths due to drug overdose in the United States in 2016, reaching 52 per 100,000 residents. It also has one the highest rates of NAS with 33.4 cases of NAS for every 1,000 hospital births.
There is currently one NAS treatment center in West Virginia, Lily’s Place, which provides a comprehensive array of services to prevent or reduce withdrawal symptoms among infants with prenatal exposure to opioids. It also provides education and counseling support to families and caregivers. As a designated NAS treatment center, Lily’s Place will now be reimbursed by Medicaid through a prospective bundled payment that is designed to cover NAS treatment services such as pharmaceutical withdrawal management, withdrawal monitoring, developing a care plan, and therapeutic swaddling.
The bundled payment includes NAS services provided by registered nurses, licensed counselors, and social workers. Physician treatment services and room and board costs are not included in the bundled payment. West Virginia’s NAS treatment center model represents a cost-effective and patient-centered approach to treating NAS and supporting the whole family impacted by opioid use.
Since 2000, the number of pregnant women using or dependent on opioids nationwide increased five-fold, and there has been a corresponding five-fold increase in the number of infants born with NAS over the same period. Additionally, a 2014 study found that one in five women enrolled in Medicaid filled a prescription for an opioid during pregnancy. The drastic rise in opioid use during pregnancy and NAS reinforces the need for effective interventions that support the mother-infant dyad.
New clinical guidelines from the Substance Abuse and Mental Health Services Administration provide important guidance and resources for states, providers, and others caring for pregnant and parenting women with opioid use disorder (OUD) and their infants. These guidelines highlight evidence-based strategies for providing individualized care that promote the health of mothers and infants, including:
- Implementing screenings for substance use disorder and mental health comorbidities for pregnant women;
- Establishing community-based teams of clinicians to engage to support the pregnant women with OUD;
- Providing and managing medication-assisted treatment for pregnant women with OUD;
- Developing and managing a treatment plan for the postpartum period, a time when women are at higher risk for returning to substance use; and
- Screening, assessing, monitoring, and treating NAS for infants exposed to opioids.
This summer, the National Academy for State Health Policy (NASHP) will publish two policy briefs that explore state policies and strategies that promote the continuum of care for women with OUD over the course of their perinatal period, and support the health and well-being of young children impacted by the opioid epidemic.
Explore additional NASHP opioid epidemic resources:
- Intervention, Treatment, and Prevention Strategies to Address Opioid Use Disorders in Rural Areas
- Chronic Pain Management Therapies in Medicaid: Policy Considerations for Non-Pharmacological Alternatives to Opioids
- State Health Policymakers Look to Washington and Each Other to Fight the Opioid Epidemic.
As states pursue a wide range of legislation to address rising drug costs, four more states have joined Utah and Vermont to introduce bills to import prescription drugs from Canada through a state-run, wholesale operation.
This market-based approach to providing more affordable medicines from Canada, where prescription drugs cost on average 30 percent less than in the United States, is appealing to a politically diverse group of states, and is currently under review by legislators in:
- Colorado (S 80);
- Missouri bill studies the creation of an importation program (SB 722);
- Oklahoma (SB 1381);
- Utah (HB 163);
- Vermont (S 175); and
- West Virginia (HB 4294).
A fiscal analysis recently completed in Utah indicated the potential for millions in reduced spending due to the significant price differences between certain products sold in the United States and Canada. This month, NASHP is convening state legislative sponsors to share information and expertise about the importation policies in their states. Many of the importation bills currently under review are based on National Academy for State Health Policy’s (NASHP) model legislation.
If an importation bill passes in a state legislature and is signed into law by the governor, the next step is to seek certification from the US Health and Human Services Secretary Alex Azar by proving that the state’s importation program meets federal requirements to ensure both product safety and consumer savings.
NASHP’s model legislation was designed to meet federal requirements by taking the form of a state-administered system of wholesale importation and distribution limited to pharmaceuticals from Canada. States can decide whether to purchase lower-cost drugs for public programs only, or to expand the importation initiative to also serve commercial health plans.
The program’s imported drugs would be safe and would produce savings because a state would:
- Select only Canadian suppliers who are licensed and regulated under Canadian law;
- Select only drugs to be imported that are already approved for the Canadian market;
- Provide the drugs only to distributors, pharmacies and other dispensers, and health plans, that volunteer to participate in the program. Participants would agree to purchase and reimburse drugs at the import price and patients would share the cost savings and pay the import price as well. The imported drug costs would be made publicly available to create greater drug pricing transparency for consumers;
- Ensure that the imported products are distributed in-state only; and
- Monitor/audit the system for compliance, safety, and savings.
In the last two weeks, there has been a flurry of federal and state activity focused on the nation’s opioid epidemic that currently kills more Americans than guns or car accidents.
- In Washington, the President’s Commission on Combating Drug Addiction and the Opioid Crisis released its final report featuring 56 recommendations to stem opioid and substance abuse and improve treatment, followed by a State Medicaid Director Letter from the Centers for Medicare & Medicaid Services (CMS), outlining expanded flexibility for states seeking Section 1115 Waivers to address the problem.
- At the annual National Academy for State Health Policy (NASHP) conference, it was standing room only at a day-long session entitled State Innovations and Interventions in America’s Opioid Crisis. State health officials from across the country shared their new approaches, which ranged from treatment improvements, innovative use of data, and coalition-building between public safety, businesses, and communities to stem the epidemic that claimed more than 64,000 lives in 2016.
|For more details about how states are combatting the opioid crisis, explore NASHP’s State Innovations and Interventions in America’s Opioid Crisis Preconference resource book.|
While it’s unclear whether the Trump Administration will adopt all of the commission’s recommendations, which include additional block grant funding and federal incentives for evidence-based programs, the state Medicaid directors’ letter offered guidance for state officials interested in using Section 1115 Waivers to create innovative or experimental programs that meet the goals of Medicaid. In this case, states could use Section 1115 Waivers to expand or create new prevention and treatment initiatives in order to provide a fuller continuum of services to address opioid use disorders within their states.
Section 1115 of the Social Security Act permits CMS to waive certain federal Medicaid requirements so states have more flexibility to innovate and test new models of care, including providing services and expanding Medicaid in ways not typically permitted under current Medicaid rules. States must show that their initiatives still align with the purposes of the Medicaid program, and their waiver applications can be far-reaching or narrowly tailored, and usually require discussion and negotiation with federal partners.
The recent Medicaid letter reiterates the ability of CMS to waive the restrictive “Institutions for Mental Disease” or IMD exclusion, which would enable state Medicaid programs to receive federal financial participation (FFP) support for those facilities that treat opioid use disorders. The guidance notes that IMD costs do not include room and board unless those settings qualify as inpatient facilities.
Additionally, while states may submit an implementation plan after they apply for the waiver, IMD costs will only be paid prospectively once the plan has been approved. Moreover, interested states will need to demonstrate their ability to make improvements on a number of additional goals and milestones, and, as with other 1115 Waivers, the cost of the waiver initiative must be budget-neutral, and incur no costs beyond what the federal government would otherwise have paid.
States may access technical support and resources from the Innovation Accelerator Program to develop their 1115 Waivers. The administration recently approved its first substance use disorder-focused waiver application from West Virginia, which provides additional insight for states looking to go in this direction.
West Virginia’s 1115 Waiver enables the state to expand its substance use disorder (SUD) treatment to include methadone treatment services, peer recovery support services, withdrawal management services, and short-term residential services to all Medicaid enrollees.
“In implementing the SUD demonstration, West Virginia is delivering SUD services through comprehensive managed care plans for managed care enrollees and introducing new policy, provider and managed care requirements to improve quality of the care delivered to West Virginia Medicaid beneficiaries and to ensure that SUD treatment services are delivered consistent with national treatment guidelines established in the American Society of Addiction Medicine Criteria,” CMS officials wrote in their letter announcing the waiver.
“In addition, West Virginia is taking steps to improve the quality and access to care for West Virginia Medicaid beneficiaries with SUD, such as introducing new care coordination features and collecting and reporting quality and performance measures,” they noted. While obtaining financial support for services in IMD may help support a full continuum of services for SUDs, states are also moving forward with innovative community-based approaches, using other funding and policy levers. Examples from the NASHP preconference include:
- The Drug Free Moms and Babies Program in West Virginia, spearheaded by that state’s Office of Maternal and Child Health. The program is decreasing the presence of illicit substances at delivery through screening and comprehensive care, including long-term follow-up.
- Connecticut’s multi-pronged approach incorporates increased use of medication-assisted treatment in corrections settings, a statewide access line with transportation, and targeted supports in emergency departments to initiate treatment, including recovery coaches.
- Ohio’s Episodes of Care payment model measures share data on opioid prescribing in connection with dental extraction, a common pathway for opioid access.
Federal focus on the opioid crisis is expected to produce tangible supports for state policymakers who are on the frontlines of the opioid epidemic. In the meantime, policymakers attending the NASHP conference concurred that they will continue to serve as the leaders, innovators, and problem-solvers in their battles against this devastating epidemic.
The West Virginia Bureau of Medical Services (Medicaid) has actively partnered with the multi-stakeholder West Virginia Health Improvement Institute (WVHII) to promote medical home development. Recently, West Virginia completed a two-year Medical Home Performance Incentive Pilot developed by the WVHII’s Measurement Work Group. Three payers, including a Medicaid managed care plan and the state employee health plan, funded technical assistance to support NCQA Patient-Centered Medical Home recognition and participating practices were eligible to receive shared savings.
In January 2012, West Virginia was selected to join the North Carolina Infrastructure for Maintaining Primary Care Transformation (IMPaCT) Learning Community. As a part of this Learning Community, West Virginia was one of four states to receive technical assistance and guidance from North Carolina on how to develop a primary care support and quality improvement system. Through the IMPaCT initiative West Virginia created a shared vision for health care delivery in the state, described by stakeholders in a 2012 white paper. The white paper references medical homes as one possible strategy to support better health outcomes in the state.
Federal Support: West Virginia has received a planning grant from the Centers for Medicare & Medicaid Services (CMS) to develop a state plan amendment to implement Section 2703 of the Affordable Care Act (ACA), establishing health homes for Medicaid enrollees with chronic conditions. The state is working closely with the West Virginia Health Improvement Institute. Visit the Institute’s Health Homes webpage for more information about the planning process. To learn more about Section 2703 Health Homes, visit the CMS Health Homes webpage.
West Virginia is also participating in the Tri-State Child Health Improvement Consortium (T-CHIC), a CHIPRA Quality Demonstration Project funded by the Centers for Medicare & Medicaid Services (CMS), with Oregon and Alaska.
Last updated: April 2014
The West Virginia Health Improvement Institute (WVHII), a partner of West Virginia Medicaid, provided a multi-stakeholder forum for development of the Medical Home Performance Incentive Pilot.
The West Virginia Bureau of Medical Services is also leading a stakeholder advisory group for Affordable Care Act Section 2703 Health Homes that is open to all interested stakeholders. This advisory group includes four workgroups:
West Virginia participated in the North Carolina Infrastructure for Maintaining Primary Care Transformation (IMPaCT) Learning Community, where it was one of four states to receive technical assistance and guidance from North Carolina on how to develop a primary care support and quality improvement system. Through this project West Virginia built on partnerships developed through the WVHII to strengthen public-private collaboration. West Virginia strengthened important partnerships between health care practitioners, local health departments, MCO officials, and medical school leaders.
|Defining & Recognizing a Medical Home|
|Aligning Reimbursement & Purchasing||
Providers and payers that participated in the Medical Home Performance Incentive Pilot agreed to share 5 percent of net savings (2.5 percent to providers, 2.5 percent to payers.) Providers also received compensation for lost revenue during learning sessions and NCQA PCMH application costs.
Payer and provider participation in the Medical Home Performance Incentive Pilot was voluntary. The following payers participated:
Practices that participated in the Medical Home Performance Incentive Pilot received a technical assistance package valued at $25,000 per practice, including:
The Medical Home Performance Incentive Pilot focused on the following outcomes:
In the West Virginia Health Improvement Institute’s (WVHII) 2012 annual report, WVHII reported that providers felt the pilot improved their workflows and care planning capabilities. While the costs for patients attributed to the demonstration rose 0.6% over the life of the pilot, costs for practices that did not achieve NCQA recognition rose by 2.0%.
By Carla Plaza
The start of a new year is a time for reflection and making resolutions. A new year also brings renewed hope, and in 2014, many individuals and families will have access to health insurance coverage, perhaps for the first time. Given all the attention to enrollment and coverage due to the roll out of the Affordable Care Act (ACA), we here at NASHP also hope to continue to help states make progress in reducing the number of uninsured children.
As of July 1, 2011, there were 326,749 beneficiaries enrolled in the state’s Medicaid program, 166,555 of whom were enrolled in one of three commercial managed care organizations through Medicaid’s Mountain Health Trust managed care program.
Physical and oral health services are provided through the Medicaid MCOs; beneficiaries who do not voluntarily enroll in an MCO receive these services through fee-for-service Medicaid. Behavioral health services are reimbursed on a fee-for-service basis.
- A Children with Disabilities Community Services Program, supported through a home and community-based services waiver, provides supports to severely disabled children in the community.
Medicaid provider manuals in the state define medical necessity as:
“Services or supplies that are proper and needed to diagnose or treat a medical condition.”
|Initiatives to Improve Access
Primary care providers participating in a Medicaid managed care organization’s provider network must provide 24-hour, seven-days-per-week access.
West Virginia’s Medicaid agency encourages providers to deliver services using telehealth to improve access for beneficiaries. Providers with the appropriate infrastructure can receive reimbursement for services delivered via telehealth and must use a service code modifier when billing.
|Reporting & Data Collection||
Medicaid managed care organizations in West Virginia are required to report to the state quarterly on:
West Virginia’s Medicaid program requires that a developmental screening be administered with a standardized screening tool at the 9-month, 18-month, and 30-month well-child visits.
The HealthCheck Provider Manual instructs providers to conduct autism surveillance at all well-child visits. Primary care providers are also expected to use a standardized autism-specific screening tool to conduct screens at the 18-month and 24-month well-child visits.
|Support to Providers and Families||
Support to Families
West Virginia hosts a HealthCheck website with information for parents on covered services and preventive health resources. The website has a tool that allows parents to enter their child’s birth date to find out what the family can expect at the child’s next well-child visit.
Support to Providers
The HealthCheck website also contains resources for providers, including a series of History and Preventive Health Screening Forms for each well-child visit on the periodicity schedule. Information updates notify providers of policy changes affecting HealthCheck. A Developmental Tool Kit and an Oral Health Tool Kit offer provider education to help providers satisfy the American Academy of Pediatrics’ Bright Futures guidelines.
A detailed HealthCheck Provider Manual offers information on the EPSDT benefit and components of a well-child visit.
West Virginia Medicaid employs six HealthCheck Outreach Workers who try to assist a medical home model of care delivery, connecting children with primary care providers who coordinate the child’s care.
Managed care organizations have a number of responsibilities to coordinate care for Medicaid beneficiaries, including:
West Virginia is partnering with Oregon and Alaska on a CHIPRA demonstration grant to support a Tri State Children’s Health Improvement Consortium. The state is working with ten pediatric practices to support care coordination and transformation of those practices into patient-centered medical homes.
||Children’s oral health services are provided through Medicaid managed care organizations (MCOs). Each MCO must have a Dental Director and each is required to educate its provider network about the state’s Infant and Child Oral Health Fluoride Varnish Program for Primary Care Practitioners program, which reimburses Medicaid primary care providers for applying fluoride varnish to young children. The MCOs are also responsible for ensuring continuity of dental and orthodontic care for Medicaid beneficiaries.|
The national IMPaCT project supported North Carolina as one of four leading states in the field of practice transformation and primary care extension. Through IMPaCT, North Carolina partnered with four other states (Idaho, Maryland, Montana, West Virginia) to disseminate its primary care practice transformation strategies. Together these states formed the North Carolina IMPaCT Learning Community, and each state received individual and group technical assistance to help implement a practice transformation initiative. North Carolina, meanwhile, is completing its own IMPaCT project with a focus on further improvements to its primary care transformation model. Participants on this webinar will hear from the states in the Learning Community. Idaho will present on how it used the technical assistance offered through the project to devise a plan for primary care transformation that would become the basis of its State Innovation Model Design award. The other three states in the Learning Community will react to Idaho’s presentation and recount how the NC IMPaCT project promoted their development in key areas of data infrastructure, stakeholder engagement, and practice support. Participants will also hear from North Carolina on its IMPaCT practice support improvements. At the end of the webinar participants will have the opportunity to ask questions of the speakers about their experiences with primary care transformation.
- Denise Chuckovich, Deputy Director, Idaho Department of Health and Welfare
- Jonathan Griffin, MD, Family Physician, St. Peter’s Medical Group
- Nancy Sullivan, Assistant to the Cabinet Secretary, West Virginia Department of Health and Human Resources
- Niharika Khanna, MD, Associate Professor, University of Maryland School of Medicine
- Darren DeWalt, MD, Associate Professor of Medicine, University of North Carolina – Chapel Hill
|Click for the Slide Deck||4 MB|
By Larry Hinkle
Many states are testing primary care extension as a strategy for supporting continuous quality improvement in practice. Primary care extension is based on the model of the Agricultural Extension Service. In health care this model applies scientific research and new knowledge to practices through provider education – often led by other providers or specially trained practice facilitators.