Source: https://healthlaw.org/resource/factsheet-prescription-drug-coverage-under-medicaid-1999/
Timestamp: 2019-04-26 11:47:24+00:00

Document:
In 1997, the Medicaid program paid nearly $12 billion for prescription drugs. Next to physician services, it is the most frequently used benefit in the Medicaid program.(1) For beneficiaries with AIDS, mental illness or other chronic or disabling illnesses, the Medicaid prescription drug benefit is a virtual lifeline. But the benefit is not without restrictions and certain types of drugs may be difficult to access. This fact sheet provides basic information about prescription drug coverage under the Medicaid program and explains some of the more common problems experienced by beneficiaries.
What is the scope of coverage for prescription drugs under Medicaid?
Under Title XIX of the Social Security Act, the federal government shares the State's cost of providing coverage for certain basic or mandatory(2) services to most categorically needy Medicaid beneficiaries. The State is also eligible to receive federal matching funds for certain optional services, including prescription drug coverage.(3) All states and the District of Columbia offer prescription drug coverage in their Medicaid programs.
Statewideness. The amount, duration and scope of coverage must be the same statewide, unless the State has received permission from the Secretary of HHS to waive this requirement.
Freedom of Choice. Generally, a Medicaid beneficiary is entitled to a free choice of participating providers.(9) However, at a State's request, the Secretary can waive this requirement and allow states to use alternative delivery systems, (e.g., managed care) and restrict Medicaid recipients to certain providers.
How do states limit access to prescription drugs?
Prescription limits. To control utilization and costs, several states limit the number of prescriptions that a beneficiary can have filled per month, or per year. While many of these programs allow for exceptions, (e.g., in the case of life threatening illnesses) or provide some mechanism to allow for review and reconsideration, some do not.
Cost-sharing. Many states impose co-payments for prescription drugs, ranging from $0.50 to $5.00. Although the federal Medicaid statute allows states to impose "nominal" co-payments, certain restrictions apply. Some categories of recipients, including those under 18 years of age, pregnant women, specified residents of medical institutions and patients needing emergency services cannot be charged co-payments. Some categories of services, such as family planning services, are also exempt. Finally, the regulations prohibit any provider from denying a service due to a beneficiary's inability to pay a co-payment.
What are drug formularies and how do they affect access?
The formulary must be developed by a committee consisting of physicians, pharmacists, and other appropriate individuals appointed by the Governor of the State or the State's drug use review board.
The formulary includes the covered outpatient drugs of any manufacturer who has entered into and complies with a Medicaid rebate agreement (see below).
A covered outpatient drug may be excluded with respect to a specific disease or condition for an identified population only if, based on the drug's labeling, the excluded drug does not have a significant, clinically meaningful therapeutic advantage (in terms of safety, effectiveness, or clinical outcome) over other drugs included in the formulary,and there is a written explanation (available to the public) of the basis for the exclusion.
The State's Medicaid plan permits coverage of a drug excluded from the formulary pursuant to a prior authorization program that complies with the requirements of the Medicaid statute.
What is the Drug Rebate Program?
How has managed care affected access to and utilization of prescription drugs in the Medicaid program?
The exponential growth of managed care in Medicaid has raised a number of problems associated with prescription drug benefits. Among the major areas of concern for beneficiaries are:.
Increased Utilization Controls: The prescription drug benefit is subject to more utilization controls. Beneficiaries in managed care may face more limitations on the number of prescription drugs and the number of refills permitted without prior authorization.
Decreased freedom of choice: HMOs generally require beneficiaries to get their prescriptions filled at pharmacies that have entered into a contract with the managed care plan. These pharmacies may be large chains that can afford to offer discounted prices to the plan. Thus, some beneficiaries may find that they no longer can get their prescriptions filled at their neighborhood drug store and may have to travel farther to obtain their medications.
Decision Makers Lack Adequate Training to Determine Appropriate Prescription Drugs: Advocates for people with disabilities and chronic conditions complain that decisions are made by health care professionals lacking sufficient knowledge of drug therapies and that both drug formularies and the companies that manage them have financial incentives to use (and pressure physicians to use) less effective drugs because they are cheaper.
How has litigation affected access to prescription drugs in the Medicaid program?
In Vissor v. Taylor,(21) the plaintiff successfully challenged the state's refusal to cover Clozaril in its prescription drug program. The court held that the state's refusal to cover Clozaril in its prescription drug program violated Medicaid regulations because it was an arbitrary reduction in the scope of services and a denial of medically necessary treatment.
In Dodson v. Parham,(22) the plaintiffs successfully challenged the state's restrictive formulary because it failed to provide services in sufficient amount, duration, and scope to achieve the purposes of the Act.
In Weaver v. Regan,(23) the court ruled that Missouri could not deny coverage of AZT for AIDS patients who are Medicaid eligible and whose physicians have certified that AZT is medically necessary.
In Sobky v. Smoley,(24) plaintiffs challenged the state's practice of allowing its counties to determine whether and in what amount to provide Medi-Cal funded methodone maintenance treatment services. The court ruled that the State's practice violated the comparability provisions of the Medicaid statute.
National Health Law Program, An Advocate's Guide to the Medicaid Program (1993) (updated edition forthcoming, Summer 1999).
Families USA and the National Health Law Program, Meeting the Needs of People with Chronic and Disabling Conditions in Medicaid Managed Care (January 1998).
1. Health Care Financing Administration, 2082 Data, 1997.
2. Basic or mandatory Medicaid services generally include inpatient hospital services; outpatient hospital services; prenatal care; vaccines for children; physician services; nursing facility services for persons aged 21 or older, family planning services, rural health clinic services, home health care for person eligible for skilled nursing services; laboratory and x-ray services; pediatric and family nurse practitioner services; nurse midwife services; Federally-qualified health center services and early and periodic screening, diagnosis and treatment (EPSDT) services for children under age 21. 42 U.S.C. §§ 1396a(a)(1)(A); 1396d(a); 42 C.F.R. § 440.210.
3. Included among the optional services are: home health services, dental services, diagnostic services, clinic services, intermediate care facilities for the mentally retarded, prescription drugs and prosthetic devices, rehabilitation and physical therapy services, hospice care, case management services, respiratory care services, and alcohol and drug treatment. 42 U.S.C. §§ 1396a(a)(1))(A)(ii); 1396d(a)(6)-(16), (18); 42 C.F.R. §§436.300-.330.
4. 42 C.F.R. § 440.230(b).
5. 42 C.F.R .§ 440.230(c).
6. 42 C.F.R .§ 440.230(d).
7. 42 U.S.C. § 1396a(a)(10)(B)(ii); 42 C.F.R § 440.240(a).
8. 42 U.S.C. § § 1396a(a)(10)(B)(i), 1396a(a)(10)(C); 42 C.F.R. § 440.240(b).
9. 42 U.S.C. § 1396a(a)(23).
10. 42 U.S.C. § 1396r(8)(d)(6).
11. 42 U.S.C. § 1396r-8(d)(2).
12. 42 U.S.C. § 1396r-8(d)(5).
13. 42 U.S.C. § 1396a(a)(8).
16. Sara Rosenbaum, Peter Shin, et al., Negotiating the New Health Care System: A Nationwide Study of Medicaid Managed Care Contracts, Vol II, Part II, Center for Health Policy Research, the George Washington University Medical Center, Feb. 1997.
17. For example, in Pennsylvania, although the responsibility for payment of prescription drugs ordered by the behavioral health carve-out rests with the enrollee's mainstream HMO, some of the drugs prescribed are not on the HMO's formulary and thus are not covered. Ann Torregrossa, Pennsylvania Health Law Project, Philadelphia, PA, personal communication, September 4, 1997, in Geraldine Dallek, Claudia Schlosberg et al, Meeting the Needs of People with Chronic and Disabling Conditions in Medicaid Managed Care, Families USA and the National Health Law Program, 1998, (hereinafter "Meeting the Needs"), at 13.
18. Val Pendergrast, "House of Cards," Metro Pulse (Knoxville, TN), April 17-23, 1997; Medicaid Reform and Managed Care.
19. In Utah, for example, physicians in the carve-out failed to coordinate their medication regimens with the clients' primary care physicians or HMOs . See Utah Prepaid Mental Health Plan – 1915(b) Waiver Renewal Request, submitted by the Division of Health Care Financing-Utah Department of Health, Salt Lake City, March 15, 1997, to the Office of Managed Care, Health Care Financing Agency, U.S. Department of Health and Human Services, in Meeting the Needs at 14.
20. During the three years following implementation of Massachuset's Medicaid behavioral managed care plan, total expenditures for mental health clinic medication increased almost three-fold (295 percent). During the same period, beneficiaries experienced large cutbacks in mental health clinic and hospital outpatient therapy. Susan Fendell, "Mental Health Managed Care: Expansion to DMH Acute Care and Medicaid Update," Advisor, Mental Health Legal Advisors Committee, Boston, MA, (Fall 1996):12-15; see also "Managed Care's Focus on Psychiatric Drugs Alarms Many Doctors," The Wall Street Journal, December 1, 1995 (Use of Ritalin, a stimulant prescribed to children with attention deficit disorder, is on the rise. Child health specialists are also reporting increased use of Prozac and other antidepressants for young children).
21. 756 F. Supp. 501, 507 (D. Kan. 1990).
22. 427 F.Supp. 97, 104-5(N.D. Ga. 1977).
23. 886 F.2d 194, 197-200 (8th Cir. 1989), reh'g denied (Nov 6, 1989).
24. 855 F. Supp. 1123, 1126-27 (E.D. Cal.,1994).

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