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Interesting Trends Revealed in 50-State Medicaid Budget Survey

Client Alert
November 3, 2021

Results of the KFF annual survey of state Medicaid directors reveal some fascinating trends in Medicaid service delivery and benefit coverage. Read on for a summary of the highlights we find most noteworthy.

Background

As a preliminary matter, many of the trends KFF identifies and that we highlight below are no doubt a result of the Covid-19 pandemic. The pandemic triggered a public health emergency and economic crisis that resulted in increased Medicaid enrollment, service offerings, and flexibility in service delivery, along with a heightened awareness of disparities in access to care and health outcomes.   

Telehealth

Perhaps no health care trend is more indicative of the impact of the pandemic on services than the lightning quick emergence of services provided via telehealth. Though state Medicaid programs were moving toward reimbursement for services provided via telehealth before the pandemic, coverage and reimbursement policies were varied and slow to progress. The onset of the pandemic prompted a significantly increased need for health care services, along with a safe environment in which to receive services. To meet these demands, state Medicaid agencies used emergency authorities to expand telehealth coverage, including expanding the range of services that can be delivered via telehealth; establishing reimbursement parity with face-to-face visits; permitting various telehealth modalities (e.g., audio-only telephone communication); and increasing the provider types that may be reimbursed for telehealth services. The wild popularity – and efficacy – of telehealth services has led many state Medicaid agencies to pledge to keep new-found flexibilities, which are good for patients and providers alike.

Forty-six states responded to the KFF survey. Nearly every state that responded (41 states) currently permits coverage for services delivered using audio-visual or audio-only telehealth. Five states permit service delivery via audio-visual coverage but not audio-only. Advocates of decreasing disparities in access to services argue for coverage of telehealth services by both audio-visual and audio-only modalities, in order to capture the greatest number of people, including those who do not have access to broadband and those who live in areas of the country experiencing provider shortages.

Pharmacy

Spending on prescription drugs accounts for roughly 10% of all health care spending in the US. Moreover, in 2017, the vast majority of spending on prescription drugs (82%) was incurred by private health insurance (42%), Medicaid (10%), and Medicare (30%), while only 14% was paid by patients out-of-pocket. The bottom line is that prescription drug spending is of great interest to payors, including state Medicaid agencies.

State Medicaid programs are challenged to control spending on prescription drugs, while also ensuring Medicaid-managed care plans are not getting fat off of the US drug pricing system. Structurally, many states administer their Medicaid pharmacy benefit through managed care organizations (MCOs) and/or pharmacy benefit managers (PBMs) that take on administrative and clinical functions for the Medicaid pharmacy benefit.

Medicaid departments are also keen to control costs on the pharmacy benefit, and they use a variety of tactics to do so. For example, Medicaid agencies use preferred drug lists (PDLs) to encourage providers to prescribe certain drugs over others. This tool allows the Medicaid agency to manage drug utilization and to force providers to prescribe lower cost drugs or drugs with a supplemental rebate for the Medicaid agency. Additionally, many state Medicaid programs now carve the prescription drug benefit into managed care because Medicaid agencies can now claim rebates on drugs provided through managed care organizations. Lastly, states increasingly utilize PBMs to help administer the pharmacy benefit and, more specifically, to administer cost savings tactics, including negotiating supplemental rebates and informing decisions surrounding the PDL. PBMs have increasingly come under fire for reimbursing pharmacies much less than the PBM is reimbursed by MCOs and pocketing the difference or “spread”. In 2018, Ohio’s Auditor of State concluded that PBMs cost the state Medicaid program almost $225 million through this practice of “spread pricing” in managed care. Ohio and other states are more intentionally examining their use of PBMs and imposing greater oversight over them.

Social Determinants of Health

Before the Covid-19 pandemic, state Medicaid agencies had begun to develop creative solutions to address social determinants of health – factors including socioeconomic status, education, neighborhood and physical environment, access to health care, and others – understanding that these considerations significantly affect health outcomes. The pandemic itself demonstrated that health outcomes do, in fact, vary depending on race and social determinants of health.

Although federal law prohibits Medicaid from paying for non-medical services, state Medicaid programs continue to develop opportunities to address social determinants of health. One popular tool is using contracts with Medicaid-managed care organizations to reach Medicaid beneficiaries where they are. Some examples include screening beneficiaries for behavioral health needs (31 states reported doing this in 2021), screening beneficiaries for social services needs (24 states), providing referrals to social services (28 states), and partnering with community-based organizations (27 states). Additionally, about half of states are working with their MCOs to address health disparities using data and quality measures. Eleven states are targeting disparities in race and ethnicity in maternal and child health, seven in behavioral health, six in Covid-19 outcomes and/or vaccination rates, and eight in other areas, including diabetes, asthma, and oral health.

Conclusion

It is clear based on the information reported by KFF that Medicaid programs are reacting in noticeable ways to the pandemic, and it is likely that some of these changes will affect healthcare for years to come.

For more information, please contact Healthcare and Hospital Law Member Daphne Kackloudis at dlkackloudis@bmdllc.com or (614) 940-4543.

Healthcare and Hospital LawDaphne KackloudisMedicaid
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