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Medicaid experiences reduction in drug costs

By By Steve Gillespie / staff writer
Sept. 8, 2003
Rica Lewis-Payton, director of the Mississippi Division of Medicaid, was appointed by Gov. Ronnie Musgrove.
Lewis-Payton previously worked in the area of health care management with the Department of Veterans Affairs for 18 years. She met last week with The Meridian Star's editorial board.
The Meridian Star: Where does most of Medicaid's money go?
Rica Lewis-Payton: The biggest expenditure, and this has been the case now for the last three years, has been prescription drugs. Typically in Medicaid programs, nursing home care is the biggest expenditure in the program. But for Mississippi it is prescription drugs consuming 21 percent of our budget in '03. In '02 it was 23 percent of our budget.
For the first time in a long time, we are actually seeing a reduction in pharmacy costs. It's important to note that is against a backdrop where health care costs are increasing, particularly in the area of pharmacy. But because of a number of the cost-containment initiatives that were implemented last year, in fiscal year '02 we started to see the reductions in the drug program.
It has exceeded my expectations because what I expected to see was a slowing of the growth because between 2000 and 2001 we had seen a 22 percent increase in prescription drug costs and a 36 percent increase between 2001 and 2002 and now between 2002 and 2003 we see a 3 percent decrease. So we have done a lot in reducing costs in the pharmacy program.
The Star: Was the initial increase because the cost of drugs increased, or was it because we added more people to the Medicaid program?
Lewis-Payton: The reasons are really three-fold. Certainly the cost of prescription drugs has gone up, so that was one contributing factor. The second, the number of people on the Medicaid rolls has gone up. In addition to that, during the legislative session of 1999 significant increases in the Medicaid program increased prescription drug coverage for Medicaid recipients from five to up to 10 prescriptions per month. So all of those things contributed to those increased costs.
The Star: What about Haley Barbour's proposal that Medicaid buy prescription medication in bulk. Is that something that still needs to be studied or is it time to do it as he has claimed?
Lewis-Payton: We have been studying it and there are a number of issues surrounding that issue. Just for clarification, Medicaid does not purchase drugs directly from manufacturers. We use pharmacies. So when you talk about bulk purchasing, it really is a misnomer. What it is is getting additional volume discounts. For example, we already get a rebate nationally because the federal government has negotiated on Medicaid's behalf, given that all Medicaid programs cover prescription drugs, certain discounts from pharmaceutical companies. What the bulk purchasing misnomer suggests is that if we were to partner, if you will, with other states or with, in my opinion, with other entities within a state that also provide prescription drug coverage, that you can get additional volume discounts in the form of supplemental rebates above and beyond what we currently receive. We have in fact been looking at that. It's going to require legislation in order to do that.
The Star: Is there a large fluctuation between people falling in and out of eligibility for Medicaid?
Lewis-Payton: We don't see a lot of dropping-in and dropping-out because when we look at the population covered by Medicaid, 60 percent are children and it goes up to 200 percent of the poverty level. So if you have someone who is right on the line, then that potential exists because these determinations are done on an annual basis. But when we look at our data, for the most part, it is not people right at that 200 percent level, but really from 150 to 75 percent.
When you look at requirements for being eligible for the adult program, you are talking about them making $441 per month for a family of four in order for them to qualify for Medicaid, so that's not a very high level of income at all.
The Star: What are the main reasons you tell people that it is essential Medicaid is adequately funded?
Lewis-Payton: If you look at Lauderdale County, the amount of money coming from Medicaid to providers in this county is about $94 million. The percentage of people in the state on Medicaid averages about 25 percent.
When you look at the budget, the largest majority of it being federal dollars, there are two compelling arguments as to why it is important for a Medicaid program in the state to be adequately funded. One is that the health status of Mississippians depends on it. We could argue all day about whether or not there are too many people on the Medicaid program. The reality is if it were not for Medicaid, for many of these people they would be uninsured, which I would argue would be even more costly to the state in terms of uncompensated care.
The second part is the economic impact of the Medicaid program. There was a study done by the Institutions of Higher Learning that concluded Medicaid's $2.8 billion budget in fiscal year '02 created directly, or indirectly, some 85,000 jobs in this state. So when you talk about significant decreases in Medicaid you have to also consider that it's going to have an economic impact in terms of lost jobs (with) providers like hospitals and nursing homes and all of those kinds of entities within the state.
Another study done by Families USA concluded given Medicaid's match in Mississippi we stood to lose the most per million dollar cut in Medicaid, in terms of jobs and well as the economic activity in the state.
The Star: Some people believe that if they are in the Medicaid program and die, the state will take their home from their family. Will you explain how Medicaid's state recovery plan works?
Lewis-Payton: The basic premise behind Medicaid is that it is for low-income persons. I think for seniors who qualify to go into the nursing homes, now they can be up to 300 percent of the poverty level but can't have assets in excess of $4,000. But you can keep your home. But Medicaid does in fact, if there is no spouse surviving, have the right to recover its cost from resources you have after your death which would include your home if your spouse is no longer alive. Now the two exceptions to that is if the house is of nominal value, generally $5,000 or less, or if you can show that the person who is currently living in the house took care of you before you went into the nursing home and they have no other place of residence, then you can request a hardship that will be considered and Medicaid will withdraw its claim against that profit.
The star: Is there a limit of what Medicaid recovers?
Lewis-Payton: It's up to the amount that Medicaid pays for your care. So if the house is valued at $100,000 and Medicaid's expenses from the time you went on the rolls until you died was $50,000, then our claim can't exceed what we paid out.