The Association of Community-Affiliated Plans, a member of the PAL coalition, released a study yesterday showing that Medicaid managed care health plans that manage their members prescriptions have higher rates of generic usage and better coordination of patient care than Medicaid managed care plans that do not.

Many states encourage Medicaid recipients to enroll in “Medicaid Managed Care Organizations (MCOs),” private health plans that contract with the state. Some states include prescription drugs in the package of services that Medicaid MCOs deliver (so-called “carve-ins”) while other states specifically exclude prescription drugs, which the state then pays for and manages itself (so-called “carve-outs.”) One reason that some states “carve out” the pharmacy benefit is that Medicaid MCOs are not eligible to receive the Federal rebate that states receive for Medicaid prescription drug costs. ACAP says that allowing Medicaid MCOs to receive that rebate would save an additional 20% on drug costs. ACAP is supporting bills currently before Congress which would make Medicaid MCOs eligible for the rebate.

Here’s ACAP’s press release:

For Immediate Release October 24, 2007

Pharmacy Carve-In Arrangements for Medicaid Managed Care Promote Better Health and Savings

Washington, DC – A study released today by the Association for Community Affiliated Plans (ACAP) finds that Medicaid managed care programs operate more effectively and thus improve patient care and cost-savings when prescription drugs are included within managed care arrangements rather than “carved out.” (“Carved out” means that the drug benefit is not provided by Medicaid health plans in the Medicaid managed care program.) The report, written by The Lewin Group and called Programmatic Assessment of Carve-In and Carve-Out Arrangements for Medicaid Prescription Drugs, is released as a proposal is pending before Congress that would protect “carve-in” arrangements by allowing Medicaid health plans to have access to the Federal drug rebate—a proposal that the Congressional Budget Office predicts will save the Federal Government over $2 billion over the next ten years.

“We engaged Lewin to assess the programmatic issues involved in including pharmacy benefits and the potential impact on both the quality and coordination of patient care,” said Margaret Murray, Chief Executive Officer of ACAP, which funded the study. She added, “We were interested in hearing from and interviewing a variety of key stakeholders, including Medical and Pharmacy Directors from managed care organizations in both carve-in and carve-out state Medicaid environments, as well as others who could provide insight into the state Medicaid agency, provider, and pharmacy perspectives.”

Some of the study’s specific findings include:

  • Carve-in arrangements can improve patient care because pharmaceutical and other medical benefits are managed by one entity, allowing for faster and more efficient communication. Carve-ins also generate incentives to address the “total person” effectively from both a clinical and cost perspective.
  • Carve-in health plans rely more heavily on generic drugs to achieve pharmacy cost savings. As of 2006, 75% of health plan prescriptions were filled using generic products, whereas in Medicaid carve-out settings generic fill rates range from 55% to 63%.
  • Medicaid health plans managing pharmacy benefits have the capability to access in-house pharmacy and medical claims data in real time, which is a critical tool in promoting improved health outcomes, tracking prescriptions among multiple pharmacies, and positively influencing physician prescribing patterns to identify quality and cost issues.
  • Pharmacy carve-in arrangements allow health plans a unique opportunity to closely monitor all prescription drugs that patients take to safeguard against dangerous drug interactions, drug abuse, and to effectively address the needs of the chronically ill.
  • Pharmacy carve-ins also alleviate a range of operational challenges as Medicaid recipients, providers, health plans and states no longer need to sort through how various parts of the benefits package are administered. Health plan enrollees in a carve-out model, for example, typically need to carry multiple health insurance cards and to keep track of which card is needed for a given type of service.

“To ensure the greatest possible coordination of our enrollees’ health care, the pharmacy benefit must be included with all other physical and mental health services,” said Pamela B. Morris, CEO of CareSource in Dayton, Ohio. “Medicaid health plans want to treat the entire individual to provide better quality health care, and since pharmacy is a critical part of medical treatment, it should always be carved-in.” In regard to providing better opportunities for care coordination and the management of patients’ costs and care, Joel Menges, a Lewin Vice President and principal author of the study, noted that “the optimal financial situation, by far, is to combine the health plans’ benefit management expertise with the rebates that currently can be accessed only in the FFS Medicaid setting. A change in Federal policy allowing Medicaid health plans the same rebates for Medicaid prescriptions as Medicaid FFS receives would likely yield more than a 20% savings in net pharmacy costs for Medicaid managed care enrollees.”

Such a policy change has been included in two pieces of currently proposed Federal legislation – Senate Bill #1589 (sponsored by U.S. Senator Jeff Bingaman (D-NM) and House Bill #3041 (sponsored by U.S. Representative Bart Stupak (D-MI)). The Congressional Budget Office has scored such a proposal as saving the Federal Government $2.3 billion over ten years.

An electronic copy of the study is available at: and

For further information, please contact:

Joel Menges, Vice President, The Lewin Group: (703) 269-5598

Margaret Murray, Executive Director, ACAP, (202) 331-4601