WASHINGTON — Changing the reimbursement formula for prescription drugs, tightening rules for asset transfers prior to receiving nursing home care, and letting states increase copayments for nonpreferred drugs were among the recommendations of a commission charged with finding ways to cut $10 billion from the Medicaid budget over the next 5 years.
“This needs to be balanced,” commission chair Donald Sundquist, a former Republican governor of Tennessee, said of the list. For example, “we don't want to hit the pharmaceutical companies with everything.”
The Medicaid Commission, which was called for by the fiscal year 2006 federal budget agreement and chartered in May by Health and Human Services Secretary Mike Leavitt, included 13 voting members and 15 nonvoting members representing a variety of interests.
At an August meeting, commissioners heard many proposals for paring down the budget. Ray Sheppach, executive director of the National Governors Association (NGA), outlined steps governors would like to take, including instituting closed formularies, determining each state's dispensing fee (rather than being subject to a federal cap), increasing the rebate from drug manufacturers to 20% from the current 15%, and having more leeway to establish multistate and in-state purchasing pools.
As for reforming the Medicaid long term care program, he said, there is a “fairly sophisticated group of lawyers now who are helping people move their assets or income streams to their children or other people so they can [qualify for] Medicaid.”
To prevent people from taking advantage of loopholes, Mr. Sheppach said the NGA favored increasing the “lookback” period—the period during which transferred assets are still be counted as a beneficiary's assets in determining Medicaid eligibility—from 3 to 5 years. “We also think the type of asset should be expanded so we can look at most assets, including trusts and annuities. And although it will be somewhat controversial, we believe that housing—which is an increasingly valuable asset—should also be put on the table.”
The “lookback” proposal was among those making the list of recommended cuts, as were two other NGA proposals: tiered prescription copays and reform of Medicaid drug reimbursement.
The idea of clamping down on asset transfers caused concern for some commission members. “Do we have enough real information to make those kind of judgments on this point?” asked commission member Gwen Gillenwater of the National Council on Independent Living.
Commission member Douglas Struyk, president and CEO of the Christian Health Care Center, a long-term care facility in Wyckoff, N.J., said beneficiaries sometimes have innocent reasons for transferring assets to their children prior to applying for Medicaid, but those situations are in the minority. “The gaming far exceeds situations where [asset transfer] happens in the normal course of families taking care of different generations,” he said.
Mr. Struyk added that nursing homes must be held harmless financially in circumstances where Medicaid beneficiaries were no longer able to pay for their care because they had transferred assets without bad intention, a sentiment endorsed by other commission members.
The “tiered copayments” proposal, which would let states implement higher copayments for nonpreferred drugs, also attracted a lot of interest.
John Monahan, president of state-sponsored business at WellPoint, the for-profit California Blue Shield plan, said that he favored increased use of generic drugs. “Getting [people to increase] utilization of generic up by even 5% would be an incredible savings.”
John Rugge, M.D., CEO of the Hudson Headwaters Health Network, in Glens Falls, N.Y., added that “with the psychotropic meds, there's a huge danger in [substituting] one antidepressant for another, one atypical antipsychotic for another. They clearly have to be tailored to the individual.”
Commission vice-chair Angus King, former Independent governor of Maine, said he thought the issue could be dealt with because of the ability of the physician to override any preferred drug if it was clinically necessary to do so. He noted that in Maine, such override requests are usually filled within 72 hours.
Commission member Carol Berkowitz, M.D., president of the American Academy of Pediatrics, said she was concerned about how well such an override system would work. Although such requests may take only 72 hours to process in some states, “in my experience it's 30–45 days before it gets approved.”
The idea of higher copays for nonpreferred drugs “is potentially good, but you've got to get the components in place [so it] doesn't have a negative impact on the patients,” added Dr. Berkowitz, who practices in Los Angeles. A suggestion to remove that provision and replace it with another cost-cutting measure was voted down.