Two Medicaid Updates: Work Requirement, PBMs

By Steve Haner

Medicaid Work – Training Requirement Dead

Disappointing many, thrilling many, and surprising nobody, the Governor of Virginia has openly broken his 2018 promise to couple expanded Medicaid coverage with a work or job training requirement for able-bodied recipients. Moving people out of poverty is no longer the goal.

Governor Ralph Northam was quoted in posted story by the Richmond Times-Dispatch saying:

“Virginians made clear they want more access to health care, not less. Given the changed makeup of the General Assembly and based on conversations with new leadership, it is unlikely Virginia will move forward with funding a program that could cause tens of thousands of Virginians to lose health care coverage.”

To which outgoing Speaker Kirk Cox responded:

“The Governor and I made personal commitments to each other on this long-term public policy agreement. There wasn’t an asterisk that said, “unless my party wins the next election.” It’s a sad reflection on the value of integrity in modern politics.”

Before the election, the excuse for not moving forward was a need for federal matching funds. Now the claim is that such a requirement “could cause tens of thousands of Virginians” to drop off Medicaid. Neither is legitimate, as explored previously on Bacon’s Rebellion. It also could cause tens of thousands to find their way to paying jobs with employer-provided benefits.

Now we’ll have to measure the success of the Medicaid expansion by the health metrics of the recipients, but don’t expect the state to embrace that effort with regular reports, either. Spending – the favored metric of the Left — we know will rise and will be deemed proof of success. Money begets health just like money begets education, right?

The Poverty Industry across the U.S. has fought other states’ efforts to impose work, training or community service conditions on Medicaid recipients not ineligible for work because of age, infirmity or disability. The same battle was brewing in Virginia. But it was part of a political compromise, one which drew enough Virginia Republican legislators over to the idea to pass the expansion in 2018.

Every Republican on House Appropriations who voted aye on expansion is now out of a job, by retirement or electoral defeat. Cox, who helped arrange the compromise, merely lost the Speaker’s gavel.

Did PBM Report Understate Potential Savings?  

Is Virginia’s Medicaid program overpaying for pharmacy benefits by relying on pharmacy benefit managers? A report ordered by the General Assembly has tentatively concluded yes, claiming a potential savings of $32 million with certain changes. The presentation to a joint legislative committee can be seen here, and this is the Daily Press story on the meeting.

At about the same time, in Kentucky a similar review is finding potential savings of $240 million, so the Virginia numbers are being met with skepticism. As the Daily Press reported, the remaining pharmacist in the General Assembly, Republican Keith Hodges, sees it as a lowball number and will keep pressing his legislation to move the savings to the consumers, public or private. (The other pharmacist-legislator was the defeated Delegate Chris Jones of Suffolk.)

The $32 million savings mentioned in Medicaid Director Karen Kimsey’s slide set may simply be administrative costs and may not include the cost of the medications. Advocates for change, which include the state’s pharmacies being squeezed out by the large PBMs, will continue to press an apparently reluctant state for more details.

As reported previously on Bacon’s Rebellion, the pharmacy costs for Medicare are controlled at the federal level, but states have flexibility in managing their own Medicaid operations. Virginia spreads the business among six managed care organizations, which in turn have their own PBM contracts.

Each has its own contracts with pharmacy providers, its own preferred drug list, and a variety of policies on “spread pricing.” Spread pricing is the heart of the argument, with critics complaining that the PBMs are keeping for themselves the bulk of the discounts they negotiate, and not passing on the benefits either to Medicaid or private insurers.

Based on Kimsey’s slides, the state benefits from this approach by having predictable costs and the MCOs take on some of the short-term risk should costs explode. It is not in her slides, but the Daily Press reports she told legislators that only two of the six programs hold back the benefits of spread pricing, amounting to $29 million in the 18 months ending June 2018.

Based on what is being seen in other states, the legislators need to keep digging. This pile clearly is high enough to hide a much larger pony.