The number of primary Medicaid behavioral health carve-outs is on the decline. In our annual analysis, we’ve seen a decrease in the number of states with behavioral health carve-outs and an increase in the number of states with integrated financing (see Do States Still Have Medicaid Behavioral Health Carve-Outs?). While the trend is toward integrated financing for physical and behavioral health services, does this apply to pharmacy benefits?
Our latest report, State Medicaid Mental Health Pharmacy Carve-Outs, analyzed the market. Before diving into the findings, it’s important to level set on exactly what we mean by integrated financing versus carve-outs for pharmacy benefits. State Medicaid financing of pharmacy benefits can take one of three forms:
- The pharmacy benefit can be integrated with financing for physical health across the plan (either within the fee-for-service [FFS] plan or a Medicaid health plan)
- The entire pharmacy benefit can be separately managed and/or financed via a primary carve-out for all pharmacy
- A portion of the pharmacy benefit—such as mental health pharmacy—can be separately managed and/or financed via a primary carve-out for behavioral health pharmacy (some states have primary carve-outs for other specialty drugs such as those for hemophilia, but they are not the focus of this report)
Our team found that in 2019, 44 states have integrated financing models for pharmacy benefits (either integrated in the FFS plans or in the Medicaid health plans) and 10 states have primary carve-outs. (Note, the total exceeds the number of states because some states use more than one financing arrangement.) Of those states with a primary carve-out, four had a primary carve-out for all pharmacy and six had a primary carve-out for mental health pharmacy only.
How does this compare with the past? There is not much change overall from a national perspective. Since 2017, one state has moved from an integrated financing model to a primary carve-out for all pharmacy. One state moved from a primary carve-out for all pharmacy to integrated financing in health plans and one state moved from a primary carve-out for mental health pharmacy to integrated financing with health plans.
Essentially, Medicaid pharmacy benefits are all over the place. Some states are integrating pharmacy benefits while others are instituting carve-outs. Three states have announced plans to implement primary carve-outs of pharmacy benefits. California plans to implement a carve-out for prescription drugs by 2021, Michigan released a notice to implement a carve-out for prescription drugs by December of this year, and North Dakota plans to implement a primary carve-out for pharmacy for the Medicaid expansion population in January 2020 (see New California Governor Orders Medi-Cal To Move Pharmacy To FFS Carve-Out Model, Medicaid Health Plan Pharmacy Drug Coverage Transition, and North Dakota Public Notice).
What does this mean for provider organizations managing complex consumer populations? On one level, the move toward managing pharmacy benefits through a primary carve-out arrangement can simplify the administration of benefits. All Medicaid consumers will have exactly the same benefit and prior authorization requirements – regardless of the consumer’s health plan. On the other hand, the use of a primary carve-out might make it more difficult to coordinate benefits. Provider organizations’ clinical teams might have to take a more active role in making sure services and medications are coordinated.
There are a couple other factors to consider. On a more global basis, pharmacy benefit carve-out models make it more difficult to use total medical spend as a performance measure in value-based contracts. And, aside from the more common use of carve-out models and pharmacy benefit managers, we’re seeing the first states using value-based reimbursement contracts with specific manufacturers for specific medications. The effects of these models are still unknown, but could change how pharmacy benefits are delivered. For more coverage of these new models, see Oklahoma Medicaid & Janssen Enter Into Results-Based Contract For LAI Antipsychotic Medication, Oklahoma Medicaid Enters Value-Based Contract With Alkermes For Injectable ARISTADA, Washington Finalizes Volume-Based Alternative Payment Model Contract With AbbVie For Hepatitis C Virus Treatment, and Louisiana Launches Hepatitis C Subscription Payment Model With Asegua Therapeutics.
For more information on the topic, read the new market intelligence report State Medicaid Mental Health Pharmacy Carve-Outs. It provides a state-by-state analysis of pharmacy benefit financing arrangements with a comparison to 2017. The report also includes an in-depth look at financing arrangements in states that have a primary carve-out for mental health pharmacy only and future financing trends.
Stay tuned next week as we continue the discussion on Medicaid pharmacy focusing on the use of preferred drug lists and join us at The 2020 OPEN MINDS Performance Management Institute in Clearwater, Florida on February 13 for the session, “Population Health Management For The Complex Consumer Market: How To Utilize Data To Coordinate Services Across The Care Continuum” with James Stewart, President and Chief Executive Officer, Grafton Integrated Health Network and OPEN MINDS Advisory Board Member.