Officials: Switch to Wal-Mart wouldn't solve Medicaid woes
by Tim Lockette
Nov 15, 2013 | 4173 views |  0 comments | 43 43 recommendations | email to a friend | print
MONTGOMERY — Even if Alabama makes Wal-Mart the main provider of drugs through Medicaid — the most dramatic of three proposals to reform Medicaid's pharmacy program — the savings won't solve the state's budget woes.

That was the message Thursday from members of the Alabama Medicaid Pharmacy Study Commission, a panel tasked with finding ways to save money in the joint state-and-federal health care program.

“If we were to choose the single most aggressive option out there ... that does not close the funding shortfall in Medicaid by more than a third at best,” said state health officer Don Williamson, the chairman of the commission.

The commission was appointed by Gov. Robert Bentley to find ways to cut drug costs in Medicaid, a program that has become the biggest single expense in the state's General Fund budget. Medicaid's $615 million price tag is more than twice what it was before the 2008 recession, largely because of an increase in clients for the program, which is designed to help people below the poverty line.

Last month, the commission heard three separate proposals for reform of Medicaid's drug program. One would turn management of the pharmacy program over to the American Pharmacy Cooperative Inc., or APCI, a group that negotiates drug prices for 500 member pharmacies. Another proposal would have put the program under the control of a pharmacy benefits manager, or PBM, such as CVS Caremark. The Wal-Mart Stores Inc. proposal would have the state send most patients exclusively to its stores, in exchange for discounts on drug prices.

Wal-Mart said its proposal would save the state $120 million in the first year, but at Thursday's meeting a state consultant presented his analysis of savings through each of the three plans. All three fell short.

The Wal-Mart plan would save between $19 million and $30 million per year, said Steve Schramm, director of Optumas, a consulting firm hired by the state. The PBM approach would save between $11 million and $29 million, Schramm projected — about $20 million less than the range projected by PBM advocates. Turning the drug benefit over to APCI would save a projected $5 million to $15 million per year, Schramm said; APCI officials had projected a savings of up to $60 million.

Williamson said the shortfalls emerged in part because he asked Optumas to consider the wider financial effects of each reform. Among other things, only one of the proposals assumed that the state's provider tax — a 10-cent tax charged on every prescription filled in the state — would remain in place.

Each plan had its benefits, Schramm said. APCI pharmacies and PBMs are already in the state, Schramm said, and PBMs have a good track record for catching Medicaid fraud.

The Wal-Mart proposal would give 80 percent to 90 percent of the state's Medicaid pharmacy business to the retail chain. Schramm said having most patients at the same pharmacy could make it easier for the state to implement wellness programs to encourage good health habits in Medicaid customers.

Schramm said Wal-Mart had presented him with projections on a number of options, including one in which Wal-Mart provided drugs to Medicaid customers with no co-pay. Co-pays in Medicaid are low — in Alabama, patients pay $3.90 per prescription — but Schramm said even those co-pays seemed to have an effect on patients.

"From our perspective we believe it does have an impact on access to care," Schramm said.

Schramm said that of the three proposals, the Wal-Mart option "represents the biggest departure" from Medicaid's current operations.

Sen. Greg Reed, R-Jasper, said he was concerned about the effect the proposals could have on rural Medicaid patients. He cited a hypothetical situation in which a small-town pharmacist closes because Medicaid business moved to a chain pharmacy.

"What happens to the patient in that particular city, who depends on the pharmacist as the number one provider of any kind of health care?" Reed asked.

Commission member Jim Carnes, who is also a spokesman for the group Alabama Arise, said the commission's analysis was losing sight of the human element.

"I'm concerned that we haven't seen any attempt to account for the human side of the relationship, the relationship between the provider and the patient," Carnes said.

The commission was originally expected to submit a report on possible reforms to Gov. Robert Bentley by Dec. 1. Williamson said he called Bentley, who is on an economic development trip in Japan, Thursday morning to ask for more time to study the issue. Among other things, Williamson wants to take a closer look at cost-cutting reforms in neighboring Georgia.

Williamson said expects to complete a report by the end of the year.

Capitol & statewide reporter Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.

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