Plans negotiate new pharmacy reimbursement rates

All three of southeast Pennsylvania’s original managed Medicaid plans maintain their pharmacy networks are adequate and meet the state’s requirement that members have at least two pharmacies to choose from within a 30-minute radius. And all contend they are doing the best they can with inadequate rates.

Help is on the way in the form of a state-mandated increase, but it remains to be seen if the extra dollars will be enough to keep the plans in the program.

An actuarial review of the payment rates, ordered by the Pennsylvania legislature and completed by Arthur Andersen in February 1998, found that the health plans were losing money on three categories of Medicaid recipients with disabilities, amounting to a total of $25.6 million based on February to September 1997 data alone. The report also chided the state for basing the rates on old, and sometimes incomplete, fee-for-service data.

The state has never conceded that its payments were inadequate, and maintains today that the ups and downs the plans are experiencing are not out of the ordinary for any new line of business. Others, however, charge that the problems are not the result of inexperience on the part of the plans.

"Managing Medicaid services and risk for a voluntary population and a mandatory one are very different," said Christine Bowser, director of the bureau of managed care under the state Department of Public Welfare. She said industry experts say plans need three to five years to be successful with a Medicaid product.

While the state seems convinced that the plans will do well eventually, at least one high-ranking Philadelphia official wasn’t so sure. Estelle Richmond, commissioner of health for Philadelphia County, told State Health Watch she was "very concerned" that the pharmacy reductions could present a hardship to people with HIV/AIDS who could no longer get prescriptions filled at a drug store of their choosing.

"The choices are going away," she said. "Whether it’s the HMOs or Eagle [Managed Care, the pharmacy benefits manager], there’s a problem somewhere." She added, "In reality, it’s the HMO that gets hurt" if the members don’t get their prescriptions filled or receive inadequate education from pharmacists about correct dosing and usage, she said.

The four Philadelphia-area plans got a 7% boost in rates this year, and are negotiating 1999 rates now. Those may reflect an increase when they go into effect in January. Although she would not release actual rates, Ms. Bowser says they are based on more updated data, which follow trend lines that show fee-for-service costs increasing. "We pulled entirely new fee-for-service data, updated it, added a year, and developed new rate ranges," Ms. Bowser said.

"We looked carefully at other state experiences with mandatory managed care programs, carefully assessed marketplace trends. We concentrated a great deal of effort in the pharmacy area and reviewing HIV/AIDS payment experience. I can say that the marketplace has been very volatile, and the market trends overall are up, and that is reflected in the data we’ve collected."

Ms. Bowser would not discuss the development of rates to be paid to the three plans in the new southwest Pennsylvania program, except to say it does not represent "major changes" from the way rates were established for the Philadelphia-area plans. One change is the establishment of a risk pool from which plans can be paid monthly for HIV/AIDS patients whose cost of care exceeds a set amount established by the state.

Others have been advocating the use of a risk-adjusted payment system, which they say would more fairly compensate the plans for people with higher-cost illnesses. This type of payment system is being used by Maryland and Colorado. Ms. Bowser said the state must be able to collect more accurate data before it can consider such a payment system, adding that the new southwest contracts have tougher data-reporting requirements than the southeast plans face.

The state operates HealthChoices under federal authority, which gives advocates an arena to air their concerns. Pennsylvania applied for a separate Medicaid waiver for the southwest area with a target implementation date. The state’s HealthChoices waiver, granted for the southeast region in December 1996, is due to expire in January 1999. It can be renewed for another two years.

At the very least, local hospital groups say they will lobby HCFA to impose tighter requirements on what constitutes adequate pharmacy access—such as mandating that the two drug store choices be under different ownership. Ms. Forbes added that the greatest concern, however, is that "they fix the rates. That’s got to happen first."

Contact Ms. Forbes at 215-985-4448, Ms. Bowser at 717-772-6300, Mr. Cabrey at 215-636-6660, and Ms. Tortu at 215-849-9606.