Medicaid programs that adopt disease management face unique challenges of working in public sector

Florida, Virginia programs are beginning to take disease management seriously

Bringing disease management to a Medicaid program often is slowed by regulations and political considerations unique to the public sector. Nevertheless, early positive returns with disease management are giving Medicaid officials the confidence to implement such programs for their enrollees.

Virginia is kicking off a disease management initiative that addresses five common ailments: diabetes, hypertension/congestive heart failure, depression, asthma/chronic obstructive pulmonary disease, and gastroesophageal reflux disease/peptic ulcer disease. As in many states, the foray beyond claims handling into clinical management represents a huge philosophical leap for Virginia’s Medicaid agency.

"This is a long-term issue," says David Shepherd, RPh, a pharmacy consultant with Virginia’s Division of Medical Assistance Services.

Virginia’s program is an outgrowth of a successful pilot program carried out in the mid-1990s. A federal mandate to implement some type of prior authorization program for the state’s fee-for-service pharmacy program seemed to promise a fiscal disaster. The strategy chosen by most states—contracting with an outside pharmacy benefits manager—would cost millions the state doesn’t have while simultaneously jeopardizing generous manufacturers’ rebates Virginia receives through the Medicaid program.

Get creative

The Health Care Financing Administration encouraged Virginia officials to be creative in incorporating prior authorization into their state Medicaid plan, says Chuck Shasky, BSciPharm, MBA, director of the $706,000 disease management pilot that brought Virginia into compliance with the requirement.

State officials persuaded the National Pharmaceutical Council to fund a voluntary three-phase program to teach physicians, pharmacists, nurses, and other health care professionals how to manage asthma patients.

While drug costs went up for the patients in the asthma disease management intervention, emergency department visits declined 47%. Researchers estimated that each dollar invested in training saved Medicaid $3 to $17 in asthma expenditures. Eventually, Virginia’s Medicaid officials embraced a "major thinking shift" to accept the notion that spending more on pharmacy could help their budget.

"They became very cognizant that the old way Medicaid managed their operations, which was quashing one pile that was specific for a budget code, was causing untoward effects in other budget code areas. It was like squeezing Jello," says Mr. Shasky.

The five-disease expansion to be carried out by Heritage Information Systems emphasizes the role of pharmacists—who at this point will not be paid for their educational services—more than did the pilot project. It’s a variation that concerns Mr. Shepherd, but he says the concept of disease management is crucial and long overdue.

"I think things have turned out differently than I would have wanted them to, but at least there’s emphasis being put on the demographics and what’s going on with these people," he says.

Florida Medicaid officials cribbed from Virginia’s playbook when they went looking for a disease management strategy, and, like Virginia, will target asthma first. In March, Integrated Therapeutics Group (ITG), a subsidiary of Schering-Plough Corp., began enrolling Medicaid members into a three-year project that will provide education and support to asthmatics and their health care providers. At the same time, ITG is continuing to sponsor a series of community outreach programs, called "Asthma Adventures," to raise asthma’s profile among the general public.

The whole nine yards

The state does not compensate ITG financially for its disease management activities, but does give ITG access to confidential Medicaid data for research purposes. Schering-Plough, ITG’s parent company, manufactures the widely prescribed allergy drug Claritin. According to Schering-Plough’s Web site, the company received about 56% of its $2.7 billion in 1997 pharmaceutical revenue from allergy and respiratory drugs.

Florida’s asthma project is only one of nine conditions targeted in a highly ambitious disease management initiative among state Medicaid programs. In Florida’s disease management bullpen are projects addressing diabetes, HIV/AIDS, hemophilia, congestive heart failure, end-stage renal disease, sickle cell anemia, hypertension, and cancer.

And there are more projects on the horizon. Florida Agency for Health Care Administration director Ruben J. King-Shaw wants to implement disease management projects that focus more specifically on elderly, disabled, and mentally ill patients. He credits his experiences as a Medicaid HMO director with establishing his confidence in disease management.

"This is the beginning of a process, not the end of one," he says.

Florida’s dive into disease management comes at the same time as the state’s highly controversial attempt to establish a Medicaid formulary. The state’s pharmacy expenditures rose from $400 million in 1993 to $1.1 billion in 1998, and grew from 8.3% to 12% of the Medicaid budget during that same time.

Mr. King-Shaw acknowledges that a disease management program probably will increase pharmaceutical costs, but he says he hopes combining disease management with implementation of a formulary will allow the state to contain overall Medicaid costs. He sees no conflict in these strategies and says, in fact, that disease management demands a tighter rein on the use of pharmaceuticals.

"In many—not all—disease management programs, your utilization of therapeutic drugs will increase," he says. "And when you know you’re going to use more of a substance, and you know those substances are costly, it drives you to the need to better manage the purchase and the use of those substances. That’s what takes you into a formulary."

The rate of increase in Florida’s pharmacy costs has hovered between 15% to 20% in the last three years, while annual increases in the overall Medicaid budget range from 3% to 5%. Mr. King-Shaw credits the spike in pharmaceutical spending with holding overall Medicaid cost increases to a more modest rate than they would be otherwise.

"You can do things, in an overall sense, more cost-effectively with drug therapies," he says.

Contact Mr. King-Shaw at (850) 922-5871, Mr. Shepherd at (804) 225-2773, and Mr. Shasky at (804) 828-0172.