According to a study released Jan. 20, large-scale savings could be achieved if 13 states abandoned their current pharmacy carve-out model in favor of a carve-in approach -- including prescription drugs in health plans' capitation payments. The study was sponsored by Medicaid Health Plans of America (MHPA) and conducted by The Lewin Group, a health care and human services consulting firm.

Lewin researchers reported that the 13 states where prescription drugs are not part of the Medicaid capitated rate but instead are "carved-out" -- paid separately through the traditional fee-for-service (FFS) program -- could collectively save $11.1 billion over 10 years through the carve-in model. The carve-out states are Connecticut, Delaware, Illinois, Iowa, Missouri, Nebraska, New York, Ohio, Tennessee, Texas, Utah, West Virginia and Wisconsin.

"We commissioned this research to show that health plans' management of the Medicaid pharmacy benefit is more efficient than in the fee-for-service setting and how much these states might actually save if they switched to the carve-in model," said Thomas Johnson, president and CEO of MHPA.

Joel Menges, a vice president at Lewin and the report's principal author, explained: "The federal rebate on Medicaid prescription drugs, previously available only for the fee-for-service program, was the main reason states opted for the pharmacy carve-out. But the recently passed health reform law included equalization provisions that gave Medicaid health plans the same rebates as the fee-for-service program. This effectively removed the primary incentive for states to use the pharmacy carve-out model."

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