A major change the Michigan Department of Health and Human Services announced last year to take control of Medicaid pharmacy services from the managed health care plans has been dropped.
Gov. Gretchen Whitmer as part of her 2020-21 fiscal year budget proposal instead announced a plan to leave the health plans in charge of pharmacy needs for those who use Medicaid for health coverage, but with a new single, statewide preferred drug list determined by DHHS.
The department informed the health plans Thursday afternoon that it had dropped the plan to take control of the pharmacy benefit and move to a fee-for-service system.
In November, as the proposal was under major criticism about six weeks after DHHS announced it, the department announced it would not take effect Dec. 1 as original scheduled so it could consider hundreds of comments, concerns and support it has received on the proposal. The health plans and hospitals had objected to the proposal, though the state's pharmacists had supported it, saying it would dramatically improve dispensing fees.
One of the concerns, however, was that the state's Medicaid beneficiaries would have had to begin paying a co-pay on prescriptions, something not now required with the health plans.
Thursday, Whitmer said the preferred drug list would rein in prescription drug costs.
Her budget proposal asserted the state would save $182.9 million ($45.8 million General Fund) through going to a single preferred drug list. She did not mention the decision to ditch the plan to have the state take over the program.
Dominick Pallone, executive director of the Michigan Association of Health Plans, said he was pleased with the administration's decision to drop the fee-for-service plan. Experiences in other states showed such moves did not save money and harmed patients, he said.
The health plans already are getting close to a single drug list, he said.
However, Pallone said the idea that the state can reap $182.9 million in savings through a preferred drug list is completely unrealistic.
"It's nowhere in the ballpark that we're looking at for such a move," he said. "We appreciate they've got to do something to rein in the uncontrollable increases in pharmacy, but you can't just snap your fingers and materialize $183 million in estimated savings."
Another reduction in the DHHS budget also caught Pallone's eye: $49.7 million from Medicaid health plan rates ($17.9 million General Fund).
The state is reducing funding to health plans based on what it thinks Medicaid is errantly paying in cases where other insurance should provide coverage, like in auto crashes. Pallone said he is seeking more information from the health department on this issue. The estimated savings is faulty, he said.
"Plans do everything we can to prevent that from going on but a lot of times we don't know that they have other coverage," he said.
If the Legislature approves these reductions, health plans will have to pass the costs onto providers, Pallone said, in the form of reduced reimbursements.
Whitmer's proposed DHHS budget was full of new spending proposals, most prominently $37.5 million for the new Healthy Moms, Healthy Babies program ($17.6 million General Fund). This money will extend Medicaid family planning benefits to women of child-bearing age up to 200 percent of the poverty level, expand postpartum coverage for mothers from 60 days to one year and boost home visiting services.
State Budget Director Chris Kolb and Whitmer highlighted Thursday the critical need to help African American mothers, whose children have a far higher rate of infant mortality.
"We need to do something now," Kolb told a joint meeting of the House and Senate Appropriations committees. "If I had one more dollar to spend, I'd spend it here."
There are several other new spending proposals in the DHHS budget:
- $20.6 million ($12.2 million General Fund) to complete the first phase of replacing the troubled Michigan Statewide Automated Child Welfare Information System with a cloud-based system. Whitmer also proposed $11.3 million ($5.8 million General Fund) in her 2019-20 fiscal year supplemental appropriation request for the new system. DHHS estimates the new system will be complete in the 2024-25 fiscal year.
- An increase for hospital reimbursement rates.
- A $21.6 million boost to the MIDocs program that forgives medical school loans to physicians who locate in underserved areas.
- A $10 million increase to support DHHS response to the opioid crisis through quick-response teams, a predictive analytics system, treatment monitoring and a revolving loan fund for recovery housing providers.
- $10 million for a new Lead Poisoning Prevention Fund to establish a loan loss reserve for private lenders to encourage lending for lead remediation in homes at below-market interest rates.
DHHS also saw the most reductions of any department or major budget area. Besides the pharmacy change and nicking the health plans over alleged failure to prevent payments when other insurance should have provided coverage, the budget also would cut:
- $84.4 million ($30.3 million General Fund) through restructuring nursing home reimbursement rates.
- $5.1 million from Community Mental Health local match funds. The state provided funding in the current fiscal year to offset county match requirements.
Sen. Peter MacGregor, R-Rockford, chair of the Senate Appropriations subcommittee on DHHS, said he is concerned about the reductions, especially given that the state will lose federal matching dollars as a result.
"I'm just trying to figure out what the department or what the budget office is thinking by diverting these dollars," he said during the question-and-answer portion of the budget presentation.
In an interview, MacGregor said the department's budget contains many new initiatives.
"I think what is happening with a lot of these programs is a search for General Fund that can be used for other areas, other priorities that the governor has," he said of the reductions combined with new spending.
That said, MacGregor said he would need time to dig into the details and looked forward to DHHS Director Robert Gordon coming to his subcommittee next week.
The new initiatives sound promising, MacGregor said, but the concern is what about good programs losing funds.
"She's spot on on a lot of this stuff," he said. "These are good ideas that need more discussion. I'm all for looking at doing preventative types of measures to keep those large, costly expenses off the state in the long run."
Rep. Mary Whiteford, R-Casco Township, chair of the House Appropriations Health and Human Services Subcommittee, said she liked Whitmer's emphasis on addressing infant mortality through better health care.
"I appreciate that because that is so instrumental to a mother and her baby being able to survive that first year," she said.
Whiteford also liked the proposal regarding lead remediation though she said it would need review.
Now that DHHS Director Robert Gordon and his deputy directors have had a year in their jobs and she has had a year to work with them, Whiteford said she anticipated a better process this year.
"With all the vetoes, I lost all of my input into it last year, but the director and I have agreed to work together so that we can all have a voice in this," she said. "It'll be a smoother budget because now the directors and the deputy directors have had the past year to be working on the budget. … And we have worked out some trust as well between me and the directors."
Overall, the budget as proposed by Whitmer would contain $27.15 billion ($5.09 billion General Fund). That's a 2.4 percent increase from the current year (6.1 percent increase General Fund).
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State drops plan to take over Medicaid pharmacy benefit; new health spending proposed in Whitmer budget - Crain's Detroit Business
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