Trends in Medicaid Prescription Drug Utilization and Payments, 1990-97

By Baugh, David K.; Pine, Penelope L. et al. | Health Care Financing Review, Spring 1999 | Go to article overview

Trends in Medicaid Prescription Drug Utilization and Payments, 1990-97


Baugh, David K., Pine, Penelope L., Blackwell, Steven, Health Care Financing Review


INTRODUCTION

The Medicaid program provides prescription drugs to certain low-income families with dependent children and low-income persons who are aged, blind, or disabled. The Medicaid program is financed by both the Federal Government and the States. Even though coverage of outpatient prescription drugs is optional in Medicaid, every Medicaid jurisdiction has chosen to cover prescribed drugs for at least Medicaid categorically needy eligible persons. The Federal Government finances between 50 and 83 percent of the expenditures for any individual State. States administer the Medicaid program within broad guidelines established by the Federal Government (Pine, Clauser, and Baugh, 1993).

The rising cost of prescription drugs has caused public officials to restructure prescription drug coverage and payment policies in Medicaid. Information concerning trends in Medicaid prescription drug expenditures is needed to inform policymakers. The purpose of this article is to provide information on Medicaid utilization and expenditures for outpatient prescription drugs from 1990 to 1997. The information is provided as a descriptive historical overview, using aggregate data on Medicaid recipients and payments for outpatient prescription drugs by eligibility group.

Legislative changes had an important impact on the Medicaid prescription drug program during the study period. Two major legislative acts attempting to curtail the rising costs of the Medicaid outpatient prescription drug program were the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) and the Omnibus Budget Reconciliation Act of 1993 (OBRA 93). OBRA 90 amended Title XIX of the Social Security Act by requiring drug manufacturers to provide a drug rebate for all covered outpatient drugs dispensed through the Federal Medicaid program. In general OBRA 90 required that a manufacturer have in effect a rebate agreement with the Federal Government before Federal Medicaid matching funds would be available to States for covered outpatient drugs. Prior to this legislation, many States had limited drug formularies. The legislation opened individual State formularies to all manufacturers who have rebate agreements with the Federal Government. Implementation by State Medicaid agencies occurred during 1991.

OBRA 93 amended Title XIX of the Social Security Act by changing the pricing schedule of single-source and innovator multiple-source drugs approved by the Food and Drug Administration after October 1990. In general OBRA 93 had an impact on the computation of the unit rebate amount for covered outpatient drugs. The effective date for implementation of OBRA 93 was October 1, 1993. Presently, more than 500 manufacturers have rebate agreements with the Federal Government which, in turn, address approximately 55,000 drug products (Gaston, 1999).

METHODOLOGY

Data and Information Sources

Three sources used by the Federal Government to analyze expenditures incurred in the Medicaid program are the HCFA-2082, the HCFA-64, and the national health expenditures (NHE) statistics. Although each source addresses Medicaid expenditures, each differs in presentation of expenditure information.

HCFA-2082

The HCFA-2082 form "Statistical Report on Medical Care: Eligibles, Recipients, Payments and Services" is an annual statistical report for each Federal fiscal year (FY) on Medicaid enrollment, recipients, payments, and utilization that is based on data submitted by State Medicaid agencies to HCFA. Some States submit these reports directly to HCFA. Other States submit person-level enrollment and claims data to HCFA for the Medicaid Statistical Information System (MSIS). For these States HCFA uses the MSIS data to prepare a HCFA-2082 report. The HCFA-2082 report includes schedules of enrollees, recipients, and payments, by type of service and basis of Medicaid eligibility.

For this study detailed data by basis of Medicaid eligibility, without respect to cash-assistance status, are combined into four major eligibility groups: aged, blind and disabled, children and adults,(1) and an all-recipients group that includes a small number of individuals who are not reported in the other four groups. …

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