Medicaid Medicaid/Medicare Mental Illness Pharmaceuticals

Medicaid Managed Care and Drug Utilization for Patients with Serious Mental Illness

How will Medicaid expansions affect patient access to pharamceuticals? This question is particularly relevant for patients with serious mental illness. The answer is complicated by the increasing presence of Medicaid managed care plans.

Increasingly, states have turned to contracts with Medicaid managed care plans in order to better control costs and reduce budgetary uncertainty. However, in many states, prescription drug spending is “carved out” (ie, not included) in the managed care benefit. Under a carve-out arrangement, prescription drug benefits are managed on an FFS [fee-for-service] basis, which excludes them from the set of services for which a managed care plan has oversight and direct financial liability. Conceptually, this suggests that carveout reduces both the ability of and incentives for managed care plans to coordinate pharmaceutical use with spending on other health services, potentially leading to “cost spillovers” elsewhere in the system.

How does Medicaid managed care affect drug utilization? A paper by Schwartz et al. (2016) uses Medicaid State Drug Utilization Data to measure drug use among patients with SMI. They use annual enrollment reports to measure the share of each state enrolled in Medicaid managed care plans between 1999-2011. The authors use the Medicaid Analytic Extract (MAX) Prescription Drug Tables to determine of the patient had a prescription drug carve out. The combined data produced a sample of 310 state-year observations. The authors find that:

managed care penetration increased from 54.5% nationally in 1999 to 74.9% nationally in 2011…We found cross-sectional, negative associations between the managed care penetration rate and each measure of SMI prescription utilization, although not all estimates were statistically significant (Table). In particular, a 10 percentage point increase in Medicaid beneficiaries enrolled in managed care was associated with 0.87 fewer SMI prescriptions per beneficiary with SMI…Similarly, a 10 percentage point increase in managed care penetration was associated with $103 lower SMI drug spending per beneficiary using the broad definition.

The results, however, were closer to 0 and not statistically significant when state fixed effects and state fixed effects interacted with a linear time trend were included in the model.


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