Ohio Medicaid Director Maureen Corcoran said the state is stepping up oversight of managed care plans following revelations that the pharmacy middlemen they hire have been overcharging taxpayers.
Promising more accountability and transparency, Corcoran told lawmakers on Wednesday that she would not sugarcoat the problems.
“I will always give you realistic and balanced assessments of how I view the Medicaid program and plan performance. My perception is that you may have been presented with an overly rosy, one-sided picture of the program in the past,” she said.
“Medicaid is not simple, and health care is messy,” Corcoran said in testimony before the House Finance Committee, which is reviewing Gov. Mike DeWine’s proposed two-year budget plan.
Within weeks of taking office, DeWine directed Corcoran to rebid contracts with Medicaid managed care plans, arguing that their pharmacy benefit managers had “ripped us off” by charging the state millions more for prescription drugs than what they were paying pharmacists to fill them, and then keeping the difference.
“It’s been kind of hands off,” Corcoran told lawmakers, referring to how the administration of former Gov. John Kasich deferred most aspects of the Medicaid program to managed care plans in exchange for overall price guarantees.
But ultimately, it’s the state’s responsibility to administer the program and “we’re beginning to talk with the plans about a new business relationship,” she said. “If the plane goes down, it’s Medicaid’s problem, not the subcontractors.”
Corcoran said the rebidding process will be “transparent and inclusive,” with the department seeking input from national experts, other states, health care providers, advocates and others.
The Dispatch has reported on the high drug costs in the Medicaid and Ohio Bureau of Worker’s Compensation programs for more than a year. A subsequent study commissioned by the state found the two pharmacy benefit managers employed by Medicaid managed care plans, CVS Caremark and OptumRx, billed taxpayers $223.7 million more for prescription drugs in a year than they reimbursed pharmacies to fill those prescriptions. That 8.8 percent difference, known as the price spread, represents as much as $180 million in excessive profit kept by CVS Caremark and Optum Rx, the study found.
The report said PBM fees should be in the range of 90 cents to $1.90 per prescription, but found CVS Caremark billed the state about $5.60 per script while Optum charged $6.50 — three to six times higher.
The findings drew sharp reactions from lawmakers concerned about keeping down costs in the $27 billion Medicaid program, which accounts for the largest chunk of the state budget. Medicaid provides health coverage to 2.8 million poor and disabled Ohioans.
Enrollment has dropped from a peak of 3.1 million in 2017, a decline Corcoran attributed to Ohio’s improving economy.
Still, the administration projects a 4-percent increase in costs the first year of the biennium and 4.6 percent the second year. A decline in federal funding is partly to blame, Corcoran told lawmakers, noting a 23-percent drop in federal reimbursements in the Children’s Health Insurance Program and 3-percent drop for adults who qualify under a recent expansion of eligibility.
In addition to new managed care contracts, Corcoran said Medicaid will implement new work requirements starting in January 2021. Under the plan, able-bodied adults covered through expansion must work at least 20 hours a week or be in school or job training with some exemptions.
Corcoran said most of the 613,000 Medicaid expansion population meets the requirement or are exempt, with about 109,000 requiring assessment for compliance.
Other initiatives in DeWine’s Medicaid spending plan include $47.1 million for home visits for poor moms and babies; $30 million for behavioral health services in schools and $10 million for lead testing and abatement in affected homes.