AP NEWS

Corral Ohio’s Medicaid ‘Pac-Man:’ Greg R. Lawson (Opinion)

October 7, 2018

Corral Ohio’s Medicaid ‘Pac-Man:’ Greg R. Lawson (Opinion)

COLUMBUS, Ohio -- Medicaid, as Gov. George Voinovich famously called it, is the “Pac-Man” of Ohio’s budget, gobbling up an ever-greater share of taxpayer resources like pixels in a 1980s arcade game.

Not surprisingly then, as Medicaid glowers over the state’s annual budget and its costs and expenses continue to escalate, state policymakers routinely — and rightly — look for responsible ways to curb those costs in order to preserve other spending priorities without jeopardizing Ohio’s fiscal future. Unfortunately, some proposed Medicaid remedies threaten to do more harm than good for Ohio.  

Medicaid’s pharmaceutical drug program, for example, has proven notoriously expensive and in dire need of commonsense reforms. Pharmacy benefits managers, or “PBMs,” have come under heavy scrutiny lately as policymakers struggle to control spiraling program costs. There are rumblings and whispers that some may be tempted to abandon Ohio’s managed care system and return the state’s prescription drug program to its fee-for-service model.

That temptation should be resisted.

Before 2011, Ohio used a fee-for-service system that paid pharmacies directly for each prescription that the pharmacy filled separately. This system created a financial incentive to dispense more expensive medications because reimbursements were tied to drug prices. And because those higher-priced drugs were reimbursed by Medicaid, Ohio taxpayers were left to pick up the tab for a necessary program at an unnecessary price.

Gov. John Kasich recognized that the fee-for-service system was untenable, costing the state far more than it should, and ignoring the stubborn reality of economic incentives. Mr. Kasich transitioned Ohio Medicaid’s drug benefits program to the managed care system we have today.

Under the current system, the state contracts with private insurers to provide health care  and pharmaceutical services, rather than managing the system itself through a bloated, state-run bureaucracy. The managed care approach allows the state to leverage private sector innovation and provider networks to better coordinate health care services, thereby avoiding duplicative efforts and eliminating the flawed, overpriced fee-for-service incentive structure.

Indeed, a study commissioned by the Ohio Department of Medicaid found that the current system actually saves Ohio taxpayers $145 million annually when compared to the state’s former fee-for-service protocols. And by contracting with PBMs to provide drug benefits and services, Ohio Medicaid takes better advantage of the expansive industry relationships and pharmacy networks that PBMs have built to provide patients with ready access to pharmaceuticals. PBMs can use such relationships and those they have cultivated with major pharmaceutical makers to leverage lower prices on Medicaid-covered prescription drugs. In the end, Mr. Kasich’s managed care system has delivered better quality at a better price.

This is not to suggest that the current system is above reproach or reform. Problems remain to be fixed and policymakers and legislators are wise to pursue solutions to perennial concerns that plague the system. As The Buckeye Institute has said before, for instance, Ohio’s managed care Medicaid program — including its PBM program — should be more transparent. Medicaid recipients should be shown and advised of the least expensive prescriptions available and taxpayers should be told what PBMs are getting paid for their services.

As the much-maligned “Pac-Man” of the state’s annual budget, Medicaid costs must be controlled and services improved. But Ohio cannot afford a wistful return to the bygone fee-for-service model of yesteryear. To such a regrettable and avoidable mistake, we must say game over.

Greg R. Lawson is the research fellow with The Buckeye Institute.

********

Have something to say about this topic? Use the comments to share your thoughts. Then, stay informed when readers reply to your comments by using the “Follow” option at the top of the comments, and look for updates via the small blue bell in the lower right as you look at more stories on cleveland.com.

AP RADIO
Update hourly