Drugs Covered by Medicaid: A Comprehensive List

Discover the comprehensive guide on drugs covered by Medicaid and empower your access to affordable healthcare.

February 27, 2024

Understanding Medicaid's Coverage

Medicaid, as a significant component of the healthcare safety net in the United States, provides a broad range of coverage, including prescription drugs. However, the specifics of drug coverage can vary, as per state policies and other factors. This section outlines the basics of Medicaid drug coverage and explores the variations in state policies.

Basics of Medicaid Drug Coverage

Medicaid covers a wide range of prescription drugs and supplements. The list is extensive, covering medications for pain management, mental health, chronic conditions, and many more. The coverage specifics, however, can depend on the particular state and the Medicaid program in question Medicaid.gov.

In addition to individual drugs, Medicaid also covers certain drug classes. These are subject to federal requirements and guidance. Specific requirements exist for prescription drugs covered by Medicaid in managed care organizations, including those in fee-for-service programs. These requirements are in place to ensure access, safety, and quality of care Medicaid.gov.

Variations in State Policies

While Medicaid is a federal program, states have considerable flexibility in determining which drugs are covered. However, they must cover certain mandatory drugs and additional drug classes, as per federal guidelines Medicaid.gov.

States also have the opportunity to leverage Medicaid's "best price" rules. These rules ensure that states receive rebates for the drugs covered by Medicaid, and drug manufacturers sell their products at the same or lower costs than those negotiated with other payers Medicaid.gov.

The federal Medicaid Drug Rebate Program requires drug manufacturers to pay rebates to states for the covered outpatient drugs they supply to Medicaid beneficiaries. This helps to offset the federal share of those costs Medicaid.gov.

In summary, while the list of drugs covered by Medicaid is extensive, there are variations based on state policies and specific Medicaid programs. Understanding these nuances can help beneficiaries and caregivers better navigate the healthcare landscape and ensure they are accessing the necessary medications.

Medicaid Drug Rebate Program

Understanding the Medicaid Drug Rebate Program (MDRP) is essential for beneficiaries seeking to navigate the complexities of the coverage provided for prescription drugs.

Origins and Purpose of MDRP

The Medicaid Prescription Drug Rebate Program (MDRP) was created in 1990 by the Omnibus Reconciliation Act in response to rising drug prices and projected increased Medicaid spending. This program mandates that manufacturers enter into a rebate agreement with the Secretary of Health and Human Services to rebate a specified portion of the Medicaid payment for the drug to the states. Additionally, manufacturers must also enter into agreements with other federal programs that serve vulnerable populations. This comprehensive program is administered by the Centers for Medicare & Medicaid Services (CMS).

Under the Affordable Care Act (ACA), the Medicaid was expanded to cover a broader list of drugs through MDRP. This expansion also brought about significant changes to the prescription drug rebate program. The ACA increased the rebate amount for both brand drugs and generic drugs and extended rebates to outpatient drugs purchased by beneficiaries covered by Medicaid managed care organizations (MCOs). Prior to this, only drugs purchased through Medicaid fee-for-service were eligible for rebates.

Impact of MDRP on Beneficiaries

The MDRP has a significant impact on state and federal Medicaid payment for prescription drugs, ensuring that Medicaid beneficiaries' out-of-pocket costs for drugs are limited to nominal amounts as set in statute. Cost-sharing is limited to $4 for preferred drugs and $8 for non-preferred drugs for individuals with incomes at or below 150% of the federal poverty level (FPL). Those with slightly higher incomes may incur somewhat higher costs. Some beneficiary groups are exempt from these cost-sharing requirements, and not all states impose cost-sharing for prescription drugs.

Medicaid programs cover nearly all of the manufacturer’s FDA-approved drugs under the MDRP, and the drugs are eligible for federal matching funds. Although the pharmacy benefit is a state option, all states cover it and administer pharmacy benefits in somewhat different ways within federal guidelines about pricing and rebates.

In summary, the MDRP has played a crucial role in ensuring that Medicaid beneficiaries have access to a wide range of drugs at affordable prices. Understanding the nuances of this program can help beneficiaries make the most of their Medicaid coverage.

Changes Brought by the ACA

The Affordable Care Act (ACA) brought significant changes to Medicaid drug coverage, expanding the list of covered drugs and increasing rebates to enhance affordability.

Expansion of Medicaid Drug Coverage

Under the ACA, Medicaid was expanded to include a wider range of drugs covered under the Medicaid Drug Rebate Program (MDRP). This program, administered by the Centers for Medicare & Medicaid Services (CMS), sets the parameters for which drugs are included in Medicaid's coverage, providing beneficiaries with access to a broader spectrum of medications. This expansion has played a vital role in enabling more individuals to access the drugs they need, enhancing the overall healthcare landscape for Medicaid beneficiaries [2].

Increased Rebates and Affordability

The ACA also brought changes to the prescription drug rebate program, which directly impacts the affordability of drugs for Medicaid beneficiaries. The law increased the rebate amount for both brand drugs and generic drugs, ensuring that these medications are more reasonably priced for beneficiaries.

Moreover, the ACA extended rebates to outpatient drugs purchased for beneficiaries covered by Medicaid managed care organizations (MCOs). This was a significant change, as previously, only drugs purchased through Medicaid fee-for-service were eligible for rebates, despite most states contracting with MCOs. This extension of rebates to include MCO purchases has enabled more beneficiaries to reap the benefits of this program.

One of the key goals of the ACA was to enhance the affordability of drugs for Medicaid beneficiaries. The legislation ensured that beneficiaries' out-of-pocket costs for drugs are limited to nominal amounts set in statute. Federal rules restrict beneficiary cost-sharing to small amounts: up to $4 for preferred drugs and $8 for non-preferred drugs, for individuals with incomes at or below 150% of the federal poverty level (FPL). Some beneficiary groups are exempt from these cost-sharing requirements, and not all states impose cost-sharing for prescription drugs, as stated in the Kaiser Family Foundation.

These changes brought about by the ACA have made strides in increasing access to vital drugs for Medicaid beneficiaries, ensuring they can afford and access the medications they need.

Medicaid's Expenditure on Drugs

Medicaid's expenditure on drugs is a critical part of healthcare spending. It's essential to understand the breakdown of these expenditures and the projected growth of Medicaid's drug costs to fully grasp the financial aspects of the drugs covered by Medicaid.

Breakdown of Medicaid's Drug Spending

Throughout the years, Medicaid's spending on outpatient prescription drugs has seen significant changes. In the fiscal year (FY) 2017, Medicaid spent approximately $64.0 billion on outpatient prescription drugs. From this amount, they collected $34.9 billion in rebates, resulting in net drug spending of $29.1 billion. This accounted for about 5.1% of total Medicaid benefit spending that year.

Fiscal Year Gross Expenditure (in billions) Rebates Collected (in billions) Net Spending (in billions) % of Total Medicaid Benefit Spending
2017 $64.0 $34.9 $29.1 5.1%

In FY 2021, Medicaid's spending on outpatient prescription drugs increased to roughly $80.6 billion. They collected $42.5 billion in rebates, which resulted in net drug spending of $38.1 billion [3].

Fiscal Year Gross Expenditure (in billions) Rebates Collected (in billions) Net Spending (in billions)
2021 $80.6 $42.5 $38.1

Projected Growth of Medicaid's Drug Costs

While the growth of Medicaid's drug spending experienced a sharp spike in 2014 due to specialty drugs and the Affordable Care Act (ACA) expansion, in recent years, it has decelerated, mirroring the overall trend in the US.

However, state policymakers express concerns about the projected escalation in Medicaid prescription drug spending in the coming years. Controlling prescription drug spending remains a focus for policymakers due to expected significant growth rates in average annual spending over the next ten years. This projected increase is particularly driven by new high-cost treatments [3].

Medicaid, due to its role in funding coverage for populations with high healthcare requirements, covers a disproportionate share of high-cost specialty drugs. The structure of Medicaid's pharmacy benefit necessitates coverage for upcoming "blockbuster" drugs [4].

Understanding the current and future trends in Medicaid's drug spending is vital for beneficiaries and policymakers alike. It offers insights into the sustainability of the program and the potential need for further policy interventions to ensure the affordability of drugs covered by Medicaid.

Beneficiary Cost-Sharing and Limitations

Understanding the out-of-pocket costs and limitations of Medicaid drug coverage can help beneficiaries better navigate their healthcare options and ensure they have access to necessary medications.

Out-of-Pocket Costs for Medicaid Beneficiaries

Medicaid beneficiaries' out-of-pocket costs for drugs are limited to nominal amounts set in statute. Due to Medicaid's role in financing coverage for high-need populations with low incomes, it is designed to provide access to prescription drugs with minimal cost to enrollees. Federal rules restrict beneficiary cost-sharing to small amounts: up to $4 for preferred drugs and $8 for non-preferred drugs, for individuals with incomes at or below 150% of the federal poverty level (FPL) and slightly more for those with higher incomes.

Some beneficiary groups are exempt from these cost-sharing requirements, and not all states impose cost-sharing for prescription drugs. These limitations ensure access to prescription drugs for low-income individuals, a key aspect of the Affordable Care Act (ACA) changes to the rebate program.

Income Level Cost for Preferred Drugs Cost for Non-Preferred Drugs
≤ 150% FPL $4 $8
> 150% FPL Slightly higher Slightly higher

Limitations on Drug Coverage

While Medicaid provides comprehensive coverage for many prescription medications, there can be limitations on drug coverage. These limitations can vary by state and may include prior authorization requirements, quantity limits, and step therapy protocols.

Prior authorization requires the doctor to get approval from Medicaid before prescribing certain medications. Quantity limits restrict the amount of medication that Medicaid will cover over a certain period. Step therapy requires beneficiaries to try one or more cost-effective drugs before Medicaid will cover a more expensive drug.

Despite these limitations, the goal of Medicaid is to ensure all beneficiaries have access to the necessary medications they need for their health and well-being. Understanding these limitations can help beneficiaries navigate their coverage and access the medications they need.

Accessing Non-Formulary Drugs

In an effort to provide comprehensive access to necessary medications, many states have procedures in place to allow Medicaid beneficiaries to request coverage of non-formulary drugs. These appeal processes and the trends in state restrictions provide insight into the evolving landscape of drugs covered by Medicaid.

Appeal Procedures for Beneficiaries

In 2021, 45 states had an appeal process in place allowing beneficiaries to request coverage for non-formulary drugs, a significant increase from 2013 when only 26 states had these mechanisms. This trend indicates a growing recognition of the need to offer flexibility in drug coverage, given the diverse healthcare needs of Medicaid beneficiaries.

The appeal process usually involves the beneficiary or their healthcare provider submitting a request to the state Medicaid agency. The request outlines the medical necessity of the non-formulary drug and provides supporting evidence, such as medical records or clinical guidelines. If approved, the Medicaid agency will cover the cost of the non-formulary drug for that beneficiary.

It's important to note that the specifics of the appeal process can vary by state, so beneficiaries should contact their local Medicaid office for detailed information.

Trends in State Restrictions

While states have the authority to determine their own drug formularies within federal guidelines, there has been a decreasing trend in limitations on the number of drugs covered by Medicaid. More states are offering ways for beneficiaries to access non-formulary drugs through appeal processes.

This shift is a response to the diverse and complex healthcare needs of Medicaid beneficiaries, many of whom require specialized medications not typically included in a standard drug formulary. By offering appeal processes, states can ensure that beneficiaries have access to the medications they need, while still maintaining control over drug costs through their formulary policies.

Despite these positive trends, it's crucial for beneficiaries and their caregivers to stay informed about changes in state policies and to actively advocate for their healthcare needs. Through a combination of understanding Medicaid drug coverage and using available appeal processes, beneficiaries can help ensure they have access to the medications they require.

Effects on High-Need Populations

Medicaid plays a crucial role in providing medication coverage for individuals with high healthcare needs. This includes coverage for critical specialty drugs, which often come with a high price tag. Moreover, Medicaid also offers substantial coverage to vulnerable populations due to its design and the changes brought about by the Affordable Care Act (ACA).

Role of Medicaid in Covering Specialty Drugs

Due to its role in funding coverage for populations with high healthcare requirements, Medicaid covers a disproportionate share of high-cost specialty drugs. The structure of Medicaid's pharmacy benefit necessitates coverage for upcoming "blockbuster" drugs [4].

Medicaid programs cover nearly all of the manufacturer’s FDA-approved drugs under the Medicaid Prescription Drug Rebate Program (MDRP), and the drugs are eligible for federal matching funds. Although the pharmacy benefit is a state option, all states cover it but administer pharmacy benefits in somewhat different ways within federal guidelines about pricing and rebates [1].

Coverage for Vulnerable Populations

Medicaid's design plays a significant role in providing access to prescription drugs for high-need populations with low incomes. Federal rules limit beneficiary cost-sharing to nominal amounts, such as up to $4 for preferred drugs and $8 for non-preferred drugs, for individuals with incomes at or below 150% of the federal poverty level (FPL) and slightly higher for those with higher incomes. Not all states impose cost-sharing for prescription drugs, and some beneficiary groups are exempt from cost-sharing requirements [1].

The Affordable Care Act (ACA) brought significant changes to the prescription drug rebate program, increasing the rebate amount for both brand drugs and generic drugs. It also extended rebates to outpatient drugs purchased for beneficiaries covered by Medicaid managed care organizations (MCOs). Previously, only drugs purchased through Medicaid fee-for-service were eligible for rebates, even though most states contract with MCOs [1].

Medicaid beneficiaries’ out-of-pocket costs for drugs are limited to nominal amounts set in statute, ensuring access to prescription drugs for low-income individuals. The ACA brought changes to the rebate program to enhance the affordability of drugs for Medicaid beneficiaries.

In essence, Medicaid's coverage for specialty drugs and its commitment to vulnerable populations ensure that individuals with high healthcare needs can access the medications they require without incurring exorbitant out-of-pocket costs.

References

[1]: https://www.kff.org/medicaid/issue-brief/understanding-the-medicaid-prescription-drug-rebate-program/

[3]: https://www.macpac.gov/topics/prescription-drugs/

[4]: https://www.kff.org/medicaid/fact-sheet/medicaids-prescription-drug-benefit-key-facts/

[5]: https://www.kff.org/other/state-indicator/state-medicaid-prescription-limits/

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