FRANKFORT, Ky. (Jan. 28, 2005) – Governor Ernie Fletcher announced today that the Medicaid deficit for fiscal year 2005 has been reduced from $526 million to approximately $130 million since December. 

Today, Governor Fletcher signed emergency regulations that will result in significant savings for the Medicaid program without harming patient care.  The changes to Medicaid’s pharmacy benefit system will bring it more in line with modern treatment and reimbursement practices used by other states and the private sector.

The Fletcher administration has worked throughout the year to improve quality and reduce costs in order to preserve services for Medicaid members. Today’s steps are expected to save a total of $68.6 million this fiscal year, and follow additional regulatory changes made previously in FY05.  Together, total savings for FY05 come to roughly $273 million. Governor Fletcher has also increased state funding for the Medicaid program during each of his quarterly spending plans in order to avoid the severe reductions in services or eligibility imposed by other states to balance their Medicaid budgets.   

“My administration is committed to making improvements in the Medicaid program that will help it continue to provide quality services for Medicaid members,” Governor Fletcher said. “These regulations represent another step to preserve those services and bring about cost savings.”

The specific changes approved today are as follows. Please note that the brand-name allowance and 90-day maintenance policy will not go into effect until March 1st in order to allow ample time for Medicaid to communicate these changes to providers and members.

• Brand-name Allowance: Medicaid members are currently allowed to receive an unlimited number of expensive brand-name drugs, resulting in a huge cost to the Commonwealth.  By requiring physicians to justify additional brand-name prescriptions after three have been prescribed in one month, Kentucky Medicaid will shift utilization to generic drugs and realize significant cost savings. There will be no limit on generic drugs. Additionally, no Medicaid members will be denied any brand-name drug deemed medically necessary by his or her physician. This represents a valuable opportunity to address the problem of drug over-utilization within the Medicaid population and enhances our ability to prevent harmful drug interactions. In 2003, 14 states (about a third of those responding to a Kaiser Foundation study) reported limiting prescriptions allowed per month, up from one-fifth of states who did so in 2000.
• Limit “repackaging” fees: Long-term care pharmacies are currently paid a 2-cent add-on fee for items that are already packaged and ready for distribution. By eliminating this fee, the Commonwealth will no longer reimburse facilities for costs already accounted for in other payments.  Additionally, the current 4-cent add-on for unpackaged items will be reduced to 2 cents to account for technological advances that have greatly reduced this cost for institutional pharmacies.
• Reduce prescription drug reimbursements: Medicaid reimbursements for prescription drugs are based on an “Average Wholesale Price” determined by pharmaceutical manufacturers. This pricing scheme, which results in inflated drug prices, is currently under investigation at the congressional level and is the subject of a lawsuit brought by the Kentucky Attorney General. New Medicaid regulations will bring Kentucky’s reimbursement rates more in line with commercial rates.
• Provide 90-day supplies of maintenance drugs: For members with chronic medical conditions, such as diabetes, this change will increase convenience while saving the state money. Rather than filling one-month prescriptions, members will receive a three-month supply when they visit their pharmacy.

“The Fletcher administration is working feverishly to avoid the draconian cuts seen in other states’ Medicaid programs. Current growth rates are simply unsustainable for the Commonwealth,” said Dr. James Holsinger, secretary of the Cabinet for Health and Family Services. “In order to ensure its long-term solvency, we must take bold actions to improve the quality and value of the health care Medicaid provides."

Another recent Medicaid initiative has focused on the usage of atypical antipsychotics began on January 18th. This has been a success in better managing the use of these potent medications. Currently providers are required to fax a completed Prior Authorization form to First Health at 1-800-365-8835. Effective February 10^th, providers will be allowed to submit the information electronically. Please contact the First Health Prior Auth Call center at 1-800-477-3071 with any clinical questions regarding this initiative.

The Kentucky Medicaid program provides health care for approximately 680,000 members and is projected to cost $4.6 billion during the fiscal year ending June 30. The pharmaceutical benefit is the largest and fastest-growing component of the Medicaid program, estimated to cost $820 million this year.

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