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Medicaid Services study shows pharmacy carve-out from managed care would save Kentucky millions

The Kentucky Department for Medicaid Services (DMS) has completed an analysis that shows moving outpatient pharmacy services from Medicaid managed care to the Medicaid fee-for-service program would save the state millions of dollars.

The study examined figures from 2017 and 2018.

The two-year study conducted by Myers and Stauffer shows a Medicaid pharmacy carve-out would generate $237.5 million in savings with the state reaping $44.7 million of that. The study proves savings would primarily come from reduced administrative costs associated with Medicaid Managed Care Organizations (MCOs) and their respective Pharmacy Benefit Managers (PBMs) and additional rebates the state would receive by making the switch.

It showed that administrative costs in Medicaid managed care could be as high as $10.18 per claim compared to Medicaid fee-for-service which could be around $2 per claim.

“This report shows that the state, which is already facing a tight budget, would save millions of dollars by moving Medicaid managed care pharmacy claims to the Medicaid fee for service program,” said Shannon Stiglitz, vice president of government affairs with the Kentucky Retail Federation. “The study demonstrates that the commonwealth can pay pharmacy providers adequately and fairly while at the same time generate savings for the state’s other budget needs.

“Since June of 2017, community pharmacies have expressed concerns that reimbursements in Medicaid Managed Care are too low, and in some instances, actually below the cost of the product being dispensed, making it difficult to stay in business. Carving out pharmacy benefits from the Medicaid managed care organizations is a way for Kentucky to lower overall Medicaid costs through reduced administrative costs.”

“The Kentucky General Assembly and incoming administration will have to craft a budget that still has to deal with a pension and a projected Medicaid shortfall,” Stiglitz added. “A Medicaid pharmacy carve-out would ensure continued access to community pharmacies and would save scarce resources.

“The Kentucky Retail Federation appreciates the General Assembly’s efforts to push for this study and urges legislators to act and move outpatient pharmacy benefits to Medicaid fee for service.”

From Kentucky Retail Federation

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