Insights

This week’s In Focus covers key takeaways and insights from a recently released HMA report, State Approaches to Managing the Medicaid Pharmacy Benefit: Insights from a National Survey for State Fiscal Years 2023 and 2024.

The report, released in August 2024 with support from Arnold Ventures, includes survey responses from 47 states (including DC) for state fiscal years (SFYs) 2023 and 2024. The survey instrument builds on questions posed in the 2019 Medicaid Pharmacy Study of all 50 states and the District of Columbia, which HMA and the Kaiser Family Foundation conducted.  

The report discusses state trends for how Medicaid pharmacy benefits are administered across the country, including planned priorities and anticipated challenges in SFY 2025 and beyond. The findings are based on information provided by the nation’s state Medicaid Directors, Medicaid Pharmacy Directors, and other Medicaid agency experts. 

Pharmacy Benefit Administration  

In many states, managed care delivery systems play a pivotal role in administering Medicaid benefits, including prescription drugs. As of July 1, 2023, survey results found that:  

• A total of 33 states carved pharmacy benefits into managed care organization (MCO) contracts, with one state, Kentucky, directing its MCOs to use a single state-selected pharmacy benefit manager (PBM). 
• Eight states carve-out the pharmacy benefit—double the number in 2019. 

MCO states were surveyed about their use of carve outs for certain drug products/classes, inclusive of physician-administered drugs covered under the medical benefit.  

• In all, 19 states reported carving out one or more drug classes or select agents within a drug class—often high-cost specialty drugs. 
• Of those states, 13 reported using the carve-out as part of a risk mitigation strategy.  

Pharmacy Benefit Managers 

The significant role and market power of PBMs have prompted many state legislatures to enact greater transparency practices and require health plans to accept more responsibility for monitoring the PBMs they contract with, which reflect notable changes since the 2019 survey. More specifically: 

• A total of 33 states reported contracting with a PBM.  
• The most frequently reported PBM functions included utilization management, drug utilization review, claims processing and/or payment, and rebate administration activities.  

The 30 MCO states that carve in pharmacy benefits responded to survey questions about PBM transparency and spread pricing requirements. Of these states:  

• 25 prohibit spread pricing in MCO PBM contracts—more than double the number of states reporting prohibitions on spread pricing in 2019.  
• 17 reported having PBM transparency reporting requirements.  
• 10 states reported having “any willing” pharmacy requirements.  

The Role of PDLs, Prior Authorization, and Step Therapy in Controlling Drug Costs and Utilization  

HMA’s experts also sought information on state payment strategies and utilization management protocols that are used to manage pharmacy expenditures. Nearly all responding states (44) have a preferred drug list (PDL) in place for fee-for-service prescriptions, which allow states to drive the use of lower cost drugs by encouraging providers to prescribe preferred drugs. Further, nearly two-thirds of responding MCO states (19 of 30 states) that do not carve out the pharmacy benefit reported having a uniform PDL for some or all drug classes, requiring all MCOs to cover the same drugs.  

Many states have implemented step therapy and prior authorization (PA) guardrails in their Medicaid programs through legislation. However, 85.1 percent of responding states (40 of 47) report utilization controls like PA or step therapy applied to drugs that are reimbursed through the medical benefit to control utilization and costs. States also play an active role in managing MCO clinical protocols or medical necessity criteria, with 22 out of 30 MCO pharmacy carve-in states reporting that they require uniform clinical protocols for some or all drugs with clinical criteria. Approximately one-half of responding MCO carve-in states also require review and approval of MCOs’ PA criteria (15 of 30 states) and step therapy criteria (14 of 30 states).  

State Adoption of VBAs: Improving Patient Access to Cell and Gene Therapies  

A growing number of states are actively considering entering into value-based arrangements (VBAs) with manufacturers, as pressure to improve patient access to cell and gene therapies increases. Nine states have at least one VBA in place, and 23 states reported that VBAs are among their future solutions for addressing coverage of new high-cost therapies. States will need to address common barriers to VBA implementation, which involves more upfront costs and operational challenges to implement than traditional contracts. 

Subsequent to the submission of survey responses, the Centers for Medicare & Medicaid Services (CMS) released a Cell and Gene Therapy (CGT) Access Model, which begins with a focus on sickle cell disease, anticipated to go live on January 1, 2025. Under the model, CMS will negotiate outcomes-based agreements with manufacturers on behalf of the state to ensure that treatment pricing is related to treatment effectiveness. In the coming years, experiences with this model will help determine whether a CMS-led approach to developing and administering VBAs for CGTs improves Medicaid member access to innovative treatment and their impact on expenditures, if any.  

Looking Ahead  

Managing the Medicaid pharmacy benefit has never been more challenging. In FY 2025 and beyond, most states will be focused on managing their Medicaid pharmacy budgets, especially the development of VBAs and other policies and strategies for managing new high-cost therapies. Other top priorities and challenges cited by multiple states include management of PBM arrangements and considering coverage of the new generation of GLP-1 anti-obesity medications. States also must react to changing drug marketplace conditions driven, in part, by federal policy changes to the Medicaid drug rebate formula and changes designed to lower Medicare drug costs. Drug manufacturer responses to these changes have implications for Medicaid state budgets, but also for state PDL management decisions and beneficiary access to needed medications. 

Connect with Us 

The upcoming event, Unlocking Solutions in Medicaid, Medicare, and Marketplace, hosted by HMA, will offer more opportunities to engage with report author Kathy Gifford at the pre-conference workshop Paying for Innovative Pharmaceuticals: State and Federal Trends Shaping Public Programs. Leaders from various sectors will join Kathy to discuss trends in prescription drug policies in public and commercial insurance programs. 

For details about the report, contact our featured experts below.

This week, our In Focus section reviews state policies designed to increase insurer participation in Medicaid managed care and Marketplace programs. As states seek to address healthcare costs, affordability, and consumer experiences, they are exploring a range of initiatives—from the rise of prescription drug affordability boards to cost containment commissions, cost growth benchmarks, transparency, and examination of mergers and acquisitions.  

A notable trend is the use of state policy and purchasing power to encourage or mandate that Medicaid managed care organizations (MCOs) offer Marketplace plans. Dual-market participation can help smooth coverage transitions, ensure continuity of care, and expand consumer choice. The remainder of this article addresses original research and analysis of this trend by our Health Management Associates, Inc. (HMA), featured experts.

Current Landscape  

In 2024, enrollment in the Marketplace program has surged to more than 21 million, approximately a 30 percent increase from 2023. This growth was largely attributed to the temporary enhanced subsidies that allowed more people to access affordable coverage. Over the past several regulatory cycles, federal policymakers also have taken steps to further align the Marketplace framework with Medicaid on key issues, such as essential community provider access, eligibility and enrollment processes, and plan design standards. In response, states are innovating to meet federal requirements while pursuing their own healthcare goals related to coverage, affordability, access, and healthcare outcomes.  

Value Proposition  

A compelling value proposition for Medicaid MCOs to participate in the Marketplace (and vice versa) includes the ability to market to and retain people moving from one program to another as life circumstances change. Dual-market participation also supports diversification and growth strategies. In fact, enrollment in the Marketplace has nearly doubled since 2020. For Medicaid MCOs in particular, expanding product offerings to include Marketplace plans presents a unique opportunity to leverage existing provider networks and reimbursement arrangements to deliver more competitive rates. 

Consumers benefit when the same organization participates in both markets. Families with parents and children who obtain coverage under different programs have an opportunity to work with a single organization and choose providers from the same or overlapping networks. Income fluctuations may result in disenrollment from one program (e.g., Medicaid) and eligibility for a new program (e.g., Marketplace subsidies). Continuity of care policies can smooth these transitions in areas such as prior authorization, care management, and provider network.  

State Strategies to Increase Dual-Market Participation 

The Affordable Care Act expanded access to affordable health insurance coverage for as many as 45 million individuals by giving states the option to expand Medicaid and provide federal subsidies to people who purchase Marketplace plans. States are now using various strategies to encourage or require insurer participation in both programs to ease transitions for individuals and families “churning” from one program to another, increase competition and choice of Marketplace plans, and reduce the risk of coverage gaps. For example:  

• Nevada is requiring any bidder that plans to respond to its upcoming Medicaid MCO procurement to separately submit a “good faith” response to the Battle Born State Plans (BBSP) RFP. This state-contracted, public option will be available on the Silver State Health Insurance Exchange beginning in 2026. Failure to submit a good faith proposal will disqualify an organization from participating in the Medicaid MCO procurement later this fall. Nevada’s current Medicaid MCOs must participate in the Marketplace by offering at least one Silver and one Gold qualified health plan (QHP) that has overlapping provider networks, serves the same service area, and charges reasonable premiums. 
• Rhode Island and New Mexico require or intend to require that their Medicaid MCOs participate in the Marketplace. As an awardee of Rhode Island’s recent Medicaid MCO procurement, UnitedHealthcare, must reenter the HealthSource Rhode Island market in 2027. These states also have designed their Medicaid MCO auto-assignment methodology to favor enrollment in a Medicaid MCO affiliated with an individual’s previous Marketplace plan or a family member’s Marketplace plan.  
• In its last Medicaid MCO procurement (2018), North Carolina offered bonus points to any bidder that agrees to offer a Marketplace MCO. The resulting contract codified the market entry commitment and included implications for failure to follow through. Nonfulfillment could result in the highest level of contract noncompliance and associated penalties. 
• Arkansas expanded its Medicaid program using federal matching funds to purchase QHP coverage through the Marketplace. Minnesota, one of the few states offering a basic health program, contracts with the same organizations to provide coverage under both programs.  
• Iowa uses contract language to encourage, but not require, Medicaid MCOs to participate in the Marketplace to facilitate continuity of care during coverage transitions. 

The Centers for Medicaid & Medicare Services (CMS) collaborated with states to promote continuity of coverage following the end of the Medicaid continuous enrollment requirement established in the Families First Coronavirus Response Act of 2020, also known as the Medicaid public health emergency (PHE) unwinding. This support includes the clarification of permissible outreach activities by Medicaid MCOs that also offer a Marketplace plan, information sharing, and other assistance. Many states have incorporated the CMS guidanceiii into Medicaid MCO contracts. North Carolina, Utah, and West Virginia include additional contract terms supporting their Medicaid MCOs’ ability to co-market Medicaid and Marketplace plans, including when an individual is losing Medicaid eligibility.  

What to Watch For 

Coverage transition challenges throughout the Medicaid PHE unwinding have highlighted the real-life impact of coverage gaps and the importance of policies and practices that promote uninterrupted access to healthcare coverage. Historic Marketplace enrollment levels and recent CMS guidance clarifying the allowability of outreach to people who are losing Medicaid coverage about Marketplace plan available make the prospect of dual-market participation increasingly attractive for Medicaid MCOs. A greater focus on improving continuity of care and Marketplace plan choice may lead to more states encouraging or requiring Medicaid MCOs to participate in the Marketplace.  

Connect with Us  

The upcoming HMA event, Unlocking Solutions in Medicaid, Medicare, and Marketplace, will offer more opportunities to engage with leaders from various sectors who are advancing innovations in Medicaid managed care and Marketplace programs and the points at which these programs intersect. State Medicaid and insurance commissioners, health plan executives, and community leaders, among others, will share insights into their market success and initiatives designed to address healthcare costs and insurance affordability.  

Experts from HMA and our family of companies have extensive experience in the policy, structure, and administration of healthcare markets and health plan contracting. For more information, contact our featured experts below.

This week’s second In Focus reviews the Texas STAR Kids request for proposals (RFP), which the Texas Health and Human Services Commission released on May 10, 2024. The STAR Kids Medicaid managed care program provides coverage to children and youth ages 20 and younger with disabilities. Nine plans currently participate in the program, with contracts worth approximately $4 billion annually.  

STAR Kids Overview  

The STAR Kids program operates under the Texas Healthcare Transformation and Quality Improvement Program 1115 demonstration project. To be eligible, individuals must receive Supplemental Security Income (SSI) and SSI-related Medicaid, participate in the Medically Dependent Children Program (MDCP) Section 1915(c) waiver, live in a community-based intermediate care facility, or participate in an intellectual or developmental disability (I/DD) waiver program.  

Medicaid managed care organizations (MCOs) provide acute, behavioral, and long-term services and supports (LTSS) to children in the MDCP program and acute services only to children covered under the other home and community-based services/IDD waivers. 

RFP 

Texas plans to award contracts to at least two MCOs for each of the 13 service areas (SAs). Each MCO can be awarded up to six SAs.  

MCOs will need to describe reimbursement strategies that incentivize high-quality and cost-effective healthcare while controlling spending and reducing ineffective service utilization in their proposals.  

MCOs must demonstrate progress toward advancing alternative payment model (APM) initiatives within an APM performance framework. MCOs will need to provide a proposed APM and a means of tracking its effectiveness, including implementation of processes that support and incentivize providers to apply value-based care models and reward high performers. 

Evaluation 

Technical questions in the proposals are divided into five broad categories, representing a total of 1,800 points. Plans can score up to 2,000 points, including oral presentations (see table below).  

Timeline 

Proposals are due July 11, with awards expected to be made between December 2025 and February 2026. The contract start date is anticipated to begin between December 2026 and February 2027. Contracts will run for six years with three two-year renewal options. 

Current Market

Incumbents CVS/Aetna, Elevance/WellPoint, Blue Cross Blue Shield of Texas, Centene/Superior Health Plan, Community First Health Plan, Cook Children’s Health Plan, Driscoll Children’s Health Plan, Texas Children’s Health Plan, and UnitedHealthcare served 150,000 beneficiaries as of November 2023.

Connect With Us  

Texas has an active Medicaid procurement schedule, with key deadlines and additional developments expected in the coming months. HMA experts in Texas are monitoring these activities as the state works to reprocure all its Medicaid managed care contracts. These programs include the State of Texas Access Reform (STAR) and CHIP for traditional Medicaid members, STAR+PLUS for members who are aged and disabled, and STAR Kids for individuals younger than 20 years old with disabilities. 

Through HMA’s Information Services, subscribers gain access to detailed information about the Texas and other state RFP landscapes and procurement documents, as well as historical data about plan contracts, enrollment, and financials.  

For more information about HMA’s work in Texas and our HMAIS resources, contact our featured experts.

This week, our In Focus section reviews recent Medicaid enrollment trends in capitated, risk-based managed care in 30 states.1 Many state Medicaid agencies post monthly enrollment figures by health plan for their Medicaid managed care population on their websites. These data allow for timely analysis of enrollment trends across states and managed care organizations. All 30 states highlighted in this review have released monthly Medicaid managed care enrollment data into quarter four (Q4) of 2023. The analysis that follows reflects the most recent data posted. HMA continues tracking enrollment as states work towards concluding their Public Health Emergency (PHE) unwinding-related redeterminations and resuming normal eligibility operations. 

Health Management Associates, Inc., (HMA) has reviewed the Q4 enrollment data (see Table 1) and offers the following observations:  

• Across the 30 states tracked in this report, Medicaid managed care enrollment declined by 7.3 percent year-over-year as of December 2023. 
• Of the 30 states, 26 experienced decreased enrollment in December 2023, compared with the previous year, as the result of Medicaid redeterminations. 
• A total of 23 of the states—Arizona, California, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Virginia, Washington, and West Virginia—saw net Medicaid managed care enrollment decrease by 469,000 (0.9%) to 51.5 million members at the end of Q4 2023. (Note: North Carolina expanded Medicaid in December 2023 and was added to the expansion group, in part inflating the change). 
• The seven states that had yet to expand Medicaid as of December 2022—Florida, Georgia, Mississippi, South Carolina, Tennessee, Texas, and Wisconsin—have seen Medicaid managed care enrollment decrease 25.2 percent to 13.9 million members at the end of Q4 2023.  

Table 1. Monthly MCO Enrollment by State, October 2023−December 2023 

It is important to note the limitations of the data presented. First, not all states report the data at the same time during the month. Some of these figures reflect beginning of the month totals, whereas others provide an end of the month snapshot. Second, in some cases the data are comprehensive in that they cover all state-sponsored health programs offering managed care; in other cases, the data reflect only a subset of the broader managed Medicaid population, making it the key limitation to comparing the data described below and figures that publicly traded Medicaid MCOs report. Consequently, the data in Table 1 should be viewed as a sampling of enrollment trends across these states rather than a comprehensive comparison, which cannot be developed based on publicly available monthly enrollment information. 

Expand Your Awareness about Medicaid and Medicare Advantage via HMAIS 

If you are interested in gaining access to detailed information on the Medicaid managed care landscape, an HMAIS subscription is the key to unlock important data. The HMA Information Services (HMAIS) collects Medicaid and Medicare Advantage Special Needs Plan (SNP) enrollment data, health plan financials, as well as developments on expansions, waivers, and demonstrations. Your HMAIS login also provides access to a library of public documents all in one place, including Medicaid RFPs, responses, model contracts, scoring sheets and other procurement related materials. HMAIS combines this publicly available information along with HMA expert insights on the structure of Medicaid in each state, as well as a proprietary HMA Medicaid Managed Care Opportunity Assessment. 

For information on how to subscribe to HMA Information Services, contact our featured experts.