ACA Requirements Create Need for Enhanced Medicaid Pharmacy Benefits Management Programs

Updated on August 26, 2023

Since the Affordable Care Act (ACA) was signed into law in 2010, it has helped bring healthcare coverage to millions of previously uninsured Americans, including a large number of individuals now receiving coverage through Medicaid expansion. The new populations entering the system through Medicaid expansion have altered the program’s case mix, increasing the prevalence of conditions and diseases treated with newer therapies that come with staggering price tags.

Some states have seen as much as 80 percent of their infectious disease caseload transfer to their Medicaid program, literally overnight, as a result of Medicaid expansion. This has shifted an enormous burden onto state governments, creating not only large financial obligations, but giving rise to new administrative challenges as well. Medicaid pharmacy benefits management (PBM) programs can play an important role in helping states manage the administrative complexities and dramatic acceleration of prescription drug costs for what has become an increasingly diverse Medicaid beneficiary population.

Given the cost and specificity of newer therapies, and a Federal law that requires states only pay for medically necessary services and therapies, an increasingly important administrative duty is performing medical necessity verification. Historical approaches relied heavily on manual clinical review to make these determinations, however, recently adopted transaction protocols enable PBM program systems to provide immediate authorization of drug claims as part of the prescription process through the use of electronic prior authorization (ePA). This ensures that patients receive their medications in a more timely fashion, rather than needlessly waiting for manually reviewed coverage authorizations that could delay or discourage therapy compliance.

Another major concern facing states that PBMs can help combat is prescription drug abuse. Drug overdose, attributable to both prescription drugs and illegal drugs, is now the leading cause of accidental death in a number of states, surpassing even motor vehicle accidents. In fact, drug abuse is such a large issue that Medicare’s spending for commonly abused opioids rose 156 percent between 2006 and 2014, from $1.5 billion to $3.9 billion. And, while many state Medicaid programs are beginning to address this issue, the challenges still loom large.

To help decrease instances of prescription drug abuse, the Centers for Disease Control recommends that states expand the role of Medicaid PBM programs in an effort to track prescription narcotic utilization by state, better monitor the dispensing and prescribing of frequently abused substances, and identify high-risk patients who would benefit from early intervention. PBMs can also provide states with full visibility into how prescription drugs are tracked, approved and dispensed, ideally leading to fewer abuse cases and a more efficient use of state resources. 

Implementing systems that more effectively monitor their populations’ evolving utilization patterns can present a challenge for state Medicaid programs. A majority of states are using legacy PBM solutions, which are often antiquated and not designed to support current best practices or regulatory compliance under the ACA. To address this issue, states must seek new solutions that further automate the entire prescription drug lifecycle and integrate it across multiple information systems.

Adopting these technologies and approaches will enable states to more effectively manage coverage across programs like Medicaid, the Children’s Health Insurance Program (CHIP), long-term care, and disease-specific programs, such as the AIDS Drug Assistance Program (ADAP). They will also provide more efficient and advanced decision-making for both medical necessity determination and policy improvement. This enhanced system functionality and interoperability will further ensure that states can adapt to changes brought about through shifting patient demographics, expanding therapeutic alternatives, and ongoing legislative and regulatory activity.

J.P. Crouse has more 25 years of experience in international, federal, state and local government programs. He has led efforts and managed projects in all facets of human services including Medicaid and CHIP, K-12 education and public safety.  His experience includes MMIS systems and operations, eligibility and enrollment, recipient and provider customer service, pharmacy benefits management, non-emergency transportation, fraud & abuse, and Health Insurance Exchange technology and operations. He holds a bachelor’s degree in Systems Analysis from Miami University.