AHIP study: Managed care saves billions on drugs compared to traditional Medicaid

Drug prices
A new report shows Medicaid managed care can save significantly more on drugs on than traditional Medicaid. Here are highlights from the analysis. (Getty/Charles Wollertz)

Medicaid managed care organizations (MCOs) saved states and taxpayers billions on prescription drugs in 2018, a new report backed by the insurance industry found. 

Consulting firm The Menges Group analyzed the financial performance of MCOs on behalf of America’s Health Insurance Plans (AHIP) and found the private Medicaid plans accounted for $6.5 billion in net savings on drugs in fiscal 2018. 

Net costs per prescription in managed care were 27% lower than those for traditional Medicaid, according to the study. 

“When states rely on Medicaid managed care plans to provide integrated drug benefits to enrollees, they do even better and deliver more savings for taxpayers every day,” said AHIP CEO Matt Eyles in a statement. “This study shows that when the private and public sectors work together for better healthcare, everyone wins.” 

RELATED: Medicaid block grants would give states more power to oversee managed care 

The study found that between 2013 and 2018, drug costs rose 13% faster in fee-for-service Medicaid compared to managed care plans. In traditional Medicaid, the average cost per prescription after rebates grew by nearly 36% in that five-year period, while costs in managed care increased by about 23%, according to the study. 

States that offered integrated drug coverage through managed care saw higher numbers of generics dispensed to members and lower rates in price growth per prescription compared to other states, according to the study. 

The reach of managed care is growing, the study notes. By 2018, more than 80% of Medicaid prescriptions were covered by MCOs, compared to 27% in 2011. 

Two-thirds of Medicaid enrollees, about 56.5 million Americans, are in a managed care plan, according to the study. That’s more than double MCO enrollment in 2010, which was 25.6 million. 

AHIP said the study is the first in a series of analyses on managed care it intends to release throughout 2020. 

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