Drug costs force estimated $25.4 million rise in state’s Arkansas Works match

Increased drug costs have caused the state’s five-year match for Arkansas Works to rise from $705 million to $730 million, legislators were told by a consultant Monday.

The Stephen Group told the Health Reform Legislative Task Force that the waiver the state is seeking from the federal Department of Health and Human Services includes a state match that has risen by $25.4 million. The total estimated cost of the program has increased from $9.04 billion to $9.35 billion from the initial waiver request. Most will be funded by the federal government.

Arkansas Works will be the new version of the private option, the state program that uses federal Medicaid dollars to purchase private health insurance for individuals with incomes up to 138% of the federal poverty level. The state is in the process of seeking a federal waiver from the federal government to make the changes to the program. The waiver is expected to be approved by October.

The Stephen Group told legislators that the increase is being driven by a recognition that some health costs are increasing. The original projected growth rate for all five years of the waiver – from 2016-21 – was 4.7%. Now, it’s expected to grow 6.5% in 2016-17 and then grow at slower rates each year, ending at 4.7% in 2020-21.

RISING DRUG COSTS, ‘DEFERRED MAINTENANCE’ DYNAMIC
The Stephen Group’s Rory Rickert told legislators that among the cost drivers are new, expensive specialty drugs coming onto the market. Until recently, drug costs were in a period of slow growth because a number of major drugs lost their patents, allowing generics to come onto the market.

Drug prices are driving increased costs in government health care and in the private insurance market. Private insurers are also facing pressures as some government-funded risk mitigation programs are being phased out.

Four of the state’s insurers have requested double-digit rate increases of 15-24% for next year. In response to questions from Sen. Jim Hendren, the task force’s chairman, Insurance Commissioner Allen Kerr said independent actuaries are studying the increases and will report to him this week. He will begin talking to the carriers next week and hopes to have answers by the first week of August, with Aug. 23 being the deadline when the department must make a decision.

Kerr discussed a recent report by the U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services showing costs in Arkansas for the individual insurance market were higher than in 48 other states and the District of Columbia. Hendren said one of the arguments for the private option was that it was supposed to introduce a younger, healthier population to the overall pool, reducing costs.

Kerr said the state has a “larger population of deferred maintenance” involving people who have not addressed health needs for a long time before obtaining insurance and now are doing so.

“The only way that the spread of risk works is if you have a population, a part of that population that’s not using the coverage,” he said.

He said costs may decrease if utilization shrinks – for example, when some Arkansans get their diabetes under control.

BEHAVIORAL HEALTH COST CHANGES
In other business, the Stephen Group told legislators Arkansas is moving forward with changes that when implemented could save $50 million-$70 million a year in behavioral health costs and $52.5 million in pharmacy costs annually.

The state’s behavioral health program is implementing seven program changes, including individual assessments and tying plans of care to severity. A $10 million-15 million reduction is planned in admissions to residential treatment, which cost the state $150 million a year in 2014.

Day rehabilitation and group therapy sessions would not be available for lower level clients, who instead would be treated individually at a rate of $27.30 per 15 minutes with a maximum of four units a day and 48 units a year. The state spent $71 million on those programs in 2014 and would save $20 million-30 million under the proposed changes.

Elizabeth Smith, the state’s Medicaid inspector general, said providers potentially were receiving $1,000 per 1.5-hour session with 12 people in group therapy sessions with an H90853 billing code. She said her office has found a significant bump in those sessions each summer over the past three years, though the bump is smaller this year, perhaps because providers are aware her office has been researching the matter. With changes, she said the program could save up to $35 million a year.

The consultants recapped information showing that uncompensated care losses by Arkansas hospitals fell 57% from $270 million in 2013 to $116 million in 2014, the first year of the private option. The Kaiser Family Foundation found a similar pattern across the country. States that expanded Medicaid under the Affordable Care Act saw a reduction in uncompensated care from $16.7 billion in 2013 to $11 billion in 2014, a 34% decrease. In states that chose not to expand Medicaid, uncompensated care losses fell by 1%, from $18.1 billion in 2013 to $17.9 billion in 2014.

The state is on track to save $52.5 million a year in its pharmacy program starting in 2017 through another set of reforms. That number has increased by $20 million than previously estimated because of a change in the way Medicaid will reimburse retail pharmacists.

EFFORT TO CURB OPIOID ABUSE
The Stephen Group offered three recommendations for how the state can reduce the abuse of opioids.

First, the state should consider requiring health care providers to review a prescription drug monitoring database before prescribing controlled substances. While 49 states (all but Missouri) have a database, only 29 require a review that would enable providers to see which patients might be shopping for drugs. Rickert said Kentucky saw significant decreases in overdose hospitalizations and deaths when it began requiring providers to check the database.

Second, the state could consider requiring e-prescriptions for controlled substances. Only three states have such a mandate, and Minnesota did not see much of a change because it didn’t enforce it. John Stephen with The Stephen Group said he would prefer the state try other means besides a mandate.

Third, the state should expand its successful drug takeback program.