On March 7 and 8, 2024, the Medicaid and CHIP Payment and Access Commission (MACPAC) held a virtual public meeting, which included the following sessions:

• Proposed recommendation for improving the transparency of Medicaid financing;
• Themes from an expert roundtable on physician-administered drugs; and
• Panel discussion on authorities and state Medicaid approaches for covering health-related social needs.

The full agenda for the meeting and the presentations for the sessions are available here.

COMMISSIONERS EXAMINE PROPOSED RECCOMENDATIONS TO IMPROVE TRANSPARENCY OF MEDICAID FINANCING METHODS

Medicaid and the Children’s Health Insurance Program (CHIP) are both funded jointly by States and the federal government, which provides matching funds to states based on their Federal Medical Assistance Percentages (FMAP). There are a variety of ways that states can fund the non-federal share of spending, including general funds, heath care specific taxes, and intergovernmental transfers, in which other public entities, such as municipal or county governments, transfer money to the Medicaid program[1]. Transparency around state funding sources is lacking, hindering analysis of Medicaid payments. While states are required to answer five questions about their financing methods when making reimbursement changes to their state plan, including describing the mechanism used by to provide the state share of funding, the answers to these questions are not publicly available. Data on state-level financing is weak; states are required to submit information on provider taxes through Centers for Medicare & Medicaid Services (CMS) Form 64.11, but this information is often incomplete. There are no reporting requirements at the provider level, making it difficult to analyze net payments to providers.

To remedy this, the Commission proposed two recommendations to increase data transparency, one for Medicaid, and one for CHIP, which would simply extend the Medicaid recommendation to the CHIP program. This work continues discussions that took place at the January 2024 meeting. The recommendations are as follows:

Medicaid

In order to improve transparency and enable analyses of net Medicaid payments, Congress should amend Section 1903(d)(6) of the Social Security Act to require states to submit an annual, comprehensive report on their Medicaid financing methods and the amounts of the non-federal share of Medicaid spending derived from specific providers. The report should include:

• a description of the methods used to finance the non-federal share of Medicaid payments, including the parameters of any health care-related taxes;
• a state-level summary of the amounts of Medicaid spending derived from each source of non-federal share, including state general funds, health care-related taxes, intergovernmental transfers, and certified public expenditures; and,
• a provider-level database of the costs of financing the non-federal share of Medicaid spending, including administrative fees and other costs that are not used to finance payments to the provider contributing the non-federal share.

This report should be made publicly available in a format that enables analysis.

 CHIP

In order to provide complete and consistent information on the financing of Medicaid and CHIP, Congress should amend Section 2107(e) of the Social Security Act to apply the Medicaid financing transparency requirements of Section 1903(d)(6) of the Social Security Act to CHIP.

The Commission believes that the recommendations would not pose too heavy of an administrative burden on states, as states already collect aggregate financing data, and Texas already reports on provider level funding, demonstrating that this sort of reporting is feasible. This work will culminate in a chapter and recommendations which the commissioners will review and vote on at next month’s meeting. The final recommendation and chapter will be included in the June 2024 Report to Congress.

COMMISSIONERS REVIEW FINDINGS FROM PHYSICIAN-ADMINISETERED DRUGS ROUNDTABLLE, INCLUDING CONCERNS WITH THE COST OF AND ACCESS TO CELL AND GENE THERAPIES

Many high-cost specialty drugs in the pipeline, such as cell and gene therapies, are physician-administered. These types of drugs are expected to be a key driver of future Medicaid drug spending. There is little information on how state Medicaid programs pay for and manage utilization of physician-administered drugs (PADs), as most existing research focuses on drugs obtained through a pharmacy. To gain insight into this area, MACPAC contracted with Milliman to conduct a roundtable discussion on Medicaid coverage of physician-administered drugs.

Payment for PADs is based on 1) the cost of the drug and 2) the cost of administration and professional services. The payment for the drug cost is not required to be on the basis of average acquisition cost, and payment for the drug cost often includes a mark-up. The methodology for drug cost varies by state, with 23 states using average sales price (ASP) plus 6 percent, 11 states using a cost between ASP and ASP plus 6 percent, 2 states using ASP and another percent, and 14 states using another benchmark.

For dually eligible beneficiaries, PADs are typically reimbursed by Medicare at the payment rate of ASP plus 6 percent for most Medicare Part B drugs. Medicaid then pays the beneficiary’s costs for Part A and Part B drugs, such as coinsurance. Medicaid does not pay for Part D drugs or associated cost sharing.

The expert roundtable, which included federal and state officials, drug payment experts, Medicaid MCOs, drug manufacturers, beneficiary advocates, and providers, identified five key themes:

1. There is tension between the mark-up on drug cost and overall payment adequacy. Providers rely on the drug mark-up to subsidize costs not covered by the administration fee, but not all states pay a mark-up, and in some cases, the mark-up cost is excessive for very high-cost drugs. There is also concern that 340B providers need the difference between payment and the 340B price to provide charity care and community benefits. To resolve these issues, a tiered approach to drug payment could be utilized, or manufacturers could consider a higher rebate as long as the additional rebate was passed along to the provider as higher payment. Additionally, bundled payments often do not adequately cover drug costs, especially for cell and gene therapies, and a state is not eligible for the Medicaid Drug Rebate Program rebate if a drug is paid for in a bundle.
2. Challenges exist with respect to utilization management under the medical benefit. Prior authorization processes are not as robust on the medical benefit, and states sometimes do not have adequate staff and capacity to develop clinical guidelines for complex therapies. The split between the medical and pharmacy benefit can be confusing. Further integrating the clinical teams under medical and pharmacy may help address this issue. There is also concern regarding prior authorization turnaround time for PADs. Some stakeholders suggested there is a need for more standardization across fee-for-service Medicaid and managed care.
3. Providers should have a role in managing spending, but this can be challenging as a provider does not know the net cost of a drug after rebates. States could consider assigning drugs a cost ranking to indicate relative net cost, using payment structures based on net cost tiers, or using a shared savings approach where a provider gets a bonus for using the most cost-effective drugs. Cost concerns are a primary factor in prescribing decisions, so a standardized and robust medical exceptions process is needed, especially for conditions that require more personalized treatment.
4. Outcomes-based contracts (OBCs) and value-based arrangements (VBAs) are administratively burdensome to develop and administer. Stakeholders generally find it easier to enter into these arrangements with state Medicaid programs rather than managed care organizations (MCOs), as one agreement covers the entire population and does not trigger best price concessions. Administrative barriers include a lack of negotiating power under MDRP, lack of resources for and burden of outcomes tracking and reporting, and uncertainty on who has responsibility for monitoring and tracking outcomes.
5. The high cost of and limited access to cell and gene therapies poses challenges for states.These therapies are only available at a limited number of qualified treatment centers (QTCs), which may lead to additional operational challenges as QTCs may not be located in-state and out-of-state provider services may be needed for both treatment and follow-up care. The cost of cell and gene therapies and payment structures limit the ability to use different providers.

Overall, potential strategies roundtable participants suggested to address these challenges include reducing the mark-up on drugs and increasing payment for administration, removing high-cost drugs such as cell and gene therapies from bundled payment arrangements and paying them separately, and aligning prior authorization across pharmacy and medical benefits.

Commissioner discussion focused on CMS’s Center for Medicare and Medicaid Innovation’s (CMMI) Cell and Gene Therapy (CGT) Access Model. This model was announced in 2024 and will test a new approach for administering outcomes-based agreements (OBAs), in which CMS will facilitate the implementation of OBAs with manufacturers on behalf of states. OBAs may include outcomes-based rebates, volume-based rebates, and guaranteed rebate components. CMS released the Request for Applications (RFAs) to states the day this session was held, March 7, 2024. CMS plans to release Notice of Funding Opportunity (NOFO) to states in summer 2024. The model will begin with a rolling start in January 2025. The model webpage is available hereand a fact sheet on the model is available here. Commissioners noted this model holds promise as it indicates CMS’s willingness to perform some of the back-end data analysis. A MACPAC staffer highlighted other benefits of the CGT Access Model, including the requirement for manufacturers to cover fertility preservation services and a safe harbor for this provision. In general, manufacturers are not allowed to cover fertility preservation services under the Anti-Kickback Statute, but the Model’s requirement may further facilitate access to treatment as many cell and gene therapies require a chemotherapy regimen that results in infertility. The staffer also noted that CMS facilitation of OBAs may reduce burden for states, as setting up rebate agreements and determining outcomes may take months or even years. Determining how to measure outcomes that are not claims-based, such as functional assessments or lab tests, poses another challenge for states that CMS facilitation may help address.

As a next step, MACPAC staff will draft an issue brief highlighting challenges related to PADs and potential payment and utilization management strategies. The Commission will continue to monitor this topic.

MACPAC PANELISTS DISCUSS STATE MEDICAID APPROACHES FOR COVERING HEALTH-RELATED SOCIAL NEEDS

The March MACPAC meeting featured a panel discussion to address different ways states are using Medicaid to cover health-related social needs (HRSN). The panelists were:

• Libby Hinton: Associate Director, Program on Medicaid and the Uninsured, KFF
• Amir Bassiri: Medicaid Director, New York State Department of Health
• Dave Badan: Deputy Director for Programs and Policy, Oregon Health Authority
• Hemi Tewarson: Executive Director, National Academy for State Health Policy (NASHP)

Libby Hinton began the panel with opening remarks focused on two Medicaid programs that address HRSN, the in-lieu of services and the 1115 waivers. In the beginning of 2023, CMS released guidance that allowed in-lieu of services, which allows states to expand their Medicaid benefits to include services or other benefits that can be substituted for Medicaid benefits to address HRSN such as housing instability and nutrition insecurity. Hinton also discussed the 1115 demonstration waivers expanded flexibilities that began at the end of 2022 to allow them to address enrollee HRSN.

Hemi Tewarson also focused on housing, noting the differences between Medicaid and government-sponsored housing in how the programs are both set up and funded, and the importance of these programs acknowledging the differences as they work together.

Amir Bassiri described his time working for the New York State Department of Health and their 1115 waiver demonstration. In January, CMS approved their amendment that targets HRSN. The health department is focused on integrating benefits such as housing or transitional housing, nutrition services, social health needs management, transportation, and care coordination under the benefit. To accomplish this the state was split into nine regions with one social care network per region. These benefits are also mostly managed under the MCOs.

Dave Badan, similarly, shared his experiences working with Oregon’s 1115 waiver demonstration. Oregon’s waiver also addresses HRSN through the Medicaid benefits but also includes other Medicaid changes such as continuous eligibility for children up to age six, then two-year continuous eligibility for anyone over age six. Badan also highlighted the climate change benefit that was a part of this waiver which included helping Medicaid members who qualified based on specific social needs get help for climate related emergencies such as needing an air conditioner during a wildfire.

The panel moderator directed the conversation toward the two state health departments and inquired more about challenges they faced with implementing their waivers, as well as strategies that were not approved on the waivers that they would have liked to have added. Bassiri focused on the challenge of requesting funding for a project without concrete data and the importance of flexible funding. He also noted that New York could not add childcare as a benefit, and that they are also working to add other services such as benefits for people who are being released from incarceration, and continuous coverage for kids. Badan found challenges with working with other governmental organizations besides CMS to properly integrate the benefits and emphasized the role of community providers. Badan noted that the state is looking for ways to improve preventive efforts for climate emergencies but since they occur quickly, it is challenging to get needed resources to those who need it in time.

Commissioners asked the panel about how certain social needs were being addressed, such as gun violence prevention; how to work with existing services; and preventive care. With regard to gun violence prevention, panelists highlighted hospital-based violence intervention, and a benefit that could go through community health workers. Hinton discussed North Carolina’s request to expand services for firearm safety and gun violence prevention. Both Bassiri and Badan agree that it is important to work with existing services that complement other ongoing work, rather than creating duplicative programs.

During the discussion, commissioners emphasized the importance of addressing HRSN at an upstream level. The panelists also touched on the importance of looking at the return on investment in terms of how the benefits address the problems from an upstream approach since programs such as nutritional assistance can keep people out of the emergency room so there are lower emergency room costs. Other problems that commissioners brought up are retention of people who use housing benefits, and addressing substance use disorder through housing, behavioral health, and physical health.

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This Applied Policy® Summary was prepared by Emma Hammer with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at ehammer@appliedpolicy.com or at 202-558-5272.

[1] For a detailed description of non-federal funding mechanisms, see this resource from MACPAC.