America’s Health Insurance Plans (AHIP), the main trade association for health plans, has released research comparing pharmacy costs in states where Medicaid pharmacy benefits are “carved in” versus “carved out.”
“Carved in” means that a managed care organization manages the benefit. “Carved out” means the Medicaid bureaucracy manages it directly. The latter costs a lot more:
- Across 28 states using the carve-in model, the net cost per prescription was 14.6%lower than the average net cost per prescription in states not carving in pharmacy.
- This 14.6% differential created a $2.06 billion net savings in state and federal expenditures in FFY2014 for states deploying the carve-in model.
- The seven carve-out states had a 20% increase in net costs per prescription from FFY2011-FFY2014 — in stark contrast to the 1% increase in net costs per prescription experienced by the 6 states that recently switched from a carve-out to a carve-in model.
- The seven carve-out states “missed” a total of $307 million in savings in FFY2014 which would have occurred had they used a carve-in model.