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WASHINGTON — Private Medicaid plans are seizing on the political rancor over prescription drug prices to lobby for an overhaul of how the government insurance program pays for medicine.

The Medicaid Health Plans of America, the major Washington-based lobbying organization, is working on a set of proposals to present to lawmakers and hopes to release them publicly by mid-2016, the group’s president and CEO, Jeff Myers, told STAT.

Medicaid is “now run by very sophisticated insurers who are taking financial risk,” Myers said. “It would be better if the market allowed pharmaceutical companies to take the same kind of risk.”


The Obama administration has signaled its concerns about Medicaid drug spending. And given the size of Medicaid — it covers one in five Americans — many believe the low-income insurance program will likely be part of any plan if Congress and this or a future administration get serious about taking action on drug costs.

“It needs to be changed,” Myers said, adding that the question is how. “The plans are still thinking through that. But I think it’s time to open the dialogue to say: Medicaid is different than it was 10 years ago.”


Myers’s group doesn’t have the name-brand recognition of the drug makers’ lobbying group, Pharmaceutical Research and Manufacturers of America, or PhRMA, or America’s Health Insurance Plans, the main insurance lobby. But its 120-plus members serve 20 million people — a number that is increasing under the Affordable Care Act and as states look for ways to arrest the growth in Medicaid spending.

These plans, known as managed-care organizations, receive a set payment from the government to cover their patients’ care. If the total cost of care is less than the payment, they keep the savings. But if it costs more, the plans are on the hook for the difference. It is a private alternative to the traditional Medicaid fee-for-service model, one that has grown exponentially in recent years.

Experts say that the private plans have long wanted to overhaul how Medicaid covers drugs, because current law places restrictions on how much they can negotiate with drug companies while the plans are still responsible for the cost of their patients’ overall care.

In the interview, Myers argued that the so-called “capitated” payment model, which by its nature pushes plans toward the most cost-effective care, is, therefore, the most logical place to start experimenting with the value-based purchasing that many lawmakers and even the drug industry say they are interested in.

By design, the plans are supposed to be responsible for the entire “wellness portfolio” of individuals, and are, therefore, willing to pay more for drugs that will keep them out of the hospital, Myers said.

Current law “doesn’t allow our plans to do what they do best,” he added.

Myers stressed that the Medicaid Health Plans of America wasn’t proposing specific solutions yet. The organization held its annual conference in Washington last week, and he said staffers were working on a set of recommendations to take to policymakers.

In the meantime, he is regularly meeting with the relevant congressional committees — namely, the House Energy and Commerce and Senate Finance panels — to make the case that changing Medicaid’s rules for drug coverage should be part of whatever plan lawmakers come up with on drug prices.

Myers did point to a couple of specific problems that his group sees with the current model. One is the requirement that Medicaid receive the best price and discounts available on the commercial market, which he said creates an artificial floor that limits private Medicaid plans’ ability to negotiate better deals. He was also critical of rules that restrict the plans’ flexibility in which drugs they cover.

“Give the plans the same leverage they have when they negotiate with doctors, nursing homes, hospitals,” he said.

But the merits of these proposals are still up for debate.

“The push has generally been to get rid of ‘best price.’ Whether that is a good idea is a matter of substantial debate,” said Brian Bruen, a researcher at George Washington University.