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  • Washington Highlights

    MACPAC Makes Recommendations on Prescription Drug Policy, Treatment of Third-Party Payments in Medicaid Shortfall Definition

    Mary Mullaney, Director, Hospital Payment Policies
    Andrew Amari, Hospital Policy and Regulatory Specialist

    The Medicaid and CHIP Access and Payment Commission (MACPAC) April 11-12 met to vote on potential recommendations to Congress on both prescription drug policy and addressing third-party payments in the disproportionate share hospital (DSH) definition of Medicaid shortfall.

    Regarding third-party payments, staff recapped previous discussions on this issue [see Washington Highlights, March 8], and presented a single recommendation for commissioners to vote on:

    • “To avoid Medicaid making DSH payments to cover costs that are paid for by other payers, Congress should change the definition of Medicaid shortfall in Section 1923 of the Social Security Act to exclude costs and payments for all Medicaid eligible patients for whom Medicaid is not the primary payer.

    Commissioners voted 15-0 to approve the draft recommendation, with one abstention and one commissioner not present. Commissioners agreed that excluding all third-party costs and payments from the shortfall definition would most effectively advance three desired policy goals: (1) making DSH funds available to safety-net hospitals; (2) not disincentivizing hospitals from serving Medicaid eligible patients with third-party coverage, and; (3) promoting administrative simplicity. Several public commenters requested MACPAC delay its vote until appellate litigation on the issue is resolved but commissioners felt the current policy, which has significant impacts on DSH payments to hospitals, merited an immediate recommendation.

    MACPAC staff also presented draft recommendations regarding prescription drug policy. The draft recommendation on new prescription drug coverage would amend the Medicaid statute to allow states to exclude or otherwise restrict coverage of a covered outpatient drug for 180 days after a new drug or new formulation of a drug has been approved by the Food and Drug Administration and entered the market.

    Some commissioners and members of the public voiced concerns about limiting access to needed drugs. MACPAC staff stated the goal of the grace period is to allow states to review new drugs and develop coverage decisions, not to delay access. 

    MACPAC staff offered a second prescription drug recommendation that would raise the cap on Medicaid drug rebates to 125% of a drug’s average manufacturer price. However, after significant discussion, most commissioners preferred eliminating the cap entirely and the recommendation was revised to reflect the change. 

    Commissioners voted 16-0 to approve both prescription drug draft recommendations, with one commissioner not present.

    The chapters on both prescription drug policy and treatment of third-party payments in the DSH definition of Medicaid shortfall will be included in MACPAC’s upcoming 2019 June Report.