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Medicaid & S-Chip
The Medicaid program is a system of matching grants to states to provide coverage to low income citizens. The program provided coverage for almost 40 million Americans in 2002. In addition a separate State Children's Health Insurance Program (S-CHIP) provided coverage for more than 5 million children in the same year.
The President's budget provides the broad outlines of a significant Medicaid reform policy. The Administration proposes to enhance state flexibility to design innovative programs without waivers in many cases. The goals of the program include better use of private sector cost containment strategies.
If adopted, the Administration proposal would combine Medicaid and S-CHIP spending for states choosing to enter the reformed program. Those states that choose the option would have flexibility for changes to spending between acute and long-term care-though protections to current Medicaid benefits would remain in place for those beneficiaries that the states are mandated to enroll. For optionally enrolled beneficiaries, states would have significant flexibility to adjust cost sharing and benefits in various areas.
Drug Rebate Reforms
The Medicaid rebate, which is the greater of the difference between a drug manufacturer's best price and its Average Manufacturer's Price (AMP) or a percentage specified in statute and has not changed substantially since its inception in 1990. Last year, the Administration proposed calculating rebates based on the difference between AWP and best price. Since AWP is typically higher than AMP, greater rebate collections were projected.
For FY '04, the Administration is again exploring changes to Medicaid rebate calculations. However, this year, there is no specific proposal in the budget. Rather, the Administration will work with committees of jurisdiction to explore policy options to generate savings and improve Medicaid drug pricing and reimbursement. The Budget notes that "best price" calculations have been "confusing" and that rebates including "best price" may serve to limit discounts in the private sector.
The HHS "Budget in Brief" estimates savings from these changes will save the federal government $13.2 billion over the next ten years, with similar savings at the state level.
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