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Medicaid Waivers: HHS Approvals of Pharmacy Plus Demonstrations Continue to Raise Cost and Oversight Concerns

GAO-04-480 Published: Jun 30, 2004. Publicly Released: Jul 30, 2004.
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Highlights

Under section 1115 of the Social Security Act, the Secretary of Health and Human Services may waive certain Medicaid requirements for states seeking to deliver services through demonstration projects. By policy, these demonstrations must not increase federal spending. GAO has previously reported concerns with HHS's approval process. GAO was asked to provide information on a new Medicaid section 1115 demonstration initiative called Pharmacy Plus, intended to allow states to cover prescription drugs for seniors not otherwise eligible for Medicaid. GAO reviewed the (1) approval status of state proposals, (2) extent to which HHS ensured that demonstrations are budget neutral, (3) basis for savings assumptions, and (4) federal and state steps to evaluate and monitor the demonstrations.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Health and Human Services To improve HHS's process for reviewing and approving states' budget neutrality proposals for Pharmacy Plus and other Medicaid section 1115 demonstrations, the Secretary of HHS should, for future demonstrations, clarify criteria for reviewing and approving states' proposed spending limits.
Closed – Not Implemented
The agency did not concur with this recommendation. However, according to Pharmacy Plus program directors, the point is moot because no more waiver applications will be reviewed.
Department of Health and Human Services To improve HHS's process for reviewing and approving states' budget neutrality proposals for Pharmacy Plus and other Medicaid section 1115 demonstrations, the Secretary of HHS should consider applying these criteria to the four approved Pharmacy Plus demonstrations and reconsider the approval decisions, as appropriate.
Closed – Not Implemented
The agency did not concur with this recommendation. Pharmacy Plus program directors confirmed that the agency has not reconsidered its decisions to approve four Pharmacy Plus demonstrations and the issue will become moot when the demonstrations are superseded by the Medicare Part D benefit and terminated by the states.
Department of Health and Human Services To improve HHS's process for reviewing and approving states' budget neutrality proposals for Pharmacy Plus and other Medicaid section 1115 demonstrations, the Secretary of HHS should document and make public the basis for any section 1115 demonstration approvals, including the basis for the cost and enrollment growth rates used to arrive at the spending limits.
Closed – Not Implemented
Although Pharmacy Plus program directors stated that the agency has made many waiver documents available on its web site, they acknowledged that the available documents do not include statements of the justification or basis for the specific growth rates that were approved in demonstration budget neutrality agreements.
Department of Health and Human Services To ensure that approved Pharmacy Plus and other Medicaid section 1115 demonstrations fulfill the objectives stated in their evaluation plans, the Secretary of HHS should ensure that states are taking appropriate steps to develop evaluation designs and to implement them by collecting and reporting the specific information needed for a full evaluation of the demonstration objectives.
Closed – Not Implemented
The agency concurred with this recommendation. Pharmacy Plus program directors stated, however, that the four approved demonstrations will be terminated early due to implementation of the Medicare Part D prescription drug benefit. Consequently the agency did not plan to pressure the states to conduct internal evaluations of their demonstrations because such evaluations are costly and state resources could be better spent preparing for the transition of demonstration enrollees to the Medicare Part D program.
Department of Health and Human Services To ensure that approved Pharmacy Plus and other Medicaid section 1115 demonstrations fulfill the objectives stated in their evaluation plans, the Secretary of HHS should, on acceptance, make public the interim and final results of HHS's independent Pharmacy Plus evaluation.
Closed – Implemented
The agency concurred with this recommendation. In July 2005, Pharmacy Plus program directors stated that a description of two of the demonstrations and a report on the implementation process had been completed by the independent evaluators and were made available on the CMS web site. The evaluators were continuing to analyze claims and survey data, with results expected in spring 2006. The program directors stated that these results will also be made available on the web site.
Department of Health and Human Services To ensure that the Secretary and other stakeholders have the information needed to monitor approved Pharmacy Plus and other Medicaid section 1115 demonstrations to determine if they are functioning as intended, the Secretary of HHS should ensure that states provide sufficient information in their demonstration progress reports, in a consistent format, to facilitate the department's monitoring.
Closed – Implemented
The agency concurred with this recommendation. Pharmacy Plus program directors stated that they provided the approved demonstrations with more complete progress reporting formats in summer 2004 and they are monitoring state spending relative to budget neutrality targets using the CMS 64 Medicaid expenditure reports.
Department of Health and Human Services To ensure that the Secretary and other stakeholders have the information needed to monitor approved Pharmacy Plus and other Medicaid section 1115 demonstrations to determine if they are functioning as intended, the Secretary of HHS should ensure that states submit required demonstration progress reports in a timely manner.
Closed – Implemented
The agency concurred with this recommendation. Pharmacy Plus program directors stated that following GAO's report and until the termination of the Pharmacy Plus program with the advent of the Medicare part D drug benefit, they had talked with state demonstration officials more frequently regarding the content and timeliness of progress reports.

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Topics

Budget controllabilityBudget outlaysDisadvantaged personsDrugsElderly personsstate relationsHealth care programsHealth insurance cost controlProgram evaluationState-administered programsWaiversDemonstration projectsMedicaid