To reduce costs in its Medicaid Health Plan (MHP), Michigan is carving out pharmacy benefit managers (PBMs) and transitioning to a fee for service (FFS) model for the delivery of prescription drugs. In October, Michigan’s Department of Health and Human Services (MDHHS) announced that outpatient prescription drug coverage will no longer be an MHP benefit. Starting December 1, 2019, the drugs will be delivered through a FFS model and the state would contract with a single PBM to bill its health department.

Michigan expects to save around $10 million in general funds annually under the FFS model. According to MDHHS, these savings will be achieved “through a combination of increased pharmaceutical rebates and elimination of related MHP administrative capitation costs. The transition to a single formulary will also result in significantly streamlined administration for Michigan’s health care providers and coverage consistency for program beneficiaries.”

To allow for a smooth transition for beneficiaries, “MDHHS will partner with MHPs and its PBM contractor by utilizing recent MHP PAs and paid claims data to create system edits. The intent of these edits is to continue the beneficiary’s medication coverage that was provided by their MHP and to minimize and/or eliminate PA obstacles during the first three-months of the coverage transition.”

In addition, the transition will apply coverage limitations and prior authorizations to all program beneficiaries. Members over the age of 21 will incur co-pays starting the first of December. For pharmacy services, copays will be $1 for preferred and $3 for non-preferred medications. 

Healthcare payers and PBMs oppose the decision. They claim that such a move does not align with MHP’s goal to deliver whole-person integrated care. The decision will increase out of pocket costs and members will not have the appropriate overview of their prescriptions.