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Next Generation of Ohio Medicaid Managed Care
The next generation plan ensures that the Medicaid program spends less on administrative functions and targets future spending on needed health care services.
Next Generation of Ohio Medicaid Managed Care

Next Generation of Ohio Medicaid Managed Care

Savings Analysis and Impact of Realigned Service Delivery

Governor DeWine’s vision for the Ohio Department of Medicaid’s (ODM) next generation of managed care was proposed in early 2019 and included in the 2020-21 executive budget discussions. The goal: securing high-quality, evidence-based health care for Ohioans. His proposal signaled the start of a multi-pronged approach to listen to stakeholders and re-examine and renovate the state’s 15-year old managed care construct, while protecting the viability of the program for future generations.

Significant Program Efficiencies and Administrative Cost Savings

The next generation plan ensures that the Medicaid program spends less on administrative functions and targets future spending on needed health care services. It will bring an unprecedented level of transparency and accountability, including improvements in care coordination and analytic capabilities necessary to better manage chronic and costly diseases and health inequities within our health care system.

The restructured managed care program drives greater efficiencies, resulting in net program efficiencies and administrative savings to taxpayers of $186.1 million in SFY 2022 and $230.7 million in SFY 2023.

Single Pharmacy Benefit Manager (SPBM) and Pharmacy Reforms

According to the Auditor of State1 and a 2018 report commissioned by the state to investigate claims of PBM malfeasance,2 more than $224 million in payments made to the managed care organizations (MCO) for pharmacy benefit manager (PBM) related expenses could not be explained. As a result, in 2019 the Ohio General Assembly required ODM to select a single PBM to administer the pharmacy benefit, rather than administration by each plan individually.

Over the past biennium, ODM has made great strides in advancing transparency and accountability in the pharmacy program. The agency ended controversial “spread pricing” and required the plans and their PBMs to adopt transparent, “pass-through” pricing instead, where the prescription drug cost paid to the pharmacy must be the same amount paid to the PBM. ODM also added contractual protections against anti-competitive PBM practices and created a public dashboard to provide unprecedented visibility into the MCO pharmacy benefit including prescription costs, ingredient and dispensing fees, utilization and more. In January 2020, after working closely with stakeholders and the General Assembly, ODM implemented a Unified Preferred Drug List (UPDL) that has resulted in annual savings of at least $60 million.

The introduced version of the budget includes the following:

  • • Single PBM: The single PBM brings much needed accountability and price transparency for Ohio taxpayers and Ohio pharmacies, providing assurance that Ohio’s tax dollars are spent appropriately. In addition, the single PBM significantly reduces costs by eliminating duplicative MCO administrative expenses and risk margin across multiple MCOs resulting in: - Savings of $128M in SFY 2022 - Savings of $184.4M in SFY 20233
  • • Unified PDL: This initiative is widely hailed by consumers and providers for creating a consistent list of medications across the MCOs resulting in a savings of $60M annually.

Managed Care Procurement Cost and Savings

  •  Managed care implementation: The new managed care contracts will provide significantly greater oversight and accountability to the program and drive long-term efficiencies. The contracts will be implemented as service cost-neutral to the state. Additional administrative resources are needed to support transition costs, readiness review, contract close-out and enhanced external quality review.
  •  This results in additional administrative costs of: - $18.9M in SFY 2022 - $15.1M in SFY 2023
  •  Managed care profit reduction: These costs, however, are more than offset by reduction of the MCOs’ risk margin by 0.25%, resulting in: - Savings of $50M in CY 2022 - Savings of $50M in CY 2023