What Medicaid’s Hepatitis C Crisis Means for Medicare Part D

Three million Americans suffer from Hepatitis C. The liver disease killed nearly 20,000 Americans in 2014 – officially claiming more American lives than any other infectious disease. One may wonder why this condition destroys so many lives, given that Hepatitis C is a curable illness.

Part of the answer comes down to the type of health care many Hepatitis C sufferers receive. Of the 3 million Americans affected by this disease, a full third of them are Medicaid eligible. Medicaid recipients frequently face major difficulties in accessing primary care and health care screenings, which are essential to detecting Hepatitis C (it can often be asymptomatic) and treating the patient before major liver damage has been done.

The other key obstacle facing Medicaid recipients currently struggling with Hepatitis C is access to effective treatment once a diagnosis has been received. Recently, the National Association of Medicaid Directors (NAMD), an association which represents state directors of Medicaid programs across the country, called on Congress to address the strain that the cost of Hepatitis C treatment is placing on the nation’s largest health insurer.

Among the many difficulties specifically expressed, NAMD points out that the current rebate system used to set drug prices in the Medicaid program makes it difficult, if not impossible, to negotiate lower rates for Hepatitis C medications while maintaining a steady supply to meet patient needs. This is because the existing rebate program sets very strict and inflexible guidelines for the pricing of prescription medications under Medicaid.

As a possible solution, NAMD suggests that this program could be changed to “enable states to effectively utilize market forces to [reduce treatment costs] on their own.” If this suggestion sounds familiar to some, it could be due to the fact that similar negotiating power was one of the selling points for another government-run health care program: Medicare Part D.

Part D, a Medicare prescription drug program, went into effect in 2006. The goal of the program was to increase seniors’ access to a wider variety of prescription medications, while utilizing the market forces of competition to control the costs of the program. The program works by allowing administrators to negotiate prices directly with drug companies, rather than relying on a strict rebate formula like Medicaid.

The program is far from perfect, but it deserves credit for costing 45 percent less than projected, resulting in the federal government spending $349 billion less than originally anticipated.

Further savings have been realized through increased access to medication, as well. Seniors have been able to manage chronic conditions more affordably through medications, saving the expense of costlier medical interventions. Better access to medication through Part D has saved Medicare $1.5 billion per year.

That’s why some look to Part D as a possible model for improving medication pricing and access in the Medicaid Program. The most effective way to allow Medicaid administrators to pursue pricing strategies that work best for each individual program’s unique needs would be to block grant Medicaid in its entirety.

In a strange coincidence, however, as Medicaid Directors look to Part D as a model for bringing down prices while increasing access to medication, the Obama administration has been looking to the Medicaid Drug Rebate Program as a possible drug pricing model to replace the more flexible negotiating power of Medicare Part D.

Many opponents of this idea have already noted that the plan is not likely to decrease the overall cost of Medicare, and will almost certainly erode access to critically-needed medications for Medicare recipients. Yet the administration has remained steadfast in its requests for Medicaid-style rebates to be introduced to the program.

As Congress considers whether to grant the administration’s request to interfere with Part D drug pricing, it should pay attention to Medicaid’s Hepatitis C woes. The future of countless Americans entering their golden years — Americans who will need access to medications currently being developed for conditions such as Alzheimer’s and Parkinson’s — will be deeply affected by their decision.

Melissa Fausz is a Senior Policy Analyst at Americans for Prosperity.