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Ohio's Medicaid system is "fraught with structural, policy and programmatic complexities and inefficiencies." This was the conclusion of a panel of experts studying how the state should reform its health plan for the poor, disabled and elderly.

The Ohio Commission to Reform Medicaid released its findings in January and six months later, Medicaid reform became an integral part of the state's $51.25 billion 2006-07 budget. From the beginning, OFBF has embraced the panel's conclusion that the state's Medicaid program has serious problems and could be overhauled without affecting services.

Medicaid's pharmaceutical division was particularly troubling, and experts found problems with the data and discovered overpayments to pharmacists, said Jennifer Carlson, the commission's former executive director. The commission, which by law ended its work July 1, has called for an immediate audit of the pharmaceutical system.

"We found over $68 million in overpayments and about $700 million in unusual pharmacy claims," she said. "The pharmacy data was so mismanaged and in such a disarray."

The commission estimated that if all of its pharmacy reforms were enacted, the state would save about $1.8 billion. This is slightly less than the state pays for higher education per year.

Not all of the pharmacy reforms made it into the final version of the budget, but it's a good start, Carlson said.

"The biennial budget begins to realize the twin goals of reducing overall cost and growth rate of the drug program while maintaining important health for our consumers," Carlson wrote in her summary of the Medicaid reform provisions contained in the budget. She said it was impossible to determine yet how much the state will save with the pharmacy reforms passed by the legislature.

Some of the biggest potential cost-saving pharmacy reforms in the budget are:

• Multi-state purchasing program – Ohio will now be able to join a multiple state drug purchasing program, increasing its bargaining power with drug makers for pharmaceutical discounts and rebates. The commission had also recommended pooling with other state agencies to buy drugs, but that was not included in the bill.
• Weekly updates for costs of Medicaid drugs – The Ohio Department of Job & Family Services (JFS), which administers the state's Medicaid program, will now have to update weekly the reimbursement rates for certain pharmaceuticals to help prevent the state from losing money when prices change. This is now being done sporadically without a complete database.
• Medicaid e-prescription system – JFS can now establish an e-prescribing system in which specified providers are required to use an electronic system when prescribing drugs for Medicaid patients. In a Florida Medicaid pilot program, doctors are using hand-held devices that show the state's Medicaid preferred drug list and provide drug cost information and patients' medical histories. About 80 percent of Florida doctors are using the system, saving the state $25.2 million per year.
• Consumer cost-sharing alternatives – The new Medicaid program will make extensive use of consumer cost-sharing alternatives allowed under federal policy by requiring a co-payment for dental, vision, prescription drug (other than generic drugs) and non-emergency services at the emergency room. This will help promote patient responsibility and direct people to less costly services. For example, redirecting consumers to use generic drugs could result in significant savings since every 1 percent increase in the use of generics saves $20.4 million.

Rocky Black, director of OFBF's legislative affairs, said the commission's findings about the prescription program and the overall Medicaid system reinforce Farm Bureau's belief that the state should more closely manage its money.

"Medicaid spending now consumes almost 40 percent of the state's general revenue fund," Black said. "Recent reforms will help but more remains to be done."

Under the new state budget, Medicaid spending will increase less than 5 percent over two years – two-thirds less than what experts had projected it would grow by in 2006 if changes were not made.

Black praised Sen. Lynn Wachtmann, R-Napoleon, for his work in getting more Medicaid reforms into the final budget.

"I think it's safe to say Ohio will save over $1 billion per year with these Medicaid reforms," Wachtmann said. "Hopefully the legislature will take some of the commission's recommendations that didn't make it into the budget and implement them down the road. Some can be done without the legislature's approval."

"We're not done by any means with Medicaid reform, but we have a huge start with this budget."