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Drug Company Offers to Pay Costs of Developing Medicaid Reform Proposal

Posted on: Sunday, 21 August 2005, 15:00 CDT

Aug. 21--The state of Georgia is considering an unusual freebie from a drug company: an offer to pay the costs of crafting Gov. Sonny Perdue's Medicaid reform proposals.

Drug costs are a major piece of the Medicaid budget, and the pharmaceutical company -- which state officials refuse to identify -- is likely to have much at stake in the overhaul.

Consumer advocates are concerned.

"It certainly raises a lot of serious questions, with a pharmaceutical company involved in financing the development of a Medicaid (reform plan)," said Kathleen Stoll, director of health policy for Families USA, a Washington -based consumer advocacy group.

"I would certainly look this gift horse in the mouth," she said.

Aides to Perdue say the company would pay expenses of developing and writing the plan, which seeks to curb Medicaid's soaring costs.

The price tag for drafting such proposals, which require federal approval, typically runs in the hundreds of thousands of dollars, Medicaid experts said.

The company is not gaining any favors or promises from the state in making the offer, Perdue's aides said.

"There is no quid pro quo," said Abel Ortiz, Perdue's health policy adviser. Perdue, through a spokeswoman, declined to comment, referring questions to his staff.

The company's motivation is to improve the Medicaid program, said Shane Hix, a spokesman for Perdue. "They have a track record of making these benevolent offers in other states to improve the delivery of Medicaid services." Perdue's aides declined to identify those states.

Medicaid covers 1.5 million poor and disabled Georgians. The health insurance program's budget totals about $6.6 billion in state and federal funds.

The offer is not the first time Georgia's Medicaid modernization plan has involved an element of secrecy. In May, Perdue and state officials met in Washington with federal officials to pitch the proposal, which had not yet been publicly discussed in Georgia.

News of the visit and the proposal were reported by The Atlanta Journal-Constitution.

In the latest attempt at Medicaid reform secrecy, Perdue aides say the drug company requested that its identity not be revealed until it gains government approval for the offer. Those officials also said it was too early in the process to identify the firm.

Both the Department of Community Health, which runs Georgia's Medicaid program, and the governor's office responded to public records requests from the Journal-Constitution by saying they had no documents on the offer. The newspaper learned of the drug company's offer only after Ortiz mentioned it to a group of medical providers in a recent meeting about the governor's plan.

Ortiz, in an interview, said the company would discuss the offer with the federal agency that oversees Medicaid. The state would then have to give final approval to the arrangement.

The federal Centers for Medicare and Medicaid Services, which oversees the Medicaid program nationwide, said Friday that the drug company's offer may be permissible. As long as the resulting funding mechanism doesn't trigger federal matching money, the agency "would likely not object or intervene," said spokeswoman Mary Kahn.

The federal agency has not discussed an offer with a drug company, Kahn said, adding that it was a Georgia matter at this point. Kahn said Georgia has shared information on the company with CMS but "has assured the drug company that its identity would remain confidential until a donation was made," she said.

"At that point, the decision (to reveal the company's name) would be between the state and the company," she said.

Hix, the Perdue spokesman, said the state was exploring the drug company's offer "in a spirit of cooperation with parties interested in improving Georgia's Medicaid system and saving taxpayer dollars."

Georgia consumer health advocate Linda Lowe questions the need for secrecy.

"There are a lot of different ways to have a vested interest in the outcome of a major undertaking like this," Lowe said. "The best thing is to be completely transparent about it. Here's another place to do it."

Annual pharmaceutical spending by Georgia Medicaid exceeds $1 billion. Recent federal government reports, though, say that Medicaid is overpaying for medications, and the National Governors Association said in June that Medicaid should make more use of generic drugs and be entitled to bigger discounts from drug companies and pharmacies.

Health care experts say that in offering money for the Medicaid reform plan, the unnamed drug company could seek payback later from the state, in such areas as favorable treatment on pricing or less restrictions on use of company pharmaceuticals.

The company could push for policy "designed to protect their profits and revenue," said Stoll of Families USA.

But state Rep. Sharon Cooper (R-Marietta), chairman of the House Health and Human Services Committee, who said she was unaware of the company's offer, added that it is not "anything unusual."

There's "nothing sinister" about the pharmaceutical company's offer, she said, likening it to receiving input and ideas from health care stakeholders.

State Rep. Stan Watson (D-Decatur), a member of the Health and Human Services Committee, said he could not comment specifically on the company's proposal because he knew nothing about it. But he said the Legislature should be involved in these types of decisions.

"Anybody who comes to do business with the state of Georgia on an issue that affects state dollars should at least be reviewed or brought before a legislative body," Watson said. "In this case, it would be a body that appropriates money for Medicaid."

Perdue's reform plan seeks more flexibility in running Medicaid in exchange for capping federal funding. The proposal, as first outlined in May, urges patients to take more responsibility for their health, and they would face higher costs for services.

Patients would choose doctors, hospitals and nursing homes based on cost and quality of service.

Perdue has already driven huge changes in Medicaid. Starting next year, 1 million people on Medicaid and 200,000 children in the PeachCare program for uninsured children will join HMOs in a cost-cutting move.

Medicaid's cost in Georgia has jumped by an average of 14 percent annually. The federal government pays $1.54 for every dollar the state spends on the health insurance plan for low-income Georgians.

Other states have been developing restructuring plans for Medicaid, nudged by the Bush administration and prominent conservatives such as former House Speaker Newt Gingrich.

Staff writer Sonji Jacobs contributed to this article.

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Source: The Atlanta Journal and Constitution

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