State Medicaid administrators are concerned that the new Medicare prescription drug benefit will not reduce state drug costs as promised, according to several officials who attended a congressional forum on Friday with CMS Administrator Mark McClellan, CQ HealthBeat reports. Prescription drug coverage for dual eligibles -- who are covered by both Medicaid and Medicare -- will shift from Medicaid to Medicare when the new federal benefit takes effect in 2006. For instance, California next year will have $215 million more in prescription drug costs as a result of the new Medicare law, despite promises of savings for states through clawback payments to the federal government, state Medicaid official Stan Rosenstein said. Under the clawback provision, states in 2006 will be required to pay the federal government 90% of the dual eligibles' prescription drug costs. Since states previously paid all of those costs, the Bush administration says that they will save 10% on drug costs. However, officials from a number of states said savings will not be realized because their clawback payments will be based on state outlays from 2003. Some state officials said they have reduced drug outlays since 2003 through cost-saving measures such as preferred drug lists, rebates and other tactics, so the 90% payment based on 2003 outlays will not accurately reflect current spending levels. They also said that rebates received in 2004 for 2003 outlays should be factored into the 2003 baseline for clawback payments. Another concern for states is an inflation factor built into the clawback payment formula. Over time, state clawback payments will decline to 75% of prescription drug costs for dual eligibles, but the inflation factor will limit savings. Officials argued that states that have worked to cut dual eligibles' drug costs since 2003 should not be subject to the clawback inflation factor.

McClellan Response
McClellan responded that the states will save $8 billion over 10 years from the drug benefit, including savings for dual eligibles and new coverage for retired state employees. McClellan also responded to concerns over the administrative costs of enrolling people in the drug benefit, stating that matching payments will be provided to states (CQ HealthBeat, 3/4).

NPR's "Weekend Edition Saturday" included an interview with Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, about proposed reductions in Medicaid funds in the Bush budget plan (Lyden, "Weekend Edition Saturday," NPR, 3/5). The complete segment is available online in RealPlayer.