Medicaid spending and state cost control: assessing policy impact on drug expenditures

This article introduces a new approach to the study of Medicaid policy and its role in state efforts to limit program costs. The approach is based upon recent work in the field of program evaluation, particularly in the areas of impact assessment and intervention modeling. To illustrate its use in evaluating program changes, the study focuses on policy reforms recently adopted by the state of Maryland as a means of cutting Medicaid expenditures for prescription drugs. Data on spending levels are taken from monthly claims reports filed with the federal government between January, 1974, and December, 1979. Preliminary findings indicate an abrupt decline in program costs following the introduction of new procedures for reimbursing drug providers and the automation of previous procedures for processing payment claims.