Use and costs under the Iowa capitation drug program

Area of Science:

• Health Economics
• Pharmaceutical Policy
• Healthcare Reimbursement

Background:

• Traditional fee-for-service reimbursement for pharmacists under Medicaid covers ingredient costs plus a dispensing fee.
• A capitation system provides a fixed monthly payment per eligible recipient, varying by aid category and season.

Purpose of the Study:

• To evaluate changes in drug service utilization and costs following the transition from a fee-for-service to a capitation reimbursement system for Medicaid pharmacists.
• To compare drug use and costs in counties transitioning to capitation with control counties remaining on fee-for-service.

Main Methods:

• A pre-post study design was used, examining a 1-year preperiod (fee-for-service) and a 2-year postperiod (capitation) in two rural counties.
• Drug use and costs were compared between experimental counties (transitioning to capitation) and control counties (remaining on fee-for-service) over a 3-year period.
• Drug costs were measured using three metrics: average cost per day of therapy, average cost per recipient, and average Medicaid expenditures per recipient.

Main Results:

• Overall drug use remained similar between experimental and control counties, except for nursing home patients, where use decreased under capitation and increased under fee-for-service.
• Significant cost savings were observed under the capitation reimbursement system compared to fee-for-service.
• Average cost of drug therapy, average drug costs per recipient, and average Medicaid expenditures for drug services per recipient were all lower under capitation.

Conclusions:

• The capitation reimbursement system for Medicaid pharmacists resulted in substantial cost savings, estimated at approximately 16% compared to the fee-for-service system.
• Savings are attributed to shifts in prescribing and dispensing behaviors, alongside changes in drug use patterns among nursing home patients.
• Capitation appears to be a more cost-effective reimbursement model for Medicaid drug services.