Medicaid Coverage of Newer Psychotropic Medication

Abstract

Approximately 5 million people in the United States suffer from severe mental illnesses such s schizophrenia, bipolar disorder, major depression, and severe forms of panic and obsessive--compulsive disorders (National Advisory Mental Health Council, 1993). These mental illnesses can run a chronic course and disable the daily living activities of individuals. Of the many treatment approaches available for severe mental illness, pharmacotherapy or drug treatment first introduced in the 1950s has been the most helpful in ameliorating symptoms caused by such disorders. The newer psychotropic drugs introduced in the mid-1990s have especially been found to be more promising than the earlier traditional psychotropic drugs. The overall findings of the clinical trials completed on newer antipsychotics provide evidence that these drugs are more effective and have fewer side effects compared with the older antipsychotic drugs (McEvoy, 1998). Clinical trials completed with newer antidepressant drugs likewise reveal that these drugs are as effective as traditional antidepressants and are safer in terms of adverse side effects (Rush, 1998). However, these newer drugs cost more than the traditional drugs (Nightengale, Crumly, Liao, Lawrence, & Jacobs, 1998). The high cost has led many private and public insurance companies to impose restrictions that can limit access to these newer drugs. State Medicaid programs, facing budget crisis, also institute such cost containment policies. Medicaid covers people who are predominantly from a low-income group and individuals who receive Supplemental Security Income because of their disabilities. It also covers many people with mental illnesses who are unemployed and who have severe symptoms (U.S. Department of Health and Human Services, 1999). Medicaid, consequently, is an important source of health coverage for people who might benefit most from the newer psychotropic drugs, yet cannot afford them. This preliminary study thus explores the extent of coverage of newer psychotropic drugs under Medicaid. There are no studies available on Medicaid psychotropic drug coverage, and this is a first step in understanding the availability of such drugs for patients with severe mental illness. FEDERAL MEDICAID DRUG COVERAGE POLICIES A review of the federal Medicaid drug coverage policies can clarify the extent of influence that the federal and state programs have on drug coverage. According to the Social Security Amendments of 1965 (P.L. Law 89-97), federal Medicaid policies give states some flexibility to determine the range of optional services covered under Medicaid, including prescription drugs (Buchanan & Smith, 1994). For federal Medicaid matching funds to be available to states for covered outpatient drugs of a manufacturer, the manufacturer must enter into and have in effect a rebate agreement with the federal government (personal communication with M. Hazelwood, manager, Pharmacy and Ancillary Services Programs, Illinois Department of Public Aid, December 20, 2000). This national drug rebate program was created by the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) and has been in effect since 1991. All of the drugs (except for a short list of drugs, such as those to treat hair loss, weight loss, infertility, and smoking) of the manufacturers who sign these rebate agreements will be covered by the state Medicaid programs. On a quarterly basis, the federal Medicaid agency sends the states a list of the manufacturers who have entered the drug rebate program. Although state Medicaid programs do not have the flexibility to decide not to cover these drugs, states may choose to put drugs from rebating manufacturers on prior authorization (Buchanan & Smith), which is a restriction that requires obtaining permission for payment before prescription. In addition, the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) allows state Medicaid programs to charge recipients nominal copayments for most covered services (Buchanan & Smith, 1994). …