From 2014 to 2016, New York’s Medicaid program saw a surge in drug spending that Governor Andrew Cuomo blamed on “abusive” behavior by drug manufacturers. But a new Empire Center issue brief shows that, after accounting for rebates, the surge was smaller than Cuomo described, and that it was mostly driven by enrollment growth. Overall, the report finds that price increases accounted for about one-fifth of the spending surge, while enrollment accounted for four-fifths.
After the Affordable Care Act took full effect in 2014, New York’s Medicaid enrollment grew by 1.3 million, or 28 percent, in large part due to the structure of the new health care law. The ACA broadened New York’s already expansive Medicaid eligibility guidelines, financed the hiring of “navigators” to facilitate sign-ups, threatened a tax penalty on those who failed to enroll and used marketing and media attention to increase public visibility.
When adjusted for enrollment and utilization, Medicaid’s drug costs over the past decade have been relatively well controlled compared to both national averages and recent history. Though costs have trended up since their 2013 low point, the program’s cost per prescription was lower in 2017 than when Cuomo took office.
The brief further shows that total drug costs are disproportionately driven by a small number of high-priced, brand-name medications. The top 10 costliest medications, out of more than 3,000 purchased, have accounted for 17 to 24 percent of total Medicaid drug costs in recent years. A handful of newly introduced hepatitis C drugs have been an especially big expense for New York since 2013, in part because officials were slow to restrict coverage.
The Empire Center, based in Albany, is an independent, not-for-profit, non-partisan think tank dedicated to promoting policies that can make New York a better place to live, work and raise a family.
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