Clinics say state’s new Medicaid drug program will force them to cut services

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SACRAMENTO – California’s sweeping new program to buy prescription drugs for its nearly 14 million Medicaid patients has alarmed health clinics that say they will lose money and have to cut services.

Gov. Gavin Newsom acknowledged on Monday that some clinics, which serve the poorest Californians, would lose funding, and he included $ 105 million for them in the 2022-2023 state budget proposal he unveiled. in the state capital.

But the allocation is well below what clinic officials say they need to keep essential health care services funded in some of California’s most needy areas. California’s federally licensed health centers, which operate more than 1,000 clinics across the state, filed a lawsuit in federal court to exempt them from the program, but a judge on Monday dismissed their request for a temporary stay. while the trial continues.

“People are going to be made redundant; services are going to be cut, ”said Anthony White, president of the Alliance of community health centers for patient access, a statewide organization of federally qualified health centers. “This will reduce access for our patients. “

The drug program, known as Medi-Cal Rx, debuted on January 1 and is one of Newsom’s main healthcare initiatives. It takes responsibility for prescription drug coverage under the state’s Medicaid managed care plans and puts it in the hands of a state contractor.

On his first day in office in 2019, Newsom vowed that the overhaul would deliver better healthcare to patients and generate “Substantial annual savings” because the state would negotiate lower prices as one of the country’s biggest buyers of drugs.

The Newsom administration predicts the state will save $ 414 million in fiscal year 2022-23 and nearly double that amount in the next, said Keely Martin Bosler, director of the California Department of Finance.

California health clinics, however, could lose up to $ 200 million a year in drug reimbursements, White estimated, money they used to treat patients with asthma, HIV and others. chronic health problems. Reimbursement money is a key revenue stream for clinics, but they depend primarily on federal grants for their funding, in addition to some patient income and private donations.

The problem is the money the clinics received under a federal prescription drug savings program known as “340B”. The 340B program requires drugmakers participating in Medicaid to offer significant discounts to certain providers who care for underserved and uninsured people, including health clinics. Health centers, in turn, must use this money to expand health services.

As of Jan. 1, California began purchasing prescription drugs for all of its low-income and disabled residents enrolled in Medi-Cal, the nation’s largest Medicaid program. Because the state expects to get larger drug discounts than Medi-Cal’s roughly two dozen managed care plans, clinics expect to receive less than $ 340 billion in cash.

Newsom’s $ 105 million earmarked for health clinics in its budget proposal to make up for their losses was not intended to replace them entirely, said Michelle Baass, director of the state’s health services department, which administers Medi-Cal, January 5. response to clinical trial.

“The plaintiffs have no right to continued profits from the sale of the 340B branded drugs,” she wrote.

The funding offered by Newsom is not guaranteed. Indeed, it is now subject to the annual budget negotiation process. Lawmakers have until June 15 to negotiate with Newsom and pass a deal. The 2022-2023 state budget comes into effect on July 1.

Mark Ghaly, secretary of the State Agency for Health and Human Services, said the administration was working with clinics and was open to further discussions.

“We’re always happy to sit down and try to figure out what the conditions are today,” Ghaly said.

Angela Hart of California Healthline contributed to this report.

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