Most health care payers interviewed covered pharmaceuticals to at least some degree. We found only one case where psychiatric medications are covered as a benefit separate from the general pharmaceutical benefit. Financing represents a mix of fee-for-service and capitation arrangements, although it appears that payers are abandoning capitation and risk-sharing in a return to fee-for-service financing.
Two out of the four consumer and provider associations interviewed (NAMI, AAFP) reported that differences in the coverage of behavioral health and other (e.g., physical health) pharmaceuticals were more common in the private sector than in the public sector. The most commonly cited reason for this difference was that managed care plans have more restricted access. In this study, we did not observe that psychotherapeutics are being singled out for special restrictions or exclusions because they are psychotherapeutics. Payers who place restrictions on pharmaceutical benefits do not generally discriminate among drug classes.
- Public Programs
Of the four Medicaid programs (California, Georgia, Texas, Wisconsin) and the four State Mental Health System programs (Arizona, Maryland, Massachusetts, and Ohio) interviewed, seven manage their pharmacy programs internally. The Massachusetts State Mental Health System contracts with a third party vendor to manage its program. Seven of the eight States interviewed (Wisconsin is the exception) reported that their pharmacy benefit is generally integrated with other benefits and financed through a mix of capitation and/or fee-for-service arrangements. Exhibit IV-1 outlines the reimbursement mechanisms for each state's pharmacy benefit.
Exhibit IV-1. Reimbursement Mechanisms for Pharmacy Benefit under Medicaid and State Mental Health System Programs
The DoD has carved out its pharmacy benefit within Tri-Care to Pharmaceutical Benefit Managers (PBMs) through the various TriCare managed care plans. Patients are instructed to first use an Military Treatment Facility (MTF). MTF's generally have limited formularies. If the MTF is not available or if the required drug is not available on the formulary, patients then order the drug from the PBM. If the drug is ordered through the PBM, the patient is responsible for a higher level of cost-sharing. The PBM program is administered on a fee-for-service basis. The VA internally manages the pharmacy benefit from within the global VA budget, fully integrating it with other benefits.
- Private Payers
Private health care payers reported a variety of methods to finance and manage pharmaceutical benefits. MCOs sometimes finance pharmaceuticals through capitation, although this arrangement varies to meet the needs of their customers (e.g., employers, Medicare, and Medicaid). It appears that MCOs are increasingly moving towards financing pharmaceuticals on a fee-for-service basis. In addition, several HMOs continue to operate risk-sharing arrangements for pharmaceuticals with their physicians.
Most HMOs interviewed manage the pharmacy benefit internally. A few carve it out. Again this arrangement varies by plan and by the client being served. Even in cases where the benefit is managed internally, the HMO may contract the services of a PBM to process claims or provide other services. In almost all cases, psychotherapeutics are covered under the same pharmacy benefit as that for physical health. It is unclear whether the financing arrangement has any direct correlation with the comprehensiveness of formulary offerings.
PBMs generally finance pharmaceutical benefits on a fee-for-service basis for both their MCO and employer clients. However, PBMs occasionally enter into risk sharing or capitation arrangements. PBMs generally manage pharmaceutical benefits for all outpatient pharmaceutical classes, including psychotherapeutics. However, long-acting injectable formulations of antipsychotics, may be covered under the behavioral or physical health benefit because these are usually administered in a provider's office, clinic, or hospital. The covered lives serviced by a PBM include all persons who obtain some or all pharmacy benefit services through the PBM. The services provided by a PBM to its MCO and employer clients may include mail service, claims processing, and/or formulary and utilization management. Some MCOs or employer clients use a PBM only to provide one or two of these services, while others utilize the complete spectrum of services.
Employers may finance pharmaceutical benefits either through full capitation through their MCO carriers or on a fee-for-service basis. In the latter case, employers will often work with a PBM to provide pharmaceutical benefits. Although employers work with their carriers to design benefits, they rarely become intimately involved with the details of coverage.
Behavioral Health Managed Care Organizations (BMHCOs) prefer not to cover pharmaceuticals. BMHCOs prefer instead to leave the pharmacy benefit integrated with the general pharmacy benefit. In a few cases (e.g. Arizona's State behavioral health managed care program) the BMHCO manages the pharmacy benefits for behavioral health directly. In Arizona, this benefit is financed on a capitated basis.
- Special Populations
Both the New York State prison system and Indian Health Service report financing pharmacy benefits out of their global budget. This method is generally similar to fee-for-service.