Battle Over California Medicaid Reimbursement Is a Preview of Our Future

More

Adventures in health care reform, via the Angry Pharmacist, who is very angry, and a wee bit profane:


Usual reimbursement from MediCal is our drug cost (give or take a few percent to account for wholesaler markups, etc) plus a dispensing fee of a single digit number (less than 10 bucks for those drunk at home). If I dispense, say, Fukitol, with a ballpark (yet entirely reasonable) price of $200, I can expect to make about $210 bucks. Those slow out there may be saying "HOLY SHIT, YOU GOT $210 BUCKS FOR THAT PRESCRIPTION! PHARMACY IS A GOLD MINE!" For those who think this, go work for the State of California, because you are a fucking retard. Yes, we did get reimbursed by the state a whopping $210 dollars, but unless I can wave a magic wand and make drugs out of thin air, my wholesaler wants $200 out of that $210 so he can pay HIS bills. So I get $10, which really is fucking good.

So California; despite having Silicon Valley, Google, dot.millionaire companies, San Francisco and LA (that combined pay more taxes in one second than we will all make in a lifetime) is broke. Go fucking figure. They decide to whack the MediCal reimbursement for drugs by 10% to stem the bleeding of throwing the baby out with the bath water. This first was voted into effect on June 1st. Us pharmacy and medicine peeps said "HOLY SHIT, YOU CANT DO THIS" and did what Americans typically do, tie it up in the courts (read on and you'll see why). Well, recently they lost the injunction, so the cuts happened.

Now you may be thinking "gee TAP, 10% cut in your fee isn't so bad, thats only like a buck". Therein lies the problem. MediCal didn't cut our dispensing fee, they cut THE WHOLE FUCKING REIMBURSEMENT.

Quick and Dirty:

Drug costs 200 bucks. We get paid 210 bucks. Take 10% off of that 210 bucks and you're left with 190 bucks. The drug still fucking costs the pharmacy 200 bucks. We make a whopping -10 dollars. Thats right, the pharmacy LOSES 10 dollars (in this case) with EACH FUCKING HIGH DOLLAR TRADE NAME FILL. Throw in some chemo drugs like Xeloda that costs the pharmacy THOUSANDS or HIV drugs at 600 bucks each, and you have yourself a closed pharmacy.

It is, of course, absolutely true that you can save a great deal of money by forcing providers to sell things below their cost of goods.  It is not necessarily true that this is a sustainable long-term strategy.


The cuts have been temporarily blocked by a federal judge on the grounds that they endanger access to care.

I hardly need to point out that we can expect a lot more stories like this one in the future.  Reimbursements currently have some give in them, which allows the highest-cost providers to operate, and the lowest-cost providers to make some profit.  The natural political tendency is to squeeze reimbursements to the level where the lowest-cost providers are pinched--or even beyond.  And the best-case result of this is that in the long-run, the lowest-cost providers get bigger, while in the short term, the disruptions among the higher-cost providers compromise at least some patients' access to care.

Are we willing to put up with that short term disruption?  Not so far, unless the service exclusively benefits the very poor.  Maybe we'll get more willing as the tax bite goes deeper.  But either way, with a dramatic Medicaid expansion on its way, and more and more of the rest of the health care system under the control of the government, the fights are going to get uglier.
Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

A Technicolor Time-Lapse of Alaska's Northern Lights

The beauty of aurora borealis, as seen from America's last frontier


Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

What Do You Wish You Learned in College?

Ivy League academics reveal their undergrad regrets

Video

Famous Movies, Reimagined

From Apocalypse Now to The Lord of the Rings, this clever video puts a new spin on Hollywood's greatest hits.

Video

What Is a City?

Cities are like nothing else on Earth.

Video

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Writers

Up
Down

More in Business

Just In