On July 15, 2013, CMS issued its Final Rule addressing prescription drug coverage for the Medicaid expansion population. Among other things, the Final Rule defines the scope of the ten applicable “essential health benefits” required by the Patient Protection and Affordable Care Act (PPACA) to be provided to all new Medicaid beneficiaries, including the minimum requirements for the provision of prescription drugs to these beneficiaries. The Final Rule, however, dramatically restricts mandatory coverage of prescription drugs for the expansion Medicaid enrollees by essentially eliminating today’s Medicaid requirement that states must cover each “covered outpatient drug” subject to a national rebate agreement. Although drugs provided to the new Medicaid expansion population will still be subject to manufacturer rebates, state Medicaid programs will not be required to cover all drugs subject to the national rebate agreement. Instead, states will only be required to cover a minimum of drugs consistent with the applicable “benchmark” plan in the state.

Background -

A major innovation of PPACA was the significant expansion of Medicaid coverage across the country to all citizens with incomes at or below 138% of the federal poverty level. PPACA § 2001(a) is estimated to expand Medicaid to over 15 million Americans. Importantly for the states implementing Medicaid expansion, PPACA commits the federal government to paying 100% of the cost of these newly enrolled beneficiaries for the next two years, slowly reducing the federal commitment to 90% in 2022 and thereafter.