June 5, 2012—Illinois is set to become the first state to require all of its 340B-eligible health care providers to participate in the federal drug discount program and then pass along to the state nearly all of their savings on 340B drugs administered or dispensed to Medicaid patients.
Gov. Pat Quinn has said he will sign S.B. 2840, which state lawmakers sent to him on May 24. [ms-protect-content id=”2799″]The bill will reduce state Medicaid spending in the fiscal year that begins in July by $1.6 billion. The state needs to achieve more than $2.5 billion in savings to keep its Medicaid program solvent. A companion bill also awaiting Quinn’s signature will raise an estimated $700 million for Medicaid by raising cigarette taxes.
That second measure, S.B. 2194, also establishes new criteria for property and sales tax exemptions for the state’s nonprofit hospitals. The Illinois Hospital Association issued a statement saying the legislation “sets clear, fair, and workable criteria that states which activities and services are sufficient for hospitals to qualify for tax exemption and how charitable care is determined. … This legislation holds hospitals accountable for what is expected and required of them.”
A third bill, S.B. 3261, passed on May 29 requires all of the state’s hospitals to provide free surgeries and other inpatient care to many uninsured and low-income patients.
According to 340B stakeholders in Illinois who have been following the situation, S.B. 2840’s 340B provisions requires all eligible providers to participate in the program and at the same time forbids them from carving their 340B drug purchases out from Medicaid. The bill gives the state discretion to exempt federally qualified health centers from the carve-in mandate.
It is not entirely clear whether the carve-in requirement applies both to Medicaid fee-for-service and managed-care drugs.
Illinois already requires actual acquisition cost billing for 340B Medicaid fee-for-service retail drugs and some fee-for-service physician administered drugs. It is not clear if this billing requirement also applies to managed care drugs.
According to an April 30 bulletin published by the state Department of Healthcare and Family Services, in addition to reimbursing drug ingredient costs, the department allows providers a $3.40 dispensing fee for branded drugs and a $6.35 fee for generics.
Illinois hospital representatives say it will be difficult to implement the mandatory carve-in requirement because the typical hospital chargemaster does not allow billing different payers different rates for physician administered drugs.
This was the experience in California, which also has a carve-in mandate. Hospitals there had to make major investments to enable their chargemasters to bill Medi-Cal at a different rate or implement burdensome manual processes.
In California, however, there is no comparable requirement for eligible hospitals to participate in 340B and, as a result, some choose not to enroll.[/ms-protect-content]