Medicaid Prescription Coverage Limits
- Federal limits cap the amount a state may spend on a specific category of drug, not on how much an individual Medicaid user can spend on the cost. This figure is referred to as the federal upper limit, and is set at 250 percent of the cost of the average manufacturer's price of the cheapest equivalent drug to treat the condition. This pushes doctors and pharmacists to fill prescriptions with cheaper equivalent medications, if they're available. Each state develops its own formula it pays per each prescription, but most pay average wholesale prices for the drug less a percentage that usually ranges between 10 and 20 percent.
- In addition to paying for the actual cost of prescription medication, Medicaid also pays pharmacies for the time needed to fill a prescription, paying them dispensing fees. These are typically small, usually under $5, although they may vary between states and, in some cases, between regions of a state or the type of medication dispensed. Medicaid users don't pay dispensing fees, as pharmacies charge the fees directly to the program.
- In order to manage costs, many states develop lists of medications Medicare recipients may receive in order to treat specific illnesses. These lists, known as formularies, limit the type of drugs Medicaid will cover for treatment. Some states allow doctors to prescribe nonformulary drugs to patients when that is the only treatment option, though the decision to go off the formulary must be placed in writing. Other states operate a closed formulary system, in which Medicaid recipients may not receive coverage for drugs not listed on the formulary.
- Medicaid won't provide prescription benefits when patients purchase some classes of drugs that aren't directly related to medical issues. Federal law bars use of Medicaid funds for nonprenatal prescription vitamins, cough and cold remedies, barbiturates and benzodiazepines. Other drugs used that promote weight loss or gain, treat sexual or erectile dysfunction, treat nicotine addiction, promote fertility, and drugs that require monitoring provided by their manufacturer also are barred from federal Medicaid subsidies. Federal funds may not be used to purchase nonprescription drugs, although some states' funding extends to these drugs.