States Strive to Limit Medicaid Expenditures for Prescribed Drugs

Medicaid spent an estimated $21.0 billion on outpatient prescribed drugs in 2000. Expenditures for drugs grew more than twice as fast as total Medicaid spending from 1997 to 2000, and officials from nearly every state cited pharmacy costs as one of the top two or three Medicaid cost drivers in 2001. Faced with double-digit Medicaid spending growth and declining revenue growth, states and the federal government are under pressure to find effective methods to control spending. This report presents data on Medicaid drug spending trends, summarizes states? options in designing their drug benefits, and reviews several ways that states are using their flexibility to curb the rate of growth of their Medicaid drug budgets. (Published by the Kaiser Commission on Medicaid and the Uninsured; 2002 February.)