Research · 7 min read
What Medicaid May Charge You for a Prescription
Federal rules put a ceiling on Medicaid cost sharing, exempt whole categories of people and services from it, cap the household total at a share of income, and generally forbid turning anyone away for not paying.
Key takeaways
- Charging is permitted but capped: the drug table in § 447.53(b) sets $4 preferred and $8 non-preferred at or below 150 percent of the federal poverty level, and $4 preferred and 20 percent of the agency's cost above it.
- The dollar maximums carry an annual CPI-U medical-care escalator from October 1, 2015, rounded up to the next 5-cent increment; percentage-based charges are not escalated.
- If a state does not differentiate preferred from non-preferred drugs, the regulation treats all drugs as preferred.
- The agency must maintain a timely process to drop a non-preferred charge to the preferred amount where the prescribing provider makes the determination the rule describes.
- Household premiums and cost sharing together may not exceed 5 percent of family income, and the state must track that through a mechanism that does not rely on beneficiary documentation.
- The default is that no provider may deny services for inability to pay cost sharing, with a permission the state may grant above 100 percent of the FPL for non-exempt individuals.
Answer first: a state may charge, but the ceiling is federal
Section 447.52(a) states the baseline: except as provided in the exemptions section, "the agency may impose cost sharing for any service under the state plan." Charging is permitted. What is not permitted is charging more than the federal maximums, and those maximums are printed in tables inside the regulation.
For drugs the table sits in § 447.53(b). At state option, cost sharing for drugs may be established at or below the amounts shown: for individuals with family income at or below 150 percent of the federal poverty level, $4 for preferred drugs and $8 for non-preferred drugs; for individuals above 150 percent of the FPL, $4 for preferred drugs and 20 percent of the cost the agency pays for non-preferred drugs.
Those figures carry an indexing rule stated in the same paragraph. The maximum allowable cost sharing "shall be increased each year, beginning October 1, 2015, by the percentage increase in the medical care component of the CPI-U for the period of September to September of the preceding calendar year, rounded to the next higher 5-cent increment," and the rule adds that the increase is not applied to any cost sharing based on the amount the agency pays for the service. So the dollar figures in the table are the rule's stated maximums with an annual escalator attached; the percentage figure is not escalated because it is already a share of what the agency pays.
Two structural limits sit alongside the table. Section 447.52(c) provides that in no case shall the maximum cost sharing established by the agency "be equal to or exceed the amount the agency pays for the service." And § 447.52(f) states that for any service the agency "may not impose more than one type of cost sharing."
The preferred and non-preferred split, and the way out of it
The drug rule is built on a distinction the state draws. Section 447.53(a) permits the agency to establish differential cost sharing for preferred and non-preferred drugs, and adds a default that resolves ambiguity in the person's favor: "All drugs will be considered preferred drugs if so identified or if the agency does not differentiate between preferred and non-preferred drugs."
The higher charge for a non-preferred drug is not fixed once the state assigns the label. Section 447.53(e) requires a route back down. Where a drug is identified by the agency as non-preferred within a therapeutically equivalent or therapeutically similar class, "the agency must have a timely process in place so that cost sharing is limited to the amount imposed for a preferred drug if the individual's prescribing provider determines that a preferred drug for treatment of the same condition either will be less effective for the individual, will have adverse effects for the individual, or both." In those cases the agency must also ensure the pharmacy is reimbursed based on the appropriate cost sharing amount.
That provision is a requirement placed on the agency — it must have such a process, and the process must be timely. It says nothing about how any individual determination will come out. The prescriber's clinical determination is the trigger the regulation names, and it is a determination for a prescriber to make.
The non-preferred category also interacts with the exemptions described below. Section 447.53(d) provides that for individuals otherwise exempt from cost sharing under § 447.56(a), the agency may impose cost sharing for non-preferred drugs, not exceeding the table maximum. It is the narrow place where the exemption list gives way.
Who and what cannot be charged at all
Section 447.56(a)(1) lists groups of individuals on whom the agency may not impose premiums or cost sharing. They include individuals aged 1 and older and under age 18 eligible under § 435.118; infants under age 1 eligible under that section within stated income limits; individuals under age 18 eligible under several other sections; children for whom child welfare services are made available on the basis of being in foster care, and individuals receiving benefits under Part E of title IV, without regard to age; at state option, individuals under age 19, 20 or 21 eligible under §§ 435.222 or 435.223; certain disabled children receiving assistance by virtue of the Family Opportunity Act; pregnant women, with stated exceptions for premiums and for services specified in the state plan as not pregnancy-related, through the postpartum period the rule defines; individuals whose institutional or, at state option, home and community-based assistance is reduced by amounts reflecting available income other than that required for personal needs; individuals receiving hospice care; Indians as the rule defines that exemption; and individuals receiving Medicaid because of a state's election to extend coverage for breast and cervical cancer.
Section 447.56(a)(2) exempts services rather than people. No cost sharing may be imposed for emergency services as defined in the referenced provisions; family planning services and supplies including contraceptives and pharmaceuticals for which the state claims or could claim the enhanced federal match; preventive services, at a minimum those specified at § 457.520, provided to children under 18 regardless of family income, reflecting the well-baby and well-child care and immunizations in the Bright Futures guidelines; pregnancy-related services including counseling and drugs for cessation of tobacco use, with all services provided to pregnant women treated as pregnancy-related except those the state plan specifically identifies as not related to the pregnancy; and provider-preventable services as defined in § 447.26(b).
The exemption list runs in one direction only. Section 447.56(b) provides that except as permitted under the targeted cost sharing provision, "the agency may not exempt additional individuals from cost sharing obligations that apply generally to the population at issue." A state may not decide case by case who is charged.
Whether a pharmacy may refuse to dispense
This is the question people actually face at a counter, and § 447.52(e) answers it with a rule and an exception.
The exception first: the agency may permit a provider, including a pharmacy or hospital, to require an individual to pay cost sharing as a condition of receiving the item or service if the individual has family income above 100 percent of the FPL, the individual is not part of an exempted group under § 447.56(a), and — for cost sharing on non-emergency services furnished in an emergency department — the conditions in § 447.54(d) have been satisfied.
Then the rule: "Except as provided under paragraph (e)(1) of this section, the state plan must specify that no provider may deny services to an eligible individual on account of the individual's inability to pay the cost sharing." And paragraph (e)(3) preserves discretion in the other direction: nothing in the section prohibits a provider from choosing to reduce or waive cost sharing on a case-by-case basis.
So the default is that inability to pay does not defeat access, and the ability to condition service on payment is a permission a state may grant within a defined income and exemption boundary. Which of those a particular state has adopted is a fact stated in that state's plan.
What the state plan has to say, and where managed care fits
Cost sharing is not something a state may apply informally. Section 447.52(i) requires that for each cost sharing charge imposed, the state plan must specify the service for which the charge is made, the group or groups of individuals who may be subject to it, the amount of the charge, and the process the state uses to ensure that exempt individuals are not charged, among other listed items.
Two further provisions shape how charges may be distributed. Under § 447.52(d), the agency may target cost sharing to specified groups of individuals with family income above 100 percent of the FPL — but for cost sharing on non-preferred drugs under § 447.53 and on non-emergency emergency-department services under § 447.54, it may target specified groups regardless of income. Under § 447.52(g), the plan may establish different charges for individuals at different income levels, subject to the maximums, and if it does, "it must ensure that lower income individuals are charged less than individuals with higher income."
Managed care does not create a separate regime. Section 447.52(h) requires that contracts with managed care organizations provide that any cost-sharing charges the organization imposes on Medicaid enrollees are in accordance with the cost sharing specified in the state plan and the requirements of §§ 447.50 through 447.57. And § 447.56(c)(1) states that, with stated exceptions, the agency must reduce the payment it makes to a provider by the amount of a beneficiary's cost sharing obligation "regardless of whether the provider has collected the payment or waived the cost sharing" — which is why a waiver by a provider is a decision about the provider's own revenue rather than a change to the state's payment.
Sources
- 42 CFR 447.52 — Cost sharingParagraph (a), the general permission to impose cost sharing for any service under the state plan except as provided in § 447.56(a). Paragraph (b)(1), the CPI-U indexing language for maximum allowable cost sharing beginning October 1, 2015, rounded to the next higher 5-cent increment. Paragraph (c), the rule that maximum cost sharing may not equal or exceed the amount the agency pays for the service. Paragraph (d), targeted cost sharing above 100 percent of the FPL, and the exception permitting targeting regardless of income for non-preferred drugs under § 447.53 and non-emergency emergency-department services under § 447.54. Paragraph (e), the three-part permission allowing a provider to require payment as a condition of service, the default prohibition on denying services for inability to pay, and the preservation of a provider's discretion to reduce or waive cost sharing case by case. Paragraph (f), the prohibition on imposing more than one type of cost sharing for any service. Paragraph (g), income-related charges and the requirement that lower income individuals be charged less. Paragraph (h), the requirement that MCO contracts conform cost sharing to the state plan and to §§ 447.50 through 447.57. Paragraph (i), the state plan specification requirements.
- 42 CFR 447.53 — Cost sharing for drugsParagraph (a), the permission to establish differential cost sharing for preferred and non-preferred drugs and the default that all drugs are considered preferred if so identified or if the agency does not differentiate. Paragraph (b), the drug cost sharing table quoted here — $4 preferred and $8 non-preferred at or below 150 percent of the FPL, and $4 preferred and 20 percent of the cost the agency pays for non-preferred above 150 percent — together with the CPI-U indexing language and the statement that the increase is not applied to cost sharing based on the amount the agency pays. Paragraph (c), the treatment of states without fee-for-service payment rates. Paragraph (d), the permission to impose non-preferred drug cost sharing on individuals otherwise exempt under § 447.56(a), not exceeding the table maximum. Paragraph (e), the required timely process limiting cost sharing to the preferred amount on the prescribing provider's determination, and the requirement that pharmacy reimbursement be based on the appropriate cost sharing amount.
- 42 CFR 447.56 — Limitations on premiums and cost sharingParagraph (a)(1), the eleven categories of individuals on whom premiums or cost sharing may not be imposed, as summarized here. Paragraph (a)(2), the five categories of exempt services, including emergency services, family planning services and supplies, preventive services for children under 18 regardless of family income referencing § 457.520 and the Bright Futures guidelines, pregnancy-related services including tobacco cessation counseling and drugs with the state-plan carve-out, and provider-preventable services. Paragraph (b), the prohibition on exempting additional individuals except as permitted under the targeted cost sharing provision. Paragraph (c)(1), the requirement that the agency reduce provider payment by the beneficiary's cost sharing obligation regardless of whether it was collected or waived. Paragraph (d), the treatment of payments to managed care organizations. Paragraph (f)(1), the 5 percent aggregate household limit applied quarterly or monthly. Paragraph (f)(2), the requirement that a state plan indicate a tracking process that does not rely on beneficiary documentation.
Frequently asked questions
Can a state Medicaid program charge for prescriptions?
Yes, within federal ceilings. Section 447.52(a) permits the agency to impose cost sharing for any service under the state plan except as the exemptions section provides, and § 447.53(b) sets the maximums for drugs in a table: at or below 150 percent of the federal poverty level, $4 for preferred and $8 for non-preferred drugs; above 150 percent, $4 for preferred and 20 percent of the cost the agency pays for non-preferred drugs.
Do those dollar figures change?
The regulation says the maximum allowable cost sharing is increased each year, beginning October 1, 2015, by the percentage increase in the medical care component of the CPI-U for the September to September period of the preceding calendar year, rounded to the next higher 5-cent increment. That escalator is not applied to cost sharing based on the amount the agency pays for the service.
What if a non-preferred drug is the one a prescriber wants used?
Section 447.53(e) requires the agency to have a timely process so that cost sharing is limited to the preferred-drug amount where the prescribing provider determines that a preferred drug for the same condition will be less effective for the individual, will have adverse effects, or both. That is a duty placed on the agency to maintain a process; it is not a statement about how any particular determination will come out.
Is there a limit on the total a family can be charged?
Yes. Section 447.56(f)(1) caps Medicaid premiums and cost sharing incurred by all individuals in the Medicaid household at 5 percent of the family's income, applied quarterly or monthly as the agency specifies. Where a state's rules could put beneficiaries at risk of reaching that limit, the state plan must indicate a tracking process that does not rely on beneficiary documentation.
Can a pharmacy refuse to fill a prescription over an unpaid copay?
The default in § 447.52(e)(2) is that the state plan must specify that no provider may deny services to an eligible individual on account of inability to pay the cost sharing. The exception in (e)(1) permits the agency to allow a provider to require payment as a condition of service where the individual has family income above 100 percent of the FPL and is not in an exempted group, plus a further condition for non-emergency emergency-department services.
Who is exempt from cost sharing entirely?
Section 447.56(a)(1) lists categories of individuals, including certain children and infants, children in foster care and title IV-E beneficiaries, pregnant women with stated exceptions, individuals receiving hospice care, Indians as the rule defines that exemption, and others. Section 447.56(a)(2) exempts services, including emergency services, family planning services and supplies, preventive services for children under 18 regardless of income, pregnancy-related services, and provider-preventable services.