Although coverage of prescription drugs is an optional benefit in the Medicaid program, all states currently offer outpatient drug coverage to beneficiaries in most eligibility groups in their Medicaid programs.
How drugs are priced and how Medicaid pays for drugs is one of the more complex issues in the Medicaid program. The federal government sets a floor on how states should implement drug reimbursement programs and each state sets policies on how they reimburse pharmacies for the cost of the drug and for filling the prescription. Medicaid programs use a policy called estimated acquisition cost which takes into account a number of benchmarks depending on the state. CMS has begun to implement a new payment policy that will attempt to get a better understanding of what the acquisition cost is for the pharmacy.
A recent report from the HHS Office of the Inspector General found that Medicaid receives greater reimbursement rates than Medicare and sees lower costs for prescription drugs. Despite the fact that the program has complex methodologies of determining reimbursement rates, it appears that it does a better job than Part D plans of reducing program costs.