McClellan: Drug program will actually save states $8 billion

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Contrary to governors' fears, state Medicaid programs should gain $8 billion in savings over the next five years due to the Medicare Part D prescription drug program, according to Mark McClellan, administrator of the Centers for Medicare & Medicaid Services.

Governors have complained and some have threatened to sue over the so-called "clawback" provision in the Medicare law. This provision requires states to give monthly payments to the federal governments to help pay for the cost of including dual-eligibles in the drug benefit.

It is supposed to help take the burden of drug payments for this population off states, but states think they will end up paying more than what it would have cost to pay for this group on Medicaid. About 70% of nursing home residents are dual-eligibles. All Medicaid recipients are included in the Medicare drug program.

McClellan said states should get the savings they have been promised with the clawback. They also are expected to save millions under the retiree coverage subsidy available under the new Medicare drug benefit. The $8 billion comes from states' budget-related estimates given to CMS, McClellan said.