Medicaid Waste in California Adds Strain on Budgets and Taxpayers

In 2009, unnecessary Medicaid spending in California was $102 million--the highest among all states--according to a new working paper by American Enterprise Institute economist Alex Brill.

Brill demonstrates that there is a considerable need to improve the cost efficiency of Medicaid drug programs in order to relieve the program's strain on already-overburdened state budgets. This is particularly important given the current fiscal crisis facing state and federal budgets and the added burden of recent health care reform legislation that will add 16 million new enrollees to Medicaid rolls by 2019.

Brill finds that the Medicaid drug program currently overpays for popular drugs by paying pharmacists for more costly brand-name medications that can easily be replaced by less costly generic alternatives containing the same active ingredient. He finds that Medicaid programs often reimbursed pharmacies for expensive brand-name drugs when alternative generic products were available at a lower cost--costing states in 2009 an estimated $329 million in excessive payments.

Among the study's highlights:

• By taking a look at twenty brand-name popular drugs which have less expensive generic versions, Brill finds that in 2009, Medicaid spent a total of $1.5 billion on drugs that could have been purchased for 22 percent less -- thus wasting $329 million.

• Among the twenty drugs studied, Medicaid wasted an average of $95 per prescription.

• On the state level, the greatest amount of unnecessary spending was in California ($102 million), Texas ($31 million), Georgia ($25 million), and Ohio ($21 million). Per Medicaid enrollee, the most wasteful states were Vermont and Iowa ($31 per enrollee in each state), Maine ($18 per enrollee), and New Hampshire ($17 per enrollee).

Alex Brill is available for interview and can be reached at [email protected] (202.862.5931) or through his assistant at [email protected] (202.862.5862). For all other media inquiries, please contact Hampton Foushee at [email protected] (202.862.5806).

AEI's in-house ReadyCam TV studio--for live and taped interviews--can be booked through VideoLink at 617.340.4300. For radio interviews, please e-mail [email protected] to book AEI's ISDN facilities.

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.