The Medicaid drug program wasted $329 million nationwide in 2009 from states all too frequently reimbursing for a version of a drug that is more costly than another product with the exact same active ingredient, dose, form and bottle size.

In a just-published op-ed, American Enterprise Institute (AEI) economist Alex Brill sets forth two options to reduce health care costs in Illinois' Medicaid system. If enacted, these efforts would be a part of a broader reform effort which is necessary to avert dramatic cuts in the future.

Patients would be better off if states were able to tailor the benefits that Medicaid covers—targeting resources to sicker people and giving healthy adults cheaper, basic coverage.

The Obama administration does not allow states to limit eligibility for Medicaid, which is a major way they usually reduce costs while providing coverage for the most needy.

Medicaid programs engage in a large amount of unnecessary and wasteful drug spending by reimbursing pharmacies for relatively costly brand products when identical generic products are available.

Panelists discuss Thomas W. Grannemann and Mark V. Pauly's newly released book, Reform Medicaid First: Laying the Foundation for National Health Care Reform.