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Walgreens and Delaware Medicaid: a premonition of what will happend when Skynet is in control

So Walgreens, told by the State to take it or leave it on new Medicaid prescription reimbursement rates, told Delaware, No thanks.

You can read the story with full liberal/progressive angst here, with reality completely dependent upon the self-serving DHSS press release:

Walgreens Turns Its Back on Delaware’s Neediest Citizens

Illinois-based company refuses to serve state’s Medicaid customers

WILMINGTON – Refusing to share in the sacrifice necessary to help Delaware meet its historic budget challenge, Walgreens Pharmacies announced Thursday that it will no longer fill Medicaid prescriptions in the First State, according to the Department of Health and Social Services....

According to Alan Levin, the former CEO of Happy Harry’s who sold the Delaware-based chain to Walgreens in 2007 and is now the Director of the Delaware Economic Development Office, “the State’s offer was fair and reasonable and should allow pharmacies to make a reasonable profit.”...

Walgreens, according to its recent SEC filing in January 2009, enjoyed $59 billion in total revenue and $2.2 billion in net income for its last reported fiscal year. In addition, Walgreens recently reported second quarter sales of $16.5 billion, a record for the company.

The conclusion drawn by our local congregation:

The bottom line is that Walgreen’s has decided to screw “Delaware’s neediest citizens.”

Or, you could go here, and listen to what the company itself has to say:

With this new rule, Delaware now has one of the lowest payment rates in the country for brand name and generic medications.

Kermit Crawford, Walgreens senior vice president of pharmacy, said, “We have made the decision, after much thought and care, to end our involvement with the state Medicaid program. Quite simply, we can’t continue to participate in a program that, in some cases, pays us less than our cost to fill these prescriptions. By making it uneconomical for pharmacies to continue filling Medicaid prescriptions, the state’s new payments to pharmacies hurt the very patients that Medicaid is meant to serve.”

The state could easily eliminate its Medicaid pharmacy budget gap simply by focusing on its generic dispensing rate at all pharmacies in the state. Each percentage point improvement in the generic dispensing rate would save the state approximately $1.2 million annually. As a low-cost, quality alternative to brand name medications, generics are good for patients, the state and pharmacies.

In addition, Crawford noted that Walgreens, in conjunction with the National Association of Chain Drug Stores, had approached the state with a number of sound alternative strategies and programs that could help Delaware fill its Medicaid budget gap. Many of these alternatives were rejected, despite their successes in other states. None of these methods would adversely impact patient care, unlike the reimbursement cut.

“Delaware’s refusal to implement programs that we know can save millions of dollars and solve their budget difficulties while maintaining a high level of patient care is, quite frankly, baffling,” said Crawford. “We don’t understand why the state would pursue a path that is a lose-lose for the patients and health care service providers.”

That is, naturally, two self-interested entities--the State government and the for-profit corporation--both spinning the story to make themselves look as high-minded as possible. And it seems that once again it is the pre-existing ideological position of the reader that is determining which one is accepted.

For example, a profit margin of 3.38% is considered prima facie evidence of some sort of gouging by jason:

DHSS point out the bullshit behind the company’s claims that it can only afford to serve wealthy customers...

Here are the realities:

1) It is perfectly legal for Walgreens to refuse to participate in the Delaware Medicaid program if the State demands a reimbursement price that is below cost for many items, and refuses to negotiate. How many times have you walked into a pharmacy or a doctor's office and seen the sign: We no longer accept XYZ healthcare plans?

2) It is equally legal for those who are outraged to boycott Walgreens, but the reality is that most people won't, and those who make so much noise about it will not actually do so for long.

3) The State can try to screw Walgreens to the wall by then cutting the chain out of the State employees' prescription drug benefit business, but if so, expect the chain to tie up Delaware in costly litigation for years--and probably win.

4) The market will go a long way toward deciding this: if Walgreens is being honest, if the reimbursement rate truly is a loser in the long term, then CVS, Rite Aid, etc., will not be able to accept this for long, and they'll stop accepting this as well.

5) DHSS has no damn business issuing declamatory press releases that accuse a for-profit chain of screwing poor people when its actions are completely legal, and the State right now has precious little credibility in that department. Will somebody please recall that this is the same State government getting ready to send hundreds if not thousands of its own workers onto public assistance with across-the-board salary and benefit cuts?

The hero of the moment, at least for me, is Liberalgeek, who broke ranks to remain intellectually consistent:

OK, shoot me. The cuts by the State to medicaid are borderline criminal. I am sure that Joanne Christian will jump into this discussion any minute now and tell you how it is for her. And she is right.

I have a friend that runs a medical office that does a lot of medicaid work for the State (especially handicapped children). Almost every discussion that I have with him contains a horror story with the problems that are encountered with that population. Missed appointments (that empty slot costs money that will never be collected from the State), anesthesia for procedures that non-handicapped wouldn’t need, more acute issues and additional paperwork to ensure that the proper person (family doesn’t always drive the patient) has given permission for medical procedures.

It is a goddamned mess. And if you are a healthcare provider still doing this work, you should be able to write it off, because it is absolutely charity.

So, again, this is an example of more Minneresque “dumb cuts” that Jack promised wouldn’t happen in his administration. This is the month that will set the tone for Jack’s term as Governor.

I know the car was busted when you got it in the shop, but there are a bunch of broken parts laying on the garage floor and you haven’t found a single part that needs to be replaced.

Two closing thoughts, the first from Coyote on how governments cut services in an attempt to blackmail everyone:

When I was in the corporate world, if I wanted extra funds for my projects, I would have to go in and say “Here are all my projects. I have ranked them from 1-30 from the most to least valuable. Right now I have enough money for the first 12. I would like funding for number 13. Here is my case.”

But the government works differently. When your local government is out of money, and wants a tax increase, what do they threaten to cut? In Seattle, it was always emergency services. “Sorry, we are out of money, we have to shut down the fire department and ambulances.” I kid you not — the city probably has a thirty person massage therapist licensing organization and they cut ambulances first. In California it is the parks. “Sorry, we are out of money. To meet our budget, we are going to have to close down our 10 most popular parks that get the most visitation.” The essence of government budgeting brinkmanship is not to cut project 13 when you only have money for 12 projects, but to cut project #1.

I can just see me going to Chuck Knight at Emerson Electric and saying “Chuck, I don’t have enough money. If you don’t give me more, we are going to have to cut the funds for the government-mandated frequency modification on our transmitters, which means we won’t have any product to sell next month.” I would be out on my ass in five minutes. It just floors me that this seems to keep working in the government. Part of it is that the media is just so credulous when it comes to this kind of thing, in part because scare stories of cut services fit so well into their business model.

So let's remember that Governor Markell has reacted to the present budget crisis by (a) consistently employing scare tactics and issuing unilateral edicts; (b) by refusing to make difficult decisions; and (c) by attacking everybody who disagrees with him on any part of his program.

In other words: the current budget crisis and health care debacle in Delaware both predict with, I suspect, pretty fair accuracy what's going to happen with the Federal budget and the coming-soon-to-a-hospital-near-you government takeover of the healthcare system.

When it happens, don't say you didn't get to watch the preview, right here in good old Delaware.


Miko said…
In my view, the problem with stereotypical leftists is that they have strong emotion without a backing of solid logic. Because of this, they're liable to see the needs of poor patients and go off on how companies should provide them with prescriptions below cost without consider the economic impossibility of this.

Conversely, the problem with stereotypical libertarians is that they have incredibly rigorous logic coupled with an equally incredible emotional void, so that they have trouble seeing anything which doesn't violate the nonagression principle as a problem. (One particularly bad example is defending sweatshops as "the best option available," which while clearly true, since no one would work in a sweatshop if they had a better option, fails to look at the larger question of why such a terrible option really is the best one or at what we can/should do about it.)

Obviously, I'm oversimplifying in both cases, but it nonetheless highlights the need I see for a left-libertarian alliance if either movement wants to accomplish its goals. (The left may point to its 2008 election results as proof that they don't need the alliance, but we can point out Obama's corporatist/conservative record since then as proof that electoral victory alone isn't getting them any closer to the world they want.) Unfortunately, whenever I propose something like this, both left-statists and non-left-libertarians seem to think that their side is getting the worse end of the deal. (Since I consider myself on both sides, it's hard for me to judge those claims.)

The left needs to realize that the state is just going to play political games with these problems while pandering to special interests and so the state will by its nature never play any role in actually solving the problems. Libertarians need to realize that these issues are problems and start proposing free market solutions now (though, of course, these solutions will be hampered by the fact that we don't have a free market and the state will regulate to the best of its ability to shoot down alternatives to its monopolistic non-solutions, building these alternative institutions such as patient cooperatives and risk-sharing collectives now is going to be a precursor to getting the statist-left on our side).
Anonymous said…
I have been looking and cant find the NJ story from 5 years ago when Alan Levin held the state hostage for the same reason and he got what he wanted.
Unknown said…
Since both the DHSS and the gang at DelLib sound like villains out of Atlas Shrugged, I'll go ahead and quote Ayn Rand:

"Political economy was, in effect, a science starting in midstream: it observed that men were producing and trading, it took for granted that they had always done so and always would -- it accepted this fact as the given, requiring no further consideration -- and it addressed itself to the problem of how to devise the best way for the 'community' to dispose of human effort."

People criticize the villains in Atlas Shrugged as one-dimensional, but I'll be damned if I don't see James Taggart's words come out of someone else's mouth pretty much every day.
Mark H said…
"but the reality is that most people won't, and those who make so much noise about it will not actually do so for long."
But I'm really persistent :) But I do believe that you are right. Eventually, people will go to whatever pharmacy is closest.

"So let's remember that Governor Markell has reacted to the present budget crisis by (a) consistently employing scare tactics and issuing unilateral edicts; (b) by refusing to make difficult decisions; and (c) by attacking everybody who disagrees with him on any part of his program."

Have to agree with you on this. I'd add:
d) Even when reasonable alternatives are available, stick with steps a through c.
Anonymous said…
"(c) by attacking everybody who disagrees with him on any part of his program."

Sounds like he took something away from that meeting he had with the Delaware Liberal bloggers.

I am about to make a post myself about this but from a more, point of view oriented perspective. If i had known this blog existed, My life would have been slightly easier.

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