States Want Their Share of Medicare Part D Recoveries

On May 17, 2017, 49 state attorney generals signed a letter to the Senate Finance Committee requesting appropriate legislation to allow for sharing of the Part D recoveries with the states.

Prior to January 2006, state Medicaid programs paid directly for outpatient prescription drug benefits for individuals covered by both Medicare and Medicaid. Because Medicaid is jointly funded, those payments included both federal and state dollars. If a state received a Medicaid recovery, it would share that recovery by remitting the federal portion of that recovery to the Federal government.

Since 2006, under Medicare Part D, the federal government now pays directly for these Part D drugs. However, the states still share in the costs through substantial monthly "clawback" payments. These payments stem from fraud and overpayment cases involving Part D drugs.

Over the last 10 years the states have contributed a combined total of approximately $80 billion in "clawback" payments to the Medicare Part D program. In 2017, those payments are expected to be over $11 billion. Despite their significant contribution, the states have yet to receive a single dollar from the recoveries.