Medicaid director defends next‑generation reforms; proposes hospital fee increase, 340B limits and other changes

Maureen Corcoran, director of the Ohio Department of Medicaid (ODM), presented the department’s 2026–27 budget overview and defended several next‑generation procurement decisions, including a single pharmacy benefit manager (PBM), stronger data use for eligibility and program integrity, and a hospital financing package that combines an increased franchise fee with state‑directed payments and limits on 340B participation.

Corcoran said ODM’s executive budget requests roughly $42.3 billion in all funds for fiscal year 2026 and emphasized that a mix of drivers — per‑member cost increases, hospital rate decisions, prescription‑drug trends and demographic shifts — explain projected Medicaid growth even with caseload nearly flat. She told senators the department included cost‑containment initiatives and “trigger” language to protect the state if federal matching rules change.

Single PBM and pharmacy: Corcoran defended Ohio’s single PBM model, saying it reduced administrative spending across managed care plans and the department by about $333 million, increased dispensing fees to pharmacies (improving rural pharmacy access), and produced a net savings of roughly $140 million over the first two years of operation. She said a full actuarial assessment by Milliman is attached to ODM materials.

Hospital financing package: Corcoran outlined a hospital franchise fee increase proposal (the recommended methodology was described as moving the equivalent to about a 7% rate in state calculation, with federal safe‑harbor calculations shown to remain below federal ceilings). She said the fee increase is expected to generate approximately $900 million in new revenue in year one and about $1 billion in year two; the executive proposal allocates that revenue in part to a 60/40 split between statewide Medicaid priorities and targeted hospital payments. Corcoran described state‑directed payment projects that hospitals have proposed; she said roughly 47 hospitals have expressed interest and hospitals requested about $2.5 billion in projects, of which the state share would be a smaller proportion.

340B rebate issue: Corcoran warned that growth in 340B contract pharmacy arrangements — particularly for hospital‑based covered entities — has reduced the Department’s drug rebate percentage and could erode hundreds of millions in manufacturer rebates. ODM’s analysis showed the department’s rebate percentage declined from near 60% (Q1 2022) to under 50% (Q3 2024); ODM projected that without policy change non‑rebate pharmacy spend could grow to a level that would cost the state roughly $1 billion annually in forgone rebates. The executive budget proposes limiting contract pharmacy participation for hospital‑based covered entities as a containment measure while preserving 340B participation for federally qualified health centers (FQHCs) with contract pharmacies.

Other points: Corcoran described OhioRISE, a specialty managed‑care carve‑out for children with complex behavioral‑health needs, and said available national quality metrics show OhioRISE has reduced emergency room visits and lengths of stay for psychiatric hospitalizations and reduced out‑of‑state placements for youth. She said ODM will begin enforcing electronic visit verification (EVV) denials for waiver personal‑care claims now that provider training and ramp‑up are complete. Corcoran also discussed continuous eligibility for children ages 0–3 (a waiver prepared but held pending legislative clarity) and the budget’s trigger language designed to shield the state if federal match levels change.

Corcoran invited follow‑up questions and provided supplemental hospital package materials and actuarial reports for committee review.