Chris Conover says it should have the freedom not to do so:
Last week, an advisory board recommended that Arkansas’s Medicaid program cover Kalydeco, a cystic fibrosis drug [which would cost the program] $239,000 per patient year. [… B]ecause “ Arkansas appears to be the only state preventing patients who meet the eligibility criteria established by the U.S. Food and Drug Administration” the state is being sued on grounds that its policy violates a federal statute requiring state Medicaid programs to pay for all medically necessary treatments. […]
[P]art of the reason the Arkansas lawsuit is getting leverage is because of evidence that cost appeared to be a factor underlying the decision to deny coverage for Kalydeco. […]
The WHO considers a medical intervention to be “not cost-effective” if it costs more than three times a nation’s per capita GDP per year of life saved. With U.S. GDP per capita currently at $51,749, it is pretty obvious that $239,000 lies pretty far outside the bounds of what WHO would deem cost-effective. […]
[T]his 7-page National Health Law Program summary of medical necessity under Medicaid highlights the complexity of the problem. The upshot is that “medical necessity” is never defined explicitly either in the Medicaid statute or regulations. It has been fleshed out in case law and administrative rulings. The Stanford definition of medical necessity which has been adopted by a number of state Medicaid programs [has] a very restrictive definition: “An intervention is considered cost effective if the benefits and harms relative to costs represents an economically efficient use of resources for patients with this condition.” [Link no longer works.]
Such a definition does not permit administrators to do what the Oregon Medicaid program did many years ago: rank order all treatments by their cost-effectiveness and eliminate from coverage all treatments above a certain cost per added year of life threshold. [Here’s one,* of many, papers on Oregon’s experience with cost-effectiveness ranking.] So how did Oregon get away with adopting cost-effectiveness rankings? By getting a waiver. […]
Chris goes on to argue that Arkansas, and all states, should be able to apply cost-effectiveness criteria without waivers. More at the link.
* Apart from the link in brackets, all others are in Chris’s original. They are not mine.