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Medicaid provides health coverage to millions of Americans, including eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government. Depending on where enrollees live and what benefits they need, Medicaid beneficiaries are either enrolled in a private managed care plan or receive their benefits through fee-for-service (FFS) Medicaid.

States establish their own eligibility standards, benefit packages, provider payment policies, and administrative structures under broad federal guidelines, both in FFS and in managed care plans. PBMs that contract with Medicaid managed care plans and state governments provide an array of services, including negotiating supplemental discounts with drug manufacturers, designing pharmacy networks, and managing specialty pharmacy benefits. Because of limits on PBM tools regarding drug pricing and networks in Medicaid, PBMs and private health plans have less leverage to drive deep discounts than in other public and private programs.


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