As part of the HHS appropriations bill for FY 2006, Congress is moving fast to drop federal funding for erectile dysfunction (ED) drugs in Medicaid, Medicare, and other federal health programs. This makes sense but there is a catch, albeit an unintentional one. Federal law will still require state Medicaid programs to pay for ED drugs. They’ll just will have to do it with 100% state dollars.

Because this is being done as a rider to the appropriation, it does nothing to change the statutory mandate that states must cover ED drugs like any FDA-approved drug when medically necessary. Under OBRA ’90, amended in 1993, if a state decides to cover prescription drugs for the Medicaid population and accept rebates from manufacturers, they must cover virtually all drugs when medically necessary. Every state opts to provide a Medicaid Rx benefit.

The other big policy done this way is the Hyde Amendment on Medicaid coverage of abortions. This too is done through the appropriation and not the statute. Federal matching dollars are available only for pregnancy terminations that are the result of rape or incest, but many states still must provide other “medically necessary” abortions with 100% state funds – all battled out via messy court challenges.

Medicaid spending on erectile dysfunction drugs is modest but the problem is symbolic of how byzantine Medicaid has become. And it’s further evidence of the need for national reform to modernize the $333 billion program and allow states the flexibility to manage it.