On February 3, 2011, HHS Secretary Kathleen Sebelius sent a letter to state governors identifying areas of potential Medicaid cost savings in light of the difficult budget circumstances facing many states. Notably, to help states purchase drugs more efficiently, Sebelius announced that HHS is undertaking a national survey to create a database of pharmacies’ actual acquisition costs (AACs) for prescription drugs that states may use as a metric to determine state-specific Medicaid reimbursement rates. A Reed Smith Alert regarding CMS’s plan to publish AACs is available here. In other areas, HHS suggests that states: enhance program integrity efforts, such as through audit contractors and claims analytics; more effectively manage care for high-cost enrollees, such as through “health homes” for people with chronic illnesses and initiatives to reduce unnecessary hospital readmissions; and limiting optional benefits or increasing cost sharing.