United States: CMS Update To Medicaid Managed Care Regulations Should Prompt Significant Change

The Centers for Medicare & Medicaid Services ("CMS") has released the final version of its much anticipated revisions to the regulations governing Medicaid managed care (the "Final Rule"). First proposed in May 2015, the Final Rule updates and expands the federal rules governing the operation, contracting, oversight, and payment of Medicaid managed care plans. Major themes articulated in the Final Rule include a desire to improve consistency between Medicaid managed care plans and plans operating in the commercial or Medicare markets, to increase protections and access to care for enrollees, and to promote value-based, patient-centered care within the context of the Medicaid program. State Medicaid programs have until the contract years commencing after July 1, 2017 to come into compliance with many of the provisions of the Final Rule; however, some changes have later effective dates and some are effective immediately. The Final Rule is likely to prompt significant changes to the Medicaid landscape, and stakeholders should look for opportunities to work with their state Medicaid agency and legislatures to determine how best to implement the new provisions. The Final Rule will be published in the Federal Register on May 6, 2016.

Development of Capitation Rates

The Final Rule updates federal requirements related to the development of capitation rates paid to Medicaid managed care plans, including the requirement that rates be "actuarially sound." To be actuarially sound, capitation rates paid to Medicaid managed care plans must be projected to provide for all reasonable, appropriate, and attainable costs required under the plan's contract with the state. Capitation rates must be appropriate for the specific populations to be covered and the services to be provided, and must be adequate to meet the network adequacy, access, and coordination of care requirements for the plan. In addition, capitation rates must be projected to allow the Medicaid managed care plan to reasonably achieve a medical loss ratio of 85% for the rate year.

The Final Rule also prohibits states, and their actuaries, from certifying a range of actuarially sound capitation rates. Some states currently modify rates paid to Medicaid managed care plans within certified "rate ranges" without submitting a new certification to CMS. Under the Final Rule, states must certify the final rate paid to each plan; however, effective for contracts after July 1, 2018, states have explicit authority to increase or decrease payments to a Medicaid managed care plan by 1.5% without submitting a new certification to CMS.

Medical Loss Ratio

The Final Rule requires states to impose a medical loss ratio ("MLR") reporting requirement on Medicaid managed care plans. The MLR is calculated as the ratio of the expenditures the Medicaid managed care plan makes or incurs for claims, health care quality activities, and fraud reduction activities, to the adjusted premium revenue the plan receives.

When establishing capitation rates for a Medicaid managed care plan, the state and its actuaries are required to take into account the plan's past MLR, as well as the plan's projected medical loss ratio. As a result, CMS states that Medicaid managed care plans that do not meet an MLR of 85% would experience adjustments to future year rate development. However, states have discretion to determine whether a remittance of funds to the state is required if a minimum MLR is not achieved. If states mandate a minimum MLR, the minimum must be equal to or higher than 85%, and must meet be based on the reports required by the Final Rule.

Managed Care Supplemental Payments

The Final Rule will prompt significant changes to payment programs that have been developed in many states to support designated Medicaid providers through supplemental payments from Medicaid managed care plans. The Final Rule prohibits states from "directing" a Medicaid plan's expenditures under its contract with the state unless an exception is met. Available exceptions include state-directed value-based purchasing programs, performance improvement or delivery system reform initiatives, or a minimum fee schedule for a service; specific requirements are applicable to such exceptions.

To allow states time to transition current payment arrangements to achieve compliance with the prohibition on directing funds, the Final Rule contains a temporary exception under which states may continue to make qualifying "pass-through payments" to hospital providers for a 10-year period. The amount of allowable pass-through payments for hospital providers is capped by a calculation of the difference between Medicare rates and the Medicaid plan or fee-for-service payment rates (excluding the pass-through payments), and the total allowable amount phases down each year until 2027. States may also continue to require pass-through payments to nursing facilities and physicians until July 1, 2021.

IMD/Alternative Settings

The Final Rule contains new authority clarifying the ability of Medicaid managed care plans to offer alternative services (or services in alternative settings) from those covered under the state's Medicaid plan ("State Plan"). Services that are provided "in lieu of" State Plan services must be identified and authorized in the Medicaid managed care plan's contract with the state, and must be determined by the state to be medically appropriate and cost effective substitutes for State Plan services. While capitation rates paid to Medicaid managed care plans must be based only on the cost of providing services available under the State Plan, the utilization and cost of "in lieu of" services may be taken into account when developing the component of the capitation rates that represents the covered State Plan services. This authority should allow states and Medicaid managed care plans to experiment with offering alternative services without creating a financial disincentive for the Medicaid managed care plan.

The Final Rule also contains authority for states to pay, and claim federal financial participation for, capitation rates for enrollees who spend less than 15 days during a month in an institute for mental disease ("IMD"). Services for adults age 21 through 64 who are in an IMD are not covered by the Medicaid program because of a federal statutory exclusion. In the Final Rule, CMS has determined that short term stays in an IMD do not violate this statutory exclusion, allowing Medicaid managed care plans to extend coverage of inpatient psychiatric services in an IMD to enrollees for at least short term stays.

In addition, the Final Rule requires Medicaid managed care plans to provide additional mental health and substance use disorder services required to achieve parity with physical health benefits available to enrollees, even if similar benefits are not available through the fee-for-service program.

Access to Care and Network Adequacy

The Final Rule imposes obligations on states to ensure that covered services are available to enrollees in a timely manner. States are required to ensure that Medicaid managed care plans contract with a network of appropriate providers to provide such access, and that they will provide necessary services outside of the network if the provider network is unable to provide necessary services. In addition, states must develop and enforce standards for network adequacy that meet requirements set forth in the Final Rule. The provisions in the Final Rule addressing access to services and network adequacy in the context of Medicaid managed care complement the separate CMS rule published on November 2, 2015 establishing standards by which states are to measure access in the Medicaid program, and how they may respond to remedy identified deficiencies in access.

Beneficiary Support

The Final Rule requires states to develop and implement a beneficiary support system to support beneficiaries both before and after enrollment into a Medicaid managed care plan. The support system must include choice counseling, assistance understanding managed care, and assistance for enrollees who use, or desire to receive, long-term services and supports. In addition, the Final Rule requires Medicaid managed care plans to have written policies regarding enrollee rights, including rights to participate in health care decisions. In the Final Rule, CMS sets forth new requirements for the enrollment of beneficiaries into managed care, including requirements for both voluntary and mandatory programs. CMS declined to finalize a proposed requirement for states to offer a 14-day period of access to fee-for-service benefits prior to enrollment into Medicaid managed care.

Program Integrity

The Final Rule enhances the program integrity requirements to which states, Medicaid managed care plans, and their subcontractors and network providers will be subject. Medicaid managed care plans, and subcontractors of such plans, will be required to implement and maintain arrangements to prevent fraud, waste, and abuse. The Final Rule sets forth minimum standards for such arrangements, including a compliance program that meets certain federal standards, provisions for the prompt return of identified overpayments, and methods to verify (such as through sampling) whether services were actually provided.

In addition, states are required to conduct the following program integrity efforts:

  • Screen and enroll, and periodically reevaluate, all network providers of Medicaid managed care plans, under the standards applicable to fee-for-service Medicaid providers. While network providers will need to be enrolled by the state Medicaid agency, the Final Rule clarifies that network providers of a Medicaid managed care plan are not required to treat fee-for-service Medicaid beneficiaries.
  • Review ownership and control disclosures from plans and plan subcontractors
  • Conduct routine checks of the Federal database of excluded individuals
  • Conduct or contract for period audits of the encounter and financial data submitted by plans
  • Receive and investigate information from whistleblowers regarding the integrity of plans, their subcontractors, or network providers receiving Federal funds
  • Make available on its website the Medicaid managed care plan contracts with the state, documentation of the availability of services and the adequacy of the plan's provider network, information on individuals or entities with an ownership or control interest in the plan, and the results of any audits

Quality of Care

The Final Rule revises and expands the quality-related requirements applicable to Medicaid managed care plans. Under the Final Rule, Medicaid managed care plans will be required to conduct a quality assessment using performance measures specified by the state and other mechanisms to detect under- and over-utilization of services and to assess the quality and appropriateness of care furnished to enrollees with special health care needs. Medicaid managed care plans are also required to undertake performance improvement projects focusing on both clinical and non-clinical areas.

Some areas of quality reporting and assessment in the Final Rule will be further developed through future guidance. The Final Rule establishes that CMS, following consultation with states and stakeholders and an opportunity for comment, will publish national quality performance measures and performance improvement projects that will be required for all Medicaid managed care plans. CMS estimates that these will be published every 3 years, but cautions that this is only an estimate. In addition, the Final Rule provides that CMS will publish a methodology for a Medicaid managed care quality rating system following a stakeholder engagement process and public opportunity to comment. States will be required to follow the methodology once published or to submit a request for CMS approval to utilize a different rating system. The quality rating system will be aligned with the system applicable to qualified health plans.

Each state is required to develop a state quality strategy that includes elements identified by CMS in the Final Rule. Medicaid managed care plans also must be accredited by a qualified private agency, and are subject to review by qualifying external quality review organizations ("EQROs") unless they fall within enumerated exceptions.

Provider Appeals and Grievances

The Final Rule modifies the regulations governing plan appeals and grievance procedures to increase uniformity with the procedures that apply to Medicare Advantage and the private insurance market. Contrary to the current framework in some states, the Final Rule requires that enrollees pursue the manage care plan's internal appeals process before accessing a state fair hearing. However, it permits states to offer an independent, external medical review to enrollees as long as the review is not required and not used to deter enrollees from proceeding to a state fair hearing. The Final Rule also includes a new basis for appeal to dispute enrollee financial liability, including cost sharing, copayments, premiums, deductibles, and coinsurance. It continues to restrict the ability of a provider to appeal on behalf of an enrollee to circumstances when state law permits the representation and the provider obtains written consent from the enrollee.

Covered Outpatient Drugs

Since 2010, state Medicaid agencies have been able to claim rebates on covered outpatient drugs provided through Medicaid managed care plans through the Medicaid Drug Rebate Program. The Final Rule furthers the implementation of this requirement by requiring Medicaid managed care plans to report drug utilization data to the state so that the rebates can be claimed. Under the Final Rule, Medicaid managed care plans are required to establish procedures to exclude utilization data for covered outpatient drugs that are subject to discounts under the 340B Program.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Foley & Lardner
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Foley & Lardner
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions