CMS Medicaid managed care final rule caps medical-loss ratio at 85%

Dive Brief:

  • HHS on Monday released its final rule on managed care in Medicaid and the Children's Health Insurance Program (CHIP).
  • The rule, weighing in at 1,425 pages, is the first overhaul of managed care regulations for the two programs in more than a decade.
  • The final rule will affect Medicaid managed care plans and the beneficiaries enrolled in them, including low-income children and families, pregnant women, elderly, and individuals with disabilities.

Dive Insight:

In a CMS Blog post, CMS acting administratory Andy Slavitt and Vikki Wachino, CMS deputy administrator and director for the Center for Medicaid and CHIP Services, wrote that nearly 72 million Americans rely on Medicaid for health insurance. The final rule "updates how Medicaid works for the nearly two-thirds of beneficiaries who get coverage through private managed care plans," they wrote.

Currently, 39 states and the District of Columbia contract with private managed care plans to furnish services to Medicaid beneficiaries. The rule's provisions will be implemented in phases over the next three years, beginning July 1, 2017.

The medical-loss ratio (MLR) was finalized at 85%, wherein all payers need to spend at least 85% of their Medicaid revenue on quality-improving initiatives and medical care. The proposed rule had been notably contentious--having received almost 900 comments during the comment period--for setting the medical loss ratio at that number.

When the rule was proposed, critics worried if states comply it will destabilize programs enveloped at the state level, and they noted that, according to an earlier CMS review of managed care plans, one in 10 had an MLR below 79% while one in four had one below 83%. 

According to HHS, the final rule has four main goals:

  1. Supporting states' efforts to advance delivery system reform and improvements in quality of care for Medicaid and CHIP beneficiaries;
  2. Strengthening the consumer experience of care;
  3. Strengthening program integrity via accountability and transparency; and
  4. Aligning rules across health insurance coverage programs.

To support states’ efforts to advance delivery system reform and improve quality, the rule establishes Medicaid’s first quality rating system and clarifies states’ authority to enter into contracts that pay plans for quality or encourage participation in alternative payment models and other delivery system reform efforts.

In addition, the rule offers flexibility for plans to cover inpatient short-term mental health services. The rule states it will pay carriers for such services to beneficiaries for an in-patient stay of no more than 15 days at an institution for mental health. The provision is an important win for mental health services access.

The rule is scheduled to be published in the Federal Register on May 6.

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Filed Under: Payer