On April 25, CMS released its final rule on regulatory changes to Medicaid managed care programs and the Children’s Health Insurance Program (CHIP). The new regulations will be implemented in phases, beginning on July 1, 2017.
“These improvements modernize the way these managed care health plans operate so that Medicaid and CHIP continue to provide cost-effective, high quality care to consumers,” Andy Slavitt, CMS acting administrator and Vikki Wachino, CMS deputy administrator and director for the Center for Medicaid and CHIP Services, said in a blog post.
Anil Shankar, senior counsel with Foley & Lardner LLP, says healthcare executives and insurers, and other stakeholders, should be reviewing the rule carefully and looking for opportunities to work with their states to determine how the final rule will be implemented. “In many cases, CMS has granted states flexibility to develop the standards to which managed care plans will be subject, and states will have to make a lot of decisions in a relatively short time frame to come into compliance,” he says.
Medical Loss Ratio
One key provision of the final rule is the medical loss ratio (MLR) was finalized at 85%, which means all Medicaid managed care providers must spend at least 85% of their revenue on medical care and quality improvement initiatives or be subject to recovery of payments. “We are disappointed to see the inclusion of the federally mandated MLR despite our urgings against this arbitrary limit,” says Jeff M. Myers, president and CEO of Medicaid Health Plans of America. “This ‘solution in search of a problem’ is a missed opportunity for allowing states maximum flexibility to provide integrated quality care for Medicaid recipients.”
Kristen Gentry, Partner at the law firm Quarles & Brady, says although there has been push back by payers and related associations on the 85% MLR, the requirement is a “step in the right direction." She believes that the 85% MLR “is unlikely to affect healthcare executives and insurers in any significant way.”
Public reporting of quality information
Also of note, the rule establishes a quality rating system for both Medicare and CHIP, under which states can publicly report quality information that consumers can use to choose a plan. “The rule creates the first quality rating system in Medicaid, setting Medicaid on par with Medicare Advantage and Qualified Health Plans,” says Megan Renfrew, director, Cognosante Solutions Lab.
The final rule also calls for transparency. “This regulation requires that states post, on a public website, a significant amount of information about Medicaid Managed Care plans,” says Renfrew. For example, some of the things payers will be required to report include enrollment, benefits, grievances and appeals, access and network adequacy and quality measures.
Renfrew says the final rule requires states to submit accurate and timely encounter data to CMS or risk loss of matching federal dollars. “Plans may need to work with their state Medicaid agency to ensure that [their] encounter data reporting meets state and CMS requirements for format, accuracy and timeliness,” she says. “Plans will need to ensure that their IT systems and operational processes are adequate to comply with these data submission and reporting requirements.”
The final rule also addresses a number of other issues, including:
- Coverage of short-term mental health services;
- Network advocacy standards (e.g., time and distance standards for certain providers);
- Program integrity requirements (e.g., treatment of overpayments); and
- Long-term care regulations.
Myers says the final rule is “complex and far-reaching, and its implementation will have an enormous effect on MCOs and the enrollees that they serve.” He also says even with the rule’s release, the work has just begun. “CMS will continue to make progress related to the governance of our industry,” Myers says. “We look forward to working with our plans, state partners and CMS as we enter into this new era of Medicaid managed care.”