The Centers for Medicare and Medicaid Servies recently revealed the first upgrade to Medicaid managed care in more than a decade, a 653-page "uber rule" that has already drawn criticism from private Medicaid plans for a provision that sets the medical loss ratio at 85%.
According to the Kaiser Family Foundation, there are now more than 42 million Americans enrolled in some type of Medicaid managed care organization (MCO). Many plans would be affected if the proposals are accepted: A recent California Healthline review of CMS data found that out of 167 managed care plans in 35 states, one in ten had MLRs below 79% and one in four had one below 83%.
39 states currently contract with approximately 265 MCOs, according to a KFF report. States pay each MCO a monthly premium for each enrolled patient, and under federal law must also establish quality standards and monitor compliance for Medicaid plans. However, each state does this differently, resulting in various contract requirements and data collection. Many argue this makes it almost impossible to compare programs across states and to determine whether a patient's health has improved.
The new guidelines propose that Medicaid MCOs align their standards with the private marketplace, ensuring uniform practice. While the idea is to "ease administrative burdens on issuers and regulators while providing an appropriate level of protection for enrollees," CMS wrote in the rules, many insurers are questioning this logic.
Streamlining the industry?
The main dispute revolves around the medical loss ratio, a mechanism originally introduced under the Affordable Care Act. CMS proposes to set this at 85%, what it calls the "industry standard" for large employers in the health insurance market. This requires insurers to spend at least 85% of their revenue on medical care—not for administrative costs or profits.
Private insurers gained $115 billion in Medicaid revenue in 2014, according Kaiser Health News. Under the new rules, Medicaid plans would not be required to rebate the difference if they spend less than 85%. CMS deputy administrator Vicki Wachino told KHN that states would "need to take that into account the next year" when setting rates and limiting profits.
This has got some insurers balking. Jeff Myers, CEO of Medicaid Health Plans of America, said that a nationwide MLR was "inappropriate" because states already have established MLRs and treating every state the same was "crushing innovation."
"An arbitrary MLR is not going to move Medicaid forward," Myers said.
The need for refinement?
Some stakeholders support the new standard, albeit with some refinements. Dr. Robert Wergin, president of the American Academy of Family Physicians (AAFP), said while his organization supports the implementation of MLR requirements, there are many Medicaid patients that require auxiliary services like transportation and social services. "So, the extent that CMS can define the uses of funds for health plan administration to include only insurer profits and administrative costs, the patient would be better served."
"The proposed rules establish new requirements on states, which in turn impacts managed-care entities, so both may object to some of the new standards," said Tricia Brooks, research assistant professor at Georgetown University's Health Policy Institute. "CMS has tried to strike a balance by establishing minimum standards or expectations while providing states with the flexibility to administer Medicaid and CHIP in ways that fit the unique circumstances of each state."
Brooks added that the new proposals could be good for consumers because states would be required to provide unbiased health plan information that's accessible online, over the phone or in person to help consumers make informed choices. "States will need to be more intentional about establishing and monitoring network adequacy standards to assure that enrollees can get reasonable access to timely care."
One of the AAFP's continued concerns, explained Dr. Wergin, is with "the narrowing of insurance networks in Medicaid managed care plans and Medicare Advantage since such practices prevent many patients from continuing to receive care from family physicians with whom they have longstanding relationships." He said the group also "has called for requiring insurance companies to share with physicians the cost and quality data they use to determine network eligibility and allow physicians a fair opportunity to respond."
Brooks said that as more money is being invested in Medicaid managed care, several key questions remain:
"Are states saving money? Do Medicaid managed care beneficiaries have better access to care or receive higher quality care? Despite a lack of conclusive research, state and federal policymakers continue to promote managed care as a means to improve access and quality as they grapple with both an economic and a political imperative to manage costs. These rules take a number of steps in the right direction to make sure that the best interests of beneficiaries are a priority, and that there is greater accountability in the public dollars we spend on managed care."
The guidelines are open to comment until July 27 and are expected to go into effect sometime in 2017.