CMS Finalizes Major Reforms to Medicaid, Part 2: Medicaid Managed Care Reg - McDermott+Consulting

CMS Finalizes Major Reforms to Medicaid, Part 2: Medicaid Managed Care Reg

CMS Finalizes Major Reforms to Medicaid, Part 2: Medicaid Managed Care Reg

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May 2, 2024 – Medicaid Regs Part 2! Last week, Regs & Eggs took a deep dive into the Ensuring Access to Medicaid Services final reg, one of two regs that the Centers for Medicare & Medicaid Services (CMS) released to add new requirements for states when operating their Medicaid programs. This week, I’m again bringing in my colleagues Katie Waldo and Kayla Holgash to describe the second reg, Medicaid and Children’s Health Insurance Program (CHIP) Managed Care Access, Finance, and Quality. If you want to dive even deeper into the reg, check out our full summary here.

The majority of states structure their Medicaid programs through a managed care approach. In fact, CMS estimates that 70% of Medicaid and CHIP enrollees receive “some or all of their care through a managed care plan.” While states have some flexibility in terms of establishing capitated payments for these managed care plans, the federal government establishes ground rules for states to follow. CMS has refined these ground rules and requirements in recent years, with previous regs in 2016, 2017 and 2020. The reg released last week includes major changes aimed at “improving access to, and quality of, care.”

A major portion of the final reg addresses state directed payments (SDPs), which were first allowed in the 2016 Medicaid managed care regulations and are generally used to establish minimum payment rates for certain types of providers or to require participation in value-based payment arrangements. However, states have used SDPs to require managed care plans to make large additional payments to providers.

The reg includes several process- and transparency-related changes to SDPs. For example, the reg ties SDPs to specific rating periods and requires provider-level reporting on actual SDP expenditures in the Transformed Medicaid Statistical Information System. It also establishes that provider SDPs for inpatient and outpatient hospital services, nursing facility services and professional services at an academic medical center may not exceed the average commercial rate. States must provide documentation of the average payment rate for each service and provider class (upon request), and must submit evaluation reports every three years if the SDP amount is more than 1.5% of the total capitation payment. CMS also examined state share financing of SDPs and now requires providers to attest that they do not participate in a hold-harmless arrangement.

Separately, Medicaid managed care plans must now include actual expenditures and revenues for SDPs as part of their medical loss ratio (MLR) to states. The reg includes MLR revisions for quality improvement expenditures, provider incentive payments and expense allocation reporting to align with Marketplace plan requirements, and specifies that MLRs are required for each managed care plan.

CMS aims to enhance transparency in payments by requiring states to submit an annual payment analysis that compares managed care plans’ payment rates for routine primary care services, obstetrical and gynecological services, and outpatient mental health and substance use disorder services as a proportion of Medicare’s payment rates. The reg also requires states to compare the managed care payment rates for homemaker, home health aide, personal care and habilitation services to Medicaid fee-for-service rates.

The reg includes provisions targeting access to care, including establishing a maximum appointment wait time standard of 10 business days for outpatient mental health and substance use disorder services and a maximum of 15 business days for primary and obstetrics and gynecology care. These wait time standards are aligned with Marketplace requirements that go into effect next year. States may also select an additional service type and maximum wait time. Furthermore, the reg requires states to conduct independent secret shopper surveys of Medicaid or CHIP managed care plans to verify compliance with appointment wait time standards and identify provider directory inaccuracies. States must also conduct an annual enrollee experience survey for each managed care program in the state. If CMS, the state or the managed care plan identify an area in which access to care could be improved, the state must submit an access remedy plan to CMS.

The reg includes several other provisions – too many to have with just breakfast. But to highlight a few others, the final reg:

  • Requires that an in lieu of service or setting (ILOS) be considered approvable as a service or setting through the Medicaid state plan or a Medicaid section 1915(c) waiver. The final reg finalizes new reporting and standard requirements for ILOSs.
  • Modifies requirements for clinical or quality improvement standards for provider incentives.
  • Increases opportunities for interested parties to provide input by requiring states to make their managed care quality strategies available for public comment when the strategies are renewed every three years, regardless of whether the state intends to make significant changes.
  • Establishes a framework for states to implement a Medicaid or CHIP quality rating system as a “one-stop-shop” for enrollees to compare Medicaid or CHIP managed care plans based on quality of care, access to providers, covered benefits and drugs, cost and other plan performance indicators.

The reg’s effective date is July 9, 2024, but provisions throughout the regulation have various effective dates.

Hope you still have room for your eggs despite all that CMS stuffed into this reg (and the other Medicaid reg discussed last week)!

Until next week, this is Jeffrey (and Kayla and Katie) saying, enjoy reading regs with your eggs.


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