Final Medicaid Managed Care Rule Explained

CMS recently finalized two key regulations: “Ensuring Access to Medicaid Services” (Access Rule) and “Medicaid, CHIP Managed Care Access, Finance, and Quality” (Managed Care Rule), aimed at improving access to care in Medicaid across delivery systems (fee-for-service and managed care) and authorities (state plan and waiver services). The Managed Care Rule addresses five primary areas: (1) access in managed care, including network adequacy, (2) state directed payments, (3) medical loss ratio standards, (4) in lieu of services and settings, and (5) quality and performance assessment. This blog summarizes the Managed Care Rule at a high level; more detailed blogs will follow. My colleague Kelly Whitener recently summarized the Access Rule.

(1) Access to Services in Managed Care 

Prior Law

The Managed Care Rule divides access to services in managed care into four topics: (1) information requirements, (2) monitoring requirements, (3) network adequacy standards, and (4) network adequacy enforcement, each of which is addressed to a lesser degree in current regulations.

 First, current regulations require that the state Medicaid agency operate a website that provides certain specified information, either directly or by linking to individual managed care organization (MCO), prepaid inpatient health plan (PIHP), prepaid ambulatory health plan (PAHP), or primary care case management (PCCM) entity websites. Second, current regulations require that states submit to CMS within 180 days after each contract year a report (with ten required items) on each managed care program administered by the state (this report is known as MCPAR and it is not widely publicly available).

Third, current regulations require that state Medicaid agencies develop a quantitative network adequacy standard for each of seven provider types (if their services are covered by the managed care plan’s risk contract) taking into consideration nine different elements, and states have some flexibility to grant exceptions to the standards. Fourth, current regulations require that each MCO, PIHP, and PAHP provide to the state Medicaid agency documentation that demonstrates that it maintains a network of providers that is sufficient in number, mix, and geographic distribution to meet the needs of the anticipated number of enrollees in the service area. The state agency, in turn, is required to submit to CMS an analysis that supports the assurance of the adequacy of the network of each managed care plan, along with supporting documentation.

New Final Rule

The final rule requires that state agencies include managed care plan information, either directly or by linking to individual MCO, PIHP, PAHP, or PCCM entity websites, on one web page; include clear and easy-to-understand labels on documents and links; verify at least every three months the accurate function of the website and the timeliness of the information presented; and explain that assistance in accessing the information on the website, including oral interpretation and written translation, is available at no cost. 

The final rule adds two items to the ten currently required in the MCPAR annual report: the availability and accessibility of any in lieu of services (ILOS) within the managed care contracts and the results of an enrollee experience survey. The rule also requires that the state agency post the MCPAR(s) on its website within 30 days of submitting it to CMS. 

The rule requires states to establish and enforce appointment wait time standards for routine visits to primary care providers, both pediatric and adult (15 business days from request), obstetrics and gynecological providers (OB/GYN, 15 business days from request), and outpatient mental health and substance use providers, both pediatric and adult (10 business days from request). To monitor compliance, states will be required to use secret shopper surveys. Importantly, the results of secret shopper surveys must be submitted to CMS and posted on the state agency’s website.

The rule requires that each managed care plan submit a “payment analysis” to the state Medicaid agency that compares the total amount paid by the plan for primary care, OB/GYN, mental health, and substance use disorder services during the prior rating period with the total that would have been paid by the plan if the plan had used published Medicare payment rates for those services. The state agency, in turn, is required to include these payment analyses in the analysis it must submit to CMS and to post its analysis on the state agency’s website within 30 calendar days of submission. The rule also requires states to conduct annual enrollee experience surveys.

(2)   State Directed Payments (SDP) 

Prior Law

In 2016 regulations, CMS formally established the option for states to use State Directed Payments (SDPs). SDPs are an option for states to implement requirements on (ie., “direct”) how their managed care organizations (MCOs) pay providers. Under the 2016 regulations, states can require MCOs to participate in multiplayer models, use a value based purchasing method, or use a minimum or maximum fee schedule or set a uniform payment increase for selected providers. The 2016 regulations did not heavily emphasize transparency, reporting, and evaluation of SDP spending.

New Final Rule

Since 2016, use of SDPs has increased dramatically, and CMS’s Managed Care Rule is intended to increase transparency and oversight of SDPs. To improve reporting on SDP spending, the rule will require states to: (1) use existing medical loss ratio reporting as a vehicle to collect annual SDP spending data and, (2) after reporting instructions are developed by CMS, report annual provider-specific data through the transformed Medicaid statistical information system (T-MSIS). The T-MSIS submission must specify the total dollars expended by each MCO for SDPs, including amounts paid to individual providers. The rule also sets out detailed requirements for evaluation reports states are required to submit for most types of SDPs that amount to more than 1.5% of managed care program costs, and requires states to publicly post the reports.

CMS’s new regulation clarifies that SDPs must be reasonable and that states make documentation of payment rates available to CMS upon request. CMS also adds a new option for states to require MCO payments to be set at 100% of the Medicare payment rate.  

The rule increases oversight of provider taxes, an important mechanism that states use to fund SDPs. Medicaid law broadly prohibits states from using “hold harmless” arrangements when financing SDPs with provider taxes. A hold harmless arrangement is one where the state charges a provider tax to finance the state’s Medicaid share, but there is a direct or indirect arrangement to later reimburse providers for their tax payments. CMS’s rule reaffirms that states must comply with hold harmless rules and further requires states to collect and make available to CMS attestations from providers receiving SDP payments certifying that the providers are not participating in any hold harmless arrangements (or, per a modification that was not in the proposed rule, the state may be granted an exception if it can provide a satisfactory explanation about why the attestation is unavailable). 

(3)   Medical Loss Ratio Standards (MLR) 

Prior Law

Current regulations require state Medicaid agencies to submit to CMS annually a “summary description” of the annual MLR reports received from each MCO with which they contract. The regulations specify that the summary description must include the amount of the numerator, the amount of the denominator, the MLR percentage achieved, the number of member months, and any remittances owed.

 New Final Rule

The final Managed Care rule clarifies that the summary description must be provided for each MCO under contract with the state and that it also includes line items for the amount of SDPs made by the MCO to its providers and the amount of SDPs made by the state Medicaid agency to each MCO. Unfortunately, the regulations do not require all of this MLR reporting to be made public, significantly reducing the public accountability of state managed care contractors.

(4)   In Lieu of Services and Settings (ILOS)

Prior Law

For many years, Medicaid managed care plans have covered “in lieu of services” (ILOS), which are services that are provided in substitution of traditional state plan services. In 2016 regulations, CMS formally established authority for covering these services. While the 2016 regulations require the services be medically appropriate, cost-effective, and specified in MCO contracts, there is little additional detail about ILOS services and oversight.

New Final Rule

The Managed Care Rule includes provisions to standardize and improve use of ILOS to meet the needs of enrollees. First, the rule establishes a new and broader definition of ILOS which is inclusive of services that are “an immediate or longer-term substitute for a covered service or setting” or that “can be expected to reduce or prevent the future need to utilize the covered service or setting.” This definition opens the door to ILOS being used to cover a broader range of health interventions that improve prevention or address health-related social needs.

The rule also improves oversight and accountability of ILOS. States will be required to provide CMS with an annual ILOS report and data on their ILOS spending as a percentage of projected and actual spending. The rule sets a new limit requiring ILOS spending to be no more than 5% of the capitation for managed care plans. Additionally, the regulation increases reporting and evaluation requirements for states using ILOS.

The rule also codifies numerous enrollee protections with respect to ILOS, such as requirements that enrollees retain all rights and protections available under managed care regulations (including appeals rights) and that ILOS may not be used to discourage access to state plan services. 

(5)   Quality Assessment and Improvement

Prior Law

Current managed care regulations include numerous provisions designed to assess and improve quality, but they fall short. States are required to implement a written quality strategy for assessing and improving the quality of health care services furnished by an MCO, PIHP, or PAHP, but these processes have not been sufficiently transparent and inclusive. States are required to conduct External Quality Review (EQR) activities, but there is a long lag time for reporting, meaning the data is often very old. In addition, current EQR regulations limit the data that must be included in reports, meaning valuable data is missing, such as network adequacy data. Finally, while the 2016 managed care regulations required states to establish managed care quality rating systems, the ratings systems have not been sufficiently impactful. For example, states are only required to publish a single quality rating for each MCO, PIHP, or PAHP on websites that are often not very helpful to enrollees.

New Final Rule

The final Managed Care rule requires states to seek public comment on the state’s quality strategy at least every three years regardless of whether significant changes are made. States must post the full evaluation of the effectiveness and results of the triennial review of the quality strategy, not just the state’s proposed plan. States are also required to submit the plan for CMS review and input. 

For EQR reporting, the rule will help ensure consistency and align data in the annual reports with the most recently available information used to conduct mandatory EQR activities. It would also require EQR technical reports to include any outcomes data and results from quantitative assessments, as well as data from the mandatory network adequacy validation activity, and mandate states post reports on state websites for five years.

The final rule would also improve the managed care Quality Rating System (QRS). It advances the QRS as a one-stop-shop where enrollees could access information about Medicaid and CHIP eligibility and managed care; compare plans based on quality and other factors key to plan selection, such as the plan’s drug formulary and provider network (if multiple plans are available); and to aid enrollees in selecting a plan that meets their needs. The rule implements new requirements for the QRS website to make it a robust tool to support choice counseling and enrollment. The rule also sets stronger mandatory metrics for QRS systems, including processes to review and update metrics, and requires states to issue a quality rating for each mandatory measure, not just a single overarching rating for each plan. 

[This is part of a blog series on two key federal regulations that aim to improve access to care for people enrolled in Medicaid and CHIP across delivery systems. Learn more about the “Ensuring Access to Medicaid Services” and “Medicaid, CHIP Managed Care Access, Finance, and Quality” rules here.]

Leonardo Cuello is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.