CMS Proposes New Medicaid Managed Care Rules

The Centers for Medicare and Medicaid Services (CMS) has issued a long-awaited proposal to update its Medicaid managed care regulations.  The proposed rule is CMS’ attempt to “modernize Medicaid and Children’s Health Insurance Program (CHIP) managed care regulations to update the programs’ rules and strengthen the delivery of quality care for beneficiaries.” 

According to the agency, the proposed rule, the first major update to Medicaid and CHIP managed care regulations in more than a decade, “would align the rules governing Medicaid managed care with those of other major sources of coverage…; implement statutory provisions; strengthen actuarial soundness payment provisions to promote the accountability of Medicaid managed care program rates; and promote the quality of care and strengthen efforts to reform delivery systems that serve Medicaid and CHIP beneficiaries.” It would also “ensure appropriate beneficiary protections and enhance policies related to program integrity,” and “require states to establish comprehensive quality strategies for their Medicaid and CHIP programs regardless of how services are provided to beneficiaries.”

A section of the proposed regulation focuses on managed long term services and support (MLTSS) programs and proposes certain beneficiary protections. The proposed rule would incorporate the best practices CMS identified in 2013 guidance. The proposal defines LTSS, for purpose of applying the Managed Care rules only, as “services and supports provided to beneficiaries of all ages who have functional limitations and/or chronic illnesses that have the primary purpose of supporting the ability of the beneficiary to live or work in the setting of their choice, which may include the individual’s home, a provider-owned or controlled residential setting, a nursing facility, or other institutional setting.”

Specifically, the proposed regulation would:

  • Create standards for the state’s readiness reviews of managed care plans and specific information given to beneficiaries who would transition from fee-for-service to managed care;
  • Create a structure for engaging stakeholders regularly in the ongoing monitoring and oversight of the MLTSS program;
  • Provide that MLTSS programs must be implemented and operated consistent with federal laws, including the Americans with Disabilities Act and the Supreme Court’s Olmstead v. L.C., 527 U.S. 581 (1999) decision;
  • Encourage payment methodologies that reflect the goals of MLTSS programs to improve the health of populations, support the beneficiary’s experience of care, support community integration of enrollees, and control costs;
  • Provide support, education, and a central contact for complaints or concerns for beneficiaries, including assistance with enrollment, disenrollment, and the appeals process;
  • Require that MLTSS providers meet the same person-centered planning standards that are encapsulated in the HCBS Rule;
  • Require that assessments for both individuals in need of LTSS as well as those with special health care needs are comprehensive and are conducted by appropriate LTSS service coordinators having qualifications specified by the state or provider;
  • Add to the criteria for defining medically necessary services a requirement that they “address the opportunity for an enrollee to have access to the benefits of community living;”
  • Ensure that utilization controls do not interfere with LTSS being authorized “in a manner that reflects the beneficiary’s continual need for such services and supports,” including a standard for state monitoring of utilization management;
  • Establish standards for coordination and referral by the managed care plan when services are divided between contracts or delivery systems to ensure that the beneficiary’s service plan is comprehensive;
  • Set standards, including specific time and distance standards, to evaluate the adequacy of the network for MLTSS programs, the qualifications and credentialing of providers, and the accessibility of providers to meet the needs of MLTSS enrollees;
  • Require that, if a state does not permit participants enrolled in MLTSS to switch managed care plans (or disenroll to Fee For Service) at any time, it must permit enrollees to disenroll and switch to another managed care plan or Fee for Service (FFS) “when the termination of a provider from their MLTSS network would result in a disruption in their residence or employment;”
  • Prevent, detect, and report critical incidents that adversely impact enrollee health and welfare; and
  • Incorporate MLTSS -specific elements into the state’s comprehensive quality strategy.

CMS proposes four elements for a beneficiary support system specific to beneficiaries who use, or desire to use, LTSS: (1) An access point for complaints and concerns about enrollment, access to covered services, and other related matters; (2) education on enrollees’ grievance and appeal rights, the state fair hearing process, and rights and responsibilities; (3) assistance, upon request, in navigating the grievance and appeal process and appealing adverse benefit determinations made by a plan to a state fair hearing; and (4) review and oversight of LTSS program data to assist the state Medicaid Agency on identification and resolution of systemic issues.

The Proposed Rule offers standards for how medical loss ratio (MLR) calculations and reporting “must be considered in both a prospective and retrospective manner in the rate setting process to ensure that capitation rates are actuarially sound,” including a requirement that rates for Medicaid Managed Care providers “must be set such that, using the projected revenues and costs for the rate year, the [provider] would achieve an MLR of at least 85 percent, but not exceed a reasonable maximum threshold that would account for reasonable administrative costs.” CMS has deferred the setting of an maximum threshold to states, indicating that they are “better positioned to establish and justify a maximum MLR threshold, which accounts for the type of services being delivered, the state’s administrative requirements, the maturity of the program and the managed care plans.” CMS also proposes “minimum standards for how the MLR must be calculated and the associated reports submitted to the state so that the MLR information used in the rate setting process is available and consistent.” Related to MLR, CMS believes its definition of “activities that improve health care quality” is broad enough to encompass activities related to service coordination, case management, and activities supporting state goals for community integration of individuals with more complex needs such as individuals using LTSS. For that reason, the agency is not specifically identifying these activities separately in this rule, but expects providers would include the cost of appropriate outreach, engagement, and service coordination in this category.

FMI: The rule can be read at