On Monday, the Centers for Medicare and Medicaid Services (CMS) released its 1,400-plus page final rule on Medicaid Managed Care and the Children’s Health Insurance Program (CHIP) requirements. The rule is the first major update since 2002 and addresses network adequacy, the medical loss ratio, quality of care, and standards for managed long-term services and supports. It is designed to bring these plans into alignment with regulations of marketplace and Medicare Advantage (MA) plans. More than 51 million Americans, roughly 70% of the 72 million Medicaid enrollees, receive their coverage under these privately-run managed-care plans in 39 states plus the District of Columbia. The rule is the latest version of a proposed rule initially released last May and is scheduled for publication on May 6.
The rule addresses network adequacy requirements for the first time in Medicaid managed care plans such as beneficiaries with long provider wait times and provider directories that have been habitually out of date. The proposed network adequacy standards would align Medicaid rules with network adequacy requirements in other markets. States would continue to have the greatest authority in setting standards, without any overarching national requirement, with the rule giving discretion to states to establish requirements on adequacy and quality metrics. It proposes setting both time and distance standards for certain types of providers.
The rule sets the medical loss ratio (MLR) for these plans at 85%, in-line with large group coverage MLR levels in the private market, and requiring insurers to spend a maximum of 15% of Medicaid revenue funds on administrative expenses. In addition to private fully insured group and individual plans, federal MLR requirements are currently applied to Medicare Advantage (MA) and Part D plans. This rule would extend similar requirements to Medicaid insurers. Insurers that don’t meet this requirement will face penalties or will face lowered funding rates in the future. The MLR for Medicaid managed care would take effect on July 1, 2017.
The rule proposes establishing a quality rating system, similar to MA’s star rating system. The rating system is designed to bring greater transparency to plans by allowing states to publicly report plan quality information for consumers to use that information to select plans. However, states will not be able to default to the MA five-star rating system.
The rule also addresses health information technology by encouraging the use of health IT and electronic exchange of health information to achieve care coordination objectives. The rules notes that “all individuals, their families, their healthcare and social service providers, and payers should have consistent and timely access to health information in a standardized format that can be securely exchanged among the patient, providers, and others involved in the individual’s care." It further encourages states to consider the increasing use of telemedicine.