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Medicaid managed care proposed rule released

CMS proposals target flexibility, program integrity

The Medicaid managed care proposed rule makes significant changes to the 2016 regulatory framework with the goals of promoting flexibility, strengthening accountability, and enhancing program integrity. The changes include a more limited view of federal oversight requirements around network adequacy and managed care benefits structures.

November 8, 2018 | Health care

On November 8, 2018, the Centers for Medicare and Medicaid Services issued a notice of proposed rulemaking (NPRM) to revise regulations governing managed care organizations administering benefits for Medicaid and the Children’s Health Insurance Program (CHIP). The NPRM would make changes to policies adopted in a 2016 final rule that was intended to permit greater flexibility for managed care organizations to participate in delivery system reform efforts while also increasing federal oversight of managed care contracts for network adequacy and adopting new requirements for state information sharing and quality initiatives.

The proposed policy changes are of particular interest to health plans given the growth in Medicaid managed care enrollment, as well as providers for whom the expansion in Medicaid managed care enrollment also presents opportunities to participate in new value-based payment arrangements and increase patient volume in some cases.

According to the August 2018 Medicaid & CHIP Enrollment Report, more than 73 million people were enrolled in Medicaid and CHIP in August 2018.

The NPRM was published in the Federal Register on November 14, 2018, with comments due to CMS by January 14, 2019.

Below are highlights from the proposed rule:

Contract requirements

The 2016 final rule requires contracts with a managed care organization (MCO), prepaid inpatient health plan (PIHP), or Prepaid Ambulatory Health Plan (PAHP) that cover Medicare-Medicaid dually eligible enrollees to provide that the MCO, PIHP, or PAHP sign a Coordination of Benefits Agreement (COBA) and participate in the automated crossover claim process administered by Medicare. The intent behind this policy was to coordinate the claims process across various entities providing beneficiary coverage.

The 2018 NPRM would remove the requirement that MCOs enter into a direct COBA, instead proposing to require contracts with managed care plans to clearly stipulate how the state would ensure that crossover claims reach the appropriate managed care plan.

Actuarial soundness

In response to stakeholder feedback, CMS proposes to revise the 2016 regulations on actuarial soundness so that capitation rates are set according to an actuarial range, rather than on the individual rate paid per rate cell to each MCO, PIHP, or PAHP that includes sufficient detail around specific data, assumptions, and methodologies used.

The proposed rule would allow states to develop a rate range per rate cell within certain parameters. During the contract year, states using this option would not be able to modify capitation rates without prior CMS approval, but they would have the flexibility of operating with a rate range of plus or minus 5 percent.

States using the present method would remain free to modify rates within a range of 1.5 percent without prior authorization.

The intended effect of this change is to give states more room to negotiate with contractors by granting them more flexibility in their bids.

Directed payment arrangements

Under the current rules, states may direct payments to certain providers for services contracted by a managed care plan with the goal of increasing access to targeted services or populations. Based on CMS’s experience reviewing and approving directed payment arrangements since the 2016 final rule was issued, directed payment arrangements submitted by states in effect have required MCOs to adopt minimum rates for particular services.

Thus, in an effort to streamline the approval process, the NPRM would add a definition for state plan approved rates as “amounts calculated as a per unit price of services described under CMS approved rate methodologies.”

As a further means of simplification, the NPRM also would allow states to require managed care plans to adopt a cost-based rate, a Medicare equivalent rate, a commercial rate, or other market-based rate for network providers. The prior approval requirement would be eliminated altogether for payment arrangements based on state plan approved rates.

In addition, states would no longer be permitted to direct the amount or frequency of expenditures by managed care plans, granting greater decisionmaking authority to the MCOs.

Because it might take multiple years for value-based payment arrangements to yield benefits, the NPRM would allow multi-year payment arrangements between states and MCOs, provided that the state meets certain guidelines around program evaluation. Under the proposal, significant alterations to rate structures would not be permitted mid-contract.

Pass-through payments

Pass-through are generally defined as any amount required by the state, and considered in calculating the actuarially sound capitation rate, to be added to the contract payment rates paid by the MCO, PIHP, or PAHP to hospitals, physicians, or nursing facilities. Of note, pass-through payments are not tied to the amount, quality, or outcomes of services. In effect, pass-through payments retain the fee-for-service (FFS) payment structure for certain items.

In the NPRM, CMS notes that states transitioning into wider use of managed care often use these payments to facilitate the changes in their markets, but that they are best deployed as a transitional arrangement. Given this need, CMS proposes to allow pass-through payments to continue under new managed care contracts only during a three-year transition period, rather than allowing them to continue in perpetuity.

Pass-through rates would be required to be less than or equal to the amount of existing FFS supplemental payments.

Institutions for mental disease

CMS proposes to retain current regulation limiting stays at institutions for mental disease (IMDs) at 15 days in a calendar month. Nevertheless, CMS encourages states to apply for Section 1115 demonstration waivers for IMD use related to substance use disorders (SUDs).

Language and communications requirements

The proposed rule would change the requirement to include taglines on all written materials for beneficiaries to a requirement for taglines only on materials for potential enrollees that “are critical to obtaining services.” It also proposes to eliminate large print requirements. The changes are intended to allow for more simple and flexible presentation of information, though state accessibility requirements continue to apply.

The proposed rule would change the requirement that managed care plans issue notices within 15 calendar days after receipt or issuance of a termination notice to the later of either:

  1. Thirty calendar days before the effective date of the termination, or
  2. Fifteen calendar days after the receipt or issuance of the notice

The NPRM would align provider directory requirements for MCOs with standards that apply to provider directories for FFS Medicaid, which were standardized under the 21st Century Cures Act in December 2016. Under the proposed policy, CMS would require the MCO directory to include a physician’s or provider’s cultural and linguistic capabilities, including the languages spoken by the physician, provider, or skilled medical interpreter providing interpretation services at the physician’s or provider’s office.

Paper directory updates would be allowed to occur on a less frequent basis, provided that a managed care plan offers electronic delivery options.

Network adequacy standards

Although current rules do not specify time and distance standards for network adequacy assessment, they do require that standards be applied uniformly across a state. Citing local variation and the expanded adoption of telehealth, the NPRM would replace time and distance standards with a requirement that states set a quantitative minimum access standard for specified health care providers. For the purposes of network adequacy standards for specialists, states would have greater latitude to set adequacy standards, including a clarification that states are free to define specialists as they see fit.

Examples of quantitative access standards include:

  • Minimum provider-to-enrollee ratios
  • Maximum travel time or distance to providers
  • Minimum percentage of contracted providers that are accepting new patients
  • Maximum wait times for an appointment
  • Hours of operation requirements (for example, extended evening or weekend hours)
  • A combination of the above measures
Quality reporting

The current regulation requires states to report on managed care quality using a uniform set of measures, with the intent of allowing a fair national comparison. Finding that variation in Medicaid programs and managed care plans makes such a comparison difficult, CMS proposes several revisions to the Medicaid Quality Reporting System (QRS) with a goal of retaining meaningful comparison while accounting for the significant differences between programs and plans.

Under the NPRM, states would be permitted to propose an alternative state QRS, provided that they can demonstrate that it is substantively equivalent for the purposes of cross-state comparisons while retaining a core set of mandatory measures. To avoid long delays in seeking approval, CMS oversight would occur retrospectively.

Grievance and appeals

The proposed rule would eliminate the requirement for enrollees to submit a written and signed appeal after an oral appeal is submitted. The proposal nonetheless requires that managed care plans treat oral appeals in the same manner as one submitted in writing. The timeframe for a beneficiary to request a state fair hearing would be revised from current requirements of 120 calendar days to no less than 90 days, and no more than 120 days from the date of the MCO, PIHP, or PAHP’s notice of resolution. The standard under this proposal is intended to better harmonize with FFS appeals standards of 90 days according to state preference.

The Children’s Health Insurance Program (CHIP)

The 2016 final rule aligned most CHIP requirements with Medicaid managed care, including network adequacy standards, medical loss ratio requirements, QRS, grievances and appeals, and beneficiary communication. The 2018 NPRM would make a series of technical changes to ensure that regulation is properly cross-referenced between Medicaid and CHIP, in addition to a number of clarifying edits.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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