CMS proposes changes to Medicaid managed care, targets rate setting

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The Centers for Medicare & Medicaid Services is proposing 650-plus pages of new regulations for Medicaid managed care, which now covers 46 million Americans, around 70 percent of Medicaid beneficiaries. The move represents the first regulatory change to Medicaid managed care in a decade as more for-profit insurers and providers take the challenge from states to cover growing Medicaid populations.

Insurers including UnitedHealth Group, Aetna and Centene have grown Medicaid managed care plans to meet demand from states to try to control costs, as have some health systems with their own health plans, like Presbyterian Healthcare Services in New Mexico and UPMC in Pennsylvania.

Among the major changes proposed for Medicaid plans are new provider adequacy standards, new mandates for capitated rate setting, beneficiary protections in long-term care, forthcoming quality ratings, and an 85 percent medical cost administrative ratio. “Overall, this proposed rule supports the agency’s mission of better care, smarter spending, and healthier people,” CMS regulators in their announcement Tuesday..

“A lot has changed in terms of best practices and the delivery of important health services in the managed care field over the last decade,” said Andy Slavitt, acting administrator of CMS and a former executive at UnitedHealth Group’s Optum company. “This proposal will better align regulations and best practices to other health insurance programs, including the private market and Medicare Advantage plans, to strengthen federal and state efforts at providing quality, coordinated care to millions of Americans with Medicaid or CHIP insurance coverage.”

Medical cost ratio

The two trade groups representing insurers, America’s Health Insurance Plans and Medicaid Health Plans of America, support of the regulatory modernization and the thrust of CMS’ proposals -- except for the national 85 percent Medicaid medical cost ratio.

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"This latest proposed guidance ensures that health plans and states have the flexibility to structure their programs and benefits to meet the unique health needs of their enrollees,” said AHIP Interim CEO Dan Durham. “However, an arbitrary cap on health plans’ administrative costs could undermine many of the critical services—beyond medical care—that make a difference in improving health outcomes for beneficiaries, such as transportation to and from appointments, social services, and more.” CMS studied 167 managed care plans in 35 of the 39 states with Medicaid managed care and found that 10 percent had a medical cost ratio below 79 percent and 20 percent had a medical cost ratio below 83 percent.

Like the 85 medical care ratio in the rest of the health insurance market, the Medicaid proposal would require 85 percent of the funding to be spent on beneficiary services, although instead of consumer rebates for plans that don’t meet the medical cost ratio, states and CMS would make adjustments in the following year’s rates.

“We also believe that it is appropriate to consider the (MCR) in rate setting to protect against the potential for an extremely high MCR,” CMS wrote. “When an MCR is too high, it means there is a possibility that the capitation rates were set too low.”

Provider adequacy

A long-simmering issue and concern for Medicaid beneficiaries and patient advocates has been provider networks in Medicaid plans.

The new CMS proposal would transition to new provider access standards, though with a lot of flexibility that states could use to determine local needs with federal oversight.

The proposal would require that some states extend time-and-distance standards to OB/GYNs, behavioral health providers and dentists. The agency is particularly interested in increasing standards for CHIP, the adolescent and pediatric extension of Medicaid, to make sure networks reflect pediatric primary, specialty, and dental providers.

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“We propose that states, at a minimum, establish time and distance standards as such standards are currently common in the commercial market and many state Medicaid managed care programs,” regulators wrote. The proposal would also extend similar commercial health insurance requirements for beneficiaries to have digital access to regularly-updated provider directories.

Quality ratings

The proposed regulations would also set up a quality rating system for Medicaid plans, similar to Medicare Advantage and forthcoming component of subsidized exchange plans. The five star ratings would be based on factors like clinical effectiveness, patient safety, care coordination. prevention, member experience, plan efficiency, affordability and management.

“The use of a rating system” similar to the “Marketplaces and MA plans would make it easier for beneficiaries, who may be transitioning among these various coverage programs, to understand the quality rating of their health plan regardless of the payer,” CMS regulators wrote. Aligning the rating systems would also “minimize the burden on health plans” operating Medicaid, exchange and Medicare Advantage plans, “and provide data for the various quality rating systems.”

Rate setting

Medicaid capitated rates to health plans are supposed to be developed based on accounting for a variety of factors. As it happens, though, 26 states and Washington D.C. currently use rates that are inconsistant.

Now, CMS is proposing to “alter past practices moving forward.” Each individual rate paid to each Medicaid plan must be “certified as actuarially sound with enough detail to understand the specific data, assumptions, and methodologies behind that rate.”

States can still use rate ranges “to gauge an appropriate range of payments on which to base negotiations, but states will have to ultimately provide certification to CMS of a specific rate for each rate cell, rather than a rate range.” Payments “from any rate cell must not be expected to cross-subsidize or be cross-subsidized by payments for any other rate cell,” CMS regulators wrote.

“While we understand that this will impact some states that rely heavily on rate ranges, we believe that requiring the details, including the specific data, assumptions, and methodologies, behind each contracted rate strengthens program integrity and transparency in the rate setting process.”

Long-term care, services and supports

As more states — 26 as of last year — have adopted managed long-term services and support and extended managed care plans to elderly, disabled and at risk populations, the number of beneficiaries in these plans has grown from 105,000 in 2004 to almost 400,000. That’s has led to concerns among patient advocates about beneficiary choice and access.

CMS took one of their ideas and is proposing to allow MLTSS participants to switch plans, which sometimes are assigned, or to disenroll and opt for traditional fee-for-service coverage if their established physicians and providers aren’t in network.

The regulations also propose a four-point beneficiary support system for LTSS: an access point for complaints and concerns; education on enrollees’ grievance and appeal rights; assistance, upon request, in navigating the grievance; and oversight of LTSS program data to assist the state Medicaid agency on identification and resolution of systemic issues.

Here is the full proposal:

Twitter: @AnthonyBrino