CMS Releases Medicaid Managed Care Final Rule

April 27, 2016

Earlier this week, the Centers for Medicare & Medicaid Services (CMS) released its long-awaited Medicaid managed care final rule in an effort to modernize the regulations to reflect changes in the usage of Medicaid managed care organizations (MCO) as well as to better align with rules governing Medicare Advantage and private insurance.

The final rule—which is more than 1,400 pages long and is the first major update to the regulations in more than a decade—will:

• Address network adequacy, actuarial soundness, and consumer access
• Include certain beneficiary protections and enhance policies related to program integrity
• Subject Medicaid MCOs to medical loss ratios of 85 percent, requiring them to spend at least that percentage of their Medicaid revenue on quality-improving initiatives and medical care (private plans already are subject to medical loss ratios)
• Establish Medicaid and Children’s Health Insurance Program first quality rating system (similar to the Medicare Advantage Program’s star rating system)

One item of concern to the hospital community is that through this rule, CMS eventually prohibits states from making certain supplemental payments to hospitals and other providers that serve Medicaid managed care enrollees. As currently written, there is a ten-year period during which states and Medicaid plans must transition to systems where payments are directly linked to quality.

The final rule is important to Pennsylvania hospitals and health systems because:

• More than 80 percent of Pennsylvania’s Medicaid beneficiaries now receive health care through HealthChoices
• Pennsylvania has been very successful in achieving coverage for low-income children in its CHIP program and securing high participation by providers
• The Pennsylvania Department of Human Services is working to implement a managed long-term services and supports program, which could impact care delivery for low-income elderly and persons with disabilities

HAP provided comments about the rule when it was issued in draft form last year. The final rule tracks closely to the proposed rule, with little modification. HAP continues to analyze the final rule and will provide members with additional information.

For more information, contact Jolene Calla, HAP’s vice president, health care finance & insurance, or Norris Benns, HAP’s vice president, insurance and managed care.