Medicaid Final Rule: Three top line issues to watch

October 7, 2016

In April CMS released final rules outlining significant updates to the Medicaid managed care program. Here are the top issues to watch.

In April, CMS released final rules outlining significant updates to the Medicaid managed care program and the Children’s Health Insurance Program (CHIP).  

BaerAt their core, these new rules bring the programs up to date with today’s healthcare environment and create greater alignment between Medicaid/CHIP and other programs, such as Medicare Advantage and Affordable Care Act (ACA) exchanges.   Increased standardization should come as welcome news for plans offering coverage through multiple federal programs.  Yet it is equally clear that federal oversight bodies will regulate with a heavier hand in the near future.

States, Medicaid plans, and providers are now evaluating the need to adjust rules, processes and operations.  States must take the lead in addressing policy gaps quickly, and while Medicaid plans will need to make significant changes to comply, it is important to remember that the Final Rule is not the final word. 

We know from implementation of the ACA that significant regulatory actions are followed by additional rules, subregulatory guidance, FAQs, etc. The agency has already released an information bulletin addressing questions about pass-through payments in Medicaid managed care delivery systems. Expect more along these lines. Also in several areas of the rule CMS suggests the state act to clarify more in-depth policy requirements.  Stakeholders are already lining up to influence these state decisions.

Medicaid plans and providers should expect tweaking and refinement in the months to come.  Watch for CMS and state action on these top line issues:

1. Medical loss ratio (MLR). The rule suggests states establish a minimum MLR standard of 85%.  The new rules clearly rely on the ACA’s MLR regulatory framework, yet states have discretion regarding implementation.  Expect states to make modifications to existing MLR levels given new mandated medical and administrative services definitions and possibly adjust rebate policies. Federally, CMS went to great lengths to lean on ACA’s MLR requirements and hopes to avoid additional guidance. Despite this, Medicaid plans may push for subregulatory guidance to clarify language in the non-binding preamble that indicates case management and service coordination should be counted as quality improvement activities for purposes of the MLR calculation. 

2. Quality strategy and rating system. The final rule mandates adoption of a state specific or federally outlined quality rating system to guide quality improvement efforts. CMS will identify measures and a rating system through an upcoming regulation and states may take similar actions.  Stakeholder listening sessions are also planned. Expect Medicaid plans to advocate for a delay of reporting start dates. CMS has been flexible with rule timelines in the past.  

3. Network adequacy. While CMS provided direction to states to develop time and distance standards, the agency fell short of outlining prescriptive measures.  Many states have already taken steps to adopt private market rules in response to the NAIC’s Network Adequacy Model Act, so it is likely they will work to bring Medicaid policies in alignment. Plans and providers should not expect that the federal government has issued its last word on networks. As ACA followers know, CMS has continued to ramp up requirements for network adequacy through the annual benefit and payment notice.  It would not be surprising to see increased federal scrutiny in Medicaid also as limited network offerings in all markets expand.

This is just the tip of the iceberg as far as activity to expect from CMS and states. Medicaid plans and providers should begin making operational changes, yet should also build processes that allow for adaptation and refinement as more details come to the forefront. 

Mara Baer, MPH, is a senior consultant, DeltaSigma, LLC, a healthcare consulting firm based in Littleton, Colorado.