New CMS rule could significantly impact Medicaid managed care


CMS regulation will lead to major changes in Medicaid managed care programs; changes that focus on quality improvements, increased transparency and accountability, and strengthened state and federal oversight.

CMS watchers expect the release of a final regulation on Managed Care in Medicaid and the Children's Health Insurance Program (CHIP) in the near future, possibly by May 1. 

This regulation will lead to major changes in Medicaid managed care programs; changes that focus on quality improvements, increased transparency and accountability, and strengthened state and federal oversight. 

Regulation highlights

According to PWC, 70% of Medicaid enrollees are served through managed care delivery systems.  Managed care accounted for 38% of federal spending on Medicaid in fiscal year 2014.

RenfrewThis figure is expected to climb in future years as states continue to expand Medicaid managed care programs by carving in more Medicaid-covered services, broadening geographic areas covered by managed care, and using managed care to deliver benefits to populations with increasingly complex medical needs.

In response to the rapid growth in Medicaid and CHIP managed care programs, CMS is seeking to ensure appropriate oversight through the updated regulation.  Recently, the agency submitted the draft final regulation on managed care in Medicaid and CHIP to the Office of Management and Budget, the penultimate step in the regulatory review process and a good signal that the regulation will be released in the near future. 

While the draft text of the final rule is not yet public, a 2015 notice of proposed rulemaking established expectations that the final rule will contain significant program reforms.  These include:

  • Strengthened beneficiary protections, such as standards for care management and choice counseling; and

  • Rules to ensure the adequacy of provider networks, and an increased focus on quality improvement. 

In addition, CMS is using this opportunity to align Medicaid managed care rules with Medicaid fee-for-service, Medicare, Medicare Advantage, and Qualified Health Plan (QHP) rules on communications with beneficiaries, provider screening and enrollment, and medical loss ratios. 

Finally, the rule supports the use of value-based purchasing in the managed care context, helping to move Medicaid in the same direction as Medicare on payment reform under the Medicare Access and CHIP Reauthorization Act of 2015.

Next: What state Medicaid and CHIP programs should do



What state Medicaid and CHIP programs should do

For state Medicaid and CHIP programs, successful implementation of the new rule is dependent on their ability to collect, store, analyze, and report on operational, financial, and program data from managed care plans. 

This makes CMS’s recent permanent extension of the 90% federal matching funds for certain state Medicaid IT development efforts particularly meaningful, as these funds can be an important resource for states seeking to acquire or improve data management tools for managed care.

Implementing a number of the proposed rule mandates will require that states have good access to managed care plan data and the ability to analyze that data efficiently and effectively for policy creation and program oversight purposes.

Most importantly, the proposed regulation clarifies that CMS will not pay for Medicaid managed care services unless it is provided with encounter data for those services that meet CMS standards on accuracy, completeness, and use of an industry standard format. 

Many states have struggled to collect complete and accurate encounter data from managed care plans, and have also had difficulty managing that data in legacy systems designed for fee-for-service claims. 

Once the final rule is issued, states will have 90 days to submit to CMS a detailed compliance plan, which will likely push them to revise managed care contracts and quickly develop or enhance data collection and management systems to meet the encounter data standards. 

Another data-dependent provision is the requirement that states implement time and distance standards for network adequacy for key provider types (e.g. hospitals, primary care and specialty physicians, behavioral health providers) to help ensure adequate access to care for beneficiaries.

At a basic compliance level, developing and monitoring these rules requires accurate beneficiary and provider enrollment data.  However, there are sophisticated geographic information system-based tools, which would also allow states to model overall demand for providers’ time based on local population density, population health status, and other factors, since many providers serve both Medicaid and non-Medicaid patients.

There are also a number of quality-related requirements that depend on accurate and timely data.  States must develop quality improvement plans that apply to both fee-for-service and managed care, and report to CMS on a core set of quality measures. 

A subset of these measures will also be used for a Medicaid quality rating program that will be aligned with quality standards for QHPs and Medicare Advantage plans, and to engage consumers and stakeholders in the development of strategies for measuring and improving quality.

Next: Softening the blow



Softening the blow

Not surprisingly, CMS’s planned reforms have generated some controversy. While generally citing support for the agency’s efforts, many of the approximately 900 comments submitted in response to the proposed regulation also expressed grave concerns about the burden and costs compliance will place on state Medicaid programs. 

These include the implementation of systems necessary to manage the robust data collection, analysis, exchange, and reporting necessary to meet the requirements of the proposed regulation, to the extent that current state systems are inadequate.

These system-related concerns were partially addressed earlier this year when CMS issued its final rule on the extension of 90% federal matching funds for Medicaid enterprise system development.

The new rule makes permanent the availability of this enhanced funding and extends its use to commercial-off-the-shelf and software-as-a-service solutions, allowing states to take advantage of previously developed and tested products in the marketplace. This additional funding will enable states to deploy the modern systems needed to achieve compliance with major Medicaid managed care reform with a limited state budget.

There are also a number of steps states can be taking now to prepare for the final Managed Care rule. These steps include evaluating provider screening policies and existing managed care contracts to determine if they cover all required provisions.

Encounter data collection processes and systems should be audited to ensure the information submitted from plans is complete and in a format that allows for submission to CMS (including through TMSIS reporting).  State should also take this opportunity to evaluate network adequacy rules to ensure they are adequate to ensure access across provider times and meet CMS’s new rules.

States should review their existing data feeds and systems (as well as any planned system builds) to ensure that these systems can meet all of CMS’s requirements with respect to managed care reporting and oversight. 

Finally, enrollment brokers and managed care organizations should evaluate their respective systems to ensure they are capable of exchanging data with the state to support the expected regulatory changes.

Megan Renfrew is a director in the Cognosante Solutions Lab. An accomplished health policy expert who spent more than five years drafting healthcare bills for the U.S. House of Representatives, she previously served as the technical director at CMS responsible for collecting and analyzing Medicaid and CHIP eligibility and enrollment data from states. 


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