CMS Unveils Proposed Rule for Medicaid Managed Care Plans

On Tuesday, CMS released a proposed rule for Medicaid managed care plans that aims to create more standardized practices across states and align managed care standards with those of the private market, The Hill reports. The proposed rule would be the first update to Medicaid managed care rules in more than a decade (Ferris, The Hill, 5/26).

Background

Enrollment in Medicaid managed care plans has increased by nearly 50%, to about 46 million beneficiaries, over the last four years, according to an estimate by Avalere Health. Avalere projects that nearly 75% of Medicaid beneficiaries will be enrolled in managed care plans by the end of 2015 (Dickson, Modern Healthcare, 5/26). Center for Medicaid and CHIP Services Director Vikki Wachino said that managed care "has evolved into the dominant delivery system in Medicaid" (Tracer, Bloomberg Business, 5/26). Medicaid managed care plans operate in 39 states (The Hill, 5/26).

Medical-Loss Ratio; Insurers Upset

The proposed rule calls for managed care plans to adhere to a medical-loss ratio of 85% (Modern Healthcare, 5/26).  The 85% MLR would take effect in 2017.  However, unlike the MLR for insurance plans established under the Affordable Care Act, insurers would not be required to repay states if they do not meet the threshold (Scott, National Journal, 5/26). Instead, states would use the information to set future payment rates so that plans are able to meet the MRL standard (CMS proposed rule, 5/26).

The Affordable Care Act set an MLR of 85% for large-group individual market plans and 80% for small group individual market plans. CMS has estimated that the measure through 2013 had saved about $9 billion through lower premiums and direct rebates (National Journal, 5/26).

In a review of 167 Medicaid managed care plans from 35 states, CMS found that about 10% had an MLR below 79%, while about one-quarter had an MLR under 83%.  

The new MLR proposal has drawn frustration from insurers, Modern Healthcare reports.

America's Health Insurance Plans interim CEO Dan Durham in a statement said, "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" (Modern Healthcare, 5/26).

Julia Paradise, associate director of the Kaiser Commission on Medicaid and the Uninsured, before the proposal's release said, "There's a lot of federal money in the program. The same reasoning that would lead you to think that a minimum MLR is a prudent thing in the private market I think would operate in this sphere also." She added, "What we think of as administrative costs might in the context of managed care seem integral to care management" (National Journal, 5/26).

Provider Networks

The proposed rule also aims to create standards to ensure beneficiaries can access adequate provider networks. Plans commonly impose limits on how far patients have to travel and how long they have to wait for a primary care visit. CMS has proposed states adopt distance and time standards for behavioral health, ob-gyns and dentists.

Further, CMS noted the number of children enrolled in Medicaid managed care plans and called for state rules for networks to reflect pediatric primary, specialty and dental providers. "Network adequacy is often assessed without regard to practice age limitations, which can mask critical shortages and increase the need for out-of-network authorizations and coordination," the proposed rule stated.

Rate Transparency

The proposed rule also seeks greater transparency in how states determine plan payment rates. States would be required to give CMS enough information for the agency to understand the data and the reasoning for the rate. According to Modern Healthcare, the measure could pose challenges to 26 states and Washington, D.C., because they certify payment ranges rather than specific rates for managed care plans.

Long-Term Care

In addition, the proposed rule includes guidance on long-term care. From 2004 to 2012, the number of Medicaid beneficiaries in managed care plans who are receiving long-term care increased from 105,000 to 389,000.

In the past, many state Medicaid programs had used fee-for-service payments for long-term care, though 26 states were using managed long-term care in 2014, according to CMS.  The proposed rule would let beneficiaries who are enrolled in long-term care change plans or disenroll and move to standard Medicaid coverage if their providers are out of managed care networks (Modern Healthcare, 5/26).