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May 26, 2015 01:00 AM

Private Medicaid plans face sweeping new regulations under CMS proposal

Virgil Dickson
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    The CMS has released a sweeping proposed rule (PDF) intended to modernize the regulation of Medicaid managed-care plans. The Medicaid managed-care population is growing rapidly, but the last regulation governing such plans was issued in 2002.

    In one provision that generated frustration among health insurers in the hours after the draft was posted, the CMS called for health plans to dedicate a minimum portion of the rates they receive toward medical services, a threshold known as a medical loss ratio.

    As of 2015, plans doing business with Medicaid and the Children's Health Insurance Program are the only health plans that aren't subject to an MLR. The Obama administration is proposing an 85% threshold for Medicaid managed-care plans, the same as the government demands of large group plans in the private market.

    America's Health Insurance Plans, the largest trade group representing health insurers, quickly responded that applying an MLR to Medicaid managed care fails to reflect much of what the plans do to hold down costs.

    “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,” interim AHIP CEO Dan Durham said in a statement.

    The MLR that the CMS has proposed for Medicaid plans is a suggestion rather than an enforceable mandate. Still, many plans will be affected if states follow through on the agency's suggestion. In a CMS review of 167 managed care plans in 35 states, one in 10 plans had an MLR below 79% and one in four had one below 83%.

    Medicaid managed-care enrollment has soared by 48% to 46 million beneficiaries over the past four years, according to consulting firm Avalere Health. By the end of this year, Avalere estimates that 73% of Medicaid beneficiaries will receive services through managed-care plans.

    “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,” acting CMS Administrator Andy Slavitt said in a statement. "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.”

    The rule would impose new standards to ensure beneficiaries have adequate provider networks. For example, plans typically require that enrollees can reach a primary care physician within a certain time or distance. The CMS wants states to extend such time-and-distance standards to OB/GYNs, behavioral health specialists and dentists.

    And given the large number of children enrolled in Medicaid, the CMS also is proposing that states' rules for provider networks specifically 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 agency says in the regulation.

    States would be allowed some leeway, however, to vary those standards in different geographic areas to account for the number of providers practicing in a particular area.

    The rule also would require greater transparency in how states determine whether the rates they pay plans are actuarially sound, meaning that the payments are sufficient to cover the services required under the contract.

    States would have to provide the CMS enough detail for the agency to understand the specific data, assumptions and methodologies behind that rate. This will likely trouble the 26 states and the District of Columbia that currently certify ranges instead of specific rates for their managed care programs.

    As expected, the rule also includes a section on managed Medicaid long-term care. Traditionally, state Medicaid programs have paid long-term-care providers on a fee-for-service basis even as they moved more nondisabled beneficiaries into managed care. But as of 2014, 26 states were using managed long-term care, up from eight in 2004, according to the CMS. The number of beneficiaries in managed long-term care has grown from 105,000 in 2004 to 389,000 in 2012.

    A key passage, requested by advocates, would allow participants enrolled in Medicaid Long Term Services and Supports, or MLTSS, to switch plans or disenroll and switch to fee-for-service if their provider is not in-network for the managed care plan.

    The Association of Community-Affiliated Plans, which represents not-for-profit safety net health plans, applauded the scope and spirit of the proposed regulation.

    “Safety net health plans support the commitment to transparency, accountability and improvement that animates this proposal,” ACAP CEO Margaret Murray said. “So much so that we believe these provisions should be extended to the entirety of the Medicaid system, including fee-for-service and primary care case management arrangements.”

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