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October 26, 2015 01:00 AM

More CMS oversight slows Medicaid managed-care rate-setting

Virgil Dickson
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    Health insurers say increased oversight from the CMS' Office of the Actuary has made the rate-setting process for Medicaid managed-care plans less predictable.

    For years, regional CMS offices accepted rates after an actuary signed off on rates that were agreed to by a plan and state Medicaid officials. But the federal agency decided last year to take a more direct role in approving rates as the Affordable Care Act adds millions of new beneficiaries to the programs.

    By 2023, state and federal Medicaid expenditures are expected to hit $800 billion as enrollment grows to about 80 million people, compared with $500 billion in spending and 70 million enrollees today, according to Christopher Truffer, a deputy director in the CMS' Office of the Actuary.

    “It's growing very quickly and may well be the largest public health system in the world,” Truffer said during a meeting on Medicare and Medicaid plans last week held by America's Health Insurance Plans, the industry's largest trade group. “With the federal government picking up 100% costs (for expansion), it made sense we carefully review the rates.”

    The heightened scrutiny of rate-setting also followed years of criticism that the agency was inconsistent in reviewing compliance with federal requirements for actuarial soundness. Some plans reportedly received payments that were too high while others received payments that were too low. A 2010 Government Accountability Office report found that Tennessee, for instance, received approximately $5 billion a year in federal funds for rates that had not been certified by an actuary.

    Roughly 58% of all Medicaid beneficiaries in 39 states and the District of Columbia accessed part or all of their Medicaid benefits through capitated health plans in 2011, the most recent year for which complete data is available, according to the CMS.

    The CMS has issued additional guidance targeting state Medicaid agencies and actuaries. State Medicaid directors have criticized the documents for laying out onerous data requirements and not incorporating their input.

    Plans have had a mixed response to increased CMS involvement in the rate-setting. It has added more uniformity to the process from state to state.

    “I do think it's been a little bit of Wild West over the years, so the new guidance is good,” Janet Grant, head of the Great Plains Region of Aetna Medicaid, said at the conference.

    On the other hand, it is taking longer for plans' rates to be finalized. When a state hasn't gotten formal approval from the CMS, it will move forward but then may alter the rates several times during negotiations with the agency.

    “There have been some growing pains,” Grant said. “One of my states has had three rate updates in a year, and the last one was a cut, so we actually owe money back to the state,” Grant said.

    Kate Tottle, vice president and chief actuary for Medicaid at Anthem, said the process is making it harder to plan for the current and coming year. “There's really a lack of predictability,” she said.

    The new oversight also means higher costs for state Medicaid agencies, according to Andrew Gaffner, a consulting actuary at Milliman.

    That's because the CMS is sending detailed queries to actuaries as it reviews the rates, and the back and forth adds more billable hours that the states are obligated to pay. Gaffner also said the queries are slowing down the process.

    Truffer, of the CMS' Office of the Actuary, said the agency is working to address concerns about the revised rate-setting oversight. “One of the challenges we had had has certainly been time, and we are working to improve timing,” he said.

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