(Story updated at 1:26 p.m. ET)
The CMS has sent a sweeping finalized rule that will overhaul the managed Medicaid program to the Office of Management and Budget for review.
The 653-page proposed version of the rule suggested the biggest changes in Medicaid managed-care regulations in more than a decade. It would cap insurer profits, require states to more rigorously supervise the adequacy of plans' provider networks, encourage states to establish quality rating systems for plans, allow more behavioral healthcare in institutional settings and encourage the growth of managed long-term care.
The OMB review can take up to 90 days, which means the final rule could be published by mid- to late May, a year after it was proposed.
The proposed rule received nearly 900 comments by the July 27 comment deadline.
That version had a requirement that states needed to make sure plans had adequate provider networks.
At a minimum, Medicaid plans' provider networks must have time and distance standards for certain types of providers, including hospitals, primary-care physicians and OB-GYNs. The CMS said time and distance more accurately capture whether beneficiaries have adequate access to care than provider-to-enrollee ratios. States must also consider whether plans offer an adequate number of providers who speak languages other than English.
The CMS encouraged states to include pediatric primary, specialty and dental providers in their networks because of the large number of children covered under Medicaid and CHIP.
The CMS rule also sets a medical-loss ratio (MLR) of 85%, meaning at least 85 cents of every premium dollar must be used for medical care. The remainder can go toward administration, marketing and profit. Plans would not be penalized if they don't meet the ratio, but states could lower future payments if plans don't meet the minimum MLR.
Although the health-plan industry has lobbied against inclusions of a minimum MLR, observers say the new Medicaid requirement would not have much effect on large national insurers. About three-quarters of states with Medicaid managed care already require average MLRs of at least 85%, according to the Kaiser Family Foundation.
The proposed CMS rule also could significantly improve access to behavioral healthcare for Medicaid beneficiaries. Since the creation of Medicaid 50 years ago, there has been a coverage exclusion for behavioral and substance-abuse treatment at inpatient facilities with more than 16 beds. The new proposed rule, however, would allow states to pay plans for behavioral care to beneficiaries who have a stay of no more than 15 days in a so-called institution for mental disease.
The CMS' proposed rule suggests that states establish a quality rating system for Medicaid plans to help beneficiaries select plans. The CMS already has a star rating system for Medicare plans. But the agency said it would defer to the states on this issue.
Some states have been waiting in dread for the final rules to be released. Indiana's Medicaid director, Joe Moser, acknowledged during a National Association of Medicaid Directors meeting last fall that his department had suggested the CMS drop the rule in its entirety.
“It's another 600-plus pages of regulations that we don't think is actually going to help this population,” Moser said. “It's unfunded mandates, more work for our staff. It's the federal government dictating to states how they should run their programs.”
The Medicaid Health Plans of America’s Jeff Myers hopes the CMS removed the language establishing a federal minimum medical loss ratio of 85% from the final rule.
“The MLR is an arbitrary number that's both inappropriate and unnecessary given the requirement already in place that states set actuarially sound rates for Medicaid health plans.”
Thirty-nine states and the District of Columbia outsource their Medicaid programs by paying fixed monthly sums to private managed-care plans, yielding $115 billion in revenue for insurers and $2.4 billion in operating profits last year, according to data compiled by Mark Farrah Associates and analyzed by Kaiser Health News.
About 46 million people, or 73% of all regular Medicaid beneficiaries, are in managed-care plans, and that figure will continue to rise through the Affordable Care Act's expansion of Medicaid to low-income adults, according to consulting firm Avalere Health. Millions of kids in the Children's Health Insurance Program are also in managed care and would be covered by the proposed rule.