CMS pushing forward with Medicaid managed-care rule

Story​ updated​ July​ 7,​ 2017.

Despite promises to shift more regulatory autonomy to the states, the Trump administration is letting some controversial Obama-era Medicaid managed-care rules stand.

The CMS in late June opted to move forward with a mega-rule on managed care that expands federal oversight of Medicaid programs after refusing several states' requests to delay implementation.

Managed-care contracts that start on or after July 1, 2017, will have to comply with the new requirements, which the CMS says will improve the rate-setting process and make plans' spending more transparent. The rule was finalized last year.

The new requirements include stricter standards to ensure that managed-care rates are actuarially sound and cover all medical and administrative costs, taxes and fees for which the health plan is responsible.

Managed-care plans also must calculate and report their current medical loss ratio, which is a breakdown of what the plans spend on medical care versus other activities, including employee salaries, marketing, profits and administrative tasks.

By July 1, 2019, managed-care plans will be required to have a medical loss ratio of at least 85%.

The agency's refusal to delay enforcement may surprise some states, as the Trump administration hinted on several occasions that it may roll back the Obama-era rulemaking. Several states asked the CMS to delay compliance with parts of the rule that kicked in this month, citing the administrative burden associated with the rollout.

"These provisions in the final rule have significant federal fiscal implications for the Medicaid program and CMS will require compliance by the specified date in the final rule," CMS Medicaid Director Brian Neale said in to states.

If states don't comply with the rulemaking, the CMS may not approve their managed-care contracts or proposed rates, according to regulatory attorneys. The agency could also reduce federal funding to the state Medicaid program until it complies with the requirements.

The CMS also said it will enforce a provision to eliminate so-called pass-through payments, which Medicaid managed-care plans receive on top of the base capitation rate. Those payments are used as incentives to attract providers to treat Medicaid enrollees if their base rates aren't enough to ensure access in an area.

At least 16 states have paid out $3.3 billion in pass-through payments on average every year. Three others have distributed about $50 million a year for nursing facilities, according to the agency, which opposes pass-through payments because they are not actuarially sound and are not directly related to contracted services.