CMS will tweak, not overhaul, Medicaid managed care

After years of promising a major overhaul to an Obama-era managed care rule, the CMS has issued a proposed regulation that makes smaller changes to the standards states meet when running their Medicaid plans.

The proposed rule issued Thursday would give states some new flexibility in setting rates for their managed care plans and ensuring insurance companies have adequate provider networks. The CMS worked with Medicaid directors to develop the proposal.

"Today's action fulfills one of my earliest commitments to reset and restore the federal-state relationship, while at the same time modernizing the program to deliver better outcomes for the people we serve," CMS Administrator Seema Verma said in a statement.

The agency estimates that the changes it's proposing would cut states' administrative costs by $27 million, or 120,000 hours less in clerical tasks.

Verma has talked at length since her confirmation hearing about scaling back a massive managed-care rule finalized under the Obama administration that imposed a variety of new requirements. However, the proposed rule largely keeps it intact.

The new proposed rule doesn't affect the key linchpin of the Obama-era rulemaking, which set a federal medical-loss ratio (MLR) of 85%. That means all insurers must spend at least 85% of their Medicaid revenue on medical care and other activities that improve quality.

Plans and states called the provision too prescriptive. They argued that MLRs should be set by state officials because they understand their Medicaid populations best.

The Trump-era CMS has said in the past it supports the 85% MLR provision because it believes it will help control spending in the program.

The new rule focuses on states' secondary concerns. For instance, the Obama rulemaking required states to develop and enforce minimum travel time and distance standards for providers. Medicaid directors have complained this policy wouldn't improve network adequacy, noting that there's no guarantee a provider or specialist practices within certain distance of a patient.

The proposed rule would allow states to use quantitative standards to judge plans' networks. That could include data such as how long it takes for a patient to get an appointment or provider-to-patient ratios.

"We believe that this change would enable states to choose from a variety of quantitative network adequacy standards that meet the needs of their respective Medicaid programs in more meaningful and effective ways," the agency said in the rulemaking.

States also criticized the Obama-era rule for issuing new rate-setting standards. While the CMS on Thursday upheld the mandate that rates must be actuarially sound and cover all medical and administrative costs, taxes and fees for which the health plan is responsible, it proposed giving flexibility in how they ensure actuarial soundness.

Some states prefer to develop a range of rates for plans rather than a set payment amount. That enables them to make minor adjustments to plan payments without going through the certification process again. This approach will be available under the new proposed rule.

Medicaid directors are reviewing the rule and plan to provide initial feedback to the CMS at their upcoming annual meeting this month, according to Matt Salo, executive director of the National Association of Medicaid Directors.

Medicaid Health Plans of America was largely pleased with the rulemaking, according to Alexander Shekhdar, vice president of state and federal policy for the trade group.

The regulation reduced administrative burden on insurance companies by proposing to eliminate a standard that paper provider directories had to updated at least monthly. This mandate meant mass reprinting of networks each month, according to the CMS.

Instead, plans would only have to update paper directories quarterly as long as they maintain their mobile directories.

Moving away from time and distance standards to prove network adequacy will also allow plans to be more innovative in their care management, with some potentially increasing use of telemedicine, Shekhdar said.

Comments on the proposed rule are due on January 14, 2019.