Perri Nena Smith

Senior Editor

Loyola University Chicago School of Law, JD 2021

 

The Centers for Medicare & Medicaid Services (“CMS”) refined the Medicaid and Children’s Health Insurance Program (“CHIP”) Managed Care final rules. CMS originally released the final rules in 2016 and another revision in 2018. After several cumulative comments on 2016 and 2018 final rules, CMS attempted to create more flexibility for States with managed care delivery methods. CMS’s third version of the final rules is more of an attempt to clarify and fix technical errors than giving States more flexibility to operate their managed care organizations.

The Final Rule

In response to State comments in 2018, CMS implemented this final rule to give states flexibility to follow managed care regulations without unnecessary administrative burden. The 2020 final rule regulations will become effective December 14, 2020, except for the two new additions of §§ 438.4(c) (instruction 4) and 438.6(d)(6) (instruction 7), which will become effective July 1, 2021. CMS responded to a total of 215 timely comments from state Medicaid and CHIP agencies, advocacy groups, health care providers and associations, health insurers, managed care plans, health care associations, and the general public.

States can implement manage care delivery systems with federal authority through sections 1915(a), 1915(b), 1932(a), and 1115(a) of the Social Security Act (“the Act”). Medicaid managed care organizations (“MCO”) provide an organized way to manage cost, utilization, and quality of enrollees. The final rule will apply to the states that have managed delivery systems.

The final rule made updates and changes to 20 different Medicaid sections and addressed each section’s many comments. From the notice, CMS aimed to increase flexibility and reduce prescriptive regulations. The updated 2020 final rules for Medicaid only had four sections aim at reducing flexibility, two sections that seem to be stricter regulation than 2016, and the rest of the sections related to clarification and technical errors.

Medicaid Sections addressed in the 2020 final rule

1. Standard contract requirements (§ 438.3(T)
2. Actuarial Soundness Standards (§ 438.4)
   438. Option to develop and certify a rate range (§ 438.4 (C))
3. Rate Development Standards: Technical Correction (§ 438.5(c)(3)(ii))
4. Special Contract Provisions Related to Payment (§ 438.6)
5. Rate Certification Submission (§ 438.7)
6. Medical Loss Ratio (MLR) Standards: Technical Correction (§ 438.8)
7. Non-Emergency Medical Transportation PAHPs (§ 438.9)
8. Information Requirements (§ 438.10)
   438. Language and Format (§ 438.10(d))
9. Disenrollment: Requirements and Limitations (§ 438.56)
10. Network Adequacy Standards (§ 438.68)
11. Adoption of Practice Guidelines (§ 438.236)
12. Enrollee Encounter Data (§ 438.242(c))
13. Medicaid Managed Care Quality Rating System (MAC QRS) (§ 438.334)
14. Managed Care State Quality Strategy (§ 438.340)
15. Activities Related to External Quality Review (§ 438.358)
16. Exemption From External Quality Review (§ 438.362)
17. External Quality Review Results (§ 438.364)
18. Grievance and Appeal System: Statutory Basis and Definitions (§ 438.400)
19. Grievance and Appeal System: General Requirements (§§ 438.402 and 438.406)
20. Resolution and Notification: Grievances and Appeals (§ 438.408)

The sections that added some state flexibility were the option to develop and certify a rate range, the information requirement, Medicaid Managed Care Quality Systems, and grievance and appeals systems: general requirements. Section 438.4(C) 2016 final rules restricted capitation rates paid to managed care organizations per member to a specific rate; the 2020 final rules now allow a range rate. Since State Medicaid program information is public, the states were concerned releasing specific rates would hurt their ability to negotiate. Additionally, Section 438.10(D) of the information requirement removed the restriction of larger font size to allow states to create effective communication documents. Next, the Medicaid Managed Care Quality System section § 438.334 prescribed a requirement that States use the CMS quality rating system.  The quality rating system rates health plans based on relative quality and price ; CMS displays the rates on HealthCare.gov for the public.  The new 2020 final rules will allow an alternative quality rating system instead. Finally, Sections §§ 438.402 and 438.406 increased state flexibility for the grievance and appeals system by eliminating the requirement that oral appeals be submitted in signed writing.

Compliance

Medicaid is extremely regulated, and failure to comply with rules can result in a corrective action plan to the states, which can also have a monetary penalty. MCOs contracted with the states can have sanctions place on them for their failure to comply. CMS mentions the States impact but not impact of the MCOs. The MCOs have to comply not only with federal regulations but State-specific regulations. The MCOs will rely on some of the flexibility given to the states from final rule updates.