On April 25, the Centers for Medicaid and Medicare Services (CMS) released a long-awaited final rule that updates the regulations for managed care organizations in the Medicaid and Children’s Health Insurance Programs (CHIP). These new requirements represent the first major updates to Medicaid and CHIP managed care since 2002. In the intervening years, the percentage of Medicaid enrollees being served at least in part by a managed care organization has risen to nearly 80 percent, with millions more eligible for the program as a result of the expansion in the Affordable Care Act. At over 1,400 pages, it is likely that the new rule will take months to fully unpack. In the coming weeks, NASHP will be developing materials that highlight the provisions that most affect states. Based on our first review, the following list contains what we believe are some of the rules most significant changes:
- States retain flexibility related to Medicaid enrollment processes. In the proposed rule, CMS had considered establishing a 14-day selection period for enrollees in both mandatory and voluntary Medicaid managed care programs. This provision would have required states to provide 14 days of fee-for-service Medicaid to eligible beneficiaries while these individuals selected their Medicaid managed care plan. CMS has decided to not implement this change in response to state concerns about potential disruption and delays in access to care. States will retain the ability to enroll beneficiaries into managed care plans effective immediately upon eligibility determination. Enrollees who are automatically enrolled into plans through a mandatory managed care program retain the ability to change plans for any reason within 90 days, every 12 months when they reenroll, and at any time for cause.
- States will have flexibility in developing network adequacy standards for key providers and populations. The final rule resolved to generally maintain the current approach to network adequacy standards in Medicaid and CHIP, which grants state officials the authority to develop standards and certify to CMS that plans are meeting these requirements. The rule does require states to develop and implement specific time and distance standards for a new set of provider types, including primary and specialty care (adult and pediatric), behavioral health (adult and pediatric), OB/GYN, pediatric dental, and hospital providers. States will also have to develop and implement network adequacy standards for Medicaid managed long-term services and supports.
- The final regulations make significant changes to CHIP. As NASHP noted in our earlier blog on the proposed rule, the changes considered, and now finalized, for CHIP come at a time of uncertainty regarding the future of the program as it is currently only funded through September 2017. While CHIP officials are hopeful that federal CHIP funding will be extended, it is unlikely the program will be made permanent. When reviewing the proposed rule, many CHIP officials questioned the value of devoting resources, including staff time and dollars, that are already stretched thin, to change a time limited program. In recognition that timing is a major concern for state CHIP officials, the final rule extends the deadline by which CHIP managed care contracts must comply with most changes to July 1, 2018.
- Creation of an 85 percent Medical Loss Ration (MLR) for Medicaid and CHIP. The final rule requires that Medicaid and CHIP managed care plans calculate and report a MLR. The new standards for calculating the MLR have been aligned to be generally consistent with Medicare Advantage plans and qualified health plans (QHPs), with some variation allowed for the unique nature of the Medicaid and CHIP programs. The MLR requirements will be effective for contracts that start on or after July 1, 2017.
- States have tools to engage Medicaid managed care plans in delivery reform efforts. The rule clarifies that state officials can use their contractual agreements to encourage managed care plans to participate in delivery system reform efforts and performance improvement initiatives. States are also permitted to use incentive or withhold arrangements to encourage managed care plans to meet quality or performance targets established through contract.
- Rule establishes Medicaid and CHIP’s first ever Quality Rating System (QRS); state officials may be able to establish their own rating methods. The rule provides authority for CMS to develop a Medicaid and CHIP managed care QRS to provide performance information to consumers on all managed care plans. A public engagement process will support the development of the QRS, similar to the process used to develop the Marketplace QRS. The rule also provides authority for CMS to develop an alternative approval process for state officials wishing to develop their own QRS system, provided that the alternative contains similar information on plan performance.
As NASHP staff spends more time reviewing and analyzing this important final rule, we encourage state officials to let us know your questions and comments. We will share more information and resources to help state official digest this final rule and implement its changes to help further modernize Medicaid programs.
 A MLR requires that managed care entities expend a minimum established percentage of revenues on medical claims and quality improvement efforts. The remaining revenue may then be used for administrative costs (e.g., overhead, marketing, salaries), taxes, and profits.