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CMS Finally Releases Proposed Rules for Medicaid Managed Care

On Friday, Mintz Levin published an advisory on CMS’s proposed Medicaid Managed Care rules. This advisory provides contextual background, a helpful overview of the rule’s contents, and an in-depth discussion of some of the rule’s key provisions.

The 653-page rule is the first major overhaul of the Medicaid managed care system since the inception of the rules in 2002. CMS's proposals affect 39 states (plus the District of Columbia) that use managed care organizations (“MCOs”) to administer Medicaid benefits, which cover approximately 70% of all Medicaid enrollees. Comments to the proposed rule are due by July 27, 2015.

Many of the changes are focused on aligning Medicaid managed care with regulatory requirements for Medicare Advantage and private insurance plans. Among many provisions, this includes proposed medical loss ratio (MLR) requirements, updates to the appeals processes, and additional marketing rules. Other changes include additional required contract provisions, minimum network adequacy standards, and updates to quality improvement programs.

The advisory discusses the impact of key provisions in detail. In addition to the contracting provisions discussed in the advisory, we provide here an overview of a few other noteworthy proposed changes:

Payment for Short-Term IMD Stays

 The Social Security Act prohibits federal financial participation (“FFP”) dollars from being used to cover services provided to individuals 21 to 64 who are in an institution for mental disease (IMD). CMS is proposing the flexibility to allow MCOs and PIHPs to receive a capitated payment (including FFP) when a patient has a “short” inpatient or sub-acute IMD stay. Payment can be provided for these members so long as the facility is a hospital providing psychiatric or substance use disorder (“SUD”) inpatient care or a sub-acute facility providing psychiatric or SUD crisis residential services and the stay in the IMD is for less than 15 days in that month.

 Additional Contract Standards

Other notable contract standards that CMS is proposing to add or update include:

  • Contracts with Medicaid managed care plans must require plans to annually submit financial statements; these audits must be conducted in accordance with generally accepted auditing principles.
  • Final capitation rates must continue to be specifically identified in contracts. CMS proposes to add that the rates must be based only upon services covered under the state plan and represent a payment amount that is adequate to allow the managed care plan to efficiently deliver covered services.
  • CMS proposes to add Section 1557 of the ACA (i.e., prohibition on discrimination in health programs that receive federal financial assistance) to the list of applicable federal laws in the applicable laws standard. The proposed rule also clarifies the existing standard that all contracts must comply with certain specified conflict of interest safeguards.
  • CMS proposes to expand inspection and audit rights for state and the federal government by adding rights to access the premises, physical facilities and equipment of contractors and subcontractors where Medicaid-related activities or work is conducted. CMS also proposes to clarify that the state, CMS, and the Office of the Inspector General may conduct an inspection or audit at any time.
  • Under the proposed rule, states seeking contract approval prior to a specific date must submit their proposed final contracts to CMS for review at least 90 days prior to the planned effective date. The same timeframe standard is proposed for review and approval of the rate certification.

As a reminder, all comments are due to CMS by July 27th.

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Ryan Cuthbertson

Pamela Polevoy

Special Counsel

Pamela handles complex health care transactions and provides intricate regulatory and compliance counsel to health care clients across the United States.