June 2015

Medicaid Managed Care Program

Proposed Rule

Question and Answers

Background

On June 1, 2015, the Centers for Medicare and Medicaid Services (CMS) publishedaProposed Rule updating the requirements for the Medicaid managed care program.[1] Iffinalized, this proposal wouldrepresentthe most sweeping changes tothe federalMedicaid managed care regulationsin over a decade. According to CMS, a revamp of the current rules is necessary to modernize the Medicaid managed care program so that it keeps pace with theevolving health care delivery landscape,particularlythe reforms enacted under the Affordable Care Act (ACA). The Proposed Rulehas significant implications forMedicaid beneficiaries and healthcare providers who provide services tomanaged care enrollees.

The comment deadline for the Proposed Rule is5 pm on July 27, 2015. Stakeholders may submit comments electronicallythrough (enter file code CMS-2015-0068-0001 into the search field).

Q. Whatis CMS’s overarching purposefor issuing this Proposed Rule?

A. The Proposed Rule is intended to update the Medicaid managed care program to reflect the current healthcare delivery environment. Until the 1990s, most Medicaid beneficiaries received healthcare services under Medicaid fee-for-service (FFS) programs. Since that time, states have increasingly turned to managed care arrangements, where beneficiaries receive part or all of their Medicaid benefits through private managed care entities[2] under contract with the state. In 2011, at least 58% of all Medicaid beneficiaries in 39 states and the District of Columbia received at least part of their Medicaid benefits through managed care, up from 41% of in 1998 and just 8% in 1992.[3]

As CMS notes in the Proposed Rule, the healthcare delivery landscape has changed significantly since 2002, when the existing regulations governing the Medicaid managed care program were first issued. In particular, the Medicaid expansion and private insurance market reforms under the ACAhave largely made the current regulatory framework obsolete.[4] In light of this new environment, the Proposed Rule is designed tostrengthen the ability of states to use managed care to promote innovative and cost-effective methods of delivering care to Medicaid patients. CMS also aims to align the Medicaid managed care program with the requirements of other private and government health insurance programs, including the Medicare Advantageprogram and the health insurance Marketplaces (also known as “Exchanges”). According to CMS, doing so would support administrative simplicity for states and ensure consistent protectionsfor individuals that transition between different sources of healthcoverage.[5]

Q. What are some of the key topics addressed in the Proposed Rule?

A. In accordance with CMS’soverall objectives formodernizing the Medicaid managed care program,the Proposed Rule includes the following key topics:

  • Outpatient prescription drugs. The proposal would establish standards for coverage and prior authorization (PA) procedures for outpatient prescription drugs.
  • Institutions for Mental Disease (IMD) exclusion. The proposal would relax the so-called“IMD exclusion” to allow managed care plans to receive capitated payments for Medicaid enrollees who are short-term stay patients ofIMDs.
  • Grievance and appeals system. The proposal would align the requirements for the Medicaid managed care plan grievance and appeals process with those of other federal and commercial health insurance programs.
  • Network adequacy. The proposal would establish new minimum parameters for states to follow to assess the adequacy of plan provider networks.
  • Beneficiary protections. The proposal would enhance beneficiary protections under themanaged care enrollment process, as well as ensure continued access to medically necessary services (including prescription drugs) during transitions of care.
  • Quality and value-based care initiatives. The proposal would grant states additionalflexibility to use value-based payment models, as well asincorporate other measures designed to improve the quality of care provided to enrollees.

I. Outpatient Prescription Drugs

Q. How would the Proposed Rule affect the coverage requirements foroutpatient prescription drugs?

A. The Proposed Rule would require Medicaid managed care plans under contract to provide prescription drugs to offer coverageon par with that available under Medicaid FFS. This means thatplans would be required to cover“covered outpatient drugs,” as that term isusedfor purposes of theMedicaid FFS program.[6] Plans would still be permitted to maintain formularies that grant preferential status to certain covered outpatient drugs over others. However, when an enrolleedemonstrates a medical need for a particulardrug that is not on the plan’s formulary but that is within the scope of the contract, the planmust cover the drug under aPA process.[7]

Q. Would any requirements apply to plans’ PA procedures for prescription drugs?

A. Yes. The PA procedures usedby Medicaid managed care planswould also be required to meet the standards that apply under theMedicaid FFS program. Thus, plans would have to respond to enrollee PA requests for covered outpatient drugs by telephone or othertelecommunication device within 24 hours of the request,as well as dispense a 72-hour supply of a drug to an enrollee in an emergency situation.[8]

II. IMD Exclusion

Q. What is the “IMD exclusion” and how does it affect Medicaid beneficiary access to inpatient psychiatriccare?

A. The “IMD exclusion” refers to a longstanding provision of federal lawthat prohibits federal Medicaid dollars from being used to pay for services provided to adults between the ages of 21 to 64 who are patients of an IMD.[9] IMDs are inpatient facilities with more than 16 beds that are primarily engaged in providing the diagnosis, treatment, or care of persons with mental illness.[10] Because of the IMD exclusion, Medicaid providers cannot be paid for furnishing services to patients of IMDs, regardless of whether those services are provided inside or outside of the IMD. As CMS itself acknowledges in the Proposed Rule, the IMD exclusion has created significant access barriers for many patients seeking inpatient mental health or substance use disorderservices. These access issues have been exacerbated by the fact that the number of inpatient psychiatric beds has declined in recent years, leading to a lack of capacity. At the same time, Medicaid and private health insurance expansion under the ACA has increased the demand for inpatient psychiatric care and substance use disorder treatment.[11]

Q. How would the Proposed Rule modify the IMD exclusion under the Medicaid managed care program?

A. The IMD exclusion applies to both the Medicaid FFS and managed care programs, and eliminating it entirely would require a change in law. However, the Proposed Rule would relax the IMD exclusion for certain short-term patient stays in IMDs. Specifically, CMS would permit managed care plans to receive monthly capitation payments from states for enrollees that receive inpatient services in an IMD for only a portion of the month (less than 15 days), so long as the facility is either: 1) a hospital providing psychiatric or substance use disorder inpatient care; or 2) a sub-acute facility providing psychiatric or substance use disorder crisis residential services.[12] The Proposed Rule would also clarify that, despite the IMD exclusion, Medicaid managed care plans would have the flexibility to covermedically appropriate and cost effectiveservices furnished to patients in an IMD in lieu services provided in less effective settings of care, such as hospital emergency departments. CMS seeks comment on this proposal, as well as other recommendations for addressing the IMD payment exclusion in the Medicaid managed care program.

Q. Why did CMS limit this proposal to short-term stays in IMDs of less than 15 days?

A. CMS’s proposal specifically seeks to address stakeholder concerns about access to and availability ofshort-term inpatient psychiatric and substance use disorder services. Moreover, CMS believes that permitting capitation payments for longer IMD stays is more likely to run afoul of the statutory IMD exclusion, which, as noted above, applies in the Medicaid managed care context. The 15-day parameter is based on evidence of lengths of stay in an IMD from the Medicaid Emergency Psychiatric Demonstration, a current CMS demonstration program in 11 states and the District of Columbia under which IMDs receive Medicaid payment.[13]

III. Network Adequacy

Q. Does the Propose Rule address the adequacy of provider networks?

A. Yes. The Proposed Rule would establish new requirements aimed establishing minimum standards for network adequacy for Medicaid managed care plans. Under the existing regulatory framework, states are in charge of ensuring the availability of services for enrollees in the plans offered by contractedmanaged care entities. However, CMS has found significant variation in the standards that states use to defineadequate plan networks, as well as the methods they use to evaluate these networks.

The Proposed Rule’s network adequacy standards would continue to primarily rely on states to oversee provider networks, but would include new minimum federal parameters that states must follow. Specifically, states would have to establish “time and distance” standards for specific types of providers that would require beneficiaries to have access to providers within maximum travel time and distance criteria. The time and distance criteriadeveloped by states would be permitted to vary in different geographic areas of the state.

CMS seeks stakeholder input on a variety of aspects of its network adequacy proposal, including whether:

  • a standard other than time and distance should be used to define network adequacy (e.g., provider-enrollee ratios);
  • CMS should define, at the federal level, the actual time and distance criteria or provider-to-enrollee ratio at the county level (or other appropriate geographic basis); or
  • states should be granted the flexibility to determine their own appropriate measure for network adequacy.[14]

To promote transparency and public input, CMS would require states to publish the network adequacy standards on the state’s Medicaid managed care website.

Q. Which providers would be subject to the new network adequacy parameters?

A. The specific provider types affected by CMS’s network adequacy proposal would include, at a minimum, the following:

  • Behavioral health;
  • Primary care (adult and pediatric);
  • Specialist (adult and pediatric);
  • OB/GYN;
  • Hospital;
  • Pharmacy; and
  • Pediatric dental.[15]

IV. Beneficiary Protections

Q. What changes would the Proposed Rule make to the beneficiary enrollment process?

A. In response to a perceived “gap” in the current Medicaid managed care enrollment regulations, the Proposed Rule would create a consistent standard for the beneficiary enrollment process for all states. States would be required to implement an enrollment system for both voluntaryprograms, where beneficiaries are given the choice to receive Medicaid services either through managed care or the FFS program, and mandatory programs, where beneficiaries must receive services from a managed care plan.[16]

For both voluntary and mandatory enrollment, states would be required to provide at least 14 days of Medicaid FFS coverage to give time for enrollees to make an active choice of their managed care plan.[17] The minimum 14-day“active choice” period must precede automatic plan enrollment under the state’s default enrollment processes. CMS requests comments on whether the 14-day period is necessary, whether it provides sufficient time for beneficiaries to make a plan election, or whether CMS should adopt a longer minimum period (e.g., 30 or 45 days).[18]

The Proposed Rule also includes standards for states’ default enrollment processes, under which enrollees who do not make active plan selections are automatically assigned toplans. Specifically, CMS would require that default enrollment processes under both voluntary and mandatory programs be conducted in a manner that takes into account existing provider-patient relationships. If doing so is not possible, then the beneficiaries would have to be equitably distributed among participating managed care plans.[19]

Q. Would there be any limits on enrollees’ ability to disenroll from a managed care plan?

A. Yes. Under current law, enrollees are permitted to disenroll from a managed care planfor any reason (i.e., “without cause”) during the first 90 days of enrollment. CMS proposes to revise the regulations to limit this 90-day “without cause” disenrollment period to the first 90 days of an enrollee’s initial enrollment into amanaged care plan.[20] This means that an enrollee would be allowed only one “without cause” disenrollment per enrollment period. Thus, beneficiaries who disenroll from one plan within 90 days could not then disenroll from another plan in which they were subsequently enrolled.

Q. Would states be required to provide Medicaid beneficiaries with additional enrollment assistance?

A. Yes. Under the Proposed Rule, states would be required to develop and implement a “beneficiary support system” to provide assistance to Medicaid beneficiaries both before and after managed care enrollment. At a minimum, the beneficiary support system must include:

  • choice counseling;
  • training on the type and availability of community based resources and supports;
  • assistance to better understand managed care; and
  • assistance regarding long-term services and supports.

The beneficiary support system would have to be made available to beneficiaries in multiple ways, including phone, internet, and via auxiliary aids and services when requested.[21]

Q. How does the Proposed Rule address continuity of care and care coordinationfor Medicaid patients moving into and out of managed care?

A. The Proposed Rule includes several proposals aimed at improving continuity of care and care coordination for Medicaid beneficiaries. These proposals are based on similar transitionpolicies currently used by other public and private health insurance programs.

First, CMS would require states to include a “transition of care policy” for individuals moving to managed care from FFS or between managed care plans. The policy would apply when, absent continuity of care, the enrollee would experience serious detriment to their health or be at risk of hospitalization or institutionalization. States would define this transition policy, subject to certain federal parameters. Most notably, states’ transition policies would need to permit enrollees to continue to receive services (including prescription drugs) that they are currently receiving from their provider for a specified time period. Second, CMS would expand the existing standards for care coordination to include coordination between settings of care, as well as coordination with services provided outside of the particular plan (including another plan and/or the Medicaid FFS program).[22]

V. Grievances and Appeals

Q. Would there be any changes to the enrollee grievance and appeals process?

A. Yes. CMS proposes several modifications to the current requirements for the Medicaid managed care appeals and grievance system, which are intended to further align Medicaid managed care with the rules applicable to Medicare Advantage plans and private insurance and group health plans. Most notably, the Proposed Rule would shorten the timeframes within which Medicaid managed care plans would have to make decisions about enrollee appeals from 45 days to 30 days.[23] Plans would be required to process expedited appeals within 72 hours, rather than thethree working days provided for under current regulations.

VI. Health Care Quality and Delivery System Reform

Q. Does the Proposed Rule address quality?

A. Yes. The Proposed Rule includes various provisions that are designed to strengthen and enhance quality measurement and improvement efforts by focusing the following principles:

  • transparency, such as public reporting of quality data;
  • alignment with other quality systems, such as the Medicare Advantage and Marketplace quality programs; and
  • consumer and stakeholder engagement.[24]

Notably, each statewould be required to develop and implement a Medicaid managed care quality rating system, similar to the systems used under the Medicare Advantage program and Marketplaces, to increase transparency regarding plan performance.[25]

In addition, the Proposed Rule would extend the requirement that states develop and maintain a comprehensive written quality strategy for the entire state Medicaid system, including both the managed care and FFS systems.[26] Currently, this requirement only applies certain managed care entities that contract with the state.

Q. Does CMS’s proposal do anything to advance value-based payment modelsfor Medicaid managed care plans?

A. Yes. CMS would grant flexibility to states to require managed care plansto adopt value-based purchasing models for provider reimbursement.[27] Under this approach, the contract between the state and plan would set forth methodologies or approaches for provider reimbursement that prioritize achieving health outcomes over the mere delivery of services. Similarly, states could that plans participate in broad-ranging delivery system reforms or other performance improvement initiatives (e.g., Patient-Centered Medical Homes).