​Fun with Medicaid Managed Care: Network Adequacy Standards and More!


We bet you have not seen the word "fun" used in the same sentence with "Medicaid" or with "Managed Care" before! To be fair, perhaps we should not have done so this time—it was a veiled (and arguably pathetic) attempt to increase our readership. But, in our defense, we are excited to share the news: On May 26, 2015, the Centers for Medicare and Medicaid Services (CMS) proposed a new rule intended to standardize Medicaid managed care across states and to bridge the gap between such plans and Medicare Advantage plans, as well as private commercial plans. Approximately 70 percent of Medicaid enrollees are served through managed care delivery systems, yet the regulations governing this area have remained dormant for approximately 12 years. With this proposed rule, the Obama administration boldly goes where nobody has dared to venture in more than a decade.

So, why now? There are a number of good reasons, but one near and dear to your authors' hearts is network adequacy. The proposed rule aims to create standards to ensure Medicaid beneficiaries can access adequate provider networks, which has always been a particular challenge for residents of rural communities. Specifically, CMS proposes that states adopt time and distance standards for behavioral health, obstetrics/gynecology, dental services, and pediatric services. While private plans have been narrowing their provider networks over time to address cost and efficiency issues, the proposed CMS rule would limit the ability of Medicaid managed care plans to do so. But, rather than setting a national standard, the proposed rule leaves a significant amount of discretion to state Medicaid agencies. This discretion will encourage state Medicaid agencies to consider the following (somewhat general) factors in determining whether beneficiaries can access the care they need:

  • anticipated enrollment
  • expected utilization
  • characteristics and health needs of enrollees
  • number and types of health professionals needed to deliver services
  • number of providers not accepting new Medicaid patients
  • geographic location and accessibility of providers and enrollees
  • ability of providers to ensure physical access, accommodations, and accessible equipment for Medicaid enrollees with physical or mental disabilities
  • ability of providers to ensure culturally competent communication, including the ability to communicate with limited English-proficient enrollees in their preferred language

CMS requests comments on whether time and distance standards are the appropriate measures and also whether CMS should give (even more) flexibility to states to determine what kind of standards to set.

In addition to network adequacy standards, the proposed rule calls for:

  • Establishing a Medical Loss Ratio (MLR)—i.e., a cap on the administrative costs of a plan such that premiums go straight to clinical and quality benefits—of 85 percent, effective in 2017. The Affordable Care Act (ACA) establishes the MLR of 85 percent for Medicare Advantage plans. The proposed Medicaid managed care MLR requirement would lack the "teeth" of the ACA. Medicaid plans would not have to fork over the moola to enrollees if they miss the threshold.
  • Greater transparency in how state Medicaid agencies determine payment rates, and affirmative reporting requirements to CMS regarding related data.
  • Freedom for beneficiaries enrolled in long term care plans to move to standard Medicaid coverage if their long term care providers are outside of managed care networks.
  • Establishment of quality standards and ranking similar to those used for Medicare and exchange coverage, with accreditation every three years.
  • Allowing a capitation payment from the state for certain services that might otherwise be subject to the Institutions for Mental Disease (IMD) payment exclusion for enrollees aged 21 to 64 who stay in an IMD in a given month (for less than 15 days of that month), provided that the IMD is a hospital providing psychiatric or substance abuse disorder inpatient care or a sub-acute facility providing psychiatric or substance abuse crisis residential services.
  • Allowing beneficiaries greater choice with regard to their managed care plans/ enrollment.
  • Revised appeals and grievance processes to align better with Medicare Advantage and private plans, e.g. adopting a 60-day timeline from "adverse benefit determination" for appeals, with decisions required within 30 days.

Comments on the proposed rule are due by July 27, 2015.

The budgetary and resource burdens on managed care plans attempting to comply with these rules seem potentially significant, and there has been speculation that states will struggle, especially those states that have no quality accreditation standards currently in place. Plans in states with existing infrastructure to meet the contemplated standards and goals will have an advantage.

See, didn't you have fun reading this? We just knew you would! We will keep you posted as the rule progresses. Try to contain your excitement because the government moves with "all deliberate speed."

For questions, please contact Jon Kammerzelt at (608) 283-2438/jon.kammerzelt@quarles.com, Sarah Coyne at (608) 283-2435/sarah.coyne@quarles.com, or your Quarles & Brady attorney.

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