CMS’s 2020 Final Medicaid Managed Care Rule: A Summary of Major Changes
Issue Brief
85 Fed. Reg. 72754-72844 (Nov. 13, 2020), https://www.govinfo.gov/content/pkg/FR-2020-11-13/pdf/2020-24758.pdf. The proposed changes were published at 83 Fed. Reg. 57264-57299 (Nov. 14, 2018), https://www.federalregister.gov/documents/2018/11/14/2018-24626/medicaid-program-medicaid-and-childrens-health-insurance-plan-chip-managed-care.
81 Fed. Reg. 27498-27901 (May 6, 2016), https://www.federalregister.gov/articles/2016/05/06/2016-09581/medicaidand-childrens-health-insurance-program-chip-programs-medicaid-managed-care-chip-delivered.
For a summary of the 2016 final rule, see KFF, CMS’s Final Rule on Medicaid Managed Care: A Summary of Major Provisions (June 2016), https://www.kff.org/report-section/cmss-final-rule-on-medicaid-managed-care-issue-brief/.
Most provisions were effective July 2016, although some provisions became effective later. See id.
Letter from HHS Sec’y Thomas E. Price and CMS Administrator Seema Verma to governors (March 14, 2017), https://www.hhs.gov/about/news/2017/03/14/secretary-price-and-cms-administrator-verma-take-first-joint-action.html.
CMCS Informational Bulletin, Medicaid Managed Care Regulations with July 1, 2017 Compliance Dates (June 30, 2017), https://www.medicaid.gov/federal-policy-guidance/downloads/cib063017.pdf.
The November 2020 final rule also includes some proposals related to CHIP which are outside of the scope of this brief.
KFF analysis of the Centers for Medicare and Medicaid Services' Medicaid Managed Care Enrollment Reports, 2020, https://www.kff.org/other/state-indicator/total-medicaid-mco-enrollment/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.
KFF, State Health Facts, Share of Medicaid Population Covered under Different Delivery Systems (July 1, 2019), https://www.kff.org/medicaid/state-indicator/share-of-medicaid-population-covered-under-different-delivery-systems/.
This brief generally refers to “health plans.” Provisions in the proposed rule generally apply to MCOs, and some provisions also apply to PIHPs, PAHPs, and PCCM entities.
CMS is continuing its stakeholder engagement process and plans a future quality rating system specific rulemaking.
Rate cell ranges are allowed provided the following conditions are met: 1) the rate certification identifies and justifies the assumptions, data, and methods specific to the upper and lower bounds of the rate range; 2) both the upper and lower bounds of the rate range are certified as actuarially sound; 3) the upper bound does not exceed the lower bound multiplied by 1.05; 4) the rate certification documents the state’s criteria for paying health plans at different points within the rate range; and 5) the state does not use as criteria for payment for different points within the rate range the willingness or agreement of plans or their network providers to enter into intergovernmental transfer (IGT) agreements or the amount of funding plans or their network providers provide through IGT agreements.
States must post the upper and lower bounds of each rate cell; a description of all assumptions that vary between the upper and lower bounds of each rate cell, including the specific assumptions used for the upper and lower bounds; and a description of the data and methodologies that vary between the upper and lower bounds of each rate cell, including the specific data and methodologies uses for the upper and lower bounds.
These practices include 1) using a profit, operating, or risk margin to develop capitation rates that is higher than the margin used to develop capitation rates for the covered population, or contract, with the lowest average rate of FFP; 2) factoring into the development of capitation rates the additional cost of contractually required provider fee schedules or minimum levels of provider reimbursement, above the cost of similar provider fee schedules, or minimum levels of provider reimbursement, used to develop capitation rates for the covered population, or contract, with the lowest average rate of FFP; and 3) lowering the remittance threshold for a medical loss ratio for any covered population, or contract, below the threshold used for the covered population, or contract, with the lowest average rate of FFP.
The 2020 final rule provides a non-exhaustive list of risk-sharing mechanisms, including reinsurance, risk corridors, and stop-loss limits. In the preamble to the 2020 final rule, CMS also confirmed that a minimum medical loss ratio with a remittance and additional restrictions on profits or contractual profit caps are considered risk-sharing mechanisms under the final rule.
Retroactive rate adjustments must be supported by a rationale; the data, assumptions, and methodologies used to determine the magnitude of the adjustment must be adequately described in enough detail for CMS or an actuary to determine that the adjustment is reasonable; certified by an actuary in a revised rate certification; and submitted as a contract amendment for CMS approval.
CMS clarified that disproportionate share hospital (DSH) and graduate medical education (GME) payments are not considered supplemental payments.
On January 17, 2018 CMS posted a final rule clarifying pass-through payment transition periods and maximum allowable pass-through payments. See 82 Fed. Reg. 5415-5429 (Jan. 18, 2017), https://www.federalregister.gov/documents/2017/01/18/2017-00916/medicaid-program-the-use-of-new-or-increased-pass-through-payments-in-medicaid-managed-care-delivery.
For background about the Medicaid IMD payment exclusion, see KFF, State Options for Medicaid Coverage of Inpatient Behavioral Health Services (Nov. 2019), https://www.kff.org/medicaid/report/state-options-for-medicaid-coverage-of-inpatient-behavioral-health-services/.
To receive federal matching funds for “in lieu of” services, a state must identify the services in the plan’s contract and determine that they are medically appropriate and cost-effective. In lieu of services are offered at plan option, and an enrollee cannot be required to use them. KFF, CMS’s Final Rule on Medicaid Managed Care: A Summary of Major Provisions (June 2016), https://www.kff.org/report-section/cmss-final-rule-on-medicaid-managed-care-issue-brief/.
In July 2015, the CMS issued a state Medicaid director letter describing Section 1115 IMD SUD payment waivers. In November 2017, the CMS issued a state Medicaid director letter revising the 2015 guidance. For current IMD state waiver activity, see KFF, Medicaid Waiver Tracker: Approved and Pending Section 1115 Waivers by State (Nov. 13, 2020), https://www.kff.org/medicaid/issue-brief/medicaid-waiver-tracker-approved-and-pending-section-1115-waivers-by-state/.
CMS, SMD #18-011, Opportunities to Design Innovative Service Delivery Systems for Adults with a Serious Mental Illness or Children with a Serious Emotional Disturbance (Nov. 13, 2018), https://www.medicaid.gov/federal-policy-guidance/downloads/smd18011.pdf.