Fact Sheets

Medicaid and Children’s Health Insurance Program Managed Care Access, Finance, and Quality Final Rule (CMS-2439-F)

Managed care is the predominant delivery system in Medicaid and the Children’s Health Insurance Program (CHIP), with over 70% of Medicaid and CHIP beneficiaries receiving some or all of their care through a managed care plan.[1],[2] In recent years, CMS and states have strived to ensure beneficiaries’ access to high-quality care, ensure adequate provider payment, and provide comprehensive program monitoring and oversight. Executive Order 14009 in 2021 established the policy objective to protect and strengthen Medicaid and the Affordable Care Act (ACA), and to make high-quality health care accessible and affordable for every American.[3] In 2022, Executive Order 14070 directed agencies to identify ways to continue to expand the availability of affordable health coverage, to improve the quality of coverage, to strengthen benefits, and to help more Americans enroll in quality health coverage.[4] This final rule helps build stronger managed care programs to better meet the needs of the people enrolled in Medicaid and CHIP by improving access to, and quality of, care. 

The final rule specifically strengthens standards for timely access to care and states’ monitoring and enforcement efforts; enhances quality and fiscal and program integrity standards for state directed payments (SDPs); specifies the scope of in lieu of services and settings (ILOSs) to better address health-related social needs (HRSNs); further specifies medical loss ratio (MLR) requirements; and establishes a quality rating system (QRS) for Medicaid and CHIP managed care plans. This final rule, along with the Ensuring Access to Medicaid Services (CMS-2442-F) final rule, underscores the Biden-Harris administration’s commitment to strengthening access to coverage and care.

The final rule includes significant regulatory revisions in the following areas: 

Topic:Final Rule:
 Establishes maximum appointment wait time standards: 15 business days for routine primary care (adult and pediatric) and obstetric/gynecological services; 10 business days for outpatient mental health and substance use disorder services (adult and pediatric). States must establish an appointment wait time for a state-selected service (adult and pediatric if appropriate). 
Requires states to use an independent entity to conduct annual secret shopper surveys to validate managed care plans’ compliance with appointment wait time standards and the accuracy of provider directories to identify errors and providers that do not offer appointments. 
Requires states to conduct an annual enrollee experience survey for each managed care plan. 
Requires states to submit an annual payment analysis that compares managed care plans’ payment rates for certain services as a proportion of Medicare’s payment rate and, for certain home- and community-based services, the state’s Medicaid state plan payment rate.
Requires states to implement a remedy plan for any managed care plan that needs improvement in meeting required access standards.
Requires states to maintain a single web page that is readily identifiable to the public, easy to use, and contains required information for public transparency.
State Directed Payments  
 Removes regulatory barriers to help states use state directed payments to implement value-based purchasing payment arrangements and include non-network providers in state directed payments.   
Eliminates written prior approval for state directed payments that are minimum fee schedules set at the Medicare payment rate.
Requires that provider payment levels for state directed payments for inpatient and outpatient hospital services, nursing facility services, and the professional services at an academic medical center not exceed the average commercial rate.
Requires states to condition fee schedule based state directed payments upon the delivery of services within the contract rating period and allows state directed payments based on value-based purchasing to tie payment to performance up to one year prior. 
Prohibits the use of post-payment reconciliation processes for state directed payments that are based on fee schedules.
Prohibits the use of separate payment terms and requires that all state directed payments be included in actuarially sound capitation rates.
Establishes submission timeframes for state directed payment preprints
Establishes submission timeframes for state directed payments in rate certifications and managed care plan contracts.
Requires provider level reporting on actual state directed payment expenditures in the Transformed Medicaid Statistical Information System.
Clarifies expectations for states on the development of evaluation plans for each state directed payment and requires states to submit evaluation reports to CMS every three years if the state directed payment costs (as a percentage of total capitation payments) exceed 1.5%.
Establishes a process for states to appeal state directed payment disapprovals to the Department Appeals Board.
Makes explicit in regulation the existing requirement that state directed payments must comply with all federal laws concerning funding sources of the non-federal share. 
Requires that states ensure each provider receiving a state directed payment attest that it does not participate in any arrangement that holds taxpayers harmless for the cost of a tax. CMS concurrently releases an informational bulletin regarding CMS’ exercise of enforcement discretion until calendar year 2028 for existing health-care related tax programs with certain hold-harmless arrangements involving the redistribution of Medicaid payments.
Medical Loss Ratio  
 Requires Medicaid managed care plans to submit actual expenditures and revenues for state directed payments as part of their medical loss ratio reports to states.
Specifies that states must provide medical loss ratios for each managed care plan.        
Makes technical revisions for quality improvement expenditures, provider incentive payments, and expense allocation reporting to align with recent regulatory changes for Marketplace plans.
Requires managed care plans to report any identified or recovered overpayments to states within 30 calendar days.
Specifies contractual requirements for provider incentive payments
In Lieu of Service and Setting (ILOS)  
 Specifies that ILOSs can be used as immediate or longer-term substitutes for a covered service or setting under the state plan, or when the ILOSs can be expected to reduce or prevent the future need for such service or setting to better support HRSNs (e.g., certain allowable housing and nutritional supports that are medically appropriate and cost effective). 
Requires that an ILOS be considered approvable as a service or setting through the Medicaid state plan or a Medicaid section 1915(c) waiver.
Requires specific information to be documented in managed care plan contracts for each ILOS.
Requires additional documentation from states on their processes to determine an ILOS medically appropriate and cost effective if the ILOS costs (as a percentage of total capitation payments) exceed 1.5%.
Imposes a limit of 5% on total ILOS costs as a percentage of total capitation payments for each program.
Requires ongoing monitoring of each ILOS and an evaluation after five years if the ILOS costs (as a percentage of total capitation payments) exceed 1.5%.
Requires states to develop a transition plan to arrange for state plan services and settings to be provided timely if an ILOS will be terminated.


Quality Strategy and External Quality Review (EQR)

 Increases public engagement around states’ managed care quality strategies.
Eliminates EQR requirements from primary care case management entities.
Makes it easier for states to use accreditation reviews for EQR.
Establishes consistent 12-month review periods for the annual EQR activities to ensure the reports contain the most recent data and information.
Requires more meaningful data and information to be included in the annual EQR reports. 
Quality: Medicaid and CHIP Quality Rating System (MAC QRS) 
 Establishes the state’s MAC QRS website as a state’s “one-stop-shop” where beneficiaries could access information about Medicaid and CHIP eligibility and managed care; compare managed care plans based on quality and other factors key to beneficiary decision making, such as the plan’s drug formulary and provider network; and ultimately select a plan that meets their needs.
Establishes the CMS framework and state requirements for the MAC QRS (including an initial set of mandatory measures for the quality ratings), and the process by which the mandatory measures would be updated in the future.
Establishes the methodology for calculating the quality ratings displayed on each state’s MAC QRS.
Broadens flexibility for states to implement an alternative QRS.
Children’s Health Insurance Program 
 Requires separate CHIPs to align with Medicaid on most proposed provisions related to access, ILOS, MLR, and quality. Notable exceptions include not adopting Medicaid provisions for SDPs and the Managed Care Annual Report (MCPAR), consistent with previous rulemaking. Unique to separate CHIPs, the final rule requires states to post summary Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey data by plan, annually, on state websites, and review CAHPS results in the state’s annual analysis of network adequacy within two years of the effective date of the Final Rule.

For more information, please see the final rule and a chart outlining the applicability date for all regulatory changes. 

Additional Medicaid managed care resources are available at:

For questions regarding Medicaid managed care, email: