Fact Sheets

Medicaid & Children’s Health Insurance Program (CHIP) Managed Care Final Rule - CMS-2408-F


The announcement of the 2020 Medicaid & CHIP Managed Care final rule highlights the Trump Administration’s continued commitment to reduce administrative burden and cut red tape, support state flexibility, and promote transparency and innovation in the Medicaid and CHIP programs for the growing number of people in Medicaid and CHIP managed care. This final rule finalizes policies from the Notice of Proposed Rule Making issued in November 2018. 

Based on 2018 state Medicaid and CHIP enrollment data, eighty three percent, or around 66 million people, are enrolled in managed care arrangements that allow private health plans to administer state Medicaid benefits[1]. In 38 states, at least 50 percent of all Medicaid beneficiaries and in 32 states, about 79 percent of CHIP children, were enrolled in managed care, as growth in managed care enrollment has continued.

In 2016, CMS issued a Medicaid & CHIP Managed Care Final Rule to update the regulations governing Medicaid and CHIP managed care programs for the first time in over a decade. Since publication, the landscape for healthcare delivery continues to change, and states are continuing to work toward reforming healthcare delivery systems to address the unique challenges and needs of their local citizens. To that end, the Department of Health and Human Services (HHS) and CMS issued a letter to the nation’s Governors on March 14, 2017, affirming the continued HHS and CMS commitment to partner with states in the administration of the Medicaid and CHIP programs, and noting key areas where we would improve collaboration with states and move toward more effective program management. In that letter, we committed to a thorough review of the managed care regulations to prioritize beneficiary outcomes and state priorities.

Since our issuance of that letter, CMS received feedback that the 2016 regulations were overly prescriptive and add costs and administrative burden to state programs. As part of the agency’s broader efforts to reduce administrative burden, we undertook a review to analyze the current managed care regulations. CMS formed a working group with the National Association of Medicaid Directors (NAMD) and state Medicaid Directors to prioritize areas of concern within the managed care regulations and inform the proposals. Together the working group identified ways to achieve a better balance between appropriate federal oversight and state flexibility, while also maintaining critical beneficiary protections, ensuring fiscal integrity, and promoting accountability for providing quality of care to people with Medicaid and CHIP. 

The recommendations from this group culminated in many of the proposals we put forward for comment in November 2018. This rule finalizes many of those proposals and helps ensure that state Medicaid and CHIP agencies are able to work efficiently and effectively to design, develop, and implement Medicaid and CHIP managed care programs that best meet each state’s local needs and populations.

The rule includes significant revision in the following areas of the managed care regulatory framework:

1.         Setting Actuarially Sound Capitation Rates (Medicaid)

2.         Pass-Through Payments (Medicaid)

3.         State-Directed Payments (Medicaid)

4.         Network Adequacy Standards (Medicaid and CHIP)

5.         Risk Sharing Mechanisms (Medicaid)

6.         Quality Rating System (Medicaid and CHIP)

7.         Appeals and Grievances (Medicaid and CHIP)

8.         Requirements for Beneficiary Information (Medicaid and CHIP)

Additional details on the changes being finalized in each section is included in the table below.


Final Rule

1. Setting Actuarially Sound Capitation Rates

  • The rate range provisions with a modification to permit states to move rate cells a de minimis amount (+/- 1 percent) within the 5 percent rate range to address minor program changes during the rating period without the need to submit a revised rate certification. This provision will take effect with rating periods beginning on or after July 1, 2021.
  • The provisions specifying that differences in the assumptions, methodologies, or factors used to develop capitation rates for covered populations must be based on valid rate development standards that represent actual cost differences in providing covered services to the covered populations and that any differences in the assumptions, methodologies, or factors used must not vary with the rate of federal financial participation associated with the covered populations in a manner that increases federal costs.

2. Pass-Through Payments

  • The provision to permit states transitioning Medicaid populations or services from a fee-for-service delivery system to a managed care delivery system to require managed care plans to make pass-through payments for up to 3-years at an amount that is less than or equal to the amount of their current upper payment limit payments under fee-for-service. This provision will take effect with rating periods beginning on or after July 1, 2021.

3. State-Directed Payments

  • The provision to allow states to require managed care plans to adopt payment models that are based on a state plan approved fee-for-service fee schedule without having to receive written approval from CMS and to provide for the approval of multi-year payment arrangements when specified criteria are met.
  • CMS is not finalizing some of the technical changes proposed in the 2018 NPRM based on the diverse range of public comments and continued experience with state directed payments since the NPRM was published. CMS will consider addressing these and other state directed payment policies in a future rulemaking.

4. Network Adequacy Standards

  • The provision to remove the requirement for states to set time and distance standards and to add a more flexible requirement that states set a quantitative network adequacy standard as well as remove “other provider types…as determined by CMS” as a provider type subject to state network adequacy standards. CMS is also clarifying that states have the authority to define “specialists” in whatever way they deem most appropriate for their programs.

5. Risk-Sharing Mechanisms

  • The provision to explicitly prohibit states from adding or modifying risk-sharing mechanisms described in the managed care contract or rate certification documents after the start of the rating period.

6. Quality Rating System (QRS)

  • Provisions that make four changes to the Medicaid and CHIP (MAC) QRS:

1.) To add a requirement that CMS develop, as part of the MAC QRS framework, a minimum set of mandatory performance measures, that will apply equally whether a state chooses to implement the CMS-developed QRS or a state alternative QRS.

2.) To expand the scope of alignment of the MAC QRS and this minimum measure set with the Medicaid Scorecard initiative and other CMS managed care rating systems, as appropriate, such as Medicare Advantage.

3.) To make explicit our intention to take feasibility into consideration when assessing whether an alternative state QRS produces substantially comparable information to that yielded by the CMS-developed QRS.

4.) To make explicit CMS’ intention to consult with states and other stakeholders in developing the MAC QRS including developing the sub-regulatory guidance on the “substantially comparable” standard for alternative QRS.

7. Appeals and Grievances

  • The provisions to eliminate the requirement for enrollees to submit a written, signed appeal after an oral appeal is submitted; to change the timeframe for enrollees to request a state fair hearing to no less than 90 calendar days and no greater than 120 calendar days to better align with Medicaid fee-for-service requirements; and to revise the definition of an adverse benefit determination to exclude claims denied solely because they do not meet the definition of a “clean claim” and thus eliminate the requirement for written notices to enrollees.

8. Requirements for Beneficiary Information

  • The provisions to delete the definition of large print and adopt “conspicuously-visible font size” as well as the requirement to print taglines on all written materials and instead only require taglines on materials that are critical to obtaining services. We are also finalizing the provision to permit quarterly provider directory updates, if the managed care plan offers a mobile-enabled provider directory. Lastly, we are finalizing the change that requires managed care plans issue notices for provider terminations to the later of 30 calendar days prior to the effective date of the termination or 15 calendar days after the receipt or issuance of a termination notice.

Additional Changes

Coordination of Benefits

  • The provision that allows states to determine the most appropriate method for coordination of benefits with the Medicare program for dually eligible enrollees.  States will be will be able to require their managed care plans to enter into a COBA with CMS and participate in the automated claims crossover process directly or, if more appropriate for their program, by using an alternative method by which the state forwards crossover claims it receives from Medicare to the appropriate managed care plan. 


  • Many of the updates to the Medicaid regulations will also apply to CHIP, including network adequacy standards, medical loss ratio standards, quality rating system and other quality standards, appeals and grievances, and requirements for beneficiary information. CMS is also finalizing CHIP-specific technical and clarifying edits, including for appeals and grievances, sanctions, and program integrity safeguards.