Press release

CMS Proposes Changes to Streamline and Strengthen Medicaid and CHIP Managed Care Regulations

CMS Proposes Changes to Streamline and Strengthen Medicaid and CHIP Managed Care Regulations
Proposed Rule Continues Commitment to Promote Flexibility, Strengthen Accountability, and Maintain and Enhance Program Integrity in Medicaid and CHIP


Today, the Centers for Medicare & Medicaid Services (CMS) is proposing significant regulatory revisions to streamline the 2016 managed care regulatory framework. The changes reflect a broader strategy to relieve regulatory burdens; support state flexibility and local leadership; and promote transparency, flexibility, and innovation in care delivery. While the 2016 managed care final rule was a substantial and comprehensive rewrite of the Medicaid and Children’s Health Insurance Program (CHIP) regulatory structure, it included provisions that many states and stakeholders identified as unnecessarily prescriptive and as adding unnecessary costs and administrative burden to state Medicaid programs without contributing to the improvement of health outcomes.

As part of CMS’ broader efforts to reduce administrative burden, CMS formed a working group with the National Association of Medicaid Directors (NAMD) and state Medicaid Directors to create a framework to review and prioritize areas of concern within the managed care regulations. Together the working group reviewed and analyzed the regulation to identify opportunities 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 for Medicaid beneficiaries.

“Today’s action fulfills one of my earliest commitments to reset and restore the federal-state relationship, while at the same time modernizing the program to deliver better outcomes for the people we serve,” said CMS Administrator Seema Verma. “I want to thank the state workgroup and the CMS team for their diligent work in analyzing these complex regulations and coming forward with a common sense approach to right-size our regulatory oversight and let states focus more on delivering quality health care to their beneficiaries.”

Managed care is a system where states contract with private health plans to administer Medicaid benefits. Over two thirds (68.1 percent) of all Medicaid beneficiaries were enrolled in comprehensive managed care in 2016, up from 65.5 percent in 2015. As states continue to expand their use of comprehensive managed care to deliver Medicaid services, enrollment in comprehensive managed care reached 54.6 million beneficiaries in 2016. The more states continue moving new populations into managed care that have traditionally received their benefits through Medicaid fee-for-service.

To reduce state administrative burden and enhance the ability of states to effectively manage s their Medicaid and CHIP programs, these key proposed revisions to the 2016 final rule would include:

  • Promoting Flexibility
    • Providing states with greater flexibility to develop and certify a rate range under specific conditions and limitations, including that the rate range be actuarially sound;
    • Removing barriers that made it difficult to transition new services and populations into managed care because of existing fee-for-service payment arrangements by providing states with a three year transition period to come into compliance with requirements related to pass-through payments;
    • Providing states more flexibility to set meaningful network adequacy standards using quantitative standards that can take into account new service delivery models like telehealth;
    • Removing outdated and overly prescriptive administrative requirements that govern how plans communicate with beneficiaries to better align with standards used across federal programs and enable the use of modern means of electronic communication when appropriate.
  • Strengthening Accountability
    • Requiring CMS to hold ourselves accountable to issue guidance to help states move more quickly through the federal rate review process and to allow for submission of less documentation in certain circumstances while providing appropriate oversight to ensure patient protections and fiscal integrity;
    • Maintaining the requirement for states to develop a Quality Rating System (QRS) for health plans to facilitate beneficiary choice and promote transparency, but with greater ability for states to tailor an alternative QRS to their unique program while requiring a minimum set of mandatory measures to align with the Medicaid and CHIP Scorecard.
  • Maintaining and Enhancing Program Integrity
    • Maintaining the current regulatory framework for program and fiscal integrity, including provisions related to the actuarial soundness of rate setting, provider screening and enrollment standards, and medical loss ratio (MLR) standards;
    • Strengthening federal requirements to protect federal taxpayers from cost shifting by prohibiting states from retroactively adding or modifying risk-sharing mechanisms and ensuring that differences in reimbursement rates are not linked to enhanced federal match.

Additionally, states expressed their concerns with how the 2016 final rule’s limitation of 15 days on lengths of stay for managed care beneficiaries in an institution for mental disease (IMD) created difficult administrative challenges for states. CMS is not proposing any changes to this requirement at this time; however, it is asking for comment from states for data that could support revisions to this policy. Meanwhile, CMS continues to support state flexibility through section 1115 demonstrations, having approved a total of 15 waivers of the IMD exclusion for states to treat patients with substance use disorder (SUD), to expand access to treatment, and is exploring further options remove barriers to important treatment options.

"Targeted improvements to the managed care rule have been a top priority for Medicaid Directors,” said Board President of NAMD, Judy Mohr Peterson. “NAMD appreciates the partnership shown by CMS to explore these issues and dialogue with the states, providing an opportunity to share perspectives on how the managed care regulatory framework could be improved. We look forward to reviewing CMS's proposed revisions and submitting formal comments."

To view a summary of the proposed changes, visit Medicaid.gov at https://www.medicaid.gov/medicaid/managed-care/guidance/index.html. And to view the proposed rule, visit the Federal Register at: https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-24626.pdf. Comments on the proposed rule are due January 14, 2019. 

For more information, you can refer to the fact sheet here: https://www.cms.gov/newsroom/fact-sheets/notice-proposed-rulemaking-nprm-medicaid-program-medicaid-and-childrens-health-insurance-program

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