CMS proposed rules published on April 10 in the Federal Register that could significantly impact the way behavioral health is treated under State Medicaid managed care and alternate benefit plans (ABPs), including states with expanded Medicaid plans under health reform and the Children’s Health Insurance Program (CHIP) plans. The proposed rules follow similar rules finalized in late 2013 for commercial health plans, but do not apply to Medicaid fee-for-service programs. Comments on the proposed regulations can be made to CMS until June 9, 2015. Medicaid and CHIP plans are jointly funded by the federal and state governments. 

Medicaid Plans 

The proposed rules require states that have Medicaid contracts with managed care organizations (MCOs) to meet the parity requirements for financial and treatment limitations consistent with regulations that are applicable to private insurers and group health plans. Some states and Medicaid MCOs outsource behavioral health benefits to separate behavioral health plans, which also would be included under the parity requirements in the proposed regulations, like those for commercial health plans. 

Medicaid plans that have limits on certain benefits – e.g., limits on the number of mental health visits per year, separate cost-sharing or deductible requirements or requiring “failure” of certain treatments before particular drugs or treatments can be approved – will violate parity rules unless those plans can demonstrate that the same rules apply to their medical benefits. More challenging parity requirements include the “non-quantitative” treatment limits such as pre-authorization requirements, medical management standards and provider network participation and reimbursement procedures. Financial and treatment limitations imposed on behavioral health benefits can be no more restrictive than those imposed on medical benefits. Out-of-network coverage must also be accessed and reimbursed comparably for medical benefits and for benefits for mental health and substance use disorders. 

Under the proposed rules, states will have some flexibility to include the cost of providing additional services or removing treatment limitations in their capitation rate methodology. By allowing revisions to the rate-setting process, the states will be able to give Medicaid MCOs the ability to include the costs necessary to provide additional services or to remove certain service limits or caps without, one, changing the state’s non-alternative benefit plans or, two, changing the state plan itself – both of which considerations are key issues for parity implementation by the states. 

States with Medicaid ABPs will be required to apply behavioral health parity as if the services were delivered by a Medicaid MCO. In all cases, either the state or the plans are required to disclose the criteria for medical necessity determinations with regard to mental health and substance use disorder benefits when requested by contracting providers or beneficiaries. The states are also required to provide the reason for any denial of payment for behavioral health services. 

CHIP Plans 

CHIP plans, including fee-for-service and managed care, will also be subject to the parity requirements. CHIP plans that currently provide full coverage of Early and Periodic Screening, Diagnostic and Treatment services (EPSDT) will be deemed to be in full compliance with the new requirements. CHIP plans that do not provide full EPSDT coverage will be required to provide behavioral health benefit parity in the same way that regulations apply to insurers and group health plans. 

Implications of the Proposed Rules 

The federal Department of Health and Human Services has estimated that of the 70 million people on Medicaid, 70 percent are enrolled in Medicaid managed care programs, and 8 million children are covered by CHIP plans. Medicaid is the largest payor of mental health services. Traditionally, however, Medicaid behavioral health benefits provide more limited services than are provided under Medicaid’s medical service benefits. Further, reimbursement to Medicaid behavioral health providers is generally low. Low reimbursement impacts the number of health care providers willing to participate in the Medicaid managed care programs. 

Some Medicaid managed care organizations are cautiously optimistic that the new rules will allow more enrollees to get care that they need at the right time, which could ultimately reduce reliance on Medicaid services in the future. Less need for more intensive and lengthier services should help lower costs in the programs overall. However, access to providers may not be impacted by the proposed rules, particularly if reimbursement rates do not increase. Ensuring that there are enough mental health and substance use disorder providers to meet the increased demand will be a challenge for many MCOs, and the newly proposed rules do not attempt to address this challenge for MCOs and their members.