Last month, for the first time in over a decade, the Centers for Medicare & Medicaid Services (CMS) published proposed revisions to the Medicaid managed care regulations. According to CMS, the proposed rule aims to reflect the changes in delivery systems, strengthen the system’s ability to serve diverse populations, and promote greater alignment of Medicaid managed care policies with those of other payers. A summary of the key provisions of the proposed rule appears below.


CMS aims to align Medicaid managed care requirements with rules governing Medicare Advantage (MA), Qualified Health Plans (QHP), and commercial coverage to improve operational efficiencies. The regulations would require managed care organizations (MCOs), pre-paid inpatient health plans (PIHPs), and pre-paid ambulatory health plans (PAHPs) to offer an internal appeals process with specified timeframes, with external appeal to the state in the event of an adverse determination. The rule would also introduce a nationally uniform 85 percent minimum medical loss ratio (MLR) as well as a standardized calculation methodology.


The proposed rule would modify the standard contract provisions between states and MCOs, PIHPs, and PAHPs by requiring annual audited financial reports and reporting to allow states to receive rebates from drug manufacturers. The rule would also allow MCOs, PIHPs, and PAHPs to receive capitation payments for patients receiving certain mental health treatment as well as increased coverage for prescription drugs.


CMS proposes to clarify the concept of actuarial soundness. The rule provides that actuarially sound capitation rates must provide for all reasonable, appropriate and attainable costs that are required under the contract for the time period and population covered under the contract's term. CMS also proposes to implement rate cells in which people with similar health characteristics would be grouped together to assist in setting more accurate capitation rates. States would have to certify a specific rate for each rate cell and certify each individual rate to be paid to MCOs as actuarially sound.


The proposed rule would require states to provide at least 14 days of fee-for-service coverage during which beneficiaries can make an “active choice” of their managed care plan. CMS proposes to require states to provide choice counseling services for potential enrollees and codify guidance regarding Managed Long Term Services and Supports programs.


The proposed rule would establish state network adequacy standards that are closely aligned with QHP and MA standards. States would have to establish time and distance standards for numerous provider types, including primary care, OB-GYN, behavioral health, specialty, hospitals, pharmacy, pediatric dental, and other provider categories.

Foster Swift health care attorneys will continue to monitor any developments in this area. Please contact a member of our health care group with any questions.