Feds finalize sweeping Medicaid managed care rule

The federal government on Monday issued a long-awaited final rule for Medicaid managed care plans that creates a quality rating system, allows states to set network adequacy standards and limits how much insurers can spend on administrative costs.

The rule, which applies to Medicaid plans managed by private insurers, signifies the first overhaul of Medicaid and Children's Health Insurance Program (CHIP) managed care regulations in more than a decade, according to the Department of Health and Human Services (HHS).

Thirty-nine states and the District of Columbia contract with private insurers to manage their Medicaid populations, and 72 percent of beneficiaries are enrolled in such managed care plans.

"These improvements modernize the way these managed care health plans operate so that Medicaid and CHIP continue to provide cost-effective, high-quality care to consumers," Centers for Medicare & Medicaid Services officials wrote in a blog post.

Here's a brief rundown of some of the rule's provisions:

  • It aligns rules across health insurance coverage programs, most notably setting a medical loss ratio of 85 percent for Medicaid managed care organizations (MCOs), which requires plans to spend that amount of their revenue or more on healthcare services, covered benefits and quality improvement efforts.
  • It also aligns Medicaid plans' appeals processes with those of other programs, and sets requirements for disseminating consumer information in accordance with private market best practices. These rules, HHS says, will benefit consumers and "ease administrative burden on issuers participating in multiple programs."
  • It requires additional transparency on how Medicaid rates are set "to help ensure the fiscal integrity of Medicaid managed care programs."
  • It establishes Medicaid's first quality rating system so states can publicly report plan quality information.
  • It gives states flexibility to determine provider network adequacy and access standards for MCOs, prepaid inpatient health plans or prepaid ambulatory health plans--nixing the time and distance standards for some types of providers that HHS had suggested in its proposed rule.

The Obama administration similarly pulled back on proposed quantitative network adequacy standards for Affordable Care Act marketplace plans after industry stakeholders argued that federal officials instead should defer to states to set their own standards.

To learn more:
- read the final rule (.pdf)
- here's HHS' announcement
- check out the CMS blog post

Related Articles:
MCO rule under fire for introducing medical loss ratio
Proposed MCO rule would subject Medicaid managed care plans to quality ratings
CMS updates Medicaid managed care organization rules
What to expect from the Medicaid managed care proposal
CMS to tighten Medicaid managed care organization regulations
AHIP report: Enrollment in Medicaid managed care plans continues to rise
CMS says it will defer to states for network adequacy standards