On November 14, 2018, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that is intended to advance CMS' efforts to relieve perceived regulatory burdens associated with the 2016 Medicaid Managed Care Final Rule (2016 final rule). The proposed rule follows on the March 14, 2017, Department of Health and Human Services (HHS) and CMS letter to the nation's governors noting CMS' commitment to a thorough review of the managed care regulations.

Despite initial reports of a comprehensive review of the managed care regulations, the proposal fails to address some of the primary concerns raised by state Medicaid programs, Medicaid managed care plans and providers. That being said, the proposed rule includes several notable revisions, particularly to the Medicaid managed care delivery system and provider payment initiative provisions implemented through the 2016 final rule and set forth at 42 C.F.R. § 438.6(c). Proposed revisions include the following:

  • Minimum fee schedules. Due to the frequency and similarities of directed payment arrangements based on state plan approved rates, CMS now believes that they should be specifically addressed in regulation. Payment arrangements that are based on state plan approved rates would not be subject to the existing written prior approval (or pre-print) requirement, although they would need to meet all other requirements. Note that CMS specifies that "state plan approved rates" exclude state plan "supplemental payments," which are defined in this proposed rule.  
  • Alternative fee schedule. CMS is also proposing to allow states to require managed care plans to adopt, as a directed payment, a cost-based rate, a Medicare equivalent rate, a commercial rate, or other market-based rate for network providers that provide a particular service under the contract, in addition to the minimum or maximum fee schedules permissible under the current rule.
  • Automatic renewal. In the 2016 final rule CMS established that a directed payment arrangement may not be renewed automatically. However, CMS has received numerous payment arrangement proposals from states requesting a multi-year approval to align state delivery system reform efforts or contract requirements. CMS now proposes to codify the additional guidance included in the November 2, 2017, CMCS Informational Bulletin (CIB) entitled "Delivery System and Provider Payment Initiatives under Medicaid Managed Care Contracts" to permit multi-year payment arrangements when certain defined criteria are met. Consistent with the CIB, approval of minimum fee schedules, maximum fee schedules and uniform dollar or percentage increases would continue to be for one rating period.

In addition to proposed revisions to the directed payment provisions, CMS is proposing to create a new, limited category of permissible pass-through payments. CMS acknowledges that since implementation of the 2016 final rule and the 2017 Pass Through Payment Final Rule, CMS has worked with many states that have not transitioned some or all services or eligible populations from their fee-for-service (FFS) delivery system into a managed care program. CMS proposes to allow states to require managed care plans to make pass-through payments to hospitals, nursing facilities or physicians for a transition period of up to three years, when Medicaid populations or services are initially transitioning from FFS to managed care. In order to qualify, (1) services must be covered for the first time under a managed care contract and previously provided in a FFS delivery system; (2) the state must have made supplemental payments, as newly defined above, to hospitals, nursing facilities or physicians during the 12-month period immediately 2 years prior to the first year of the transition period; and (3) the aggregate amount of the pass-through payments must be less than or equal to the amounts calculated pursuant to the new methodologies set forth in the proposed rule.

As noted above, CMS intends for the proposed rule to relieve regulatory burdens and streamline the managed care regulations by reducing unnecessary and duplicative administrative requirements. Other proposed revisions include the following:

  • Permit states to again use certified rate ranges, subject to defined conditions, rather than requiring that states develop and certify as actuarially sound each individual rate paid per rate cell. States would be required to demonstrate in their rate certification how the upper and lower bounds of the rate range are actuarially sound. 
  • Revise existing regulations to clearly specify CMS standards for actuarial soundness.
  • Commit CMS to, at least annually, issue guidance that describes the rate review and approval process. 
  • Eliminate the requirement that managed care plans update paper copies of provider directories monthly.
  • Provide states with greater flexibility regarding network adequacy time and distance standards.
  • Revise grievance and appeal member notice requirements.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.