85% medical-loss ratio in final managed Medicaid rule
The CMS also punted to the states to determine network adequacy
By Virgil Dickson and Bob Herman
April 25, 2016 - Modern Healthcare
The CMS has finalized a long-awaited rule that will
overhaul managed Medicaid, which has not been updated in a decade.
The
sweeping 1,425-page
rule, which was proposed
last May, caps insurer profits, requires states to more rigorously supervise
the adequacy of plans' provider networks, encourages states to establish quality
rating systems for plans, allows more behavioral healthcare in institutional
settings and promotes the growth of managed long-term care. But the CMS deferred
to state control for several issues.
States have turned to Medicaid
managed-care plans to cut costs and gain more budget predictability. But some
charge that leads managed Medicaid insurers to offer inadequate provider
networks and deny needed care to pad their bottom lines. Connecticut has
actually reverted back to traditional fee-for-service Medicaid, saying it
abandoned the managed-care version because it did not save money or improve
care.
Thirty-nine states and the District of Columbia outsource their
Medicaid programs by paying monthly fixed, per-member sums to private insurers,
according to HHS. Approximately 46 million low-income people were enrolled in a
managed Medicaid plan in 2015, consulting firm Avalere Health reports, and that
number continues to rise. The Affordable Care Act's Medicaid expansion has also
funneled more beneficiaries in managed-care plans.
One of the linchpin
components of the rule is a federal medical-loss ratio, or MLR. The CMS
finalized it at 85%, meaning all insurers must spend at least 85% of their
Medicaid revenue on medical care and other activities that improve quality. The
remaining 15% can be spent on employee salaries, marketing, profits and other
administrative tasks. Plans that don't meet the 85% standard will have their
state rates lowered in the future.
The health insurance industry is
somewhat divided over the Medicaid MLR. Many states already require MLRs of 85%
or more, and several insurers already
work within the 85% limit. Industry groups oppose the MLR, calling it
unnecessary, but some individual insurers have advocated for the ratio as a way
to standardize the varying state rules.
Medicaid plans that fall below
the 85% threshold would be dinged financially, but that would also potentially
save taxpayer money. The CMS estimated the federal government would collect $7
billion to $9 billion from 2018 to 2020 based on plans that didn't meet the MLR,
according to the final rule, and state governments would recoup another $4
billion to $5 billion over the same time span.
Jeff Myers, CEO of
Medicaid Health Plans of America, a Washington-based lobbying group for Medicaid
insurers, was one of the most vocal opponents of the MLR because he argued
nearly every Medicaid contractor has to abide by a benefits ratio when an
agreement is signed.
"We don't believe it's going to result in any new
money to states," Myers said. But, sending the CMS was going through with the
85% limit, he said, "We'll manage it the best we can."
The CMS eliminated
quantitative time and distance standards for provider network adequacy, a major
change from the proposed rule. The CMS originally wanted Medicaid plans'
provider networks to have time and distance standards for certain types of
providers, including hospitals, primary-care physicians and OB-GYNs. Ultimately,
the agency deferred to individual state decisions in the final rule.
HHS'
Office of the Inspector General found a clear need for better provider networks
in Medicaid programs, saying in a harsh 2014 report that states were not
ensuring Medicaid patients had enough hospitals and doctors to care for them.
One managed-care enrollee reportedly had no access to an in-network urologist
within 75 miles, and the health plan did not explain how the patient could
receive care, the OIG said.
The Obama administration's about-face on
networks parallels exactly with its February decision to drop
quantitative network standards in the ACA's individual insurance
marketplaces. Now it's up to states to establish robust provider network
parameters, but it's unclear how quickly states will do so.
"We believe
that states should be allowed to set appropriate and meaningful quantitative
standards for their respective programs," the CMS said. "We also believe that
states are in the best position to set specific quantitative standards that
reflect the scope of their programs, the populations served and the unique
demographics and characteristics of each state."
Provider networks and a
federal MLR were only the tip of the Medicaid rule iceberg, though. The CMS
followedd through with a proposal that will allow states to require Medicaid
plans to lay out gvalue-basedh payment models for hospitals and doctors, such as
patient-centered medical homes and those that tie payment to better quality
outcomes. The federal government has made explicit goals to move Medicare toward
alternative payment models and away from fee-for-service medical claims, and the
final rule will incentivize states and health plans to do the same for
Medicaid.
The federal government, however, will not mandate Medicaid
plans to move to those types of models; it will again give flexibility to the
states.
The federal agency backed off several ideas, including an
enforcement proposal to ensure that payments to managed-care plans are
actuarially sound—meaning that they cover all medical and administrative costs,
taxes and fees for which the health plan is responsible. The CMS had proposed to
withhold federal funding if a state submitted a contract and found the agreement
didn't ensure actuarial soundness, but backed off after commenters noted the
agency didn't have the legal authority to do so.
It is also not
finalizing a proposal that would have required states to provide potential
Medicaid enrollees with at least 14 days of fee-for-service coverage during
which they can make an active enrollment choice. Some states had complained they
no longer had a fee-for-service program for Medicaid enrollees, making it hard
for them to comply with this section. MHPA had aggressively fought that proposal
and was pleased with the CMS' reversal, Myers said.
The rule also could
significantly affect access to behavioral health for Medicaid beneficiaries.
Since the creation of
Medicaid 50 years ago, there has been a coverage exclusion for behavioral
and substance-abuse treatment at inpatient facilities with more than 16 beds.
The new rule, however, would allow states to pay plans for behavioral care to
beneficiaries who have a stay of no more than 15 days in a so-called institution
for mental disease.
With long-term care, the CMS has finalized a
controversial proposal that would allow managed-care patients receiving LTC
services to switch to fee-for-service if their provider is not in-network.
Patient advocates had pushed for this provision as a safeguard. As of 2014, 26
states were using managed long-term care, up from eight in 2004, according to
the CMS. Plans had said this provision could be a disincentive for LTC providers
to negotiate contracts with plans if they know they can continue to see patients
under fee-for-service or another plan.
The rule will be officially
published on May 6.