In addition to the noted authors, thank you to Manatt Health’s contributors and thought leaders who supported the development of this summary, including Stephanie Anthony, Emily Carrier, Hailey Davis, Avi Herring, Anne Karl, Cindy Mann, Kaylee O’Connor and Kinda Serafi.
On Monday, April 22, the Centers for Medicare & Medicaid Services (CMS) released two highly anticipated final rules. Together, these rules reshape the federal regulatory landscape for Medicaid and the Children’s Health Insurance Program (CHIP), particularly with respect to standards for ensuring access to care, transparency, and oversight of provider payment rates, creating opportunities for public input (especially for people enrolled in Medicaid), quality measurement, and program accountability.
The first rule, which focuses on managed care delivery systems, is titled “Managed Care Access, Finance, and Quality” (or the “Managed Care Final Rule”). The second final rule, which focuses on fee-for-service (FFS) delivery systems and program improvements for home and community-based services (HCBS) across delivery systems, is titled “Ensuring Access to Medicaid Services” (or the “Access Final Rule”). Although the two rules largely focus on different delivery systems, they share common goals and themes, with some provisions in each applying across multiple delivery systems.
These final rules represent the most significant changes to federal Medicaid and CHIP regulations since CMS established the existing regulatory framework for managed care in 2016. These changes are all the more noteworthy because of the magnitude of these programs: together, Medicaid and CHIP provide health coverage to more than 85 million people nationwide. Three out of four of these individuals receive covered benefits through managed care plans that contract with the state.
For the most part, CMS finalized the provisions described in its May 2023 proposed rules with only minor revisions, clarifications, and technical corrections. However, CMS departed from the proposed rule in a few notable respects in response to the large volume of public comments (415 on the Managed Care Proposed Rule and more than 2,100 on the Access Proposed Rule).
The final rules officially take effect on July 9, 2024, but for most provisions, CMS has defined implementation deadlines that vary from 60 days to six years following this effective date.
This newsletter summarizes significant provisions and overarching themes across both final rules. A more comprehensive section-by-section analysis is available through Manatt on Health (see details below). In addition, Manatt Health is hosting a three-part public webinar series on these final rules. In this series, Manatt Health’s multidisciplinary team will unpack the newly finalized rules, offering key insights and implications for stakeholders such as Medicaid enrollees, providers, managed care organizations, and state governments.
Key Provisions in the Final Rules
The Managed Care Final Rule includes provisions that, among other things:
- Strengthen access to care and access monitoring requirements in managed care programs by establishing federal minimum standards for appointment wait times for certain services, enhancing state requirements for access monitoring, and requiring states to publish analyses of managed care plans’ aggregate provider payments for certain services. Recognizing the rise of telehealth, CMS also provides new clarity to states and managed care plans about how to account for telehealth when monitoring for timely access and network adequacy.
- Codify and revise the federal regulations governing State Directed Payments (SDPs)—through which states can establish parameters for managed care plans’ provider payments—by creating new flexibilities for certain types of SDPs while codifying or strengthening the guardrails around others. (Manatt will be releasing additional newsletters unpacking these changes to SDPs and Medicaid financing).
- Codify and build on recent CMS policy changes regarding “in lieu of services” (ILOS), a mechanism through which managed care plans can provide alternatives to standard covered services when it is medically appropriate and cost-effective.
- Modify Medical Loss Ratio (MLR) methodologies and processes to align more closely with comparable MLR requirements for the commercial health insurance market, increase accuracy of plan reporting for rate-setting purposes, and allow for more consistent comparisons across each plan’s different managed care business lines and from state to state.
- Establish a national framework and enhance requirements for managed care quality rating systems (QRS) to increase accountability for plans, assist beneficiaries with plan selection, and make various other changes to the existing provisions governing states’ managed care quality strategies and quality monitoring. Out of all the provisions in the Managed Care Final Rule, CMS expects that implementing these QRS requirements will require the greatest investments in technology and staff time, for both states and managed care plans.
The Access Final Rule includes provisions that, among other things:
- Create new transparency and consultation requirements for FFS provider payment rates, including a requirement for states to publish analyses comparing the Medicaid FFS rates for certain services against corresponding Medicare FFS rates, the establishment of an “interested parties’ advisory group” to advise and consult on payment rates for certain HCBS, and significant new procedural requirements for certain types of FFS rate changes. These provisions replace the current requirements for triennial Access Monitoring Review Plans, which are rescinded as of the rule’s effective date.
- Modify the procedures for requesting federal approval to reduce or restructure FFS rates, by requiring additional supporting analyses with respect to state plan amendments (SPAs) that, based on a preliminary review, present potential risks to beneficiaries’ access to services.
- Strengthen program advisory groups. States must create and support a Medicaid Advisory Committee (MAC) comprising diverse stakeholders, and a Beneficiary Advisory Council (BAC) comprising solely of people with lived experience and reflecting the diverse population in the Medicaid program. These two groups—which replace the currently required Medical Care Advisory Committee (MCAC)—will provide input to the state Medicaid agency on a broad scope of program issues such as eligibility, coverage, access to care, and quality of care.
- Update HCBS program standards and processes regarding care access, quality, and payment, including a requirement that at least 80% of Medicaid payments for certain home-based services go to compensation for the individual direct care workers who provide these services (a proposal that drew a large volume of comments both for and against, and which was modified in several respects in the final rule); new standards and reporting requirements related to person-centered service plans, waiting lists, and other access measures; a requirement to establish an HCBS grievance system and incident management system in FFS (similar to what is already required for HCBS delivered through managed care); and a new regulatory framework to require state reporting of performance measures from the HCBS Quality Measure Set (which has, to date, been voluntary). CMS estimates that, for states, implementing the updated critical incident system will be by far the costliest component of these two final rules.
Key Themes Across the Two Final Rules
Several key themes emerge from the thousands of pages that make up the proposed and final rules and their accompanying preambles:
- These rules will significantly increase transparency for Medicaid and CHIP program data related to provider payments and access to care. States and managed care plans must soon begin publishing several new types of data sets and reports, which must be publicly available in a standardized format and with relevant context.
- The final rules show CMS’s continued emphasis on addressing health disparities and advancing health equity. Consistent with the U.S. Department of Health and Human Services’ (HHS) overall focus on equity in its administration of Medicaid and CHIP, Medicare, and the Marketplaces, these rules evince an effort to identify and disclose health disparities (e.g., by requiring states to stratify data based on race and other demographic factors), emphasize meaningful engagement of people enrolled in Medicaid and CHIP (e.g., by supporting enrollee participation in advisory groups, requiring enrollee experience surveys, and requiring that program data be easy for the public to find and understand).
- CMS seeks to align standards and approaches across federally regulated health care programs. Across multiple provisions, CMS looks to existing standards for Medicare and the Marketplace to inform and align Medicaid and CHIP with these standards. Examples include the Medicaid/Medicare comparative payment analyses mentioned above, as well as CMS’s efforts to align the standards and quality measures for Medicaid and CHIP managed care more closely with Qualified Health Plans sold on the Marketplace.
- The rules impose significant new requirements on states and managed care plans, which CMS seeks to mitigate through regulatory design, phased-in implementation, and technical assistance. CMS estimates that states, plans, and providers will collectively spend almost $500 million to implement these rules over the next 10 years. Many of CMS’s reforms require new or expanded analyses and reporting by states and plans, upgraded IT infrastructure, and additional state monitoring and oversight responsibilities. For states already stretched thin as they unwind the COVID-19 continuous coverage requirement, these new requirements could pose significant challenges, especially in light of CMS’s recently finalized reforms for eligibility and enrollment systems. In certain areas, CMS also attempts to mitigate administrative burdens on states.
- The final rules define new processes for enforcement and dispute resolution between states and CMS. The final rules increase not only the volume and types of data that will be available for CMS oversight, but also the types of procedural mechanisms at CMS’s disposal to bring states into compliance
The Managed Care Final Rule and Access Final Rule represent a significant modernization of the framework for defining, measuring, and enforcing the standards for access to care in Medicaid and CHIP. States and managed care plans—and CMS itself—will be hard at work in the coming years implementing these requirements, including making policy decisions in areas where the rules leave room for flexibility. Meanwhile, beneficiaries, providers, and other stakeholders will be eagerly awaiting the new reports required under the rule, while also encouraging their state and local plans to implement the rule in a manner that promotes adequate provider payments and beneficiary access to care.
This analysis is excerpted from Manatt on Health, Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments. For more information on how to subscribe to Manatt on Health, please reach out to Barret Jefferds.