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Proposed Medicaid Rules will Create Medicare-like Compliance Regime

We have long discussed the impending emergence of a national healthcare accountability model. With the Centers for Medicare and Medicaid Services (CMS) now the lead healthcare policy agency across all lines of business, it was only a matter of time before the federal agency began overhauling the disparate rules between programs and seeking continuity in how beneficiaries are treated and what rules plans must follow.

Medicare Advantage and Part D have led the way in establishing a robust compliance regime. With the launch of the Exchanges, CMS and sister regulators at Labor and Treasury quickly established a similar and growing rigor. Now, with the release of what is quickly becoming known as an “Uber rule,” CMS is proposing a massive overhaul of how Medicaid functions for the first time in more than a decade.

Medicaid is technically a state-federal partnership, with the federal government dictating overall rules and states operating the program. States traditionally were given significant leeway in how they implemented such rules and operated the program. This has led to a myriad of strategies and poor quality achievement. While Medicaid managed care has been vigorously endorsed in many states, some states have been slow to move from the archaic and inefficient fee-for-service (FFS) model of care. Additionally, enforcement of accountability and achievement rules for managed care have been mixed as well, with just a small number of states (such as New York) adopting model quality measurement and bonus programs.

For the past few years, CMS has been working individually with states to reform their Medicaid programs. In connection with waiver renewals and other interventions, CMS has forced states to address provider network sufficiency, quality outcomes, and other touchy issues. As well, CMS has endorsed the rollout of the dual demonstration projects and worked with individual states to map Medicare-Medicaid Plans (MPP) that look and feel like their Medicare Advantage cousins.

Because of this, the June announcement of the Uber rule was of little surprise. The proposal builds on achievements in the individual states and seeks to establish uniform policy approaches to the most challenging issues over the past few decades. Some states and plan lobbyists quickly criticized the scope of the dictates; it is hard to argue, however, the merit of most of the proposals, especially as many of these same states and plans have resisted investing in critical areas to promote quality of outcomes. In addition, Medicaid managed care has seen explosive growth over the past few years; it has soared to 46 million beneficiaries. Soon, almost three-quarters of all Medicaid beneficiaries will receive some or all services through the many flavors of managed-care plans. Last, it was imperative that CMS align the policies of Medicaid with the State Children’s Health Insurance Program (SCHIP) as well.

The major changes proposed by CMS include:

  • Marketing changes: In an effort to bridge the gap when people lose Medicaid coverage, CMS will allow Medicaid plans that offer Exchange products to market both Medicaid and Exchange to Medicaid eligibles without violating marketing restrictions. CMS believes that this will help ensure continuity of coverage when Medicaid eligibility is lost as well as better coordinate coverage of family members who may be in separate programs but want to be covered by the same plan and a similar network of providers.
  • Enrollment changes: As with Medicare Advantage, the new Medicaid rules emphasize informed selection of a health plan by beneficiaries as opposed to the traditional auto-assignment seen in many states. Beneficiaries would have at least a 14-day period to determine the best plan for them. Auto-assignment would be permitted only after the timeframe has expired. If states opt for auto-assignment upfront, beneficiaries would have the right to enroll in a different plan if not satisfied and the assignment process would have to protect members as much as possible (e.g., assignment to plans with providers the member has used in the past, etc.). The troubling aspect of this reform is that a state that adopts active selection upfront would have to make coverage available in the FFS system while a beneficiary is making a choice. So states would have to continue to invest significant administrative resources in maintaining a dying system.
  • Alignment of appeals and grievances with Medicare and Exchange: Decision timeframes will mirror these other programs and members will need to look to their plan first in a dispute. Members would need to exhaust an internal plan appeal process for a service denial before appealing to the state’s fair hearing process.
  • Minimum Medical Loss Ratio (MLR) and Actuarial Soundness standards: Beginning in 2017, CMS proposes that Medicaid and CHIP plans calculate and report medical loss ratios (MLRs). For the most part, the methodology used for the Affordable Care Act MLR calculation and rebates will be used, including recognizing quality set-aside spend as medical expense. In addition, rates will need to be calculated against an expected 85% minimum MLR. Other rate transparency standards are proposed as well, including what would constitute actuarially sound rates.
  • A Medicaid Star program: Given the success of the Medicare Advantage Star program, CMS has now directed all states to craft a similar quality bonus program for Medicaid. Some states have already done so, and the dual demonstration programs have quality revenue set-asides for plans targeted to achievement. The new regulations mirror the current Medicare Advantage program in terms of the type of categories to be measured (Clinical, Survey and Plan Performance).
  • Encounter data: CMS has long dictated that states collect encounter data to validate the quality of outcomes and to ensure that services are appropriately rendered. States have had an extremely mixed track record. To get past this, CMS is playing the “FFP card,” stating that incomplete or inaccurate encounter data could mean penalties and withholding of federal financial participation (FFP) revenue-sharing with states. This will undoubtedly get laggard and recalcitrant states to focus attention on plan submission processes. Plans should expect this risk to be passed down to them, which necessitates instituting best practices for encounter submission collection, submission, remediation, and analysis.
  • Other reforms: CMS proposed a series of other important reforms, including strengthening delegated oversight and program integrity and applying greater network adequacy requirements to address long-standing availability of service issues in the program.

With these new rules will also come an audit regime that in time will rival what we see today in Medicare Advantage and Part D. Indeed, we already see a number of states hiring outside audit firms that also serve CMS in the federal programs. While some states have had strong compliance oversight, many plans in certain states are in store for a sea change when it comes to how their states interact with them and assess their performance.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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