CMS finalizes Medicaid managed care overhaul: 5 things to know

CMS released a final rule Monday that includes the first major update to Medicaid managed care regulations in more than 10 years.

The regulations governing Medicaid managed care were last updated in 2002 and 2003, and the 1,425-page final rule CMS released Monday "modernizes" the system, according to CMS.

Here are five things to know about the Medicaid managed care final rule.

1. The rule imposes new requirements for the medical loss ratio — a financial measurement that sets the minimum amount of premium dollars health plans must spend on actual healthcare costs. The goal of the measurement is to cut overhead spending by insurers.

The rule sets the MLR at 85 percent, meaning insurers must spend that percentage of Medicaid revenue on medical care.

2. In May, when the rule was proposed, Jeff Meyers, president and CEO of Medicaid Health Plans, told The Hill he "strongly encouraged CMS not to go down this route" because every state already uses some form of the MLR, and the rule could "destabilize the programs that are developed on a state level."

3. The rule addresses quality of care standards. It requires states to establish a Medicaid managed care quality rating system that includes performance information on all health plans.

4. The rule establishes new standards for managed care provider networks. The rule requires states to develop and implement time and distances standards for primary and specialty care providers and to assess and certify the adequacy of a managed care plan's provider network at least annually.

5. Under the final rule, states are prohibited from making "pass-through" payments to healthcare providers through health plans. CMS said current managed care regulations expressly prohibit states from making payments to providers for services available under a contract between the state and a managed care plan. As a matter of policy, CMS said it has interpreted those regulations to also prohibit states from making supplemental payments to providers through a managed care plan, which is referred to as a "pass-through" payment.

Regarding the change, American Hospital Executive Vice President Tom Nickels said the AHA is disappointed CMS will no longer allow supplemental payments in managed care plans. However, he said the AHA is pleased CMS is allowing 10 years for the transition.

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