On May 27, 2015, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule that would “modernize the Medicaid managed care regulations to reflect changes in the usage of managed care delivery systems.” The first major update to Medicaid managed care regulations in over a decade, the rule seeks to reduce the significant variability and inconsistency among the nation’s many Medicaid managed care plans.

CMS categorizes its proposals into several key areas, including: beneficiary experience; state delivery system reform; quality improvement; program and fiscal integrity; managed long-term services and support programs; Children’s Health Insurance Program (“CHIP”) quality and access; and alignment with Medicare Advantage and Qualified Health Plans.

A summary of some of the key areas is included below.

Beneficiary Experience

The proposed rule includes requirements for Medicaid managed care plans aimed at improving beneficiaries’ experiences with managed care, including new marketing requirements, new care coordination and treatment plan standards, and new network availability and accessibility requirements.

For example, there are electronic delivery and non-English language requirements related to communications from managed care plans; as well as significant changes to grievance and appeal operations, including shorter time frames for responses and notice content requirements.

Medical Loss Ratio

The proposed rule establishes a medical loss ratio (“MLR”) of 85% for Medicaid plans and establishes minimum standards for calculating and reporting MLR. The rule addresses certain costs that may be moved out of the administrative costs category in the MLR calculation, such as activities that improve health care quality and fraud prevention activities.

Program Integrity & State Monitoring Standards

The elements that must be included in a Medicaid managed care plan’s program integrity/compliance program and administrative procedures to detect and prevent fraud, waste and abuse are also detailed in the proposed rule. For example, the elements of such a program must include procedures and a system for responding promptly to compliance issues, mandatory reporting of certain information to the state, and policies and procedures that ensure information is exchanged between the plan, the state and law enforcement.

The proposed rule confirms that the managed care organization is solely accountable for complying with the contract with the state, regardless of what services it delegates or subcontracts, and sets forth standards for relationships with first tier, downstream and related entities, modeled on Medicare Advantage standards.

There are also modernized standards for state monitoring of Medicaid managed care plans to include monitoring of: administration and management; appeal and grievance systems; claims management; enrollee materials and customer services; finance; and marketing, just to name a few. CEOs or CFOs of managed care plans are now personally responsible for the accuracy, completeness, and truthfulness of data reported about the plan.

Quality Improvement

CMS also proposes to strengthen quality measurement and improvement efforts by, among other things, requiring states to develop a comprehensive quality strategy that includes a quality rating system. Meaningful and reliable data that is comparable across plans, providers and programs must be reported and collected and quality standards will be aligned with that of Medicare Advantage to simplify and integrate approaches. Consumers will also be engaged in making decisions about their health and developing state strategies for improving care and quality of life.

Stakeholders have until July 27, 2015, to submit comments and feedback on the proposed rule to CMS.

This is a brief summary of a few of the proposed provisions. For more information about the proposed rule and its implications, please read our Client Advisory here.

If we can provide any additional information, please contact Jillian Jagling or Joel Goloskie at ; email: or .


Source: Advisory: CMS Proposes Substantial Changes to Medicaid Managed Care Rules