Health Law Daily CMS issues final rule that modifies Medicaid and CHIP managed care regulations
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Friday, November 13, 2020

CMS issues final rule that modifies Medicaid and CHIP managed care regulations

By Robert B. Barnett Jr., J.D.

In accordance with the Trump administration’s promise to reduce regulation, CMS has issued a final rule to give states more flexibility in designing Medicaid and CHIP managed care plans.

CMS has issued a final rule that amends the framework for regulating Medicaid and Children’s Health Insurance Program (CHIP) managed care networks to give the states more flexibility in designing their programs with fewer regulatory hurdles. The rule finalizes a proposed rule that CMS issued in 2018 purportedly to reduce federal regulatory barriers to help ensure that state Medicaid agencies are able to design, develop, and implement Medicaid and CHIP managed care programs that meet each state’s needs and populations (Final rule, 85 FR 72754, November 13, 2020).

Background. In 2016, under the Obama administration, CMS published a final rule that modernized the Medicaid and CHIP managed care regulations to reflect changes in the growing use of managed care systems. It was the first update to those rules in more than a decade. The final rule’s purpose was to align the rules governing Medicaid and CHIP with those of other major sources of coverage. In January 2017, under the Obama administration, CMS issued a final rule that amended the pass-through payment transition periods under Medicaid managed care contracts.

In March 2017, now under the Trump administration, CMS issued a letter to state governors promising a commitment to partner with the states to reform the rules. According to CMS, in response to the letter, the states complained that the current regulations added costs and administrative burdens without outcome improvements for beneficiaries. In November 2018, CMS published the proposed rule that sought to streamline the Medicaid and CHIP managed care regulatory framework to give states more flexibility in operating Medicaid and CHIP managed care programs. This just-released final rule incorporates additional comments in seeking what CMS calls "a better balance between federal oversight and state flexibility."

Significant revisions. The final rule incorporates "significant revision" to the managed care framework in the following areas: setting actually sound capitation rates, pass-through payments, state-directed payments, network adequacy standards, risk-sharing mechanisms, the quality rating system, appeals and grievances, and requirements for beneficiary information.

For example, regarding state-directed payments, the final rule allows states to require managed care plans to adopt payment models that are based on a state-approved fee-for-service fee schedule without having to receive written approval from CMS. Regarding network adequacy standards, the final rule eliminates the requirement that states have to set time and distance standards and replaces it with a requirement that states establish a more flexible quantitative network adequacy standard. States have also been given authority to define "specialists" however they deem most appropriate. Regarding the quality rating system, the final rule requires that CMS develop a minimum set of mandatory performance measures that will apply equally whether a state chooses to implement the CMS-developed quality rating system or a state alternative quality rating system. Regarding appeals and grievances, the final rule eliminates the requirement that enrollees submit a written, signed appeal after an oral appeal is submitted.

In fact, the full list of regulatory changes is significant enough to take up 91 pages in the Federal Register. Most of the changes are effective on December 14, 2020, with a few of the changes to be effective on July 1, 2021.

MainStory: TopStory FinalRules CMSNews ManagedCareNews MedicaidNews EligibilityNews MedicaidPaymentNews ProgramIntegrityNews FedTracker HealthCare

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