Health Reform WK-EDGE CMS issues guidance on Medicaid managed care fee, capitation options responding to COVID-19
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Thursday, May 28, 2020

CMS issues guidance on Medicaid managed care fee, capitation options responding to COVID-19

By Sandra J. Stoll, J.D.

The Center for Medicaid and CHIP Services (CMCS) provided an informational bulletin announcing temporary flexibilities in fee and capitation options in Medicaid managed care plans to help states address the public health emergency presented by COVID-19.

In the face of the novel coronavirus disease of 2019 (COVID-19) many states are seeking ways to temporarily modify provider payment methodologies and capitation rates under their Medicaid managed care contracts. CMS has issued guidance providing several options that states can consider in dealing with the dramatic shifts in utilization that are occurring across the healthcare industry. The three options announced by CMS, align with statutory and regulatory requirements and CMS has considered, where appropriate, state requests to retroactively amend or implement risk mitigation strategies. A related appendix with examples is also included in the bulletin (CMCS Informational Bulletin, May 14, 2020).

Capitation rates. CMS outlines two options states may have to revise their managed care capitation rates where temporary rate increases in Medicaid fee-for-service (FFS) fee schedules have been put in place. These apply where an approved state directed payment requires plans to pay FFS rates.

De minimis rate adjustments: Authority to make de minimis rate adjustments to managed care capitation rates already exists under 42 CFR 438.7(c)(3) if these adjustments result in an increase or decrease to the capitation rate per rate cell of less than 1.5 percent. A revised actuarial rate certification does not need to be submitted; only a contract amendment needs to be submitted to CMS. If the states’ actions to implement temporary rate increases result in a less than 1.5 percent adjustment to the capitation rates, states may use this option, and they are not required to submit a new actuarial rate certification to CMS.

Rate amendment: For states that implement capitation rate adjustments that result in an increase or decrease of more than 1.5 percent per rate cell, states will need to submit a revised actuarial rate certification and contract amendment. This option also provides for expedited review and approval of such amendments.

Managed care plans. States are currently authorized to make retainer payments under Soc. Sec. Act §1915(c)(4)(B). This authority allows certain providers to continue to bill in circumstances that could include self-quarantining activities during the COVID-19, which may lead to the temporary closure of a provider or limit a provider’s ability to furnish the type of in-person services that are typically included in the service plan.

CMS suggest that states review the guidance relevant to when and how retainer payments may be authorized, as having authorization for those payments is necessary before states can direct their managed care plans to make such payments.

CMS stated its belief that states may implement state directed payments under 42 CFR §438.6(c) that contractually require managed care plans to make these retainer payments to providers where the authorized service is covered under the contract. Because the state directed retainer payments must meet all requirements and criteria for retainer payments to be permissible, as well as the requirements in §438.6(c), and the guidance does not address all those requirements. CMS strongly recommends that states review the applicable guidance, as well as the COVID-19 FAQs published by CMS for future guidance on retainer payments.

CMS is making a prepopulated template available to states for minimum fee schedule requirements tied to approved retainer payments.

State directed payments. The section of the guidance includes applicable requirements related to state directed payments developed in response to COVID-19. CMS reiterated the guidance published in November 2017, that included a related appendix with examples, and a preprint for states to obtain approval of state directed payments under 42 CFR §438.6(c).

To help states comply with 42 CFR §438.6(c) in designing state directed payments in specific response to the COVID-19 pandemic, CMS in this current guidance provides a framework, which will facilitate its review and approval process. The framework addresses eight guiding principles; Connection to Utilization; Quality; Targeted Providers; Risk Mitigation; Payment Levels; Rating Period; Rate Certification Documentation; and a Preprint Template.

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