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Medicaid Officials Release Long-Awaited Managed Care Rule

By Rebecca Adams, CQ Roll Call

May 26, 2015 -- Medicaid plans would have to spend a minimal amount of their revenues on medical costs rather than administrative expenses, under a long-awaited proposal that federal Medicaid officials recently released. 

The proposed rule would streamline regulations that were last updated in 2003. Since then, managed care plans have become grown to cover a rising portion of the Medicaid population, including an increasing number of people with long-term service needs or disabilities.

"A lot has changed in terms of best practices and the delivery of important health services in the managed care field over the last decade," said Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt. "This proposal will better align regulations and best practices to other health insurance programs, including the private market and Medicare Advantage plans."

The rule will require plans to spend at least 85 percent of their revenues on medical costs for beneficiaries rather than administrative costs, similar to requirements for private plans in the Medicare Advantage program. The Medicaid program currently does not have such a requirement, known as a "medical loss ratio."

The rule also addressed the availability of information to the public. The proposed rule said that states should send consumers information on their right to disenroll from a plan, the basic features  of managed care, the service area of each managed care plan, covered benefits, provider directory information, cost sharing requirements of patients, care coordination services available, and measurements of the quality of each managed care plan. CMS officials proposed that a new ratings system of managed care plans be created.

The Government Accountability Office also has found CMS' oversight of the rates that Medicaid managed care organizations set to be inconsistent, so the regulators are trying to make sure that the rates are sufficient to cover beneficiaries' care but not too high. 

The existing rules for actuarial soundness require that plans' rates are certified by a qualified actuary. The proposed revisions to the rules for setting payment rates for Medicaid managed care plans would spell out the type of data to be used and the level of documentation that would be required so that CMS officials can more effectively review and approve rates.  

The proposal went to the Office of Management and Budget for review on March 19 and was cleared for publication on May 21.

The public has until July 27 to comment on the rule. 

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