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Medicaid Rule Requires Health Plans to Meet Financial Standards

By Marissa Evans, CQ Roll Call 

April 25, 2016 -- Health insurers that participate in Medicaid will have to spend a minimum amount of the money they receive on medical care, under a new Centers for Medicare and Medicaid Services (CMS) rule released late Monday.

The change was included in the 1,425-page rule that gives states, health providers, and managed care organizations new clarity. Under the final rule, managed care plans that cover Medicaid patients for the first time will have to spend at least 85 percent of their revenues on medical care under guidelines in the rule. Those standards are similar to those that private plans that serve Medicare must meet.

States also will have to develop the first Medicaid managed care quality rating system to help consumers compare and shop for insurance plans, develop more robust provider network adequacy standards and develop more tools to help beneficiaries learn how to enroll and file an appeal when their care is not covered.

Vikki Wachino, director of the Center for Medicaid and CHIP Services within CMS, said on a press call that the rule "takes a major step forward" in improving Medicaid and Children's Health Insurance Program coverage.

"The overall goal of the rule is to clearly support cost efficient, high-quality care," Wachino said. "That's important because many states use managed care not just to promote better coordination but to drive cost efficiency forward in their program."

Government agencies and health industry groups have been waiting for a finalized rule for almost a year after CMS officials released a proposed version. The rule updates regulations issued 14 years ago. Wachino said that provisions of the rule will be implemented in phases starting Jan. 1, 2017.

The rule comes as more states move toward managed care systems for poor and disabled Medicaid beneficiaries, including those with chronic health issues and social service needs. Thirty-nine states and the District of Columbia use Medicaid managed care organizations, according to CMS. About two-thirds of the 72 million people who receive Medicaid are in managed care. 

A number of states that expanded Medicaid under the federal health law are using managed care for people who gained eligibility.

The new provisions are also giving state and federal officials more work. Under the rule, the federal agency will have to approve the primary care providers states use and will monitor the adequacy of provider networks for patients.

Wachino said during the call that the agency was unable to develop specific cost estimates as each state would likely have different ways of implementing changes.

Matt Salo, executive director for the National Association of Medicaid Directors (NAMD), said that the organization would be "looking at it from a pragmatic approach." Last year, NAMD expressed concerns over state and federal officials having the budget and staff to fulfill new requirements in the proposed version, CMS's own ability to oversee the changes and the lack of power states would have.

"The big things we're looking at are: Can this actually be implemented?" Salo said. "What are the timetables? Is this realistic?"

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