Medicaid Program; Medicaid and Children's Health Insurance Program (CHIP) Managed Care
| Published date | 13 November 2020 |
| Citation | 85 FR 72754 |
| Record Number | 2020-24758 |
| Section | Rules and Regulations |
| Court | Centers For Medicare & Medicaid Services |
Federal Register, Volume 85 Issue 220 (Friday, November 13, 2020)
[Federal Register Volume 85, Number 220 (Friday, November 13, 2020)]
[Rules and Regulations]
[Pages 72754-72844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24758]
[[Page 72753]]
Vol. 85
Friday,
No. 220
November 13, 2020
Part IIDepartment of Health and Human Services-----------------------------------------------------------------------Centers for Medicare & Medicaid Services-----------------------------------------------------------------------42 CFR Parts 438 and 457Medicaid Program; Medicaid and Children's Health Insurance Program
(CHIP) Managed Care; Final Rule
Federal Register / Vol. 85 , No. 220 / Friday, November 13, 2020 /
Rules and Regulations
[[Page 72754]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 438 and 457
[CMS-2408-F]
RIN 0938-AT40
Medicaid Program; Medicaid and Children's Health Insurance
Program (CHIP) Managed Care
AGENCY: Centers for Medicare & Medicaid Services (CMS), Health and
Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule advances CMS' efforts to streamline the
Medicaid and Children's Health Insurance Program (CHIP) managed care
regulatory framework and reflects a broader strategy to relieve
regulatory burdens; support state flexibility and local leadership; and
promote transparency, flexibility, and innovation in the delivery of
care. These revisions of the Medicaid and CHIP managed care regulations
are intended to ensure that the regulatory framework is efficient and
feasible for states to implement in a cost-effective manner and ensure
that states can implement and operate Medicaid and CHIP managed care
programs without undue administrative burdens.
DATES:
Effective Date: These regulations are effective on December 14,
2020, except for the additions of Sec. Sec. 438.4(c) (instruction 4)
and 438.6(d)(6) (instruction 7), which are effective July 1, 2021.
Compliance Dates: States must comply with the requirements of this
rule beginning December 14, 2020, except for Sec. Sec. 438.4(c),
438.6(d)(6), 438.340, and 438.364. States must comply with Sec. Sec.
438.4(c) and 438.6(d)(6) as amended effective July 1, 2021 for Medicaid
managed care rating periods starting on or after July 1, 2021. States
must comply with Sec. 438.340 as amended for all Quality Strategies
submitted after July 1, 2021. As Sec. 438.340 applies to CHIP through
an existing cross-reference in Sec. 457.1240(e), separate CHIPs must
also come into compliance with the requirements of Sec. 438.340 as
amended for all Quality Strategies submitted after July 1, 2021. States
must comply with Sec. 438.364 for all external quality reports
submitted on or after July 1, 2021. Because Sec. 438.364 applies to
CHIP through an existing cross reference in Sec. 457.1250(a), separate
CHIPs must also come into compliance with the requirements of Sec.
438.364 for external quality reports submitted on or after July 1,
2021.
FOR FURTHER INFORMATION CONTACT:
John Giles, (410) 786-5545, for Medicaid Managed Care provisions.
Carman Lashley, (410) 786-6623, for the Medicaid Managed Care
Quality provisions.
Melissa Williams, (410) 786-4435, for the CHIP provisions.
SUPPLEMENTARY INFORMATION:
I. Medicaid Managed Care
A. Background
States may implement a managed care delivery system using four
types of Federal authorities--sections 1915(a), 1915(b), 1932(a), and
1115(a) of the Social Security Act (the Act); each is described briefly
in this final rule.
Under section 1915(a) of the Act, states can implement a voluntary
managed care program by executing a contract with organizations that
the state has procured using a competitive procurement process. To
require beneficiaries to enroll in a managed care program to receive
services, a state must obtain approval from CMS under one of two
primary authorities:
Through a state plan amendment that meets standards set
forth in section 1932 of the Act, states can implement a mandatory
managed care delivery system. This authority does not allow states to
require beneficiaries who are dually eligible for Medicare and Medicaid
(dually eligible), American Indians/Alaska Natives (except as permitted
in section 1932(a)(2)(C) of the Act), or children with special health
care needs to enroll in a managed care program. State plans, once
approved, remain in effect until modified by the state.
We may grant a waiver under section 1915(b) of the Act,
permitting a state to require all Medicaid beneficiaries to enroll in a
managed care delivery system, including dually eligible beneficiaries,
American Indians/Alaska Natives, or children with special health care
needs. After approval, a state may operate a section 1915(b) waiver for
a 2-year period (certain waivers can be operated for up to 5 years if
they include dually eligible beneficiaries) before requesting a renewal
for an additional 2 (or 5) year period.
We may also authorize managed care programs as part of
demonstration projects under section 1115(a) of the Act that include
waivers permitting the state to require all Medicaid beneficiaries to
enroll in a managed care delivery system, including dually eligible
beneficiaries, American Indians/Alaska Natives, and children with
special health care needs. Under this authority, states may seek
additional flexibility to demonstrate and evaluate innovative policy
approaches for delivering Medicaid benefits, as well as the option to
provide services not typically covered by Medicaid. Such flexibility is
approvable only if the objectives of the Medicaid statute are likely to
be met, and the demonstration is subject to evaluation.
The above authorities may permit states to operate their programs
without complying with the following standards of Medicaid law outlined
in section of 1902 of the Act:
Statewideness [section 1902(a)(1) of the Act]: States may
implement a managed care delivery system in specific areas of the state
(generally counties/parishes) rather than the whole state;
Comparability of Services [section 1902(a)(10) of the
Act]: States may provide different benefits to people enrolled in a
managed care delivery system; and
Freedom of Choice [section 1902(a)(23)(A) of the Act]:
States may generally require people to receive their Medicaid services
only from a managed care plan's network of providers or primary care
provider.
In the May 6, 2016 Federal Register (81 FR 27498), we published the
``Medicaid and Children's Health Insurance Program (CHIP) Programs;
Medicaid Managed Care, CHIP Delivered in Managed Care, and Revisions
Related to Third Party Liability'' final rule (hereinafter referred to
as ``the 2016 final rule'') that modernized the Medicaid and CHIP
managed care regulations to reflect changes in the use of managed care
delivery systems. The 2016 final rule aligned many of the rules
governing Medicaid and CHIP managed care with those of other major
sources of coverage; implemented applicable statutory provisions;
strengthened actuarial soundness payment provisions to promote the
accountability of managed care program rates; strengthened efforts to
reform delivery systems that serve Medicaid and CHIP beneficiaries; and
enhanced policies related to program integrity.
In the January 18, 2017 Federal Register (82 FR 5415), we published
the ``Medicaid Program; The Use of New or Increased Pass-Through
Payments in Medicaid Managed Care Delivery Systems'' final rule (the
2017 pass-through payments final rule) that made changes to the pass-
through payment transition periods and the maximum
[[Page 72755]]
amount of pass-through payments permitted annually during the
transition periods under Medicaid managed care contract(s) and rate
certification(s). That final rule prevented increases in pass-through
payments and the addition of new pass-through payments beyond those in
place when the pass-through payment transition periods were established
in the 2016 final Medicaid managed care regulations.
In the November 14, 2018 Federal Register (83 FR 57264), we
published the ``Medicaid Program; Medicaid and Children's Health
Insurance Plan (CHIP) Managed Care'' proposed rule (the 2018 proposed
rule) which included proposals designed to streamline the Medicaid and
CHIP managed care regulatory framework to relieve regulatory burdens;
support state flexibility and local leadership; and promote
transparency, flexibility, and innovation in the delivery of care. This
2018 proposed rule was intended to ensure that the Medicaid and CHIP
managed care regulatory framework is efficient and feasible for states
to implement in a cost-effective manner and ensure that states can
implement and operate Medicaid and CHIP managed care programs without
undue administrative burdens.
Since publication of the 2016 final rule, the landscape for
healthcare delivery continues to change, and states are continuing to
work toward reforming healthcare delivery systems to address the unique
challenges and needs of their local citizens. To that end, the
Department of Health and Human Services (HHS) and CMS issued a letter
\1\ to the nation's Governors on March 14, 2017, affirming the
continued HHS and CMS commitment to partnership with states in the
administration of the Medicaid program, and noting key areas where we
intended to improve collaboration with states and move toward more
effective program management. In that letter, we committed to a
thorough review of the managed care regulations to prioritize
beneficiary outcomes and state priorities.
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\1\ Letter to the nation's Governors on March 14, 2017: https://www.hhs.gov/sites/default/files/sec-price-admin-verma-ltr.pdf.
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Since our issuance of that letter, stakeholders have expressed that
the current Federal regulations are overly prescriptive and add costs
and administrative burden to state Medicaid programs with few
improvements in outcomes for beneficiaries. As part of the agency's
broader efforts to reduce administrative burden, we undertook an
analysis of the current managed care regulations to ascertain if there
were ways to achieve a better balance between appropriate Federal
oversight and state flexibility, while also maintaining critical
beneficiary protections, ensuring fiscal integrity, and improving the
quality of care for Medicaid beneficiaries. This review process
culminated in the November 14, 2018 proposed rule. After reviewing the
public comments to the 2018 proposed rule, this final rule seeks to
streamline the managed care regulations by reducing unnecessary and
duplicative administrative burden and further reducing Federal
regulatory barriers to help ensure that state Medicaid agencies are
able to work efficiently and effectively to design, develop, and
implement Medicaid managed care programs that best meet each state's
local needs and populations.
B. Medicaid Managed Care Provisions of the Rule and Analysis of and
Responses to Public Comments
We received a total of 215 timely comments from state Medicaid and
CHIP agencies, advocacy groups, health care providers and associations,
health insurers, managed care plans, health care associations, and the
general public. The following sections, arranged by subject area,
include a summary of the comments we received and our responses to
those comments. In response to the November 14, 2018 proposed rule,
some commenters chose to raise issues that were beyond the scope of our
proposals. In this final rule, we are not summarizing or responding to
those comments.
1. Standard Contract Requirements (Sec. 438.3(t))
In the 2016 final rule, we added a new provision at Sec. 438.3(t)
requiring that contracts with a managed care organization (MCO),
prepaid inpatient health plan (PIHP), or prepaid ambulatory health plan
(PAHP) that cover Medicare-Medicaid dually eligible enrollees provide
that the MCO, PIHP, or PAHP sign a Coordination of Benefits Agreement
(COBA) and participate in the automated crossover claim process
administered by Medicare. The purpose of this provision was to promote
efficiencies for providers by allowing providers to bill once, rather
than sending separate claims to Medicare and the Medicaid MCO, PIHP, or
PAHP. The Medicare crossover claims process is limited to fee-for
service-claims for Medicare Parts A and B; it does not include services
covered by Medicare Advantage plans under Medicare Part C.
Since publication of the 2016 final rule, we heard from a number of
states that, prior to the rule, had effective processes in place to
identify and send appropriate crossover claims to their managed care
plans from the crossover file the states received from us. Medicaid
beneficiaries can be enrolled in multiple managed care plans or the
state's fee-for-service (FFS) program. For example, a beneficiary may
have medical care covered by an MCO, dental care covered by a PAHP, and
behavioral health care covered by the state's FFS program. When a
Medicaid managed care plan enters into a crossover agreement with
Medicare, as required in Sec. 438.3(t), we then send to that plan all
the Medicare FFS crossover claims for their Medicaid managed care
enrollees, as well as to the state Medicaid agency. When this occurs,
the managed care plan(s) may receive claims for services that are not
the contractual responsibility of the managed care plan. Additionally,
states noted that having all claims sent to the managed care plan(s)
can result in some claims being sent to the wrong plan when
beneficiaries change plans. Some states requested regulation changes to
permit states to send the appropriate crossover claims to their managed
care plans; that is, states would receive the CMS crossover file and
then forward to each Medicaid managed care plan only those crossover
claims for which that plan is responsible. These states have expressed
that to discontinue existing effective processes for routing crossover
claims to their managed care plans to comply with this provision adds
unnecessary costs and burden to the state and plans, creates confusion
for payers and providers, and delays provider payments.
To address these concerns, we proposed to revise Sec. 438.3(t) to
remove the requirement that managed care plans must enter into a COBA
directly with Medicare and instead would require a state's contracts
with managed care plans to specify the methodology by which the state
would ensure that the managed care plans receive all appropriate
crossover claims for which they are responsible. Under this proposal,
states would be able to determine the method that best meets the needs
of their program, whether by requiring the managed care plans to enter
into a COBA and participate in the automated claims crossover process
directly or by using an alternative method by which the state forwards
crossover claims it receives from Medicare to each MCO, PIHP, or PAHP,
as appropriate. Additionally, we proposed to require, if the state
elects to use a methodology other than requiring
[[Page 72756]]
the MCO, PIHP, or PAHP to enter into a COBA with Medicare, that the
state's methodology would have to ensure that the submitting provider
is promptly informed on the state's remittance advice that the claim
has been sent to the MCO, PIHP, or PAHP for payment consideration.
The following summarizes the public comments received on our
proposal to revise Sec. 483.3(t) and our response to those comments.
Comment: Many commenters supported the proposed addition of state
flexibility to use alternate mechanisms to send crossover claims to
managed care plans. Commenters stated that the changes would provide
states and plans more flexibility while continuing to promote better
coordination of benefits for dually eligible individuals and reducing
burden on the providers who serve them.
Response: We appreciate the support for the proposed change to the
regulation.
Comment: One commenter supported the proposed rule but added that
it is necessary for CMS to ensure that any alternative state crossover
methodology separates Medicare claims from Medicaid rate setting and
actuarial soundness.
Response: While Medicare Part A or Part B cost-sharing payments--
which are Medicaid costs--must be factored into Medicaid rate setting
if a Medicaid plan is responsible for covering them, we agree that
other costs for the provision of Medicare covered services should not
be. Nothing in our proposal or the revision to Sec. 438.3(t) that we
finalize here will impact the processes for Medicaid rate-setting or
determination of actuarial soundness.
Comment: One commenter supported the proposed changes but offered a
note of caution relating to potentially opening the door to subpar
manual processes that states might adopt that could incur additional
costs and unnecessary complexity.
Response: As discussed in this final rule, the regulations at Sec.
438.3(t) finalized in 2016 established a crossover process in which
providers only bill once, rather than multiple times. The revision to
Sec. 438.3(t) that we are finalizing here maintains a process in which
providers only bill once (to Medicare), because the regulation only
applies when the state enters into a COBA but allows greater state
flexibility in how that claim is routed from Medicare to Medicaid and
Medicaid managed care plans. We agree that automated processes are
usually optimal and create efficiencies for states, plans, and
providers. We encourage states that adopt alternate methodologies to
use automated processes as appropriate to achieve efficient and
economical systems. Regardless of the method chosen by a state, the
provider role in the crossover claim submission process is not changed
by this proposal.
Comment: Some commenters noted concern that the proposed changes
would have on plans and providers that operated across state lines. One
commenter noted that Medicaid managed care plans that operate in
multiple states would need to develop and maintain different processes
in different states. Another commenter who supported the proposed
changes noted that it may pose challenges for providers that furnish
services in multiple states.
Response: We carefully considered the benefits of national
uniformity for Medicaid managed care plans and providers that serve
multiple states. In this instance, we believe that states should have
the flexibility to adopt the methodology that works best within their
state to ensure that the appropriate MCO, PIHP, or PAHP will receive
all applicable crossover claims for which the MCO, PIHP, or PAHP is
responsible. This flexibility will allow states to maintain current
processes and not incur unnecessary costs or burden to providers and
beneficiaries to conform to a new mandated process. We note here that
this revision to Sec. 438.3(t) does not require states to change their
current cross over claim handling processes; it merely provides states
with an option. Regardless of which methodology a state chooses to
implement, it should not have any effect on providers, who should be
able to submit their claims once and have it routed to the appropriate
MCO, PIHP, or PAHP for adjudication.
Comment: One commenter who objected to the proposed changes
requested clarification about how it intersects with a similar
provision in section 53102(a)(1) of the Bipartisan Budget Act (BBA) of
2018 (Pub. L. 115-123, enacted February 9, 2018) concerning procedures
for states processing prenatal claims when there is a known third party
liability.
Response: We do not believe that Sec. 438.3(t), as amended here,
conflicts with the third party liability requirements added by section
53102(a)(1) of the BBA of 2018. We note that section 53102(a)(1) of the
BBA of 2018 applies when the provider bills Medicaid directly for a
prenatal claim. As further discussed in our June 1, 2018 Informational
Bulletin to states,\2\ that provision requires states to use standard
cost avoidance when processing prenatal claims. Thus if the state
Medicaid agency has determined that a third party is likely liable for
a prenatal claim, it must reject, but not deny, the claim returning the
claim back to the provider noting the third party that the Medicaid
state agency believes to be legally responsible for payment. If a
provider billed Medicaid for a prenatal claim for a dually eligible
individual, the state would be required to reject the claim but note
that Medicare is the liable third party, as Medicare would be the
primary payer.
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\2\ See https://www.medicaid.gov/federal-policy-guidance/downloads/cib060118.pdf.
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By contrast, the regulation in Sec. 438.3(t), which is triggered
because the state enters into a COBA with Medicare, applies when the
provider bills Medicare for any Part A or B service under Medicare FFS
for a dually eligible individual for which there is cost-sharing
covered by Medicaid. Medicare would generate the crossover consistent
with the COBAs in place. If the state has elected to require its
Medicaid managed care plans to enter into a COBA with Medicare, then
Medicare would forward the crossover claims to the Medicaid managed
care plan. If the state has elected under Sec. 438.3(t) to use a
different methodology for ensuring that the appropriate managed care
plan receives the applicable crossover claims, then Medicare would
forward the crossover claims to the state pursuant to the state's COBA
with Medicare; the state would then forward that crossover claim to the
Medicaid managed care plan for payment. If a state adopts an alternate
methodology as provided in Sec. 438.3(t), the state must ensure that
the submitting provider is promptly informed on the state's remittance
advice that the claims have not been denied, but instead, has been sent
to the MCO, PIHP, or PAHP for consideration.
Comment: One commenter requested that CMS add regulatory language
at Sec. 438.3(t) stating that ``The coordination methodology also must
ensure that dually eligible individuals are not denied Medicaid
benefits they would be eligible to receive if they were not also
eligible for Medicare benefits.''
Response: We agree that it is essential that dually eligible
individuals are not denied Medicaid benefits they would be eligible to
receive if they were not also eligible for Medicare benefits; however,
this is outside the scope of this regulation, which is limited to how
states must ensure the appropriate managed care plan receives all
[[Page 72757]]
applicable crossover claims for which it is responsible. We note that
there is no regulation in part 438 that authorizes denial of Medicaid-
covered services for an enrollee who is eligible for those services
based on the enrollee's eligibility as well for Medicare.
Comment: One commenter suggested providing Medicare eligibility
data to MCOs, PIHPS, and PAHPs through data feeds, file transfers, or
an online portal for efficient coordination of benefits, to improve
care coordination and outcomes. One commenter encouraged free and
timely access to all clinical and administrative data to promote
coordination among managed care plans. The commenter suggested creating
a standardized process by which managed care organizations can receive
timely claims and clinical data from both Medicaid and Medicare. The
commenter noted that the proposed changes may limit full integration in
instances where a beneficiary in a Medicaid managed long term care plan
is enrolled in an unaligned (that is, offered by a separate
organization) Medicare Advantage plan such as a Dual Eligible Special
Needs Plan offered by a different organization than offers the Medicaid
plan in which the person is enrolled.
Response: We appreciate the value of making such data available to
plans. We are separately exploring whether we have authority to do so
within existing limits, such as those established under the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L.
104-191, enacted August 21, 1996). For the comment on enrollment in
different managed care plans for Medicaid and Medicare, we note that
the Medicare crossover process is limited to Original Medicare
(Medicare Part A and B). Claims for cost sharing for a Medicare
Advantage enrollee are beyond the scope of this regulation.
Comment: One commenter requested that we itemize all claim
inclusion and exclusion selection criteria for professional claim
services.
Response: We do not have the authority to make the requested
change. The National Uniform Claims Committee (NUCC), which establishes
the standards for 837 professional claims and the CMS-1500 form, has
chosen not to array professional and DME claims by type of bill (TOB),
as happens with institutional claims, which are under the purview of
the National Uniform Billing Committee (NUBC).
Comment: One commenter requested that we allow plans to continue
their COBA with, and receive crossover claims directly from, Medicare
in states where plans already did so as required under the 2016 final
rule.
Response: As we proposed the amendment and are finalizing it here,
Sec. 438.3(t) does not require any changes for states and MCOs, PIHPs,
and PAHPs that are already complying with the 2016 final rule. This
final rule amends Sec. 438.3(t) to provide states with additional
flexibility to adopt a different methodology to ensure that the
appropriate MCO, PIHP, or PAHP will receives all applicable crossover
claims for which the MCO, PIHP, or PAHP is responsible, subject to some
limited parameters to ensure that the applicable provider is provided
information on the state's remittance advice. This additional
flexibility might result in states developing and using more efficient
and economical processes for handling cross-over claims applicable to
Medicaid managed care enrollees.
Comment: One commenter who supported the proposed changes
encouraged CMS to monitor states that adopt alternative methodologies
to ensure that providers still receive payments in a timely manner.
Response: While this regulation does not establish a timeframe for
the state to forward the crossover claim to its managed care plan, we
note that the existing regulations on timely claims payment in the
Medicaid FFS context apply. Specifically, Sec. 447.45(d)(4)(ii)
specifies that the state Medicaid agency must pay the Medicaid claim
relating to a Medicare claim within 12 months of receipt or within 6
months of when the agency or provider receives notice of the
disposition of the Medicare claim. A state that uses an alternative
methodology under Sec. 438.3(t) and receives crossover claims from
Medicare would need to ensure payment within this timeframe. To do so,
the state would need to forward crossover claims to a Medicaid plan and
ensure the plan pays it within 6 months of when the state initially
received it.
Comment: A few commenters who opposed the proposed changes
recommended that, if the regulation is finalized as proposed and a
state elects to devise its own system, the state be required to
promptly educate participating health care providers about any ensuing
changes in the state's updated remittance advice. One commenter
expressed concern that some health care providers would not be promptly
made aware of the new requirements to submit multiple claims to the
managed care plan for payment consideration, resulting in unpaid claims
through no fault of their own, and that this would be antithetical to
CMS' ``Patients Over Paperwork'' initiative.
Response: We believe that provider education is critical whenever a
state implements changes to how crossover claims are routed to the
Medicaid managed care plan responsible for processing them. We
encourage states to conduct such education prior to implementing any
process changes.
For the concern that without education, providers would not know
where to submit claims for Medicare cost-sharing, this provision is
designed to remove from providers the burden of having to identify the
Medicaid managed care plan in which each dually eligible patient is
enrolled, and submit the bill for the Medicare cost-sharing to the
correct plan. Under our proposed regulation, the crossover claim is
still routed to the Medicaid managed care plan. States may continue to
require that plans enter into a COBA with Medicare to route crossover
claims directly to the plan. In the alternative, states that elect to
receive crossover claims from Medicare (or elect any other methodology
than having the Medicaid managed care plans enter into COBAs with
Medicare) would route the claims to the plan and issue remittance
advice to the applicable provider. In both cases, the claims will be
routed to the Medicaid managed care plan; there is no need for the
provider to take any action to identify or submit the crossover claim
to the plan. We believe this is fully in line with our ``Patients over
Paperwork'' initiative.
We also sponsor an enhanced secondary COBA feed (also known as the
``Medicaid Quality project''), which is available to states that have a
COBA and participate in the Medicare crossover process. This secondary
feed ensures that states receive a complete array of Medicare FFS
adjudicated Part A and B claims for individuals that the states
submitted to CMS on their eligibility file. The state must be in
receipt of the normal crossover claims file to be eligible to receive
the second enhanced COBA feed.
Comment: One commenter who opposed the proposed changes expressed
concern that any process in which there is an intermediary would create
confusion and delay. The commenter noted that a smoothly operating
crossover claim process reduces burden on providers, and may make them
more willing to serve Qualified Medicare Beneficiaries and other dually
eligible individuals. The commenter suggested simplifying and
streamlining the procedures so that all crossover claims can be handled
promptly by one entity, either the state
[[Page 72758]]
Medicaid agency or the MCO. The commenter also noted that when CMS
adopted Sec. 438.3(t), it allowed states time to have Medicaid managed
care plans get COBAs in place, and that if more time is needed, the
better course would be to extend the time for enforcement rather than
to modify the regulation.
Response: We share the preference for reducing the complexity of
the crossover claim process and agree with the commenter that
complexity in the crossover process can be a disincentive to serving
dually eligible individuals. The Sec. 438.3(t) regulatory language
that we proposed and are finalizing requires that if a state uses an
alternate methodology, it must ensure that the appropriate managed care
plan (that is, the MCO, PIHP, or PAHP whose contract covers the
services being billed on the claim) receives all applicable crossover
claims, and ensure the remittance advice conveys that the claim is
forwarded rather than denied. In either scenario, the provider is
relieved of the burden of determining which entity--the state or
Medicaid managed care plan--is liable for the Medicare cost-sharing.
Comment: Several commenters opposed the proposed changes and
requested we leave the current regulatory requirements in place. Many
of these commenters noted that the flexibility in the proposed change
could increase provider administrative burden and confusion when states
indicate multiple denials on the state's remittance advice to providers
(that is, when they forward a crossover claim to an MCO, PIHP, or PAHP)
and that it would create further confusion when the Medicaid managed
care plan then processed the claim and notified the provider on the
plan's remittance advice. Some also expressed concern that alternate
methodologies would increase provider practice costs--especially for
small practices.
Response: As noted in the proposed rule and in this final rule, an
important factor prompting the proposed change was that some states and
providers raised concerns after the original provision was finalized in
the 2016 final rule requiring a state to abandon effective alternative
processes would actually add to provider burden and increase risk of
payment delays. We believe that state flexibility would permit
carefully crafted alternative arrangements to continue in a way that
benefits providers, plans, and states. We reiterate that this proposal
retains a system in which providers are only required to bill once (to
Medicare), and that the claim will be transferred to Medicaid or the
Medicaid managed care plan to address the payment of Medicare cost-
sharing.
To address the commenter's concern about when states indicate
multiple denials on the state's remittance advice, we are clarifying
our intent by finalizing Sec. 438.3(t) with additional text specifying
that the state's remittance advice must inform the provider that the
claim was not denied by the state but was redirected to a managed care
plan for adjudication. We regret that our intent was not clear in the
proposed rule and believe this clarification will minimize provider
confusion and reduce the risk of providers inadvertently perceiving
forwarded claims as denied.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.3(t) as proposed with one modification to clarify
that when a state elects not to require its managed care plans to enter
into COBAs with Medicare, the remittance advice issued by the state
must indicate that the state has not denied payment but that the claim
has been sent to the MCO, PIHP, or PAHP for payment consideration. In
addition, we are finalizing the regulation text with slight grammatical
corrections to use the present tense consistently.
2. Actuarial Soundness Standards (Sec. 438.4) \3\
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\3\ In Texas v. United States, No. 7:15-cv-151-O, slip op. at
40, 62 (N.D. Tex. Mar. 5, 2018), appeal docketed, No. 18-10545 (5th
Cir. May 7, 2018) (``Texas''), six states challenged the portion of
the regulation previously codified at 42 CFR 438.6(c)(1)(i)(C)
(2002) (now codified in portions of 42 CFR 438.2, 438.4), defining
``actuarially sound capitation rates'' as capitation rates ``that .
. . [h]ave been certified . . . by actuaries who meet the
qualification standards established by the American Academy of
Actuaries and follow the practice standards established by the
Actuarial Standards Board,'' on the basis that Actuarial Standard of
Practice (``ASOP'') 49 defines ``actuarially sound capitation
rates'' to mean rates that account for all fees and taxes, including
the Health Insurance Provider Fee (``HIPF''). In a decision issued
on March 5, 2018, the court declared the challenged portion of the
regulation to be ``set aside'' under the Administrative Procedure
Act, 5 U.S.C. 706(2)(B) through (C). Texas, slip op. at 62. In its
decision, the court specifically allowed CMS to ``continue to use
ASOP 49 to make internal decisions whether capitation rates are
`actuarially sound,' '' and only ``cannot use ASOP 49 to . . .
require Plaintiffs to pay the HIPF.'' Texas, slip op. at 21. As of
July 2019, the court had not issued a final judgment. The government
has appealed the court's March 5, 2018 decision; during the pendency
of the appeal, the government is complying with the court's order.
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a. Option to Develop and Certify a Rate Range (Sec. 438.4(c))
Before the 2016 final rule was published, we considered any
capitation rate paid to a managed care plan that fell anywhere within
the certified rate range to be actuarially sound (81 FR 27567).
However, to make the rate setting and the rate approval process more
transparent, we changed that process in the 2016 final rule at Sec.
438.4 to require that states develop and certify as actuarially sound
each individual rate paid per rate cell to each MCO, PIHP, or PAHP with
enough detail to understand the specific data, assumptions, and
methodologies behind that rate (81 FR 27567). We noted in that 2016
final rule that states could continue to use rate ranges to gauge an
appropriate range of payments on which to base negotiations with an
MCO, PIHP, or PAHP, but would have to ultimately provide certification
to us of a specific rate for each rate cell, rather than a rate range
(81 FR 27567). We believed that this change would enhance the integrity
of the Medicaid rate-setting process and align Medicaid policy more
closely with actuarial practices used in setting rates for non-Medicaid
plans (81 FR 27568).
Since publication of the 2016 final rule, we heard from
stakeholders that the requirement to certify a capitation rate per rate
cell, rather than to certify a rate range, has the potential to
diminish states' ability to obtain the best rates when contracts are
procured through competitive bidding. For example, we heard from one
state that historically competitively bid the administrative component
of the capitation rate that the requirement to certify a capitation
rate per rate cell may prevent the state from realizing a lower rate
that could have been available through the state's procurement process.
States that negotiate dozens of managed care plans' rates annually have
also cited the potential burden associated with losing the flexibility
to certify rate ranges. States have claimed that the elimination of
rate ranges could potentially increase administrative costs and burden
to submit separate rate certifications and justifications for each
capitation rate paid per rate cell.
To address states' concerns while ensuring that rates are
actuarially sound and Federal resources are spent appropriately, we
proposed to add Sec. 438.4(c) to provide an option for states to
develop and certify a rate range per rate cell within specified
parameters. We designed our proposal to address our previously
articulated concerns over the lack of transparency when large rate
ranges were used by states to increase or decrease rates paid to the
managed care plans without providing further notification to us or the
public of the change. We noted that the rate range option at proposed
paragraph (c) would allow states to certify a rate range per rate cell
subject to specific limits and
[[Page 72759]]
would require the submission of a rate recertification if the state
determines that changes are needed within the rate range during the
rate year. Under our proposal, we noted that an actuary must certify
the upper and lower bounds of the rate range as actuarially sound and
would require states to demonstrate in their rate certifications how
the upper and lower bounds of the rate range were actuarially sound.
Specifically in Sec. 438.4(c)(1), we proposed the specific
parameters for the use of rate ranges: (1) The rate certification
identifies and justifies the assumptions, data, and methodologies
specific to both the upper and lower bounds of the rate range; (2) the
upper and lower bounds of the rate range are certified as actuarially
sound consistent with the requirements of part 438; (3) the upper bound
of the rate range does not exceed the lower bound of the rate range
multiplied by 1.05; (4) the rate certification documents the state's
criteria for paying MCOs, PIHPs, and PAHPs at different points within
the rate range; and (5) compliance with specified limits on the state's
ability to pay managed care plans at different points within the rate
range. States using this option would be prohibited from paying MCOs,
PIHPs, and PAHPs at different points within the certified rate range
based on the willingness or agreement of the MCOs, PIHPs, or PAHPs to
enter into, or adhere to, intergovernmental transfer (IGT) agreements,
or the amount of funding the MCOs, PIHPs, or PAHPs provide through
IGTs. We proposed these specific conditions and limitations on the use
of rate ranges to address our concerns noted in this final rule; that
is, that rates are actuarially sound and ensure appropriate stewardship
of Federal resources, while also permitting limited state flexibility
to use certified rate ranges. We stated in the proposed rule our belief
that the proposed conditions and limitations on the use of rate ranges
struck the appropriate balance between prudent fiscal and program
integrity and state flexibility. We invited comment on these specific
proposals and whether additional conditions should be considered to
ensure that rates are actuarially sound.
Under proposed Sec. 438.4(c)(2)(i), states certifying a rate range
would be required to document the capitation rates payable to each
managed care plan, prior to the start of the rating period for the
applicable MCO, PIHP, and PAHP, at points within the certified rate
range consistent with the state's criteria in proposed paragraph
(c)(1)(iv). States electing to use a rate range would have to submit
rate certifications to us prior to the start of the rating period and
must comply with all other regulatory requirements including Sec.
438.4, except Sec. 438.4(b)(4) as specified. During the contract year,
states using the rate range option in Sec. 438.4(c)(1) would not be
able to modify capitation rates within the +/- 1.5 percent range
allowed under existing Sec. 438.7(c)(3); we proposed to codify this as
Sec. 438.4(c)(2)(ii). We noted that this provision would enable us to
give states the flexibility and administrative simplification to use
certified rate ranges. We noted in the proposed rule that while the use
of rate ranges is not standard practice in rate development, our
proposal would align with standard rate development practices by
requiring recertification when states elect to modify capitation rates
within a rate range during the rating year. States wishing to modify
the capitation rates within a rate range during the rating year would
be required, in proposed Sec. 438.4(c)(2)(iii), to provide a revised
rate certification demonstrating that the criteria for initially
setting the rate within the range, as described in the initial rate
certification, were not applied accurately; that there was a material
error in the data, assumptions, or methodologies used to develop the
initial rate certification and that the modifications are necessary to
correct the error; or that other adjustments are appropriate and
reasonable to account for programmatic changes.
We acknowledged that our proposal had the potential to reintroduce
some of the risks that were identified in the 2016 final rule related
to the use of rate ranges in the Medicaid program. In the 2016 final
rule, we generally prohibited the use of rate ranges, while finalizing
Sec. 438.7(c)(3) to allow de minimis changes of +/- 1.5 percent to
provide some administrative relief to states for small changes in the
capitation rates. This change was intended to provide some flexibility
with rates while eliminating the ambiguity created by rate ranges in
rate setting and to be consistent with our goal to make the rate
setting and rate approval processes more transparent. We specifically
noted in the 2016 final rule that states had used rate ranges to
increase or decrease rates paid to the managed care plans without
providing further notification to us or the public of the change or
certification that the change was based on actual experience incurred
by the MCOs, PIHPs, or PAHPs that differed in a material way from the
actuarial assumptions and methodologies initially used to develop the
capitation rates (81 FR 27567 through 27568).
We further noted in the 2016 final rule that the prohibition on
rate ranges was meant to enhance the integrity and transparency of the
rate setting process in the Medicaid program, and to align Medicaid
policy more closely with the actuarial practices used in setting rates
for non-Medicaid health plans. We noted that the use of rate ranges was
unique to Medicaid managed care and that other health insurance
products that were subject to rate review submit and justify a specific
premium rate. We stated in the 2016 final rule our belief that once a
managed care plan has entered into a contract with the state, any
increase in funding for the contract should correspond with something
of value in exchange for the increased capitation payments. We also
provided additional context that our policy on rate ranges was based on
the concern that some states have used rate ranges to increase
capitation rates paid to managed care plans without changing any
obligations within the contract or certifying that the increase was
based on managed care plans' actual expenses during the contract
period. In the 2016 final rule, we reiterated that the prohibition on
rate ranges was consistent with the contracting process where managed
care plans are agreeing to meet obligations under the contract for a
fixed payment amount (81 FR 27567-27568).
We noted how the specific risks described in the proposed rule
concerned us, and as such, were the reason for specific conditions and
limitations on the use of rate ranges that we proposed. Our rate range
proposal was intended to prevent states from using rate ranges to shift
costs to the Federal Government. There are some states that currently
make significant retroactive changes to the contracted rates at, or
after, the end of the rating period. As we noted in the 2016 final
rule, we do not believe that these changes are made to reflect changes
in the underlying assumptions used to develop the rates (for example,
the utilization of services, the prices of services, or the health
status of the enrollee), but rather we are concerned that these changes
are used to provide additional reimbursements to the plans or to some
providers (81 FR 27834). Additionally, we noted that states would need
to demonstrate that the entirety of rate ranges (that is, lower and
upper bound) compliant with our proposal are actuarially sound. As
noted in the 2016 final rule, 14 states used rate ranges with a width
of 10 percent or smaller (that is, the low end and the high end of the
range were within 5
[[Page 72760]]
percent of the midpoint of the range), but in some states, the ranges
were as wide as 30 percent (81 FR 27834). We noted that we believed
that our proposal would limit excessive ranges because proposed Sec.
438.4(c)(1)(i) and (ii) would require the upper and lower bounds of the
rate range to be certified as actuarially sound and that the rate
certification would identify and justify the assumptions, data, and
methodologies used to set the bounds. While we believed that our
proposal struck the right balance between enabling state flexibility
and our statutory responsibility to ensure that managed care capitation
rates are actuarially sound, we noted that our approach may reintroduce
undue risk in Medicaid rate-setting.
Therefore, we requested public comments on our proposal in general
and on our approach. We requested public comment on the value of the
additional state flexibility described in our proposal relative to the
potential for the identified risks described in the proposed rule and
in the 2016 final rule, including other unintended consequences that
could arise from our proposal that we have not yet identified or
described. We requested public comment on whether additional conditions
or limitations on the use of rate ranges would be appropriate to help
mitigate the risks we identified. We also requested public comment from
states on the utility of state flexibility in this area--specifically,
we requested that states provide specific comments about their policy
needs and clear explanations describing how utilizing rate ranges
effectively meets their needs or whether current regulatory
requirements on rate ranges were sufficiently flexible to meet their
needs. We also requested that states provide quantitative data to help
us quantify the benefits and risks associated with the proposal. We
also encouraged states and other stakeholders to comment on the needs,
benefits, risks, and risk mitigations described in the proposed rule.
The following summarizes the public comments received on our
proposal to add Sec. 438.4(c) and our responses to those comments.
Comment: Many commenters supported the proposed option to develop
and certify a 5 percent rate range, stating it allows for increased
flexibility in rate setting. Commenters noted that the rate range
proposal will remove ambiguities in determining actuarial soundness and
will put appropriate limits on unsustainable rates. Some commenters
specifically noted support for the requirements to recertify rates when
there are changes made within the approved rate range and for states to
document the specific rates for each managed care plan. Commenters also
noted support for the proposal that states cannot pay managed care
plans at different rates within the range based on IGT agreements.
Several commenters noted that the specific conditions proposed by CMS
must be implemented and strictly enforced to ensure that actuarial
soundness is achieved within the rate ranges. A few commenters urged
CMS to adopt all of the conditions set forth in Sec. 438.4(c) if rate
ranges are finalized.
Response: We continue to believe, particularly with the support of
commenters, that the 5 percent, or +/-2.5 percent from the midpoint,
rate range will permit increased flexibility in rate setting, while the
specific conditions proposed will also ensure that the rates are
actuarially sound. The proposed parameters and guardrails carefully
strike a balance between state flexibility and program integrity and we
are finalizing them, with some modifications as discussed in response
to other comments.
Comment: Several commenters opposed the proposal to allow states to
certify rate ranges and urged CMS not to finalize it. Some of these
commenters expressed concerns that rate ranges decrease transparency,
do not ensure that rates are actuarially sound, and do not enable CMS
to ensure the adequacy of state and Federal investments in patient
care. Some commenters noted that our proposal represents diminished
Federal oversight of the adequacy of payment rates to Medicaid managed
care plans and that it would result in lower payments to managed care
plans, which could limit patient access to care. One commenter
specifically expressed concern that wider rate ranges may result in
lower rates to managed care plans and in turn result in contracts being
awarded to less qualified plans, which may lead to early contract
terminations, plan turnover, and instability for beneficiaries; this
commenter also noted that such plans may be unable to pay competitive
market rates, which could reduce patient access to care. Commenters
also stated that the rate range provision is unnecessary since the
existing +/-1.5 percent adjustment under Sec. 438.7(c)(3) is adequate
to provide states with administrative flexibility. One commenter
expressed concern that the rate range proposal would result in reduced
services for enrollees and instability for managed care plans and
providers.
Response: We understand commenters' concerns related to the use of
rate ranges in Medicaid managed care. We also acknowledge our own
fiscal and program integrity concerns which were noted in the 2016
final rule, as well as in the 2018 proposed rule. However, we proposed
this rate range provision because we heard from states that this was a
critical flexibility to reduce administrative burden in state Medicaid
programs. We developed our proposal to carefully strike a balance
between state flexibility and program integrity. Balancing this
flexibility with the fiscal and program integrity concerns was the
driving reason for including comprehensive guardrails around the use of
rate ranges in the proposal and this final rule. To ensure appropriate
Federal oversight, we specifically proposed parameters to ensure that
rate ranges: (1) Do not inappropriately use IGTs to draw down
additional Federal dollars with no correlating benefit to the Federal
Government or the Medicaid program; (2) are bounded at the upper and
lower ends with rates that are actuarially sound consistent with the
regulations at Sec. Sec. 438.4 through 438.7; and (3) strike the
appropriate balance between prudent fiscal and program integrity and
state flexibility. With regard to this last point, we specifically
proposed that states using rate ranges must document in the rate
certification the criteria used to select the specific rate within the
range for each managed care plan under contract with the state. The
guardrails finalized in Sec. 438.4(c) will enable CMS to review the
establishment and use of rate ranges by states and ensure that all
rates actually paid to managed care plans are actuarially sound. To
address specific concerns about unsound capitation rates, this final
rule requires both the upper and lower bounds of the rate range to be
actuarially sound; therefore, actuarially unsound rates would not be
consistent with Sec. 438.4(c).
We agree with commenters that the existing regulation that permits
a +/-1.5 percent adjustment to certified rates can help states
appropriately address mid-year programmatic changes or mid-year rate
adjustments. However, we also believe that the additional option to
certify a rate range can be helpful to states, especially in
circumstances where states are competitively bidding the capitation
rates. We also agree with commenters that rate ranges can obfuscate
payment rates, and that is why we included specific guardrails around
the use of rate ranges in the proposed rule and are finalizing those
requirements. For
[[Page 72761]]
example, Sec. 438.4(c)(1)(i) requires that the state's rate
certification identify and justify the assumptions, data, and
methodologies used to develop the upper and lower bounds of the rate
range. Also, Sec. 438.4(c)(2)(i) requires that states document the
capitation rates, prior to the start of the rating period, for the
managed care plans at points within the rate range, consistent with the
state's criteria for paying managed care plans at different points
within the rate range. This means that the contract and rate
certification must be submitted for CMS approval before the rating
period begins. We specifically included this timing requirement to
limit the obfuscation of rates. We believe that the guardrails we
proposed and are finalizing, such as these two examples, provide a
level of transparency on the use of rate ranges and provide a mechanism
to avoid obfuscation, especially since this regulation requires the
actuary to describe and justify the assumptions, data, and
methodologies used to develop the rate range in the actuarial
certification.
We understand that several commenters were concerned that rate
ranges could be used to lower payments to managed care plans, thereby
leading to reduced services for enrollees and instability for managed
care plans and providers; however, we have incorporated safeguards to
prevent such outcomes. Under Sec. 438.4(c)(1)(ii), both the upper and
lower bounds of the rate range must be certified as actuarially sound
consistent with the requirements in part 438. Actuarially sound
capitation rates must provide for all reasonable, appropriate, and
attainable costs that are required under the terms of the contract and
for the operation of the managed care plan for the time period and the
population covered under the terms of the contract. Since the lower
bounds of rate ranges must also be actuarially sound and developed in
accordance with the regulations in part 438 governing actuarial
soundness and rate development, we believe that rates within the range
must all be actuarially sound. Under Sec. 438.4(c) as finalized,
states using rate ranges must also document the criteria for paying
managed care plans at different points within the rate range and must
document the capitation rates prior to the start of the rating period--
this means that the criteria used to set managed care plans' capitation
rates must be documented prior to the start of the rating period. We
believe that these requirements will ensure that states are not
arbitrarily reducing payments to managed care plans. We also want to
reiterate that the regulations in 42 CFR part 438 contain other
beneficiary protections meant to ensure that plans are not arbitrarily
reducing services to managed care enrollees. For example, Sec. 438.210
requires that the services covered under the managed care contract must
be furnished in an amount, duration, and scope that is no less than the
amount, duration, and scope for the same services furnished to
beneficiaries under FFS Medicaid. We would also highlight the
requirements in Sec. 438.206 regarding the timely availability of
services that states and managed care plans must ensure for all managed
care enrollees.
Comment: Several commenters supported the proposal to allow rate
ranges but recommended that the range be expanded beyond 5 percent.
Some commenters requested that CMS expand the rate range provision to
10 percent. Commenters also requested that CMS restore rate ranges to
pre-2016 regulatory levels, noting their belief that limits on a rate
range are not necessary if the requirement of paying actuarially sound
rates remains in place. Several commenters also recommended a narrower
rate range to ensure the actuarial soundness of the final rates and
recommended that actuaries be required to consider specific factors in
determining the width (or size) of the rate range, such as maturity of
the program, credibility/quality of the base data, amount of
statistical variability in the underlying claim distribution, and size
of the population. Commenters suggested additional rate ranges with a
width (or size) of +/-2 percent (total range of 4 percent) or +/-3
percent (total range of 6 percent) from the midpoint, or two times the
risk margin reflected in the capitation rates as alternatives to our
proposal. Some commenters considered the proposed 5 percent range to be
overly broad and recommended smaller ranges for the rates to remain
actuarially sound. Some commenters gave specific scenarios by which the
proposed 5 percent rate range may be insufficient and recommended that
CMS not finalize a prescriptive +/- rate range to permit additional
state flexibility.
Response: We are declining to adopt any of these specific
recommendations, as some commenters requested wider permissible ranges,
while other commenters requested narrower permissible ranges. Because
of the mix of public comments on this topic, we believe that we struck
the right balance in the proposed rule by permitting a rate range up to
5 percent, or +/-2.5 percent from the midpoint, between the lower and
upper bound. We believe that 5 percent, or +/-2.5 percent from the
midpoint, is a reasonable rate range to permit the administrative
flexibility requested by states and also to ensure that all rates
within the entire rate range are actuarially sound. We proposed, and
are finalizing, regulatory requirements that the rate certification
identify and justify the assumptions, data, and methodologies specific
to both the upper and lower bounds of the rate range (paragraph
(c)(1)(i)), and that both the upper and lower bounds of the rate range
are certified as actuarially sound (paragraph (c)(1)(ii)). We believe
that the 5 percent, or +/-2.5 percent from the midpoint, rate range is
more appropriate to ensure that these requirements can be satisfied,
rather than an unspecified limit, or a limit that is so wide that it
would not be possible to find both the upper and lower bounds of the
rate range to be actuarially sound.
Regarding comments about the factors used in determining a rate
range, such as maturity of the program, credibility/quality of the base
data, amount of statistical variability in the underlying claim
distribution, and size of the population, we believe that such factors
would be permissible for actuaries to consider as part of the
assumptions, data, and methodologies specific to both the upper and
lower bounds of the rate range in accordance with generally accepted
actuarial principles and practices, and the requirements for rate
setting in Sec. Sec. 438.4, 438.5, 438.6, and 438.7. If actuaries use
these factors in determining the rate range, it would be appropriate to
document these factors in the rate certification as required under
Sec. 438.4(c)(1)(i) and (ii). However, we decline to require that
actuaries must consider these factors when determining the width (or
size) of the rate range, as such an approach is overly prescriptive. We
believe that actuaries may consider other factors when identifying and
justifying the assumptions, data, and methodologies specific to both
the upper and lower bounds of the rate range.
Comment: Some commenters submitted technical recommendations about
the rate range option, including that the calculation of the rate range
should exclude risk adjustments and pass-through payments, that states
should be able to apply or adjust risk adjustment mechanisms outside of
setting the certified rate range, that the calculation of rate ranges
should not reflect incentive payments for managed care plans, and that
state budget factors should not influence the calculation of rates
within the rate range. Other commenters recommended that administrative
expenses should not be
[[Page 72762]]
subject to rate range variances. A few commenters recommended that
certain government-mandated costs be considered outside of the rate
range, including the Health Insurance Provider Fee (HIPF). One
commenter also recommended that rate ranges be limited to include only
underlying benefit changes.
Response: Under Sec. 438.4(c)(1)(ii), both the upper and lower
bounds of the rate range must be certified as actuarially sound
consistent with the requirements of part 438. This means that the
calculation of the rate range under Sec. 438.4(c) must include all of
the components of the capitation rate that are currently required to be
included in the rate development and certification under Sec. Sec.
438.4, 438.5, 438.6, and 438.7. This includes pass-through payments,
administrative expenses, taxes, licensing and regulatory fees,
government-mandated costs (including the HIPF and other taxes and
fees), and underlying benefit costs, which are all required components
of developing the capitation rates under our existing regulations.\4\
We agree that it would be inappropriate to include the specific
incentive payments for managed care plans made under Sec. 438.6(b)(2)
in the calculation of the rate range, as per longstanding policy since
the 1990's, those incentive arrangements are provided in excess of the
approved capitation rate and are already limited to 105 percent of the
approved capitation payments attributable to the enrollees or services
covered by the incentive arrangement. We also agree that it would be
inappropriate for state budget factors to influence the calculation of
rates within the rate range since such factors are not considered valid
rate development standards (that is, state budget factors are not
relevant to the costs required to be included in setting the capitation
rates in accordance with Sec. Sec. 438.4, 438.5, 438.6, and 438.7).
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\4\ While proceedings in Texas v. United States, No. 7:15-cv-
151-O, slip op. (N.D. Tex. Mar. 5, 2018), appeal docketed, No. 18-
10545 (5th Cir. May 7, 2018) (``Texas''), are ongoing, CMS will not
require that the HIPF be accounted for in capitation rates for the
six plaintiff states in Texas (Indiana, Kansas, Louisiana, Nebraska,
Texas, and Wisconsin) in order for such rates to be approved as
actuarially sound under 42 CFR 438.2 & 438.4(b)(1).
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Regarding comments about risk adjustment, we generally agree with
commenters that risk adjustment mechanisms can be applied outside of
setting the certified rate range, consistent with existing Federal
regulations at Sec. 438.7(b)(5). While the state's actuary is required
to certify rate ranges and must describe the risk adjustment
methodology in the certification and certify the methodology, the
state's actuary is not required to certify risk-adjusted rate ranges
(that is, the rate ranges with the risk adjustment methodologies
applied to reflect the actual payments potentially available to the
managed care plan). The Federal requirements for including risk
adjustment mechanisms in the capitation rates are found in Sec.
438.7(b)(5). As part of the 2016 final rule, we acknowledged that risk
adjustment methodologies can be calculated and applied after the rates
are certified (81 FR 27595); therefore, we finalized specific standards
for retrospective risk adjustment methodologies at Sec.
438.7(b)(5)(ii). Further, the regulation at Sec. 438.7(b)(5)(iii),
which we finalized in the 2016 final rule, provides that a new rate
certification is not required when approved risk adjustment
methodologies are applied to the final capitation rates because the
approved risk adjustment methodology must be adequately described in
the original rate certification; payment of rates as modified by that
approved risk adjustment methodology would be within the scope of the
rate certification that adequately describes the risk adjustment
mechanism. We also clarified in the 2016 final rule, under the
requirements in Sec. 438.7(c)(3), that the application of a risk
adjustment methodology that was approved in the rate certification
under Sec. 438.7(b)(5) did not require a revised rate certification
for our review and approval (81 FR 27568). However, we noted that the
payment term in the contract would have to be updated as required in
Sec. 438.7(b)(5)(iii). Requirements for risk adjustment and risk
sharing mechanisms in Sec. 438.6 must also be met. Therefore, as long
as the Federal requirements are met for risk adjustment, we agree that
such mechanisms can be appropriately applied outside of the certified
rate range (meaning, applied to the rates after calculation of the rate
range), consistent with existing Federal regulations and our analysis
in the 2016 final rule.
Comment: One commenter recommended that CMS describe the permitted
rate range in terms of a percentage.
Response: We confirm for this commenter that the permissible rate
range is expressed as a percentage. Section 438.4(c)(1)(iii), as
finalized in this rule, requires that the upper bound of the rate range
does not exceed the lower bound of the rate range multiplied by 1.05.
This means that the upper bound of the rate range cannot exceed the
lower bound of the rate range by more than 5 percent, or +/-2.5 percent
from the midpoint.
Comment: A few commenters requested clarification on the use of the
de minimis +/-1.5 percent range that is currently codified in Sec.
438.7(c)(3). Commenters requested detail on whether the proposal to
allow rate ranges adds new parameters on the use of the de minimis
flexibility that is currently codified in Sec. 438.7(c)(3). Commenters
also requested clarity on how the new rate range provision and the +/-
1.5 percent flexibility can be used together.
Response: As proposed and finalized, Sec. 438.4(c) does not add or
require additional parameters on the use of the +/-1.5 percent
adjustment as permitted under Sec. 438.7(c)(3) for any state that does
not use rate ranges. However, under Sec. 438.4(c)(2)(ii), states that
use rate ranges are not permitted to modify the capitation rates under
Sec. 438.7(c)(3). States are permitted to either use the rate range
option under Sec. 438.4(c)(1) or use the de minimis +/-1.5 percent
range that is currently codified in Sec. 438.7(c)(3), but states are
not permitted to use both mechanisms in combination. As noted in the
2018 proposed rule, we believe that this prohibition on using rate
ranges in combination with the de minimis revision permitted under
Sec. 438.7(c)(3) is necessary to ensure program integrity and guard
against other fiscal risks. As finalized at Sec. 438.4(c)(1)(i), the
rate certification must identify and justify the assumptions, data, and
methodologies specific to both the upper and lower bounds of the rate
range. The rate range cannot be wider than 5 percent, or +/-2.5 percent
from the midpoint; the de minimis revision permitted under Sec.
438.7(c)(3) cannot be used in combination with this rate range. It is
our belief that the upper and lower bounds of a 5 percent rate range
can remain actuarially sound as long as all of the Federal requirements
for rate development, including the requirements we are finalizing in
Sec. 438.4(c), are met. If states were permitted to use rate ranges in
combination with the de minimis revision permitted under Sec.
438.7(c)(3), this could result in final rates that are outside of the 5
percent range, and this is not permitted. As provided in this rule in a
separate response, we continue to believe that 5 percent is a
reasonable rate range to permit the administrative flexibility
requested by states. We believe that the 5 percent rate range is
appropriate to ensure that the rate development requirements in part
438
[[Page 72763]]
can be satisfied, rather than a wider rate range where it may not be
possible to find both the upper and lower bounds of the rate range to
be actuarially sound.
Comment: Several commenters expressed concern about the requirement
to recertify modified rates within the rate range, noting that
recertification is too rigid and is burdensome for both states and the
Federal Government. One commenter requested that additional
documentation could be provided rather than a requirement to recertify
rates. A few commenters expressed concern that states cannot modify
capitation rate ranges using the de minimis flexibility in Sec.
438.7(c)(3) and requested that CMS allow states to employ both
approaches to increase flexibility and reduce the need for
recertification when rates change because of minor programmatic
changes. Some commenters requested that mid-year rate changes be
permitted within the rate range during the rating year without the need
to recertify the rates to reduce burden and actuarial costs for states.
Some commenters also recommended that CMS permit de minimis
modifications to rates used within the 5 percent rate range.
Response: We disagree with commenters that states should be able to
use the de minimis rule in Sec. 438.7(c)(3) in combination with a rate
range. We proposed and are finalizing a prohibition on such
combinations in Sec. 438.4(c)(2)(ii). States may use either the rate
range option under Sec. 438.4(c) or use the de minimis +/-1.5 percent
range that is currently codified in Sec. 438.7(c)(3), but states are
not permitted to use both mechanisms in combination. As noted in the
2018 proposed rule, we proposed Sec. 438.4(c)(2)(ii) to enable
appropriate state flexibility and administrative simplification without
compromising program integrity or other fiscal risks. It is our belief
that the upper and lower bounds of a 5 percent, or +/-2.5 percent from
the midpoint, rate range should be permissible only as long as all of
the Federal requirements for rate development are met. If states were
permitted to use rate ranges in combination with the de minimis
revision permitted under Sec. 438.7(c)(3), this could result in final
rates that are outside of the 5 percent range and therefore could
result in a rate that is not actuarially sound. We continue to believe
that 5 percent is a reasonable rate range to permit the administrative
flexibility requested by states, but also to ensure that each rate
within the entire rate range is actuarially sound. We believe that the
5 percent rate range is appropriate to ensure that the rate development
requirements in part 438 can be satisfied, rather than a wider rate
range where it may not be possible to find both the upper and lower
bounds of the rate range to be actuarially sound.
However, we are persuaded that our proposal at Sec.
438.4(c)(2)(iii), which required states to recertify capitation rates
for modifications of the capitation rates within the rate range,
regardless of whether the modification was for minor programmatic
changes or a material error, was too rigid and would likely add
unnecessary administrative burden and costs for states. We reached this
conclusion for minor changes within the rate range that would not
result in scenarios where such changes resulted in capitation rates
outside of the 5 percent, or +/-2.5 percent from the midpoint, range.
Therefore, we are finalizing Sec. 438.4(c)(2)(iii) as permitting
changes (increases or decreases) to the capitation rates per rate cell
within the rate range up to 1 percent during the rating period without
submission of a new rate certification, provided that such changes are
consistent with a modification of the contract as required in Sec.
438.3(c) and are subject to the requirements at Sec. 438.4(b)(1). Just
as we do not permit rate ranges in combination with the de minimis
revision permitted under Sec. 438.7(c)(3), we will not permit any
changes that could result in final rates that are outside of the 5
percent range or in rate ranges that have upper and lower bounds that
are larger than 5 percent apart.
Any modification to the capitation rates within the rate range
greater than the permissible +/-1 percent amount will require states to
provide a revised rate certification for CMS approval that demonstrates
compliance with the criteria proposed and finalized at Sec.
438.4(c)(2)(iii)(A) through (C). We believe that this modification to
what we proposed for this regulation will address commenters' concerns
related to mid-year programmatic changes or mid-year rate adjustments.
We note that the permissible +/-1 percent standard under Sec.
438.4(c)(2)(iii) is slightly smaller than the de minimis standard (+/-
1.5 percent) for changes that do not require a new rate certification
under Sec. 438.7(c)(3) when rate ranges are not used. We believe that
it is appropriate to use the smaller amount under Sec.
438.4(c)(2)(iii) when rate ranges are used because when states use rate
ranges, they are already afforded additional flexibility, as rates are
permissible within the upper and lower bounds of the rate range, than
they are afforded when certifying the rates to a specific point. We
believe that the ability to make a permissible +/-1 percent change
provides states flexibility to make small changes while easing the
administrative burden of rate review for both states and CMS. Further,
permitting small changes facilitates CMS' review process of rate
certifications in accordance with the requirements for actuarially
sound capitation rates because we would not require revised rate
certifications for minor programmatic changes that result in minor and
potentially immaterial changes to the capitation rates; therefore, CMS'
review of rate certifications can be more focused on substantial issues
that impact the capitation rates.
Comment: Commenters requested clarification on the acceptable
criteria for paying managed care plans at different points within the
rate range. Specifically, commenters requested if rates can vary based
on state negotiations with managed care plans or a competitive bidding
process.
Response: We note that capitation rates, including permissible rate
ranges under Sec. 438.4(c), must comply with all rate setting
requirements in Sec. Sec. 438.4, 438.5, 438.6, and 438.7. This means,
as finalized in Sec. 438.4(b)(1), that capitation rates must have been
developed in accordance with the standards specified in Sec. 438.5 and
generally accepted actuarial principles and practices. Under this final
rule, Sec. 438.4(b)(1) also requires that any differences in the
assumptions, methodologies, or factors used to develop capitation rates
for covered populations must be based on valid rate development
standards that represent actual cost differences in providing covered
services to the covered populations (see section I.B.2.b. of this final
rule for a discussion of this provision in Sec. 438.4(b)(1)). We
clarify this here to ensure that commenters are aware that the
standards for capitation rate development, including the development of
rate ranges under Sec. 438.4(c), do not change with the use of rate
ranges under Sec. 438.4(c). Regarding the acceptable criteria for
paying managed care plans at different points within the rate range,
which must be documented in the rate certification documents under
Sec. 438.4(c)(1)(iv), we confirm that such criteria could include
state negotiations with managed care plans or a competitive bidding
process, as long as states document in the rate certification how the
negotiations or the competitive bidding process produced different
points within the rate range. For example, if specific, documentable
components of the capitation rates varied because of state negotiations
or a competitive bidding process, the rate
[[Page 72764]]
certification must document those specific variations, as well as
document how those variations produced different points within the rate
range, to comply with Sec. 438.4(c)(1)(iv) and (c)(2)(i). We
understand that capitation rate development necessarily involves the
use of actuarial judgment, such as adjustments to base data, trend
projections, etc., and that could be impacted by specific managed care
plan considerations (for example, one managed care plan's utilization
management policies are more aggressive versus another managed care
plan's narrow networks); under this final rule, states must document
such criteria as part of the rate certification to comply with Sec.
438.4(c)(1)(iv) and (c)(2)(i).
Comment: Several commenters recommended that CMS add minimum
transparency requirements on the use of rate ranges. A few commenters
recommended that states be required to provide managed care plans with
the CMS approved rate ranges and the data underlying those rate ranges
prior to bidding, with sufficient time and opportunity for managed care
plans' review and input. Some commenters recommended that states be
required to provide a comment period for managed care plans to review
the rate ranges. One commenter recommended that CMS engage with managed
care plans through a technical expert panel to develop appropriate
standards for rate ranges. Another commenter recommended that CMS hold
a public comment period during which stakeholders can raise issues
related to rate ranges before and during the bidding process each year.
Commenters also recommended that CMS require a dispute resolution
process when states and managed care plans do not agree on the rate
ranges. One commenter recommended that CMS require states to conduct
studies to ensure that the rate ranges are sufficient to facilitate
patient access to care.
Response: In the proposed rule, we specifically requested public
comment on whether additional conditions or limitations on the use of
rate ranges would be appropriate to help mitigate the risks we
identified. Based on the comments we received, we understand that
commenters have significant concerns about the lack of transparency
inherent in the use of rate ranges. The lack of transparency in the use
of rate ranges has also been a significant concern for us; when we
finalized the 2016 final rule, we explained that elimination of rate
ranges would make the rate setting and the rate approval process more
transparent (81 FR 27567). Further, we explained how the requirement to
develop and certify as actuarially sound each individual rate paid per
rate cell to each managed care plan with enough detail to understand
the specific data, assumptions, and methodologies behind that rate
would enhance the integrity of the Medicaid rate setting process (81 FR
27567). We agree with commenters that a significant level of
transparency is necessary, particularly if states are using rate ranges
for competitive bidding purposes. We believe that managed care plans
and other stakeholders should have access to the necessary information
and data to ensure that rates are actuarially sound, and we believe
that such transparency will also help to ensure that competitive bids
are appropriately based on actual experience and appropriately fund the
program, and that the bids are actuarially sound. Providing managed
care plans with approved rate ranges prior to bidding, with sufficient
time and opportunity for managed care plans' review and input, along
with the data underlying those rate ranges ensures that there is
transparency in the setting and use of rate ranges.
Therefore, we are finalizing a requirement at Sec. 438.4(c)(2)(iv)
to require states, when developing and certifying a range of capitation
rates per rate cell as actuarially sound, to post specified
information. States are required under Sec. 438.10(c)(3) to operate a
public website that provides certain information. As finalized, Sec.
438.4(c)(2)(iv) requires that states must post on their websites
specified information prior to executing a managed care contract or
contract amendment that includes or modifies a rate range. We are
including this standard to ensure that managed care plans and
stakeholders have access to the information with sufficient time and
opportunity for review and input, and to ensure that the information is
available to meaningfully inform plans' execution of a managed care
contract with the state.
At Sec. 438.4(c)(2)(iv)(A) through (C), we are finalizing the list
of information that must be posted on the state's website required by
Sec. 438.10(c)(3): (A) The upper and lower bounds of each rate cell;
(B) a description of all assumptions that vary between the upper and
lower bounds of each rate cell, including for the assumptions that
vary, the specific assumptions used for the upper and lower bounds of
each rate cell; and (C) a description of the data and methodologies
that vary between the upper and lower bounds of each rate cell,
including for the data and methodologies that vary, the specific data
and methodologies used for the upper and lower bounds of each rate
cell. We believe that these requirements ensure that managed care plans
and stakeholders have access to a minimum and standard level of
information, for reasons outlined in the public comments. We believe
that these requirements are also appropriate and necessary to ensure a
minimum level of transparency when states utilize rate ranges under
Sec. 438.4(c). We also believe that this level of information will
help to ensure that capitation rates are appropriately based on actual
experience and are actuarially sound since plans will have access to
such information prior to executing a managed care contract.
Regarding the public comments recommending public comment periods,
technical expert panels, dispute resolution processes, and specific
studies on access to care, we decline to adopt these specific
recommendations. While we believe that states should seek broad
stakeholder feedback, we do not believe that it is necessary to create
new and expansive Federal requirements to accomplish this goal. In our
experience, states are already working with many stakeholder groups,
including their managed care plans, and we believe that states should
continue to have discretion in how they convene stakeholder groups and
obtain stakeholder feedback to inform Medicaid managed care payment
policy. If states want to utilize public comment periods, technical
expert panels, or conduct specific studies on access to care to help
inform their rate setting, including rate ranges, states are welcome to
utilize such approaches. We also understand that commenters are
interested in Federal dispute resolution processes; however, we do not
believe that is an appropriate role for CMS in the Medicaid program.
When plans and/or other stakeholders do not agree on rates, we would
refer those groups to the state Medicaid agencies to appropriately
address specific rate setting concerns. Since state Medicaid agencies
are the direct administrators of the Medicaid program in their
respective states, we believe that this approach is more appropriate.
Comment: Some commenters expressed concern that requiring states to
document the capitation rates at points within the rate range prior to
the start of the rating period is too rigid and unrealistic. Commenters
noted that the time and labor-intensive process of developing and
certifying actuarially sound rates can, and often does, result in
unexpected delays that push the
[[Page 72765]]
process into the rating period for which the rates are being developed.
Commenters recommended extending flexibility to states around
submission timing in a manner that maintains proper CMS oversight and
is consistent with current CMS practice. One commenter further
recommended that if the timing requirement is finalized, it should be
delayed by 3 years.
Response: We acknowledge that our proposed requirement in Sec.
438.4(c)(2)(i) that states document the capitation rates at points
within the rate range prior to the start of the rating period means, as
a practical matter, that states electing to use rate ranges must submit
contracts and rate certifications to us prior to the start of the
rating period. We also note that section 1903(m)(2)(A)(iii) of the Act
and Sec. 438.806 require that the Secretary must provide prior
approval for MCO contracts that meet certain value thresholds before
states can claim FFP. This longstanding requirement is implemented in
the regulation at Sec. 438.806(c), which provides that FFP is not
available for an MCO contract that does not have prior approval from
us. This requirement is necessary and appropriate to ensure that rate
ranges are not used to shift costs onto the Federal Government and to
protect fiscal and program integrity. As we noted in the 2018 proposed
rule, one of the goals of the guardrails we proposed, and are
finalizing here, for use of rate ranges is to prevent states from using
rate ranges to make significant retroactive changes to the contracted
rates at or after the end of the rating period; this goal is served by
the requirement that rate ranges and the specific rates per cell be
documented and provided to CMS prior to the beginning of the rating
period. While we are not prohibiting outright all retroactive rate
changes, the limits on when rates can be changed under Sec.
438.4(c)(2) will necessarily limit the types of retroactive changes
that raise the most issues. As we noted in the 2016 final rule and the
2018 proposed rule, we do not believe that retroactive changes are made
to reflect changes in the underlying assumptions used to develop the
rates (for example, the utilization of services, the prices of
services, or the health status of the enrollee), but rather we are
concerned that these changes are used to provide additional
reimbursements to the managed care plans or to some providers without
adding corresponding new obligations under the contract. We do not
believe that such changes are consistent with actuarially sound rates
and represent cost-shifting to the Federal Government.
Because of these specific concerns, we decline to adopt commenters'
recommendations about the timing guardrails included in Sec. 438.4(c),
including the recommendation that we delay this proposal by 3 years. We
are finalizing the rule with the requirement in Sec. 438.4(c)(2)(i)
that states document the capitation rates (consistent with the
requirements for developing and documenting capitation rates) at points
within the rate range prior to the start of the rating period. However,
since rate ranges were previously prohibited under the 2016 final rule
(and before this final rule), we believe a transition period is
appropriate to allow states that elect to utilize the rate range option
at Sec. 438.4(c) time to appropriately develop rate ranges and submit
the rate certifications and contracts in advance of the start of a
rating period. Therefore, we are delaying the effective date of this
provision to rating periods starting on or after July 1, 2021.
Comment: A few commenters expressed concern about the proposal to
prohibit states from paying MCOs, PIHPs, and PAHPs at different points
within the certified rate range based on the willingness or agreement
of the MCOs, PIHPs, or PAHPs to enter into, or adhere to,
intergovernmental transfer (IGT) agreements, or the amount of funding
the MCOs, PIHPs, or PAHPs provide through IGTs. One commenter expressed
concern that the proposal is too restrictive on states' ability to make
use of non-Federal share sources and that our proposal constrains
states' authority under sections 1902(a)(2) and 1903(w) of the Act to
draw upon a variety of state and local sources to fund the non-Federal
share of medical assistance costs, including in the managed care
context. One commenter stated that the prohibition on varying payments
within a certified rate range based on the existence of IGT
arrangements is an expansive Federal restriction on the longstanding
ability of states to make use of a variety of non-Federal share sources
to improve reimbursement to safety-net providers in managed care.
Commenters recommended that the regulation be amended to allow using
IGT agreements in conjunction with other criteria for paying managed
care plans at different points within the rate range.
Response: We disagree that our proposal unnecessarily constrains
states' authority under sections 1902(a)(2) and 1903(w) of the Act to
draw upon a variety of state and local sources to fund the non-Federal
share of medical assistance costs, as our proposal does not limit
states from using permissible sources of the non-Federal share to fund
costs under the managed care contract. Under Sec. 438.4(c)(1)(v), the
state is not permitted to use as a criterion for paying managed care
plans at different points within the rate range either of the
following: (1) The willingness or agreement of the managed care plans
or their network providers to enter into, or adhere to, IGT agreements;
or (2) the amount of funding the managed care plans or their network
providers provide through IGT agreements. This prohibition is specific
to states using amounts transferred pursuant to an IGT agreement to pay
managed care plans at different points within the rate range under
Sec. 438.4(c) and is not a prohibition on states' authority to use
permissible sources of the non-Federal share to fund costs under the
managed care contract. Further, we explicitly clarify here that certain
financing requirements in statute and regulation are applicable across
the Medicaid program irrespective of the delivery system (for example,
fee-for-service, managed care, and demonstration authorities), and are
similarly applicable whether a state elects to use rate ranges or not.
Such requirements include, but are not limited to, limitations on
financing of the non-Federal share applicable to health care-related
taxes and bona fide provider-related donations.
We are concerned that without these specific parameters in the
regulation, states could try to use rate ranges to inappropriately use
IGTs to draw down additional Federal dollars with no correlating
benefit to the Federal Government or the Medicaid program. To address
commenters' concerns related to increasing levels of provider
reimbursement for safety-net providers, we note that states can use the
authority for state directed payments under Sec. 438.6(c) to direct
specific payments to providers. However, we clarify here that certain
financing requirements in statute and regulation are applicable across
the Medicaid program irrespective of the delivery system (for example,
fee-for-service, managed care, and demonstration authorities), and are
similarly applicable whether a state elects to direct payments under
Sec. 438.6(c). Such requirements include, but are not limited to,
limitations on financing of the non-Federal share applicable to health
care-related taxes and bona fide provider-related donations. These
financing requirements similarly apply when a state elects to direct
payments under Sec. 438.6(c). We understand that safety-
[[Page 72766]]
net providers play a critical role in serving underserved populations
in states, including Medicaid managed care enrollees. We also
understand that safety-net providers are critical to maintaining
network adequacy and adequate access to care in many communities,
including rural areas of the state, and we do not believe our proposal
unnecessarily constrains states' authority under sections 1902(a)(2)
and 1903(w) of the Act to draw upon a variety of state and local
sources to fund the non-Federal share of medical assistance costs, as
our proposal does not limit states from using permissible sources of
the non-Federal share to fund costs under the managed care contract.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.4(c) as proposed with the following modifications:
At Sec. 438.4(c)(2)(iii), we are finalizing authority for
a state to make changes to the capitation rates within the permissible
rate range of up to 1 percent of each certified rate within the rate
range without the need for the state to submit a revised rate
certification. Under final Sec. 438.4(c)(2)(iii), a state may increase
or decrease the capitation rate per rate cell within the rate range up
to 1 percent of each certified rate during the rating period provided
that any changes of the capitation rate within the permissible +/-1
percent amount must be consistent with a modification of the contract
as required in Sec. 438.3(c) and are subject to the requirements at
Sec. 438.4(b)(1). Any modification to the capitation rates within the
rate range greater than the permissible +/-1 percent amount will
require states to provide a revised rate certification for CMS approval
and to meet the requirements listed in paragraphs (c)(2)(iii)(A)
through (C).
At Sec. 438.4(c)(2)(iv), we are finalizing a requirement
that states, when developing and certifying a range of capitation rates
per rate cell as actuarially sound, must post the following specified
information on their public websites: (A) The upper and lower bounds of
each rate cell; (B) a description of all assumptions that vary between
the upper and lower bounds of each rate cell, including for the
assumptions that vary, the specific assumptions used for the upper and
lower bounds of each rate cell; and (C) a description of the data and
methodologies that vary between the upper and lower bounds of each rate
cell, including for the data and methodologies that vary, the specific
data and methodologies used for the upper and lower bounds of each rate
cell.
States certifying a rate range must document the capitation rates
payable to each managed care plan prior to the start of the rating
period for the applicable MCO, PIHP or PAHP under Sec. 438.4(c)(2)(i).
As noted previously in this final rule, this requirement means that
states electing to use a rate range would have to submit rate
certifications to us prior to the start of the rating period and must
comply with all other regulatory requirements including Sec. 438.4,
except Sec. 438.4(b)(4) as specified. In order to publish additional
guidance needed to implement this requirement, we are delaying the
effective date of this provision until the first contract rating period
beginning on or after July 1, 2021. States that elect to adopt rate
ranges must comply with Sec. 438.4(c) as amended effective July 1,
2021 for Medicaid managed care rating periods starting on or after July
1, 2021.
b. Capitation Rate Development Practices That Increase Federal Costs
and Vary With the Rate of Federal Financial Participation (FFP) (Sec.
438.4(b)(1) and (d))
In the 2016 final rule, at Sec. 438.4(b), we set forth the
standards that capitation rates must meet to be approved as actuarially
sound capitation rates eligible for FFP under section 1903(m) of the
Act. Section 438.4(b)(1) requires that capitation rates be developed in
accordance with generally accepted actuarial principles and practices
and meet the standards described in Sec. 438.5 dedicated to rate
development standards. In the 2016 final rule (81 FR 27566), we
acknowledged that states may desire to establish minimum provider
payment rates in the contract with the managed care plan. We also
explained that because actuarially sound capitation rates must be based
on the reasonable, appropriate, and attainable costs under the
contract, minimum provider payment expectations included in the
contract must necessarily be built into the relevant service components
of the rate. We finalized in the regulation at Sec. 438.4(b)(1) a
prohibition on different capitation rates based on the FFP associated
with a particular population as part of the standards for capitation
rates to be actuarially sound. We explained in the 2015 proposed rule
(80 FR 31120) and the 2016 final rule (81 FR 27566) that different
capitation rates based on the FFP associated with a particular
population represented cost-shifting from the state to the Federal
Government and were not based on generally accepted actuarial
principles and practices.
In the 2016 final rule (81 FR 27566), we adopted Sec. 438.4(b)(1)
largely as proposed and provided additional guidance and clarification
in response to public comments. We stated that the practice intended to
be prohibited in Sec. 438.4(b)(1) was variance in capitation rates per
rate cell that was due to the different rates of FFP associated with
the covered populations. We also provided an example in the 2016 final
rule, in which we explained that we have seen rate certifications that
set minimum provider payment requirements or established risk margins
for the managed care plans only for covered populations eligible for
higher percentages of FFP. Under the 2016 final rule, such practices,
when not supported by the application of valid rate development
standards, were not permissible. We further explained that the
regulation did not prohibit the state from having different capitation
rates per rate cell based on differences in the projected risk of
populations under the contract or based on different payment rates to
providers that were required by Federal law (for example, section
1932(h) of the Act). In the 2016 final rule, we stated that, as
finalized, Sec. 438.4(b)(1) provided that any differences among
capitation rates according to covered populations must be based on
valid rate development standards and not on network provider
reimbursement requirements that apply only to covered populations
eligible for higher percentages of FFP (81 FR 27566).
Since publication of the 2016 final rule, we have continued to hear
from stakeholders that more guidance is needed regarding the regulatory
standards finalized in Sec. 438.4(b)(1). At least one state has stated
that if arrangements that vary provider reimbursement pre-date the
differences in FFP for different covered populations, the regulation
should not be read to prohibit the resulting capitation rates. We
explained in the 2018 proposed rule that while we believe that the
existing text of Sec. 438.4(b)(1) is sufficiently clear, we also want
to be responsive to the comments from stakeholders and to eliminate any
potential loophole in the regulation. Therefore, we proposed to revise
Sec. 438.4(b)(1) and added a new paragraph Sec. 438.4(d) to clearly
specify our standards for actuarial soundness. We did not propose
changes to the existing regulatory requirement in Sec. 438.4(b)(1)
that capitation rates must have been developed in accordance with the
standards specified in Sec. 438.5
[[Page 72767]]
and generally accepted actuarial principles and practices but proposed
to revise the remainder of Sec. 438.4(b)(1).
We proposed that any differences in the assumptions, methodologies,
or factors used to develop capitation rates for covered populations
must be based on valid rate development standards that represent actual
cost differences in providing covered services to the covered
populations. Further, we proposed that any differences in the
assumptions, methodologies, or factors used to develop capitation rates
must not vary with the rate of FFP associated with the covered
populations in a manner that increases Federal costs consistent with a
new proposed paragraph (d). Our proposal was intended to eliminate any
ambiguity in the regulation and clearly specify our intent that
variation in the assumptions, methodologies, and factors used to
develop rates must be tied to actual cost differences and not to any
differences that increase Federal costs and vary with the rate of FFP.
The proposed revisions to Sec. 438.4(b)(1) used the phrase
``assumptions, methodologies, and factors'' to cover all methods and
data used to develop the actuarially sound capitation rates.
In conjunction with our proposed revisions to Sec. 438.4(b)(1), we
also proposed a new paragraph (d) to provide specificity regarding the
rate development practices that increase Federal costs and vary with
the rate of FFP. We proposed in Sec. 438.4(d) a regulatory requirement
for an evaluation of any differences in the assumptions, methodologies,
or factors used to develop capitation rates for MCOs, PIHPs, and PAHPs
that increase Federal costs and vary with the rate of FFP associated
with the covered populations. We explained that this evaluation would
have to be conducted for the entire managed care program and include
all managed care contracts for all covered populations. We proposed to
require this evaluation across the entire managed care program and all
managed care contracts for all covered populations to protect against
state contracting practices in their Medicaid managed care programs
that may cost-shift to the Federal Government. We noted that this would
entail comparisons of each managed care contract to others in the
state's managed care program to ensure that variation among contracts
does not include rate setting methods or policies that would be
prohibited under our proposal.
We also proposed at Sec. 438.4(d)(1) to list specific rate
development practices that increase Federal costs and would be
prohibited under our proposal for Sec. 438.4(b)(1) and (d): (1) A
state may not use higher profit margin, operating margin, or risk
margin when developing capitation rates for any covered population, or
contract, than the profit margin, operating margin, or risk margin used
to develop capitation rates for the covered population, or contract,
with the lowest average rate of FFP; (2) a state may not factor into
the development of capitation rates the additional cost of
contractually required provider fee schedules, or minimum levels of
provider reimbursement, above the cost of similar provider fee
schedules, or minimum levels of provider reimbursement, used to develop
capitation rates for the covered population, or contract, with the
lowest average rate of FFP; and (3) a state may not use a lower
remittance threshold for a medical loss ratio for any covered
population, or contract, than the remittance threshold used for the
covered population, or contract, with the lowest average rate of FFP.
We proposed Sec. 438.4(d)(1) to be explicit about certain rate
development practices that increase Federal costs and vary with the
rate of FFP. Our proposal was to explicitly prohibit the listed rate
development practices under any and all scenarios; we also noted that
the rate development practices under Sec. 438.4(d)(1) were not
intended to represent an exhaustive list of practices that increase
Federal costs and vary with the rate of FFP, as we recognized that
there may be additional capitation rate development practices that have
the same effect and would also be prohibited under our proposed rule.
In the 2018 proposed rule, we explained our goal of ensuring that the
regulatory standards for actuarial soundness clearly prevent cost-
shifting from the state to the Federal Government.
Finally, in Sec. 438.4(d)(2), we proposed to specify that we may
require a state to provide written documentation and justification,
during our review of a state's capitation rates, that any differences
in the assumptions, methodologies, or factors used to develop
capitation rates for covered populations or contracts, not otherwise
referenced in paragraph (d)(1), represent actual cost differences based
on the characteristics and mix of the covered services or the covered
populations. We noted that our proposal was consistent with proposed
revisions to Sec. 438.7(c)(3), to add regulatory text to specify that
adjustments to capitation rates would be subject to the requirements at
Sec. 438.4(b)(1), and to require a state to provide documentation for
adjustments permitted under Sec. 438.7(c)(3) to ensure that
modifications to a final certified capitation rate comply with our
regulatory requirements. We requested public comments on our revisions
to Sec. 438.4(b)(1) and new Sec. 438.4(d), including on whether these
changes were sufficiently clear regarding the rate development
practices that are prohibited in Sec. 438.4(b)(1).
The following summarizes the public comments received on our
proposal to revise Sec. 438.4(b)(1) and add Sec. 438.4(d) and our
responses to those comments.
Comment: Many commenters supported the proposal to prohibit certain
rate development practices and to require a state to provide written
documentation that rate variations are based on actual cost
differences. Many commenters also opposed this proposal and noted that
there are often legitimate and actuarially sound reasons for varying
pricing assumptions between rate cells that are independent of
differing levels of FFP. Commenters stated that there are valid
actuarial reasons where varying rating components would be supported by
actuarial experience and data. Commenters recommended that were CMS to
finalize the proposed amendments to Sec. 438.4(b)(1) and (d), we do it
in a way that would allow states to continue to have differentials in
margins, payment levels, and MLR remittance thresholds for higher FFP
contracts when those differences are justified in data and actuarial
experience.
Commenters stated that valid rate development practices would be
prohibited under the proposal, including using a lower margin
assumption for populations with more stable costs, varying MLR
thresholds based on actual administrative cost differences, adjusting
the underwriting gain used, and using higher reimbursement for highly
specialized providers or services or in areas where it is difficult to
recruit providers. Commenters stated that the proposal is too
prescriptive and duplicative of current requirements and recommended
that CMS allow states to use assumptions that reflect different levels
of risk so that rate cells are appropriately funded. Commenters stated
that restricting actuarial variables from being determined by certain
program characteristics will result in rates that are not actuarially
sound. A few commenters also believed that the proposal could
unintentionally result in new cost-shifting to the Federal Government,
such as requiring higher margin assumptions for certain populations or
requiring higher levels of provider reimbursement in specific
[[Page 72768]]
programs. One commenter requested that the regulation differentiate
situations where rate development assumptions are intended to increase
Federal costs from those where such an outcome is incidental and that
CMS should only prohibit the former.
Several commenters recommended that instead of prohibiting certain
rate development practices, CMS should instead require documentation
and justification that variations related to margin, provider
reimbursement, or MLR are actuarially valid. One commenter recommended
that CMS only require such documentation in circumstances when we
believe that the variation is related to FFP. One commenter expressed
concern that the requirement to provide documentation duplicates
existing policy. One commenter requested clarification on whether the
written justification is part of the rate certification process and
supporting documents, the managed care contract review, or is an
additional requirement.
Response: Our goal in proposing these revisions to Sec.
438.4(b)(1) and (d) was to clarify the standards that capitation rates
must meet to be approved as actuarially sound capitation rates eligible
for FFP under section 1903(m) of the Act. Our proposal was also
intended to eliminate any ambiguity in the regulations and to clearly
specify that variation in the assumptions, methodologies, and factors
used to develop rates must be tied to actual cost differences and not
to any differences that increase Federal costs and vary with the rate
of FFP. We remain committed to these goals, and to our overarching
goals of improving fiscal and program integrity within Medicaid managed
care rate setting. However, we believe it is appropriate to finalize
the proposal with changes to address the concerns of commenters that
our proposal was too restrictive and overlooked scenarios by which our
prohibited rate development practices under proposed Sec. 438.4(d) may
be actuarially appropriate in limited circumstances.
We reiterate that our overarching policy goal of prohibiting
variation in capitation rates associated with the FFP for a particular
population, which we explained in the 2015 proposed rule, 2016 final
rule, and the 2018 proposed rule, has not changed and is not changing
as part of this final rule. Specifically, we explained in the 2015
proposed rule (80 FR 31120) that different capitation rates based on
the FFP associated with a particular population represented cost-
shifting from the state to the Federal Government and were not based on
generally accepted actuarial principles and practices. In the 2016
final rule (81 FR 27566), we finalized, at Sec. 438.4(b)(1), a
prohibition on different capitation rates based on the FFP associated
with a particular population as part of the standards for capitation
rates to be actuarially sound. Also in the 2016 final rule (81 FR
27566), we provided additional guidance and clarification in response
to public comments that the practice intended to be prohibited in Sec.
438.4(b)(1) was variance in capitation rates per rate cell that was due
to the different rates of FFP associated with the covered populations;
that discussion included an example where rate certifications set
minimum provider payment requirements or established risk margins for
the managed care plans only for covered populations eligible for higher
percentages of FFP. We note that setting minimum provider payment
requirements for covered populations under the managed care contract is
permissible as long as such requirements apply broadly, are not
selectively applied to only those covered populations eligible for
higher percentages of FFP, are supported by valid rate development
standards that represent actual cost differences in providing covered
services to the covered populations, and do not shift costs to the
Federal Government. In the 2016 final rule, we explained how Sec.
438.4(b)(1), as adopted there, required that any differences among
capitation rates according to covered populations must be based on
valid rate development standards and not on network provider
reimbursement requirements that apply only to covered populations
eligible for higher percentages of FFP (81 FR 27566). In the 2018
proposed rule (83 FR 57268), we clarified our policy that Sec.
438.4(b)(1) was intended to prohibit variances in capitation rates
based on the rate of FFP, even if such variances in capitation rates
were the result of variances in provider reimbursement that pre-date
the differences in FFP for different covered populations. We explained
that our current proposal would eliminate ambiguity on this point and
eliminate any potential loophole in Sec. 438.4(b)(1) by more clearly
specifying the scope of the prohibition. We reiterate these published
statements here as part of this final rule and remind commenters that
CMS has not changed our position on this topic. As finalized with the
amendments in this final rule, Sec. 438.4(b)(1) prevents states from
cost-shifting onto the Federal Government and prohibits any variances
in capitation rates associated with the rate of FFP for different
covered populations. Further, we explicitly clarify here that Sec.
438.4(b)(1) is not premised on nor require a state's intention to shift
costs to the Federal Government; we believe that an intent to cost
shift is immaterial compared to the actual effect of cost shifting.
Therefore, as part of this final rule, we are finalizing amendments
to Sec. 438.4(b)(1) to codify this policy clearly. Section
438.4(b)(1), as amended, continues to require that capitation rates be
developed in accordance with the standards specified in Sec. 438.5 and
generally accepted actuarial principles and practices. We are also
finalizing the proposed new and revised regulation text that any
differences in the assumptions, methodologies, or factors used to
develop capitation rates for covered populations must be based on valid
rate development standards that represent actual cost differences in
providing covered services to the covered populations and that any
differences in the assumptions, methodologies, or factors used to
develop capitation rates must not vary with the rate of FFP associated
with the covered populations in a manner that increases Federal costs.
We are not finalizing the text proposed in paragraph (d)(1) to address
the concerns from commenters that proposed Sec. 438.4(d)(1) was too
restrictive and overlooked scenarios where the proposed list of
prohibited rate development practices may be actuarially appropriate.
We will generally use the list of prohibited rate development
practices in interpreting the prohibition finalized in paragraph (b)(1)
and we will consider the state's documentation and justification in
applying the prohibition. We originally proposed Sec. 438.4(d)(1) in
conjunction with our proposed revisions to Sec. 438.4(b)(1) to provide
specificity regarding the rate development practices that we believed
increased Federal costs and varied with the rate of FFP; however, based
on public comments, we agree with commenters that there could be
legitimate and actuarially sound reasons for varying pricing
assumptions between rate cells that are (and must be) independent of
differing levels of FFP, and that there could be valid actuarial
reasons for an actuary to vary rating components that would be
supported by actuarial experience and data. Therefore, as part of this
final rule, we are not finalizing the list of rate development
practices that we proposed in Sec. 438.4(d)(1). We agree with the
commenters that we are unable to
[[Page 72769]]
predict every future scenario and there might be situations where one
or more of the items on that list of rate development practices is
actuarially appropriate. We remind commenters that it is still our view
that these rate development practices generally increase Federal costs
and vary with the rate of FFP. As such, in situations where one of
those practices is not actuarially appropriate and where it increases
Federal costs, we will apply Sec. 438.4(b)(1) to deny rates that have
been developed based on such practices. To fully evaluate scenarios
where differences in the assumptions, methodologies, or factors used to
develop capitation rates appear to vary with the rate of FFP, we
believe that we will need additional information and explanation from
the state. If states or actuaries intend to utilize these rate
development practices, we need to be able to require written
documentation and justification that any differences in the
assumptions, methodologies, or factors used to develop capitation rates
for covered populations or contracts represent actual cost differences
based on the characteristics and mix of the covered services or the
covered populations. We had originally proposed a requirement for
submission of information and documentation for this purpose under
Sec. 438.4(d)(2). Since we are not finalizing Sec. 438.4(d), we are
finalizing this proposed standard as part of the new text in Sec.
438.4(b)(1). To address commenters' request for clarity, we note that
such written documentation and justification would be required as part
of CMS' review of the rate certification.
We are finalizing the introduction in proposed paragraph (d) as
part of the new text in Sec. 438.4(b)(1) that the evaluation of
compliance with Sec. 438.4(b)(1) be on a program-wide basis, including
all managed care contracts and covered populations. The final rule
continues to prohibit any differences in the assumptions,
methodologies, or factors used to develop capitation rates that vary
with the rate of FFP associated with a covered population in a manner
that increases Federal costs. To ensure that this requirement is met,
the final rule requires an evaluation of any differences in the
assumptions, methodologies, or factors used to develop capitation rates
for MCOs, PIHPs, and PAHPs that increase Federal costs and vary with
the rate of FFP associated with the covered populations. This
evaluation must be conducted for the entire managed care program and
include all managed care contracts for all covered populations. We are
finalizing this requirement for an evaluation across the entire managed
care program and all managed care contracts for all covered populations
to protect against any potential loopholes where state managed care
contracting practices may cost-shift to the Federal Government.
Specifically, as noted in the proposed rule, this requirement would
entail comparisons of each managed care contract to others in the
state's managed care program to ensure that variation among contracts
does not include rate setting methods or policies that would be
prohibited under Sec. 438.4(b)(1).
Comment: A few commenters noted that risk margin differences can
apply between TANF, ABD, and LTSS populations and expressed concern
that the proposal would require inappropriate comparisons between
populations that have legitimate cost differences. Other commenters
provided that the proposed regulation may have the unintended effect of
causing actuaries to increase margins on disabled or LTSS populations
to maintain justifiable higher margin assumptions for non-LTSS
populations, which could increase Federal and state costs for the
Medicaid program. Commenters stated that from an actuarial standpoint,
the percentage risk margin may appropriately vary by population
characteristics due to insurance risk differences. Commenters also
explained that populations may have very different PMPM costs and, in
particular, that expansion populations may require higher risk margins
to account for unknown risks associated with a population not
previously covered by the Medicaid program. Commenters recommended that
CMS monitor for inappropriate rate setting practices or require
additional documentation if we believe that cost-shifting is occurring,
but these commenters recommended that CMS not finalize the proposal
prohibiting specific rate development practices. One commenter stated
that existing CMS authority enables us to enforce appropriate rate
setting and that the proposed revisions to Sec. 438.4(b)(1) and (d)
are unnecessary.
Response: We understand the issues raised by commenters and
reiterate that to the degree the pricing assumptions are based on
actual cost differences in providing covered services to the covered
populations under the contract, these varying pricing assumptions would
be permissible under Sec. 438.4(b)(1) as valid rate development
factors. To the degree that varying pricing assumptions represent
actual cost differences in providing covered services to the covered
populations, we would find the assumptions to be consistent with valid
rate development standards. If a population has documented higher
costs, supported by actual experience, we would not find the pricing
assumptions to be in violation of finalized Sec. 438.4(b)(1), even if
the higher cost population is also one with a higher FFP percentage.
However, we emphasize that varying pricing assumptions must not include
using a rate development practice that increases Federal costs and
varies with the rate of FFP when not supported by valid rate
development standards that represent actual cost differences in
providing covered services to the covered populations. As finalized in
this rule under Sec. 438.4(b)(1), any differences in the assumptions,
methodologies, or factors used to develop capitation rates must not
vary with the rate of FFP associated with the covered populations in a
manner that increases Federal costs unless those variances represent
actual cost differences in providing covered services to the covered
population.
Under the regulations governing rate setting at Sec. Sec. 438.4
through 438.7, including as revised in this final rule, states and
actuaries can vary the pricing assumptions based on actual cost
differences in providing covered services to the covered populations
under the contract, but the prohibition on shifting costs to the
Federal Government through use of such variances remains. We also
believe that there are other tools that can be used to mitigate the
issues that were raised by commenters without inappropriately shifting
costs onto the Federal Government and running afoul of Sec.
438.4(b)(1). Although we are not finalizing a list of specifically
prohibited rate development practices (as proposed at Sec. 438.4(d)),
it is still our view that these rate development practices generally
increase Federal costs and vary with the rate of FFP, and as such, are
generally prohibited under Sec. 438.4(b)(1) as finalized in this rule.
If states or actuaries intend to utilize these rate development
practices (for example, higher margin assumptions for non-LTSS
populations), we will require written documentation and justification
that any differences in the assumptions, methodologies, or factors used
to develop capitation rates for covered populations or contracts
represent actual cost differences based on the characteristics and mix
of the covered services or the covered populations.
Comment: Several commenters provided that our proposal to restrict
capitation rate development practices that are based on minimum levels
of
[[Page 72770]]
provider reimbursement would likely result in unintended consequences
for states seeking to comply with the provisions under at least two
scenarios: (1) States would be required to decrease provider
reimbursement rates to the lowest common denominator of the lowest FFP
contracts, which could diminish access to care for some Medicaid
populations; or (2) States would be required to increase provider
reimbursement rates to the highest common denominator of the higher FFP
contracts for the lowest FFP contracts, which could increase Federal
and state Medicaid expenditures. Commenters also provided that many
states have contracts for a specific population, such as a population
at the average FMAP rate, with state statute setting the rate structure
at the state's FFS rates; in these circumstances, this proposal would
make the state's FFS rate structure the standard by which other managed
care contracts would be evaluated, which may not be actuarially
appropriate. A few commenters also expressed concern that fee schedule
variation is limited under the proposal and noted that there is often a
need to increase the fee schedules for certain provider types to meet
network adequacy and encourage provider participation. These commenters
expressed concern that such limitations on provider fee schedules may
unfairly burden managed care plans. Commenters urged CMS not to
finalize this provision as part of the proposal.
Response: We understand the issues raised by commenters and
reiterate that to the degree the pricing assumptions are based on
actual cost differences in providing covered services to the covered
populations under the contract, these varying pricing assumptions would
be permissible under Sec. 438.4(b)(1) as valid rate development
factors. To the degree that varying pricing assumptions represent
actual cost differences in providing covered services to the covered
populations, we would find the assumptions to be consistent with valid
rate development standards. If a population has documented higher
costs, supported by actual experience, we would not find the pricing
assumptions to be in violation of finalized Sec. 438.4(b)(1). However,
in our experience in reviewing and approving capitation rates, we have
seen rate certifications that set minimum provider payment requirements
for the managed care plans for covered populations eligible for higher
percentages of FFP. We note here that such practices, when they shift
costs to the Federal Government and when not supported by the
application of valid rate development standards, are not permissible.
Any differences among capitation rates according to covered populations
must not shift costs to the Federal Government and must be based on
valid rate development standards rather than network provider
reimbursement requirements that apply to covered populations eligible
for higher percentages of FFP even in cases where provider
reimbursement requirements for such populations are mandated by state
statute. Furthermore, we reiterate that setting minimum provider
payment requirements for covered populations under the managed care
contract is not permissible if such requirements shift costs to the
Federal Government, even if such differential provider payments are
authorized under Sec. 438.6(c). For example, we have seen one state
use Sec. 438.4(b)(1) to vary provider reimbursement for covered
populations eligible for higher percentages of FFP, as mandated by
state law and not on valid rate development standards, and this state
has stated that when such arrangements pre-date differences in FFP, the
regulation should not be read to prohibit the resulting capitation
rates. Our proposal and the amendment to Sec. 438.4(b)(1) we are
finalizing here eliminates that particular argument as a potential
loophole. Regardless of when the differential rates were started, Sec.
438.4(b)(1) as amended in this rule requires that differential rates be
based on valid rate development standards and that they not shift costs
to the Federal Government; such non-compliant differential rates must
be eliminated. As revised, Sec. 438.4(b)(1) prevents states from cost-
shifting onto the Federal Government and prohibits any variances in
capitation rates based on the rate of FFP for different covered
populations, regardless of whether arrangements that vary provider
reimbursement are mandated by state statute and/or pre-date the
differences in FFP for different covered populations. We note that this
state also stated that the different rates were intended to better
align Medicaid rates with commercial rates but did not demonstrate that
differential provider payments for one covered population was a valid
rate development factor. As noted above in a previous response to
public comments in this section, setting minimum provider payment
requirements for covered populations under the managed care contract is
permissible as long as such requirements apply broadly, are not
selectively applied to covered populations eligible for higher
percentages of FFP, are supported by valid rate development standards
that represent actual cost differences in providing covered services to
the covered populations and do not shift costs to the Federal
Government. We note that varying pricing assumptions based on provider
payment requirements mandated by state legislation that shift costs to
the Federal Government do not constitute actual cost differences in
providing covered services.
To the extent that states need to enhance reimbursement for
specific providers or specific services, we believe that states can
utilize other means to accomplish that goal, such as enhancing fees for
covered services across all of their programs rather than varying fee
schedules only for higher FMAP populations. We also understand that
some states may have legislatively mandated fee schedules; however, as
long as such states comply with all applicable regulatory requirements
and are not including additional costs or mandating higher levels of
reimbursement for higher FMAP populations, states can comply with
mandated fee schedules and this regulation without a conflict. Mandated
fee schedules that comply with all applicable regulatory requirements
and do not result in higher payment for higher FMAP populations may be
used as the basis for rate setting for the managed care contracts. We
emphasize that varying pricing assumptions must not include using a
rate development practice that increases Federal costs and varies with
the rate of FFP when not supported by valid rate development standards
that represent actual cost differences in providing covered services to
the covered populations regardless of whether such differences are
mandated by state legislation. As finalized in this rule under Sec.
438.4(b)(1), any differences in the assumptions, methodologies, or
factors used to develop capitation rates must not vary with the rate of
FFP associated with the covered populations in a manner that increases
Federal costs.
Although we are not finalizing a list of prohibited rate
development practices (as proposed at Sec. 438.4(d)), it is still our
view that these rate development practices generally increase Federal
costs and vary with the rate of FFP, and as such, are prohibited in
most cases under Sec. 438.4(b)(1) as finalized in this rule. If states
or actuaries intend to utilize these rate development practices, we
will require written documentation and justification that any
differences in the assumptions, methodologies, or
[[Page 72771]]
factors used to develop capitation rates for covered populations or
contracts represent actual cost differences based on the
characteristics and mix of the covered services or the covered
populations.
Comment: A few commenters expressed concern with the proposal (at
proposed Sec. 438.4(d)(1)(iii)) that states may not use a lower MLR
remittance threshold for expansion populations than the MLR remittance
threshold used for TANF, ABD, and LTSS contracts. Commenters stated
that it is impractical and not actuarially sound to use an average MLR
remittance threshold without acknowledging the actual costs of each
managed care program and covered population. One commenter noted that
remittance thresholds vary as a function of the administrative load of
a product and is unrelated to the FFP for the program. Some commenters
expressed concern that the proposal will force states to reduce MLR
remittance thresholds for all managed care contracts, which will
increase Federal Medicaid costs. Some commenters also stated that there
are valid actuarial reasons to establish a higher MLR remittance
threshold for LTSS populations, and that states should not be
prohibited from designing such reasonable approaches based on
actuarially sound practices. Commenters provided that the
administrative costs for an LTSS program as a percent of revenue is
lower than an expansion program (managed care plan covering the
Medicaid benefits for the expansion population). As such, if a minimum
MLR threshold is developed with an equal likelihood of being triggered
by each program, the LTSS MLR threshold would need to be higher for the
LTSS program.
Response: We agree with commenters and acknowledge that our
proposed rule failed to account for varying MLR thresholds for high-
cost populations, such as LTSS populations. We agree that if a minimum
MLR threshold is developed with an equal likelihood of being triggered,
the MLR may need to be higher for LTSS programs because the
administrative costs, as a percent of revenue, may be lower. Under
Sec. 438.4(b)(1) as finalized here, we will require states to provide
valid reasons for varying the MLR threshold component in contracts
where the FFP percentages are different. For approval of rates that are
developed using such different MLR thresholds, a state could
demonstrate that it has used factors to develop rates based on valid
rate development standards and not on differences that increase Federal
costs and vary with the rate of FFP, and it has applied the same
methodologies for developing the administrative costs within the
capitation rate, and therefore, the corresponding MLR remittance
threshold is based on those same underlying methodologies. In such a
situation, we would not find this approach to be a violation of Sec.
438.4(b)(1) despite the different MLR thresholds used in setting the
rates for high and low FMAP populations.
We emphasize that varying pricing assumptions must not include
using a rate development practice that increases Federal costs and
varies with the rate of FFP when not supported by valid rate
development standards that represent actual cost differences in
providing covered services to the covered populations. We note that
varying pricing assumptions based only on provider payment requirements
mandated by state legislation do not constitute actual cost differences
in providing covered services. As finalized in this rule under Sec.
438.4(b)(1), any differences in the assumptions, methodologies, or
factors used to develop capitation rates must not vary with the rate of
FFP associated with the covered populations in a manner that increases
Federal costs. Although we are not finalizing a list of prohibited rate
development practices (as proposed at Sec. 438.4(d)(1)), it is still
our view that these rate development practices generally increase
Federal costs and vary with the rate of FFP, and as such, are
prohibited in most cases under Sec. 438.4(b)(1) as finalized in this
rule. If states or actuaries intend to utilize these rate development
practices, we will require written documentation and justification that
any differences in the assumptions, methodologies, or factors used to
develop capitation rates for covered populations or contracts represent
actual cost differences based on the characteristics and mix of the
covered services or the covered populations.
Comment: One commenter expressed concern that the proposal does not
account for recent statutory changes made by section 4001 of the
Substance Use-Disorder Prevention that Promotes Opioid Recovery and
Treatment (SUPPORT) for Patients and Communities Act (Pub. L. 115-271,
enacted October 24, 2018), which allows states to retain a larger share
of the remittances collected from managed care plans by remitting funds
back to the Federal Government for expansion enrollees at the state's
standard rate of FFP, provided that certain statutory conditions are
met.
Response: Section 4001 of the SUPPORT for Patients and Communities
Act, enacted October 24, 2018, amended section 1903(m) of the Act to
add a new paragraph (m)(9). Section 1903(m)(9) provides a time-limited
opportunity (after fiscal year 2020 but before fiscal year 2024) for
states that collect an MLR remittance from their Medicaid managed care
plans for the eligibility group described in section
1902(a)(10(A)(i)(VIII) to apply the state's regular Federal medical
assistance percentage (FMAP) match rate (calculated pursuant to section
1905(b) of the Act) to determine the Federal share of that remittance
instead of the higher FMAP match rate specified under 1905(y) for use
in connection with the Medicaid expansion group. Since this statutory
provision is limited to requirements on the amounts paid to the Federal
Government on certain MLR remittances within the specified parameters
of the statute, and not related to varying the remittance thresholds
for specific populations or contracts, section 4001 of the SUPPORT for
Patients and Communities Act is outside the scope of this final rule.
Specifically, we clarify for this commenter that this final rule does
not implicate the requirements under section 4001 of the SUPPORT for
Patients and Communities Act regarding the amounts paid to the Federal
Government on certain MLR remittances.
Comment: A few commenters requested clarification regarding whether
the proposal would apply to CHIP programs.
Response: We clarify here that our proposal under Sec. 438.4(d)
was never intended to and our amendment of Sec. 438.4(b)(1) does not
apply to CHIP programs. The CHIP requirements for rate development are
found in Sec. 457.1203, which does not incorporate or reference the
Medicaid managed care regulations on actuarial soundness and rate
setting.
Comment: A few commenters expressed concern that CMS refers to a
list of prohibited rate development practices that are ``including but
not limited to'' certain practices. These commenters expressed concern
that this non-exhaustive list requires additional clarification and
recommended that specific rate development practices be identified
through notice and comment rulemaking.
Response: The list of specific rate development practices that we
proposed to prohibit outright in proposed Sec. 438.4(d) is not being
finalized. However, should such practices be used and result in rates
that violate the standard we proposed and are finalizing in the
amendment of Sec. 438.4(b)(1), the
[[Page 72772]]
resulting rates will not be approved. We confirm for commenters that
should we find it necessary to prohibit specific rate development
practices in the future, we would do so through notice and comment
rulemaking. Here, however, we are limiting how rates must be developed
to ensure that differences in the assumptions, methodologies, and
factors used to develop rates are based on valid rate development
factors that represent actual cost differences and do not vary with the
rate of FFP in a manner that increases Federal costs.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing our proposed amendments to Sec. 438.4(b)(1) with
modifications and are not finalizing the proposed addition of Sec.
438.4(d); specifically, we are finalizing amendments to Sec.
438.4(b)(1) as follows:
At Sec. 438.4(b)(1), we are finalizing the proposal to
add regulation text to provide that any differences in the assumptions,
methodologies, or factors used to develop capitation rates for covered
populations must be based on valid rate development standards that
represent actual cost differences in providing covered services to the
covered populations and that any differences in the assumptions,
methodologies, or factors used to develop capitation rates must not
vary with the rate of Federal financial participation (FFP) associated
with the covered populations in a manner that increases Federal costs.
At Sec. 438.4(b)(1), we are finalizing that the
evaluation of compliance with Sec. 438.4(b)(1) be on a program-wide
basis, including all managed care contracts and covered populations.
The final rule will require an evaluation of any differences in the
assumptions, methodologies, or factors used to develop capitation rates
for MCOs, PIHPs, and PAHPs that increase Federal costs and vary with
the rate of FFP associated with the covered populations. This
evaluation must be conducted for the entire managed care program and
include all managed care contracts for all covered populations. This
provision was proposed as part of the introduction text to paragraph
(d).
At Sec. 438.4(b)(1), we are also finalizing the authority
for CMS to require a state to provide written documentation and
justification that any differences in the assumptions, methodologies,
or factors used to develop capitation rates for covered populations or
contracts represent actual cost differences based on the
characteristics and mix of the covered services or the covered
populations. This provision was proposed as part of paragraph (d)(2).
At Sec. 438.4(b)(1), we are not finalizing any references
to paragraph (d).
3. Rate Development Standards: Technical Correction (Sec.
438.5(c)(3)(ii))
In the 2016 final rule, we finalized at Sec. 438.5(c)(3) an
exception to the base data standard at Sec. 438.5(c)(2) in recognition
of circumstances where states may not be able to meet the standard at
paragraph (c)(2) regarding base data. We explained in the 2016 final
rule preamble (81 FR 27574) that states requesting the exception under
Sec. 438.5(c)(3) must submit a description of why the exception is
needed and a corrective action plan detailing how the state will bring
their base data into compliance no more than 2 years after the rating
period in which the deficiency was discovered.
Regrettably, the regulation text regarding the corrective action
timeline at Sec. 438.5(c)(3)(ii) was not as consistent with the
preamble or as clear as we intended. The regulation text finalized in
2016 provided that the state must adopt a corrective action plan to
come into compliance ``no later than 2 years from the rating period for
which the deficiency was identified.'' The preamble text described the
required corrective action plan as detailing how the problems ``would
be resolved in no more than 2 years after the rating period in which
the deficiency was discovered.'' This discrepancy resulted in ambiguity
that confused some stakeholders as to when the corrective action plan
must be completed and when a state's base data must be in compliance.
To remove this ambiguity, we proposed to replace the word ``from'' at
Sec. 438.5(c)(3)(ii) with the phrase ``after the last day of.'' The
preamble of the 2016 final rule used the term ``discovered'', while the
regulatory text used the term ``identified.'' We proposed to retain the
term ``identified'' in the regulatory text since we believed this term
to be more appropriate in this context. We explained that our proposed
change would clarify the corrective action plan timeline for states to
achieve compliance with the base data standard; that is, states would
have the rating year for which the corrective action period request was
made, plus 2 years following that rating year to develop rates using
the required base data. For example, if the state's rate development
for calendar year (CY) 2018 did not comply with the base data
requirements, the state would have 2 calendar years after the last day
of the 2018 rating period to come into compliance. This means that the
state's rate development for CY 2021 would need to use base data that
is compliant with Sec. 438.5(c)(2).
The following summarizes the public comments received on our
proposal to revise Sec. 438.5(c)(3)(ii) and our responses to those
comments.
Comment: A few commenters supported the proposed language change.
One of these commenters supported the proposal to use the term
``identified'' in Sec. 438.5(c)(3)(ii) instead of the word
``discover,'' which was used in the preamble of the 2016 final rule to
describe the regulation. One of these commenters also urged CMS to
ensure that the base data used by a state submitting a corrective
action be improved to meet the standards in Sec. 438.5 and recommended
that CMS enforce these requirements. One of these commenters also
requested that the base data be required to include all available and
emerging experience, such as pharmacy utilization experience.
Response: We agree with commenters that the term ``identified'' in
the regulatory text is appropriate, and therefore, we used it in the
proposed rule and this final rule. We also agree with commenters that
states and actuaries should be utilizing base data that is compliant
with the standards and requirements set forth in the 2016 final rule,
and we assure commenters that CMS is enforcing those rules. While we
also agree with commenters that our base data standards should include
the use of appropriate available and emerging experience, we did not
propose any changes to the standards governing base data and are not
finalizing any changes to those standards in Sec. 438.5(c)(1) and (2).
We remind commenters that the general rule for base data at Sec.
438.5(c)(2) already requires states and their actuaries to use the most
appropriate data, with the basis of the data being no older than from
the 3 most recent and complete years prior to the rating period, for
setting capitation rates. Such base data must be derived from the
Medicaid population, or, if data on the Medicaid population is not
available, derived from a similar population and adjusted to make the
utilization and price data comparable to data from the Medicaid
population. Data must also be in accordance with actuarial standards
for data quality.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing the amendment to Sec. 438.5(c)(3)(ii) as proposed.
[[Page 72773]]
4. Special Contract Provisions Related to Payment (Sec. 438.6)
a. Risk-Sharing Mechanism Basic Requirements (Sec. 438.6(b))
In the ``Medicaid and Children's Health Insurance Program (CHIP)
Programs; Medicaid Managed Care, CHIP Delivered in Managed Care,
Medicaid and CHIP Comprehensive Quality Strategies, and Revisions
Related to Third Party Liability'' proposed rule (the 2015 proposed
rule) (80 FR 31098, June 1, 2015), we proposed to redesignate the basic
requirements for risk contracts previously in Sec. 438.6(c)(2) as
Sec. 438.6(b). In Sec. 438.6(b)(1), we proposed a non-exhaustive list
of risk-sharing mechanisms (for example, reinsurance, risk corridors,
and stop-loss limits) and required that all such mechanisms be
specified in the contract. In the preamble, we stated our intent to
interpret and apply Sec. 438.6(b)(1) to any mechanism or arrangement
that has the effect of sharing risk between the MCO, PIHP, or PAHP, and
the state (80 FR 31122). We did not receive comments on paragraph
(b)(1) and finalized the paragraph as proposed in the 2016 final rule
(81 FR 27578) with one modification.
In the 2016 final rule, we included the standard from the then-
current rule (adopted in 2002 in the ``Medicaid Program; Medicaid
Managed Care: New Provisions'' final rule (67 FR 40989, June 14, 2002)
(hereinafter referred to as the ``2002 final rule'')) that risk-sharing
mechanisms must be computed on an actuarially sound basis. The 2015
proposed rule inadvertently omitted the requirement that risk-sharing
mechanisms be computed on an actuarially sound basis but we finalized
Sec. 438.6(b)(1) with that standard included in the 2016 final rule
(81 FR 27578). As managed care contracts are risk-based contracts,
mechanisms that share or distribute risk between the state and the
managed care plan are inherently part of the capitation rates paid to
plans for bearing the risk. Therefore, the risk-sharing mechanisms
should be developed in conjunction with the capitation rates and using
the same actuarially sound principles and practices.
We explained in the 2018 proposed rule how we expect states to
identify and apply risk-sharing requirements prior to the start of the
rating period because they are intended to address the uncertainty
inherent in setting capitation rates prospectively. Because we believed
that the 2016 final rule was clear on the prospective nature of risk-
sharing and our expectations around the use of risk-sharing mechanisms,
we did not specifically prohibit retroactive adoption and use of risk-
sharing mechanisms. However, since publication of the 2016 final rule,
we have found that some states have applied new or modified risk-
sharing mechanisms retrospectively; for example, some states have
sought approval to change rates, or revise a medical loss ratio (MLR)
requirement, after the claims experience for a rating period became
known to the state and the managed care plan. As noted in the 2018
proposed rule, we acknowledge the challenges in setting prospective
capitation rates and encourage the use of appropriate risk-sharing
mechanisms; in selecting and designing risk-sharing mechanisms, states
and their actuaries are required to only use permissible strategies,
use appropriate utilization and price data, and establish reasonable
risk-sharing assumptions.
We also acknowledged in the 2018 proposed rule how, despite a
state's best efforts to set accurate and appropriate capitation rates,
unexpected events can occur during a rating period that necessitate a
retroactive adjustment to the previously paid rates. We explained that
when this occurs, states should comply with Sec. 438.7(c)(2), which
provides the requirements for making a retroactive rate adjustment.
Section 438.7(c)(2) clarifies that the retroactive adjustment must be
supported by an appropriate rationale and that sufficient data,
assumptions, and methodologies used in the development of the
adjustment must be described in sufficient detail and submitted in a
new rate certification along with the contract amendment.
To address the practice of adopting or amending risk-sharing
mechanisms retroactively, we proposed to amend Sec. 438.6(b)(1) to
require that risk-sharing mechanisms be documented in the contract and
rate certification documents prior to the start of the rating period.
We also proposed to amend the regulation at Sec. 438.6(b)(1) to
explicitly prohibit retroactively adding or modifying risk-sharing
mechanisms described in the contract or rate certification documents
after the start of the rating period.
In the proposed rule, we acknowledged that our proposed requirement
that risk-sharing mechanisms be documented in a state's contract and
rate certification documents prior to the start of the rating period
meant, as a practical matter, that states electing to use risk-sharing
mechanisms would have to submit contracts and rate certifications to us
prior to the start of the rating period. We noted that section
1903(m)(2)(A)(iii) of the Act, as well as implementing regulations at
Sec. 438.806, require that the Secretary must provide prior approval
for MCO contracts that meet certain value thresholds before states can
claim FFP. This longstanding requirement is implemented in the
regulation at Sec. 438.806(c), which provides that FFP is not
available for an MCO contract that does not have prior approval from
us. We have, since the early 1990s, interpreted and applied this
requirement by not awarding FFP until the contract has been approved
and permitting FFP back to the initial date of a contract approved
after the start of the rating period if an approvable contract were in
place between the state and the managed care plan. This practice is
reflected in the State Medicaid Manual, section 2087.
The following summarizes the public comments received on our
proposal to amend Sec. 438.6(b)(1) and our responses to those
comments.
Comment: Several commenters supported the proposed amendment that
risk-sharing mechanisms be documented in a state's contract and rate
certification documents prior to the start of the rating period.
Commenters noted that doing so would improve transparency and
facilitate CMS' oversight of these risk-sharing mechanisms. One
commenter noted the proposed amendment to Sec. 438.6(b)(1) would
promote a more reliable and predictable method for risk-adjusting
payments to managed care plans. Commenters also stated that risk-
sharing mechanisms should be documented in the contract prior to the
start of the rating period to provide certainty to both states and
their contracted managed care plans.
Response: We appreciate commenters' support and agree that risk-
sharing mechanisms should be documented in a state's contract(s) and
rate certification(s) prior to the start of the rating period for all
of the reasons commenters provided. As risk-sharing mechanisms are
intended to address the uncertainty inherent in setting capitation
rates prospectively, we believe that states should develop risk-sharing
requirements prior to the start of the rating period and that risk-
sharing mechanisms should be developed in accordance with actuarially
sound principles and practices.
Comment: Several commenters stated that retroactive adjustments
should not be limited to adjustments to rates but should also apply to
risk-sharing mechanisms. These commenters stated that states
transitioning new populations or services into managed
[[Page 72774]]
care programs, such as LTSS, are more likely to need retroactive
adjustments to payment structures due to the unknown risks in covering
new populations in managed care for the first time.
Response: We disagree with commenters on permitting retroactive
adjustments to risk-sharing mechanisms. We do not believe that it is
appropriate to modify risk-sharing mechanisms between states and plans
after the claims experience for a rating period is known, because such
retroactive changes undercut the need for states and plans to address
uncertainty prospectively. We are not foreclosing retroactive
adjustments to rates when appropriate. As provided by Sec.
438.7(c)(2), if the state determines that a retroactive adjustment to
the capitation rate is necessary, the retroactive adjustment must be
supported by a rationale for the adjustment and the data, assumptions,
and methodologies used to develop the magnitude of the adjustment must
be adequately described with enough detail to allow CMS or an actuary
to determine the reasonableness of the adjustment. These retroactive
adjustments must be certified by an actuary in a revised rate
certification and submitted as a contract amendment to be approved by
CMS. These types of changes are distinct from application of a
previously set risk-sharing mechanism that is retrospective. While CMS
will not permit a retroactive change to the risk-sharing mechanism
under this final rule, the state can pursue a retroactive change to the
capitation rates if the requirements under Sec. 438.7(c)(2) are
satisfied.
Comment: Commenters requested that CMS clarify the difference
between risk adjustment and risk mitigation. One commenter requested
that CMS create definitions for risk adjustment and risk mitigation.
Commenters also requested that CMS clarify that the proposed change in
this section does not apply to risk adjustments as permitted in Sec.
438.7(b)(5). Another commenter noted that the new language explicitly
prohibiting retroactively adding or modifying risk-sharing mechanisms
may be seen as not allowing retroactive rate adjustments and requested
that CMS add language to this section that clearly states retroactive
rate adjustments under Sec. 438.7(c)(2) are still permitted.
Response: First, we clarify here that risk-sharing mechanisms,
which can include a risk mitigation strategy, are a distinct and
separate concept from risk adjustment. We note that ``risk mitigation''
is not a phrase used in part 438. Risk adjustment is defined at Sec.
438.5(a) as a methodology to account for the health status of enrollees
via relative risk factors when predicting or explaining costs of
services covered under the contract for defined populations or for
evaluating retrospectively the experience of MCOs, PIHPs, or PAHPs
contracted with the state. The requirements regarding risk adjustment
are found at Sec. Sec. 438.5(g) and 438.7(b)(5). Risk-sharing
mechanisms, on the other hand, are any means, mechanism, or arrangement
that has the effect of sharing risk between the MCO, PIHP, or PAHP, and
the state. A risk mitigation strategy is a means to protect the state,
or the managed care plan, against the risk that assumptions (not only
based on health status of enrollees) underlying the rate development
will not match later actual experience. In other words, ``risk-
sharing'' is about the aggregate actual experience, while ``risk
adjustment'' is about paying based on the health status of enrollees at
the individual level and how health status is assumed to result in
higher costs.
Second, we explain how the regulations that address these concepts
interact or do not interact. We confirm here that Sec. 438.6(b)(1),
including the proposed change that we are finalizing here, does not
regulate and has no impact on risk adjustment as addressed in
Sec. Sec. 438.5(g) and 438.7(b)(5). We also confirm that our proposed
change to Sec. 438.6(b)(1) does not impact states' ability to revise
or adjust capitation rates retroactively under Sec. 438.7(c)(2) when
unexpected events or programmatic changes occur during a rating period
that necessitate a retroactive change or adjustment to the previously
paid rates. Section 438.7(c)(2) clarifies that the retroactive
adjustment (or change) to capitation rates must be supported by an
appropriate rationale and that sufficient data, assumptions, and
methodologies used in the development of the adjustment must be
described in sufficient detail and submitted in a new rate
certification along with the contract amendment. Changes to a risk-
sharing mechanism are not changes to the capitation rates themselves;
they are changes to an arrangement or mechanism that results in a
separate payment from a state to a managed care plan or a remittance to
a state from a managed care plan.
Section 438.6(b)(1) applies to any and all mechanisms or
arrangements that have the effect of sharing risk between the MCO,
PIHP, or PAHP, and the state on an aggregate level. We believe that
this concept includes risk mitigation strategies and other arrangements
that protect the state or the MCO, PIHP, or PAHP against the risk that
the assumptions used in the initial development of capitation rates are
different from actual experience. Common risk mitigation strategies
include a medical loss ratio (MLR) with a remittance, a risk corridor,
or a risk[hyphen]based reconciliation payment. Under Sec. 438.6(b)(1),
we included a non-exhaustive list of risk-sharing mechanisms, such as
reinsurance, risk corridors, or stop-loss limits. We also defined risk
corridor in Sec. 438.6(a) as a risk-sharing mechanism in which states
and MCOs, PIHPs, or PAHPs may share in profits and losses under the
contract outside of a predetermined threshold amount. Because the
regulations in part 438 do not use the term ``risk mitigation
strategy,'' we do not believe it is necessary to define the term or add
it to the regulations. Section 438.6(b)(1) is clear that all risk-
sharing mechanisms are subject to its scope.
Comment: One commenter requested CMS add risk pools to the list of
risk-sharing arrangements in Sec. 438.6(b)(1) to clarify that such
arrangements are subject to actuarial soundness requirements and must
be documented in the managed care contract prospectively.
Response: If a risk pool is used as a mechanism to share risk
between the MCO, PIHP, or PAHP, and the state, then we agree with
commenters that a risk pool is subject to the requirements in Sec.
438.6(b)(1). We reiterate that any mechanism, strategy, or arrangement
that protects the state or the MCO, PIHP, or PAHP against the risk that
the assumptions used in the initial development of capitation rates are
different from actual experience is subject to the requirements in
Sec. 438.6(b)(1). We decline to add a specific mention of ``risk
pools'' into the regulations because we believe that Sec. 438.6(b)(1)
adequately indicates that it applies to all risk-sharing mechanisms and
only lists certain mechanisms as examples.
Comment: One commenter requested clarification from CMS regarding
whether restrictions on profits are to be considered a risk-sharing
mechanism, including minimum MLR requirements and contractual profit
caps. Another commenter requested that the proposed risk-sharing
mechanism be open to modifications while CMS is reviewing the rates, so
that if CMS does not accept the initially proposed risk-sharing
mechanism, then the state can modify and propose to CMS an alternative,
acceptable strategy.
Response: We confirm that a minimum MLR requirement with a
remittance would be considered a risk-sharing mechanism and subject to
the requirements in Sec. 438.6(b)(1). We also
[[Page 72775]]
confirm that additional restrictions on profits or contractual profit
caps would also be considered risk-sharing mechanisms under this
regulation. To the degree that arrangements (like the examples provided
by the commenter or other arrangements) function to explicitly share
risk between states and managed care plans, such arrangements would be
risk-sharing mechanisms and subject to the requirements in Sec.
438.6(b)(1). Regarding possible modifications to a risk-sharing
mechanism while CMS is reviewing the rates, we confirm for commenters
that such modifications would only be possible prior to the start of
the rating period to comply with the final regulation text. The
requirements in Sec. 438.6(b)(1) to document the risk-sharing
mechanism in the contract and rate certification documents prior to the
start of the rating period, as well the prohibition on adding or
modifying risk-sharing mechanisms after the start of the rating period,
would apply to states, plans, and CMS. If states are seeking CMS review
and approval prior to the start of the rating period, CMS and states
can work toward modifications that would ensure that arrangements are
reasonable, appropriate, and compliant with Federal requirements, as
long as such modifications are in place and documented in the contract
and rate certification documents for the rating period prior to the
start of the rating period and CMS' approval of such documents.
Comment: Several commenters opposed the proposed change and
requested CMS allow states flexibility to retroactively adjust risk-
sharing mechanisms. Commenters expressed concern that the proposed
section may restrict states from employing important tools for paying
plans in a volatile health care environment. Commenters noted that the
addition of new technologies, drugs, and populations to the Medicaid
managed care program often require retroactive adjustment of plan
payments. Commenters further noted that rates may be adjusted, but
states have also effectively employed risk-sharing mechanisms to ensure
that plans receive appropriate payment. Commenters stated that
continuing to allow retroactive addition or modification of risk-
sharing mechanisms will allow states to pay plans adequately when
substantial coverage changes occur mid-year. A few commenters noted
that states often make adjustments to rates to address disease
outbreaks, launches of high-cost prescription drugs, other unforeseen
circumstances that increase benefit costs, and refinements to risk
adjustment methodologies that improve rate accuracy. One commenter
requested CMS allow for appropriate flexibility for states to make
applicable retroactive modifications to risk-sharing mechanisms through
the development of an exception process as an option to account for
either lack of performance or unforeseen events that detrimentally
impact performance or trend.
Response: We disagree with commenters about permitting retroactive
adjustments to risk-sharing mechanisms, and we also disagree with
creating an exception process to permit such retroactive adjustments to
risk-sharing arrangements. We do not believe that it is appropriate to
modify risk-sharing mechanisms between states and plans after the
claims experience for a rating period is known, as we believe that this
approach undercuts the need for states and plans to address uncertainty
prospectively using risk-sharing mechanisms. As discussed in the
proposed rule and in our responses here, we have specific concerns that
permitting modification of risk-sharing mechanisms after claims
experience for a rating period is known could be used inappropriately
to shift costs onto the Federal Government.
We note that we are not foreclosing retroactive rate adjustments
(that is, changes to the rates themselves as opposed to changes to the
risk-sharing mechanism) when appropriate, such as when substantial
coverage changes occur mid-year, adjustments are necessary to address
disease outbreaks, launches of high-cost prescription drugs, or other
unforeseen circumstances that increase benefit costs (some of the
examples provided by commenters). We agree that it would be appropriate
to implement retroactive rate adjustments to accommodate unexpected
programmatic changes; however, modifying existing risk-sharing
mechanisms, or adding new risk-sharing mechanisms, after claims
experience for a rating period is known is not the appropriate tool for
states to use to address such concerns. States should adjust rates
using the appropriate requirements under Sec. 438.7(c)(2) to address
unexpected events that necessitate a retroactive adjustment (that is,
change) to previously paid rates. As provided by Sec. 438.7(c)(2), if
the state determines that a retroactive adjustment to the capitation
rate is necessary, the retroactive adjustment must be supported by a
rationale for the adjustment and the data, assumptions, and
methodologies used to develop the magnitude of the adjustment must be
adequately described with enough detail to allow CMS or an actuary to
determine the reasonableness of the adjustment. These retroactive
adjustments must be certified by an actuary in a revised rate
certification and submitted as a contract amendment to be approved by
CMS.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.6(b)(1) as proposed.
b. Delivery System and Provider Payment Initiatives Under MCO, PIHP, or
PAHP Contracts (Sec. 438.6(a) and (c))
As finalized in the 2016 final rule, Sec. 438.6(c)(1) permits
states to, under the circumstances enumerated in Sec. 438.6(c)(1)(i)
through (iii), direct the managed care plan's expenditures under the
contract. Among other criteria, such directed payment arrangements
require prior approval by CMS, per Sec. 438.6(c)(2); our approval is
based on meeting the standards listed in Sec. 438.6(c)(2), including
that the state expects the directed payment to advance at least one of
the goals and objectives in the state's quality strategy for its
Medicaid managed care program. We have been reviewing and approving
directed payment arrangements submitted by states since the 2016 final
rule, and we have observed that a significant number of them require
managed care plans to adopt minimum rates, and that most commonly,
these minimum rates are those specified under an approved methodology
in the Medicaid state plan. We explicitly clarify here that certain
financing requirements in statute and regulation are applicable across
the Medicaid program irrespective of the delivery system (for example,
fee-for-service, managed care, and demonstration authorities), and are
similarly applicable whether a state elects to direct payments under
Sec. 438.6(c). Such requirements include, but are not limited to,
limitations on financing of the non-Federal share applicable to health
care-related taxes and bona fide provider-related donations.
Due to the frequency and similarities of these types of directed
payment arrangements, we proposed to specifically address them in an
amendment to Sec. 438.6. At Sec. 438.6(a), we proposed to add a
definition for ``state plan approved rates'' to mean amounts calculated
as a per unit price of services described under CMS approved rate
methodologies in the state Medicaid plan. We also proposed to revise
Sec. 438.6(c)(1)(iii)(A) to specifically reference a directed payment
arrangement that is based on an
[[Page 72776]]
approved state plan rate methodology. We explicitly noted how, as with
all directed payment arrangements under Sec. 438.6(c), a directed
payment arrangement established under proposed paragraph (c)(1)(iii)(A)
would have to be developed in accordance with Sec. 438.4, the
standards specified in Sec. 438.5, and generally accepted actuarial
principles and practices.
We explained in the proposed rule that supplemental payments
contained in a state plan are not, and do not constitute, state plan
approved rates as proposed in Sec. 438.6(a); we proposed to include a
statement to this effect under proposed paragraph (c)(1)(iii)(A). We
noted in the proposed rule our view that a rate described in the
approved rate methodology section of the state plan reflects only the
per unit price of particular services. Supplemental payments are not
calculated or paid based on the number of services rendered on behalf
of an individual beneficiary, and therefore, would be separate and
distinct from state plan approved rates under our proposal. We also
proposed to define supplemental payments in Sec. 438.6(a) as amounts
paid by the state in its FFS Medicaid delivery system to providers that
are described and approved in the state plan or under a waiver and are
in addition to the amounts calculated through an approved state plan
rate methodology.
Further, we proposed to redesignate current paragraph
(c)(1)(iii)(A) as paragraph (c)(1)(iii)(B) and to revise the regulation
to distinguish a minimum fee schedule for network providers that
provide a particular service using rates other than state plan approved
rates from those using state plan approved rates. To accommodate our
proposal, we also proposed to redesignate current paragraphs
(c)(1)(iii)(B) and (C) as paragraphs (c)(1)(iii)(C) and (D),
respectively.
We also noted that as we have reviewed and approved directed
payment arrangements submitted by states since publication of the 2016
final rule, we have observed that our regulation does not explicitly
address some types of potential directed payments that states are
seeking to implement. To encourage states to continue developing
payment models that produce optimal results for their local markets and
to clarify how the regulatory standards apply in such cases, we
proposed to add a new Sec. 438.6(c)(1)(iii)(E) that would allow states
to require managed care plans to adopt a cost-based rate, a Medicare
equivalent rate, a commercial rate, or other market-based rate for
network providers that provide a particular service under the contract.
We explained how authorizing these additional types of payment models
for states to implement would eliminate the need for states to modify
their payment models as only minimum or maximum fee schedules to fit
neatly into the construct of the current rule.
Along with the proposed changes in Sec. 438.6(c)(1)(iii)(A), we
also proposed a corresponding change to the approval requirements in
Sec. 438.6(c)(2). In the 2016 final rule, we established an approval
process that requires states to demonstrate in writing that payment
arrangements adopted under Sec. 438.6(c)(1)(i) through (iii) meet the
criteria specified in Sec. 438.6(c)(2) prior to implementation. Since
implementing this provision of the 2016 final rule, states have noted
that the approval process for contract arrangements that include only
minimum provider reimbursement rate methodologies that are already
approved by CMS and included in the Medicaid state plan are
substantially the same as the approval requirements under the Medicaid
state plan. Some states have stated that the written approval process
in Sec. 438.6(c)(2) is unnecessary given that a state will have
already justified the rate methodology associated with particular
services in the Medicaid state plan (or a state plan amendment) to
receive approval by us that the rates are efficient, economical, and
assure quality of care under section 1902(a)(30)(A) of the Act.
Therefore, to avoid unnecessary and duplicative Federal approval
processes, we proposed to eliminate the prior approval requirement for
payment arrangements that are based on state plan approved rates. To do
so, we proposed to redesignate existing paragraph (c)(2)(ii) as
(c)(2)(iii), to add a new paragraph (c)(2)(ii), and to redesignate
paragraphs (c)(2)(i)(A) through (F) as paragraphs (c)(2)(ii)(A) through
(F), respectively. We also proposed to revise the remaining paragraph
at Sec. 438.6(c)(2)(i) to require, as in the current regulation, that
all contract arrangements that direct the MCO's, PIHP's, or PAHP's
expenditures under paragraphs (c)(1)(i) through (iii) must be developed
in accordance with Sec. 438.4, the standards specified in Sec. 438.5,
and generally accepted actuarial principles and practices; we proposed
to delete the remaining regulatory text from current paragraph
(c)(2)(i).
In proposed new paragraph (c)(2)(ii), we specified prior approval
requirements for payment arrangements under paragraphs (c)(1)(i) and
(ii) and (c)(1)(iii)(B) through (E). We proposed amended paragraph
(c)(2)(ii) as explicitly providing that payment arrangements under
paragraph (c)(1)(iii)(A) do not require prior approval from us; we
proposed to retain the requirement that such payment arrangements meet
the criteria in paragraphs (c)(2)(ii)(A) through (F). We justified this
proposed revision as a means to reduce administrative burden for many
states by eliminating the need to obtain written approval prior to
implementation of this specific directed payment arrangement that
utilizes previously approved rates in the state plan. With the
redesignation of paragraphs (c)(2)(ii)(A) through (F), we proposed to
keep in place the existing requirements for our approval to be granted.
In the 2016 final rule, we specified at Sec. 438.6(c)(2)(ii)(C)
that contract arrangements which direct expenditures made by the MCO,
PIHP, or PAHP under paragraph (c)(1)(i) or (ii) for delivery system or
provider payment initiatives may not direct the amount or frequency of
expenditures by managed care plans. At that time, we believed that this
requirement was necessary to deter states from requiring managed care
plans to reimburse particular providers specified amounts with
specified frequencies. However, based on our experience in reviewing
and approving directed payment arrangements since the 2016 final rule,
we now recognize that this provision may have created unintended
barriers to states pursuing innovative payment models. Some states have
adopted or are pursuing payment models, such as global payment
initiatives, which are designed to move away from a volume-driven
system to a system focused on value and population health. These
innovative payment models are based on the state directing the amount
or frequency of expenditures by the managed care plan to achieve the
state's goals for improvements in quality, care, and outcomes under the
payment model. Therefore, we proposed to delete existing Sec.
438.6(c)(2)(ii)(C) which would permit states to direct the amount or
frequency of expenditures made by managed care plans under paragraph
(c)(1)(i) or (ii). As a conforming change, we proposed to redesignate
existing Sec. 438.6(c)(2)(ii)(D) as Sec. 438.6(c)(2)(iii)(C).
Under existing Sec. 438.6(c)(2)(i)(F) (which we proposed to
redesignate as Sec. 438.6(c)(2)(ii)(F)), a contract arrangement
directing a managed care plan's expenditure may not be renewed
automatically. While Sec. 438.6(c)(2)(i)(F) does not permit an
automatic renewal of a contract arrangement described in paragraph
(c)(1), it does not prohibit
[[Page 72777]]
states from including payment arrangements in a contract for more than
one rating period. We have received numerous payment arrangement
proposals from states requesting a multi-year approval of their payment
arrangement to align with their delivery system reform efforts or
contract requirements.
To provide additional guidance to states on the submission and
approval process for directed payments, on November 2, 2017, we issued
a CMCS Informational Bulletin (CIB) entitled ``Delivery System and
Provider Payment Initiatives under Medicaid Managed Care Contracts''
(available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib11022017.pdf). The CIB explained that based on our
experience with implementation of Sec. 438.6(c)(2), we recognize that
some states are specifically pursuing multi-year payment arrangements
to transform their health care delivery systems. The CIB also described
that states can develop payment arrangements under Sec. 438.6(c)(1)(i)
and (ii), which are intended to pursue delivery system reform, over a
period of time that is longer than one year so long as the state
explicitly identifies and describes how the payment arrangement will
vary or change over the term of the arrangement.
In the 2018 proposed rule, we stated that some payment
arrangements, particularly value-based purchasing arrangements or those
tied to larger delivery system reform efforts, can be more complex and
may take longer for a state to implement. We noted that setting the
payment arrangement for longer than a one-year term would provide a
state with more time to implement and evaluate whether the arrangement
meets the state's goals and objectives to advance its quality strategy
under Sec. 438.340. We reiterated our position from the CIB that we
interpret the regulatory requirements under Sec. 438.6(c) to permit
multi-year payment arrangements when certain criteria were met. The CIB
identified the criteria for multi-year approvals of certain directed
payment arrangements, and we proposed to codify those criteria in a new
Sec. 438.6(c)(3).
Specifically, we proposed in new paragraph (c)(3)(i) that we would
condition a multi-year approval for a payment arrangement under
paragraphs (c)(1)(i) and (ii) on the following criteria: (1) The state
has explicitly identified and described the payment arrangement in the
contract as a multi-year payment arrangement, including a description
of the payment arrangement by year, if the payment arrangement varies
by year; (2) the state has developed and described its plan for
implementing a multi-year payment arrangement, including the state's
plan for multi-year evaluation, and the impact of a multi-year payment
arrangement on the state's goal(s) and objective(s) in the state's
quality strategy in Sec. 438.340; and (3) the state has affirmed that
it will not make any changes to the payment methodology, or magnitude
of the payment, described in the contract for all years of the multi-
year payment arrangement without our prior approval. If the state
determines that changes to the payment methodology, or magnitude of the
payment, are necessary, the state must obtain prior approval of such
changes using the process in paragraph (c)(2). We noted that in
addition to codifying criteria for the approval of multi-year payment
arrangements, the proposed new paragraph (c)(3)(i) would address any
potential ambiguity on the narrow issue of the permissibility of states
to enter into multi-year payment arrangements with managed care plans.
Finally, in alignment with our guidance in the November CIB, we
proposed to specify at paragraph (c)(3)(ii) that the approval of a
payment arrangement under paragraph (c)(1)(iii) would be for one rating
period only. We explained that while we understood that value-based
purchasing payment arrangements or those tied to larger delivery system
reform efforts can be more complex and may take longer for a state to
implement, we believed that more traditional payment arrangements and
fee schedules permitted under paragraph (c)(1)(iii) should continue to
be reviewed and evaluated on an annual basis by both states and us. We
explained how it was important to continue ensuring that such payment
arrangements under paragraph (c)(1)(iii) are consistent with states'
and our goals and objectives for directed payments under Medicaid
managed care contracts.
We proposed several revisions in Sec. 438.6(c) including
specifying different types of potential directed payments such as
arrangements based on a Medicare equivalent rate, a commercial rate, a
cost-based rate, or other market-based rate (Sec. 438.6(c)(1)(iii)(E))
and permitting states to direct the amount or frequency of expenditures
by deleting existing Sec. 438.6(c)(2)(ii)(C). Some commenters were
supportive, some were not, and others raised related policy issues with
state directed payments that we believe warrant additional
consideration. For example, several commenters stated that these
proposals increased flexibility for states to design directed payment
arrangements which would help drive innovation and enable states to
better optimize their programs to accommodate their own unique policy
and demographic conditions. Other commenters noted that Medicare,
commercial, and market-based rates would, in some cases, reduce
provider reimbursement rates and jeopardize quality and access to
Medicaid services. A few commenters were concerned about the ability of
managed care plans to manage risk as it relates to state-directed
payment arrangements. One commenter stated that the regulatory
requirements under Sec. 438.6(c) were too rigid for managed care plans
and can degrade the utility and effectiveness of value-based
arrangements.
Based on the diverse range of public comments and our continued
experience with state directed payments since the proposed rule was
published in November 2018, we have decided not to finalize the
revisions proposed at Sec. 438.6(c)(1)(iii)(E) and (c)(2)(ii)(C) in
this final rule. However, we will consider addressing these and other
state directed payment policies in future rulemaking. We thank
commenters for their valuable input and will use it to inform our
future rulemaking.
The following summarizes the public comments received on our
proposal to amend Sec. 438.6(a) and (c) and our responses to those
comments.
Comment: Several commenters supported the changes to Sec.
438.6(a), including the addition of a definition for state plan
approved rates and the additional clarification in Sec.
438.6(c)(1)(iii)(A) that supplemental payments are not, and do not
constitute, state plan rates. Several commenters disagreed with
proposed Sec. 438.6(c)(1)(iii)(A) and recommended that CMS revise the
proposed definitions of state plan approved rates and supplemental
payments to acknowledge the legitimacy and importance of supplemental
payments in the Medicaid program. One commenter recommended that we
define or explain our meaning for ``per unit''. One commenter requested
that CMS confirm that state plan approved rates also include state plan
approved payments that are based on a provider's actual or projected
costs. One commenter requested that CMS clarify whether the proposed
definition of supplemental payments in Sec. 438.6(a) included
disproportionate share hospital (DSH) or graduate medical education
(GME) payments.
Response: We do not agree with commenters that further revisions
are needed to address the role of supplemental payments in the Medicaid
program; we believe that our policies
[[Page 72778]]
finalized in this final rule, specifically to define the term
``supplemental payments'' for purposes of part 438, including Sec.
438.6, and to adopt (in Sec. 438.6(d)(6)) a period for pass-through
payments to be used for states transitioning new services or new
populations to Medicaid managed care, demonstrate that CMS understands
the role of supplemental payments in the Medicaid program. We note that
our proposed definition of ``supplemental payments'' may not have been
as clear as it could be, so we are finalizing the definition by adding
``or demonstration'' to recognize 1115 demonstration authority as well
as waiver authority.
Regarding the definition of ``per unit,'' we have reconsidered the
use of that term and acknowledge that this definition may not have been
clear. To correct this, we have revised the definition to remove ``per
unit'' and instead, reference amounts calculated for specific covered
services identifiable as having been provided to an individual
beneficiary described under CMS approved rate methodologies in the
Medicaid State plan. Moreover, we explicitly clarify here that certain
financing requirements in statute and regulation are applicable across
the Medicaid program irrespective of the delivery system (for example,
fee-for-service, managed care, and demonstration authorities), and are
similarly applicable whether a state elects to direct payments under
Sec. 438.6(c). Such requirements include, but are not limited to,
limitations on financing of the non-Federal share applicable to health
care-related taxes and bona fide provider-related donations.
We agree with commenters that clarification is needed regarding
whether ``supplemental payments,'' as the term is defined and used in
Sec. 438.6, includes DSH or GME payments. It was never our intent to
include DSH or GME payments in our definition of supplemental payments
for the purposes of Medicaid managed care under part 438. Therefore, we
are finalizing the definition of supplemental payments at Sec.
438.6(a) with an additional sentence stating that DSH and GME payments
are not, and do not constitute, supplemental payments. We note that DSH
and GME payments would not meet the definition, finalized at Sec.
438.6(a), of state plan approved rates because such payments are not
calculated as amounts for specific covered services identifiable as
having been provided to an individual beneficiary. We are also
finalizing a technical change to the definition of supplemental
payments by revising the phrase ``amounts calculated through an
approved state plan rate methodology'' to ``state plan approved
rates.'' This revision eliminates ambiguity and uses terminology that
is being finalized in this final rule.
We also believe that the definition of state plan approved rates
should include the clarification that was proposed in Sec.
438.6(c)(1)(iii)(A) that supplemental payments are not, and do not
constitute, state plan approved rates as they are not directly
attributable to a covered service furnished to an individual
beneficiary. We are finalizing the definition of the term ``state plan
approved rates'' in Sec. 438.6(a) with this clarifying sentence
included in the definition instead of at paragraph (c)(1)(iii)(A).
Comment: A few commenters requested clarification on the difference
between a state plan approved rate and a supplemental payment.
Commenters noted that in some states there are situations where there
is a per unit price set at an amount higher than the Medicaid fee
schedule for a class of providers, and this higher price has been
approved in the state plan. The difference between the higher rate and
the Medicaid fee schedule amount is paid retrospectively, but the total
payment is still based on the number of units incurred for the
applicable services. Commenters questioned whether rates in this
situation would be a state plan approved rate or a supplemental
payment.
Response: As finalized in this rule, state plan approved rates
means amounts calculated for specific covered services identifiable as
having been provided to an individual beneficiary described under the
CMS approved rate methodologies in the Medicaid state plan. We confirm
for commenters that state plan approved rates can include payments that
are higher than the traditional Medicaid FFS fee schedule for a
specific class of providers when the payment methodology has been
approved in the state plan and is for specific covered services
identifiable as having been provided to an individual beneficiary. We
have also revised the definition to note that supplemental payments are
not, and do not constitute, state plan approved rates. Supplemental
payments approved under a Medicaid state plan are often made to
providers in a lump sum and often cannot be linked to specific covered
services provided to an individual Medicaid beneficiary; therefore,
supplemental payments are not directly attributable to a covered
service furnished to an individual beneficiary. We understand that some
payment methodologies are calculated retrospectively for specific
reasons, such as when payments are made based on a provider's actual
costs. We emphasize that payment amounts calculated for specific
covered services identifiable as having been provided to an individual
beneficiary must be directly tied to the provision of covered services
to Medicaid beneficiaries, which is why these payment amounts are
consistent with our definition of ``state plan approved rates'' under
part 438, including Sec. 438.6 (and why these payment amounts are not
considered supplemental payments for the purposes of Sec. 438.6).
Comment: A few commenters requested clarification that state plan
approved rates include FFS payments that are described and approved in
the state plan when the payment is for a specific service or benefit
provided to enrollees covered under a contract.
Response: As finalized in this rule, state plan approved rates
means amounts calculated for specific covered services identifiable as
having been provided to an individual beneficiary described under
approved rate methodologies in the Medicaid state plan. As defined
here, the term ``state plan approved rates'' includes Medicaid FFS
payments for a specific service or benefit provided to enrollees when
the payment methodology results in amounts calculated for specific
covered services identifiable as having been provided to an individual
beneficiary and has been approved in the state plan. As long as the
payment amounts are calculated for specific covered services
identifiable as having been provided to an individual beneficiary and
described under CMS approved rate methodologies in the state plan, the
payment amounts will meet our definition for state plan approved rates
under Sec. 438.6(c).
Comment: Some commenters recommended changing the language in
proposed Sec. 438.6(a) to indicate that state plan approved rates
means amounts paid on a ``per claim'' basis by the state in its FFS
Medicaid delivery system to providers for services as described under
CMS approved rate methodologies in the Medicaid state plan. Other
commenters recommended changing the language for supplemental payments
to mean amounts paid separately by the state in its FFS Medicaid
delivery system to providers that are described and approved in the
state plan or under a waiver thereof and are in addition to state plan
approved rates. One commenter requested that CMS consider changing the
proposed definition of supplemental payments to be amounts paid by the
state in its FFS
[[Page 72779]]
Medicaid delivery system to providers that are described and approved
in the state plan or under a waiver thereof; are not for a specific
service or benefit provided to a specific enrollee covered under the
contract; and are in addition to the amounts calculated through an
approved state plan rate methodology.
Response: After reviewing the specific recommendations made by
commenters, we do not believe that these specific revisions to the
definitions are necessary. However, we have reconsidered the use of
``per unit'' and acknowledge that this may not have been clear. To
correct this, we have revised the definition to remove ``per unit'' and
instead, reference amounts calculated for specific covered services
identifiable as having been provided to an individual beneficiary
described under CMS approved rate methodologies in the Medicaid State
plan. The recommendation to use the term ``per claim'' instead of ``per
unit'' in the definition for state plan approved rates is also not
necessary as we are not finalizing the term ``per unit'' as described
elsewhere. The other recommendations add the phrases ``paid
separately'' and ``are not for a specific service or benefit provided
to a specific enrollee covered under the contract'' to the definition
of supplemental payments. These recommendations do not add clarity to
the definition, and we believe that these same concepts are already
present in our proposed definitions in Sec. 438.6(a). For example, in
the definition of supplemental payments, we proposed and are finalizing
the phrase ``and are in addition to'' which could include whether the
payment amounts are paid separately or not. We also do not believe that
it is necessary to add the phrase ``are not for a specific service or
benefit provided to a specific enrollee covered under the contract'' to
the definition of supplemental payments because we believe that our
proposed definition is broad enough to include this concept, especially
since the definition for state plan approved rates means that payments
are calculated as amounts calculated for specific covered services
identifiable as having been provided to an individual beneficiary and
supplemental payments are paid in addition to those state plan approved
rates. We are also finalizing a technical change to the definition of
supplemental payments by revising the phrase ``amounts calculated
through an approved State plan rate methodology'' to ``State plan
approved rates.'' This revision eliminates ambiguity and uses
terminology that is being finalized in this final rule.
Comment: Many commenters supported the proposals that eliminate the
prior approval requirement for payment arrangements that use state plan
approved rates, allowing states to mirror FFS rates in their managed
care plans and develop rates tied to a variety of payment options.
Commenters noted that the proposals reduce states' and CMS'
administrative burden and create greater flexibility for states to
develop stable, long-term payment strategies that can be applied
equally in both FFS and managed care delivery systems. Commenters noted
that the proposals allow for flexibility that can help states and CMS
focus on those payment methodologies that are truly unprecedented or
novel, while bringing financial predictability to safety-net providers
who rely on Medicaid funding. Some commenters opposed the proposed
changes to eliminate prior approval for state plan approved rates,
stating that the proposals do not provide a mechanism for frequent and
consistent oversight or ensure that the proposals will provide access
to care.
Response: We agree that our modifications to Sec. 438.6(c)(2)(ii)
will reduce state and Federal burden by eliminating the requirement
that states obtain written prior approval for payment arrangements that
have already been approved by CMS in the Medicaid state plan. We
disagree with commenters that our proposed changes would increase
unintended risk or a lack of Federal oversight because we are only
eliminating the prior approval requirement for those payment
arrangements which have already been reviewed and approved by CMS under
the Medicaid state plan. We do not believe that a duplicative review
and approval process has value or provides any necessary additional
Federal oversight. We believe that prudent program management is
necessary to efficiently and effectively administer the Medicaid
program and eliminating unnecessary and duplicative review processes
will improve states' efforts to implement payment arrangements that
meet their local goals and objectives. To ensure appropriate oversight
and prudent program management, we have initiated a review of state-
directed payments and may issue future guidance and/or rulemaking based
on the findings of this evaluation. This review was initiated based on
our experience reviewing state requests for state-directed payments, as
we have seen proposals for significant changes to provider
reimbursement, which may in turn have an impact on program
expenditures.
Comment: A few commenters requested clarification on whether prior
approval under Sec. 438.6(c) would be required if a state implemented
a uniform percentage increase for managed care plan provider payments
concurrently with an increase to the state's FFS rates. These same
commenters noted that the managed care plan provider payments would not
match the state's FFS rates and that the per unit prices of services
for managed care and FFS would vary.
Response: In the scenario described by the commenters, the state's
requirement for managed care plans to provide a uniform increase to
health care providers would be consistent with Sec.
438.6(c)(1)(iii)(C) as proposed and finalized, which permits states to
require their managed care plans to provide a uniform dollar or
percentage increase for providers that provide a particular service
covered under the contract, provided that the other requirements in
Sec. 438.6(c) are met. Section 438.6(c)(2)(ii), as finalized in this
rule, requires that contract arrangements that direct the managed care
plan's expenditures under Sec. 438.6(c)(1)(iii)(B) through (D) must
have written approval from CMS prior to implementation. This means that
the uniform percentage increase for managed care plan provider payments
would require prior approval. We note that a state-directed payment
mandating a managed care plan pay the state's FFS rates is authorized
under Sec. 438.6(c)(1)(iii)(A) and prior approval would not be
required under Sec. 438.6(c)(2)(ii), as amended in this rule under
this section.
Comment: A few commenters requested clarification on the
requirement of written approval for state-directed payments under
proposed Sec. 438.6(c)(1)(iii)(A). These commenters noted that the
proposed regulation states that these arrangements ``do not require
written approval prior to implementation'' and questioned if these
arrangements ever require written approval from CMS.
Response: If the state requires managed care plans to adopt a
minimum fee schedule for network providers that provide a particular
service covered under the contract using state plan approved rates as
defined in Sec. 438.6(a), written approval is not required from us
under Sec. 438.6(c)(2)(ii), as amended in this rule. This means that
states may implement these specific payment arrangements, which have
already been reviewed and approved by CMS under the Medicaid state
plan,
[[Page 72780]]
without obtaining any additional approvals from CMS under Sec.
438.6(c). However, this exemption from the prior approval requirement
only applies to required use by managed care plans of the state plan
approved rates for the FFS program. If the state requires a managed
care plan to apply increases or other adjustments to those state plan
approved rates, it is not an arrangement described in paragraph
(c)(1)(iii)(A), and therefore, paragraph (c)(2)(ii) would apply and
require prior written approval.
Comment: One commenter requested that CMS confirm that the
evaluation requirement at Sec. 438.6(c)(2)(ii)(D) and the prohibition
against automatic renewal at Sec. 438.6(c)(2)(ii)(F) are inapplicable
to state direction that a managed care plan use the state plan minimum
fee schedules under Sec. 438.6(c)(1)(iii)(A). If CMS will still
require documentation of these factors, this commenter recommended CMS
allow that documentation to be incorporated into the traditional rate
certification submission to avoid duplicative administrative review
processes.
Response: Under Sec. 438.6(c)(2)(ii), contract arrangements that
require managed care plans to adopt a minimum fee schedule for network
providers that provide a particular service under the contract using
state plan approved rates do not require prior approval from us;
however, we proposed and are finalizing that such directed payment
arrangements must meet the criteria described in Sec.
438.6(c)(2)(ii)(A) through (F). These criteria include that states have
an evaluation plan that measures the degree to which the payment
arrangement advances at least one the state's quality goals and
objectives, and that such payment arrangements are not renewed
automatically. We confirm here, only for payment arrangements that
utilize minimum fee schedules based on state plan approved rates (as
specified in Sec. 438.6(c)(1)(iii)(A)), that while there is no
regulatory requirement for the submission of any documentation from the
state to demonstrate that state directed arrangements described in
Sec. 438.6(c)(1)(iii)(A) meet the criteria described in Sec.
438.6(c)(2)(ii)(A) through (F), these criteria apply and CMS may
require states to submit evidence of compliance with the criteria in
Sec. 438.6(c)(2)(ii)(A) through (F) if we have reason to believe the
state is not complying with the requirements. Because the requirement
to comply with these criteria, even if written approval from us is not
required, applies nonetheless to arrangements described in Sec.
438.6(c)(1)(iii)(A), we expect that states will maintain their
evaluation plans and will continue monitoring and evaluating these
payment arrangements. Further, the other criteria listed in Sec.
438.6(c)(2)(ii), such as the prohibition related to IGTs, continue to
apply even if we do not require the state to document that compliance
to us, and we may require states to submit evidence of compliance with
the criteria in Sec. 438.6(c)(2)(ii)(A) through (F) if we have reason
to believe the state is not complying with the requirements. Under the
plain language of Sec. 438.6(c)(2)(ii), all contract arrangements that
direct a managed care plan's expenditures, regardless of whether the
payment arrangement requires prior approval under Sec. 438.6(c)(2),
must meet the criteria listed in paragraphs (c)(2)(ii)(A) through (F).
In addition, we clarify here that certain financing requirements in
statute and regulation are applicable across the Medicaid program
irrespective of the delivery system (for example, fee-for-service,
managed care, and demonstration authorities). Such requirements
include, but are not limited to, limitations on financing of the non-
Federal share applicable to health care-related taxes and bona fide
provider-related donations. These financing requirements similarly
apply when a state elects to direct payments under Sec. 438.6(c),
including Sec. 438.6(c)(1)(iii)(A).
Comment: One commenter recommended that CMS provide guidance to
states on adopting the Medicaid FFS outpatient drug reimbursement
methodology as a minimum fee schedule or a separate and distinct cost-
based rate for pharmacy payments in the Medicaid managed care program.
Response: Under Sec. 438.6(c)(1)(iii)(A), states are permitted to
contractually require their managed care plans to adopt a minimum fee
schedule for providers that provide a particular service covered under
the contract using state plan approved rates. The state plan approved
rates, under the definition finalized at Sec. 438.6(a), can include
the Medicaid FFS outpatient drug reimbursement methodologies that are
approved by CMS and in the Medicaid state plan. States may implement
payment arrangements under paragraph (c)(1)(iii)(A), which have already
been reviewed and approved by CMS under the Medicaid state plan,
without obtaining any additional approvals from us under Sec.
438.6(c). If cost-based rate methodologies are approved in the Medicaid
state plan, states could implement the payment arrangements under
paragraph (c)(1)(iii)(A) if the contract requirement is implemented as
a minimum fee schedule and if it comports with other regulatory
requirements. We note that after consideration of the overall goals and
purposes of Sec. 438.6(c), we have reconsidered our proposal in Sec.
438.6(c)(1)(iii)(E) to permit states to direct their Medicaid managed
care plans to use a cost-based rate, Medicare-equivalent rate,
commercial rate, or other market-based rate as explained elsewhere in
this regulation.
Comment: Commenters requested that CMS finalize the proposals at
Sec. 438.6(c) with the condition that such arrangements only be
applied in a manner that accounts for potential adverse effects on
access to care or other unintended impacts to dental benefits.
Commenters requested that states be required to consult and seek public
comment from dental plans and providers prior to including dental
services in a value-based payment model.
Response: We proposed and are finalizing additional types of
payment arrangements that states may direct their managed care plans to
use for paying providers that furnish covered services, to enable
states to achieve specific state goals and objectives related to
Medicaid payment, access to care, and other delivery system reforms at
a local level. Under Sec. 438.6(c)(2), we require that states
demonstrate that the arrangement complies with specific criteria prior
to implementing the payment arrangements. One of those criteria is that
the payments advance at least one of the goals and objectives in the
state's Medicaid managed care quality strategy (such as an access to
care, or quality of care, goal and/or objective); another is that the
state has an evaluation plan to assess the degree to which the payment
arrangements achieve the state's objectives. While it might be
theoretically possible for a state to design and mandate a particular
provider payment arrangement that does not consider access to care as
part of setting the provider payment, there are other regulatory
requirements (such as required quantitative network adequacy standards)
in part 438 that ensure that states consider access to care in
contracting with managed care plans. We believe that our regulations,
including Sec. 438.6(c) and other requirements in part 438, are
sufficient to ensure that payment arrangements account for potential
adverse effects on access to care or other unintended impacts;
therefore, we decline to adopt
[[Page 72781]]
additional conditions as part of this final rule.
We also decline to adopt new regulations or new requirements that
states consult and seek public comment from plans and providers before
mandating a payment arrangement that is permitted under Sec. 438.6(c).
While we believe that states should be seeking broad stakeholder
feedback when developing and implementing delivery system reforms and
performance payment initiatives, we do not believe that it is necessary
to create new Federal requirements to accomplish this goal. In our
experience, states are already working with many stakeholder groups
when designing and implementing new payment requirements for providers
in the managed care context, and we believe that states should continue
to have discretion in how they convene stakeholder groups and obtain
stakeholder feedback to inform state Medicaid policy in this specific
area.
Comment: One commenter requested that CMS clarify that states may
set minimum payment rates for providers within a class that meet
certain criteria. The commenter noted that such criteria could include
the provision of a particular type of service, such as a public health
service.
Response: We agree that states are permitted to establish state-
directed payments and direct them equally, and using the same terms of
performance, for a class of providers providing services under a
contract. We explained this in the 2016 final rule (81 FR 27586) and
our position on this standard has not changed since the 2016 final
rule, and we agree that states could develop minimum payment rates
under Sec. 438.6(c) for a class of providers in accordance with the
requirements in Sec. 438.6(c)(2)(ii)(B).
Comment: A few commenters were concerned about the ability of
managed care plans to manage risk as it relates to state-directed
payment arrangements. Commenters recommended that CMS confirm that
managed care plans retain the ability to manage risk effectively and
have discretion in managing their contracts relating to minimum fee
schedules and pay increases, as well as maximum fee schedules.
Commenters recommended that CMS require states to consult with managed
care plans prior to implementing state directed payments. One commenter
stated that the regulatory requirements under Sec. 438.6(c) were too
rigid for managed care plans and can degrade the utility and
effectiveness of value-based arrangements. Commenters also noted that
plans, similar to states, should be given the flexibility to deploy
specific tactics aimed at encouraging the provision of high-quality and
cost-efficient care, and that CMS can continue to add value in this
area by disseminating various state approaches and sharing both policy
and operational best practices.
Response: We agree with commenters that managed care plans should
have adequate authority and flexibility to be able to effectively
manage risk and have discretion in managing their contracts with
providers. This was part of our rationale for adopting the limits on
pass-through payments and state-directed payments in Sec. 438.6 in the
2016 final rule (81 FR 27587-27592). We also agree with commenters that
plans should be able to deploy specific tactics aimed at encouraging
the provision of high-quality and cost-efficient care. However, while
we do not agree with commenters that additional revision to Sec.
438.6(c) is necessary at this time, after consideration of the overall
goals and purposes of Sec. 438.6(c) and public comments, we have
reconsidered our proposal to delete existing Sec. 438.6(c)(2)(ii)(C)
which prohibits states from directing the amount or frequency of
expenditures made by managed care plans under Sec. 438.6(c)(1)(i) or
(ii). While we stated in the proposed rule that this provision may have
created unintended barriers to states pursuing innovative payment
models, after further consideration, we believe the Sec. 438.6(c)
criteria established in the 2016 final rule struck the appropriate
balance between the need for autonomy by managed care plans and
flexibility for state Medicaid agencies (81 FR 27582 and 27583).
Further, we believe retaining this provision will achieve our goal of
ensuring managed care plans have the authority and flexibility to
effectively manage risk and discretion in managing their contracts with
providers. We acknowledge that state direction of provider payments by
managed care plans, as permitted under Sec. 438.6(c), can require that
managed care plans adopt specific payment parameters for specified
providers and can require that managed care plans participate in
specified value-based purchasing or performance improvement
initiatives; however, we believe that managed care plans retain the
ability to reasonably manage risk and still have adequate discretion in
managing their contracts with providers, even in circumstances where
states may require managed care plans to adopt specific parameters for
provider payment. We discussed these issues in the 2016 final rule and
why the specific permitted payment arrangements and criteria identified
in Sec. 438.6(c) struck the appropriate balance between the need for
autonomy by managed care plans and flexibility for state Medicaid
agencies (81 FR 27582 and 27583).
Section Sec. 438.6(c) is not intended to take discretion away from
managed care plans in managing their risk; rather, Sec. 438.6(c) is
intended to help states implement delivery system and provider payment
initiatives under Medicaid managed care contracts and permit states to
direct specific payments made by managed care plans to providers under
certain circumstances to assist states in furthering the goals and
priorities of their Medicaid programs. We believe that the payment
requirements under Sec. 438.6(c) can assist both states and managed
care plans in achieving their overall objectives for delivery system
and payment reform and performance improvement without compromising
managed care plans' ability to manage risk with their providers. We
also note that the requirements under Sec. 438.6(c) do not prohibit
managed care plans from adopting their own (or additional) value-based
payment arrangements that are aimed at encouraging the provision of
high-quality and cost-efficient care. We expect states and managed care
plans to work together in developing and implementing delivery system
reforms that will be the most impactful for each state's local needs.
We also decline to require that states consult managed care plans
before implementing a payment arrangement under Sec. 438.6(c). While
we believe that states should be seeking broad stakeholder feedback,
including from managed care plans, when developing and implementing
delivery system reforms and performance payment initiatives, we do not
believe that it is necessary to create new Federal requirements to
accomplish this goal. In our experience, states are already working
with many stakeholder groups, including managed care plans, when
designing and implementing new payment requirements under Sec.
438.6(c), and we believe that states should continue to have discretion
in how they convene stakeholder groups and obtain stakeholder feedback
to inform state Medicaid policy.
Comment: Several commenters supported the allowance of multi-year
approval of directed payment arrangements under certain conditions in
Sec. 438.6(c)(3). Commenters praised the added flexibility, citing
that these payment arrangements encourage providers to make multi-year
commitments to quality outcomes and
[[Page 72782]]
savings goals, reduce administrative burden, and support the expansion
of value-based payment models. A few commenters urged CMS to expand the
proposal permitting multi-year approvals at Sec. 438.6(c)(3)(i) to
include payment arrangements under paragraph (c)(1)(iii); commenters
suggested that this would require a state to explicitly identify the
payment arrangement in a contract as multi-year, describe its
implementation plan including multi-year evaluation, and seek CMS
approval for changes. Commenters noted that annual approvals for
directed payments are challenging for states because of the lack of
data to support the required annual evaluation to renew payment
arrangements. One commenter requested that CMS reconsider the
requirement that state-directed payments under Sec. 438.6(c)(1)(iii)
be approved annually because states generally implement minimal changes
to fee schedules from one year to the next and delays in CMS approval
of directed payments create uncertainty for states, managed care plans,
and the provider community.
Response: We agree with commenters that multi-year approval of
specific payment arrangements listed at paragraphs (c)(1)(i) and (ii)
can reduce administrative burden and support the expansion of value-
based payment models. We also agree that multi-year approval of payment
arrangements listed at paragraphs (c)(1)(i) and (ii) can encourage
providers to make multi-year commitments to quality outcomes. We also
understand that commenters would like the option for multi-year
approval for payment arrangements listed at paragraph (c)(1)(iii);
however, we decline to adopt this recommendation. We continue to
believe that the approval of a payment arrangement under paragraph
(c)(1)(iii) should be for one rating period. As we explained in our
proposed rule (83 FR 57272), while we understand and acknowledge that
value-based purchasing payment arrangements and those tied to larger
delivery system reform efforts can be more complex, we believe that
more traditional payment arrangements and fee schedules under paragraph
(c)(1)(iii) should continue to be reviewed and evaluated on an annual
basis by both states and CMS to ensure that the payments are consistent
with states' and CMS' goals and objectives for directed payments under
Medicaid managed care contracts. Based on our experience with
implementing state directed payments, states have been submitting
proposals to CMS for significant changes to provider fee schedules
under Sec. 438.6(c)(1)(iii), particularly for uniform dollar or
percentage increases, and we believe at this time that we should
continue to monitor these payment arrangements on an annual basis.
Moreover, to ensure appropriate oversight and prudent program
management, we have initiated a review of state-directed payments and
may issue future guidance and/or rulemaking based on the findings. This
review was initiated based on our experience reviewing state requests
for state-directed payments, as we have seen proposals for significant
changes to provider reimbursement, which may in turn have an impact on
program expenditures.
Regarding commenters' concerns about the lack of data to support
the required annual evaluation in Sec. 438.6(c)(2), we understand that
states will not always have finalized evaluation results before
requesting the next year's approval; however, we expect states to have
a finalized evaluation plan. As noted in the November 2017 CIB,
directed payments must have an evaluation plan to assess the degree to
which the directed payment arrangement achieves its objectives. The
basis and scope of the evaluation plan should be commensurate with the
size and complexity of the payment arrangement. For example, a state
implementing a minimum fee schedule to promote access to care may be
able to utilize existing mechanisms to evaluate the effectiveness of
the payment arrangement, such as external quality review (EQR) or an
existing consumer or provider survey. States also have the ability to
identify performance measures that are most appropriate for this
evaluation and may wish to consider using performance measures
currently being used by the state or other existing measure sets in
wide use across the Medicaid, CHIP, and Medicare programs to facilitate
alignment and reduce administrative burden.
Regarding commenters' concerns related to delays in CMS approval of
directed payments, we committed in our November 2017 CIB to a timely
review process for states. CMS committed to process Sec. 438.6(c)
preprints that do not contain significant policy or payment issues
within 90 calendar days after receipt of a complete submission. Since
publishing this CIB, we have continued to be committed to this
timeframe, and in our recent experience in processing and approving
Sec. 438.6(c) payment arrangements, we are generally working with
states to approve these payments within 90 calendar days.
Comment: Some commenters recommended that CMS consider automatic
renewals of payment arrangements if either the state or the managed
care plan can attest that the key characteristics of the payment
arrangement that were used to make the initial determination remain in
place. Commenters stated that an automatic renewal option would
encourage more participation among physicians and physician specialty
groups in various value-based contracts.
Response: We do not agree with commenters that we should permit
automatic renewals of payment arrangements under Sec. 438.6(c).
Section 438.6(c)(2)(ii)(F), which was adopted in the 2016 final rule,
prohibits payment arrangements under Sec. 438.6(c) from being renewed
automatically. In the 2016 final rule, we explained that because we
sought to evaluate and measure the impact of these payment reforms,
such agreements could not be renewed automatically (81 FR 27583).
Automatic renewal is not consistent with our view that these payment
arrangements must be reviewed to ensure that the requirements in Sec.
438.6(c)(2) are met and continue to be met. Our policy on this issue
has not changed. Under Sec. 438.6(c)(3), we are finalizing in this
rule, the option for states to seek multi-year approval of specific
payment arrangements listed at paragraphs (c)(1)(i) and (ii), as we
believe this will encourage more providers to make commitments to
quality outcomes and support the expansion of value-based payment
models. These payment arrangements will continue to be reviewed on a
periodic basis.
Comment: One commenter requested that CMS clarify in Sec.
438.6(c)(3) that a state does not need prior CMS approval to adjust for
inflation or rebase an approved multi-year payment threshold.
Response: We do not agree with commenters that prior approval is
not needed to adjust rates for inflation or when states rebase rates
for an approved payment methodology, as this is not consistent with
paragraph (c)(3)(i)(C) as proposed and finalized. Under this final
rule, the state must affirm that it will not make changes to the
payment methodology, or magnitude of the payment, described in the
managed care contract for all years of the multi-year payment
arrangement without our prior approval. If a state plans to adjust the
payments for inflation or rebase a previously approved payment
arrangement, the state must obtain prior approval of such changes under
paragraph (c)(2), consistent with the text in paragraph (c)(3)(i)(C).
This approach is consistent with our view that these payment
arrangements must be
[[Page 72783]]
reviewed to ensure that the requirements in Sec. 438.6(c)(2) are met,
including that the payments continue to be consistent with Sec. 438.4,
the standards specified in Sec. 438.5, and generally accepted
actuarial principles and practices.
Comment: One commenter requested clarification on whether state
directed payments under Sec. 438.6(c)(1)(iii)(A) are subject to
approval for one rating period or are excluded from this limitation
because they are already approved under the state plan rate
methodology.
Response: Under Sec. 438.6(c)(2)(ii) as finalized, payment
arrangements under paragraph (c)(1)(iii)(A) do not require written
prior approval from CMS; therefore, the approval timeframes in Sec.
438.6(c)(3) are not applicable to those payment arrangements.
Comment: A few commenters requested that CMS establish time
parameters for CMS' review and approval of state directed payment
proposals.
Response: While we decline to adopt commenters' request to
establish specific time parameters for our review and approval of
payment arrangements under Sec. 438.6(c), we committed in our November
2017 CIB to a timely review process for states. We committed to process
Sec. 438.6(c) preprints that do not contain significant policy or
payment issues within 90 calendar days after receipt of a complete
submission. Since publishing this CIB, we have continued to be
committed to this timeframe, and in our recent experience in processing
and approving Sec. 438.6(c) payment arrangements, we are generally
working with states to approve these payments within 90 calendar days.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.6(a) and (c) as proposed with the following
modifications:
At Sec. 438.6(a), included a sentence in the definition
of supplemental payments that states DSH and GME payments are not, and
do not constitute, supplemental payments; and included a technical
change to the definition of supplemental payments by revising the
phrase ``amounts calculated through an approved State plan rate
methodology'' to ``State plan approved rates.''
At Sec. 438.6(a), included a sentence (which had been
proposed to be codified in Sec. 438.6(c)(1)(iii)(A)) in the definition
of state plan approved rates that a state's supplemental payments
contained in a state plan are not, and do not constitute, state plan
approved rates under our definition.
At Sec. 438.6(a), deleted the phrase ``per unit price for
services'' and replaced it with ``for specific services identifiable as
having been provided to an individual beneficiary''.
At Sec. 438.6(c)(1)(iii)(A), finalizing the provision
without the sentence that states supplemental payments contained in a
state plan are not, and do not constitute, state plan approved rates.
c. Pass-Through Payments Under MCO, PIHP, and PAHP Contracts (Sec.
438.6(d))
In the 2016 final rule, and the 2017 ``Medicaid Program; The Use of
New or Increased Pass-Through Payments in Medicaid Managed Care
Delivery Systems'' final rule (82 FR 5415), we finalized a policy to
limit state direction of payments, including pass-through payments, at
Sec. 438.6(c) and (d). We defined pass-through payments at Sec.
438.6(a) as any amount required by the state, and considered in
calculating the actuarially sound capitation rate, to be added to the
contracted payment rates paid by the MCO, PIHP, or PAHP to hospitals,
physicians, or nursing facilities that is not for the following
purposes: A specific service or benefit provided to a specific enrollee
covered under the contract; a provider payment methodology permitted
under Sec. 438.6(c)(1)(i) through (iii) for services and enrollees
covered under the contract; a subcapitated payment arrangement for a
specific set of services and enrollees covered under the contract;
graduate medical education (GME) payments; or federally-qualified
health center (FQHC) or rural health clinic (RHC) wrap around payments.
We noted in our 2017 pass-through payment final rule that a
distinguishing characteristic of a pass-through payment is that a
managed care plan is contractually required by the state to pay
providers an amount that is disconnected from the amount, quality, or
outcomes of services delivered to enrollees under the contract during
the rating period of the contract (82 FR 5416).\5\ We noted that when
managed care plans only serve as a conduit for passing payments to
providers independent of delivered services, such payments reduce
managed care plans' ability to control expenditures, effectively use
value-based purchasing strategies, implement provider-based quality
initiatives, and generally use the full capitation payment to manage
the care of enrollees.
---------------------------------------------------------------------------
\5\ Medicaid Program; The Use of New or Increased Pass-Through
Payments in Medicaid Managed Care Delivery Systems, Final Rule, (82
FR 5415-5429, January 18, 2017).
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In the 2016 final rule, we also noted that section 1903(m)(2)(A) of
the Act requires that capitation payments to managed care plans be
actuarially sound and clarified our interpretation of that standard as
meaning that payments under the managed care contract must align with
the provision of services to beneficiaries covered under the contract.
We clarified the statutory and regulatory differences between payments
made on a FFS basis and on a managed care basis (81 FR 27588). We
provided an analysis and comparison of section 1902(a)(30)(A) of the
Act regarding FFS payments and implementing regulations that impose
aggregate upper payment limits (UPL) on rates for certain types of
services or provider types to section 1903(m)(2)(A) regarding the
requirement that capitation payments in managed care contracts be
actuarially sound and implementing regulations that require payments to
align with covered services delivered to eligible populations. Based on
that analysis, we concluded that pass-through payments were not
consistent with our regulatory standards for actuarially sound rates
because they do not tie provider payments to the provision of specific
services. Despite this conclusion, we acknowledged in the 2016 final
rule that, for many states, pass-through payments have been approved in
the past as part of Medicaid managed care contracts and served as a
critical source of support for safety-net providers caring for Medicaid
beneficiaries (81 FR 27589). We therefore adopted a transition period
for states that had already transitioned services or eligible
populations into managed care and had pass-through payments in their
managed care contracts as part of the regulations that generally
prohibit the use of pass-through payments in actuarially sound
capitation rates. Although Sec. 438.6(d) was not explicitly limited to
pass-through payments in the context of an established managed care
program, the use of pass-through payments in place as of the 2016 final
rule as an upper limit on permitted pass-through payments during the
transition periods described in Sec. 438.6(d) effectively precludes
new managed care programs from adopting pass-through payments under the
current law.
We used the 2016 final rule to identify the pass-through payments
in managed care contract(s) and rate certification(s) that were
eligible for the pass-through payment transition period. We provided a
detailed description of the policy rationale (81 FR 27587 through
27592) for why we established
[[Page 72784]]
pass-through payment transition periods and limited pass-through
payments to hospitals, nursing facilities, and physicians, and this
policy rationale has not changed. We focused on the three provider
types identified in Sec. 438.6(d) because these were the most common
provider types to which states made supplemental payments within
Federal UPLs under state plan authority in Medicaid FFS.
Since implementation of the 2016 and 2017 final rules, we have
worked with many states that have not transitioned some or all services
or eligible populations from their FFS delivery system into a managed
care program. We have understood that some states would like to begin
to transition some services or eligible populations from FFS to managed
care but would also like to continue to make supplemental payments to
hospitals, physicians, or nursing facilities. In the 2018 proposed
rule, we acknowledged the challenges associated with transitioning
supplemental payments into payments based on the delivery of services
or value-based payment structures. We acknowledged the transition from
one payment structure to another requires robust provider and
stakeholder engagement, broad agreement on approaches to care delivery
and payment, establishing systems for measuring outcomes and quality,
planning, and evaluating the potential impact of change on Medicaid
financing mechanisms. We also recognized that implementing value-based
payment structures or other delivery system reform initiatives, and
addressing transition issues, including ensuring adequate base rates,
are central to both delivery system reform and to strengthening access,
quality, and efficiency in the Medicaid program.
To address states' requests to continue making supplemental
payments for certain services and assist states with transitioning some
or all services or eligible populations from a FFS delivery system into
a managed care delivery system, we proposed to add a new Sec.
438.6(d)(6) that would allow states to make pass-through payments under
new managed care contracts during a specified transition period if
certain criteria are met. We explained that when we refer to
transitioning services from FFS Medicaid to Medicaid managed care
plan(s) for purposes of our proposal at Sec. 438.6(d)(6), we are
referring to both when a state expands the scope of its managed care
program in terms of services (for example, covering behavioral health
services through Medicaid managed care that were previously provided
under Medicaid FFS for populations that are already enrolled in managed
care) and populations (that is, adding new populations to Medicaid
managed care when previously those populations received all Medicaid
services through FFS delivery systems).
Specifically, we proposed in Sec. 438.6(d)(6)(i) through (iii)
that states may require managed care plans to make pass-through
payments, as defined in Sec. 438.6(a), to network providers that are
hospitals, nursing facilities, or physicians, when Medicaid populations
or services are initially transitioning or moving from a Medicaid FFS
delivery system to a Medicaid managed care delivery system, provided
the following requirements are met: (1) The services will be covered
for the first time under a Medicaid managed care contract and were
previously provided in a Medicaid FFS delivery system prior to the
first rating period, as defined in Sec. 438.2, of the specified
transition period for pass-through payments (``pass-through payment
transition period''); (2) the state made supplemental payments, as
defined in Sec. 438.6(a), to hospitals, nursing facilities, or
physicians during the 12-month period immediately 2 years prior to the
first rating period of the pass-through payment transition period for
those specific services that will be covered for the first time under a
Medicaid managed care contract (this 12-month period is identified in
Sec. 438.6(d)(2) and used in calculating the base amount for hospital
pass-through payments under Sec. 438.6(d)(3)); and (3) the aggregate
amount of the pass-through payments that the state requires the managed
care plan to make is less than or equal to the amounts calculated in
proposed paragraph (d)(6)(iii)(A), (B), or (C) for the relevant
provider type for each rating period of the pass-through payment
transition period--this requirement means that the aggregate amount of
the pass-through payments for each rating period of the specified pass-
through payment transition period that the state requires the managed
care plan to make must be less than or equal to the payment amounts
attributed to and actually paid as FFS supplemental payments to
hospitals, nursing facilities, or physicians during the 12-month period
immediately 2 years prior to the first rating period of the pass-
through payment transition period for each applicable provider type.
We also proposed at Sec. 438.6(d)(6)(iv) that the state may
require the MCO, PIHP, or PAHP to make pass-through payments for
Medicaid populations or services that are transitioning from a FFS
delivery system to a managed care delivery system for up to 3 years
from the beginning of the first rating period in which the services
were transitioned from payment in a FFS delivery system to a managed
care contract, provided that during the 3 years, the services continue
to be provided under a managed care contract with an MCO, PIHP, or
PAHP.
We proposed paragraphs (d)(6)(iii)(A) through (C) to address the
maximum aggregate pass-through payment amounts permitted to be directed
to hospitals, nursing facilities, and physicians for each rating period
of the specified 3-year pass-through payment transition period; that
is, we proposed three paragraphs to identify the maximum aggregate
amount of the pass-through payments for each rating period of the 3-
year pass-through payment transition period that the state can require
the managed care plan to make to ensure that pass-through payments
under proposed Sec. 438.6(d)(6) are less than or equal to the payment
amounts attributed to and actually paid as FFS supplemental payments to
hospitals, nursing facilities, or physicians, respectively, during the
12-month period immediately 2 years prior to the first rating period of
the pass-through payment transition period for each applicable provider
type. This means that the aggregate pass-through payments under the new
3-year pass-through payment transition period must be less than or
equal to the payment amounts attributed to and actually paid as FFS
supplemental payments in Medicaid FFS.
To include pass-through payments in the managed care contract(s)
and capitation rates(s) under new paragraph (d)(6), we proposed that
the state would have to calculate and demonstrate that the aggregate
amount of the pass-through payments for each rating period of the pass-
through payment transition period was less than or equal to the amounts
calculated as described in proposed paragraph (d)(6)(iii)(A), (B), or
(C) for the relevant provider type. In Sec. 438.6(d)(6)(iii), we
proposed that for determining the amount of each component for the
calculations contained in proposed paragraphs (d)(6)(iii)(A) through
(C), the state must use the amounts paid for services during the 12-
month period immediately 2 years prior to the first rating period of
the pass-through payment transition period. As a practical matter, the
proposed calculation would require the state to use Medicaid Management
Information System (MMIS) adjudicated claims data from the 12-month
period immediately 2 years prior to the first rating period of the
pass-through payment transition period. This
[[Page 72785]]
timeframe and use of 2-year old data was chosen so that the state has
complete utilization data for the service type that would be subject to
the pass-through payments. Under our proposal for this calculation, the
state would also be required to restrict the amount used in each
component of the calculation to the amount actually paid through a
supplemental payment for each applicable provider type. Our proposal
referred to the most common provider types to which states made
supplemental payments within Federal UPLs under state plan authority in
Medicaid FFS. In the proposed rule, we provided the following four
basic steps for making the calculation:
Step 1: For each applicable provider type, identify the
actual payment amounts that were attributed to and actually paid as FFS
supplemental payments during the 12-month period immediately 2 years
prior to the first rating period of the pass-through payment transition
period.
Step 2: Divide (a) the payment amounts, excluding
supplemental payments, paid for the services that are being
transitioned from payment in FFS to the managed care contract for each
applicable provider type by (b) the total payment amounts paid through
payment rates for services provided in FFS for each applicable provider
type to determine the ratio. In making these calculations, the state
must use the amounts paid for each provider type during the 12-month
period immediately 2 years prior to the first rating period of the
pass-through payment transition period.
Step 3: Multiply the amount in Step 1 by the ratio
produced by Step 2.
Step 4: The aggregate amount of pass-through payments that
the state may require the MCO, PIHP, or PAHP to make for each rating
period of the 3-year pass-through payment transition period must be
demonstrated to be less than or equal to the result achieved in Step 3.
In the proposed rule, we provided the following formula to help
illustrate the aggregate amount of pass-through payments for each
rating period of the pass-through payment transition period for each
applicable provider type:
[GRAPHIC] [TIFF OMITTED] TR13NO20.000
In the proposed rule, we also provided an example to help
demonstrate how the calculation would be performed. In the example, we
assumed that a state Medicaid program paid $60 million in claims in FFS
for inpatient hospital services in CY 2016. To acknowledge the Medicaid
FFS UPL, we assumed that those same services would have been reimbursed
at $100 million using Medicare payment principles. The difference
between the amount that Medicare would have paid and the amount
Medicaid actually paid in claims is $40 million.
For Step 1, of the $40 million difference, the state actually paid
$20 million in supplemental payments to inpatient hospitals in CY 2016.
For this example, we assumed that CY 2016 was the 12-month period
immediately 2 years prior to the first rating period of the pass-
through payment transition period in which inpatient hospital services
would be transitioned to a managed care contract; therefore, we assumed
the pass-through payments were to be made during CY 2018. This
transition to managed care could be either by moving Medicaid
beneficiaries from FFS to coverage under managed care contracts that
cover inpatient hospital services or by moving inpatient hospital
services into coverage under an existing managed care program (that is,
for enrollees who are already enrolled in managed care for other
services).
Next, in Step 2, the state determines the ratio of the payment
amounts paid in FFS for inpatient hospital services that will be
transitioned from payment in a FFS delivery system to the managed care
contract for the specific provider category and requisite period in
relation to the total payment amounts paid in FFS for all inpatient
hospital services within the same provider category during the same
period. For example, if the state paid $36 million in FFS for inpatient
hospital services for a specific population out of the $60 million in
total claims paid in FFS for inpatient hospital services during 2016,
and the state wants to transition the population associated with the
$36 million in paid claims to the managed care contract, then the ratio
is $36 million divided by $60 million, or 60 percent.
In Step 3, the state multiplies the $20 million in actual
supplemental payments paid by 60 percent (the ratio identified in step
2), resulting in $12 million. The $12 million is the amount used in
Step 4 as the total amount that the state would be permitted under our
proposal to require the managed care plans to make in pass-through
payments to inpatient hospitals for each rating period during the pass-
through payment transition period.
In an effort to provide network providers, states, and managed care
plans with adequate time to design and implement payment systems that
link provider reimbursement with services, we also proposed, in Sec.
438.6(d)(6)(iv), to allow states a transition period of up to 3 years
to transition FFS supplemental payments into payments linked to
services and utilization under the managed care contract. We proposed
the 3-year pass-through payment transition period to provide states
with time to integrate pass-through payment arrangements into allowable
payment structures under actuarially sound capitation rates, including
value-based purchasing, enhanced fee schedules, Medicaid-specific
delivery system reform, or the other approaches consistent with Sec.
438.6(c). We noted that a state may elect to use a shorter transition
period but would be permitted a maximum of 3 years to phase out the
pass-through payments. We explained that we believed that the proposed
3-year pass-through payment transition period was appropriate because
the services (and corresponding supplemental payments) would not yet
have been transitioned at all into managed care contracts; therefore,
we believed that states should be in a better position to design
payment structures that appropriately account for these payments during
the transition to managed care (unlike the current pass-through
payments rules, which only provide transition periods for pass-through
payments that have already been incorporated into managed care
contracts and rates prior to the adoption of specific limits on the
state direction
[[Page 72786]]
of payments made by managed care plans). We specifically invited
comment on whether the 3-year pass-through payment transition period
was an appropriate amount of time.
Unlike the 2016 final rule, our proposal did not set a specific
calendar date by which states must end pass-through payments; rather,
our proposal provided a transition period for up to 3 years from the
beginning of the first rating period in which the services were
transitioned from payment in a FFS delivery system to a managed care
contract, provided that during the 3 years, the services continue to be
provided under a managed care contract with an MCO, PIHP, or PAHP. We
noted that by providing states, network providers, and managed care
plans time and flexibility to integrate current pass-through payment
arrangements into permissible managed care payment structures, states
would be able to avoid disruption to safety-net provider systems that
they have developed in their Medicaid programs.
The following summarizes the public comments received on our
proposal to amend Sec. 438.6(d)(6) and our responses to those
comments.
Comment: Many commenters supported the proposal to allow states to
include new pass-through payments which encourage providers to
participate in new managed care arrangements. Commenters noted that
allowing states to have a set period of time to transition away from
existing FFS supplemental payment programs when the state moved
services (or populations) into a managed care program will be helpful
in preventing abrupt reductions in services or access to providers
because of the lack of supplemental payments. Commenters noted that
pass-through payments are critical for ensuring that safety-net
providers remain profitable enough to continue to treat their patients.
Commenters also noted that states have long used these payments to
combat provider shortages in areas of need by increasing reimbursement
for providers who accept a proportionally large number of Medicaid
patients.
Response: We agree that the new pass-through payment transition
period under Sec. 438.6(d)(6) can assist states with transitioning
some or all services or eligible populations from a FFS delivery system
into a managed care delivery system. We believe the new pass-through
payment transition period will provide states, network providers, and
managed care plans time and flexibility to integrate such payment
arrangements into permissible managed care payment structures. States
can use the transition period to avoid unnecessary disruption to any
safety-net provider systems that they have developed in their Medicaid
programs when the state moves services or populations into managed
care. We understand that some states have previously used pass-through
payments to increase reimbursement for safety-net providers; however,
we note that there are other mechanisms that states can use to increase
reimbursement to providers in a managed care program that do not
implicate the pass-through payment restrictions. For example, states
can use the payment arrangements under Sec. 438.6(c) to direct managed
care plans to link the delivery of services and quality outcomes for
Medicaid managed care enrollees under the managed care contract.
However, we reiterate here that certain financing requirements in
statute and regulation are applicable across the Medicaid program
irrespective of the delivery system (for example, fee-for-service,
managed care, and demonstration authorities), and are similarly
applicable whether a state elects to direct payments under Sec.
438.6(c). Such requirements include, but are not limited to,
limitations on financing of the non-Federal share applicable to health
care-related taxes and bona fide provider-related donations. These
financing requirements similarly apply when a state elects to direct
payments under Sec. 438.6(c) or the payment transition periods under
Sec. 438.6(d). We continue to view pass-through payments as
problematic and not consistent with our regulatory standards for
actuarially sound rates because they do not tie provider payments with
the provision of services to Medicaid beneficiaries covered under the
contract. Therefore, while we proposed and are finalizing a pass-
through payment transition period under Sec. 438.6(d)(6), that
transition period is limited and the amount of pass-through payments
permitted during that period is subject to restrictions as outlined in
the regulation. In the proposed rule, we provided the 4 step
calculation noted above and the proposed regulation text incorporated
the steps in paragraphs (d)(6)(iii)(A) through (C) and in paragraph
(d)(6)(iv) without affirmatively identifying the process as steps 1
through 4. We are finalizing the regulation with a technical edit to
Sec. 438.6(d)(6)(iii)(A) through (C) to clarify that both the
numerator and denominator of the ratio described in Step 2 should
exclude any supplemental payments as defined in Sec. 438.6(a) made to
the applicable providers and counted in Step 11. In paragraphs
(d)(6)(iii)(A) through (C), we are also finalizing the text using the
phrase ``State plan approved rates'' instead of ``payment rates'' to
clarify how those ratios do not include supplemental payments.
We encourage states to plan for how FFS supplemental payments can
be incorporated into standard capitation rates or permissible payment
arrangements in a managed care program as quickly as possible.
Comment: A few commenters requested that CMS clarify how DSH
payments will be considered when determining the amount of FFS
supplemental payments that can be continued as pass-through payments in
managed care. Commenters noted that it appears from the preamble
discussion that the new pass-through payment provision is intended to
be limited to non-DSH supplemental payments, but the proposed
definition of supplemental payments in Sec. 438.6(a) could be
interpreted as including DSH payments. A few commenters also requested
clarity on the treatment of GME payments when determining the amount of
FFS supplemental payments that can be continued as pass-through
payments in managed care. Several commenters recommended that CMS allow
for GME funding to be distributed to providers directly by the state.
Response: We never intended for DSH or GME payments to be included
in our proposed definition of supplemental payments in Sec. 438.6(a)
and therefore never intended for the pass-through payments subject to
the limits in paragraph (d) to apply to DSH or GME payments. As
proposed in the 2018 proposed rule, one of the requirements for the new
pass-through payment transition period was that the state had
previously made supplemental payments, as defined in Sec. 438.6(a), to
hospitals, nursing facilities, or physicians during the 12-month period
immediately 2 years prior to the first rating period of the transition
period. As noted in this final rule in the responses to comments for
Sec. 438.6(a) (Definitions), we agree with commenters that the
definition of supplemental payments must be revised to clarify that DSH
and GME payments are not supplemental payments as that term is defined
and used for part 438. DSH and GME payments are made under separate and
distinct authorities in the Medicaid program under 42 CFR part 447. As
discussed in I.B.4.b. of this final rule, we are finalizing the
definition of supplemental payments at Sec. 438.6(a) with a
modification to include a sentence in the definition that states
[[Page 72787]]
DSH and GME payments are not, and do not constitute, supplemental
payments.
The existing definition of pass-through payment in Sec. 438.6(a)
excludes GME payments. We have not revised that definition since the
2016 final rule so the prohibition on pass-through payments in Sec.
438.6(d) does not apply to GME payments. Further, under existing Sec.
438.60, state Medicaid agencies may make direct payments to network
providers for GME costs approved under the state plan without violating
the prohibition of additional payments for services covered under
managed care contracts.
Comment: Some commenters requested that CMS confirm the standard
``12-month period immediately 2 years prior'' that is used in Sec.
438.6(d)(6)(ii) and (iii). These commenters requested that CMS confirm
that the first month of the 12-month period used to calculate the
maximum aggregate payment is 24 months (and not 36 months) before the
first month of the first rating period for the managed care contract
into which the new services or populations are moving. Commenters also
requested that additional flexibility be applied to the term ``relevant
provider type'' to consider more granular provider classifications
relevant to a specific supplemental payment mechanism, such as academic
medical hospitals. Commenters also requested clarity on whether the
transition mechanism will require three equal reductions (33\1/3\
percent annually) to the calculated aggregate supplemental payment
maximum or whether reductions are required under the new transition
period.
Response: We confirm that the standard ``12-month period
immediately 2 years prior'' that is used in Sec. 438.6(d)(6)(ii) and
(iii), as well as the standard that is currently codified in existing
pass-through payment regulations at Sec. 438.6(d)(2) in relation to
the calculation of the base amount for hospital pass-through payments
under Sec. 438.6(d)(3), means that the first month of the twelve-month
period used to calculate the maximum aggregate payment is twenty-four
months before the first month under managed care. In the 2018 proposed
rule, we provided an example that illustrates our response here: in the
example we assumed that CY 2016 was the 12-month period immediately 2
years prior to the first rating period of the pass-through payment
transition period in which inpatient hospital services were to be
transitioned to a managed care contract; therefore, we noted in the
example that the pass-through payments were for CY 2018 (83 FR 57274).
If the first month of the managed care contract is January 2018, the
first month of the 12-month period described in Sec. 438.6(d)(6)(ii)
and (iii) is January 2016.
We understand that commenters would like us to include additional
provider types under Sec. 438.6(d)(6)(iii), or that we expand the
phrase ``relevant provider type'' that is used in Sec.
438.6(d)(6)(iii) to include more granular provider classifications;
however, we decline to make these modifications. As noted in the 2016
final rule (81 FR 27590) and the 2018 proposed rule (83 FR 57272), we
focused on the three provider types identified in Sec. 438.6(d)
because these were the most common provider types for which states made
supplemental payments within Federal UPLs under state plan authority,
and we note that these are the provider types for which states have
typically sought to continue making payments as pass-through payments
under managed care programs. Further, the rules at Sec. 438.6(d)(6)
need to be consistent with the existing pass-through payment
regulations at Sec. 438.6(d)(3) and (5), which currently recognize
pass-through payments for hospitals, nursing facilities, and
physicians. We focused on the three provider types identified in Sec.
438.6(d) because these were the most common provider types to which
states made supplemental payments within Federal UPLs under state plan
authority in Medicaid FFS.
Unlike existing hospital pass-through payments made under Sec.
438.6(d)(3), which requires a phasedown of the pass-through payment
amounts over the transition period (up to 10 years), we confirm for
commenters that the pass-through payment transition period of 3-years
at Sec. 438.6(d)(6) does not require three equal reductions to the
calculated aggregate payment maximum. We also confirm that the pass-
through payment transition period under Sec. 438.6(d)(6) does not
require any reductions or a phase-down across the 3-year transition
period. As noted in the proposed rule, a state may elect to use a
shorter transition period but would be permitted a maximum of 3-years
to phase out the pass-through payments. The regulation does not require
any reductions from one year to the next during the 3-year transition
period in Sec. 438.6(d)(6), but once the 3-year transition period
ends, all of the pass-through payments must be completely phased out of
the managed care contracts and rates because the prohibition in Sec.
438.6(d) applies. We note that states are permitted to phase the pass-
through payments down by three equal reductions or otherwise to the
aggregate payment maximum, but the regulation we are finalizing does
not require or discourage states use of this approach.
Comment: A few commenters noted that a state's transition to
phasing out pass-through payments may take longer than 3 years and
suggested that CMS increase the transition period to 5 years. One
commenter urged CMS to allow pass-through payments for network
hospitals to be phased out on a longer timeline than the proposed 3-
year transition period, until at least July 1, 2027. One commenter
suggested that the 3-year transition period was inadequate and that a
10-year transition period was more appropriate under Sec. 438.6(d)(6).
Response: We do not agree with commenters that we should increase
the length of the pass-through payment transition period under Sec.
438.6(d)(6). We continue to view pass-through payments as problematic
and not consistent with our regulatory standards for actuarially sound
rates because they do not tie provider payments with the provision of
services. However, as noted in the 2018 proposed rule, we understand
that network providers, states, and managed care plans need adequate
time to design and implement payment systems that link provider
reimbursement with services when the state is transitioning new
services or new populations to a managed care contract. We proposed and
are finalizing this amendment to Sec. 438.6(d) to assist with that.
However, we still believe that the 3-year pass-through payment
transition period provides states with a reasonable amount of time to
integrate pass-through payment arrangements into allowable payment
structures under actuarially sound capitation rates, including value-
based purchasing, enhanced fee schedules, Medicaid-specific delivery
system reform, or the other approaches consistent with Sec. 438.6(c).
Further, states that have not yet transitioned these services (and
corresponding supplemental payments) into managed care contracts should
be in a better position to design payment structures that appropriately
account for these payments during the transition to managed care. We
find the commenters' recommended timeframes of 5 years, 10 years, and
through July 1, 2027 to be unreasonably long, and we believe that a
transition period of these lengths would unnecessarily delay the
transition of these payments into allowable payment structures under
actuarially sound capitation rates. Therefore, we decline to make
modifications to the length of the
[[Page 72788]]
transition period and will finalize 3-years at Sec. 438.6(d)(6).
Comment: Some commenters stated that pass-through payments should
not be prohibited so long as the overall payments made to Medicaid
managed care plans are actuarially sound. One commenter noted that our
proposal would redefine state supplemental FFS payments and could
exclude transitioning pass-through payments to state directed payment
arrangements in the future. This commenter requested clarification on
whether these pass-through payments under the new transition period
could be transitioned into state directed payments at the end of the 3-
year transition period. Commenters also requested that CMS collect and
make pass-through payment data publicly available so that stakeholders
can examine the amount of pass-through payments and to whom they are
being made.
Response: We disagree with commenters that pass-through payments,
beyond those payments permitted under a pass-through payment transition
period, should be permissible under Medicaid managed care. As explained
in our proposed rule, pass-through payments are not consistent with our
regulatory standards for actuarially sound rates because they do not
tie provider payments with the provision of services. When managed care
plans only serve as a conduit for passing payments to providers
independent of delivered services, such payments reduce managed care
plans' ability to control expenditures, effectively use value-based
purchasing strategies, implement provider-based quality initiatives,
and generally use the full capitation payment to manage the care of
enrollees. We have also previously provided a detailed description of
our policy rationale (81 FR 27587 through 27592) related to pass-
through payments and our position has not changed. Therefore, we will
not amend or eliminate the prohibition against pass through payments in
Sec. 438.6(d) beyond the specific change we proposed for Sec.
438.6(d)(6) to assist states with transitioning new populations or new
services to managed care.
We also disagree with commenters that Sec. 438.6(d)(6) limits the
state's ability to transition pass-through payments to state-directed
payment arrangements under Sec. 438.6(c). We believe that the pass-
through payment transition period under Sec. 438.6(d)(6) provides
states with a reasonable amount of time to integrate pass-through
payment arrangements into allowable payment structures under
actuarially sound capitation rates, including value-based purchasing,
enhanced fee schedules, Medicaid-specific delivery system reform, or
the other approaches consistent with Sec. 438.6(c). Since the 2016
final rule, we have worked with many states to transition some or all
of the state's pass-through payments into actuarially sound capitation
rates that do not limit the plan's discretion or permissible payment
arrangements under Sec. 438.6(c). States can work with their managed
care plans and network providers to transition the amounts currently
provided through pass-through payments in approvable ways, such as
actuarially sound capitation rates that do not limit the plan's
discretion or the approaches consistent with Sec. 438.6(c).
Regarding the recommendation that CMS collect and make pass-through
payment data publicly available, we have traditionally deferred to
states for making specific components of rate development publicly
available. We note that pass-through payments are added to the
contracted payment rates and considered in calculating the actuarially
sound capitation rate; therefore, pass-through payments are a specific
component of capitation rate development. As such, we will continue to
defer to states on making these amounts publicly available.
Comment: A few commenters noted that current CMS regulations apply
only to hospitals, nursing facilities, and physicians. These commenters
requested that CMS change the terminology from ``physician'' to
``provider'' to ensure that all health care providers are eligible for
the pass-through payments. Some commenters requested clarity on whether
nurse practitioners are included in the physician pass-through payment
category.
Response: We understand that commenters would like us to include
additional provider types under Sec. 438.6(d)(6)(iii) (such as by
replacing the term ``physician'' as used in Sec. 438.6(d)(6)(iii)(C)
to the more general and broader term ``provider'') to recognize
additional health care providers; however, we decline to make these
modifications. As noted in the 2016 final rule (81 FR 27590) and the
2018 proposed rule (83 FR 57272), we focused on the three provider
types identified in Sec. 438.6(d) because these were the most common
provider types for which states made the majority of supplemental
payments within Federal UPLs under state plan authority, and we note
that these are the provider types for which states have typically
sought to continue making payments as pass-through payments under
managed care programs. We also do not want our rules at Sec.
438.6(d)(6) to be inconsistent with the existing pass-through payment
regulations at Sec. 438.6(d)(3) and (5), which currently recognize
pass-through payments for hospitals, nursing facilities, and
physicians.
Regarding the request for clarity on whether nurse practitioners
are included in the physician pass-through payment category, we clarify
here that nurse practitioners are not included in the physician
category for purposes of the pass-through payment transition periods
under Sec. 438.6(d). While CMS has not defined the term ``physician''
in regulation for purposes of the pass-through payment transition
periods under Sec. 438.6(d), we rely on section 1905(a)(5) of the Act,
which incorporates the definition for physician from sections
1861(r)(1) and (r)(2) of the Act, and the implementing regulation at 42
CFR 440.50 to provide meaning for physicians' services for the purpose
of medical assistance under Title XIX. Under sections 1861(r)(1) and
1861(r)(2) of the Act, the term ``physician'' means a doctor of
medicine or osteopathy legally authorized to practice medicine and
surgery by the state in which he or she performs such services, and a
doctor of dental surgery or of dental medicine who is legally
authorized to practice dentistry by the state in which he or she
performs such services and who is acting within the scope of his or her
license, to the extent that such services may be performed under state
law either by a doctor of medicine or by a doctor of dental surgery or
dental medicine if furnished by a physician.
Comment: One commenter suggested updating the language in Sec.
438.6(d)(6)(i) to read: ``The Medicaid populations or services will be
covered for the first time under a managed care contract and were
previously provided in a FFS delivery system prior to the first rating
period of the transition period.'' One commenter suggested that Sec.
438.6(d)(6)(i) be clarified to allow new pass-through payments for
geographic areas that are newly transitioning to Medicaid managed care.
Response: We decline to add the phrase ``The Medicaid population
or'' at the beginning of Sec. 438.6(d)(6)(i) because it is not
necessary. As proposed and finalized, Sec. 438.6(d)(6) used the phrase
``when Medicaid populations or services are initially transitioning
from a FFS delivery system to a managed care delivery system.''
Therefore, we believe that the rule is clear on this point.
Regarding pass-through payments for geographic areas that are newly
transitioning to Medicaid managed care,
[[Page 72789]]
we confirm that the pass-through payment transition period at Sec.
438.6(d)(6) would be appropriate as long as the conditions and
requirements under Sec. 438.6(d)(6)(i) through (iv) are met, including
that the populations or services will be covered for the first time
under a managed care contract and were previously provided in a FFS
delivery system prior to the first rating period of the transition
period. When states transition a new geographic area into Medicaid
managed care, the services and populations in that new geographic area
are newly moving into managed care.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.6(d)(6) as proposed with the following
modifications:
At Sec. 438.6(d)(iii)(A) through (C), included the
following sentence, ``Both the numerator and denominator of the ratio
should exclude any supplemental payments made to the applicable
providers'' and using the phrase ``State plan approved rates'' instead
of ``payment rates'' to clarify how those ratios do not include
supplemental payments.
To ensure states have adequate time to plan and implement a
transition from a fee-for-service system to a managed care delivery
system, we are delaying the effective date of this provision. States
that are initially transitioning populations and services from fee-for-
service to managed care must comply with Sec. 438.6(d)(6) as amended
effective July 1, 2021 for Medicaid managed care rating periods
starting on or after July 1, 2021.
d. Payments to MCOs and PIHPs for Enrollees That Are a Patient in an
Institution for Mental Disease (IMD) (Sec. 438.6(e))
Under the policies we adopted in the 2016 final rule at Sec.
438.6(e), we permitted FFP for a full monthly capitation payment to an
MCO or PIHP for an enrollee aged 21 to 64 who received inpatient
treatment in an institution for mental diseases (IMD) for part of the
month when certain requirements are met, including a requirement that
the stay in the IMD be for no more than 15 days in the month for which
the capitation payment is made (81 FR 27563). Since publication of the
2016 final rule, we have heard from states and other stakeholders that
FFP should be provided for capitation payments made for months that
include stays longer than 15 days, especially on behalf of Medicaid
enrollees who may require substance use disorder (SUD) treatment as a
result of the ongoing opioid crisis.
We considered proposing changes to the regulation at Sec. 438.6(e)
but, after careful review, did not do so because of our belief that the
underlying analysis regarding the transfer of risk that underpinned the
policy in the 2016 final rule was appropriate. We also conducted a
literature and data review and did not identify any new data sources
other than those we relied upon in the 2016 final rule that supported
15 days (81 FR 27560). We requested public comment on additional data
sources that we should review.
The following summarizes the public comments received and our
responses to those comments.
Comment: Several commenters supported the policy to not extend the
availability of FFP for capitation payments made for months that
include stays longer than 15 days. Commenters stated that making
payments under those circumstances would incentivize the provision of
care in institutions rather than community-based settings. Other
commenters disagreed with the CMS decision to not extend the
availability of FFP for capitation payments made for months that
include stays longer than 15 days. These commenters noted that the 15-
day limit is not based on an individual's care needs and suggested that
the 15-day limitation creates inappropriate incentives around the
timing of admissions. Other commenters recommended alternatives to the
15-day policy, such as adjusting the length of stay in the IMD to 25
days.
Response: We remind commenters that we did not propose changes to
the regulation because we continue to believe that the underlying
analysis regarding the transfer of risk that underpinned the policy in
the 2016 final rule is appropriate. Our detailed analysis and
explanation of the rule can be found in the 2016 final rule at 81 FR
27555 through 27563. In the 2018 proposed rule, we requested public
comment on additional data sources that we should review, and these
commenters did not provide such data. We also remind commenters that we
have developed section 1115(a) demonstration initiatives aimed at (1)
improving access to and quality of treatment for Medicaid beneficiaries
to address substance use disorders (SUDs) and the ongoing opioid
crisis; \6\ and (2) designing innovative service delivery systems,
including systems for providing community-based services, for adults
with a serious mental illness (SMI) or children with a serious
emotional disturbance (SED) who are receiving medical assistance.\7\
These demonstrations enable states to receive FFP for longer lengths of
stay in IMDs within specified parameters. We also note that section
5052 of the SUPPORT for Patients and Communities Act, which provides a
state plan option to provide Medicaid coverage for certain individuals
with substance use disorders who are patients in certain IMDs from
October 1, 2019 through September 30, 2023, may also provide mechanisms
to receive FFP for longer lengths of stay in IMDs consistent with
section 5052 of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------
\6\ SMD #17-003: Strategies to Address the Opioid Epidemic;
available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd17003.pdf.
\7\ SMD #18-011: Opportunities to Design Innovative Service
Delivery Systems for Adults with a Serious Mental Illness or
Children with a Serious Emotional Disturbance; available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd18011.pdf.
---------------------------------------------------------------------------
Comment: One commenter noted that the 15-day policy has caused
confusion in the industry, stating some managed care plans have
interpreted this part of the 2016 final rule to mean IMDs should
reimburse the managed care plans for the care provided for only the
first 15 days if a patient stays beyond day 15. Given the confusion
around this issue, the commenter requested that CMS clarify that
repayments between IMDs and managed care plans are not covered by the
2016 final rule.
Response: There is no requirement in Sec. 438.6(e) that requires
IMDs to reimburse managed care plans for the care provided for only the
first 15 days if a patient stays beyond day 15; nor does Sec. 438.6(e)
address repayment arrangements between a Medicaid managed care plan
(that is, a MCO or PIHP) and a provider that is an IMD. Section
438.6(e) only governs the availability of FFP when states make
capitation payments to an MCO or PIHP for enrollees aged 21-64
receiving inpatient treatment in an IMD. The rule permits FFP to the
state for the capitation payment only if specified conditions are met,
including that the length of stay in the IMD is for a short term stay
of no more than 15 days during the period of the monthly capitation
payment. Any requirements for repayment from IMDs to managed care plans
are not governed by this rule, but instead appear to be within the
scope of the contractual arrangements between IMDs and managed care
plans.
Comment: One commenter requested that CMS confirm that states are
not precluded from using the flexibility afforded by Sec. 438.6(e) to
collect FFP on
[[Page 72790]]
capitation payments made for enrollees under age 21 in an IMD when an
individual is receiving substance use disorder (SUD) services.
Response: CMS does not agree with the commenter that Sec. 438.6(e)
permits states to collect FFP on capitation payments made for enrollees
under age 21 in an IMD when that individual is receiving SUD services.
Section 438.6(e) permits FFP when the state makes a capitation payment
to an MCO or PIHP for an enrollee aged 21-64 receiving inpatient
treatment in an IMD so long as certain conditions outlined in the
regulation are met. While Sec. 438.6(e) is not the appropriate
authority for enrollees under the age of 21, many states provide
inpatient psychiatric and SUD services for individuals under age 21 as
part of their state plan, which can include stays in an IMD, subject to
the requirements at part 441 Subpart D. In accordance with Sec.
438.3(c) and part 438 subpart J, if the service provided to enrollees
under the age of 21 is a Medicaid state plan service and included under
the managed care contract, FFP would be available for the monthly
capitation payment.
Comment: A few commenters made recommendations for additional data
sources that CMS should review to support the availability of FFP for
capitation payments made for months that include stays in an IMD. One
commenter recommended that CMS use the data that we collect as required
by the 21st Century Cures Act (Cures Act) (Pub. L. 114-255, enacted
December 13, 2016) to study the effects of the 15-day in-lieu-of
provision, which also requires CMS to issue a report in December 2019.
One commenter also recommended that CMS use data that becomes available
through approved section 1115(a) SUD demonstrations.
Response: We agree with commenters that once data becomes available
through these potential sources, such data should be used to inform
future policy decisions and rulemaking. We will take these
recommendations under advisement.
As we did not propose any modifications to Sec. 438.6(e), we are
not finalizing any changes to Sec. 438.6(e) under this final rule.
5. Rate Certification Submission (Sec. 438.7)
Section 438.7(c)(3) gives states flexibility to make de minimis
rate adjustments during the contract year by enabling states to
increase or decrease the capitation rate certified per rate cell by 1.5
percent without submitting a revised rate certification. We stated in
the 2016 final rule that a rate that is within +/-1.5 percent of a
certified rate is also actuarially sound as that percentage is
generally not more than the risk margin incorporated into most states'
rate development process (81 FR 27568). By giving states the
flexibility to make small adjustments around the certified rate, we
intended to ease the administrative burden of rate review on states
while meeting our goals of transparency and integrity in the rate-
setting process.
Since the publication of the 2016 final rule, some stakeholders
have expressed a desire for us to clarify that once a state has
certified the final capitation rate paid per rate cell under each risk
contract, the state can adjust the certified rate +/-1.5 percent at any
time within the rating period without submitting justification to us.
We clarified in the 2018 proposed rule that when states are adjusting a
final certified rate within the contract year within the range of 1.5
percent up or down from the final certified rate, states do not need to
submit a revised rate certification or justification to us, unless
documentation is specifically requested by us in accordance with our
proposed revisions in paragraph (c)(3) (83 FR 57275).
We proposed to amend Sec. 438.7(c)(3) to clarify the scope of
permissible changes to the capitation rate per rate cell and the need
for a contract modification and rate certification. Proposed Sec.
438.7(c)(3) included the existing text authorizing the state to
increase or decrease the capitation rate per rate cell up to 1.5
percent without submitting a revised rate certification. Proposed
paragraph (c)(3) also retained the remaining text in current Sec.
438.7(c)(3) that such adjustments to the final certified rate must be
consistent with a modification of the contract as required in Sec.
438.3(c) and included new text to specify that the adjustments would be
subject to the requirements at Sec. 438.4(b)(1) and to authorize us to
require a state to provide documentation for adjustments permitted
under Sec. 438.7(c)(3) to ensure that modifications to a final
certified capitation rate comply with the requirements in Sec. Sec.
438.3(c) and (e) and 438.4(b)(1). We reiterate here that all capitation
rates, regardless of whether they are established through the initial
rate certification or through a contract amendment, must comply with
the requirements in Sec. Sec. 438.3(c) and (e) and 438.4 through
438.7. Further, we explicitly clarify here that certain financing
requirements in statute and regulation are applicable across the
Medicaid program irrespective of the delivery system (for example, fee-
for-service, managed care, and demonstration authorities). Such
requirements include, but are not limited to, limitations on financing
of the non-Federal share applicable to health care-related taxes and
bona fide provider-related donations.
In the 2016 final rule, we highlighted our concerns that different
capitation rates based on the FFP associated with a particular
population could be indicative of cost shifting from the state to the
Federal Government and were not consistent with generally accepted
actuarial principles (81 FR 27566). The rate development standards we
instituted with the final rule sought to eliminate such practices. The
+/-1.5 percent rate changes permitted in Sec. 438.7(c)(3) were not
intended to be used by states to shift costs to the Federal Government.
To protect against cost shifting and eliminate any potential loophole
in Sec. 438.7(c)(3), we proposed that any changes of the capitation
rate within the permissible 1.5 percent would be subject to the
requirements in Sec. 438.4(b)(1), which prohibits differing capitation
rates based on FFP and requires that any proposed differences among
capitation rates according to covered populations be based on valid
rate development standards and not vary with the rate of FFP associated
with the covered populations (see also section I.B.2.b. of this final
rule for a discussion of Sec. 438.4(b)(1) and this prohibition on
rates varying with the FFP percentage). In addition, Sec. 438.4(b)(1)
requires that rates be developed in accordance with Sec. 438.5 and
generally accepted actuarial principles and practices; we noted in our
proposal that using this cross-reference to regulate mid-year changes
of capitation rates within the +/-1.5 percent range would ensure that
such changes were not arbitrary or designed to shift costs to the
Federal Government. The proposed amendment to Sec. 438.7(c)(3) would
permit us to require documentation that the adjusted rate complied with
our proposed requirements and other criteria related to the actuarial
soundness of rates.
We also proposed Sec. 438.7(e), which commits us to issuing annual
guidance that describes: (1) The Federal standards for capitation rate
development; (2) the documentation required to determine that the
capitation rates are projected to provide for all reasonable,
appropriate, and attainable costs that are required under the terms of
a contract; (3) the documentation required to determine that the
capitation rates have been developed in accordance part 438; (4) any
updates or developments in the rate review process to reduce state
burden and facilitate prompt actuarial reviews;
[[Page 72791]]
and (5) the documentation necessary to demonstrate that capitation
rates competitively bid through a procurement process have been
established consistently with the requirements of Sec. Sec. 438.4
through 438.8. We noted in our proposal that such guidance would
interpret and provide guidance on the part 438 regulations and specify
procedural rules for complying with the regulations; we specifically
explained how the guidance would therefore address the information
required to be in rate certifications. This guidance will be published
as part of the annual rate guide for Medicaid managed care under the
PRA package, CMS-10398 #37, OMB control number 0938-1148.
We solicited comments on our proposals and whether additional areas
of guidance would be helpful to states.
The following summarizes the public comments received on our
proposal to amend Sec. 438.7 and our responses to those comments.
Comment: A few commenters supported the proposal to allow de
minimis adjustments without further rate justifications. A few
commenters recommended that CMS always require documentation
accompanying de minimis rate changes as well as certification that
revised rates are actuarially sound. A few commenters recommended that
CMS should also require documentation that disclosed other de minimis
changes made during the year that may not have changed the capitation
rates. A few commenters requested clarification that the +/-1.5 percent
was intended to be calculated as a percentage of the certified rate.
One commenter requested that CMS clarify that states cannot use the de
minimis rate adjustment to reduce rates in this final rule beyond the
lower bound of the newly proposed five percent rate range.
Response: We disagree with commenters that recommended that CMS
always require documentation or a rate certification for any change in
the rate, even for de minimis rate changes within the +/-1.5 percent
threshold, as this approach is not consistent with either our position
(explained in the 2016 final rule) that de minimis changes of +/-1.5
percent do not affect the actuarial soundness of the capitation rate or
our intent to provide additional state flexibility under this final
rule. Adopted in the 2016 final rule, Sec. 438.7(c)(3) provides states
with the flexibility to make de minimis rate adjustments during the
contract year by enabling states to increase or decrease the capitation
rate certified per rate cell by 1.5 percent without submitting a
revised rate certification. We determined that the fluctuation of +/-
1.5 percent did not change the actuarial soundness of a capitation rate
and reasoned that the resulting rate will remain actuarially sound (81
FR 27568). Providing states this flexibility to make de minimis
adjustments around the certified rate eases the administrative burden
of rate review on states while meeting our goals of transparency and
integrity in the rate-setting process. We also decline to add new
regulation text requiring states to document other changes made during
the year that may not have changed rates because any changes would have
to be included as modifications to the managed care plan contract and
submitted to CMS for approval under Sec. 438.3(a). We do not believe
that requiring additional documentation is necessary and believe that
our existing processes for the submission of contract modifications is
sufficient without adding a new documentation requirement for states.
We confirm that the +/-1.5 percent is to be calculated as a
percentage of the certified rate. Section 438.7(c)(3) permits rate
adjustments during the contract year by increasing or decreasing the
capitation rate certified per rate cell by 1.5 percent without
submitting a revised rate certification. This means that the certified
rate per rate cell can be adjusted by the +/- 1.5 percent without a
revised certification. However, states cannot use both the de minimis
rate adjustment under Sec. 438.7(c)(3) and the newly proposed 5
percent, or +/- 2.5 percent from the midpoint, rate range under
proposed Sec. 438.4(c). As proposed and finalized, Sec.
438.4(c)(2)(ii) prohibits a state that is using a rate range from also
modifying capitation rates under Sec. 438.7(c)(3) by +/-1.5 percent
(see also section I.B.2.a. of this final rule for a discussion of Sec.
438.4(c)).
Comment: Several commenters described the regulation under Sec.
438.7(c)(3) as permitting de minimis rate changes during the contract
year or during the rating period.
Response: While these commenters did not specifically recommend a
revision to the regulation, the public comments highlighted a need for
CMS to clarify this issue here. In developing our responses to the
public comments, we noticed a technical error in the regulatory text in
Sec. 438.7(c)(3). In the 2018 proposed rule, we described our proposal
by stating that Sec. 438.7(c)(3) gives states flexibility to make de
minimis rate adjustments during the contract year by enabling states to
increase or decrease the capitation rate certified per rate cell by 1.5
percent (resulting in an overall 3 percent range) without submitting a
revised rate certification (83 FR 57275). In the 2016 final rule, when
we originally finalized Sec. 438.7(c)(3), we described the final rule
as providing the ability for the state to adjust the actuarially sound
capitation rate during the rating period by +/-1.5 percent (81 FR
27568). However, we noticed that the regulatory text in Sec.
438.7(c)(3) does not actually contain this language, even though the
preamble of the 2016 final rule does describe the rate changes under
Sec. 438.7(c)(3) as changes made during the rating period or during
the contract year. Therefore, we are finalizing a revision to Sec.
438.7(c)(3) to include the language ``during the rating period'' as
part of the standard for using the 1.5 percent adjustment. A
retroactive adjustment to the capitation rate must meet the
requirements in Sec. 438.7(c)(2) as there is no regulatory provision
carving de minimis rate changes out of the scope of Sec. 438.7(c)(2)
and the preamble discussions in the 2016 final rule and 2018 proposed
rule limited the de minimis rate changes to those changes made during
the contract year or rating period.
Comment: Several commenters appreciated the proposal to provide
annual rate development and documentation guidance for capitation
rates, documentation requirements, updates in the rate review process,
and demonstrating competitive bidding. Some commenters requested that
states be provided the opportunity to give feedback on proposed changes
prior to implementation. Some commenters recommended that the following
topics be addressed in any subregulatory guidance: value-added
benefits, changes to rates with changes in scope of services, the role
of states versus CMS in certifying rates, guidelines for documentation,
calculation definitions, and information on the appropriateness of
withholds. One commenter requested that guidance be issued with
sufficient time for managed care plans to negotiate payment rates with
providers.
Response: We will take these comments under advisement as we
develop and publish future subregulatory guidance. As we noted in the
2018 proposed rule, we have published rate review guidance every year
since 2014, and we proposed Sec. 438.7(e) to demonstrate our
commitment to efficient review and approval processes. We will continue
to work with states and managed care plans to ensure greater
transparency regarding the rate review process and ensure that states
are optimally informed to prepare and submit rate
[[Page 72792]]
certifications for our review and approval.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.7(c)(3) and (e) as proposed, with a modification
in Sec. 438.7(c)(3) to include the language ``during the rating
period'' as part of the standard for using the 1.5 percent adjustment.
6. Medical Loss Ratio (MLR) Standards: Technical Correction (Sec.
438.8)
The MLR numerator is defined in Sec. 438.8(e); the numerator of an
MCO's, PIHP's, or PAHP's MLR for a MLR reporting year is the sum of the
MCO's, PIHP's, or PAHP's incurred claims; the MCO's, PIHP's, or PAHP's
expenditures for activities that improve health care quality; and fraud
prevention activities. In the 2015 proposed rule (80 FR 31109), we
proposed at Sec. 438.8(e)(4) that expenditures related to fraud
prevention activities, as set forth in Sec. 438.608(a)(1) through (5),
(7), and (8) and (b), may be attributed to the numerator but would be
limited to 0.5 percent of MCO's, PIHP's, or PAHP's premium revenues.
This proposal was never finalized and does not align with the MLR
requirements for Medicare Part C or Part D or the private market. We
also proposed at that time a corresponding requirement, at paragraph
(k)(1)(iii), for submission by each managed care plan of data showing
the expenditures for activities described in Sec. 438.608(a)(1)
through (5), (7), and (8) and (b). In the 2016 final rule (81 FR
27530), we did not finalize Sec. 438.8(e)(4) as proposed, and instead
finalized Sec. 438.8(e)(4) to provide that MCO, PIHP, or PAHP
expenditures on activities related to fraud prevention, as adopted for
the private market at 45 CFR part 158, will be incorporated into the
Medicaid MLR calculation in the event the private market MLR
regulations were amended. However, we erroneously finalized Sec.
438.8(k)(1)(iii) as proposed instead of referencing the updated
finalized regulatory language in Sec. 438.8(e)(4). Therefore, in the
2018 proposed rule, we proposed to revise Sec. 438.8(k)(1)(iii) to
replace ``expenditures related to activities compliant with Sec.
438.608(a)(1) through (5), (7), (8) and (b)'' with ``fraud prevention
activities as defined in Sec. 438.8(e)(4)'' to be consistent with our
changes to Sec. 438.8(e)(4) in the previous final rule. We also
proposed to correct a technical error in paragraph (e)(4) by removing
the phrase ``fraud prevention as adopted'' and adding in its place the
phrase ``fraud prevention consistent with regulations adopted'' to
clarify the regulatory text.
The following summarizes the public comments received on our
proposal to amend Sec. 438.8 and our responses to those comments.
Comment: Several commenters supported the proposal to revise Sec.
438.8(k)(1)(iii) to replace ``expenditures related to activities
compliant with Sec. 438.608(a)(1) through (5), (7), (8) and (b)'' with
``fraud prevention activities as defined in Sec. 438.8(e)(4),''
consistent with how Sec. 438.8(e)(4) was finalized in the 2016 final
rule. One commenter stated that it was pleased that CMS did not
substantially modify the MLR requirements for Medicaid and CHIP managed
care plans.
Response: We believe that it is critical for our rules to be
technically accurate and our proposed revisions correct technical
errors from the 2016 final rule.
Comment: One commenter requested clarification on what activities
CMS expects states to require their MCOs, PIHPs, and PAHPs to report on
as a result of the revision to Sec. 438.8(k)(1)(iii). One commenter
requested clarification on whether the technical correction to Sec.
438.8(k)(1)(iii) would allow Medicaid and CHIP plans' fraud-related
costs to be included in the Quality Improvement Activities (QIAs)
portion of the numerator. Several commenters also recommended that CMS
align Medicaid policy with Medicare Advantage and permit fraud
prevention expenditures as QIAs in the MLR numerator.
Response: Our proposed rule did not propose any policy changes for
the Medicaid MLR regulation. The technical amendments were proposed to
correct errors from the 2016 final rule and ensure that Sec. 438.8 is
internally consistent. Section 438.8(e) provides, irrespective of the
corrections adopted here, that fraud prevention activities, as defined
in paragraph (e)(4), are included in the numerator. With the revision
we are finalizing to Sec. 438.8(e)(4), the regulation is clear that
MCO, PIHP, or PAHP expenditures on activities related to fraud
prevention will be incorporated into the Medicaid MLR calculation,
using the same standards for identifying fraud prevention activities in
the private market MLR regulations at 45 CFR part 158. We intend that
if and when those part 158 regulations defining fraud prevention
activities are amended in the future, the updated standards will
likewise be used for the Medicaid MLR requirements. The correction to
Sec. 438.8(k)(1)(iii) makes the Medicaid MLR requirements consistent
by requiring reporting from MCOs, PIHPs, and PAHPs of fraud prevention
activities as defined in paragraph (e)(4), which are the activities
that are used in the MLR calculation.
We are aware that Medicare Advantage adopted different regulations
on the treatment of fraud prevention expenditures and expanded the
definition of QIA in Sec. Sec. 422.2430 and 423.2430 to include all
fraud reduction activities, including fraud prevention, fraud
detection, and fraud recovery. We note that when we finalized the MLR
requirements in the 2016 final rule, we specifically aligned Medicaid
MLR standards with the regulations for the private market at 45 CFR
part 158. As such, the Medicaid MLR rules do not reference the QIAs in
Medicare Advantage, and instead we adopted the terminology used in the
private market MLR regulations in part 158 related to activities that
improve health care quality as specified in Sec. 438.8(e)(3). While we
will take commenters' recommendations to align with Medicare Advantage
on this point under advisement, we are not finalizing such
modifications as part of this final rule. We note, however, that fraud
prevention activities, subject to the different definitions and
limitations specified for the different programs, are ultimately
included in the numerator for the MLR for Medicaid managed care plans,
private market insurance, Medicare Advantage plans, and Medicare Part D
plans.
Comment: Commenters opposed the proposed technical clarification
and recommended that CMS reconsider our alignment with regulations in
the private market at 45 CFR part 158.
Response: We disagree with commenters and believe that it is
critical for our rules to be technically accurate. Our proposed
revisions only correct technical errors from the 2016 final rule and we
did not propose to reconsider our alignment with regulations in the
private market. We do not see a reason to reconsider or change that
alignment.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing the technical amendments to Sec. 438.8(e)(4) and
(k)(1)(iii) as proposed.
7. Non-Emergency Medical Transportation PAHPs (Sec. 438.9)
In the 2016 final rule, at Sec. 438.9(b)(2), we inadvertently
failed to exempt NEMT PAHPs from complying with Sec. 438.4(b)(9).
Section 438.9(b) generally exempts NEMT PAHPs from complying with
regulations in part 438 unless the requirement is listed. Under the
regulation, NEMT PAHPs are not
[[Page 72793]]
required to comply with the MLR standards. The inclusion of all of
Sec. 438.4 in Sec. 438.9(b)(2) causes a conflict because Sec.
438.4(b)(9) specifically addresses states' responsibility to develop
capitation rates to achieve a medical loss ratio of at least 85
percent. To eliminate that conflict, we proposed to revise Sec.
438.9(b)(2) by adding ``except Sec. 438.4(b)(9).''
The following summarizes the public comment received on our
proposal to amend Sec. 438.9 and our responses to those comments.
Comment: One commenter supported the proposal to amend Sec.
438.9(b)(2) to clarify that NEMT PHAPs are not required to comply with
the MLR standards.
Response: Amending Sec. 438.9(b)(2) will conform the regulation
text to our policy for how rates for NEMT PAHPs are developed and
ensure that there isn't a Federal requirement for such plans to develop
and report an MLR.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing the amendment to Sec. 438.9(b)(2) as proposed.
8. Information Requirements (Sec. 438.10)
a. Language and Format (Sec. 438.10(d))
In the 2016 final rule, we finalized provisions at Sec.
438.10(d)(2) and (3) and (d)(6)(iv), requiring that states and managed
care plans include taglines in prevalent non-English languages and in
large print on all written materials for potential enrollees and
enrollees. Based on print document guidelines from the American
Printing House for the Blind, Inc., we defined large print to mean no
smaller than 18-point font (81 FR 27724).\8\ Taglines required to be
large print are those that explain the availability of written
translation or oral interpretation, how to request auxiliary aids and
services for individuals who have limited English proficiency or a
disability, and the toll-free phone number of the entity providing
choice counseling services and the managed care plan's member/customer
service unit.
---------------------------------------------------------------------------
\8\ American Printing House for the Blind, Inc. Print Document
Guidelines. http://www.aph.org/research/design-guidelines/.
---------------------------------------------------------------------------
We explained in the November 2018 proposed rule how our goal
remains to ensure that materials for enrollees and potential enrollees
are accessible for individuals who are vision-impaired. However, since
the publication of the 2016 final rule, states and managed care plans
have found that requiring taglines in 18-point font size sometimes
increases overall document length, thereby decreasing the ease of use
by enrollees and eliminating the use of certain effective formats such
as postcards and trifold brochures.
To address these issues, we proposed to revise Sec. 438.10(d)(2)
by deleting the definition of large print as ``no smaller than 18-
point'' and adopting the ``conspicuously visible'' standard for
taglines that is codified at 45 CFR 92.8(f)(1), a regulation
implementing section 1557 of the Patient Protection and Affordable Care
Act of 2010 (PPACA) (Pub. L. 111-148, enacted March 23, 2010 as amended
by the Health Care and Education Reconciliation Act of 2010 (Pub. L.
111-152, enacted March 30, 2010)).\9\ Section 1557 of the PPACA
prohibits discrimination on the basis of race, color, national origin,
sex, age, or disability in certain health programs, including Medicaid.
We explained our rationale that adopting a more flexible requirement
would encourage states to use effective forms of written communication
and avoid unnecessarily long documents. For example, taglines in a font
size smaller than 18-point would permit states to more easily use
postcards and tri-fold brochures, which may be more effective for
relaying certain information since they are shorter and offer more
design options for visual appeal. We noted as well how states would
retain the ability to create additional requirements for greater
specificity of font size for taglines for written materials subject to
Sec. 438.10 as long as they meet the standard of conspicuously-visible
and comply with all other Federal non-discrimination standards,
including providing auxiliary aids and services to ensure effective
communication for individuals with disabilities.
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\9\ Nondiscrimination in Health Programs and Activities final
rule (81 FR 31376 (May 18, 2016).
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Additionally, we proposed to replace the requirement to include
taglines on ``all written materials'' with a requirement for taglines
only on materials for potential enrollees that ``are critical to
obtaining services'' in Sec. 438.10(d)(2). This proposed change would
align the documents that require taglines with the documents that must
be translated into prevalent non-English languages and would facilitate
the use of smaller, more user-friendly documents. We note that states
would have the ability to require taglines on any additional materials
that they choose, as including taglines only on documents that are
critical to obtaining services would be a minimum standard.
In Sec. 438.10(d)(3), we proposed to make the same substantive
changes proposed for Sec. 438.10(d)(2), as well as to reorganize the
paragraph for clarity. We believed that combining the requirements for
the provision of alternative formats, taglines, and inclusion of the
managed care plan's member/customer service unit telephone number into
one sentence in paragraph (d)(3), would improve readability and
clarity.
Section 438.10(d)(6) addresses requirements for all written
materials provided by states and MCOs, PIHPs, PAHPs, primary care case
management (PCCM) and PCCM entities to enrollees and potential
enrollees. As we proposed to limit the tagline requirement to materials
that are critical to obtaining services, we proposed to delete Sec.
438.10(d)(6)(iv).
The following summarizes the public comments received on our
proposal to amend Sec. 438.10 and our responses to those comments.
Comment: Many commenters supported the proposal to adopt the
``conspicuously visible'' standard for taglines in place of the ``no
smaller than 18-point'' large print definition. Many commenters stated
that the proposal would provide greater flexibility for communicating
with beneficiaries, increase readability for beneficiaries, reduce
costs and logistical efficiencies associated with printing and mailing,
and provide greater consistency with overlapping Federal regulations.
Many commenters supported the proposal to amend Sec. 438.10(d)(2),
(3), and (6) but requested that CMS define ``conspicuously visible.''
Response: We continue to believe that a more flexible requirement
for taglines will continue to put enrollees and potential enrollees on
notice of the availability of written translation, oral interpretation,
and auxiliary aids and services for people who have limited English
proficiency or a disability while helping to avoid unnecessarily long
documents. We decline to include a specific definition or minimum font
size in Sec. 438.10, other than as specified in current Sec.
438.10(d)(6)(iii). When adopting 45 CFR 92.8(f)(1), a regulation
implementing section 1557 of the PPACA, the Office for Civil Rights
(OCR), clarified that assessing the effectiveness of taglines ``is
whether the content is sufficiently conspicuous and visible that
individuals seeking services from, or participating in, the health
program or activity could reasonably be expected to see and be able to
read the
[[Page 72794]]
information.'' \10\ We believe that definition is appropriate for
Medicaid managed care programs, and we will use this in interpreting
and enforcing the standards in Sec. 438.10(d)(2) and (3) as revised.
Notwithstanding this change in the regulation text, states and managed
care plans have continuing obligations under Federal disability rights
laws that in some circumstances require the provision of large print
materials as an appropriate auxiliary aid or service, including
materials in 18-point or larger font size, unless certain exceptions
apply.\11\ Additionally, we remind states and managed care plans of
their obligations to comply with all Federal and state laws as
specified at Sec. Sec. 438.3(f) and 438.100(d) and that enrollment
discrimination is expressly prohibited in Sec. 438.3(d). States that
elect to change the required font size for taglines should work with
their managed care plans and stakeholders and local experts on
disabilities to gather input on selecting the most appropriate
characteristics of ``conspicuously visible.''
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\10\ 81 FR 31397.
\11\ See, for example, 28 CFR 35.104 (defining ``auxiliary aids
or services'') and 35.160(a) through (b); 28 CFR part 164; 28 CFR
36.303(a) through (c) and (h); 45 CFR 84.52(d) and 92.202(a).
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We note that OCR issued a notice of proposed rulemaking on June 14,
2019,\12\ that proposed to eliminate Sec. 92.8 and thus the use of the
term ``conspicuously visible.'' In doing so, HHS stated that the
proposed elimination of Sec. 92.8 was intended in part to reduce
redundancies while maintaining enforcement of civil rights statutes (84
FR at 27887). HHS did not intend in that proposed rule to direct the
parameters of tagline requirements set forth in regulations such as
Sec. 438.10(d), which derive from statutory authorities other than
section 1557 of the PPACA. Consequently, the intent of the proposed
1557 rule is not inconsistent with Medicaid's exercise of discretion in
amending these regulations. We believe ``conspicuously visible''
reflects an appropriate level of protection for enrollees of Medicaid
managed care plans and of the flexibility that we desire to provide to
states and managed care plans. Therefore, regardless of whether that
proposed rule is finalized, we are finalizing ``conspicuously visible''
in Sec. 438.10(d)(2), (3), and (6) as explained in this final rule.
---------------------------------------------------------------------------
\12\ Docket No.: HHS-OCR-2019-0007 (https://www.federalregister.gov/documents/2019/06/14/2019-11512/nondiscrimination-in-health-and-health-education-programs-or-activities).
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A typographical error was made in the proposed regulatory text at
Sec. 438.10(d)(2). The word ``language'' was erroneously written as
singular: ``Written materials that are critical to obtaining services
for potential enrollees must include taglines in the prevalent non-
English language . . .'' It was not our intention to propose a change
along those lines and `language'' should have remained plural in the
2018 proposed rule. We are correcting this error in this final rule and
finalizing the amendment to Sec. 438.10(d)(2) with ``languages.''
Comment: Many commenters disagreed with the proposal to adopt the
``conspicuously visible'' standard for tag lines in place of the ``no
smaller than 18-point'' large print definition. Commenters stated that
this change would result in reduced access to plan information by
enrollees and potential enrollees with visual impairment and the harm
caused by this result should outweigh any possible benefit to other
stakeholders. One commenter suggested that 12-point Times New Roman be
adopted as the minimum. Several commenters stated that while aligning
requirements across the health system is favorable, the ``conspicuously
visible'' requirement adopted under the PPACA is overly vague and
requested CMS provide greater clarity to the requirement to eliminate
ambiguity. One commenter recommended that CMS include a requirement for
states to provide a sample to CMS of what they determine meets the
``conspicuously visible'' standard.
Response: We acknowledge that adopting ``conspicuously visible'' is
less descriptive and specific than ``no less than 18-point'' but do not
believe that states will apply the conspicuously visible standard in a
way that will reduce access to information or cause harm to
beneficiaries with disabilities. States and managed care plans
understand the importance of the information required by Sec. 438.10
and benefit when beneficiaries read and utilize the information. We
note that current Sec. 438.10(d)(6)(iii) requires that all written
materials for potential enrollees and enrollees use a font size no
smaller than 12 point. We do not believe that it will be necessary for
us to review a sample of what states determine to be conspicuously
visible; we expect states and managed care plans to exercise due
diligence in gathering input from experts in disabilities and other
stakeholders in developing their materials to comply with the
regulation as revised in this final rule.
We note that states and managed care plans were required to comply
with Sec. 438.10(d) by the beginning of rating periods that started on
or after July 1, 2017 and finalizing the ``conspicuously visible''
standard in place of the 18-point font standard does not require states
and managed care plans already in compliance to make changes. Continued
use of 18-point font will comply with the regulation as amended here.
This revision simply provides states and managed care plans with an
option to select and use a different conspicuously visible font size to
achieve the desired outcome. We remind states and managed care plans
that they will be held accountable for compliance with Sec.
438.10(d)(2) through (6) and with ensuring that all necessary steps are
taken to adequately accommodate enrollees and potential enrollees that
request information in large print or that request other formats or
auxiliary aids and services. States and managed care plans have
continuing obligations under Title VI and section 1557 of the PPACA to
take reasonable steps to provide meaningful access to programs to
individuals who have limited English proficiency. This may require
states and managed care plans to provide documents and information in
other languages to LEP individuals, including documents and information
that are not ``critical to obtaining services''. Further, in assessing
whether states and managed care plans have met this obligation, the
Department considers whether recipients of Federal financial assistance
take steps to identify LEP persons with whom it has contact, by
providing notice of the availability of language assistance. HHS,
Guidance to Federal Financial Assistance Recipients Regarding Title VI
Prohibition Against National Origin Discrimination Affecting Limited
English Proficient Persons, https://www.hhs.gov/civil-rights/for-individuals/special-topics/limited-english-proficiency/guidance-federal-financial-assistance-recipients-title-vi/index.html.
Comment: Several commenters stated that CMS failed to provide any
evidentiary basis for how vision-impaired persons would be able to
access plan information under this standard and stated that vision
impairment is more common among the Medicaid-eligible population. Some
commenters stated that this proposal violates section 1557 of the
PPACA, which prohibits discrimination on the basis of race, color,
national origin, sex, age, and disability.
Response: Persons with disabilities, including vision impairments,
make up a significant proportion of the Medicaid population. Under
regulations implementing the ADA, section 504 of the Rehabilitation Act
of 1973 and section 1557 of the PPACA, states and
[[Page 72795]]
managed care plans must take appropriate steps to provide effective
communication to people with disabilities. This includes providing
appropriate auxiliary aids and services to individuals with
disabilities ``where necessary to afford individuals with disabilities,
. . . [ ] an equal opportunity to participate in, and enjoy the
benefits of, a service, program, or activity of a public entity.'' (28
CFR 35.160(b)(1); see also 28 CFR 36.303; 45 CFR 84.52(d) and 92.202.)
``Auxiliary aids and services'' is defined to include large print, and
many other alternative formats used by individuals who are blind and
vision-impaired. (28 CFR 35.104; 28 CFR 36.303(b)(1); 45 CFR 92.4.)
Thus, separate and apart from these regulations, states and managed
care plans have an obligation to make materials and information
accessible to blind and visually impaired individuals. Regardless of
how states and managed care plans apply the ``conspicuously visible''
standard, they must provide auxiliary aids and services, including
large-print type under certain circumstances, to potential enrollees
and enrollees upon request and at no cost under Sec. 438.10(d)(3),
(d)(5)(ii), and (d)(6)(iii). While we did not provide any empirical
studies to address the use of a ``conspicuously visible'' standard, we
do not believe that is necessary because it is a qualitative and not a
quantitative standard; using a standard that focuses on whether the
information is sufficiently conspicuous and visible that enrollees
could reasonably be expected to see and be able to read the information
avoids the ``one size fits all'' hazard that a quantitative standard
that focuses only on font size could raise. We expect that states and
managed care plans will be able to use size, font, color and other
elements of their printed materials to make information conspicuously
visible. It may be that for some materials, the font and color used are
as effective, if not more effective, than merely making the font larger
for individuals with disabilities to be able to see and read the
information.
Comment: One commenter expressed concern that the proposed
``conspicuously visible'' standard will result in additional challenges
for managed care plans if states create standards that greatly exceed
the proposed requirement and as a result, requested that CMS adopt
safeguards that would allow managed care plans to work with states to
define standards that balance enrollee accessibility with
administrative burden.
Response: We decline to include further criteria or safeguards in
Sec. 438.10. We encourage states to collaborate with their managed
care plans, experts in older adults and persons with disabilities, and
other stakeholders to determine appropriate characteristics of
``conspicuously visible''. However, we also remind stakeholders that
states, under their own authority and state law, may impose higher or
more protective standards to ensure enrollee access to information than
the minimum imposed by Sec. 438.10(d).
Comment: Many commenters agreed with the proposal to only require
taglines on materials critical to obtaining services. They agreed that
putting taglines on all written materials was unnecessary, impeded the
use of certain effective forms of written communication, and created
unnecessarily long documents that were not easy for enrollees to use.
Response: We agree that requiring taglines only on materials
critical to obtaining services will help states and managed care plans
create consumer-friendly documents that maximize effectiveness for the
enrollee.
Comment: Many commenters disagreed with the proposal to replace the
requirement to include taglines on ``all written materials'' with the
requirement for taglines only on materials for potential enrollees and
enrollees that ``are critical to obtaining services.'' Many commenters
stated that taglines have proven to be a low-cost and effective means
of communicating information to individuals with limited English
proficiency (LEP) and people with disabilities and that this change
would weaken beneficiary protections and result in reduced access to
plan information by some enrollees and potential enrollees. Commenters
also stated that the proposed requirement would give managed care plans
or state agencies the ability to decide what materials meet this
requirement, possibly resulting in important materials failing to be
included, thereby reducing access and ability to make well-informed
plan decisions for disabled, or LEP individuals. Many commenters
further stated that this change is inconsistent with section 1557 of
the PPACA and regulations implemented by HHS' OCR that ``covered
entities'' must provide taglines on all ``significant'' documents and
creates conflicting standards.
Response: As noted in this rule, ``conspicuously visible'' will be
used to assess the effectiveness of taglines based on whether the
content is sufficiently conspicuous and visible that enrollees and
potential enrollees in the Medicaid managed care plan could reasonably
be expected to see and be able to read the information.
In addition, we expect that states and managed care plans will
exercise due diligence in determining which documents are critical to
obtaining services. Requiring taglines on less than all written
materials is consistent with Medicare Advantage, qualified health plans
in the Marketplace, and current implementing regulations for section
1557 of the PPACA as issued by the HHS and OCR. While requiring
taglines only on materials that are critical to obtaining services is a
change from the 2016 final rule, we do not believe that it will
disadvantage certain populations. Further, the availability of other
resources for assistance such as a state's beneficiary support system
or a managed care plan's phone lines and websites provide additional
opportunities for potential enrollees and enrollees to access the
information they need or want. We remind states and managed care plans
that they have independent obligations under Title VI of the Civil
Rights Act of 1964, section 504 of the Rehabilitation Act of 1973,
section 1557 of the PPACA, and the ADA that may require them to do more
than what 42 CFR part 438 requires.
We do not believe that we are creating a conflicting standard
between documents that are ``critical to obtaining services'' versus
requiring taglines on ``significant documents'' as used in Sec. 92.8.
The standard ``critical to obtaining services'' cuts to the heart of
the role of Medicaid managed care plans: The provision of services to
enrollees. By adopting a different standard, we preserve for the
Medicaid program the ability to make different determinations about
which documents must contain taglines. Therefore, we are finalizing the
amendments to Sec. 438.10 using the standard ``critical to obtaining
services'' to identify the documents that must contain taglines. We
believe states are in the best positon to apply the standard since they
have the necessary information and familiarity with the documents to
analyze the scope and purpose of each document. This standard and the
lack of a definitive list provides the means to ensure that the proper
documents used in each program and managed care plan contain taglines,
based on the use and audience of each document.
Comment: A few commenters requested that CMS provide a targeted
list of publications that require taglines. Many commenters requested
that CMS include additional definitions clarifying which materials are
``critical to obtaining services'' to remove ambiguity to the greatest
extent possible; however,
[[Page 72796]]
commenters did not provide specific examples. One commenter requested
that CMS consider permitting taglines and non-discrimination statements
be provided annually on at least one document that is critical to
obtaining services, as opposed to on all ``significant'' publications.
Response: Section 438.10(d)(3) includes a non-exhaustive list of
documents that are critical to obtaining services; we decline to
further list documents that are ``critical to obtaining services.'' We
do not believe that an exhaustive list can be provided in the Sec.
438.10(d)(3) regulation as each state and managed care plan produces
different types of documents and that states and managed care plans
must apply the standard in the regulation to determine which documents
are critical to obtaining services. Providing a list also runs the risk
that regulated entities focus only on the list without conducting the
necessary analysis to think through the purpose and scope of each
document to identify each document that is critical to obtaining
services. We clarify here that including taglines only on documents
critical to obtaining services is a minimum standard, and therefore,
states and managed care plans have the option to continue requiring
(and including) taglines on all written materials. We also decline to
adopt the commenter's suggestion that taglines only be required
annually on at least one document that is critical to obtaining
services. Finalizing the text as proposed provides states and managed
care plans with sufficient responsibility and authority to identify the
documents that require taglines. Only providing taglines annually and
on as few as one document is not sufficient notification to enrollees.
Comment: One commenter expressed concern that the proposed changes
to Sec. 438.10(d)(2) and (3) seemed to be in conflict. Commenter
stated that paragraph (d)(2) requires that written materials that are
critical to obtaining services for potential enrollees include taglines
explaining the availability of written translations or oral
interpretation to understand the information provided and the toll-free
telephone number of the entity providing choice counseling services as
required by Sec. 438.71(a). The commenter noted that paragraph (d)(3)
requires that written materials that are critical to obtaining services
include taglines explaining the availability of written translation or
oral interpretation to understand the information provided and include
the toll-free and TTY/TDY telephone number of the MCO's, PIHP's, PAHP's
or PCCM entity's member/customer service unit. Commenter stated that if
the written materials that are critical to obtaining services for
potential enrollees overlap with written materials for enrollees, it is
unclear what the tagline should say and requested clarification.
Response: As the tagline information required in Sec. 438.10(d)(2)
and (3) is the same except for the telephone number, we believe the
commenter is requesting clarification on that aspect. As such, we
clarify that if documents are intended for use with both potential
enrollees and enrollees, the documents would need to comply with the
requirements in both Sec. 438.10(d)(2) and (3); that is, the document
would need to include both the toll-free telephone number of the entity
providing choice counseling services and the toll-free and TTY/TDY
telephone number of the MCO's, PIHP's, PAHP's or PCCM entity's member/
customer service unit.
Comment: Commenters expressed concern that allowing managed care
plans to decide which documents are critical to obtaining services has
the potential to result in adverse selection, whereby plans would
discourage enrollment by persons with significant health needs.
Response: States and managed care plans must comply with all
applicable laws under Sec. 438.3(f). Enrollment discrimination,
including on the basis of health status, as well as on other prohibited
bases, is expressly prohibited in Sec. 438.3(d). Section 438.3(f)
requires compliance with applicable civil rights laws, which prohibit
discrimination more broadly than just with regard to enrollment. We
believe that these requirements are sufficient to address this issue
and remind stakeholders that nothing in our amendment to Sec. 438.10
changes these other obligations.
Comment: One commenter expressed concern that the proposal to
delete Sec. 438.10(d)(6)(iv) appeared to delete the requirement that
information on how to request auxiliary aids and services be included
in a tagline and sought clarification as to whether that was CMS'
intent.
Response: Our intent was to delete the requirement that the tagline
be large print in a font size no smaller than 18-point, not to delete
the requirement that a tagline provide information on how to access
auxiliary aids and services. Instructions on how to access auxiliary
aids and services is important information that should be included in a
tagline. To correct this inadvertent error, we are finalizing
additional revisions in paragraphs (d)(2) and (3) so that the list of
information required to be included in taglines in Sec. 438.10(d)(2)
and (3) includes information on how enrollees can request auxiliary
aids and services. We believe having all of the tagline elements in one
sentence in each paragraph makes the requirements clear and easy to
understand. We acknowledge that the availability of auxiliary aids and
services is already addressed as a requirement in Sec. 438.10(d)(3),
(d)(5)(ii), (d)(6)(iii), and (g)(2)(xiii) but those references do not
specifically require that the information be provided in a tagline nor
precisely how a potential enrollee or enrollee can make a request. We
believe revising the lists in Sec. 438.10(d)(2) and (3) is the most
effective way to ensure that the information on how to request
auxiliary aids and services is provided as a tagline on all documents
critical to obtaining services.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing amendments to Sec. 438.10(d)(2) and (3) and (d)(6)(iv)
substantially as proposed with a modification to Sec. 438.10(d)(2) and
(3) to add how enrollees can request auxiliary aids and services to the
list of information required to be included in taglines and to make
``language'' plural in Sec. 438.10(d)(2).
b. Information for All Enrollees of MCOs, PIHPs, PAHPs, and PCCM
Entities: General Requirements (Sec. 438.10(f))
In the comprehensive revision to Federal regulations governing
Medicaid managed care in 2002, we required notice to certain specified
enrollees of a provider's termination within 15 days of a covered
plan's receipt or issuance of the termination notice (67 FR 41015,
41100). We established the 15-day time-period following receipt of
notice because we wanted to ensure that enrollees received notice of
the provider terminations in advance given the reality that providers
often give little notice of their plans to terminate participation in a
network (67 FR 41015). Currently, Sec. 438.10(f)(1) requires that a
managed care plan must make a good-faith effort to provide notice of
the termination of a contracted in-network provider to each affected
enrollee within 15 days of receipt or issuance of the termination
notice. However, there can be circumstances when plans or providers
send a termination notice to meet their contractual obligations but
continue negotiating in an effort to resolve the issue(s) that
triggered the decision to commence termination procedures. If the
issue(s) can be
[[Page 72797]]
amicably resolved, then the termination notice is usually rescinded and
the provider remains in the network. In these situations, the issuance
of notices by a state to enrollees before resolution efforts have been
attempted, can cause alarm and confusion for enrollees who believe that
they need to locate a new provider.
In an effort to prevent unnecessary notices from being sent to
enrollees, we proposed at Sec. 438.10(f)(1) to change the requirement
that managed care plans issue notices within 15 calendar days after
receipt or issuance of the termination notice to the later of 30
calendar days prior to the effective date of the termination or 15
calendar days after the receipt or issuance of the notice. For example,
if the plan receives a termination notice from a provider on March 1
for a termination that is effective on May 1, the proposed regulation
would require that written notice to enrollees be provided by April 1
(30 days prior to effective date) or by March 16 (within 15 days of
receipt of the termination notice), whichever is later. In this
example, the managed care plan would have to issue a notice to the
enrollees by April 1, since it is later.
The following summarizes the public comments we received on our
proposal to amend Sec. 438.10(f) and our responses to those comments.
Comment: Many commenters supported the proposal to change the
requirement that managed care plans issue termination notices within 15
calendar days after receipt or issuance of the termination notice to
the later of 30 calendar days prior to the effective termination date
or 15 calendar days after the receipt or issuance of the notice. Many
commenters agreed with CMS' rationale that it would reduce beneficiary
confusion by reducing the number of unnecessary notices that they
receive. Commenters also noted that the proposal aligns with commercial
coverage practices and provides additional flexibility for managed care
plans to negotiate with providers who are considering terminating their
network contract and attempt to resolve the provider's underlying
issue. One commenter stated that CMS should work with states to
develop, implement, and deploy enforcement measures for this provision.
One commenter recommended that CMS should monitor implementation of the
new timeline.
Response: We believe it is prudent to allow managed care plans time
to work with providers to potentially resolve the underlying issue and
maintain a provider's network participation to avoid disrupting care
for enrollees. To the extent that the new timelines for this notice
that we are finalizing in this rule will permit Medicaid managed care
plans to align their processes across different lines of business, we
believe that is a bonus benefit to our goal of reducing the potential
for confusion to enrollees. We do not believe that states nor CMS will
need to develop new or unique enforcement mechanisms for this
provision. States have existing oversight and monitoring processes
which should be updated to reflect these new timeframes.
Comment: One commenter suggested that CMS require states or plans
to maintain a hotline that enrollees can call to ask questions about
and better understand notices of provider terminations to reduce
confusion.
Response: States are required to have beneficiary support systems
under Sec. 438.71 and managed care plans customarily use their member/
customer service units to assist enrollees with questions and
information to comply with Sec. 438.10(c)(7), which requires plans to
have mechanisms to help enrollees and potential enrollees understand
the requirements and benefits of the plan. We do not believe it is
necessary to mandate a separate mechanism to address questions about
provider termination notices. We encourage plans to be proactive in
notifying enrollees about the availability of the call center and other
existing resources to deal with a provider's termination from the
plan's network.
Comment: Many commenters disagreed with the proposal to change the
requirement that managed care plans issue termination notices within 15
calendar days after receipt or issuance of the termination notice to
the latter of 30 calendar days prior to the effective termination date
or 15 calendar days after the receipt or issuance of the notice. Many
commenters stated that patients should be given as much notice as
possible to find a replacement provider to avoid disruptions in
continuity of care which can have negative health outcomes and increase
costs, especially with regard to specialists, patients with chronic
conditions, disabilities, or linguistic challenges, and patients in
rural areas. A few commenters stated that the risk of beneficiary
confusion is outweighed by the risk to patients who may experience gaps
in care as they seek alternative providers. Another commenter stated
that the currently approved timeline is not adequate to maintain
continuity of care and should instead be lengthened to at least 90
days. A few commenters provided additional recommendations, including
ensuring that authorizations for services and the established timeframe
be honored for patients transitioning to new providers.
Response: We understand that in some situations, permitting managed
care plans to issue notices of certain provider terminations within the
later of 30 calendar days prior to the effective date of the
termination or 15 calendar days after the receipt or issuance of the
notice, will result in an enrollee notification period that is shorter
than the notification period currently required by Sec. 438.10(f). We
clarify here that the new timeframe finalized in Sec. 438.10(f) is a
minimum notification period; managed care plans are encouraged to
provide enrollees more than the minimum required notification period to
reduce the possibility of disruption in care. Additionally, enrollees
should be educated and encouraged to utilize the numerous resources
that can assist them with locating providers, such as their managed
care plans member/customer service units, the state's beneficiary
support system, and their managed care plan's provider directory. Some
enrollees also have a case manager or care coordinator from whom they
can receive assistance in locating a comparable provider. Managed care
plans often include the contact information for comparable providers
near the enrollee in the notice of termination and some plans utilize
proactive outreach calls to assist enrollees in these situations. We
encourage all plans to provide customized information and assistance to
prevent disruptions in care from occurring. We agree with commenters
that managed care plans should review existing authorizations for
enrollees affected by a provider termination to ensure that disruptions
in care are prevented. We remind states and managed care plans of their
obligations under Sec. 438.206 to ensure that all covered services
must be available and accessible in a timely manner and that if a
provider network is unable to provide necessary services covered under
the contract, the managed care plan must timely and adequately provide
them out-of-network. States also have program monitoring obligations
under Sec. 438.66 that should be used to monitor for access and
continuity of care issues that arise from this change in notification
time frame and adjust program policies accordingly.
Comment: One commenter recommended that notification of provider
termination should include information on how the affected beneficiary
can disenroll or select a plan
[[Page 72798]]
in which his or her provider participates.
Response: Section 438.56(c) and (d) list the reasons for which
disenrollment from a Medicaid managed plan (including to switch to
another plan, if offered) may be requested by an enrollee; termination
of a provider from the plan network is not cause for disenrollment
except in limited circumstances under that regulation. Aside from those
reasons, and subject to certain limitations, states have the authority
to determine additional reasons or periods for disenrollment. States
and managed care plans have been addressing changes in provider
networks based on provider terminations since the beginning of network-
based managed care programs. In the absence of significant, systemic
problems that need a Federal solution, we do not believe that
additional regulation of states and plans in this way is necessary.
After consideration of public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing the amendment to Sec. 438.10(f)(1) as proposed.
c. Information for All Enrollees of MCOs, PIHPs, PAHPs, and PCCM
Entities: Enrollee Handbooks (Sec. 438.10(g))
In the 2016 final rule, an erroneous reference was included in
Sec. 438.10(g)(2)(ii)(B) to paragraph (g)(2)(i)(A) which does not
exist. We proposed in this rule to correct the reference to paragraph
(g)(2)(ii)(A), which describes the applicable services to which
paragraph (g)(2)(ii)(B) refers.
We received no public comments on this proposal and will finalize
Sec. 438.10(g)(2)(ii)(B) as proposed.
d. Information for All Enrollees of MCOs, PIHPs, PAHPs, and PCCM
Entities: Provider Directories (Sec. 438.10(h))
In the 2016 final rule, we added the requirement at Sec.
438.10(h)(1)(vii) requiring each managed care plan to include
information in its provider directory on whether the provider has
completed cultural competence training. We added this requirement to
the final rule in recognition of the linguistic and cultural diversity
of Medicaid beneficiaries (81 FR 27724). After the final rule was
published, the Cures Act amended section 1902 of the Act,\13\ to add
requirements for publication of a FFS provider directory.\14\ Now that
the Congress has established new standards for provider directories in
FFS Medicaid, we believe that it is beneficial to Medicaid managed care
enrollees to align the requirements for Medicaid managed care
directories with the FFS directories, especially since many managed
care enrollees also receive some services on a FFS basis. The proposed
amendment would require that the information in a directory include a
provider's cultural and linguistic capabilities, including the
languages spoken by the provider or by the skilled medical interpreter
providing interpretation services at the provider's office. The statute
does not require information on whether the provider has completed
cultural competence training; therefore, we proposed to amend Sec.
438.410(h)(1)(vii) to eliminate the phrase `and whether the provider
has completed cultural competence training.''
---------------------------------------------------------------------------
\13\ Section 1902(a)(83)(A)(ii)(II) of the Act.
\14\ Section 5006 of the Cures Act added paragraph
(83)(A)(ii)(II) to section 1902(a) of the Act.
---------------------------------------------------------------------------
In the 2016 final rule, we finalized at Sec. 438.10(h)(3)
requirements that information in a paper directory must be updated at
least monthly and that information in an electronic directory must be
updated no later than 30 calendar days after the managed care plan
receives updated provider information. In paragraph (h)(1), we
clarified that paper provider directories need only be provided upon
request, and we encouraged plans to find efficient ways to provide
accurate directories within the required timeframes (81 FR 27729).
Since the publication of the 2016 final rule, states and managed
care plans have raised concerns about the cost of reprinting the entire
directory monthly. While the final rule did not require that the
directory be reprinted in its entirety monthly, many managed care plans
were forced to do so to recognize savings from printing in large
quantities. To address this inefficiency, as well as to provide managed
care plans with another option for reducing the number of paper
directories requested by enrollees due to the lack of access to a
computer, we proposed to modify the requirements for updating a paper
provider directory that would permit less than monthly updates if the
managed care plan offers a mobile-enabled, electronic directory.
We noted in the 2018 proposed rule that research has shown that 64
percent of U.S. adults living in households with incomes less than
$30,000 a year owned smartphones in 2016 (83 FR 57278); using updated
data, research has shown that 67 percent of U.S. adults living in
households with incomes less than $30,000 a year owned smartphones in
2018.\15\ We discussed access to information through smartphones in the
proposed rule: Lower-income adults are more likely to rely on a
smartphone for access to the internet, because they are less likely to
have an internet connection at home \16\ and recent studies show that
the majority of Americans have used their smartphones to access
information about their health,\17\ and consider online access to
health information important.\18\ We explained our belief that
providing mobile-enabled access to provider directories may provide
additional value to enrollees by allowing them to access the
information anytime, anywhere--which is not feasible with a paper
directory. Mobile applications for beneficiaries are increasingly
available in programs serving older adults and individuals with
disabilities and include access to Medicare marketing materials \19\
and medical claims on Blue Button \20\ to empower enrollees to better
manage and coordinate their healthcare. For enrollees that request a
paper directory, we opined that quarterly updates would not
significantly disadvantage them as other avenues for obtaining provider
information are readily available, such as the managed care plan's
customer service unit or the state's beneficiary support system.
---------------------------------------------------------------------------
\15\ http://www.pewinternet.org/fact-sheet/mobile/.
\16\ Id.
\17\ http://www.pewresearch.org/fact-tank/2015/04/30/racial-and-ethnic-differences-in-how-people-use-mobile-technology/.
\18\ https://www.ncbi.nlm.nih.gov/pubmed/27413120.
\19\ 2016 Medicare Marketing Guideline 100.6. https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/2017MedicareMarketingGuidelines2.pdf.
\20\ http://bluebuttonconnector.healthit.gov/.
---------------------------------------------------------------------------
To reflect this change in access to data and modify the
requirements for updating a paper provider directory to permit less
than monthly updates if the managed care plan offers a mobile-enabled
directory, we proposed several revisions to Sec. 438.10(h)(3). First,
we proposed to add paragraphs (h)(3)(i) and (ii) to Sec. 438.10 which
would delineate requirements for paper directories from those for
electronic directories. Second, we proposed to add paragraphs
(h)(3)(i)(A) and (B) which would reflect, respectively, that monthly
updates are required if a plan does not offer a mobile enabled
directory and that only quarterly updates would be required for plans
that do offer a mobile enabled directory. Lastly, we proposed to make
``directories'' singular (``directory'') at
[[Page 72799]]
Sec. 438.10(h)(3)(ii) which would avoid implying that a managed care
plan must have more than one directory of providers.
In the proposed rule, we explicitly reminded managed care plans
that some individuals with disabilities, who are unable to access web
applications or require the use of assistive technology to access the
internet, may require auxiliary aids and services to access the
provider directory. In keeping with the requirement that managed care
plans must provide auxiliary aids and services to ensure effective
communication for individuals with disabilities consistent with section
504 of the Rehabilitation Act of 1973 (Pub. L. 93-112, enacted on
September 26, 1973) and section 1557 of the PPACA, these individuals
should, upon request, be given the most current provider directories in
the same accessible format (paper or electronic) that they receive
other materials.
We also encouraged managed care plans to perform direct outreach to
providers on a regular basis to improve the accuracy of their provider
data and to ensure that all forms of direct enrollee assistance (such
as telephone assistance, live web chat, and nurse help lines) are
effective, easily accessible, and widely publicized.
The following summarizes the public comments we received on our
proposal to amend Sec. 438.10(h)(1)(vii) and our responses to those
comments.
Comment: Several commenters supported the proposal to no longer
require provider directories to note whether a provider has completed
cultural compliance training and noted that doing so would ease
administrative burden on plans and providers by better aligning the
Medicaid managed care policy with the amendment to section 1902(a)(83)
of the Act, made by the Cures Act. One commenter noted that completion
of the cultural competency course was not an indicator of a provider's
cultural capabilities for any particular culture and that many
beneficiaries do not understand the significance of the notation in the
provider directory, thereby reducing its importance.
Response: We appreciate the support for no longer requiring managed
care plans to include an indication of cultural competence training as
a required element in a provider directory. The statute does not
require information on whether the provider has completed cultural
competence training and we believe it's important to facilitate states
aligning the requirements for their FFS directories with those of their
managed care plans.
Comment: One commenter suggested that provider self-reported data
be acceptable to meet the proposed requirement for the directory to
report linguistic and cultural capabilities and that, if after
solicitation, no capabilities are reported, the directory should list
``none reported'' as the cultural capabilities of that provider.
Response: We decline to amend the regulation to specify how to
collect cultural competence data, including the degree to which self-
reported data is reliable, and how a provider's cultural competencies
or lack of cultural competencies should be displayed in a provider
directory. We believe states are better suited to determine how to
collect this information and how it should be displayed, particularly
given that some states may elect to use a consistent format for their
FFS and managed care programs.
Comment: Several commenters disagreed with the proposal to
eliminate the phrase ``and whether the provider has completed cultural
competence training'' from provider directories. These commenters
stated that the change is unnecessary, removes important information
for many beneficiaries seeking new providers and providers seeking to
make effective referrals for existing patients, removes the incentive
for providers to complete cultural competency training, and may
increase health disparities in underserved beneficiary populations by
potentially limiting a patient's confidence in choosing a provider that
is best suited for them and preventing adequate access to healthcare
services. Commenters noted that inclusion of the phrase would help
ensure that a provider is sensitive to a patient's beliefs, practices,
and culture, thereby strengthening the patient-provider relationship
and improving the possibility of better health outcomes.
Response: We understand that some commenters consider an indication
of cultural competence training in provider directories as useful
information for enrollees and providers. However, we do not believe
that removing a ``yes'' or ``no'' indicator reflecting the completion
of training impacts the usefulness of the other information presented
about cultural competencies nor that it necessarily indicates whether a
provider is more sensitive to patients' beliefs, practices, and
culture. Given that states are required to also display a provider's
cultural and linguistic capabilities--which is far more descriptive
than a ``yes/no'' indicator about training--in their FFS directories,
we believe that they will select clear, consistent, and meaningful ways
to display the information and ensure that their managed care plans do
so as well.
Comment: A few commenters noted that displaying a provider's
cultural and linguistic capabilities without also indicating whether
the provider took a cultural competence training is not enough to
adequately convey whether the individual has the skills or training to
effectively communicate or provide language assistance. One commenter
suggested that states should be required to maintain a list of
providers who have completed cultural competency training.
Response: We clarify that displaying whether a provider has
completed cultural competence training is not prohibited, it is merely
not required under the amendment to Sec. 438.10(h)(1)(vii) that we are
finalizing in this rule. If managed care plans determine that
displaying the information is useful, they may continue including it in
their directory; similarly, states can adopt standards to require the
directory to include more information than the Federal minimum adopted
in Sec. 438.10(h)(1). Additionally, if enrollees do not find a
provider's linguistic competency adequate for effective communication,
we encourage them to contact their managed care plan immediately for
assistance. Under Sec. 438.206(b)(1) plans are required to ensure
adequate access to all services covered under the contract for all
enrollees, including those with limited English proficiency or physical
or mental disabilities. We decline to require states and managed care
plans to maintain a list of providers who have completed training and
defer to states and managed care plans to decide if doing so would be
useful for their enrollees.
After consideration of public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing the amendment to Sec. 438.10(h)(1)(vii) as proposed.
The following summarizes the public comments received on our
proposal to amend Sec. 438.10(h)(3) and our responses to those
comments.
Comment: Many commenters supported the proposal to require only
quarterly updates for paper directories for plans that offer a mobile
enabled directory in lieu of monthly updates. These commenters stated
that the proposal strikes a suitable balance for streamlining access
between electronic and print formats, increases consistency with the
Medicare Advantage program, reduces administrative burden and
environmental impact while having
[[Page 72800]]
minimal negative impact to enrollees, and incentivizes plans to invest
in mobile enabled features that improve beneficiary experience.
Response: We believe enrollees will appreciate the increased ease
of access to provider directory information and believe that decreasing
the rate of updates to paper directories when there is a mobile-enabled
electronic alternative to the paper provider directory is an
appropriate way to ensure enrollee access to information about the
network of providers.
Comment: Several of the commenters cited concerns with potential
ambiguity regarding the term ``mobile-enabled'' and requested CMS
provide a definition of the term to ensure that states and plans are
able to take full advantage of the offered flexibility while reducing
administrative burden for plans that may be required to meet different
standards across multiple states. Several commenters recommended that
CMS not limit rulemaking to mobile ``applications'' and that ability to
access an online printable directory, search tool, or provider
directory formatted for viewing on a mobile device should be considered
compliant with the proposed requirement.
Response: We use the term ``mobile-enabled'' to mean a mobile
website or a mobile application; we defer to states and managed care
plans to determine whether a mobile website or application is most
appropriate for each applicable managed care program and managed care
plan, provided that the end result is that the provider directory is
mobile-enabled as explained here. As we outlined in the proposed rule,
we believe that making the provider directory information usable for
smartphone or mobile technology users is the key point, not the
technology or format used to accomplish that. A mobile-enabled website
could include a mobile friendly, mobile optimized, or a responsive
design. A true mobile enabled website will automatically detect what
environment each visitor is using to access the website, then display
it in the format best for that device, whether a smartphone, tablet, or
other mobile device is used. With a mobile-enabled website, the
navigation and content are reorganized so that the web page fits the
browser window for the device used, and the pages are made ``lighter,''
so they download more quickly. Our goal with proposing to reduce the
frequency of paper directory updates if a mobile-enabled directory is
available is to improve the enrollee's ability to navigate and utilize
the directory information when accessing it on a mobile device. We
would expect features such as small image sizes to allow for fast
loading, simplified navigation that is ``thumb'' friendly, reduced
graphics that do not interrupt access to critical information, and
text-based phone numbers, physical addresses, or email addresses that
can trigger a call, directions, or email message from the mobile device
to be included in a mobile-enabled provider directory. Managed care
plans may find it helpful to visit HHS' website for Building and
Managing websites; it sets out different stages of ``mobile'' that
could serve as a useful guide when determining which enhancements would
be useful to the end user.\21\ HHS guidance notes that when developing
exclusively mobile versions of websites, these ``microsites'' should be
designed for mobile accessibility. These sites should contain code
specific to, and designed for, mobile web tasks and browsing. These
microsites often contain pared down information on the same topics
covered on the main site. Additionally, content should be written in
such a way as to be read easily on a mobile device, usually in small
text groupings of about three to four lines of text and provide the
most important information at the top of the page, so that the site
user has access to the most important information quickly.
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\21\ https://www.hhs.gov/web/building-and-managing-websites/mobile/index.html.
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By providing guidance on what it means for the provider directory
to be mobile-enabled, we aim to establish a base for the
characteristics of a mobile-enabled website without restricting website
developers. States and managed care plans can determine whether a
mobile website or application is most appropriate to provide access
that meets the regulatory standard.
We do not consider merely being able to access a managed care
plan's provider directory from its website on a mobile device or a
printable online directory to be mobile-enabled. A website that is not
mobile-enabled, is usually very difficult to read when accessed using a
mobile device, often requiring the user to zoom, scroll, and manipulate
the image to view it. Additionally, we clarify that Sec. 438.10(c)(6)
already requires that required enrollee information, which would
include a provider directory, provided electronically by a managed care
plan must be in an electronic format which can be retained and printed;
the standard for mobile-enabled provider directories, which are only
relevant for purposes of identifying the frequency of updates to the
paper provider directory, is different than what is required by Sec.
438.10(c)(6).
Comment: Commenters recommended that CMS clarify that the proposed
changes apply to duals programs, including Dual Eligible Special Needs
Plans (D-SNP) and Medicare-Medicaid Plans (MMP).
Response: To the extent Part 438 applies to (1) a D-SNP (if it is
also a Medicaid MCO, PIHP, PAHP, and, in some cases, PCCM, or PCCM
entity), or (2) a MMP under the capitated financial alignment model
demonstrations, Sec. 438.10(h)(3)(i)(B) would also apply.
Comment: One commenter recommended that CMS require electronic
notification to enrollees and providers of availability of updates and
another commenter recommended that CMS work with states to develop,
implement and deploy enforcement measures for these provisions.
Response: We are not finalizing a new rule to require electronic
notification to enrollees and providers of updates to the provider
directory. We believe the commenter is referencing updates necessary
for mobile applications. If so, the use of a mobile enabled application
is at the option of the state and managed care plan as a means to
provide a mobile-enabled provider directory as described in Sec.
438.10(h)(3). However, if a software application is used and updates to
the application are required, we would expect the necessary
notifications to be sent to users of the application. We do not believe
that states will need to develop new or unique enforcement mechanisms
for this provision.
Comment: Several commenters expressed that CMS should only require
that printed provider directories be distributed upon request.
Response: Managed care plans must provide paper directories upon
request per Sec. 438.10(h)(1), which provides that each MCO, PIHP,
PAHP, and when appropriate the PCCM entity, must make available in
paper form upon request and electronic form. We remind managed care
plans that if required information is provided electronically instead
of on paper, Sec. 438.10(c)(6) applies. Therefore, use of a mobile-
enabled directory will not satisfy the requirement to provide the
provider directory in electronic form; use of a mobile-enabled provider
directory is relevant only for purposes of identifying the updating
schedule with which a managed care plan must comply under Sec.
438.10(h).
Comment: A few commenters recommended that CMS require managed care
plans that meet the condition for quarterly updates to produce update
flyers upon request or a customer support phone line with after-
[[Page 72801]]
hours capacity. Some of these commenters also expressed that the
customer support phone line should not only provide contact information
for providers, but also assist in making appointments and allow for
patients and providers to update Medicaid managed care plan network
records.
Response: We are not incorporating these suggestions into the
regulatory requirements for managed care plans as we do not believe
that they are necessary to ensure enrollee access to the provider
directory. We encourage managed care plans to insert errata sheets into
paper directories to reflect the most up-to-date provider information,
provide extended customer service hours, offer appointment setting
assistance, and utilize effective electronic mechanisms for collecting
provider directory information.
Comment: One commenter recommended that printed provider
directories be provided in a format that permit directories for certain
geographic areas--as Medicare permits--rather than by the entire
managed care plan's service area. This commenter further noted that in
a large state, provider information for the entire state may not be
useful to members in a specific region and that member's need provider
information on a reasonable service area based on where they access
health services. Another commenter recommended that printed directories
for an entire service region of a managed care plan should only be
required annually.
Response: Section 438.10(h) requires that each MCO, PIHP, PAHP, and
when appropriate PCCM and PCCM entity make available--in paper form
upon request and electronic form--certain specified information about
the providers in its network. There is no requirement in Sec.
438.10(h) for a single directory to be printed for a managed care
plan's entire service area. States can permit or require their managed
care plans to print directories for areas less than the entire service
area if the state has determined that best meets the needs of their
enrollees given known utilization and travel patterns within the state.
This would allow more customized, consumer friendly directories to be
sent and is well suited to on-demand printing rather than bulk
printing. On-demand printing allows managed care plans to print the
directory data from the current on-line version, thus allowing
enrollees using printed versions to receive the same information as
enrollees using an electronic directory. We remind managed care plans
that enrollees must be able to access information on a plan's entire
network if they choose to and that all information required by Sec.
438.10 must be provided in paper form upon request, at no cost, and
within five business days. Plans subject to this requirement can
provide paper versions of directories that cover smaller areas (if
permitted by the state) so long as, in aggregate, the paper directories
provide the necessary information for the plan's entire service area
and entire network.
Comment: A few commenters requested that CMS consider alternatives
to the proposed requirements for printing provider directories such as
providing monthly updates or inserts.
Response: We believe the commenter is suggesting that errata sheets
alone should be permitted to be sent to enrollees in lieu of an entire
directory but the comment is not clear as an errata sheet is merely an
update to what is included in the provider directory, so sending only
the errata sheet would not seem useful if the paper directory that was
being updated with new provider information had not first been
provided. If being used to meet the monthly paper director update
requirement in Sec. 438.10(h)(3), errata sheets must be inserted into
a paper directory. We point the commenter to the response in this final
rule which clarifies another option that states may permit;
specifically, that the printing of partial directories is permissible
when requested by an enrollee and if allowed by the state.
Comment: One commenter stated that managed care plans exempted from
the requirement to timely update their paper directories should be
required to display conspicuously on their paper directories and
websites that real-time assistance is available along with the number
to call to obtain such assistance.
Response: We do not believe that additional revision to paragraph
(h)(3) along these lines is necessary. The phone number for assistance
is already required in Sec. 438.10(d)(3) which specifies that managed
care plans must include a tagline on all provider directories and that
taglines must contain the toll-free and TTY/TDY telephone number of the
plan's customer/member services unit. This requirement for providing
the tagline about the customer/member services unit applies regardless
whether the managed care plan makes available a mobile-enabled provider
directory and regardless of the updating schedule for the provider
directory.
Comment: Many commenters disagreed with the proposal to only
require quarterly updates to paper provider directories if mobile
enabled directories are available. Many commenters stated that there
continues to be too high a percentage of people among the Medicaid-
eligible population and among people with disabilities that do not have
sufficient understanding of or have access to mobile devices or
broadband internet service \22\ to justify reducing the frequency of
updates to paper directories and that this proposal would result in
increased difficulty and burden navigating the healthcare system and
accessing care. Several commenters cited census data indicating half of
households with annual incomes under $25,000 lack a computer, broadband
internet access, or both, expressed that the proposed changes are
premature given the absence of research on enrollee preferences for
print versus mobile/electronic formats, and stated that CMS should
engage in active compliance monitoring and enforcement actions when
plans fail to meet existing standards. One commenter cited the National
Association of Insurance Commissioners' (NAIC) recent update to their
network adequacy model act which included provisions requiring plans to
update their provider directory at least monthly.
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\22\ https://www.pewresearch.org/fact-tank/2017/04/07/disabled-americans-are-less-likely-to-use-technology/.
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Response: We acknowledge that not all Medicaid enrollees have a
smartphone or internet access, but studies have shown that 67 percent
of U.S. adults living in households with incomes less than $30,000 a
year owned smartphones in 2018.\23\ We understand that the challenges
of paper printing do not diminish a segment of the population's need
for paper directories, nor should it diminish plans' efforts to produce
accurate paper directories.\24\ However, we do not believe those issues
lessen the value of increasing access to the directory for those
portions of the population that choose to utilize electronic methods.
Per Sec. 438.10(h)(3), managed care plans must update paper provider
directories at least monthly after the managed care plan receives
updated provider information. Managed care plans could take steps to
alleviate discrepancies between directory updates such as inserting an
errata sheet before mailing, printing on demand a directory that covers
less than a plan's entire service area when requested by an enrollee,
and ensuring that their customer service, care management, and nurse
help line (if applicable) staff have
[[Page 72802]]
access to the most updated data and are prepared to assist enrollees
with locating network providers. Managed care plans should also ensure
that their network primary care providers have easy access to updated
provider directory information since primary care providers are
frequently the source of specialty referrals for enrollees. Lastly,
managed care plans should be sensitive to the disparities in the use of
electronic information when providing resources for their telephone
hotline, and providing auxiliary aids and services to people with
disabilities.
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\23\ http://www.pewinternet.org/fact-sheet/mobile/.
\24\ https://www.pewresearch.org/fact-tank/2017/04/07/disabled-americans-are-less-likely-to-use-technology/.
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After consideration of public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing the amendments to Sec. 438.10(h)(3) as proposed.
9. Disenrollment: Requirements and Limitations (Sec. 438.56)
We inadvertently included PCCMs and PCCM entities in Sec.
438.56(d)(5) related to grievance procedures. Because PCCMs and PCCM
entities are not required by Sec. 438.228, which does impose such a
requirement on MCOs, PIHPs and PAHPs, to have an appeals and grievance
process, we proposed to revise Sec. 438.56(d)(5) to delete references
to PCCMs and PCCM entities. We note that states may impose additional
requirements on their managed care plans but believe that our
regulations should be internally consistent on this point.
No public comments were received on this provision. For the reasons
outlined in the proposed rule, we are finalizing the amendment to Sec.
438.56(d)(5) as proposed.
10. Network Adequacy Standards (Sec. 438.68)
Currently, Sec. 438.68(b)(1) requires states to develop time and
distance standards for specified provider types if covered under the
contract. In the 2016 final rule, we declined to set other national
requirements or specific benchmarks for time and distance (for example,
30 miles or 30 minutes) as we believed it best not to be overly
prescriptive and we wanted to give states the flexibility to build upon
the required time and distance standards as they deemed appropriate and
meaningful for their programs and populations. (81 FR 27661). We
proposed revisions to Sec. 438.68(b)(1) to require states to use a
quantitative standard, rather than only a time and distance standard,
for providers. We explained in the proposed rule how as states have
worked to comply with the 2016 final rule, they have alerted us to
increasing concerns about the appropriateness of uniformly applying
time and distance standards to the specified provider types across all
programs. In some situations, time and distance may not be the most
effective type of standard for determining network adequacy and some
states have found that the time and distance analysis produces results
that do not accurately reflect provider availability. For example, a
state that has a heavy reliance on telehealth in certain areas of the
state may find that a provider to enrollee ratio is more useful in
measuring meaningful access, as the enrollee could be well beyond a
normal time and distance standard but can still easily access many
different providers on a virtual basis. To address states' concerns and
facilitate states using the most effective and accurate standards for
their programs, we proposed to revise Sec. 438.68(b)(1) and (2) by
deleting the requirements for states to set time and distance standards
and adding a more flexible requirement that states set a quantitative
network adequacy standard for specified provider types. We explained in
the proposed rule that quantitative standards that states may elect to
use include, but are not limited to, minimum provider-to-enrollee
ratios; maximum travel time or distance to providers; a minimum
percentage of contracted providers that are accepting new patients;
maximum wait times for an appointment; hours of operation requirements
(for example, extended evening or weekend hours); and combinations of
these quantitative measures. We encouraged states to use the
quantitative standards in combination--not separately--to ensure that
there are not gaps in access to, and availability of, services for
enrollees.
We stated that this proposed change would enable states to choose
from a variety of quantitative network adequacy standards that meet the
needs of their respective Medicaid programs in more meaningful and
effective ways, particularly for LTSS programs given the often very
limited supply of providers and the potential functional limitations of
the LTSS population. We proposed to remove Sec. 438.68(b)(2)(i) and
(ii) and reflect all LTSS network adequacy requirements in Sec.
438.68(b)(2). Currently, Sec. 438.68(b)(1) specifies the provider
types for which states are required to establish network adequacy
standards and Sec. 438.68(b)(1)(iv) requires states to establish time
and distance standards for ``specialist, adult and pediatric.'' As
noted in the 2016 final rule, we believed that states should set
network adequacy standards that are appropriate at the state level and
are best suited to define the number and types of providers that fall
into the ``specialist'' category based on differences under managed
care contracts, as well as state Medicaid programs. Therefore, we
believed it was inappropriate for us to define ``specialist'' at the
Federal level (81 FR 27661). Since the publication of the 2016 final
rule, we have received numerous questions from states and other
stakeholders about who should define the types of providers to be
included as specialists. We clarified that our proposal would give
states the authority under the final rule to define ``specialist'' in
whatever way they deem most appropriate for their programs. To make
this authority clear, we proposed to revise Sec. 438.68(b)(1)(iv) to
add ``(as designated by the state)'' after ``specialist.'' This
proposed change would eliminate potential uncertainty regarding who has
responsibility to select the provider types included in this category
for the purposes of network adequacy.
Currently, Sec. 438.68(b)(1)(viii) requires states to establish
time and distance standards for ``additional provider types when it
promotes the objectives of the Medicaid program, as determined by CMS,
for the provider type to be subject to time and distance access
standards.'' In the 2016 final rule, we finalized the language in Sec.
438.68(b)(1)(viii) because it provided the flexibility to address
future national provider workforce shortages and future network
adequacy standards (81 FR 27660). Since the 2016 final rule was
published, states have expressed concern that if we rely on this
authority and its flexibility of identifying ``additional provider
types,'' managed care plans may have to assess network adequacy and
possibly build network capacity without sufficient time. Based on this
state input, we proposed to remove Sec. 438.68(b)(1)(viii) to
eliminate any uncertainty states may have regarding this requirement.
The following summarizes the public comments received on our
proposal to amend Sec. 438.68 and our responses to those comments.
Comment: Many commenters supported the proposal to delete the
requirement for states to establish time and distance standards and
instead require any quantitative standard. Commenters stated that not
requiring the use of time and distance increases flexibility to states
and will have a positive impact on more accurately assessing access to
telemedicine. Many commenters offered recommendations including
requiring states to use a combination of data-driven quantitative
[[Page 72803]]
and qualitative standards for capacity, availability, and accessibility
that have been cooperatively developed with stakeholders to ensure
appropriate network access and patient satisfaction that is reasonable
and achievable. A few commenters recommended requiring states to
establish separate standards for rural and urban areas that align with
the Medicare Advantage managed care program. One commenter recommended
setting a maximum number of measures that can be implemented by states.
Response: While we agree that states should use a combination of
data-driven quantitative and qualitative standards that have been
developed with stakeholder input to comprehensively assess network
adequacy, we do not believe that it is appropriate to include that as a
requirement in the regulation. As we noted in the proposed rule, we
encourage states to use the quantitative standards in combination--not
separately--to ensure that there are not gaps in access to and
availability of services for enrollees. We decline to require states to
establish separate standards for rural and urban areas or to align
their standards with those used in the Medicare Advantage program, but
note that Sec. 438.68(b)(3) permits states to vary network adequacy
standards for the same provider type based on geographic areas. We also
decline to limit the number of measures a state can implement to assess
network adequacy. We believe states are in the best position to
determine the most appropriate number and type of quantitative measures
to provide them with the information needed to effectively manage their
programs, as well as fulfill their obligations under Sec. Sec. 438.206
and 438.207.
Comment: Commenters recommended requiring states and health plans
to routinely monitor their standards and network performance for
alignment with needs of the enrolled population and that states enforce
these standards through corrective action when necessary. Additionally,
commenters recommended requiring states to measure network access at
the subnetwork level, that is, when a managed care plan restricts its
enrollees to using only a portion of the plan's larger network, if
managed care plans impose subnetwork access requirements on enrollees.
Some commenters recommended requiring adequacy standards for specific
specialties and provider types. A few commenters suggested that CMS
encourage states to acknowledge differences in provider types,
particularly for pharmacies, as patients have multiple options outside
of brick-and-mortar establishments to fill prescriptions such as mail
order and home delivery, which do not lend themselves easily to
inclusion under typical network adequacy standards. Commenters stated
CMS should give states the flexibility to set different standards for
pharmacies due to their unique features.
Response: We expect states and health plans to routinely monitor
their network performance against the standards established by the
state under Sec. 438.68 as amended in this final rule; we believe that
states will set these standards in alignment with, and taking into
account, the needs of the covered population. We also expect that
states will take corrective action when necessary. The timeframes for
submission of network adequacy documentation required by Sec.
438.207(c) is a minimum, and states and managed care plans should use
network adequacy measurement as a tool that can be utilized at any time
to proactively identify trends and address issues. Under Sec. 438.68,
network adequacy standards can be set at whatever level a state deems
appropriate; thus, states that have plans utilizing subnetworks, could
establish and measure network adequacy at that level. We decline to
specify additional provider types as suggested by commenters in Sec.
438.68(b)(1) nor to add more categories or types of ``pharmacies'' in
Sec. 438.68(b)(1)(vi), but clarify here that the provider types listed
are a minimum. States are free to apply network adequacy standards to
additional provider types as they deem appropriate for their programs.
Comment: One commenter recommended stipulating that telehealth
providers may only be counted toward a managed care plan's network
adequacy when that provider is actively providing services to CHIP/
Medicaid beneficiaries in that community and the managed care plan has
demonstrated that its telehealth coverage policies and practices offer
parity to telehealth providers.
Response: We defer to each state to determine the criteria to be
applied to telehealth providers and how such providers would be taken
into account when evaluating network adequacy of the state's Medicaid
managed care plans. Section 438.68(b) does not set criteria of this
nature that states must use. Under Sec. 438.68(c)(1)(ix), states must
consider the availability and use of telemedicine when developing their
network adequacy standards. If states elect to include telehealth
providers in their network adequacy analysis, we believe that the
states will establish criteria that appropriately reflect the unique
nature of telehealth, as well as the availability and practical usage
of telehealth in their state.
Comment: Several commenters stated that CMS should, at minimum,
encourage states to consider the following when establishing standards
and measuring network adequacy: Regionalization of specialty care; co-
located service offerings; enrollee ratios by specialty; geographic
accessibility including proximity to state lines; foreseeable road
closures; wait times by specialty based on provider hours and
availability; volume of technological and specialty services available
to serve the needs of covered persons requiring technologically
advanced or specialty care; diagnostics or ancillary services; patient
experience survey data, and minimum appropriate providers available to
meet the needs of children and adults with special health care needs.
Response: We believe these factors could be valuable additions to
states' network adequacy review process, and therefore, encourage
states to consider them, although we decline to mandate their use in
Sec. 438.68. We also remind states to be cognizant of the mental
health parity provisions applicable to MCOs, PIHPs, and PAHPs in Sec.
438.910(d) when selecting measures of network adequacy. Plans also need
to be mindful of their responsibilities for mental health parity under
part 438, subpart K, in network development and evaluation. We believe
that states are in the best position to determine the most appropriate
measures for use in their programs to address the local needs of their
populations.
Comment: A few commenters recommended baseline or minimum provider
time and distance, patient-provider ratios, and timely access standards
which could be used to inform state-developed network adequacy
standards. A few commenters suggested specific minutes and miles
standards while another suggested specific appointment wait time
standards. One commenter stated that giving states too much flexibility
could result in significant variability across states thereby
increasing administrative burden for plans which operate in multiple
states.
Response: As we stated in the 2016 final rule (81 FR 27661), we
decline ``to adopt quantitative standards for time and distance.''
Underlying that 2016 final rule with regard to Sec. 438.68(b) and our
2018 proposed rule is a belief that states should be allowed to set
appropriate and meaningful quantitative standards for their respective
programs. States are in the best position to set specific quantitative
standards that
[[Page 72804]]
reflect the scope of their programs, the populations served, and the
unique demographics and characteristics of each state.'' We reiterated
this position in the proposed rule and continue to believe that we
should defer to states and not set Federal standards as prescriptive as
the commenters suggest. We understand that providing states this level
of flexibility could result in widely varied standards but given the
diversity and complexity of Medicaid managed care programs, such
variation may be warranted. We encourage states and managed care plans
to collaborate on the development of network adequacy standards and for
plans that participate in Medicaid in multiple states, to share
information with states so that best practices and lessons learned can
be leveraged to improve network adequacy measurement in all states.
States should consider using technical expert panels and multiple
sources of stakeholder input to ensure that they develop robust and
appropriate network adequacy measures for their programs.
Comment: A few commenters suggested that CMS provide additional
clarification and detail regarding ``quantitative network adequacy
standards,'' specifically asking if CMS recommends weighing variables a
certain way, whether variables will be adjusted for different provider
types that might have varying data based on their demands and location,
what will be the reporting sources for network adequacy data and if
they are self-reported, how will states ensure minimal subjectivity in
the data, and how will standards such as ``minimum percentage of
contracted providers that are accepting new patients'' be implemented.
Response: We decline to include additional specificity in Sec.
438.68 addressing considerations for state development or
implementation of network adequacy standards. We believe the list in
Sec. 438.68(c) reflects an appropriate level of detail. The
commenters' suggestions may be useful to states and we encourage states
to consider them as appropriate.
Comment: A few commenters recommended that CMS outline possible
quantifiable standards that could supplement time and distance
standards or provide additional guidance regarding the types of
quantitative network adequacy standards that could be adopted by a
state. A few commenters suggested that CMS convene a group of
stakeholders or experts to address issues regarding network adequacy
standards such as clear definition and suggested guidelines of what
constitutes network adequacy, including as they relate to populations
that access LTSS provided in the home.
Response: We decline to adopt or implement these recommendations as
we believe that providing states with the flexibility to identify the
type of quantitative standard, as well as the standard itself for
purposes of establishing and measuring network adequacy in Medicaid
managed care programs, is appropriate in light of the traditional role
of states in administering Medicaid. We continue to believe that we
should defer to states and not set overly prescriptive Federal
standards. We note here that we convened a group of states to gather
information on their best practices and lessons learned about network
adequacy. The resulting document was published in April 2017: Promoting
Access in Medicaid and CHIP Managed Care: A Toolkit for Ensuring
Provider Network Adequacy and Service Availability and is available at
https://www.medicaid.gov/medicaid/managed-care/downloads/guidance/adequacy-and-access-toolkit.pdf. This toolkit, designed as a resource
guide for state Medicaid and CHIP agency staff, is intended to: Assist
state Medicaid and CHIP agencies with implementing the requirements of
the new Federal rule related to network adequacy and service
availability standards; provide an overall framework and suggest
metrics for monitoring provider network adequacy and service
availability, as well as Medicaid and CHIP managed care enrollees'
access to care overall; and highlight effective or promising practices
that states currently use to develop and monitor provider network and
access standards, and promote access to care. We encourage states and
managed care plans to review the Toolkit as they establish standards
under Sec. 438.68.
Comment: One commenter noted that states should be required to
consult with American Indian/Alaskan Native (AI/AN) tribes to determine
quantitative network adequacy standards and specialists to which the
standards would apply, such that gaps in coverage and limitations in
access to care for AI/ANs in tribal communities are minimized.
Response: We agree that states should engage in robust stakeholder
engagement when developing their network adequacy standards to ensure
inclusion of appropriate provider types based on the needs of the
covered populations. We remind states of their obligations for tribal
consultation as specified in Section 1902(a)(73) of the Act as well as
additional guidance issued in State Medicaid Director Letter 10-001
(https://www.medicaid.gov/Federal-Policy-Guidance/downloads/SMD10001.PDF).
Comment: Many commenters disagreed with the proposal to delete the
requirement for states to set time and distance standards and instead
require a quantitative minimum access standard. Commenters stated that
current requirements already provide states with adequate flexibility
in establishing network adequacy standards and are necessary to avoid
narrowing of existing networks to ensure plans make every effort to
safeguard patient access. Several commenters expressed that not enough
time has passed since the associated provisions in the 2016 final rule
became effective to form an evidentiary basis from which to determine
whether the proposed changes are necessary.
Response: We believe that, while useful and appropriate for many
plans and areas, time and distance analysis may not always produce
results that accurately reflect provider availability within a network.
We believe that deleting the requirement to use a time and distance
standard for all of the required provider types will enable states to
choose from a variety of quantitative network adequacy standards that
meet the needs of their respective Medicaid managed care programs in
more meaningful and effective ways. We clarify that the proposed change
to Sec. 438.68(b)(1) does not require states currently using a time
and distance standard to cease using, or make changes to, their
standard. The proposed change merely offers states an option to use a
different adequacy standard if they believe that time and distance is
not the most appropriate standard for their program.
Comment: Many commenters noted that removal of current measures may
result in additional burden to providers, as well as enrollees residing
in rural areas and would increase risk and negatively impact health
outcomes for children and underserved populations.
Response: We do not believe that providing states with the option
to use a different quantitative standard than time and distance will
add provider burden or negatively impact health outcomes for children
and underserved populations. Our expectation is that if states use a
variety of quantitative measures designed to produce the most accurate
and comprehensive assessment possible of network adequacy of providers
needed for services covered under the contract, providers and enrollees
should benefit from that because adequate access to necessary providers
will have been ensured.
[[Page 72805]]
Comment: One commenter stated that the proposed rule fails to meet
the statutory requirement that the Medicaid managed care plans provide
assurances that it ``maintains a sufficient number, mix, and geographic
distribution of providers of services'' as directed in section
1932(b)(5) of the Act and that time and distance standards are the only
standards described in the proposed rule which can make these
assurances. This commenter further stated that CMS lacks the legal
authority to eliminate the statutory requirement that Medicaid managed
care plans assure the state and the Secretary that it maintains a
sufficient ``geographic distribution of providers of services.''
Response: We disagree that time and distance is the only standard
that can produce information sufficient to enable a managed care plan
to attest that it maintains a sufficient number, mix, and geographic
distribution of providers of services. Time and distance standards are
one of many quantitative measures that states and managed care plans
can use, alone or in combination, to assess provider networks and
ensure a sufficient number, mix, and distribution of providers.
Quantitative standards that states may elect to use include, but are
not limited to, minimum provider-to-enrollee ratios; maximum travel
time or distance to providers; a minimum percentage of contracted
providers that are accepting new patients; maximum wait times for an
appointment; hours of operation requirements (for example, extended
evening or weekend hours). We clarify that our proposal in no way
eliminates the statutory requirement that managed care plans assure the
state and the Secretary that it maintains a sufficient geographic
distribution of providers of services. That requirement is unaffected
by this change and implemented by Sec. 438.207.
Comment: Many commenters expressed concern with CMS' rationale for
the proposal regarding the impact of telemedicine on the efficacy of
time and distance standards (83 FR 57278). Commenters noted that
telehealth and telemedicine cannot offer the full array of services
that are otherwise available to a patient who is physically present in
a provider's office. Commenters stated that states should be required
to develop separate network adequacy standards for telemedicine, but
maintain standards for traditional service delivery, and noted that in-
person access should remain a priority when measuring network access as
many situations are not applicable for the use of technology-enabled
care.
Response: We understand the commenters' concerns but clarify that
it was not our intent to imply that telehealth offers the full array of
services that are otherwise available to a patient who is physically
present in a provider's office. We used telehealth as an example of a
situation where measuring access using a time and distance standard may
not be optimally effective to evaluate the adequacy of a provider
network and the ability of the plan to ensure access to services. We
agree that states need to balance the use of telehealth with the
availability of providers that can provide in-person care and
enrollees' preferences for receiving care to ensure that they establish
network adequacy standards under Sec. 438.68 that accurately reflect
the practical use of both types of care in their state. Under Sec.
438.68(c)(1)(ix), states must consider the availability and use of
telemedicine when developing their network adequacy standards.
Comment: Some commenters recommended requiring states to establish
standards that align with other regulatory provisions (such as those
applicable to Qualified Health Plans (QHPs) or Medicare Advantage
plans), and the Medicaid statute at section 1932(c) of the Act (cited
by the commenter as 42 U.S.C. 1396u-2(c)), which requires states to
establish standards for access to care so that covered services are
available within reasonable timeframes and in a manner that ensures
continuity of care and adequate primary care and specialized services
capacity. The commenters stated that alignment with these provisions
would ensure reasonable timelines for access to care and continuity of
care. A few commenters recommended requiring states, contracted managed
care plans, and pharmacy benefit managers to follow Medicare Part D
regulatory guidance on access to specialty medications.
Response: We decline to require states to align their network
adequacy standards with the standards applicable to other programs
(such as standards for QHPs, Medicare Advantage or Medicare Part D). We
believe that the states establishing and assessing their managed care
plans' networks using the standards required in Sec. 438.68 will
ensure compliance with the statute. However, we clarify that Sec.
438.68 is consistent with section 1932(c)(1)(A)(i) of the Act, which
requires states to develop and implement a quality strategy that
includes standards for access to care so that covered services are
available within reasonable timeframes and that ensure continuity of
care. We believe that the managed care regulations at Sec. 438.206,
which requires that states ensure that all services covered under the
contract are available and accessible to enrollees, and Sec. 438.68,
which requires states to develop network adequacy standards, work
together to ensure that states meet their obligations under the Act. We
acknowledge that states may find some of those standards to be
appropriate for their Medicaid managed care programs and that adopting
existing measures may reduce the amount of time states have to spend
developing standards, as well as reduce operational burden on managed
care plans that also participate in other programs. States should
review standards used by other programs and evaluate their potential
usefulness in their Medicaid managed care programs. However, we believe
that state flexibility on this point is paramount and will not impose
alignment as a requirement.
Comment: Several commenters supported the proposal to give states
the authority to define ``specialist'' in whatever way they deem
appropriate for their programs. Some commenters offered suggestions for
specific types of specialists that we should require states to include
in their definition of ``specialist.'' A few commenters recommended
that CMS provide guidance to states on specialties that should be
considered or included in each category listed in Sec. 438.68(b)(1)
and prioritize provider types to help avoid undue administrative burden
on plans due to variability across states.
Response: We appreciate the comments in support of our proposal to
clarify that states have the authority to designate ``specialists'' to
which network adequacy standards will apply under Sec. 438.68(b)(1).
We decline to identify additional specific specialties or provider
types for states to include in this category. We believe states are
best suited to identify the provider types for which specific access
standards should be developed in order to reflect the needs of their
populations and programs. We note that States' network adequacy
standards are included in their quality strategies and are subject to
publication and public comment consistent with existing transparency
provisions in Sec. 438.340(c)(1).
Comment: Many commenters disagreed with the proposal to allow
states to define ``specialist'' in whatever way they deem appropriate
and recommended that CMS identify specific provider types as
specialists. One commenter stated that CMS should define specialists to
include providers who focus on a specific area of health and include
sub-specialists who have additional training beyond that of a
specialist. Some commenters
[[Page 72806]]
recommended requiring states to include specific specialists including
hematologists, adult and pediatric oncologists, surgical specialists,
pulmonologists, allergists, and emergency physicians. One commenter
recommended that CMS revise its proposed language to state ``(as
designated by the state in a manner that ensures access to all covered
services),'' which would reiterate the need for states to ensure that
managed care plan's provider networks guarantee full access to all
benefits covered under the state plan and are representative of the
types of providers that frequently provide services to consumers within
their corresponding service areas.
Response: We understand commenters' concerns but do not agree CMS
should define ``specialist'' in Sec. 438.68(b)(1)(iv). As noted in the
2016 final rule on this topic, we believe that states should set
network adequacy standards that are appropriate at the state level and
are best suited to designate the number and types of providers that
fall into the ``specialist'' category based on differences under
managed care contracts, as well as state Medicaid programs; therefore,
we believe it would be inappropriate for us to identify at the Federal
level specific specialists for which each state must establish an
access standard (81 FR 27661). We expect states to apply network
adequacy standards to all provider types and specialties necessary to
ensure that all services covered under the contract are available and
accessible to all enrollees in a timely manner as required by Sec.
438.206.
Comment: Commenters noted that allowing states to define
``specialist'' may inadvertently limit access for enrollees to covered
services, result in higher costs if certain categories of specialists
are no longer in-network, lead to inconsistent application of the
policy when patients see physicians in another state that defines
specialists in different ways, and decrease quality of care in states
that create standards which allow less qualified providers (for
example, nurse practitioners in lieu of doctors) to meet ``specialist''
criteria. One commenter expressed concern that allowing states to
define ``specialist'' could negatively affect national quality measures
that rely heavily on certain provider types rendering care to count
towards numerator compliance.
Response: We do not agree that allowing states to designate which
specialists are subject to the required network adequacy standards is
likely to limit access, increase costs, lead to lower quality of care,
promote inconsistent application due to differing designations among
states, or affect the accuracy of national quality measures. Network
adequacy standards are utilized by managed care plans and states to
assess network adequacy at an aggregate level on a periodic basis.
Meaning, network adequacy standards are not used to determine the
availability of, or authorize care by, a particular type of provider
for an individual enrollee. We believe that Sec. 438.206 is
sufficiently clear on states' and managed care plans' responsibilities
for ensuring that all covered services are available and accessible to
enrollees in a timely manner, including specifically addressing
situations when an enrollee's managed care plan's network is unable to
provide necessary services in Sec. 438.206(b)(4). Managed care plans
must necessarily develop their networks in ways that enable them to
comply with all of their obligations under Sec. Sec. 438.206 and
438.207. Lastly, although we do not see a correlation between the
specialists a state chooses to include for network adequacy purposes
and provider types necessary for calculating quality measures, states
can include specialists that are implicated in quality measure
calculations if they so choose.
Comment: Several commenters suggested that the final rule should
instruct states that their designations of specialists for purposes of
Sec. 438.68(b), and any network adequacy standards, must be consistent
with existing state laws regarding licensure and certification, as well
as the Medicaid managed care nondiscrimination regulation which
prohibits managed care plans from discriminating against providers
based on their licensure or certification.
Response: States and managed care plans must comply with all
applicable Federal and state laws as specified in Sec. Sec. 438.3(f)
and 438.100(d) and provider discrimination is specifically prohibited
in Sec. Sec. 438.12 and 438.214. Specifically, Sec. 438.12 prohibits
managed care plans from discrimination in the participation,
reimbursement, or indemnification of any provider who is acting within
the scope of his or her license or certification under applicable state
law, solely on the basis of that license or certification and Sec.
438.214(c) specifies that managed care plans are prohibited from
discriminating against providers that serve high-risk populations or
specialize in conditions that require costly treatment. We do not
believe that the requirement on states to establish network adequacy
standards in Sec. 438.68(b) contravenes or limits these other
provisions, or that an amendment to Sec. 438.68 to incorporate similar
requirements about non-discrimination is necessary or appropriate.
Comment: A few commenters agreed with the proposal to eliminate the
requirement for states to establish time and distance standards for
``additional provider types'' identified by CMS because it will foster
experimentation and innovation to improve care delivery as well as
streamline assessment of network adequacy.
Response: We believe removing the requirement for states to
establish time and distance standards for ``additional provider types''
identified by CMS will enable states to recognize and react more
quickly to local needs and developing trends in care.
Comment: Several commenters disagreed with the proposal to no
longer require states to establish time and distance standards for
``additional provider types when it promotes the objectives of the
Medicaid program.'' Commenters stated that the current requirement
gives CMS an efficient way to address changes in Medicaid benefits,
workforce shortages, or concerns regarding access to care without going
through the rulemaking process, which impairs CMS' ability to respond
to emergent concerns. Several commenters suggested that rather than
eliminating the provision, it could be amended to provide states with
advanced notice (specifically one year) before including a new provider
type. A few commenters stated that any concerns regarding
implementation timelines could be addressed in informal guidance or by
allowing states to create implementation standards within certain
parameters established through agency instruction.
Response: We believe that deleting Sec. 438.68(b)(1)(viii) removes
an unnecessary level of administrative burden and makes it clear that
designating additional provider types that are subject to network
adequacy analysis is a state responsibility. This revision is
consistent with the other revisions proposed at Sec. 438.68(b)
introductory text and (b)(1)(iv). We considered proposing a specific
timeline for advance notice instead of deleting Sec.
438.68(b)(1)(viii) completely, but ultimately concluded that that
approach was not consistent with the overall goal and purpose of Sec.
438.68(b).
Comment: Several commenters supported the proposed network adequacy
requirements allowing states to use any quantitative standard when
developing network adequacy standards for long term services and
supports programs, specifically noting appreciation for flexibility in
determining how networks are developed and stated that CMS'
[[Page 72807]]
emphasis on states developing standards that ensure beneficiary access
and provider availability rather than just time and distance is
appropriate.
Response: We appreciate the comments in support of our revisions to
reorganize Sec. 438.68(b)(2) to reflect consistency with the
requirement in Sec. 438.68(b)(1) for states to develop network
adequacy standards for specified provider types.
Comment: Commenters suggested that CMS develop meaningful and
appropriate network adequacy standards (including national standards)
for LTSS providers that recognize the realities of various settings and
locations in which these services are delivered as well different
provider types (agency employees versus independent personal care
workers). One commenter also stated that any national standards
developed by CMS should be subject to a stakeholder notice and comment
period and ensure that standards support consumer choice of providers
and community living. One commenter encouraged CMS to provide states
with increased guidance rather than less, including, network adequacy
metrics based on choice standards, service fulfillment standards, and
provider ratios. The commenter continued that guidance should ensure
that networks for LTSS services in which the provider travels to the
enrollee are just as robust as those in which the enrollee travels to
the provider.
Response: We decline to set national network adequacy standards. We
believe it is particularly important that states have flexibility to
set network adequacy standards customized for their LTSS programs given
the wide variation in program design, the often very limited supply of
providers, the provision of services outside of an office setting, and
the potential functional limitations of the LTSS population. We
encourage states to solicit stakeholder input in the development of
their LTSS network standards to ensure that they adequately address
situations when enrollees travel to the provider as well as when the
provider travels to the enrollee. CMS issued guidance on setting
network adequacy standards in April 2017: Promoting Access in Medicaid
and CHIP Managed Care: A Toolkit for Ensuring Provider Network Adequacy
and Service Availability and is available at https://www.medicaid.gov/medicaid/managed-care/downloads/guidance/adequacy-and-access-toolkit.pdf. This toolkit, designed as a resource guide for state
Medicaid and CHIP agency staff, includes a specific chapter on LTSS.
See Chapter V ``Network and Access Standards and Monitoring for Special
Provider and Service Types.''
Comment: Several commenters disagreed with the proposal to delete
the requirement for states to set time and distance standards for LTSS
providers and stated that such standards are highly beneficial to
guiding how LTSS network adequacy standards are developed and judged,
and that these standards are particularly relevant for LTSS given the
provider shortages for direct-care staff in many areas. Commenters
further stated that time and distance standards help ensure that there
are providers available in a given area and provide home care agencies,
managed care plans, and state agencies with a standard that is easy to
use and understand to assess whether provider shortages are due to long
travel times that require additional compensation. Another commenter
stated that for nursing facility and other institutional-type LTSS
providers, time and distance standards also ensure that enrollees are
able to maintain their relationships with their community and family
during their time in a facility and that if an enrollee has to enter a
facility far way (either in time or distance), the enrollee is less
likely to be able to maintain the support networks they will ultimately
need to successfully transition back into the community.
Response: We agree that time and distance may be useful network
adequacy standards for certain provider types and we clarify that our
proposed revisions do not prohibit nor discourage the use of time and
distance as a network adequacy standard. Our proposed revisions merely
remove the requirement that time and distance standards be used as the
standard for all provider types. States and managed care plans can
continue using time and distance--alone or in conjunction with other
standards such as enrollee-to-provider ratios--for any provider types
that they deem appropriate. Nursing facilities and other institutional-
type facilities that provide LTSS are not specifically included in
Sec. 438.68(b)(1); as such, the development and application of network
adequacy standards to these provider types is at state discretion
because we do not designate the LTSS provider types for which specific
evaluation standards must be developed and used in paragraph (b)(2);
identifying specific provider types at the Federal level is unnecessary
as states have the requisite knowledge and expertise about the services
covered under their managed care plans to know which provider types
should be individually evaluated for access. We agree that facilitating
the maintenance of the support networks that will help enrollees
transition back to and stay in the community after an institutional
stay is important and we urge states and managed care plans to consider
this in the development of their network adequacy standards.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.68 as proposed.
11. Adoption of Practice Guidelines (Sec. 438.236)
In the 2016 final rule, we attempted to remove the terminology
``contracting health care professionals'' throughout the rule because
it is not defined in any regulation or statute and we believed that use
of ``network provider'' as defined in Sec. 438.2 was more accurate. We
inadvertently missed removing the term at Sec. 438.236(b)(3). To
correct this, we proposed to remove the words ``contracting health care
professionals'' and insert ``network providers'' in Sec.
438.236(b)(3).
The following summarizes the public comments received on our
proposal to amend Sec. 438.236 and our responses to those comments.
Comment: One commenter supported the proposed language change to
remove the words ``contracting health care professionals'' and insert
``network providers'' in Sec. 438.236(b)(3).
Response: We thank the commenter for the support. Consistent Use of
``network provider,'' which is a defined term in Sec. 438.2 promotes
clarity in the regulations.
After consideration of public comments and for the reasons
articulated in the proposed rule and our responses to comments, we will
finalize Sec. 438.236(b)(3) as proposed.
12. Enrollee Encounter Data (Sec. 438.242(c))
In Sec. 438.242(b)(3) of the final rule, we required that all
contracts between a state and an MCO, PIHP, or PAHP provide for the
submission by the managed care plan of all enrollee encounter data that
the state is required to submit to us under Sec. 438.818. Since the
final rule, some states and managed care plans have expressed concern
about, and been hesitant to submit, certain financial data--namely, the
allowed amount and the paid amount. Some managed care plans consider
this information to be proprietary and inappropriate for public
disclosure. We explained in the proposed rule that we understand their
concern but emphasize the importance of these data for proper
[[Page 72808]]
monitoring and administration of the Medicaid program, particularly for
capitation rate setting and review, financial management, and encounter
data analysis. Additionally, the allowed and paid amounts of claims are
routinely included on explanation of benefits provided to enrollees;
thus making this information already publicly available. To clarify the
existing requirement and reflect the importance of this data, we
proposed to revise Sec. 438.242(c)(3) to explicitly include ``allowed
amount and paid amount.'' We explained in the proposed rule that the
proposed change to Sec. 438.242(c)(3) would in no way change the
rights of Federal or state entities using encounter data for program
integrity purposes to access needed data. Nor would it change the
disclosure requirements for explanation of benefits notices (EOBs) or
other disclosures to enrollees about their coverage.
In the proposed rule, we noted that the health insurance industry
has consistently stated that the contractual payment terms between
managed care plans and providers are confidential and trade secret
information and that the disclosure of this information could cause
harm to the competitive position of the managed care plan or provider.
We also stated that we would treat data as trade secret when the
requirements for such a classification are met. We stated that we
recognize the significance of the volume of data collected in the T-
MSIS and take our obligations seriously to protect from disclosure
information that is protected under Federal law. Our goal in proposing
to explicitly name allowed and paid amount in Sec. 438.242(b)(3) is to
ensure that the scope of the collection of encounter data is clear. We
affirmed our commitment to safeguarding data protected by Federal law
from inappropriate use and disclosure.
The following summarizes the public comments received on our
proposal to amend Sec. 438.242(c) and our responses to those comments.
Comment: Many commenters supported the proposed revision to Sec.
438.242(c)(3) and agreed that more accurate and complete Medicaid data
and transparency are needed and that data on allowed and paid amounts
are critical to monitoring and administering the Medicaid program.
Commenters noted that this clarification will strengthen the ability of
state and Federal officials to monitor managed care plan payments to
network providers for their effect on access to care, is consistent
with statutory provisions regarding reporting of encounter data
established in the Patient Protection and Affordable Care Act of 2010
(PPACA) (Pub. L. 111-148, enacted March 23, 2010 as amended by the
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152,
enacted March 30, 2010)) (``Affordable Care Act''),\25\ and will help
to identify potential fraud, waste, and abuse. A few commenters
supported this proposal because they believe that managed care plans
erroneously state that this information is trade secret. Several
commenters stated that the proposed revision to Sec. 438.242(c) will
improve the accuracy, transparency, and accountability of encounter
data.
---------------------------------------------------------------------------
\25\ Sections 6402(c)(3) and 6504(b)(1) of the Affordable Care
Act reorganize, amend, and add to sections 1903(i)(25) and
1903(m)(2)(A)(xi) of the Act by adding provisions related to routine
reporting of encounter data as a condition for receiving Federal
matching payments for medical assistance.
---------------------------------------------------------------------------
Response: We agree that it is important for states and us to have
complete and accurate encounter data for proper program administration.
We appreciate the support and recognition of this important program
policy from commenters.
Comment: Several commenters requested clarifications about the
proposed changes to Sec. 438.242(c). A few commenters requested more
guidance on the definitions of ``allowed amount'' and ``paid amount'',
and one commenter recommended that CMS seek input from managed care
plans and other stakeholders on the proposed definitions. A few
commenters requested clarification on how the requirement to report
allowed and paid amounts will apply to subcapitated arrangements with
providers that do not have clear payments for individual services and
do not use a per service payment structure. Specifically, a few
commenters requested clarification regarding whether the allowed and
paid amounts that the state is required to report to CMS are the
amounts the MCO, PIHP, or PAHP or subcontractor allowed and paid to the
direct healthcare provider.
Response: We understand the request for additional clarification on
how the allowed and paid amount fields should be populated in T-MSIS
submissions. For provider claims paid by the managed care plan or
subcontractor on a FFS basis, ``allowed amount'' and ``paid amount''
have the same meaning as used for completing EOBs sent to enrollees;
that is, the allowed amount reflects the amount the managed care plan
or subcontractor expects to pay for a service based on its contract
with the provider and the paid amount reflects the amount the managed
care plan or subcontractor actually sends to the provider after
adjudicating the claim. This would be the same for claims paid by the
state Medicaid agency or a managed care plan.
We acknowledge that there are many types of payment arrangements
including other than a per service payment arrangement, used in
Medicaid managed care and that data fields in T-MSIS may need to be
populated in different ways to accurately capture the data associated
with the different arrangements. It is critical that Transformed
Medicaid Statistical Information System (T-MSIS) data reflect all data
associated to services provided to managed care enrollees, including
services provided by subcontractors. For example, comprehensive data on
pharmacy services subcontracted to a pharmacy benefit manager must be
submitted to T-MSIS with the same level of accuracy and completeness as
data for claims paid by the managed care plan directly. The
requirements for populating fields in T-MSIS are documented in a data
dictionary and accompanying guidance issued by CMS. We also have
technical assistance available for states that have questions about
submitting T-MSIS data. For more information, visit: https://www.medicaid.gov/medicaid/data-and-systems/macbis/tmsis/index.html. The
dynamic nature of health care payment arrangements necessitates that we
use flexible and rapid methods for distributing T-MSIS information to
states in the most efficient and effective manner. As such, including
overly specific details to address every type of payment arrangement in
a regulation is not prudent nor feasible. States should consult T-MSIS
requirements and guidance documents and request technical assistance as
needed to ensure that their T-MSIS submissions meet current standards.
Comment: One commenter stated that the allowed amount is not needed
for administering the Medicaid program because it is not necessary for
invoicing Federal rebates or capturing Federal reimbursement for
Medicaid expenditures. Another commenter stated that the capitation
rates should be set based on the paid amount, not the allowed amount,
and that if CMS has concerns about amounts paid, it should look towards
addressing policies that drive up costs, such as state-mandated
formularies or any willing provider provisions, and adopt proven
benefit design tools used in the commercial market to keep costs down.
Response: We disagree with the commenter that the information about
[[Page 72809]]
the allowed amount should not be collected. While allowed amount data
submitted by managed care plans to states may not be utilized as
routinely as paid amount data in setting capitation rates or oversight
activities, it nonetheless provides states and CMS insight into
important aspects of a managed care plan's network, namely, its fee
schedule and contractually negotiated rates. Analyzing allowed amount
data can facilitate plan comparisons that are not possible with paid
amounts as well as provide insight into possible causes for access
issues within a plan's network. We clarify here that we did not intend
to convey in our proposal that we had ``concerns with paid amounts,''
but rather to clarify the meaning of ``all enrollee encounter data'' in
Sec. 438.242(c)(3) as finalized in the 2016 final rule by explicitly
stating the mandatory submission of encounter data includes allowed
amount and paid amount data. Under Sec. 438.818, states must submit
all enrollee encounter data to CMS; Sec. 438.242(c) requires states to
require Medicaid managed care plans to submit to the state the same
encounter data that must be submitted in their T-MSIS submissions to
us. As explained in the 2016 final rule, Sections 6402(c)(3) and
6504(b)(1) of the Affordable Care Act reorganize, amend, and add to the
provisions of sections 1903(i)(25) and 1903(m)(2)(A)(xi) of the Act by
adding provisions related to routine reporting of encounter data as a
condition for receiving Federal matching payments for medical
assistance. Section 1903(i)(25) of the Act mandates that, effective
March 23, 2010, Federal matching payments to the states must not be
made for individuals for whom the state does not report enrollee
encounter data to us. The PPACA amendment to section 1903(m)(2)(A)(xi)
of the Act specifies that the obligation for an MCO to report ``patient
encounter data'' was, for contract years after January 1, 2010, to the
state in a timeframe and level of detail specified by the Secretary.
The data that must be collected and reported under these provisions is
the same, but the population covered by section 1903(i)(25) of the Act,
compared to the population covered by section 1903(m)(2)(A)(xi) of the
Act, included enrollees of PIHPs and PAHP. (81 FR 27737). These
statutory changes or the data required from Medicaid managed care plans
were reflected in Sec. Sec. 438.242 and 438.818 of the 2016 final
rule.
Comment: Several commenters appreciated CMS' commitment to
safeguarding data protected by Federal law from inappropriate use and
disclosure but recommended that CMS reinforce this assurance in
regulatory language by including an affirmative statement in Sec.
438.242(c) that would make the submissions subject to applicable
Federal and state confidentiality laws and regulations. A few
commenters stated that they appreciate CMS' recognition that
contractual payment terms between managed care plans and providers may
be confidential and trade secret information, the disclosure of which
could potentially harm competition among managed care plans and
providers.
Response: We decline to include additional regulatory text
indicating the applicability of Federal and state laws and regulations
to the collection of enrollee encounter data that states are required
to submit to T-MSIS. We exercise due diligence to comply with all
applicable laws and regulations with respect to all data in T-MSIS. We
do not believe that this final rule is the appropriate place to discuss
fully the scope and applicability of various confidentiality and data
protection laws to encounter data that must be submitted under sections
1903(i)(25) and 1903(m)(2)(A)(xi) of the Act. If, and when, there is a
request for disclosure of this data (or if we seek to disclose without
a request), we will evaluate the applicable law and whether encounter
data submissions are protected from release or disclosure under Federal
law. The facts of each situation, including the age and scope of the
data, are necessarily key components in any such analysis.
Comment: A few commenters disagreed that the allowed amount is
already in the public domain in the form of EOBs because EOBs are not
public documents. Several commenters stated that the allowed amount is
considered proprietary information by most plans and is not appropriate
for public disclosure.
Response: We understand commenters' concern; however, there are no
restrictions on an enrollee's use or disclosure of their EOBs. We
recognize the significance of managed care plans' concerns and commit
to treating these data as confidential under applicable law when the
requirements for such treatment are met. We also acknowledge the
significance of the large volume of data collected in T-MSIS as opposed
to the very limited amount of data available from individual EOBs, and
the potential uses the quantity would enable. We take our obligations
seriously to safeguard information that is protected under Federal law
from inappropriate use and disclosure.
Comment: One commenter urged CMS to not only ensure that
contractual payment terms are safeguarded from disclosure, but also
stated that aggregated data that could be used to reverse engineer
contractual payment terms is safeguarded. Another commenter requested
additional information about the measures CMS uses or proposes to use
to safeguard the allowed and paid amount data and recommended that CMS
apply stringent safeguards in how this information is used to ensure
that this data is only used for its intended purposes and not in
manners that have the potential to adversely impact competition for
plans and providers. One commenter requested that the final rule
clarify that any additional disclosure of allowed and paid amounts,
beyond that made to the state and CMS, is at the discretion of the
managed care plan. One commenter stated that they discourage requiring
submission of allowed and paid amounts, and that at a minimum, managed
care plans need to better understand the purpose of this data
collection and CMS' intended use for this data.
Response: We understand the concern that the large quantity of data
maintained in T-MSIS could be used to reverse engineer payment terms
and fee schedules. Safeguarding information that is protected under
Federal law from inappropriate use and disclosure is a priority for us.
However, there are adequate protections in other Federal law (for
example, exemption 4 in the Freedom of Information Act, 5 U.S.C.
552(b)(4), the Trade Secrets Act, 18 U.S.C. 1905) so adding a new
regulatory protection here is not appropriate. Further, we decline to
include regulatory text giving plans discretion over the use and
distribution of T-MSIS data. CMS will comply with all applicable
Federal requirements associated with use and disclosure of data. As we
stated in the proposed rule, we consider encounter data invaluable for
proper monitoring and administration of the Medicaid program,
particularly for capitation rate setting and review, financial
management, program integrity, and utilization analysis. As we
explained in SMD 13-004 (https://www.medicaid.gov/federal-policy-guidance/downloads/smd-13-004.pdf), our goal is for T-MSIS data to be
used for initiatives such as to study encounters, claims, and
enrollment data by claim and beneficiary attributes; analyze
expenditures by medical assistance and administration categories;
monitor expenditures within
[[Page 72810]]
delivery systems and assess the impact of different types of delivery
system models on beneficiary outcomes; examine the enrollment, service
provision, and expenditure experience of providers who participate in
our programs; and observe trends or patterns indicating potential
fraud, waste, and abuse in the programs so we can prevent or mitigate
the impact of these activities. We are committed to collecting accurate
and comprehensive data, meeting our obligations to safeguard that data,
and using it to reach our goals to improve the Medicaid program and the
health outcomes of its beneficiaries.
Comment: A few commenters expressed concerns about the impact of
reporting the allowed amount on costs associated with modifying
encounter data collection and IT systems for states and health plans.
One commenter stated that the allowed amount is not currently an
available field in either the National Council for Prescription Drug
Programs (NCPDP) standard reporting layouts frequently used by states
as the basis for capturing their pharmacy encounters, or in the 837 ASC
\26\ X12 standards used to report professional claims. One commenter
recommended that instead of requiring the allowed amount to be reported
with enrollee encounter data, CMS should use the approach taken by the
837 ASC X12 workgroup that permits calculation of the allowed amount
from the fields needed to calculate it in the data already captured in
the current layout. Commenter stated that calculating allowed amount in
this manner would promote greater consistency in reporting and allow
CMS to achieve its goal of more accurately identifying administrative
costs.
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\26\ Accredited Standards Committee.
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Response: We believe the commenter is referring to the pre-
adjudicated allowed amount field. If so, we understand that the allowed
amount is no longer a required field in 837 ASC X12 for pre-adjudicated
claims. However, Loop 2400 HCP02 (Priced/Repriced Allowed Amount) data
element does still exist in the 5010 format and is applicable to post-
adjudicated claims. The allowed amount added by the managed care plan
or subcontractor during adjudication is the data that should be
submitted to T-MSIS. We clarify here that we are not requiring the
creation of new fields in any of the standardized transaction formats
referenced in Sec. 438.242(c)(4); existing fields should be populated
consistent with the T-MSIS data dictionary. As such, we do not believe
states nor managed care plans will need to invest significant, if any,
IT resources to comply. We decline to adopt a requirement for a
calculated allowed amount over one populated when the claim is
adjudicated.
Comment: A few commenters recommended ways to implement the
proposed change to Sec. 438.242. Commenters stated that, given the
variety of contracting and subcontracting arrangements, consultation
should occur between Medicaid plans, states, and CMS on how best to
define and implement this provision to ensure that all appropriate
costs are captured for rate development. A few commenters recommended
that there be sufficient time for implementation because the use of new
fields in the encounter system will require considerable programming
for point of service claims, and one commenter requested a future
effective date for these changes.
One commenter recommended making reporting the allowed amount
optional. One commenter recommended that CMS work with healthcare
stakeholders to create industry standard formats for encounter file
submissions and seek public input through future formal rulemaking.
Commenters also recommended that CMS finalize any such industry
standard formats with sufficient time and definitive guidance in
advance of required use.
Response: The size and scope of today's Medicaid programs need
robust, timely, and accurate data to ensure the highest financial and
program performance, support policy analyses, and maintain ongoing
improvement that enables data-driven decision making. Encounter data
are the basis for any number of required or voluntary activities,
including rate setting, risk adjustment, quality measurement, value-
based purchasing, program integrity, and policy development. Since
1999, states have been required to electronically submit data files to
MSIS, including eligibility and paid claims files. The paid claims
files have always required the same fields of data that are present on
a claim form or standardized electronic format. Submitting allowed and
paid amounts for encounter data to CMS is not a new requirement for
states, although their compliance rates of completeness and accuracy
have varied widely. Congress enacted sections 6402(c)(3) and 6504(b)(1)
of the PPACA which reorganized, amended, and added to the provisions of
sections 1903(i)(25) and 1903(m)(2)(A)(xi) of the Act by adding
provisions related to routine reporting of encounter data as a
condition for receiving Federal matching payments for medical
assistance. Section 1903(i)(25) of the Act mandates that, effective
March 23, 2010, Federal matching payments to the states must not be
made for individuals for whom the state does not report enrollee
encounter data to us. Further, section 1903(m)(2)(A)(xi) of the Act
specifies that an MCO must report ``patient encounter data'' for
contract years after January 1, 2010, to the state in a timeframe and
level of detail specified by the Secretary. We do not believe that the
clarification we are adding to the regulation (by incorporating
explicit wording that the allowed amount and paid amount are part of
the required encounter data reporting) for the purpose of emphasizing
the importance of accurate and complete submission by Medicaid managed
care plans necessitates additional consultation or significant
implementation efforts. We do not believe there is a need for one
industry standard reporting format solely for encounter data
submissions. We addressed data standardization and file formats for
submission of encounter data in the 2016 final rule in Sec.
438.242(c)(4), which specifies submission of encounter data to the
state in standardized ASC X12N 837 and NCPDP formats, and the ASC X12N
835 format as appropriate. As noted previously in our responses to
comment on the proposal to amend Sec. 438.242(c)(3), we believe that
populating the existing field in the X12N 837 and NCPDP formats, and
the ASC X12N 835 format will not entail significant burden.
Generally, all regulations have future effective dates, and we do
not believe we need to set an additionally delayed or unique compliance
date for Sec. 438.242(c)(3) as revised in this final rule given the
lengthy history of this requirement.
After consideration of the public comments and for the reasons
articulated in the proposed rule and our responses to comments, we are
finalizing Sec. 438.242(c) as proposed.
13. Medicaid Managed Care Quality Rating System (MAC QRS) (Sec.
438.334)
In the 2016 final rule (81 FR 27686), we established at Sec.
438.334 the authority to require states to operate a Medicaid managed
care quality rating system (QRS) and incorporated this provision in its
entirety into CHIP at Sec. 457.1240(d). That regulation provides that
we, in consultation with states and other stakeholders, and after
providing public notice and opportunity to comment, will identify
performance measures and a methodology for a Medicaid and CHIP managed
care quality rating system. That regulation
[[Page 72811]]
also provides that states will have the option to use the CMS-developed
QRS or establish an alternative state-specific QRS (``state alternative
QRS''), provided that the state alternative QRS produces substantially
comparable information about plan performance. Under the regulation,
any state alternative QRS is subject to CMS approval.
In the 2016 final rule, we used the acronym Medicaid Managed Care
Quality Rating System QRS (MMC QRS). In this final rule, we refer to
the Medicaid and CHIP Managed Care Quality Rating System (``MAC QRS''),
as both Medicaid and CHIP are subject to the QRS regulations.
In the November 14, 2018 proposed rule, we proposed to make several
revisions to the QRS regulations at Sec. 438.334. These proposed
revisions were intended to better balance the goal of facilitating
inter-state comparisons of plan performance and reducing plan burden
through standardization with the need for state flexibility and the
practical challenges inherent in producing comparable ratings across
heterogeneous states. We proposed no changes to Sec. 457.1240(d),
therefore all proposed changes to Sec. 438.334 would be incorporated
by Sec. 457.1240(d)'s cross-reference and apply equally to both a
state's Medicaid and CHIP programs.
Specifically, we proposed to revise the requirement in Sec.
438.334(c)(1)(i) (redesignated at paragraph (c)(1)(ii) in this final
rule) to make explicit our intention to take feasibility into account
when requiring that the information yielded by a state alternative QRS
be substantially comparable to the information yielded by the CMS-
developed QRS, by taking into account differences in state programs
that may complicate comparability. We also proposed to add a new
paragraph (c)(4) to explicitly provide that we would engage with states
and other stakeholders in developing sub regulatory guidance on what it
means for an alternative QRS to yield substantially comparable
information, and how a state would demonstrate it meets that standard.
Current Sec. 438.334(b) provides that CMS ``will identify
performance measures and a methodology'' for the MAC QRS. We proposed
to revise paragraph (b) to provide that CMS will develop a MAC QRS
framework, including the identification of a set of mandatory
performance measures and a methodology.
We proposed to redesignate Sec. 438.334(c)(1)(i) and (ii) as
paragraphs (c)(1)(ii) and (iii), respectively, and proposed to add new
paragraph (c)(1)(i) to require a state alternative QRS to include the
mandatory measures identified in the framework. We noted that states
will retain flexibility to include additional measures important to
serving their quality goals and meeting the needs of their
beneficiaries and stakeholder communities. The purpose of the proposed
change is to facilitate comparable ratings while continuing to provide
flexibility for states to include additional measures important to
serving their beneficiaries and achieving their quality goals. We also
noted that, as the MAC QRS and our recently launched Medicaid and CHIP
Scorecard serve related goals, we expect to coordinate the measures
selected for the Scorecard and those selected for the CMS-developed
QRS. The Scorecard includes measures from the Child and Adult Core Sets
that CMS identifies and publishes pursuant to sections 1139A and 1139B
of the Act and that are voluntarily reported by states, as well as
federally-reported measures in three areas: State health system
performance, state administrative accountability, and Federal
administrative accountability. Both the Child and Adult Core Sets and
the Scorecard are reviewed annually and are expected to continue to
evolve. More information about the Scorecard is available at https://www.medicaid.gov/state-overviews/scorecard/index.html.
We proposed to revise Sec. 438.334(b) to provide that the CMS-
developed QRS will align where appropriate with the Qualified Health
Plan (QHP) quality rating system developed in accordance with 45 CFR
156.1120, the Medicare Advantage 5-Star Rating System, and other
related CMS quality rating approaches. We noted that alignment would be
determined as part of the ongoing development of the proposed measures
and methodologies and would be addressed in the MAC QRS-specific
rulemaking.
Finally, we proposed to revise the current introductory language in
Sec. 438.334(c)(1) introductory text and (c)(1)(ii) to eliminate the
requirement that states obtain prior approval from CMS before
implementing a state alternative QRS to reduce the upfront
administrative burden on states and speed time to implementation.
Instead of prior CMS approval, we proposed at Sec. 438.334(c)(3) that
states would, upon CMS request, submit the following information to CMS
to demonstrate compliance with Sec. 438.334(c): The state's
alternative QRS framework, including the performance measures and
methodology to be used in generating plan ratings; documentation of the
public comment process described in Sec. 438.334(c)(2)(i) and (ii),
including issues raised by the Medical Care Advisory Committee and the
public, any policy revisions or modifications made in response to the
comments, and the rationale for comments not accepted; and other
information specified by CMS. We noted that as part of our general
oversight responsibilities, we would still review states' alternative
QRS and work with states on any identified deficiencies. We described
the proposed approach as similar to the oversight process we use for
states' Medicaid eligibility verification plans (Sec. 435.945(j)), and
CHIP eligibility verification plans (Sec. 457.380(i)), which require
states to submit eligibility verification plans to CMS upon request, in
a manner and format prescribed by CMS. However, our proposal for the
state alternative QRS would not have required prior approval.
The following summarizes the public comments received on our
proposal to amend Sec. 438.334 and our responses to those comments.
Comment: We received many comments supporting the establishment of
a minimum mandatory measure set that would be applicable across both
the CMS-developed QRS and state alternative QRS. A number of commenters
stated that this proposal will reduce administrative burden on plans
and providers and allow for more easily comparable data across states.
Several commenters supported the proposal to apply the minimum
mandatory measure set across the CMS-developed QRS and state
alternative QRS, noting this will establish a level of consistency
across states but continue to give states additional flexibility to add
measures important to the state. One commenter supported coordinating
the minimum set with Scorecard and offered to work with CMS on
exploring how the QRS and Scorecard can support one another.
Response: We thank commenters for their support and are finalizing
the proposed policies for (1) adoption by CMS of a minimum mandatory
measure set within the full MAC QRS measure set and of a methodology
developed in accordance with Sec. 438.334(b) with some modifications
as discussed in this section of this final rule; and (2) application of
the minimum mandatory measure set to state alternative QRS in Sec.
438.334(c)(1)(i).
Comment: A number of commenters recommended that the minimum set of
mandatory measures should include measures that are focused on
outcomes; are clinically credible; address potentially avoidable
outcomes; are comprehensive in scope; have
[[Page 72812]]
quantifiable financial impact; use standard data; and are comparable
across states.
Response: We will take commenters' suggestions under advisement as
we continue the stakeholder engagement and MAC QRS development process
leading to a future MAC QRS-specific rulemaking.
Comment: One commenter sought confirmation that health plans will
not be responsible for reporting measures that are specific to types of
services not included in their benefit packages, in situations where
states have provided carve-outs for those services such as pharmacy,
behavioral health or dental.
Response: While the reporting requirements for plans associated
with the MAC QRS are beyond the scope of this rule, we agree that it
would not be reasonable to hold plans accountable for services that are
not included in their contracts and which they do not provide. We
intend to take this and other considerations related to service carve-
outs and limited benefit plans into account as part of the stakeholder
engagement process, in development of the proposed MAC QRS-specific
rulemaking.
Comment: Many commenters expressed concern with aligning the MAC
QRS with other CMS quality rating approaches and/or with the proposals
to develop the minimum set of mandatory measures and to coordinate that
minimum set with the Scorecard initiative. Several commenters noted
deficiencies or gaps in the current QHP and Medicare Advantage 5-Star
Quality Rating System methodologies, and pointed out that the Medicaid/
CHIP programs serve different populations than Medicare and QHP
programs and cover different services. As such, these commenters
believed that alignment with the Medicare Advantage 5-Star Quality
Rating System may not provide an accurate picture of the care being
provided. A few commenters expressed concern with the proposed
alignment because Medicaid and CHIP serve a significant number of
children and recommended that CMS ensure pediatric specific ratings are
available and that the measure set include measures relevant to
children and their caregivers.
Some commenters noted that the current version of Scorecard
contains only 16 quality measures and expressed concern that a measure
set comprised only of Scorecard measures would leave large measurement
gaps for key Medicaid populations, such as adults and children with
disabilities, pregnant women and newborns, persons receiving long term
services and supports, and aging populations. A few commenters noted
that a mandatory measure set may not be applicable across disparate
managed care programs within a state that serves unique populations.
One commenter did not support the proposal to require mandatory
measures, because the mandatory measures may be in clinical domains in
which their state already excels. The commenter also noted that a
mandatory measure set would not consider the resources states with an
existing QRS may have already spent to gain support for the measures
already contained in such an existing QRS.
Response: We are finalizing the authority and requirements for (1)
a framework for the MAC QRS, including the identification of the
performance measures, a minimum mandatory measure set within the full
MAC QRS measure set, methodology, and (2) an alignment where
appropriate with the qualified health plan (QHP) quality rating system
developed in accordance with 45 CFR 156.1120, the Medicare Advantage 5-
Star Rating System, and other related CMS quality rating approaches in
the amendment to Sec. 438.334(b), which we are redesignating as
paragraph (b)(1). We use the term framework to encompass all of the
critical components of a QRS, which include, but are not necessarily
limited to, the selected performance measures and methodology. Although
alignment, where appropriate, with other CMS quality rating systems and
approaches is required under the rule we are finalizing, the
regulation, as proposed and finalized, does not limit MAC QRS measures
only to those included in the Scorecard, the listed rating systems, or
other CMS quality rating systems. For example, measures not currently
included in Scorecard but important to beneficiaries and pertinent to
specialty services and specific populations (for example, MLTSS
measures) will also be considered for the full MAC QRS measure set.
Moreover, states will continue to have the flexibility to add measures
for services, programs and populations that are important to each
state, should the full MAC QRS measure set (including the minimum
mandatory subset) not include specific measures important to a
particular state for its quality improvement goals. Therefore, we are
finalizing the amendments to Sec. 438.334(b), redesignated as
paragraph (b)(1), with modification to clarify that the MAC QRS
framework includes the identification of the performance measures, as
well as a subset of mandatory performance measures, and a methodology.
Per Sec. 438.334(b)(1), we will consult with states and other
stakeholders in developing the framework including the MAC QRS measure
set and subset of minimum mandatory measures, which then will be
subject to formal public notice and comment so we expect that
stakeholders and the public will have ample opportunity to provide
comment on the measures identified by us, including the mandatory
measures.
Further, while the proposed and final rule call for the MAC QRS to
be aligned with the QHP QRS, the Medicare Advantage 5-Star rating
system and other related CMS quality rating approaches (such as
Scorecard) where appropriate, this does not mean alignment in all
aspects. Differences would be appropriate, for example, to address the
different populations and services covered in the Medicaid and CHIP
programs.
Comment: Many commenters supported our proposal to align the CMS-
developed MAC QRS with other CMS rating approaches where appropriate.
Several commenters agreed that alignment across programs will reduce
administrative burden and promote high-quality care.
Response: As we noted in the proposed rule, we proposed to expand
the requirement to align the MAC QRS, where appropriate, with other
CMS-developed quality rating approaches, based on feedback gathered
through early stages of the stakeholder engagement process that a more
expansive approach to alignment would reduce reporting burden on plans
that operate across multiple markets, such as Medicare Advantage and
the Marketplace. We are finalizing the amendment to include alignment
with the Medicare Advantage 5-Star rating system and other CMS quality
rating approaches in addition to the QHP QRS at Sec. 438.334(b)(1). In
the final regulation text, we are making a technical modification to
the citation of the Medicare Advantage 5-Star rating system to indicate
that it is described in 42 CFR part 422, subpart D.
Comment: A few commenters requested clarification on the process
CMS will use to develop the MAC QRS framework including measures and
methodology and requested that CMS provide a timeline for development
of the MAC QRS framework.
Response: As we noted in the proposed rule, we have begun the early
stages of a stakeholder engagement process needed for the MAC QRS
framework. We have conducted interactive listening sessions with
various stakeholders, including state
[[Page 72813]]
and health plan stakeholder groups' directors, and interviewed several
beneficiaries. We also have convened a diverse technical expert panel
(TEP) to meet periodically to advise us on the framework, objectives,
measures, and methodologies for the MAC QRS. The TEP includes
representatives from state Medicaid and CHIP agencies, plans,
beneficiary advocates, and quality measurement experts. We intend to
continue this type of stakeholder engagement to develop the MAC QRS,
culminating in the publication of a MAC QRS-specific proposed rule in
the Federal Register, consistent with at the requirements in Sec.
438.334(b), which we are redesignating as paragraph (b)(1). We also
intend to provide technical assistance and guidance to states to assist
them with implementation of the MAC QRS.
As we explained in both the 2015 Medicaid managed care proposed
rule (80 FR 31153) and the 2016 final rule response to comments (81 FR
27688), after finalizing the initial CMS-developed QRS, we may
periodically review it to determine the need for modifications, such as
refining the methodology and updating the measures to ensure continuing
alignment. However, we realize that the current regulations do not
clearly reflect the policy described in the preambles; therefore, we
are adding a new paragraph at Sec. 438.334(b)(2) to make clear that
CMS would follow the same stakeholder engagement and rulemaking process
prior to updating the CMS-developed QRS, including consulting with
States and other stakeholders and then providing public notice and
opportunity to comment, in accordance with paragraph (b)(1) of Sec.
438.334.
Comment: Several commenters supported the proposed language change
that clarified and reinforced our intention to include stakeholders in
developing the MAC QRS framework, including a set of performance
measures, a subset of mandatory measures, and methodology for
determining a rating based on reported measures. A few commenters
recommended working with the Core Measures Quality Collaborative. A few
commenters recommended including beneficiaries, providers and
researchers in the process. One commenter recommended that Medicaid
MCOs have an opportunity to participate in the development of the QRS
framework. A few commenters supported CMS' proposal to work with
stakeholders to develop sub regulatory guidance on what it means for an
alternative QRS to yield substantially comparable information. A few
commenters requested that health plans be included in the process. One
commenter suggested that CMS should seek input from The Partnership for
Medicaid.
Response: We appreciate commenters' interest and willingness to
participate in the development of the MAC QRS. We are committed to a
stakeholder engagement process that captures the diverse viewpoints of
the Medicaid and CHIP community. Our current regulation at Sec.
438.334(b), redesignated as Sec. 438.334(b)(1) in this final rule,
provides for CMS consultation with states and other stakeholders in the
development of the CMS-developed QRS. Our proposal at Sec.
438.334(c)(4) (for the Secretary to issue guidance in consultation with
states and other stakeholders) was intended to codify our intention
similarly to actively engage with states and other stakeholders in the
development of the ``substantially comparable'' guidance for state
alternative QRSs as well. We are retaining the policy to require
consultation in development of the CMS-developed QRS in Sec.
438.334(b)(1) of the final rule and finalizing proposed paragraph
(c)(4), with a technical modification in both paragraphs to clarify
that issuance of the MAC QRS-specific rulemaking and the subregulatory
guidance on substantial comparability will be ``after consulting,''
rather than ``in consultation,'' with states and other stakeholders. We
believe this technical change eliminates potential confusion about the
timing of stakeholder consultation and clarifies that it is a distinct
engagement process that will happen before the rulemaking used to adopt
or revise the framework for the CMS-developed QRS. We recognize the
broad range of stakeholders interested in the development of the MAC
QRS and are committed to working with them in the development of both
the MAC QRS and subregulatory guidance related to alternative QRS.
Comment: Several commenters supported our proposal, in Sec.
438.334(c)(1)(ii), to take feasibility into account when applying the
substantial comparability requirements to a state alternative QRS. A
few commenters appreciated CMS's effort to clarify the considerations
that will be taken into account in applying the standard and providing
additional flexibility to states, but continued to question how the
substantially comparable standard will be implemented. Many other
commenters expressed concerns that this proposal would create too much
flexibility, limiting comparability and allowing states to implement
inadequate rating systems with measures that are not useful for
Medicaid populations, especially vulnerable populations within their
state.
Response: We agree that comparability is an important goal and that
utilization of meaningful measures is key, but we also believe
feasibility is an important consideration because states' covered
populations and program design, as well as their information
technology, data collection and reporting capacity, differ. We are
finalizing paragraph (c)(1)(ii) as proposed. We will engage with states
and other stakeholders in developing the sub regulatory guidance
specifying the criteria and process for determining the substantially
comparability standard, as required under Sec. 438.334(c)(4). We look
forward to working with states and other stakeholders to strike the
right balance between comparability and flexibility under the standard
for state alternative QRSs, set forth in Sec. 438.334(c)(1)(ii) of the
final rule, while producing ratings that are meaningful and useful for
beneficiaries, plans, and states. As Sec. 438.334(c)(4) requires that
we consult with states and other stakeholders before issuing the
guidance on the substantial comparability standard, it would be
premature to provide specific guidance on that point here. We also
expect that the MAC QRS will evolve, and with continued CMS support and
technical assistance to states, what may not be initially feasible may
become more feasible over time.
Comment: Many commenters recommended additional measures and
measure sets for alignment with and inclusion in the MAC QRS. Several
commenters recommended including the Medicaid and CHIP Core Measure
Sets. Several commenters recommended aligning the MAC QRS measures with
the ``Meaningful Measures'' initiative by CMS for use across CMS
programs. A few commenters encouraged CMS to utilize standard,
nationally developed and consensus-based measures. A few commenters
encouraged CMS to use reliable and valid measures that reflect quality
of care and plan performance. A few commenters recommended that any
mandatory measures should be relevant to long-term care and LTSS
programs and one commenter recommended that the CMS-developed QRS and
any state alternative QRS be required to include at least the domains
listed in Sec. 438.330(c)(1)(ii) on quality of life, rebalancing, and
community integration. Several commenters requested that the mandatory
measure set include sufficient measures for pharmacy, cancer care,
screenings and preventive care. One commenter urged
[[Page 72814]]
CMS to recognize the importance of access to care as a summary
indicator when developing a standardized Medicaid QRS.
A few commenters suggested including Healthcare Effectiveness Data
and Information Set (HEDIS) measures. A few commenters also encouraged
the use of medication use-related metrics and aligning with the
Pharmacy Quality Alliance (PQA) measures. A few commenters requested
that CMS define pharmacy quality within the QRS and urged that measures
related to pharmacy performance be standardized, achievable, and have
proven criteria that measure individual pharmacy performance. One
commenter recommended including the Consumer Assessment of Healthcare
Providers and Systems (CAHPS) survey. Another commenter recommended
aligning with the Medicare Part D star rating program. One commenter
encouraged aligning with the Dental Quality Alliance for oral health. A
few commenters encouraged CMS to ensure that states have a dental-
specific QRS domain rather than a single measure within a broader set.
One commenter suggested that measures related to cancer care should be
included and that these measures should focus on the specifics of
cancer treatment, be meaningful to patients and relevant to all
oncology specialties. One commenter suggested using existing summary
indicators for the qualified health plans (QHPs).
Response: We did not propose specific measures or measure sets in
this rule, which is focused on the overarching authority for the MAC
QRS. Consideration of specific measures and measure sets is being
addressed in the ongoing engagement CMS is having with stakeholders in
developing the MAC QRS framework. The regulation we are finalizing at
Sec. 438.334(b)(1) requires the MAC QRS that CMS develops to align
where appropriate with CMS quality rating approaches, but does not
preclude our consideration of other quality rating systems. We will
consider them as we continue the stakeholder engagement and development
of the MAC QRS within the authority of Sec. 438.334.
We provide here for readers some information about some of the CMS
initiatives noted by the commenters. Section 1139A of the Act requires
HHS to identify and publish a core measure set of children's health
care quality measures for voluntary use by state Medicaid and CHIP
programs. In addition, section 1139B of the Act similarly requires HHS
to identify and publish a core set of health care quality measures for
adult Medicaid enrollees. For more information on the Medicaid and CHIP
Core Measure Sets see https://www.medicaid.gov/medicaid/quality-of-care/performance-measurement/index.html. CMS's comprehensive initiative
``Meaningful Measures'' was launched in 2017 and identifies high
priority areas for quality measurement and improvement across our
programs. Its purpose is to improve outcomes for patients, their
families and providers while also reducing burden on clinicians and
providers. More information about this initiative may be found at
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
Comment: A few commenters supported the proposal to eliminate the
prior-approval requirement in Sec. 438.334(c)(1) of the current
regulations for states opting to develop a state alternative QRS,
noting this will reduce delays in implementing a state alternative QRS
and will allow for greater state flexibility. One commenter supported
the proposal but expressed concern that too much flexibility for states
could create too much variation among QRS requirements across states.
Many other commenters opposed removing the prior-approval requirement.
Some commenters perceived this change could undermine CMS's oversight
authority, or reduce plan accountability by allowing states to choose
only those measures on which the state and/or their contracted health
plans already perform well and for which there is little room for
improvement. Some commenters perceived this change could reduce the
ability to share and collect meaningful data, and create additional
reporting requirements and burdens on physicians. A few commenters were
concerned that states could receive feedback from CMS requiring a
change in their state alternative QRS late in its implementation, after
states had already expended significant time and resources in
developing and building their alternative QRS. These commenters
requested that CMS allow states the option to submit their alternative
QRS for some level of CMS review and approval prior to implementation.
Response: The proposal was intended to provide states with upfront
administrative flexibility and avoid potential delay in implementation.
However, we also understand the concerns of commenters regarding this
risk to states in expending time and resources on an alternative QRS
which CMS might subsequently determine does not meet the substantial
comparability standard. We also agree with commenters' concerns about
the risks to ensuring that all state alternative QRS's meet the
substantial comparability standard. Therefore, we are not finalizing
our proposal to remove the requirement that states submit alternative
QRS to CMS for approval prior to implementation. As discussed in this
rule, the prior approval requirement currently codified at Sec.
438.334(c)(1)(ii) is being redesignated as paragraph (c)(1)(iii) in
this final rule with one grammatical correction as to the word
``receives''. In addition, our proposal to amend Sec. 438.334(c)(2),
which was to revise the introductory text solely to be consistent with
the proposal to eliminate the prior approval requirement, is not being
finalized.
Comment: One commenter requested clarification whether updates to a
state's alternative QRS would trigger a CMS review or additional
stakeholder outreach. One commenter suggested that CMS review states'
alternative QRS on at least an annual basis to address any
deficiencies.
Response: As explained in this rule, we are not finalizing the
change to the current requirement that states receive prior-approval
from CMS of an alternative QRS prior to its implementation. For the
same reasons, we agree with the commenters that prior approval of
modifications is necessary to ensure that the standards for use of an
alternative QRS continue to be met and that states do not make
significant investment in modifications that CMS then determines do not
comply with the substantially comparable standard. Prior approval from
CMS of a state alternative QRS, including modifications to a state
alternative QRS, is required under the current regulations at Sec.
438.334(c)(1)(ii), and we are not substantively modifying this
requirement in light of our decision not to finalize the proposal to
eliminate the prior approval requirement. This requirement is
redesignated as Sec. 438.334(c)(1)(iii), in this final rule. Further,
we note that Sec. 438.334(c)(2), which we are not amending, requires
that both implementation of a state alternative QRS and modification of
an approved state alternative QRS require Medical Care Advisory
Committee input and a state public notice and comment process prior to
submission to us for approval. These stakeholder engagement
requirements, which apply whether a state is implementing an initial
state alternative QRS or making modifications to an existing state
alternative QRS, continue to apply. We believe that CMS review and
approval of the state alternative QRS prior to
[[Page 72815]]
implementation and prior to a modification would be substantively
similar in terms of the standards applied and the information
considered. We do not believe adding a specific requirement for annual
CMS review of an approved alternative QRS is necessary given that CMS
approval of the initial state alternative QRS and any modifications are
already addressed in the regulation text. As noted in this rule, we are
codifying at Sec. 438.334(b)(2) the authority to periodically update
and modify the MAC QRS framework including a continued process for
stakeholder engagement and public notice and opportunity for comment.
When we make changes, we will explain in those future rulemakings and
guidance what it means for states implementing the CMS-developed MAC
QRS, as well as how the changes affect the substantial comparability
analysis of any state alternative QRS. We expect to work with all
states to implement future MAC QRS modifications.
Comment: Several commenters expressed concern that the removal of
CMS prior-approval of alternative QRS also changed the timing of the
state-level public stakeholder process from prior to submitting an
alternative QRS proposal to CMS to prior to a state implementing an
alternative QRS. Commenters expressed concern that this could limit the
impact stakeholders have with states developing an alternative QRS. One
commenter suggested that CMS should reinforce the importance of the
public comment process in developing an alternative QRS and several
recommended that CMS model the state-level public comment process on
the section 1115(a) demonstration public engagement requirements.
Response: As noted, we are not finalizing the proposed removal of
CMS prior-approval. In addition, we remind readers that Sec.
438.334(c)(2), which we did not propose to amend, requires states to
obtain input from their Medical Care Advisory Committee and to provide
an opportunity for public comment of at least 30-days prior to the
state submitting to CMS a request for or modification of a state
alternative QRS. Also, current Sec. 438.334(c)(3), as amended and
redesignated at paragraph (c)(3)(ii), requires states to include
documentation of the public comment process in the request to CMS,
including discussion of the issues raised by the MCAC and the public as
well as documentation of any policy revisions or modifications made in
response to the comments and rationale for comments accepted.
Comment: One commenter requested that CMS clarify the proposal to
redesignate Sec. 438.334(c)(1)(ii) of the current text (that requires
states to receive CMS prior approval) to Sec. 438.334(c)(1)(iii)
because it conflicts with CMS's proposal to eliminate the prior
approval requirement.
Response: While we agree this was a technical error in the
amendatory instructions for the proposed changes (see 83 FR 57296), we
are not finalizing the removal of the prior-approval requirement. We
are redesignating revised paragraph (c)(1)(i) (relating to the
substantial comparability standard for alternative QRS) as paragraph
(c)(1)(ii); adding a new paragraph (c)(1)(i) (applying the minimum
mandatory measure set to alternative QRS); and redesignating paragraph
(c)(1)(ii) (requiring CMS prior-approval of alternative QRS) as
paragraph (c)(1)(iii). We are also finalizing the proposed amendment to
paragraph (c)(1) so that it provides that ``a state may implement'' a
state alternative QRS. The proposed text eliminates a redundancy in the
current regulation text, paragraph (c)(1), which provides that a state
``may submit a request to CMS for approval''. This language is
redundant with the requirement in redesignated paragraph (c)(1)(iii)
requiring that states receive CMS approval prior to implementing an
alternative QRS.
After consideration of all the comments received and for the
reasons outlined in the proposed rule and our responses to the
comments, we are finalizing the changes to the MAC QRS regulations at
Sec. 438.334 as proposed with some modifications for clarity and with
the exception of the proposal to eliminate the requirement for CMS
prior approval of a state's use of an alternative QRS. We are
finalizing amendments to Sec. 438.334 as follows:
We are finalizing amendments to proposed paragraph (b),
redesignated it as paragraph (b)(1), with minor modifications. As
finalized, paragraph (b)(1) includes clarifications about the MAC QRS
framework, including performance measures, a subset of minimum
mandatory measures, and methodology; timing of CMS's consultation with
states and other stakeholders; clarifications to the listed examples of
the content of the MAC QRS; and a technical correction to the citation
to the Medicare Advantage 5-Star Quality Rating System.
We are finalizing a new paragraph at Sec. 438.334(b)(2)
to make clear that CMS, after consulting with States and other
stakeholders and providing public notice and opportunity to comment,
may periodically update the MAC QRS framework developed in accordance
with paragraph (b)(1).
We are finalizing proposed revisions to eliminate
duplicative language in the introductory language in paragraph (c)(1).
We are finalizing, as proposed, revisions to current
paragraph (c)(1)(i) (relating to feasibility factors for the
substantial comparability standard for a state alternative QRS) and
redesignating this as paragraph (c)(1)(ii); finalizing a new paragraph
(c)(1)(i) (applying the minimum mandatory measure set to state
alternative QRS); and redesignating current paragraph (c)(1)(ii)
(requiring CMS prior-approval of state alternative QRS) as paragraph
(c)(1)(iii)).
We received no comments on the several proposed changes to
Sec. 438.334(c)(3), regarding the information about their alternative
QRS that states would need to provide to CMS. We proposed that states
would provide, in addition to the information about stakeholder
engagement already required by Sec. 438.334(c)(3), a copy of the
alternative QRS framework, including the performance measures and
methodology to be used in generating plan ratings, and other
information specified by CMS to demonstrate compliance with the
substantial comparability standard. We are finalizing these proposed
changes with modification to correct several grammatical errors, to
enumerate the additional information to be provided in separate
paragraphs (c)(3)(i) through (iii) and to more clearly identify the
scope of the information we may request by using a cross-reference to
paragraph (c)(1).
We are finalizing the proposed addition of paragraph
(c)(4) related to a stakeholder engagement requirement and issuance of
guidance on the substantial comparability of alternative QRS, with one
modification to change the phrase ``in consultation'' to ``after
consultation.''
14. Managed Care State Quality Strategy (Sec. 438.340)
In the November 2018 proposed rule, we proposed to make some
technical changes to Sec. 438.340 to clarify the inclusion of PCCM
entities, as described in Sec. 438.310(c)(2), as one of the managed
care entities to be included in the state managed care quality
strategy. Specifically, because Sec. 438.340(b)(8) did not make clear
how PCCM entities should be incorporated into the other elements of the
quality strategy, we proposed to delete Sec. 438.340(b)(8) and to add
PCCM entities to the list of managed care plans identified in the
[[Page 72816]]
quality strategy elements described at Sec. 438.340(b)(2), (b)(3)(i),
(b)(6), and (c)(1)(ii). We then proposed to redesignate paragraphs
(b)(9), (10), and (11) as paragraphs (b)(8), (9), and (10),
respectively, and to make a conforming revision to the cross reference
in Sec. 438.340(c)(3)(ii) to refer to redesignated paragraph (b)(10).
We explained in the 2018 proposed rule why additional revision to add
references to PCCM entities to other paragraphs in Sec. 438.340(b) was
not necessary.
Additionally, we proposed to amend Sec. 438.340(b)(6) which, for
the purposes of the states' plan to reduce health disparities within
the quality strategy, defines ``disability status'' based on whether
the individual qualified for Medicaid on the basis of a disability.
Specifically, we proposed to remove this definition of disability
status because we were concerned that it may be unintentionally narrow,
leading to under-recognition of individuals with disabilities. Because
disability status can change over the course of an individual's
lifetime, qualifying for Medicaid on the basis of disability will only
be one source of information to determine a beneficiary's disability
status, and not necessarily the only source or the most accurate source
of this information. In addition, there is no consensus definition of
``disability status,'' and the definition applied for purposes of
Medicaid eligibility is not necessarily the only definition appropriate
for evaluating health disparities. We also noted that providing this
demographic information for each Medicaid enrollee to the managed care
plan at the time of enrollment is a minimum standard under the current
regulation and encouraged states to send updated demographic
information to an enrollee's managed care plan whenever updated
demographic information is available to the state.
As we considered the comments on these proposed changes, discussed
in this rule, we realized that the regulation on the state managed care
quality strategy is not the most appropriate place for the requirement
to transmit certain information to managed care plans to be located.
Since the requirement to transmit this information is tied to the
enrollment of the individual beneficiary in the managed care plan, we
believe it would be best to include this requirement as part of the
standards for enrollment. Therefore, we are moving this requirement
from Sec. 438.340(b)(6) to Sec. 438.54(b) (relating to state managed
care enrollment systems) by adding a new paragraph (b)(3) in Sec.
438.54, requiring states to provide the demographic information listed
in Sec. 438.340(b)(6) for each Medicaid enrollee to the individual's
managed care plan at the time of enrollment. The movement of this
requirement from Sec. 438.340(b)(6) to Sec. 438.54(b) is a non-
substantive, technical change.
The following summarizes the public comments received on our
proposal to amend Sec. 438.340 and our responses to those comments.
Comment: A few commenters supported the technical correction
related to PCCM entities to delete Sec. 438.340(b)(8) and to add
references to PCCM entities in each regulatory paragraph regarding the
applicable quality strategy elements.
Response: We are finalizing the proposed changes to delete
paragraph (b)(8) and to add reference to PCCM entities to paragraphs
(b)(2), (b)(3)(i), and (c)(1)(ii) as proposed. We also had proposed to
add reference to PCCM entities in paragraph (b)(6) and are finalizing
the substance of that change. In conjunction with moving the sentence
in Sec. 438.340(b)(6) (requiring the State to provide its plans with
certain demographic information), to which that change was proposed, to
Sec. 438.54(b)(3), we are including reference to PCCM entities in
Sec. 438.54(b)(3) as revised in this final rule. With the deletion of
paragraph (b)(8) in Sec. 438.340, we also are finalizing the proposed
redesignation of paragraphs (b)(9), (10), and (11) as paragraphs
(b)(8), (9), and (10), respectively. We note that we are finalizing a
conforming technical change to paragraph (c)(3)(ii) to change the
internal reference from paragraph (b)(11) to its new designation of
paragraph (b)(10).
Comment: Several commenters supported the proposal to remove the
definition of disability status from Sec. 438.340(b)(6). Several
commenters agreed that the current definition of disability status in
this regulation is too narrow but expressed concern that removing the
definition would make it difficult to compare health disparity data
across states without a common definition. A few commenters recommended
that there should be a common or standard approach to defining
disability status, noting the variation in how it is defined across
HHS, as well as other Federal agencies. The commenters stated that the
lack of a standardized, routine approach for defining and identifying
the population with disabilities impedes efforts to monitor the
population, target care appropriately, or develop quality measures that
could be used to improve understanding of gaps and how effective
interventions are in closing those gaps. One commenter suggested using
the HHS definition of disability status currently used in population
health surveys. One commenter suggested including voluntary disability
status questions in the Medicaid eligibility application. One commenter
recommended that CMS issue guidance on how best to collect and share
data on disability status. One commenter recommended that states adopt
a definition of disability status that will allow plans to identify
individuals who may need LTSS or individuals with disabilities that may
need reasonable accommodations.
Response: While we agree that standardization and comparability are
important considerations, we are not able to define disability status
for the purposes of other programs. We also recognize that not all
states have the same data systems or access to all of the same sources
of data on disability status. The only uniform definition of disability
status for purposes of these regulations would be to limit designation
of disability status to beneficiaries who are eligible for Medicaid on
the basis of disability, which we agree with commenters is too narrow.
Thus, we have determined it best not to establish a uniform definition
of disability. At the same time, we agree with commenters who are
concerned that having no definition will impede identification of
individuals with disabling conditions, provision of appropriate
services and utilization of robust quality measurement to drive
improvements in care. Therefore, we are neither finalizing the proposal
to remove the definition of disability status from Sec. 438.340(b)(6)
entirely nor adopting a single definition at the Federal level for this
regulation. Instead, we are revising Sec. 438.340(b)(6) to provide
states with flexibility to define in their quality strategy
``disability status.'' Further, we are requiring in Sec. 438.340(b)(6)
that the state's quality strategy include how the state will make the
determination that a Medicaid enrollee meets the state's definition,
including a description of the data source(s) that the state will use
to identify disability status. To assure some uniformity, we are
adopting a requirement that, at a minimum, states' definition of
``disability status'' include individuals who qualify for Medicaid on
the basis of disability. We appreciate commenters' requests for
guidance on how best to collect and share data on disability status and
will consider developing such guidance in the future.
[[Page 72817]]
With regard to states' efforts to identify enrollees who may need
LTSS or reasonable accommodations, we note that the standards for
coordination and continuity of care located at Sec. 438.208(c) already
require states to implement mechanisms to identify persons who need
LTSS or have special health care needs, as defined by the state, to
MCOs, PIHPs and PAHPs. Additionally, Sec. 438.208(c)(1) requires
states to specify this plan in the state's managed care quality
strategy. The mandatory elements of the managed care quality strategy
are identified in Sec. 438.340(b), and the requirement to describe the
state's plan for identifying persons who need LTSS or who have special
health care needs is codified at redesignated Sec. 438.340(b)(9) in
this final rule). We also note that qualified individuals with a
disability, including those who do not need LTSS may be entitled to
reasonable accommodation under Federal disability rights law. The
provisions we are finalizing here do not change or limit application
and obligations arising under Federal disability rights law so we
remind states and managed care plans to ensure that their obligations
are met.
Comment: Several commenters recommended that if CMS finalizes this
proposal, CMS should require states to include in their quality
strategy how they define disability and the sources of information they
used to make the determination. Commenters stated that doing so would
foster greater transparency and aid in comparability.
Response: We agree that transparency and comparability of health
data are important considerations. We are finalizing Sec.
438.340(b)(6) with a modification to address the definition of
``disability status.'' We are retaining the requirement in the current
regulation that disability status means whether the individual
qualified for Medicaid on the basis of disability, but that is a
minimum standard for identifying disability status rather than the only
permitted definition. We are also finalizing regulation text to require
that states include in their quality strategy how the state is defining
``disability status'' and how the state will make the determination
that a Medicaid enrollee meets the standard, including which data
sources the state is using to identify these individuals.
Comment: A few commenters did not support the proposed change to
the definition of disability status, claiming that states do not have
access to other data sources to determine disability status and
requiring them to use other data sources would create confusion in the
eligibility system and add undue reporting burden.
Response: We disagree that states do not have other data sources to
determine disability status. In fact, several state Medicaid agencies
supported our proposal because they would prefer to use other and more
accurate data sources than to rely solely on the information used to
establish eligibility. For example, states may use Title II data, which
would indicate whether the Social Security Administration has found
that the person has a disability. Further, we did not propose and are
not finalizing a requirement that states are required to use other data
sources to ascertain beneficiaries' disability status for purposes of
meeting the requirements in Sec. 438.340(b)(6). However, if states
have other, more accurate sources of information of disability status
or any other demographic factors, we believe it is appropriate that
states be permitted to use such information as part of their plan to
identify, evaluate, and reduce, to the extent practicable, health
disparities. As finalized, Sec. 438.340(b)(6) enables states to do so.
Comment: One commenter expressed concern about states obtaining
demographic information from additional sources and whether the methods
of gathering and using the information would respect patient health
information privacy.
Response: We appreciate the commenter's concern. However, the
ability to use information obtained from other available sources of
information on disability status does not create new authority for
states to obtain such information. Rather, Sec. 438.340(b)(6) of the
final rule simply provides states with flexibility to use other third
party information which the state already is permitted to access for a
purpose directly connected to administration of the state plan, that
is, to improve the health outcomes of individuals living with
disabilities or falling into demographic groups associated with poorer
health outcomes. Such use is consistent with the privacy and
confidentiality protections afforded beneficiaries under section
1902(a)(7) of the Act and the HIPAA Privacy Rule, 45 CFR part 160 and
subparts A and E of part 164. If a data source is not available to the
state or the state is not authorized to use a particular data source,
our regulation at Sec. 438.340(b)(6) does not change that or create
authorization for access by the state.
Comment: Several commenters agreed with CMS' encouragement that
states should send updated demographic information to managed care
plans whenever available.
Response: We appreciate commenters' support.
After consideration of all comments received, and for the reasons
outlined in the proposed rule and our responses to the comments
received, we are finalizing the technical changes related to references
to PCCM entities, as proposed, in Sec. 438.340(b)(2), (b)(3)(i), and
(c)(1)(ii). In paragraph (b)(3)(i), we are also finalizing a minor
grammatical correction to use ``will'' in place of ``would'' in the
last sentence. We are not finalizing the proposed addition of the term
``PCCM entity'' to paragraph (b)(6) as proposed, but are finalizing the
requirement that the state provide the demographic information listed
in Sec. 438.340(b)(6) for each Medicaid enrollee to the individual's
MCO, PIHP, PAHP, or PCCM entity at the time of enrollment at Sec.
438.54(b)(3). We are finalizing the deletion of paragraph (b)(8) and
the redesignation of paragraphs (b)(9), (10), and (11) as paragraphs
(b)(8), (9), and (10), respectively. We are finalizing a conforming
technical change to paragraph (c)(3)(ii) to change the internal
reference from paragraph (b)(11) to its new designation of paragraph
(b)(10).
Further, we are not finalizing the deletion of the definition of
disability status in Sec. 438.340(b)(6), but instead are modifying the
current regulation to indicate that ``disability status'' means, at a
minimum, whether the individual qualified for Medicaid on the basis of
a disability and to require that states include in their quality
strategy how the state defines disability status and how the state
determines whether a Medicaid enrollee meets the standard, including
any data sources the state will use to identify disability status.
15. Activities Related to External Quality Review (Sec. 438.358)
In the 2018 proposed rule, we proposed a technical correction to
amend the cross references listed in Sec. 438.358(b)(1)(iii), which
requires that a review be conducted within the previous 3-year period
to determine MCO, PIHP, and PAHP compliance with certain managed care
standards. Specifically, we proposed a technical correction to Sec.
438.358(b)(1)(iii) to insert cross-references to several standards
which this review must address but which had been inadvertently omitted
from the 2016 final rule, including Sec. Sec. 438.56 (Disenrollment
requirements and limitations), 438.100 (Enrollee rights) and 438.114
(Emergency and post-stabilization services). The
[[Page 72818]]
requirements in these regulations have been included in the EQR
protocol for the compliance review activity since the initial release
of the protocols in 2003 and in all subsequent revisions of the
protocols. It was not our intent to change the scope of EQR or to
delete these cross-references in the 2016 rule. Indeed, we noted in
both the 2015 proposed rule (80 FR 31156) and the 2016 final rule (81
FR 27706) that we did not intend to make substantive changes to
eliminate any elements of the compliance review EQR activity.
The following summarizes the public comments received on our
proposal to amend Sec. 438.358 and our responses to those comments.
Comment: All the commenters on this topic supported the technical
correction to add the references to Sec. 438.358(b)(1)(iii) to match
the scope of the regulation and the EQR protocols prior to the 2016
final rule.
Response: We thank the commenters for their support. Adding these
references to certain requirements for access standards, structure and
operations, and quality measurement and performance ensures that Sec.
438.358(b)(1)(iii) provides for the same scope of EQR as it required
prior to amendment by the 2016 final rule.
After consideration of all comments received and for the reasons
outlined in the proposed rule and our responses to those comments, we
are finalizing the amendments to Sec. 438.358(b)(1)(iii) as proposed.
16. Exemption From External Quality Review (Sec. 438.362)
Section 438.362 implements section 1932(c)(2)(C) of the Act, which
provides that a state may exempt an MCO from undergoing an EQR when
certain conditions are met. First, the MCO must have a current Medicare
contract under Part C of Title XVIII or under section 1876 of the Act,
as well as the current Medicaid contract under section 1903(m) of the
Act. Second, the two contracts must cover all or part of the same
geographic area within the state. Third, the Medicaid contract must
have been in effect for at least 2 consecutive years before the
effective date of the exemption and during those 2 years, the MCO must
have been subject to the Medicaid EQR during those 2 years and been
found to have performed acceptably with respect to the quality,
timeliness, and access to health care services it provides to Medicaid
beneficiaries. Neither the statute nor Sec. 438.362 requires states to
exempt plans from EQR; however, this is explicitly provided as an
option for states. States have discretion to require all their managed
care plans to undergo EQR, even those MCOs that could be exempted under
Sec. 438.362. To increase transparency regarding state use of the
exemption from the Medicaid EQR for certain MCOs, we proposed to add a
new Sec. 438.362(c) to require that states annually identify on their
website, in the same location as where EQR technical reports are
posted, the names of the MCOs it has exempted from EQR, and when the
current exemption period began.
We sought comment on whether instead to revise Sec. 438.364(a) to
require that states identify the exempted plans and the beginning date
of the plan's current exemption period in their annual EQR technical
reports, either in addition, or as an alternative, to posting this
information directly on the state's website. We also solicited comments
on how states are currently using the exemption provision and how
states currently make that information publicly available.
The following summarizes the public comments received on our
proposal to amend Sec. 438.362 and our responses to those comments.
Comment: Several commenters supported the proposal to require
states to publicly identify any exempted plans along with the beginning
date of their current exemption period on their website or in the
annual EQR technical support. Commenters stated that this proposal
represents little burden to plans or states but improves transparency
and accountability. Other commenters noted that without this exemption
information posted on the website, the annual EQR technical report may
be misinterpreted as a comprehensive account of the quality of all
managed care plans in a state, when in actuality there may be plans
omitted from the report.
Response: We thank commenters for their support and agree that
acknowledging the exemptions provided to certain MCOs from the EQR
provides greater transparency with minimal burden on states. We are
finalizing with modification the proposed revision to Sec. 438.362 to
make minor grammatical changes and to add a new paragraph (c) to
require identification of MCOs exempt from Medicaid EQR, or that no
MCOs are exempt, as appropriate, on the state agency website required
under Sec. 438.10(c)(3).
Comment: Several commenters supported the alternative suggestion
that states identify MCOs exempt from Medicaid EQR activities in the
EQR technical report, noting that this would allow for historical
trending of exemption information whereas the information states post
on their website may only include current exemption information.
Several commenters stated that CMS should require the information to be
both included in the EQR technical report as well as displayed on the
website. These commenters noted that posting this information in more
than one place will not present a burden to the states since they
already make exemption determinations, inform their EQRO of which plans
are exempted from EQR, and maintain EQR information on their websites.
Finally, several commenters noted that if CMS does not require both
methods, CMS should prioritize sharing the information on the state's
website, as this is more accessible to beneficiaries, providers, and
other stakeholders.
Response: We agree with commenters that both alternatives are
useful. Because they are not mutually exclusive, we are also finalizing
new regulation text at Sec. 438.364(a)(7) that states also include in
their EQR technical reports the names of the MCOs exempt from EQR by
the state, including the beginning date of the current exemption period
or that no MCOs are exempt, as appropriate.
Comment: Some commenters sought clarification with regard to what
would be required of states that do not exempt managed care plans from
EQR due to a Medicare review.
Response: We had intended that if no MCOs are exempt from the
Medicaid EQR, the state would indicate this fact on the state's website
consistent with the new transparency requirement. Requiring an explicit
statement that no MCOs have been exempted from the requirement ensures
that this information is clearly communicated on the state's website.
To make this clear, we are finalizing the proposed revisions to Sec.
438.362 and the additional revision to Sec. 438.364(a)(7) with
additional text to make this requirement explicit.
Comment: A few commenters recommended that CMS require states to
provide direct links to the most current Medicare performance review
for the MCOs they have exempted from EQR to allow consumers and
advocates to easily find relevant performance data on exempted plans.
They stated this would improve transparency without adding any burden
to plans or states in terms of redundant reporting.
Response: We do not currently publish all information about
Medicare performance reviews for every plan. At this time, we annually
provide summary information on Medicare Parts C and D plan performance,
compliance, audits
[[Page 72819]]
and enforcement actions on CMS.gov. Moreover, we did not propose to
require states to make public the most current Medicare performance
review. Therefore, we are not adopting the recommendation made by these
commenters. We agree that directing consumers to information about
Medicare performance reviews would support our transparency goals, and
encourage states to provide links to any publicly available
information, but we do not think a requirement for that is necessary or
appropriate to finalize here.
After consideration of all comments received on this topic and for
the reasons outlined in the proposed rule and our responses to those
comments, we are finalizing the revision to Sec. 438.362 with an
additional requirement for states to indicate that no MCOs are exempt
from EQR if that is the case and technical modifications to improve the
clarity of the text. We are also finalizing a new paragraph (a)(7) in
Sec. 438.364 of the final rule to require that information on state
exemption of MCOs be included as an element of the annual EQR technical
reports or that no MCOs are exempt, as appropriate.
17. External Quality Review Results (Sec. 438.364)
In the 2018 proposed rule, we explained how in Sec. 438.364(d), we
had inadvertently referenced paragraph (b) instead of referencing
paragraph (c). We proposed to revise Sec. 438.364(d) to amend the
incorrect reference.
We did not receive comments on this technical correction to Sec.
438.364(d) and, for the reasons noted here and in the proposed rule,
are finalizing it as proposed.
18. Grievance and Appeal System: Statutory Basis and Definitions (Sec.
438.400)
We proposed to revise the definition of ``adverse benefit
determination'' in Sec. 438.400(b) to clarify treatment of denials of
claims on the basis that they are not clean claims. In the 2016 final
rule at Sec. 438.400(b)(3), we finalized the definition of an
``adverse benefit determination'' including denials in whole or in part
of payment for service. The term adverse benefit determination was
proposed and finalized in the 2016 final rule as a replacement for the
term ``action,'' which had been defined with the same definition in the
2002 rule. Under Sec. 438.404(a), managed care plans are required to
give enrollees timely notice of an adverse benefit determination in
writing and consistent with the requirements in Sec. 438.10 generally.
Given the broad meaning of the term ``denial of a payment,'' some
managed care plans may be generating a notice to each enrollee for
every denied claim, even those that are denied for purely
administrative reasons (such as missing the National Provider
Identifier, missing the enrollee's sex, or because the claim is a
duplicate) and which generate no financial liability for the enrollee.
Issuing notices of such adverse benefit determinations for which the
enrollee has no financial liability nor interest in appealing simply to
comply with Sec. 438.404(a) may create administrative and economic
burdens for plans, and unnecessary confusion and anxiety for enrollees
who frequently misunderstand the notices as statements of financial
liability.
To alleviate unnecessary burden on the managed care plans and
enrollees, we proposed to revise Sec. 438.400(b)(3), to specify that a
denial, in whole or in part, of a payment for a service because the
claim does not meet the definition of a clean claim at Sec. 447.45(b)
is not an adverse benefit determination. Under the proposal, the notice
requirements in Sec. 438.404 would not be triggered if the denial is
solely because the claim is not a clean claim as defined at Sec.
447.45(b). Section 447.45(b) defines ``clean claim'' as one that can be
processed without obtaining additional information from the provider of
the service or from a third party, and includes a claim with errors
originating in a State's claims system; it does not include a claim
from a provider who is under investigation for fraud or abuse, or a
claim under review for medical necessity. We explained that this
amendment would eliminate burden on plans to send unnecessary notices
and avoid anxiety for enrollees receiving such notices and that the
proposed change was not expected to expose enrollees to financial
liability without notice, or jeopardize their access to care or rights
to appeal.
We also provided guidance on how we would interpret the proposed
change to the definition of adverse benefit determination. While
notices to enrollees for claims that do not comply with the clean claim
definition in Sec. 447.45(b) would not be required under our proposed
amendment to Sec. 438.400(b)(3), the notice requirements for all
future claims (including resubmission of the same claim) would have to
be independently determined. For example, if a provider resubmits a
clean claim after the initial one was not processed because it did not
comply with the requirements in Sec. 447.45(b), and the managed care
plan subsequently issues an adverse benefit determination, the managed
care plan would still be required to issue a timely notice under Sec.
438.404(a) for the second claim. Whether an adverse benefit
determination notice is required must be determined for each claim
individually, regardless of whether notices were required for
previously submitted claims.
The following summarizes the public comments received on our
proposal to amend Sec. 438.400 and our responses to those comments.
Comment: Many commenters supported the proposed change to eliminate
the enrollee notice requirement for claims denied for not meeting the
definition of a clean claim. Commenters noted that Medicaid enrollees
are inundated with communications from providers and insurers, adding
to the stress and confusion they experience when navigating the health
care system. Accordingly, they should not be notified when a denial is
based on a technical error that providers and managed care plans can
resolve without enrollee input. Commenters noted that this proposed
change would reduce beneficiary anxiety and confusion.
Response: We appreciate the supportive comments and believe
enrollees and managed care plans will benefit from the reduction in
unnecessary notices.
Comment: Commenters recommended that the proposed clean claim
language could cause confusion among managed care plans and states as
they attempt to determine how to apply notice requirements in cases
where a claim falls under the technical definition a clean claim, but
the claim denial does not impact the enrollee.
Response: In cases where a claim meets the technical definition of
a clean claim and payment is denied in whole or in part, that denial
does meet the definition of adverse benefit determination and the
managed care plan must send the notice required in Sec. 438.404. The
revision to Sec. 438.400(b)(3), as proposed and as finalized, only
addresses claims that do not meet the definition of clean claim in
Sec. 447.45(b). Whether a claim denial ``impacts the enrollee'' is not
part of the definition of an adverse benefit determination and does not
affect a managed care plan's responsibility for sending the notice
required in Sec. 438.404. To make our intent clear, we will add
``solely'' in the final text of Sec. 438.400(b)(3) to clarify that the
only claim denials for all or part of the payment that do not trigger
the notification requirements are those denials that result solely from
the claim not meeting the definition of clean claim in Sec. 447.45(b).
[[Page 72820]]
Comment: Several commenters requested that CMS not finalize the
proposed clean claim language and instead specify more directly that
notice requirements are not triggered in situations where a member will
be held harmless or is not financially responsible despite a full or
partial denial of a payment for service. Alternatively, commenters
noted that CMS could provide additional context for the definition of
``clean claim'' by including guidance and a range of practical
examples. The examples should make clear that the notices are not
triggered in the denial cases mentioned in the preamble such as missing
data or duplicate submissions, nor are they triggered in other similar
cases such as clear billing errors or practices involving waste or
abuse. Commenters stated that either change would still provide for
independent determinations on the need for notices at a later point,
for example, after a resubmitted claim, if an enrollee could then be
subject to financial liability.
Response: We decline to adopt the commenters' suggestion to exempt
all claims that do not result in enrollee liability from the definition
of adverse benefit determination. While this may seem a minor expansion
of the types of claims our revision targets, it actually would, in some
states, increase the number of eliminated notices exponentially. These
notices are an important beneficiary protection as they may be the only
notification an enrollee receives alerting them that a claim has been
submitted on their behalf. If the enrollee then begins to receive bills
from the provider, they are already aware of the situation and have the
information needed to appeal or obtain information from the managed
care plan about their cost sharing rights and responsibilities.
Further, the provision of these notices when there is a denial of
coverage (or payment), is consistent with the principle that enrollees
are entitled to be active participants in their health care; without
full understanding of what is covered, enrollees are not able to make
knowledgeable decisions about their health care coverage and their use
of health care.
From a program integrity perspective, another benefit of these
notices is the opportunity it provides the enrollee to detect potential
fraudulent claims. For example, if a provider is billing for services
that were never rendered, the adverse benefit determination notice is
likely the enrollee's first alert to the situation. Enrollees can play
an important role in the detection and reporting of potential fraud,
waste, and abuse, and it was not our intent in this provision to
undermine that. By limiting the carve out from the definition of
adverse benefits determination to situations where the denial is
because the claim does not meet the definition of clean claim, we
believe we struck the appropriate balance between reducing burden and
confusion for enrollees and maintaining an important enrollee
protection.
With regard to the request for additional context, we do not
believe we can, or should, develop a list of examples for the
regulation text. The potential number of reasons for denying a claim
because it does not meet the definition of clean claim is unlimited and
any attempt to create an exhaustive list of examples would likely cause
ambiguity and confusion. The obligation to determine if a claim meets
the definition in Sec. 447.45(b), that is, is a claim that can be
processed without obtaining additional information from the provider of
the service or from a third party rests with the managed care plan and
must be determined for each claim, regardless of whether notices were
required for previously submitted claims. Plans must apply the
definition in Sec. 447.45(b) consistently and reasonably and have an
obligation to comply with their responsibilities in connection with
adverse benefit determinations, as that term is defined in Sec.
438.400 as finalized here. The concept of a ``clean claim,'' including
as defined in Sec. 447.45(b), is ubiquitous in the health care system
and we do not believe that this is a difficult standard to apply.
Comment: Several commenters opposed the proposed change and stated
that these types of denials should continue to be treated as adverse
benefit determinations that trigger notice requirements. Commenters
stated that it is important to err on the side of providing more
transparency and information to enrollees so they can be as fully
engaged in their care as possible. One commenter noted that if a
consumer is not aware of a denied claim, the provider may send a bill
if Medicaid is secondary to private insurance. Another commenter
recommended the continuation of the requirement to send notices for
these types of denials but allow for a process for enrollees to opt out
of receiving the notices about these specific types of denials if they
so choose.
Response: We agree that adverse benefit determination notices do
improve transparency and provide claim information to enrollees that
they may find useful. However, we do not generally believe receiving a
notice on claim denials that are related solely to whether the claim
was submitted with all necessary information, and therefore, generate
no financial liability or reason to appeal for the enrollee, is
advantageous to enrollees nor facilitates engagement in their care. A
claim denied solely for not being a clean claim does not impact any
future adjudication of that same claim based on program benefit level
and medical necessity, which would be subject to the adverse benefit
determination notice provision in Sec. 438.400(b)(3). As we stated in
the 2018 proposed rule, whether an adverse benefit determination notice
is required must be determined for each claim, regardless of whether
notices were required for previously submitted claims. Adverse benefit
determination notices are a valuable and important beneficiary
protection and we believe that finalizing this provision strikes a
reasonable balance. We appreciate the commenter's suggestion to retain
the current definition and allow enrollees to opt-out, but we decline
to implement that suggestion.
After consideration of the public comments received and for the
reasons articulated in the proposed rule and our responses to comments,
we are finalizing the revision to the definition of adverse benefit
determination in Sec. 438.400(b) substantially as proposed with the
addition of ``solely'' for clarity.
19. Grievance and Appeal System: General Requirements (Sec. Sec.
438.402 and 438.406)
We proposed changes to Sec. Sec. 438.402(c)(3)(ii) and
438.406(b)(3) to eliminate the requirements that an oral appeal be
submitted in writing to be effective. In the 2016 final rule, we
adopted the requirement that an oral appeal must be followed by a
written, signed appeal at Sec. 438.402(c)(3)(ii). This requirement was
also included at Sec. 438.406(b)(3), regarding handling of grievances
and appeals, where managed care plans must treat oral inquiries seeking
to appeal an adverse benefit determination as appeals and that such
oral inquiries must be confirmed in writing. We stated in the 2018
proposed rule that managed care plans have found that some enrollees
may take too long to submit the written, signed appeal, while others
fail to submit the written appeal at all. This creates problems for
enrollees who wait for extended periods of time for a resolution and
for managed care plans who must invest resources to encourage enrollees
to submit the documentation, as well as uncertainty for managed care
plans as to how to comply with Sec. 438.406 (Handling Grievances and
Appeals) when the
[[Page 72821]]
enrollee never submits the written, signed appeal.
We proposed to eliminate the requirement for enrollees to submit a
written, signed appeal after an oral appeal is submitted in Sec. Sec.
438.402(c)(3)(ii) and 438.406(b)(3). We explained our belief that the
removal of the requirement would reduce barriers for enrollees who
would not have to write, sign, and submit the appeal, would enable
plans to resolve appeals more quickly, and would decrease the economic
and administrative burden on plans. This proposed change would also
harmonize the managed care appeal process with the state fair hearing
process because Sec. 431.221(a)(1)(i) requires state Medicaid agencies
to permit an individual or authorized representative of the individual
to submit state hearing requests via different modalities--including
telephone--without requiring a subsequent written, signed appeal.
Although we proposed to eliminate the requirement in Sec.
438.406(b)(3) that an oral appeal must be followed by a written, signed
appeal, we did not propose to change the current regulatory language
there that specifies that oral inquiries seeking to appeal an adverse
benefit determination are treated as appeals.
The following summarizes the public comments received on our
proposal to revise Sec. Sec. 438.402(c)(3)(ii) and 438.406(b)(3) and
our responses to those comments.
Comment: Many commenters supported the elimination of the
requirement for a written, signed appeal after an oral appeal is
submitted. Commenters stated an oral appeal should be sufficient to
begin the appeals process alone, and subsequent written, signed
requirements add an unnecessary barrier to enrollees filing an appeal
with the managed care plan. Commenters stated that the elimination of
the written requirement benefits all parties involved, as it reduces
the additional administrative burdens for both the enrollee and the
plan.
Response: We continue to believe eliminating the requirement for
enrollees to submit a written appeal after filing an oral appeal will
facilitate enrollees receiving resolutions to their appeals much more
quickly.
Comment: Several commenters expressed concern that no longer
requiring a written request will harm enrollees by removing the
evidence of an appeal request. Commenters stated that this type of
change may inadvertently cause states to no longer be able to hold
plans accountable for the overall grievance and appeal system,
including following up on appeal requests in a timely manner,
processing requests and initiating the appeals process. The filing of
the written appeal helps to ensure that data are available on appeals
filed and processed, as well as data on the disposition of appeals.
Commenters urged CMS to create a way to incorporate a written record
that is less burdensome on the enrollee, perhaps assigning a
confirmation number to the oral transaction, to ensure that the appeal
is received and documented for the appeals process.
Response: We clarify that finalizing this provision does not
eliminate the option for enrollees to submit appeals in writing; any
enrollee that is not comfortable filing their appeal orally due to
concerns that the appeal may not be documented or tracked
appropriately, can file it in writing. Further, the regulation change
we are finalizing in Sec. Sec. 438.402(c)(3)(ii) and 438.406(b)(3)
does not change any reporting, tracking, documentation or other
requirements on the managed care plan. To the extent that the managed
care plan needs to assign a tracking number, make written (or
electronic) records summarizing the oral request made by the enrollee,
or take other steps to comply with the requirements for the appeal and
grievance system, those have not changed. All that this final rule
changes is whether the enrollee must follow up in writing after making
an oral request for an appeal. We believe there are adequate regulatory
requirements supporting the appeal process; specifically, Sec. 438.228
requires states' contracts with MCOs, PIHPs, and PAHPs to have a
grievance and appeal system that meets the requirements of subpart F
and Sec. 438.416 specifies the recordkeeping requirements for
grievances and appeals. We believe that data collected on appeals may
actually improve because excluding oral appeals that were not followed
up in writing or not followed up in a timely fashion based on review of
a plan's performance, would have inappropriately skewed the resolution
timeframes. Without these delays, appeal resolution data should more
accurately reflect a managed care plan's performance. Managed care
plans may find a method such as a confirmation number useful and we
encourage them to consider it along with any other method that they
find efficient and effective to accurately track oral appeals and to
ensure that the plan is compliant with the appeal and grievance system
requirements in part 438, Subpart F.
Comment: A few commenters stated that requiring a written request
may make it easier for certain populations to file an appeal, such as
individuals with disabilities, individuals who are incapacitated,
individuals with limited English proficiency and individuals with
health aids, health care proxies, powers of attorney and translators,
because they would be able to request an appeal in a manner and at a
time that is most convenient for them.
Response: Finalizing the elimination of the requirement for a
written appeal to be submitted in follow up to an oral appeal in
Sec. Sec. 438.402(c)(3) and 438.406(b)(3), does not eliminate the
option for enrollees to submit appeals in writing. Enrollees can submit
an appeal orally or in writing; the choice of method is a decision left
to the enrollee. We expect that enrollees (or their representatives)
who believe that a written request is better suited to their own needs
will file written appeals.
Comment: Several commenters supported the elimination of the
requirement for a written, signed appeal but recommended that CMS
require states to create redundancy protection to ensure that oral
requests for appeals are fully and accurately recorded. Commenters
stated that managed care entities may fail to acknowledge and document
oral requests, raising concern that the lack of a written record would
create a ``he said, she said'' situation between the appealing enrollee
and the managed care plan.
Response: We agree that oral appeals need to be accurately
documented but we decline to require a specific method or impose
specific requirements along those lines. Managed care plans should use
whatever means they deem most appropriate and that comply with Sec.
438.416, which requires that each grievance or appeal record must
contain, at a minimum: A general description of the reason for the
appeal or grievance; the date received; the date of each review or, if
applicable, review meeting; resolution at each level of the appeal or
grievance, if applicable; date of resolution at each level, if
applicable; and the name of the covered person for whom the appeal or
grievance was filed. Additionally, the record must be accurately
maintained in a manner accessible to the state and available upon
request to CMS. Given that managed care plans may have to defend their
appeal decisions at a state fair hearing if one is requested by the
enrollee, we believe managed care plans will select an appropriate
documentation method that accurately captures the appeal in sufficient
detail. Finally, states have the ability to specify a specific
documentation method in a managed care plan's contract if they
[[Page 72822]]
wish to do so and this final rule does not change that.
Comment: One commenter recommended CMS clarify in the regulation
language how a state or managed care plan can make a determination that
a verbal contact from a member constitutes an oral appeal. Commenter
requested that CMS include the language that a member would need to
specifically use or questions that the managed care plan needs to ask
to ensure that there is understanding that an appeal is being requested
orally. Commenter noted that for the purposes of tracking of appeals
and response times, a date of when the appeal process officially starts
is necessary, as any lack of clarity as to what constitutes an oral
appeal will negatively impact the setting of an official appeal start
date.
Response: We do not believe it is necessary for us to provide a
script for either enrollees or managed care plans. Section 431.221(a)
has allowed states to permit oral filings for state hearing requests
since 1979. As such, we believe enrollees have a sufficient level of
understanding of, and experience in, using an oral appeal filing
process and will benefit from the consistency between the process
described in Sec. 431.221(a)(1)(i) and the amendment being finalized
in this rule. As noted in this rule, enrollees retain the right to file
a written appeal if they prefer that method. We note that states have
the flexibility to mandate specific processes for their managed care
plans to follow for handling oral appeals if they elect to do so.
After consideration of the public comments received and for the
reasons articulated in the proposed rule and our responses to comments,
we are finalizing Sec. Sec. 438.402(c)(3)(ii) and 438.406(b)(3) as
proposed.
20. Resolution and Notification: Grievances and Appeals (Sec. 438.408)
We proposed a revision to Sec. 438.408(f)(2) to require the
timeframe for an enrollee to request a state fair hearing after
receiving an adverse decision from a managed care plan would be no less
than 90 calendar days and no more than 120 calendar days from the date
of the MCO's, PIHP's, or PAHP's notice of resolution; under this
proposal, the state would set the specific deadline within these
limits. Previously, in the 2016 final rule, we revised the timeframe
for managed care enrollees to request a state fair hearing to 120
calendar days from a plan's decision; this was codified at Sec.
438.408(f)(2). We adopted this timeframe because we believed it would
give enrollees more time to gather the necessary information, seek
assistance for the state fair hearing process, and make the request for
a state fair hearing (81 FR 27516). However, we have heard from
stakeholders that the 120-calendar day requirement has created an
inconsistency in filing timeframes between Medicaid FFS and managed
care, creating administrative burdens for states and confusion for
enrollees. The FFS rule limits the timeframe beneficiaries have to
request a hearing to no more than 90 days (Sec. 431.221(d)).\27\ It
was not our intent to burden states with additional tracking of the
fair hearing process in multiple systems, on multiple timeframes. Nor
do we want to confuse enrollees in states where some services are
provided through FFS and others through managed care.
---------------------------------------------------------------------------
\27\ 42 CFR 431.221(d) states that the agency must allow the
applicant or beneficiary a reasonable time, not to exceed 90 days
from the date that notice of action is mailed, to request a hearing.
---------------------------------------------------------------------------
Therefore, we proposed to revise Sec. 438.408(f)(2) to stipulate
that the timeframe for enrollees to request a state fair hearing will
be no less than 90 calendar days and no greater than 120 calendar days
from the date of the MCO's, PIHP's, or PAHP's notice of resolution. We
stated the proposed revision would allow states that wished to align
managed care with the FFS filing timeframe to do so without
jeopardizing the enrollee's ability to gather information and prepare
for a state hearing. This proposal would also allow states that have
already implemented the 120-calendar day timeframe to maintain that
timeframe without the need for additional changes.
The following summarizes the public comments received on our
proposal to amend Sec. 438.408(f)(2) and our responses to those
comments.
Comment: Many commenters supported the proposal to move from a
fixed 120 calendar days to a more flexible range of 90-120 calendar
days. Commenters noted that this would improve consistency and reduce
member confusion by avoiding two different timelines depending on the
service delivery model (that is, managed care or FFS), as well as
provide consistency for stakeholders. Commenters noted that benefits of
such alignment, including minimizing confusion and administrative
costs, and encouraging more timely resolution of cases.
Response: We agree that finalizing this provision as proposed can
benefit enrollees and states.
Comment: Several commenters opposed the proposed 90-120 day range.
These commenters stated providing enrollees with as much time as
possible to prepare for a hearing is substantially more important than
providing states with the ability to align their managed care and FFS
delivery system timeframes for filing requests for a state fair
hearing. Commenters noted that it takes time to collect evidence,
gather proper documentation and seek legal help, and noted that it is
essential that beneficiaries have every opportunity to make their case.
Response: We understand the commenters' concerns but do not believe
that enrollees will be disadvantaged in states that elect to limit
their managed care enrollees to the minimum 90 calendar days to file
for a state fair hearing. We believe 90 calendar days is sufficient
time for enrollees to gather documentation and seek legal assistance if
desired. We remind commenters that the compliance date for Sec.
438.408(f)(2) was the rating period for contracts starting on or after
July 1, 2017, and therefore, states should already be in compliance
with the 120 calendar day filing limit. Finalizing this change does not
require states to change their filing limit, it simply provides states
with an option if they elect to exercise it.
Comment: Commenters expressed concern that many beneficiaries are
medically fragile, frail, or actively ill or injured and that CMS
should be proposing steps to ensure state Medicaid programs fully
educate their beneficiaries about the steps required and timing of
internal appeals and Medicaid state fair hearings.
Response: We do not believe that a change in the managed care
regulations is necessary for this purpose. Managed care plans are
required to provide information on appeal and state fair hearing rights
and processes under Sec. Sec. 438.10(g)(2)(xi) and 438.408(e)(2)(i).
Section 438.10(g)(2)(xi) requires enrollee handbooks to contain
grievance, appeal, and state fair hearing procedures and timeframes, in
a state-developed or state-approved description and Sec.
438.408(e)(2)(i) requires a notice of appeal resolution to include the
right to request a state fair hearing and how to do so. We believe this
provides sufficient and appropriate means of conveying this information
to enrollees.
Comment: One commenter recommended that CMS reduce the timeframe to
60 days because the longer timeline exposes enrollees and plans to
increased financial risk since the beneficiary can be held financially
responsible for the services rendered during the time the appeal is
proceeding as specified in Sec. 438.420(d).
[[Page 72823]]
Response: We understand the commenter's concern about enrollee
exposure to financial liability but decline to adopt a 60-day filing
timeframe. As we stated in the 2016 final rule, because the
continuation of benefits option includes the active participation of
the enrollee (that is, the enrollee can elect the extent and duration
of the services that they wish to continue receiving), the enrollee has
some ability to control the amount of liability they are willing to
assume in certain situations. (81 FR 27637). We also clarify that
regardless of the upper limit on the filing timeframe, enrollees are
free to request a state fair hearing immediately upon receiving the
managed care plan's notice of adverse appeal resolution. There is no
required ``wait time'' between receiving a plan's notice of adverse
appeal resolution and making the request for a state fair hearing. We
believe that this ability for an enrollee to promptly file for a state
fair hearing, plus the protection available in the context of
continuation of benefits under Sec. 438.420, provides ample protection
against this particular harm and are therefore not revising the appeal
timeframe for requesting a state fair hearing for this reason.
After consideration of the public comments received and for the
reasons articulated in the proposed rule and our responses to comments,
we are finalizing the amendment to Sec. 438.408(f)(2) as proposed.
II. Children's Health Insurance Program (CHIP) Managed Care
A. Background
The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L.
111-5, enacted February 17, 2009), the Children's Health Insurance
Program Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3, enacted on
February 4, 2009), and the PPACA made applicable to CHIP several
Medicaid managed care provisions in section 1932 of the Act, including
section 1932(a)(4), Process for Enrollment and Termination and Change
of Enrollment; section 1932(a)(5), Provision of Information; section
1932(b), Beneficiary Protections; 1932(c), Quality Assurance Standards;
section 1932(d), Protections Against Fraud and Abuse; and section
1932(e), Sanctions for Noncompliance. In addition, the PPACA applied to
CHIP sections 1902(a)(77) and 1902(kk) of the Act related to provider
and supplier screening, oversight, and reporting. Our 2016 final rule
implemented these statutory provisions and built on initial guidance
provided in State Health Official (SHO) letters 09-008 and 09- 013,
issued on August 31, 2009 and October 21, 2009, respectively. The
provisions in the 2016 final rule both reflected and superseded this
earlier guidance.
Since the publication of the 2016 final rule, and subsequent
technical corrections to the rule in a correction notice published on
January 3, 2017 (82 FR 37) (the 2017 correction notice), we have
observed the need for additional minor technical or clarifying changes
to the CHIP managed care provisions, primarily to clarify that certain
Medicaid managed care requirements do not apply to CHIP. These changes
were included in the November 14, 2018 proposed rule. The public
comments received on the proposed CHIP provisions in the 2018 proposed
rule and our responses are described in this final rule.
B. CHIP Managed Care Provisions of the Rule and Analysis of and
Responses to Public Comments
The following sections, arranged by subject area, are a summary of
the comments we received regarding specific CHIP proposals. Some of the
comments raise issues that are beyond the scope of the proposed rule.
We are not summarizing or responding to those comments.
1. Compliance Dates for Part 457 Managed Care Provisions
The 2016 final rule provides that unless otherwise noted, states
will not be held out of compliance with new requirements in part 457
adopted in the 2016 final rule until CHIP managed care contracts as of
the state fiscal year beginning on or after July 1, 2018, so long as
the states (and applicable CHIP managed care contracts) complied with
the previously applicable regulations (that is, the regulations in
place before the 2016 final rule) (81 FR 27499). Since the 2016 final
rule was published, some stakeholders expressed that they believed that
the preamble was not clear about when states need to comply with the
CHIP managed care regulations. We clarified in the 2018 proposed rule
that, except as otherwise noted, compliance with the revisions to the
CHIP managed care regulations in part 457 of the 2016 final rule is
required as of the first day of the state fiscal year beginning on or
after July 1, 2018, regardless of whether or not the managed care
contract in effect is a multi-year contract entered into a previous
fiscal year or is a new contract effective for the first state fiscal
year beginning on or after that date.
Comment: Several commenters supported the clarification provided
regarding CHIP's compliance date.
Response: We thank commenters for their support.
2. Information Requirements (Sec. 457.1207)
Section 457.1207 sets forth the CHIP requirements for providing
enrollment notices, informational materials, and instructional
materials for enrollees and potential enrollees of managed care
entities by adopting, by cross-reference, the Medicaid requirements in
Sec. 438.10. We addressed in the 2018 proposed rule three cross
references that should not apply to CHIP and that we inadvertently
included in the CHIP regulatory text.
Section 438.10(c)(2) requires state Medicaid agencies to use the
state's beneficiary support system as specified in Sec. 438.71. We did
not intend to adopt the Medicaid beneficiary support system
requirements for CHIP in the 2016 final rule; therefore, we proposed to
modify the language in Sec. 457.1207 to exclude Sec. 438.10(c)(2)
from the cross-reference used to incorporate the Medicaid requirements
into the CHIP regulations.
Section 438.10(g)(2)(xi)(E) requires that the enrollee handbook of
Medicaid managed care entities notify Medicaid enrollees that, when
requested, benefits will continue when the enrollee files an appeal or
state fair hearing (also known as ``aid paid pending''). Because CHIP
enrollees are not entitled to continuation of benefits pending an
appeal, we intended to exclude the requirement to notify CHIP enrollees
of this requirement from the handbook of CHIP plans. Because Sec.
457.1207 of the 2016 final rule inadvertently included a cross
reference applying this handbook requirement in CHIP, we proposed to
modify the language in Sec. 457.1207 to exclude Sec.
438.10(g)(2)(xi)(E) from the cross-reference used to incorporate the
Medicaid requirements into the CHIP regulations.
Additionally, Sec. 438.10(g)(2)(xii) requires that the enrollee
handbooks for Medicaid MCOs, PIHPs, PAHPs, and PCCM entities must
provide information on how to exercise an advance directive, as set
forth in Sec. 438.3(j). CHIP regulations do not include advanced
directive requirements, and therefore, we did not intend that managed
care plans be required to notify CHIP enrollees on how to exercise
advanced directives. As a result, we proposed to modify the language in
Sec. 457.1207 to eliminate an erroneous reference applying the
Medicaid information requirement regarding advance directives to CHIP.
The following is a summary of the public comments we received on
our
[[Page 72824]]
proposal to amend Sec. 457.1207 and our responses to them.
Comment: Several commenters supported the proposed clarifications
and technical corrections.
Response: We are finalizing our proposal to amend Sec. 457.1207 as
proposed.
Comment: One commenter recommended CMS provide an explanation of
its position regarding ``aid paid pending''.
Response: As we explain in this final rule and as we noted in our
response to comments received in the 2016 final rule (81 FR 27768), the
right to benefits pending the outcome of a grievance or appeal does not
derive from section 1932(b)(4) of the Act, but from the constitutional
due process protections afforded to beneficiaries of an entitlement
program under Goldberg v. Kelly, 397 U.S. 254 (1970) and its progeny,
including provision of benefits to beneficiaries who are being
terminated from or denied coverage pending appeal. Unlike Medicaid,
CHIP is not an entitlement program, and therefore the right to benefits
pending appeal is not available to CHIP beneficiaries.
Comment: One commenter recommended affording states the discretion
to apply beneficiary support provisions to CHIP enrollees and to make
FFP available for states doing so.
Response: The Medicaid provision to provide beneficiary support in
Sec. 438.71 and cross-referenced under the beneficiary information
requirements in Sec. 438.10(c)(2) requires states to provide
counseling to Medicaid enrollees regarding choice of managed care plans
and assistance with LTSS, among other requirements. While CHIP does not
adopt Medicaid's requirements to ensure beneficiary choice of managed
care plans at enrollment in Sec. 438.52 and states are not required to
cover LTSS under CHIP, states are required by Sec. 457.110 to provide
information to all CHIP applicants and enrollees in order for these
families to make informed decisions about their choice of health plans
and providers. Under Sec. 457.110, states must provide information to
CHIP applicants and enrollees about covered benefits, cost sharing
requirements, names and locations of participating providers, and other
information related to CHIP. A state is permitted to use its Medicaid
beneficiary support system to fulfill the CHIP enrollment assistance
and information requirements; states simply are not required to do so.
We note also that our revisions to Sec. 457.1207 do not remove
application to CHIP of any of the numerous other requirements in Sec.
438.10 that require managed care entities to provide important
information to enrollees and potential enrollees about the entity's
provision of services through, for example, enrollee handbooks and
provider directories. Section 2105(a)(1)(D)(v) allows for claiming of
``other reasonable costs incurred by the state to administer the plan''
as a CHIP administrative expense, subject to the state's 10 percent cap
on administrative expenditures under section 2105(a)(2) of the Act. If
the state chooses to provide the information to CHIP enrollees through
the beneficiary support system established for Medicaid enrollees, the
state may claim that expenditure as a CHIP administrative expense.
For the requirements in Sec. 438.71 (relating to LTSS), as we
discussed in our response to comments received in the 2016 rule (81 FR
27757), states are not required to cover home and community-based
services (that is, LTSS) in their separate CHIPs. Therefore, LTSS
beneficiary support is not usually applicable to states with a separate
CHIP. States that choose to cover LTSS have flexibility to determine
the role the MCOs and other entities have in authorizing LTSS.
Comment: One commenter recommended that CMS allow states to provide
information regarding advance directives to CHIP enrollees and that FFP
be available to states that do so.
Response: As we noted in our response to comments received in the
2016 final rule (81 FR 27760), the mandatory Medicaid standards
regarding advance directives described in Sec. Sec. 438.3(j) and
422.128 do not apply to CHIP and we do not believe that they should. We
believe that the Medicaid advance directives provisions would create a
significant burden on states and MCOs, PIHPs, and PAHPs in the CHIP
context, with correspondingly little benefit for beneficiaries, as
there are very few adult beneficiaries in CHIP and very few children
need an advance directive. States may choose to require a managed care
entity to provide information about advance directives to managed care
enrollees since the requirements in Sec. 457.1207 (cross-referencing
Sec. 438.10, including Sec. 438.10(g)) represent the minimum amount
of information that must be provided to enrollees in an enrollee
handbook. A state could also choose to require its CHIP managed care
entities to provide certain CHIP enrollees (for example, pregnant
women) with information about how to execute an advance directive,
similar to the requirement for Medicaid set out at Sec. 438.3(j), and
may receive FFP as a CHIP administrative expenditure for doing so,
subject to the state's 10 percent cap on administrative expenditures
under section 2105(a)(2) of the Act. However, because the underlying
Medicaid advance directive requirement does not apply in the context of
CHIP, we decline to adopt a requirement for states to require their
CHIP managed care entities make this information available.
After consideration of the public comments and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing as proposed the amendment to Sec. 457.1207 to exclude
paragraphs (c)(2), (g)(2)(xi)(E), and (g)(2)(xii) of Sec. 438.10 the
cross-reference used to incorporate the Medicaid requirements into the
CHIP regulations.
3. Structure and Operations Standards (Sec. 457.1233)
In the 2016 final rule, at Sec. 457.1233(b), we adopted the
provisions in Sec. 438.230 related to MCO, PIHP, PAHP and PCCM entity
requirements for contracting with subcontractors. However, in Sec.
457.1233(b) we inadvertently included PCCMs instead of PCCM entities.
We proposed to revise Sec. 457.1233(b) to conform to the requirement
that Sec. 438.230 applies to PCCM entities.
Also, at Sec. 457.1233(d), we adopted the provisions in Sec.
438.242 that require states operating a separate CHIP to collect
enrollee encounter data from managed care plans. In finalizing Sec.
438.242, we also intended to apply to CHIP the requirements of Sec.
438.818, which is cross-referenced in Sec. 438.242 and requires the
submission of enrollee encounter data to CMS. We proposed to revise
Sec. 457.1233 to make explicit our intention to apply the terms of
Sec. 438.818 to CHIP.
Finally, in the 2016 final rule at Sec. 457.1233(d) we made a
technical error regarding the CHIP applicability date. Our cross-
reference to Sec. 438.242 inadvertently applied the Medicaid
applicability date of July 1, 2017 for the health information system
requirements instead of the later compliance date generally applicable
to CHIP (which is as of the first day of the state fiscal year
beginning on or after July 1, 2018) that was specified in the 2016
final rule and discussed in section II.B.1 of this final rule.
Therefore, we also proposed to revise Sec. 457.1233(d) to make this
technical correction.
The following is a summary of the public comments we received on
our proposals to amend Sec. 457.1233.
Comment: Several commenters supported the technical corrections and
clarification about collection of enrollee
[[Page 72825]]
encounter data in the CHIP structure and operations standards
regulatory sections.
Response: We thank the commenters for their support.
After consideration of the comments and for the reasons outlined in
the proposed rule and our responses to the comments, we are finalizing
as proposed the amendments to paragraphs (b) and (d) of Sec. 457.1233.
4. Quality Measurement and Improvement (Sec. 457.1240)
In the 2016 final rule, we aligned the quality assessment and
performance improvement program standards for CHIP MCOs, PIHPs and
PAHPs (with minor exceptions) with the Medicaid standards at Sec.
438.330 by adopting references to Sec. 438.330 in Sec. 457.1240(b).
Where appropriate, Sec. 457.1240, as finalized in the 2016 final rule,
also applied these Medicaid standards to PCCM entities. However, we
inadvertently failed to include a cross-reference to one of the
Medicaid standards at Sec. 438.330(b)(2), relating to the collection
and submission of quality performance measurement data, which we
intended to apply to PCCM entities in CHIP. We proposed revisions to
Sec. 457.1240(b) to correct this omission and reflect application of
Sec. 438.330(b)(2) to PCCM entities in CHIP.
Additionally, we inadvertently failed to exclude references to
consultation with the State's Medical Care Advisory Committee as a
state requirement when the state drafts or revises the state's quality
strategy in Sec. 438.340(c)(1)(i) (which we incorrectly identified as
Sec. 438.330(c)(1)(i) in the 2018 proposed rule) and when the state
requests, or modifies the use of an alternative managed care QRS under
Sec. 438.334(c)(2)(i) and (c)(3). Establishment of a Medical Care
Advisory Committee (MCAC) is required for Medicaid programs under Sec.
431.12. Regulations at Sec. Sec. 438.334(c)(2)(i) and (c)(3) and
438.340(c)(1)(i) require that the state seek input from the MCAC in
developing a state alternative QRS and managed care quality strategy.
However, there is no requirement that states establish a MCAC for CHIP
similar to that in Sec. 431.12, and therefore, the consultation
requirements with the state's MCAC in Sec. Sec. 438.340(c)(1)(i) and
438.334(c)(2)(i) and (c)(3) are not applicable to CHIP. We proposed to
revise Sec. 457.1240 to eliminate the MCAC consultation requirements
from the incorporation of the Medicaid requirements relating to
adoption of a QRS and managed care quality strategy for CHIP.
We noted in the November 2018 proposed rule how changes proposed to
Sec. 438.340 (regarding the managed care state quality strategy) were
addressed as technical, conforming changes to the CHIP regulation
(Sec. 457.1240(e)) that incorporates Sec. 438.340. Comments on the
proposed changes in Sec. 438.340 (relating to the managed care state
quality strategy), are discussed in the preamble at section I.B.14 of
this final rule while comments received specific to CHIP, which adopts
the Medicaid requirements for the state quality strategy, are addressed
in section II.B.8 of this final rule.
The following is a summary of the public comments we received on
our proposal to amend Sec. 457.1240 and our responses.
Comment: Several commenters supported the clarifications and
technical corrections of the requirements to collect and submit quality
performance measurement data to PCCM entities.
Response: We thank commenters for their support and are finalizing
the proposed correction.
Comment: One commenter noted that proposed Sec. 457.1240 included
a reference to ``Sec. 438.330(c)(1)(i)'' even though this reference
does not address consultation with the Medical Care Advisory Committee,
which is the requirement that we proposed to remove for CHIP.
Response: We appreciate the commenter bringing this error to our
attention. We agree that the correct reference should be to Sec.
438.340(c)(1)(i). We are making the proposed correction in the final
rule by finalizing an amendment to Sec. 457.1240(e), which cross-
references Sec. 438.340 to incorporate requirements for a written
quality strategy for assessing and improving the quality of health care
and services furnished to CHIP enrollees. As finalized in this rule,
Sec. 457.1240(e) excludes the reference to consultation with the MCAC
(described in Sec. 438.340(c)(1)(i)) from the incorporation of
Medicaid managed care requirements into CHIP. In addition, we have
noted that Sec. 457.1240(d), which cross-references Sec. 438.334 and
incorporates the requirement for a managed care quality rating system,
also fails to exclude from the CHIP regulation the requirement that the
state consult with the MCAC. We are also finalizing an amendment to
Sec. 457.1240(d) to exclude Sec. 438.334(c)(2)(i) and (c)(3) from
application to CHIP. These items were proposed in Sec. 457.1240(b) of
the proposed rule but we have determined that they would be more
appropriately placed in Sec. Sec. 457.1240(d) and (e).
Comment: Several commenters opposed the proposal to remove
consultation with the MCACs regarding the state's quality strategy as a
requirement for CHIP and suggested that states be required, or
encouraged, by CMS to seek and respond to MCACs, other advocacy groups,
and key stakeholder groups involved in CHIP quality measurement and
improvement activities to provide their perspective and expertise.
Response: We appreciate the commenters' recognition of the
important role stakeholder groups play in advising states on CHIP
quality strategies and agree with the commenters about the importance
of this involvement. Because we agree that stakeholder input is
important, Sec. 457.1240(e) generally incorporates those components
from the Medicaid managed care rule at Sec. 438.340 by cross-
referencing Sec. 438.340 with, as finalized here, only an exclusion
for the MCAC consultation in Sec. 438.340(c)(1)(i). Thus, CHIP adopts
the Medicaid requirement to make the quality strategy available for
public comment before submitting the strategy to CMS (at Sec.
438.340(c)(1)) and to make the review of the effectiveness of the
quality strategy conducted by the state at least every 3 years
available to the public (at Sec. 438.340(c)(2)). Further, states must
ensure ongoing public involvement in the state's CHIP state plan under
Sec. 457.120(b). However, the regulations at Sec. 431.12, which
require each state to establish an MCAC, specify that the MCAC advise
the Medicaid agency about health and medical care services (emphasis
added). While states have the flexibility to consult their MCAC for
purposes of their CHIP quality strategy, and we encourage them to do
so, the CHIP regulations do not require establishment of a similar
advisory committee for CHIP. Consultation with the MCAC has never been
a regulatory requirement for CHIP agencies, and we did not intend to
create a mandate for them to do so implicitly through a cross reference
in the 2016 managed care regulation. In addition, to require
consultation with the Medicaid MCAC would require that the MCAC exceed
its regulatory mandate. Therefore, we decline to adopt a requirement
for consultation with the MCAC in connection with CHIP managed care
programs and the comprehensive quality assessment and performance
improvement programs that managed care entities must be required to
establish and implement under Sec. 457.1240(d) and (e).
[[Page 72826]]
After consideration of the public comments and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing our proposal to reflect application of Sec. 438.330(b)(2)
to PCCM entities in CHIP with some minor non-substantive revisions to
Sec. 457.1240(b). We are reformatting and revising the text in two
ways. First, we are redesignating most of the current regulation text
in Sec. 457.1240(b) as Sec. 457.1240(b)(1) and designating a separate
paragraph (b)(2) for the regulation text providing that, in the case of
a CHIP contract with a PCCM entity, the requirements of Sec.
438.330(b)(2) and (3), (c), and (e) apply. Second, we are revising the
text to improve the readability of the regulation.
We inadvertently proposed to codify exceptions to the applicability
of Sec. Sec. 438.334 and 438.340 (regarding consultation with the
MCAC) in Sec. 457.1240(b). In the final rule, we are finalizing these
exceptions in the appropriate paragraphs of Sec. 457.1240. In Sec.
457.1240(d), we state that Sec. 438.334(c)(2)(i) and (c)(3) related to
consultation with the MCAC do not apply to the requirements related to
the managed care quality rating system for CHIP. In Sec. 457.1240(e)
we state that Sec. 438.340(c)(1)(i) related to the MCAC does not apply
to the requirements related to the managed care quality strategy for
CHIP. This is substantively consistent with our proposal to exclude
references to consultation with the MCAC from the CHIP requirements.
5. Grievance System (Sec. 457.1260)
In the 2016 final rule, we aligned CHIP with the Medicaid grievance
and appeals provisions in subpart F of part 438, by incorporating them
into Sec. 457.1260, with two substantive exceptions. First, Sec.
457.1260 provides that references to ``state fair hearings'' in part
438 should be read as referring to part 457, subpart K (which imposes
certain CHIP applicant and enrollee protections). Second, Sec.
457.1260 excludes the applicability date in Sec. 438.400(c) from
applying in the CHIP context. Following publication of the 2016 final
rule, we became aware of a number of concerns related to how Sec.
457.1260 currently incorporates the requirements applicable to Medicaid
managed care plans, including the following:
Definition of adverse benefit determination (Sec.
438.400): We inadvertently failed to exclude a reference to paragraph
(6) of the definition of ``adverse benefit determination'' in Sec.
438.400; this paragraph includes in the definition of adverse benefit
determination the denial of enrollee's request to exercise his or her
choice to obtain services outside the network under Sec. 438.52. We
did not adopt Sec. 438.52 in CHIP, and therefore, this should not have
been included in the definition of adverse benefit determination for
CHIP. Our proposed regulation text at Sec. 457.1260(a)(2) would
incorporate the definitions adopted in Sec. 438.400, other than this
one provision from the definition of adverse benefit determination.
General requirements for appeals and grievances (Sec.
438.402): In the 2016 final rule, in Sec. 457.1260 we adopted all of
Sec. 438.402 into CHIP. This included an optional external medical
review at Sec. 438.402(c)(1)(i)(B). However, at Sec. 457.1120(a),
CHIP already provides states with two options to conduct an external
review of a health services matter. The additional optional external
medical review was superfluous. We proposed to effectively eliminate
this additional, optional external medical review from the CHIP managed
care appeal process by excluding the language of Sec.
438.402(c)(1)(i)(B) in the list of appeal and grievance provisions that
were incorporated from the Medicaid managed care appeals requirements
in proposed Sec. 457.1260(b).
In addition, we proposed provisions in Sec. 457.1260(b)(2) through
(4) that would apply in place of the provisions in Sec.
438.402(c)(1)(i)(A), (c)(1)(ii), and (c)(2), respectively, by
substituting references to ``state fair hearings'' from the Medicaid
rules with references to part 457, subpart K (which provides for
certain CHIP applicant and enrollee protections, including external
review) in proposed regulation text that otherwise generally mirrored
text in Sec. 438.402. This approach is substantively consistent with
the current rule. Our proposed regulation text, at Sec. 457.1260(b),
would continue to incorporate Medicaid grievance and appeals system
establishment and operation rules in Sec. 438.402(a), (b), and (c)(2)
and (3).
Timing of notice of adverse benefit determinations (Sec.
438.404): We realized that there may have been some confusion about
whether states should follow the timing of notice of adverse benefit
determination requirements described in Sec. 438.404(c)(1) or in Sec.
457.1180. We proposed to clarify that we did not intend to incorporate
the requirements of part 431, subpart E into CHIP from Sec.
438.404(c)(1). We proposed, at Sec. 457.1260(c)(1), that states must
ensure that the CHIP managed care entities comply with the provisions
in Sec. Sec. 438.404(a), (b)(1), (2), and (4) through (6) and (c)(2)
through (6). In addition, we proposed at Sec. 457.1260(c)(2) language
that would effectively replicate the requirements in Sec.
438.404(b)(3) but substitute the reference to ``state fair hearings''
with the reference to part 457, subpart K. We also proposed, at Sec.
457.1260(c)(3), that states provide timely written notice for
termination, suspension, or reduction of previously authorized CHIP-
covered services, which mirrors the timing of notice requirements in
Sec. 457.1180.
Handling of grievances and appeals (Sec. 438.406): We
proposed at Sec. 457.1260(d) that the state must ensure that the CHIP
managed care entities comply with the provisions in Sec. 438.406.
Resolution and notification (Sec. 438.408): We proposed
revisions in Sec. 457.1260(e) to address the concerns about references
to state fair hearings and external medical reviews discussed in this
rule. Proposed Sec. 457.1260(e)(2) mirrored the language of Sec.
438.408(a) but we proposed to restate the text (rather than cross-
reference Medicaid managed care regulation) so that the use of ``this
section'' in the text referred to the language in Sec. 457.1260
instead of Sec. 438.408. In addition, proposed Sec. 457.1260(e)(3)
through (7) effectively restated the requirements imposed Sec.
438.408(b)(3), (e)(2), (f)(1) introductory text, (f)(1)(i), and (f)(2),
respectively, with references to part 457, subpart K, instead of
referring to ``state fair hearings'' as the Medicaid managed care
regulation does. We did not include the Medicaid external medical
review provisions (Sec. 438.408(f)(1)(ii)) from the list of appeal and
grievance provisions that we proposed to incorporate in proposed Sec.
457.1260. However, our proposed regulation text at Sec. 457.1260(e)
incorporated the resolution and notification requirements of Medicaid
grievance and appeals rules as set out at Sec. 438.408(b), (c)(1) and
(2), (d), (e)(1), and (f)(3).
Services not furnished (Sec. 438.424): The current
regulation inadvertently incorporated and applied the Medicaid standard
at Sec. 438.424(b), which requires a state to pay for disputed
services furnished while an appeal is pending--which we did not intend
to apply to CHIP. The Medicaid rule at Sec. 438.420, regarding the
continuation of benefits while an appeal is pending does not apply to
CHIP. Therefore, the CHIP regulation at Sec. 457.1260 should not
include either Sec. 438.420 or Sec. 438.424(b), which provides that a
state must pay for disputed services furnished while the appeal is
pending if the decision to deny authorization of the services is
reversed. Therefore, we did not propose to incorporate Sec. 438.420 or
Sec. 438.424(b)
[[Page 72827]]
in proposed Sec. 457.1260. Proposed Sec. 457.1260(i) mirrored Sec.
438.424(a), except for substituting the reference to ``state fair
hearings'' with the reference to part 457, subpart K. in requiring CHIP
managed care entities to provide denied services as expeditiously as
the enrollee's health requires, but no later than 72 hours, from the
date the managed care entity receives notice reversing its denial.
In sum, we proposed revisions to the regulation text in Sec.
457.1260 that adopted some provisions of the Medicaid appeals and
grievances requirements in total (such as in Sec. Sec. 438.406,
438.410, 438.414 or 438.416) and some only in part (such as in
Sec. Sec. 438.400, 438.402, 438.404, 438.408, and 438.424). We
solicited comments on whether our more detailed regulation text, which
incorporates specific provisions of subpart F of part 438, was
sufficiently clear and detailed for the appropriate administration of
grievances and appeals in the CHIP context.
The following is a summary of the public comments we received on
our proposal to amend Sec. 457.1260 and our responses to those
comments.
Comment: A few commenters supported the proposed changes to the
CHIP grievance system to require the state to require MCOs, PIHPs and
PAHPs to comply with incorporated provisions (in Sec. Sec. 438.402,
438.404, 438.406, 438.408, and 438.414) and noted that these changes
would expedite the grievance process.
Response: We appreciate the support for our proposal at Sec.
457.1260 regarding the grievance system.
Comment: One commenter requests that states be able to use the
Medicaid definition of ``adverse benefit determination'' in Sec.
438.400(b) and receive FFP for doing so, even though CHIP is not
adopting Sec. 438.400(b)(6). That section includes in the definition
of ``adverse benefit determination'' any denial of an enrollee's
request to exercise his or her choice to obtain services outside the
network under Sec. 438.52 as a result of Medicaid choice at enrollment
requirements and certain exceptions to this rule for rural areas.
Response: We previously did not adopt Sec. 438.52 in CHIP in the
2016 final rule because CHIP does not require choice of plans at
enrollment, and therefore, this should not have been included in the
definition of adverse benefit determination for CHIP. However, if a
state optionally provided for choice of plan at enrollment, created a
rural exception that, like Sec. 438.52(b)(2)(ii), allowed for an
enrollee to obtain services outside the network and established that a
denial of that rural exception would constitute an adverse benefit
determination, FFP would be available. We do not believe that
additional regulation text is necessary for Sec. 457.1260 to address
the ability of a state to expand the definition of ``adverse benefit
determination'' to include denials of optional benefits that the state
may adopt for its CHIP. We are finalizing Sec. 457.1260(a)(2) as
proposed.
Comment: One commenter requested that states be able to adopt the
Medicaid state fair hearing process for CHIP and receive FFP for using
the Medicaid state hearing process.
Response: States are already permitted to use the Medicaid fair
hearing process for CHIP pursuant to Sec. 457.1120. Section
457.1120(a) provides that a state must have one of two review
processes: (1) A process that meets the requirements of Sec. Sec.
457.1130 through 457.1180, which set forth specific standards about the
matters subject to review, core elements of the review process,
impartiality, time frames, continuation of enrollment, and notices; or
(2) a process that complies with State review requirements currently in
effect for all health insurance issuers (as defined in section 2791 of
the Public Health Service Act) in the State. The Medicaid state fair
hearing process is compliant with the standards outlined in Sec. Sec.
457.1130 through 457.1180 (66 FR 2635-2640). Many states already use
the Medicaid fair hearing process for this purpose.
The proposed clarifying amendments to Sec. 457.1260 to remove
references to the Medicaid state fair hearing process would not
eliminate states' option to utilize the Medicaid state fair hearing
process to satisfy the CHIP requirements in Sec. 457.1120(a)(1). The
proposed revisions, which we are finalizing with modifications in this
final rule, simply clarify how the appeals and grievances process under
part 438, subpart F relate to the state CHIP review requirements in
Sec. 457.1120.
Comment: One commenter requested clarification regarding the
applicable timelines for adverse benefit notifications for CHIP in
proposed Sec. 457.1260(c). The commenter suggested that we had
proposed conflicting requirements in proposed Sec. 457.1260(c)(3) and
proposed Sec. 457.1260(c)(1), which cross-references Sec.
438.404(c)(3). Further, the commenter suggested that Sec.
438.404(c)(3) addressed the timing of appeals and grievances but not
the timing of notices for denials and limitations of services.
Response: We agree with the commenter that the timelines as
proposed were confusing. The CHIP standard in Sec. 457.1180 simply
requires that states provide enrollees and applicants of ``timely
written notice'' of any adverse determination. Rather than aligning the
standard for CHIP plans to provide notice to enrollees with the
standards for Medicaid plans, we agree that alignment with the
timeliness standards for states to notify CHIP beneficiaries of other
adverse benefit determinations is appropriate. Therefore, in the final
rule we state in Sec. 457.1260(c)(3) that CHIP plans must provide the
enrollee with timely written notice of adverse benefit determinations,
which is consistent with the timeliness standard in 457.1180, except
for expedited service authorization decisions. This makes the
timeframes for notice consistent across Sec. Sec. 457.1260 and
457.1180. CHIP does not address expedited service authorization
decisions in Sec. 457.1180. Therefore, for these types of decisions,
we are finalizing at Sec. 457.1260(c)(3) the use of the Medicaid
notice timing requirement in Sec. 438.404(c)(6) (which cross
references Sec. 438.210(d)(2)).
Comment: Several commenters sought clarification on the continued
inclusion (in Sec. 457.1260) of references to continuation of benefits
despite the fact that CHIP beneficiaries are not entitled to continued
benefits pending appeal. One commenter specifically suggested that we
remove the reference to Sec. 438.404(b)(6) in proposed Sec.
457.1260(c)(1) and the proposed language at Sec. 457.1260(e)(4)(ii)
and (iii) because each of these relate to the continuation of benefits
during an appeal even though CHIP does not adopt the Medicaid
continuation of benefits requirements in Sec. 438.420. In addition,
several commenters suggested that we include the right to continue to
receive benefits pending an appeal in Sec. 438.420 and the related
requirement for payment for reversed adverse benefit determinations
when benefits were provided pending appeal Sec. 438.424(b) because
preservation of enrollee health and due process require that enrollees
retain access to services during the resolution of any dispute
regarding their entitlement to them. Alternatively, several commenters
suggested that CMS at least permit states to continue benefits while
pending appeal and require states to notify enrollees of this option.
Response: First, we thank commenters for pointing out where our
proposed regulation text for Sec. 457.1260 included cross-references
to requirements from part 438 that are relevant to the aid pending
appeal policy. As there is no continuation of benefits/aid pending
appeal requirement in CHIP, we are not
[[Page 72828]]
finalizing any of the related references in Sec. 457.1260.
Second, we are not finalizing references to any right or policy
regarding the continuation of benefits pending appeal in Sec.
457.1260(c)(2) or (3), (e)(4)(ii) and (iii), or (i). As we have
previously explained (83 FR 57284), the right to benefits pending the
outcome of a CHIP review does not derive from section 1932(b)(4) of the
Act, but from the constitutional due process protections afforded to
beneficiaries of an entitlement program under Goldberg v. Kelly, 397
U.S. 254 (1970) and its progeny, including provision of benefits to
beneficiaries who are being terminated from or denied coverage pending
appeal. Unlike Medicaid, CHIP is not an entitlement program and
therefore the right to benefits pending appeal is not available to CHIP
beneficiaries. Therefore, in summary, to address these clarifications
and respond to these comments, we are:
Finalizing Sec. 457.1260(c)(2) and (3), with revisions;
Not finalizing Sec. 457.1260(e)(4)(ii) and (iii); and
Finalizing Sec. 457.1260(i) with revisions to eliminate
references to aid pending appeal.
Comment: One commenter suggested that the language proposed at
Sec. 457.1260(e)(3) and (6) was duplicative, as both deemed exhaustion
of the plan's appeal process and permitted an enrollee to seek State
external review in accordance with part 457, subpart K, if an MCO, PIHP
or PAHP failed to comply with the notice and timing requirements for an
adverse decision outlined in Sec. 457.1260.
Response: We agree, and therefore, are not finalizing the
regulation text at proposed Sec. 457.1260(e)(6). We are finalizing the
deemed exhaustion provision at Sec. 457.1260(e)(3) and including there
a statement that the enrollee may initiate a state external review in
accordance with part 457, subpart K, in such cases. We also note an
additional duplication of this deemed exhaustion requirement in the
proposed language at Sec. 457.1260(b)(3) so we are not finalizing that
duplicative provision either. Proposed Sec. 457.1260(b)(4) is
redesignated as paragraph (b)(3) in the final rule.
Comment: Several commenters stated that they appreciated Medicaid
aligning in Sec. 438.408(f)(2) the timeframes for enrollees to request
a state fair hearing across the managed care and fee for service
delivery systems by giving states the flexibility to choose a time
period between 90 and 120 days. The CHIP proposal at Sec.
457.1260(e)(6) maintained the requirement that enrollees have 120 days
to request a state review, which is out of alignment with Medicaid.
Response: We agree that timeframes should be aligned across
delivery systems and programs and appreciate commenters bringing to our
attention our inadvertent failure to align the timeframe in proposed
Sec. 457.1260(e)(7) with the revisions for Medicaid in proposed Sec.
438.408(f)(2). We are modifying the regulation text in proposed Sec.
457.1260(e)(7), redesignated as paragraph (e)(5), to achieve the
intended alignment. Under Sec. 457.1260(e)(5) of the final rule,
states have the same flexibility they have in Medicaid to provide
enrollees with between 90 and 120 calendar days to request a state
external review of a plan's adverse benefit determination.
Comment: One commenter questioned why CHIP MCOs have to comply with
Sec. 438.408(f)(3) (proposed at Sec. 457.1260(e)(1)) when there is no
state fair hearing requirement for CHIP.
Response: Although we proposed that the substance of the Medicaid
regulations at Sec. 438.408(f)(3) (regarding the parties to be
included in a fair hearing) apply to CHIP, we agree that the proposed
application of all of Sec. 438.408(f)(3) to CHIP was an error, because
Sec. 438.408(f)(3) is explicitly about the parties to be at the State
fair hearing. CHIP has separate regulations, found in subpart K of part
457 of the regulations, governing the review process for CHIP
beneficiaries. Therefore, we are not finalizing at Sec. 457.1260(e)(1)
the proposal that CHIP managed care entities comply with Sec.
438.408(f)(3)).
After consideration of the public comments and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing, with several modifications, the regulation text proposed at
Sec. 457.1260 regarding the appeal and grievance systems. A summary of
the changes is as follows:
Throughout Sec. 457.1260, we are finalizing parenthetical
text to identify the scope and nature of the requirements from part 438
that we are incorporating to apply to CHIP MCOs, PIHPs, and PAHPs. In
addition, we have corrected cross-references throughout Sec. 457.1260
as needed to refer to the sections within Sec. 457.1260 in lieu of the
Medicaid cross-references.
Statutory basis and definitions. We are finalizing Sec.
457.1260(a)(1) and (2) as proposed. Paragraph (a)(1) identifies the
applicable statutory provisions regarding CHIP managed care entities
having an appeals and grievance system. Paragraph (a)(2) incorporates
the definitions of the following terms from Sec. 438.400(b): ``adverse
benefit determination,'' except for paragraph (6); ``appeal,''
``grievance,'' and ``grievance and appeal system.''
General requirements. We are finalizing as proposed Sec.
457.1260(b)(1). We are finalizing paragraph (b)(2) with a minor
modification to cite to Sec. 457.1260(e) instead of Sec. 438.408. We
are not finalizing the proposal at Sec. 457.1260(b)(3) because it is
duplicative of what we are finalizing at paragraph (e)(3). We are
finalizing what was proposed at paragraph (b)(4) as Sec.
457.1260(b)(3) regarding the ability of a provider or authorized
representative to file a grievance, request an appeal, or request state
external review for an enrollee.
Notice of Adverse Benefit Determination. We are finalizing
Sec. 457.1260(c) to address the content and timing requirements for
notices of adverse benefit determinations, with substantial revisions
to the timeframes for these notices. We are finalizing Sec.
457.1260(c)(1) to require that the state ensure that its CHIP managed
care entities comply with the provisions at Sec. 438.404(a) and
(b)(1), (2), and (5) regarding the content of the notice of an adverse
benefit determination. We are also finalizing additional content
requirements for these notices in paragraph (c)(2). Taken together,
Sec. 457.1260(c)(1) and (2) mean that the following information must
be provided to an enrollee as part of a notice of adverse benefit
determinations:
++ The adverse benefit determination the MCO, PIHP, or PAHP has
made or intends to make.
++ The reasons for the adverse benefit determination, including the
right of the enrollee to be provided upon request and free of charge,
reasonable access to and copies of all documents, records, and other
information relevant to the enrollee's adverse benefit determination.
Such information includes medical necessity criteria, and any
processes, strategies, or evidentiary standards used in setting
coverage limits.
++ The circumstances under which an appeal process can be expedited
and how to request it.
++ The enrollee's right to request an appeal of the MCO's, PIHP's,
or PAHP's adverse benefit determination, including information on
exhausting the MCO's, PIHP's, or PAHP's one level of appeal and the
right to request a State external review in accordance with the terms
of subpart K of part 457;
++ The procedures for the enrollee to exercise his or her rights to
an appeal.
We are finalizing provisions regarding the timing of the notice at
Sec. 457.1260(c)(3). As explained in our
[[Page 72829]]
response to comments about the timing of notices of adverse benefit
determinations, CHIP managed care entities will have to comply with a
standard that notices be ``timely,'' consistent with the requirement in
Sec. 457.1180, rather than within a specific timeframe for notices of
adverse benefit determination, except in cases of expedited service
authorizations. In the circumstances of expedited service authorization
decisions, the terms of Sec. 438.404(c)(6) (incorporating Sec.
438.210(d)(2) by cross reference) apply. Section 438.210(d)(2) sets out
timeframes for expedited authorization determinations.
Handling of grievances and appeals. We are finalizing
Sec. 457.1260(d) as proposed, to require states to ensure that CHIP
managed care entities comply with the provisions at Sec. 438.406 with
regard to the handling of grievances and appeals.
Resolution and notification. We are finalizing Sec.
457.1260(e) with revisions.
++ In paragraph (e)(1), we are finalizing as proposed the
requirement that states ensure CHIP managed care entities comply with
the provisions at Sec. 438.408(b) (relating to the timeframe for
resolution of grievances and appeals), (c)(1) and (2) (relating to the
extension of timeframes for resolution of grievances and appeals), (d)
(relating to the format of the notice of resolution for grievances and
appeals), and (e)(1) (relating to the content of the notice of
resolution for grievances and appeals). However, we are not finalizing
the proposal to require compliance with Sec. 438.408(f)(3) because the
parties to an appeal in the CHIP managed care contexts are set forth at
part 457, subpart K.
++ We are finalizing paragraph (e)(2) as proposed with a
clarification that the state-established timeframes for resolution of
each grievance and appeal must not exceed the timeframes identified in
paragraph (e)(1) of Sec. 457.1260, which incorporates the timeframes
in Sec. 438.408(b) and (c)(1) and (2).
++ We are finalizing Sec. 457.1260(e)(3) with additional text
specifying that an enrollee may seek state external review in
accordance with part 457, subpart K, after the plan's appeal process is
exhausted.
++ We are finalizing paragraph (e)(4) regarding the content of the
notice of appeal resolution with only the proposal that such notice
include the enrollee's right to seek state external review in
accordance with the terms of part 457, subpart K, and how to do so. We
are not finalizing the proposal to require that the notice include the
right to request and receive benefits while the review is pending and
that the enrollee may be held liable for the costs of those benefits if
the adverse benefit determination was upheld.
++ We are finalizing paragraph (e)(5) with modifications. We are
finalizing as proposed in paragraph (e)(5) that an enrollee may request
a state external review only upon exhausting the CHIP managed care
entity's appeal process. We are adding to paragraph (e)(5) the
timeframe for requesting a state external review, which was proposed in
paragraph (e)(7).
++ We are modifying that proposal to align with Sec.
438.408(f)(2), by requiring that enrollees must have no less than 90
days and no more than 120 days after the plan's date of resolution to
request a review.
6. Sanctions (Sec. 457.1270)
In the 2016 final rule, CHIP adopted, at Sec. 457.1270, the
Medicaid requirements related to sanctions in the managed care context
in part 438, subpart I. We inadvertently did not include a provision in
Sec. 457.1270 that states may choose to establish sanctions for PCCMs
and PCCM entities as specified in Sec. 438.700(a). In addition, we did
not indicate that references in Sec. 438.706(a)(1) and (b) should be
read to refer to the requirements of subpart L of part 457, rather than
references to sections 1903(m) and 1932 of the Act. We proposed to
revise the language of Sec. 457.1270 to reflect these technical
changes.
The following is a summary of the public comments we received on
our proposals to amend Sec. 457.1270.
Comment: A few commenters supported the clarifications and
technical corrections to the regulatory sanctions applicable in Sec.
457.1270.
Response: We are finalizing the amendments to Sec. 438.1270.
After consideration of the public comments and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing the amendments to Sec. 457.1270 as proposed with slight
modification. We are adding parentheticals in the regulation text to
help readers understand what general subject is addressed in the
Medicaid cross-references in Sec. 457.1270(b) and (c).
7. Program Integrity Safeguards (Sec. 457.1285)
Section 457.1285 sets forth the CHIP requirements for program
integrity safeguards for managed care entities by adopting the Medicaid
requirements in subpart H of part 438, except for the terms of Sec.
438.604(a)(2), by cross-reference. These cross-referenced standards
include, among other things, requirements related to provider
enrollment, auditing, implementation and maintenance of arrangements or
procedures that are designed to detect and prevent fraud, waste, and
abuse. In the 2016 final rule, we inadvertently failed to exclude from
our cross-reference to the Medicaid managed care program integrity
provisions a regulation that should not apply to CHIP. Specifically,
CHIP does not adopt the Medicaid actuarial soundness requirements,
therefore, states do not need to use the specified plan information
collected in Sec. 438.608(d)(1) and (3) for setting actuarially sound
capitation rates as required in Medicaid; we proposed to modify the
language of Sec. 457.1285 to reflect this technical correction.
The following is a summary of the public comments we received on
our proposal to amend Sec. 457.1285.
Comment: A few commenters supported the proposed clarifications and
technical corrections to program integrity safeguards.
Response: We thank commenters for their support.
Comment: One commenter noted that the proposed regulatory text at
Sec. 457.1285 included a typographical error in failing to include a
reference to Sec. 438.608(d)(4) as proposed. The rule text states,
``except that the terms of Sec. 438.604(a)(2) and (d)(4) of this
chapter do not apply;'' however, the text should read ``except that the
terms of Sec. Sec. 438.604(a)(2) and 438.608(d)(4) of this chapter do
not apply.''
Response: Section 438.608(d)(4) is the correct cross-reference as
we explained in the preamble of the 2018 proposed rule, and we make
that correction in the final rule.
Comment: One commenter requested that CHIP adopt the Medicaid state
monitoring requirements in Sec. 438.66.
Response: This comment is outside the scope of this rule. We did
not propose to incorporate Sec. 438.66 into the CHIP regulations and
therefore cannot do so in the final rule as such a substantive change
in the responsibilities of a state with regard to its CHIP and the
managed care entities with which the state contracts should be subject
to public notice and comment. We also refer the commenter to Sec.
457.204, which authorizes CMS compliance actions when a state fails to
comply with its oversight responsibilities under these regulations for
a managed care contract.
After consideration of the public comments and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing the
[[Page 72830]]
regulation text at Sec. 457.1285 as proposed with one modification. We
are modifying the regulatory text at Sec. 457.1285 to exclude
Sec. Sec. 438.604(a)(2) and 438.608(d)(4), rather than Sec.
438.604(a)(2) and (d)(4), from being applied in CHIP.
8. CHIP Conforming Changes To Reflect Medicaid Managed Care Proposals
In the 2016 final rule, CHIP adopted many of the Medicaid
regulations via cross-reference. We proposed to revise some of these
Medicaid regulations. The cross-references to these revised regulations
are unchanged in this final rule. We explained in the proposed rule
that the changes made to the following Medicaid regulations in this
final rule would also apply, by existing cross-reference, to CHIP. We
welcomed comments on the proposed changes specifically as they apply to
CHIP:
MLR standards (Sec. 438.8(k)): As discussed in section
I.B.6. of this final rule, we proposed revisions to Sec.
438.8(k)(1)(iii) and (e)(4). Section 438.8(k) is incorporated into the
CHIP regulations in Sec. 457.1203(e) and (f).
Information requirements (Sec. 438.10): As discussed in
section I.B.8 of this final rule, we proposed several revisions to
Sec. 438.10. Section 438.10 is incorporated into the CHIP regulations
at Sec. Sec. 457.1206(b)(2) (via cross-reference to Sec. 457.1207),
457.1207, and 457.1210(c)(5) (via cross-reference to Sec. 457.1207).
Disenrollment: Requirements and limitations (Sec.
438.56): As discussed in section I.B.9. of this final rule, we proposed
revisions to Sec. 438.56(d)(5) by deleting ``PCCMs or PCCM entities.''
Section 438.56 is adopted in CHIP at Sec. 457.1212.
Network adequacy standards (Sec. 438.68): As discussed in
section I.B.10. of this final rule, we proposed revisions to the
provider-specific network adequacy standards in Sec. 438.68(b). The
Medicaid network adequacy standards are applied to CHIP per Sec.
457.1218.
Practice guideline (Sec. 438.236): As discussed in the
preamble at section I.B.11. of this final rule, we proposed revisions
to Sec. 438.236(b)(3) by deleting contracting health care
professionals and replacing it with network providers. Section 438.236
is incorporated into the CHIP regulations at Sec. 457.1233(c).
Health information systems (Sec. 438.242): As discussed
in section I.B.12. of this final rule, we proposed revisions to the
health information systems requirements in Sec. 438.242. Section
438.242 is adopted in CHIP at Sec. 457.1233(d).
Medicaid managed care QRS (Sec. 438.334): As discussed in
the section I.B.13. of this final rule, we proposed revisions to Sec.
438.334(b), (c)(1) introductory text, and (c)(1)(ii), redesignating
current paragraphs (c)(1)(i) and (ii) as paragraphs (c)(1)(ii) and
(iii), respectively, and adding new paragraph (c)(1)(i). We also
proposed revisions to redesignated paragraph (c)(1)(ii) and adding new
paragraph (c)(4). Section 438.334 is adopted in CHIP at Sec.
457.1240(d).
Managed care state quality strategy (Sec. 438.340): As
discussed in the preamble at section I.B.14. of this final rule, we
proposed revisions to Sec. 438.340(b)(2), (b)(3)(i), (b)(6), and
(c)(1)(ii). We also proposed removing Sec. 438.340(b)(8), and
redesignating paragraphs (b)(9), (10), and (11) as paragraphs (b)(8),
(9), and (10), respectively. Section 438.340 is incorporated into the
CHIP regulations at Sec. 457.1240(e).
Activities related to EQR (Sec. 438.358): As discussed in
section I.B.15. of this final rule, we proposed revisions to Sec.
438.358(b)(1)(iii). Section 438.358 is incorporated into the CHIP
regulations at Sec. 457.1250(a).
EQR Results (Sec. 438.364(d)): As discussed in section
I.B.17 of this final rule, we proposed revisions to Sec. 438.364(d).
Section 438.364 is incorporated into CHIP regulations at Sec.
457.1250(a).
Statutory basis, definitions, and applicability (Sec.
438.400): As discussed in section I.B.18. of this final rule, we
proposed revisions to Sec. 438.400(b)(3). Section 438.400 is
incorporated into the CHIP regulations at Sec. 457.1260.
General requirements (Sec. Sec. 438.402 and 438.406): As
discussed in section I.B.19. of this final rule, we proposed revisions
to Sec. Sec. 438.402(c)(3)(ii) and 438.406(b)(3). Sections 438.402 and
438.406 are incorporated in CHIP in Sec. 457.1260.
The following is a summary of the public comments we received on
our proposal to CHIP conforming changes to reflect Medicaid managed
care proposals.
Comment: We received several comments supporting CHIP's proposals
to align with the Medicaid requirements where appropriate.
Response: We thank commenters for their support.
Comment: We received several comments that did not include specific
comments on the CHIP proposal to incorporate these Medicaid proposals
but referred us to their comments on the Medicaid proposals.
Response: Because CHIP proposed to adopt, by cross-reference, the
proposed changes to Sec. Sec. 438.8(k), 438.10, 438.56, 438.68,
438.236, 438.242, 438.334, 438.340, 438.358, 438.364(d), 438.400,
438.402, and 438.406, we direct commenters to the responses to their
comments on the Medicaid proposals adopted by CHIP.
Comment: Several commenters disagreed with the proposal revisions
in Sec. 438.68(b), adopted by cross-reference to CHIP through Sec.
457.1218, to eliminate the requirement for states to establish time and
distance standards for the list of specified provider types and to
eliminate the requirement for standards to be developed for
``additional provider types'' identified by CMS. Alternatively, these
commenters requested that CMS establish specific minimum quantitative
standards for the specified provider types, including for
pediatricians, pediatric specialists, and pediatric dentists, and to
also identify additional types of pediatric provider types to be
included in network adequacy standards, including pediatric medical
subspecialties, providers at FQHCs and pediatric dental specialties.
Response: We refer commenters to section I.B.10 of the preamble and
the responses provided therein to address comments received for these
proposed revisions to Sec. 438.68. As we stated there, we believe
removing the requirement for states to establish time and distance
standards for specified providers and removing authority for CMS to add
additional provider types will enable states to recognize and react
more quickly to local needs and developing trends in care. The list of
providers for which states must develop quantitative network adequacy
standards includes pediatric primary care, pediatric specialists,
pediatric behavioral health, and pediatric dental. We believe this list
provides the appropriate balance between assuring that states maintain
appropriate networks for the child population, and providing
flexibility to states to react to the specific needs of their
population and provider landscape in their state. States already have
the authority to add additional provider types to their network
adequacy standards to meet the needs of their CHIP programs and
enrollees.
Comment: One commenter expressed concern with CMS retaining the
general requirement for actuarial soundness in CHIP rates at Sec.
457.1203. The commenter stated that CMS should apply the Medicaid
actuarial soundness requirements to CHIP and reconsider its position.
Response: We agree that states must develop payment rates for MCOs,
PIHPs, and PAHPs for CHIP using actuarially sound principles, as
required under
[[Page 72831]]
Sec. 457.1203(a) of the 2016 final rule. However, as we stated in the
2016 final rule, Title XXI does not provide the same specificity about
rate development standards as Title XIX, and while we agree that we
have authority under section 2101 of the Act to establish additional
standards, we have determined it would not be appropriate to impose all
of the Medicaid rate-setting standards on separate CHIPs at this time,
including those cited by commenters. Under Sec. 457.1201 of the 2016
final rule, states are required to include payment rates in their
managed care contracts submitted to CMS upon request of the Secretary.
As we stated in the 2016 final rule, as we continue to gain additional
experience with rate setting in CHIP, we may consider developing
additional standards for CHIP in the future.
After consideration of the public comments, we are finalizing
application to CHIP of the changes to the Medicaid managed care
requirements in Sec. Sec. 438.8(k), 438.10, 438.56, 438.68, 438.236,
438.242, 438.334, 438.340, 438.358, 438.364(d), 438.400, 438.402, and
438.406 as finalized in this final rule.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), we are required to provide 60-day notice in the Federal Register
and solicit public comment before a collection of information
requirement is submitted to the Office of Management and Budget (OMB)
for review and approval. For the purpose of the PRA and this section of
the preamble, ``collection of information'' is defined under 5 CFR
1320.3 of the PRA's implementing regulations. To fairly evaluate
whether a collection of information should be approved by OMB, section
3506(c)(2)(A) of the PRA requires that we solicit comment on the
following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In our November 14, 2018 (83 FR 57264) proposed rule, we solicited
public comment on each of the aforementioned issues for the following
sections of the rule that contained information collection requirements
(ICRs).
We did not receive any PRA-related public comments and are
finalizing all provisions as proposed.
A. Wage Estimates
To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' May 2018 National Occupational Employment and Wage
Estimates for all salary estimates (http://www.bls.gov/oes/current/oes_nat.htm). Table 1 presents the mean hourly wage, the cost of fringe
benefits and overhead (calculated at 100 percent of salary), and the
adjusted hourly wage.
Table 1--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupation Mean hourly benefits and Adjusted
Occupation title code wage ($/hr) overhead ($/ hourly wage
hr) ($/hr)
----------------------------------------------------------------------------------------------------------------
Business Operations Specialist.................. 13-1000 35.52 35.52 71.04
Computer Programmer............................. 15-1131 43.07 43.07 86.14
Actuary......................................... 15-2011 55.89 55.89 111.78
Office and Administrative Support Worker........ 43-9000 17.28 17.28 34.56
----------------------------------------------------------------------------------------------------------------
As indicated, we are adjusting our employee hourly wage estimates
by a factor of 100 percent. This is necessarily a rough adjustment,
both because fringe benefits and overhead costs vary significantly from
employer to employer, and because methods of estimating these costs
vary widely from study to study. Nonetheless, we believe that doubling
the hourly wage to estimate total cost is a reasonably accurate
estimation method.
B. Information Collection Requirements (ICRs)
To estimate the burden for the requirements in part 438, we
utilized state submitted data for enrollment in managed care plans for
CY 2017. The enrollment data reflected 55,601,033 enrollees in MCOs,
17,702,565 enrollees in PIHPs or PAHPs, and 5,462,769 enrollees in
PCCMs, for a total of 80,242,585 managed care enrollees. This includes
duplicative counts when enrollees are enrolled in multiple managed care
plans concurrently. This data also showed 42 states that contract with
519 MCOs, 14 states that contract with 134 PIHPs or PAHPs, 16 states
that contract with 21 non-emergency transportation PAHPs, 16 states
with 26 PCCM or PCCM entities, and 20 states that contract with one or
more managed care plans for managed LTSS).
To estimate the burden for these requirements in part 457, we
utilized state submitted data for enrollment in managed care plans for
CY 2016. The enrollment data reflected 9,013,687 managed care
enrollees. This data also showed that 32 states use managed care
entities for CHIP enrollment.
1. ICRs Regarding Standard Contract Requirements (Sec. 438.3(t))
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0920 (CMS-10108). Subject to
renewal, it was last approved on December 16, 2016, and remains active.
Amendments to Sec. 438.3(t) will permit states to choose between
requiring their MCOs, PIHPs, and PAHPs to sign a COBA with Medicare, or
requiring an alternative method for ensuring that each MCO, PIHP, and
PAHP receives all appropriate crossover claims. If the state elects to
use an alternative methodology the methodology must ensure that the
submitting provider is promptly informed on the state's remittance
advice that the claim has been sent to the MCO, PIHP, or PAHP for
payment consideration. We estimate it will take 1 hour at $86.14/hr for
a computer programmer to implement the message on the remittance
advice. Given that 23 of the 33 states with duals in managed care have
already required their plans to obtain COBAs, we estimate that half of
the remaining states (5 states) will elect to pursue an alternative
method. In aggregate, we estimate a one-time burden of 5 hours (5
states x 1 hr at a cost of $430.70 (5 hr x $86.14/hr)). Over the course
of OMB's anticipated 3-year approval period, we estimate an annual
burden of 1.33 hours (5 hr/3 years) at a cost of $143.57 ($430.70/3
years). We are annualizing the one-time burden
[[Page 72832]]
estimate since we do not anticipate any additional burden after the 3-
year approval period expires.
Additionally, for the 5 states that elect to require an alternative
method, the amendments to Sec. 438.3(t) will alleviate the 25 managed
care plans that are operating within those states of the one-time
requirement to obtain a COBA. In aggregate, we estimate a one time
savings of-100 hr (25 plans x -4 hr for a business operations
specialist) and -$7,104 (100 hr x $71.04/hr). As this will be a one-
time savings, we annualize this amount to -33.33 hr (100 hr/3 years)
and -$2,368 (-$7,104/3 years).
For the 5 states that elect to require that their plans obtain a
COBA, in aggregate we estimate a one-time burden of 100 hrs (25 plans x
4 hr for a business operations specialist) at a cost of $7,104 (100 hrs
x $71.04/hr specialist). As this will be a one-time burden, we
annualize this amount to 33.33 hr (100 hr/3 years) and $2,368 ($7,104/3
years). We are annualizing the one-time burden estimate since we do not
anticipate any additional burden after the 3-year approval period
expires.
2. ICRs Regarding Special Contract Provisions Related to Payment (Sec.
438.6(c))
The following requirements and burden will be submitted to OMB for
approval under control number 0938-1148 (CMS-10398 #52). Subject to
renewal, it was last approved on March 1, 2018, and remains active.
Amendments to Sec. 438.6(c) will remove the requirement for states
to obtain prior approval for directed payment arrangements that utilize
state plan approved rates. To obtain prior approval, states submit a
preprint to CMS. Based on our experience, we estimate that 20 states
may elect annually to request approval for 40 directed payments that
utilize a state approved FFS fee schedule. By eliminating the
requirement that states submit a preprint for each arrangement, we
estimate that a state would save 1 hour at $71.04/hr for a business
operations specialist per directed payment arrangement. In aggregate,
we estimate an annual savings of -40 hours (20 states x -2 preprints/
year x 1 hr per preprint) and -$2,842 (-40 hr x $71.04/hr).
3. ICRs Regarding Rate Certification Submission (Sec. 438.7(c)(3))
Amendments to Sec. 438.7(c)(3) will permit CMS to require states
to submit documentation attesting that +/- 1.5% modifications to a
capitation rate comply with specified regulatory requirements. We
estimate that CMS will require documentation from no more than 3 states
annually and that it will take a state's actuary 1 hour to prepare the
documentation. For the 3 states that may be required to submit
documentation, in aggregate we estimate an annual burden of 3 hrs (3
plans x 1 hr for an actuary) at a cost of $335.34 (3 hrs x $111.78/hr
specialist).
4. ICRs Regarding Information Requirements (Sec. 438.10(d)(2) and (3))
Amendments to Sec. 438.10(d)(2) and (d)(3) will no longer require
states or plans to add taglines in prevalent languages to all written
materials, nor to use 18-point font size. Instead, states and plans
will have the ability to include taglines only on materials critical to
obtaining services and could select any font size they deem to be
conspicuously visible. While we have no data indicating how many states
experienced increased document length or an increase in postage costs
as a result of these requirements, we believe that this provision will
likely reduce paper, toner, and postage costs for some states and
managed care plans. Assuming that this change saves one sheet of paper
(average price $25 per 5000 sheet carton or $0.005 per sheet), toner
(average price $125 for 25,000 pages or $0.005 per sheet), and postage
($0.38 bulk postage per ounce) per enrollee, we estimate a savings of -
$2,542,513 ([-$0.005 per sheet of paper x 74,779,816 enrollees or
sheets of paper] + [-$0.005 toner per sheet of paper x 74,779,816
enrollees or sheets of paper] + [-$.024 ($0.38/bulk postage x 0.16 oz
per sheet of paper) x 74,779,816 enrollees or sheets of paper]). The
estimates are based on commonly available prices for bulk paper, toner,
and bulk postage rate. We estimate the -$2,542,513 will be shared
equally between the states and managed care plans given that they each
provide written materials to enrollees and potential enrollees.
5. ICRs Regarding Information Requirements Sec. 438.10(h)(3)(i)(B)
Amendments to Sec. 438.10(h)(3) will permit states that elect to
offer a mobile enabled provider directory to update the hardcopy
provider directory quarterly instead of monthly. We are unable to
estimate with any accuracy the cost of creating a mobile enabled
provider directory; however, we assume it is substantially more than
the savings that may be recognized from reducing the frequency of
updating the directory since many of the data elements that are in the
directory must be maintained accurately for other purposes, such as
claims payment. We are not estimating a burden for this provision at
this time.
6. ICRs Regarding Network Adequacy Standards (Sec. 438.68(a))
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0920 (CMS-10108). Subject to
renewal, it was last approved on December 16, 2016, and remains active.
Amendments to Sec. 438.68(a) will eliminate a requirement that
states develop time and distance standards for provider types set forth
in Sec. 438.68(b)(1) and for LTSS providers if covered in the MCO,
PIHP, or PAHP contract. The provision replaces the requirement to adopt
time and distance standards with a requirement to adopt a quantitative
standard to evaluate network adequacy. We estimated in the May 6, 2016
final rule (81 FR 27777) a burden of $12,892 (20 states x 10 hrs at
$64.46/hr for a business operations specialist) during the first year
of developing the time and distance network adequacy standards for the
provider types specified in Sec. 438.68(b)(1). We further estimated a
one-time state burden of $10,313.60 (16 states x 10 additional hours at
$64.46/hr for a business operations specialist) to develop LTSS
standards (81 FR 27777). In each case we did not estimate additional
burden for states after the first year.
Since time and distance is one of many quantitative network
adequacy standards, for states that used time and distance prior to the
2016 final rule or for those that have adopted time and distance to
comply with the 2016 final rule, discontinuing the use of time and
distance is merely an option that they may elect if they believe
another measure better reflects the needs of their program.
Additionally, as clarified in the 2016 final rule (81 FR 27661), states
have always had the ability to have network adequacy standards in
addition to time and distance if they choose. We believe the change
increases flexibility for states without affecting burden on states
since it does not require states to take any action.
7. ICRs Regarding Grievance and Appeal System: General Requirements
(Sec. Sec. 438.402(c)(3)(ii) and 438.406(b)(3)).
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0920 (CMS-10108). Subject to
renewal, it was last approved on December 16, 2016, and remains active.
Amendments to Sec. Sec. 438.402(c)(3)(ii) and 438.406(b)(3) will
no longer require enrollees to follow up an oral appeal with a written
appeal. This change will
[[Page 72833]]
alleviate the burden on plans to follow up with enrollees that do not
submit the written appeal. We estimate it will take up to 2 hours at
$34.56/hr for an Office and Administrative Support Worker to call or
send letters to enrollees in an effort to receive the written appeal.
We estimate that 300 plans in 20 states have an average of 200 oral
appeals that are not followed up with a written appeal. In aggregate,
we estimate an annual private sector savings of -120,000 hours (300
plans x 200 appeals x 2 hr) and -$4,147,200 (-120,000 hr x $34.56/hr).
8. ICRs Regarding Information Requirements (Sec. 457.1207)
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0920 (CMS-10108). Subject to
renewal, it was last approved on December 16, 2016, and remains active.
Section 438.10(d)(2) and (3) are adopted by cross-reference in the
CHIP regulations at Sec. 457.1207. As discussed in section II.B.2 of
this final rule, amendments to Sec. 438.10(d)(2) and (3) will remove
requirements for states or plans to add taglines in prevalent languages
to all written materials, nor to use 18-point font size. Instead,
states and plans will have the ability to include taglines only on
materials critical to obtaining services and could select any font size
they deem to be conspicuously visible. While we have no data indicating
how many states experienced increased document length and an increase
in postage costs as a result of these requirements, we believe that the
provision will likely reduce paper, toner, and postage costs for some
states. Assuming that, the change saves one sheet of paper (average
price $25 per 5,000 sheet carton or $0.005 per sheet), toner (average
price $125 per 25,000 pages or $0.005 per sheet), and postage ($0.38
bulk purchase per ounce) per enrollee, we estimate a savings of -
$1,983,013.15 [$.005 per sheet of paper x 9,013,687 sheets of paper] +
$.005 toner per sheet of paper x 9,013,687 sheets of paper] + (-
$1,892,874.27= [$0.21/oz bulk postage x 9,013,687 sheets of paper]).
The estimates are based on commonly available prices for bulk paper and
toner.
9. ICRs for Grievance and Appeal System: Definitions (Sec. 457.1260)
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0920 (CMS-10108). Subject to
renewal, it was last approved on December 16, 2016, and remains active.
Section 438.400(b) is adopted by cross-reference in the CHIP
regulations at Sec. 457.1260. As discussed in this final rule, the
amendments to Sec. 438.400(b) will revise the definition of an
``adverse benefit determination'' to exclude claims that do not meet
the definition of ``clean claim'' at Sec. 447.45(b), thus eliminating
the requirement for the plan to send an adverse benefit notice. While
we have no data on the number of adverse benefit notices are sent due
to denials of unclean claims, we believe that at least one unclean
claim may be generated for half of all enrollees; thus, this provision
could reduce paper, toner, and postage costs for some states. Assuming
that the change saves one sheet of paper (average price $25 per 5,000
sheet carton or $0.005 per sheet), toner (average price $125 for 25,000
pages or $0.005 per sheet), and postage ($0.38 bulk postage per ounce)
per enrollee, we estimate a savings of -$1,757,669.16 [ $.005 per sheet
of paper x -4,506,844 adverse benefit notices] + [$.005 toner x -
4,506,844 adverse benefit notices] + [ $0.38/oz bulk postage x -
4,506,844 adverse benefit notices]. The estimates are based on commonly
available prices for bulk paper and toner purchases and bulk postage
rates.
C. Summary of Added Burden and Burden Reduction Estimates
Tables 2 and 3 set out our annual burden and burden reduction
estimates.
Table 2--Summary of Annual PRA-Related Requirements and Burden Under Part 438
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Burden
Number of Number of per Total Labor Cost per Annualized Annualized
CFR section respondents responses response annual rate $/ response Total cost ($) Frequency hours costs ($)
(hours) hours hr ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 438.3(t)............................. 5 5 1 5 86.14 86.14 430 Once..................... 0.333 143
Sec. 438.3(t)............................. 5 25 -4 -100 71.04 -284 -7,104 Once..................... -33.333 -2,368
Sec. 438.3(t)............................. 5 25 4 100 71.04 284 7,104 Once..................... 33.333 2,368
Sec. 438.6(c)............................. 20 2 -1 -40 71.04 -71.04 -2,842 Annual................... -40 -2,841
Sec. 438.7(c)(3).......................... 3 3 1 3 111.78 111.78 335.34 Annual................... 3 335.34
Sec. 438.10(d)(2) and (3)................. 42 74,779,816 n/a n/a n/a -0.005 -373,899.08 Annual................... n/a -373,899.08
Sec. 438.10(d)(2) and (3)................. 42 74,779,816 n/a n/a n/a -0.005 -373,899.08 Annual................... n/a -373,899.08
Sec. 438.10(d)(2) and (3)................. 42 74,779,816 n/a n/a n/a -0.024 -1,794,715.58 Annual................... n/a -1,794,715.58
Sec. 438.10(h)............................ .............. .......... ......... .......... ......... ......... ................ ......................... .......... ................
Sec. 438.402(c)(3)(i)..................... 300 60,000 -2 -120,000 34.56 -69.12 -4,147,200 Annual................... -120,000 -4,147,200
---------------------------------------------------------------------------------------------------------------------------------------------------
Total................................... 342 74,779,818 varies -120,032 varies varies -6,691,789 n/a...................... -120,040 -6,692,746
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Table 3--Summary of Annual PRA-Related Requirements and Burden Under Part 457
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Burden
Number of Number of per Total Labor Cost per Annualized Annualized
CFR section respondents responses response annual rate $/ response Total cost ($) Frequency hours costs ($)
(hours) hours hr ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 457.1207............................. 32 9,013,687 n/a n/a n/a $0.005 -$45,068.44 Annual................... n/a -$45,068.44
Sec. 457.1207............................. 32 9,013,687 n/a n/a n/a 0.005 -45,068.44 Annual................... n/a -45,068.44
Sec. 457.1207............................. 32 9,013,687 n/a n/a n/a 0.21 -1,892,874.27 Annual................... n/a -1,892,874.27
Sec. 457.1260............................. 32 4,506,844 n/a n/a n/a 0.005 -22,534.22 Annual................... n/a -22,534.22
Sec. 457.1260............................. 32 4,506,844 n/a n/a n/a 0.005 -22,534.22 Annual................... n/a -22,534.22
Sec. 457.1260............................. 32 4,506,844 n/a n/a n/a 0.38 -1,712,600.72 Annual................... n/a -1,712,600.72
---------------------------------------------------------------------------------------------------------------------------------------------------
Total................................... 192 40,561,593 n/a n/a n/a 0.61 -3,740,680.31 Annual................... n/a -3,740,680.31
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 72834]]
IV. Regulatory Impact Analysis
A. Statement of Need
As described in detail in section I.B. of this final rule, many of
the revisions to part 438 outlined in this final rule are part of the
agency's broader efforts to reduce administrative burden and to achieve
a better balance between appropriate Federal oversight and state
flexibility, while also maintaining critical beneficiary protections,
ensuring fiscal integrity, and improving the quality of care for
Medicaid beneficiaries. This final rule streamlines the managed care
regulations by reducing unnecessary and duplicative administrative
burden and further reducing Federal regulatory barriers to help ensure
that state Medicaid agencies are able to work efficiently and
effectively to design, develop, and implement Medicaid managed care
programs that best meet each state's local needs and populations.
B. Overall Impact
We have examined the impact of this final rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive
Order 13771 on Reducing Regulation and Controlling Regulatory Costs
(January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Pursuant
to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of
lnformation and Regulatory Affairs designated this rule as not a
``major rule'', as defined by 5 U.S.C. 804(2).''
We did not receive any public comments on our assumptions or
analysis.
We have examined the provisions in this final rule and determined
that most of the revisions to part 438 outlined in this final rule are
expected to reduce administrative burden as we noted in the Collection
of Information (COI) section (see section III. of this final rule).
Aside from our analysis on burden reduction in the COI section, we
believe that the only provision in this final rule that may have an
economic impact is the provision with revisions to managed care pass-
through payments because of the general magnitude associated with
managed care payments and our previous efforts to analyze financial
impacts associated with managed care pass-through payments.
The May 6, 2016 final rule (81 FR 27830) and the January 18, 2017
pass-through payment final rule (82 FR 5425) both contained regulatory
impact analyses that discussed the financial and economic effects of
pass-through payments. In the May 6, 2016 final rule, we did not
project a significant fiscal impact for Sec. 438.6(d). When we
reviewed and analyzed the May 6, 2016 final rule, we concluded that
states will have other mechanisms to build in the amounts currently
provided through pass-through payments in approvable ways, such as
approaches consistent with Sec. 438.6(c). If a state was currently
building in $10 million in pass-through payments to hospitals under
their current managed care contracts, we assumed that the state will
incorporate the $10 million into their managed care rates in
permissible ways rather than spending less in Medicaid managed care. We
expected that the long pass-through payment transition periods provided
under the May 6, 2016 final rule will help states to integrate existing
pass-through payments into actuarially sound capitation rates or
permissible Medicaid financing structures, including enhanced fee
schedules or the other approaches consistent with Sec. 438.6(c) that
tie managed care payments to services and utilization covered under the
contract.
In the January 18, 2017 pass-through payment final rule, we noted
that a number of states had integrated some form of pass-through
payments into their managed care contracts for hospitals, nursing
facilities, and physicians. We also noted that as of the effective date
of the May 6, 2016 final rule, we estimated that at least eight states
had implemented approximately $105 million in pass-through payments for
physicians annually; we estimated that at least three states had
implemented approximately $50 million in pass-through payments for
nursing facilities annually; and we estimated that at least 16 states
had implemented approximately $3.3 billion in pass-through payments for
hospitals annually. We noted that the amount of pass-through payments
often represented a significant portion of the overall capitation rate
under a managed care contract, and that we had seen pass-through
payments that had represented 25 percent, or more, of the overall
managed care contract and 50 percent of individual rate cells. In our
analysis of that final rule, we concluded that while it was difficult
for CMS to conduct a detailed quantitative analysis given considerable
uncertainty and lack of data, we believed that without the pass-through
payment final rule, which prohibited new and increased pass-through
payments that were not in place as of the effective date of the May 6,
2016 final rule, states will continue to increase pass-through payments
in ways that were not consistent with the pass-through payment
transition periods established in the May 6, 2016 final rule.
Since there is still considerable uncertainty regarding accurate
and reliable pass-through payment data, we are only including a
qualitative discussion in this RIA. Under Sec. 438.6(d)(6), we are
finalizing our proposal to assist states with transitioning some or all
services or eligible populations from a Medicaid FFS delivery system
into a Medicaid managed care delivery system by allowing states to make
pass-through payments under new managed care contracts during a
specified transition period if certain criteria in the final rule are
met. One of the requirements in the final rule is that the aggregate
amount of the pass-through payments for each rating period of the
transition period that the state requires the managed care plan to make
must be less than or equal to the payment amounts attributed to and
actually paid as Medicaid FFS supplemental payments to hospitals,
nursing facilities, or physicians in Medicaid FFS. This means that
under this new pass-through payment transition period, the aggregate
payments added to Medicaid managed care contracts as pass-through
payments must be budget neutral to the aggregate payments transitioned
from Medicaid FFS. We also note that under the new pass-through payment
transition period, states will only have 3 years to include these
payments as pass-through payments before needing to transition the
payments into allowable payment structures under actuarially sound
capitation rates.
We acknowledge that relative to the current pass-through payment
baseline, this final rule permits states to incorporate new pass-
through payments under a new transition period when states are
transitioning some or all services or eligible populations from a
Medicaid FFS delivery system into a
[[Page 72835]]
Medicaid managed care delivery system; however, the net financial
impact to state and Federal governments, and the Medicaid program, must
be zero given the requirements in this final rule that aggregate pass-
through payments under the new transition period must be less than or
equal to the payment amounts attributed to and actually paid as
Medicaid FFS supplemental payments in Medicaid FFS. Since the final
rule only permits payment amounts attributed to Medicaid FFS to be made
under Medicaid managed care contracts, this is not an increase in
Medicaid payments; rather, these payments only represent a movement of
funding across Medicaid delivery systems for a limited and targeted
amount of time when Medicaid populations or services are initially
transitioning from a Medicaid FFS delivery system to a Medicaid managed
care delivery system. Without the transition period, we believe that
existing Federal pass-through payment requirements could incentivize
states to retain some Medicaid populations or Medicaid services in
their Medicaid FFS programs. We also believe that some states may
choose to delay implementation of Medicaid managed care programs,
especially if states have not already been working with stakeholders
regarding existing Medicaid FFS supplemental payments. As we noted in
this final rule, we wanted to ensure that Federal pass-through payment
rules do not unintentionally incent states to keep populations or
services in Medicaid FFS, and we do not want Federal rules to
unintentionally create barriers that prevent states from moving
populations or services into Medicaid managed care. As noted in the
2016 final rule (81 FR 27852), potential benefits to the changes in the
Medicaid managed care rule include improved health outcomes for
Medicaid enrollees through improved care coordination and case
management, as well as improved access to care. We believe that this
limited and targeted transition period will help states further these
goals.
Finally, as noted throughout this final rule, this limited and
targeted transition period is only available if the state actually made
Medicaid FFS supplemental payments to hospitals, nursing facilities, or
physicians during the 12-month period immediately 2 years prior to the
first rating period of the transition period, and the aggregate amount
of the pass-through payments that the state requires the managed care
plan to make must be less than or equal to the amounts paid under
Medicaid FFS. As noted in this final rule, states will be required to
calculate and demonstrate that the aggregate amount of the pass-through
payments for each rating period of the transition period is less than
or equal to the amounts attributed to and actually paid as Medicaid FFS
supplemental payments to hospitals, nursing facilities, or physicians.
As a practical matter, states will be required to use MMIS-adjudicated
claims data from the 12-month period immediately 2 years prior to the
first rating period of the transition period for the purposes of these
calculations, and we will verify that the pass-through payment amounts
are permissible under this final rule, including that the aggregate
payments added to Medicaid managed care contracts as pass-through
payments must be budget neutral to the aggregate payments transitioned
from Medicaid FFS. Therefore, we are not projecting a specific fiscal
impact to state or Federal governments, or the Medicaid program, as we
expect the net financial impact of this provision to be budget neutral.
We requested public comments on our assumptions and analysis as part of
the proposed rule.
We did not receive any public comments on our assumptions or
analysis.
We are setting out savings based on amendments being finalized in
this rule to Sec. 438.400(b) which will revise the definition of an
``adverse benefit determination'' to exclude claims that do not meet
the definition of ``clean claim'' at Sec. 447.45(b), thus eliminating
the requirement for the plan to send an adverse benefit notice per
Sec. 438.404(a). While we have no data on the number of adverse
benefit notices that are sent due to denials of unclean claims, we
believe that at least one unclean claim may be generated for half of
all enrollees (37,389,908); thus, this proposal could reduce paper,
toner, and postage costs for some managed care plans. If we assume that
in the aggregate, this change saves one sheet of paper (average price
$25 per 5,000 sheet carton or $0.005 per sheet), toner (average price
$125 for 25,000 pages or $0.005 per sheet), and $0.024 bulk postage
($.038/per ounce x 0.16 oz per sheet of paper) per enrollee, we
estimate an annual savings of $1,084,307.30
Based on the calculations in the Collection of Information (COI)
section (see section III. of this final rule, Tables 2 and 3), and the
additional cost savings identified for Sec. 438.400(b) described
above, we are estimating that this final rule will result in an annual
cost savings of $12,071,068.
C. Anticipated Effects
The Regulatory Flexibility Act (RFA) requires agencies to analyze
options for regulatory relief of small businesses. For purposes of the
RFA, small entities include small businesses, nonprofit organizations,
and small governmental jurisdictions. Most hospitals and most other
providers and suppliers are small entities, either by nonprofit status
or by having revenues of less than $7.5 million to $38.5 million in any
1 year. Individuals and states are not included in the definition of a
small entity. We believe that all Medicaid managed care plans have
annual revenues in excess of $38.5 million; therefore, we do not
believe that this final rule will have a significant economic impact on
a substantial number of small businesses. We sought comment on this
belief.
We did not receive any public comments on our assumptions or
analysis. Therefore, we are not preparing an analysis because we have
determined, and the Secretary certifies, that this final rule will not
have a significant impact on the operations of a substantial number of
small businesses.
In addition, section 1102(b) of the Act requires CMS to prepare an
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside a Metropolitan Statistical Area and has fewer than
100 beds. We do not anticipate that the provisions in this final rule
will have a substantial economic impact on most hospitals, including
small rural hospitals. The provisions in this rule place no direct
requirements on individual hospitals, and we note that any impact on
individual hospitals will vary according to each hospital's current and
future contractual relationships with MCOs, PIHPs, and PAHPs. We expect
that any additional burden (or burden reduction) on small rural
hospitals should be negligible. We sought comment on this analysis and
our assumptions. Therefore, we are not preparing an analysis for
section 1102(b) of the Act because we have determined, and the
Secretary certifies, that this final rule will not have a significant
impact on the operations of a substantial number of small rural
hospitals.
We did not receive any public comments on our assumptions or
analysis.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
[[Page 72836]]
also requires that agencies assess anticipated costs and benefits
before issuing any rule whose mandates require spending in any 1 year
of $100 million in 1995 dollars, updated annually for inflation. In
2020, that is approximately $156 million. We believe that this final
rule will have no consequential effect on state, local, or tribal
governments or on the private sector.
We did not receive any public comments on our assumptions or
analysis.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a final rule that imposes substantial
direct requirements costs on state and local governments, preempts
state law, or otherwise has federalism implications. This final rule
does not impose any substantial direct costs on state or local
governments; however, the provision at Sec. 438.4(b)(1) may preempt
state law if the differences among capitation rates for covered
populations are not based on valid rate development standards and
instead are based solely on network provider reimbursement requirements
for covered populations that are mandated by state statute.
We did not receive any public comments on our assumptions or
analysis.
Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of
Executive Order 13771 requires an agency, unless prohibited by law, to
identify at least two existing regulations to be repealed when the
agency publicly proposes for notice and comment, or otherwise issues, a
new regulation. In furtherance of this requirement, section 2(c) of
Executive Order 13771 requires that the new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
two prior regulations. Many of the revisions to part 438 outlined in
this final rule are expected to reduce administrative burden;
therefore, this rule is an E.O. 13771 deregulatory action. We estimate
that this final rule generates $11,704,348 million in annualized cost
savings, discounted at 7 percent relative to year 2016, over a
perpetual time horizon. Details on the estimated cost savings of this
final rule can be found in the preceding analyses.
We did not receive any public comments on our assumptions or
analysis.
D. Alternatives Considered
One alternative we considered was leaving the 2016 final rule as it
is today; however, since the rule was finalized in 2016, we continued
to hear from stakeholders that the 2016 final rule was overly
prescriptive and included provisions that were not cost-effective for
states to implement. As a result, we undertook a review of the current
regulations to ascertain if there were ways to achieve a better balance
between appropriate Federal oversight and state flexibility, while also
maintaining critical beneficiary protections, ensuring fiscal
integrity, and improving the quality of care for Medicaid
beneficiaries. This final rule is the result of that review and
streamlines the managed care regulations by reducing unnecessary and
duplicative administrative burden and further reducing Federal
regulatory barriers to help ensure that state Medicaid agencies are
able to work efficiently and effectively to design, develop, and
implement Medicaid managed care programs that best meet each state's
local needs and populations.
We sought comment on a number of requirements included in this
final rule to identify potential alternatives to proposed provisions.
The following is a summary of the public comments we received on
the requirements included in this final rule to identify potential
alternatives to proposed provisions.
Comment: One commenter expressed concerns that the only alternative
considered was leaving the 2016 final rule as is. This commenter noted
that there were already errors acknowledged in the previous rule and
noted that rather than improving on the rule, these changes will not
benefit families and their children.
Response: We understand the commenter's concerns; however, as
noted, we undertook a comprehensive review of the current regulations
and developed proposals to achieve a better balance between appropriate
Federal oversight and state flexibility. As the commenter did not offer
other alternatives for CMS to consider, we are not including additional
alternatives under this final rule, other than the alternatives already
discussed.
E. Uncertainties
We have attempted to provide a framework for common definitions and
processes associated with the statutory provisions being implemented by
this rule. It is possible that some states may need to use alternative
definitions to be consistent with state law, and we sought comment on
these kinds of issues with the intent to modify and add to the common
terminology in this final rule as appropriate based on the comments
received.
We did not receive any public comments on our assumptions or
analysis.
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.
F. Accounting Statement
As discussed in this RIA, the benefits, costs, and transfers of
this final rule are identified in Table 4.
Table 4--Accounting Statement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary ------------------------------------------------
Category estimate Low estimate High estimate Period Notes
Year dollars Discount rate covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified.......................... Benefits include: consistency with the statutory requirements in section 1903(m) of the Act and regulations
for actuarially sound capitation rates; improved transparency in rate development processes; greater
incentives for payment approaches that are based on the utilization and delivery of services to enrollees
covered under the contract, or the quality and outcomes of such services; improved support for delivery system
reform that is focused on improved care and quality for Medicaid beneficiaries; and improved health outcomes
for Medicaid enrollees through improved care coordination and case management, as well as improved access to
care.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 72837]]
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized $ millions/year.... -12 .............. .............. 2018 .............. Annual
---------------------------------------------------------------------------------------------------------------
Non-Quantified.......................... Costs to state or Federal governments should be negligible. Burden and/or burden reduction estimates
associated with the activities (other than information collections as defined in the Paperwork Reduction Act)
that will be necessary for generating the benefits listed in this final rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified.......................... Relative to the current pass-through payment baseline, this final rule permits states to incorporate new pass-
through payments under a new transition period when states are transitioning some or all services or eligible
populations from a FFS delivery system into a managed care delivery system; however, the net financial impact
to state and Federal governments, and the Medicaid program, must be zero given the requirements in this rule
that aggregate pass-through payments under the new transition period must be less than or equal to the payment
amounts attributed to and actually paid as FFS supplemental payments in Medicaid FFS. Therefore, we are not
projecting a specific fiscal impact to state or Federal governments, as we expect the net financial impact of
the provision to be budget neutral.
--------------------------------------------------------------------------------------------------------------------------------------------------------
List of Subjects
42 CFR Part 438
Grant programs-health, Medicaid, Reporting and recordkeeping
requirements.
42 CFR Part 457
Administrative practice and procedure, Grant programs-health,
Health insurance, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 438--MANAGED CARE
0
1. The authority citation for part 438 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
2. Section 438.3 is amended by revising paragraph (t) to read as
follows:
Sec. 438.3 Standard contract requirements.
* * * * *
(t) Requirements for MCOs, PIHPs, or PAHPs responsible for
coordinating benefits for dually eligible individuals. In a State that
enters into a Coordination of Benefits Agreement (COBA) with Medicare
for Medicaid, an MCO, PIHP, or PAHP contract that includes
responsibility for coordination of benefits for individuals dually
eligible for Medicaid and Medicare must specify the methodology by
which the State ensures that the appropriate MCO, PIHP, or PAHP
receives all applicable crossover claims for which the MCO, PIHP, or
PAHP is responsible. If the State elects to use a methodology other
than requiring the MCO, PIHP, or PAHP to enter into a COBA with
Medicare, that methodology must ensure that the submitting provider is
promptly informed on the State's remittance advice that the State has
not denied payment and that the claim has been sent to the MCO, PIHP,
or PAHP for payment consideration.
* * * * *
0
3. Section 438.4 is amended by revising paragraph (b)(1) to read as
follows:
Sec. 438.4 Actuarial soundness.
* * * * *
(b) * * *
(1) Have been developed in accordance with the standards specified
in Sec. 438.5 and generally accepted actuarial principles and
practices. Any differences in the assumptions, methodologies, or
factors used to develop capitation rates for covered populations must
be based on valid rate development standards that represent actual cost
differences in providing covered services to the covered populations.
Any differences in the assumptions, methodologies, or factors used to
develop capitation rates must not vary with the rate of Federal
financial participation (FFP) associated with the covered populations
in a manner that increases Federal costs. The determination that
differences in the assumptions, methodologies, or factors used to
develop capitation rates for MCOs, PIHPs, and PAHPs increase Federal
costs and vary with the rate of FFP associated with the covered
populations must be evaluated for the entire managed care program and
include all managed care contracts for all covered populations. CMS may
require a State to provide written documentation and justification that
any differences in the assumptions, methodologies, or factors used to
develop capitation rates for covered populations or contracts represent
actual cost differences based on the characteristics and mix of the
covered services or the covered populations.
* * * * *
0
4. Section 438.4 is further amended, effective July 1, 2021, by adding
paragraph (c) to read as follows:
Sec. 438.4 Actuarial soundness.
* * * * *
(c) Option to develop and certify a rate range. (1) Notwithstanding
the provision at paragraph (b)(4) of this section, the State may
develop and certify a range of capitation rates per rate cell as
actuarially sound, when all of the following conditions are met:
(i) The rate certification identifies and justifies the
assumptions, data, and methodologies specific to both the upper and
lower bounds of the rate range.
(ii) Both the upper and lower bounds of the rate range must be
certified as actuarially sound consistent with the requirements of this
part.
(iii) The upper bound of the rate range does not exceed the lower
bound of the rate range multiplied by 1.05.
(iv) The rate certification documents the State's criteria for
paying MCOs, PIHPs, and PAHPs at different points within the rate
range.
(v) The State does not use as a criterion for paying MCOs, PIHPs,
and PAHPs at different points within the rate range any of the
following:
[[Page 72838]]
(A) The willingness or agreement of the MCOs, PIHPs, or PAHPs or
their network providers to enter into, or adhere to, intergovernmental
transfer (IGT) agreements; or
(B) The amount of funding the MCOs, PIHPs, or PAHPs or their
network providers provide through IGT agreements.
(2) When a State develops and certifies a range of capitation rates
per rate cell as actuarially sound consistent with the requirements of
this paragraph (c), the State must:
(i) Document the capitation rates, prior to the start of the rating
period, for the MCOs, PIHPs, and PAHPs at points within the rate range,
consistent with the criteria in paragraph (c)(1)(iv) of this section.
(ii) Not modify the capitation rates under Sec. 438.7(c)(3).
(iii) Not modify the capitation rates within the rate range, unless
the State is increasing or decreasing the capitation rate per rate cell
within the rate range up to 1 percent during the rating period.
However, any changes of the capitation rate within the permissible 1
percent range must be consistent with a modification of the contract as
required in Sec. 438.3(c) and are subject to the requirements at
paragraph (b)(1) of this section. Any modification to the capitation
rates within the rate range greater than the permissible 1 percent
range will require the State to provide a revised rate certification
for CMS approval, which demonstrates that--
(A) The criteria in paragraph (c)(1)(iv) of this section, as
described in the initial rate certification, were not applied
accurately;
(B) There was a material error in the data, assumptions, or
methodologies used to develop the initial rate certification and that
the modifications are necessary to correct the error; or
(C) Other adjustments are appropriate and reasonable to account for
programmatic changes.
(iv) Post on the website required in Sec. 438.10(c)(3) the
following information prior to executing a managed care contract or
contract amendment that includes or modifies a rate range:
(A) The upper and lower bounds of each rate cell;
(B) A description of all assumptions that vary between the upper
and lower bounds of each rate cell, including for the assumptions that
vary, the specific assumptions used for the upper and lower bounds of
each rate cell; and
(C) A description of the data and methodologies that vary between
the upper and lower bounds of each rate cell, including for the data
and methodologies that vary, the specific data and methodologies used
for the upper and lower bounds of each rate cell.
0
5. Section 438.5 is amended by revising paragraph (c)(3)(ii) to read as
follows:
Sec. 438.5 Rate development standards.
* * * * *
(c) * * *
(3) * * *
(ii) States that request an exception from the base data standards
established in this section must set forth a corrective action plan to
come into compliance with the base data standards no later than 2 years
after the last day of the rating period for which the deficiency was
identified.
* * * * *
0
6. Section 438.6 is amended--
0
a. In paragraph (a) by adding the definitions of ``State plan approved
rates'' and ``Supplemental payments'' in alphabetical order;
0
b. By revising paragraphs (b)(1), (c)(1)(iii), and (c)(2); and
0
c. By adding paragraphs (c)(3).
The revisions and additions read as follows:
Sec. 438.6 Special contract provisions related to payment.
(a) * * *
State plan approved rates means amounts calculated for specific
services identifiable as having been provided to an individual
beneficiary described under CMS approved rate methodologies in the
Medicaid State plan. Supplemental payments contained in a State plan
are not, and do not constitute, State plan approved rates.
Supplemental payments means amounts paid by the State in its FFS
Medicaid delivery system to providers that are described and approved
in the State plan or under a demonstration or waiver thereof and are in
addition to State plan approved rates. Disproportionate share hospital
(DSH) and graduate medical education (GME) payments are not, and do not
constitute, supplemental payments.
* * * * *
(b) * * *
(1) If used in the payment arrangement between the State and the
MCO, PIHP, or PAHP, all applicable risk-sharing mechanisms, such as
reinsurance, risk corridors, or stop-loss limits, must be documented in
the contract and rate certification documents for the rating period
prior to the start of the rating period, and must be developed in
accordance with Sec. 438.4, the rate development standards in Sec.
438.5, and generally accepted actuarial principles and practices. Risk-
sharing mechanisms may not be added or modified after the start of the
rating period.
* * * * *
(c) * * *
(1) * * *
(iii) The State may require the MCO, PIHP, or PAHP to:
(A) Adopt a minimum fee schedule for network providers that provide
a particular service under the contract using State plan approved rates
as defined in paragraph (a) of this section.
(B) Adopt a minimum fee schedule for network providers that provide
a particular service under the contract using rates other than the
State plan approved rates defined in paragraph (a) of this section.
(C) Provide a uniform dollar or percentage increase for network
providers that provide a particular service under the contract.
(D) Adopt a maximum fee schedule for network providers that provide
a particular service under the contract, so long as the MCO, PIHP, or
PAHP retains the ability to reasonably manage risk and has discretion
in accomplishing the goals of the contract.
(2) Process for approval. (i) All contract arrangements that direct
the MCO's, PIHP's, or PAHP's expenditures under paragraphs (c)(1)(i)
through (iii) of this section must be developed in accordance with
Sec. 438.4, the standards specified in Sec. 438.5, and generally
accepted actuarial principles and practices.
(ii) Contract arrangements that direct the MCO's, PIHP's, or PAHP's
expenditures under paragraphs (c)(1)(i) and (ii) and (c)(1)(iii)(B)
through (D) of this section must have written approval prior to
implementation. Contract arrangements that direct the MCO's, PIHP's, or
PAHP's expenditures under paragraph (c)(1)(iii)(A) of this section do
not require written approval prior to implementation but are required
to meet the criteria in paragraphs (c)(2)(ii)(A) through (F) of this
section. To obtain written approval, a State must demonstrate, in
writing, that the arrangement--
(A) Is based on the utilization and delivery of services;
(B) Directs expenditures equally, and using the same terms of
performance, for a class of providers providing the service under the
contract;
(C) Expects to advance at least one of the goals and objectives in
the quality strategy in Sec. 438.340;
(D) Has an evaluation plan that measures the degree to which the
arrangement advances at least one of the
[[Page 72839]]
goals and objectives in the quality strategy in Sec. 438.340;
(E) Does not condition provider participation in contract
arrangements under paragraphs (c)(1)(i) through (iii) of this section
on the provider entering into or adhering to intergovernmental transfer
agreements; and
(F) May not be renewed automatically.
(iii) Any contract arrangements that direct the MCO's, PIHP's, or
PAHP's expenditures under paragraph (c)(1)(i) or (ii) of this section
must also demonstrate, in writing, that the arrangement--
(A) Must make participation in the value-based purchasing
initiative, delivery system reform or performance improvement
initiative available, using the same terms of performance, to a class
of providers providing services under the contract related to the
reform or improvement initiative;
(B) Must use a common set of performance measures across all of the
payers and providers;
(C) May not set the amount or frequency of the expenditures; and
(D) Does not allow the State to recoup any unspent funds allocated
for these arrangements from the MCO, PIHP, or PAHP.
(3) Approval timeframes. (i) Approval of a payment arrangement
under paragraphs (c)(1)(i) and (ii) of this section is for one rating
period unless a multi-year approval is requested and meets all of the
following criteria:
(A) The State has explicitly identified and described the payment
arrangement in the contract as a multi-year payment arrangement,
including a description of the payment arrangement by year, if the
payment arrangement varies by year.
(B) The State has developed and described its plan for implementing
a multi-year payment arrangement, including the State's plan for multi-
year evaluation, and the impact of a multi-year payment arrangement on
the State's goals and objectives in the State's quality strategy in
Sec. 438.340.
(C) The State has affirmed that it will not make any changes to the
payment methodology, or magnitude of the payment, described in the
contract for all years of the multi-year payment arrangement without
CMS prior approval. If the State determines that changes to the payment
methodology, or magnitude of the payment, are necessary, the State must
obtain prior approval of such changes under paragraph (c)(2) of this
section.
(ii) Approval of a payment arrangement under paragraph (c)(1)(iii)
of this section is for one rating period.
* * * * *
0
7. Section 438.6 is further amended, effective July 1, 2021, by adding
paragraph (d)(6) to read as follows:
Sec. 438.6 Special contract provisions related to payment.
* * * * *
(d) * * *
(6) Pass-through payments for States transitioning services and
populations from a fee-for-service delivery system to a managed care
delivery system. Notwithstanding the restrictions on pass-through
payments in paragraphs (d)(1), (3), and (5) of this section, a State
may require the MCO, PIHP, or PAHP to make pass-through payments to
network providers that are hospitals, nursing facilities, or physicians
under the contract, for each rating period of the transition period for
up to 3 years, when Medicaid populations or services are initially
transitioning from a fee-for-service (FFS) delivery system to a managed
care delivery system, provided the following requirements are met:
(i) The services will be covered for the first time under a managed
care contract and were previously provided in a FFS delivery system
prior to the first rating period of the transition period.
(ii) The State made supplemental payments, as defined in paragraph
(a) of this section, to hospitals, nursing facilities, or physicians
during the 12-month period immediately 2 years prior to the first year
of the transition period.
(iii) The aggregate amount of the pass-through payments that the
State requires the MCO, PIHP, or PAHP to make is less than or equal to
the amounts calculated in paragraph (d)(6)(iii)(A), (B), or (C) of this
section for the relevant provider type for each rating period of the
transition period. In determining the amount of each component for the
calculations contained in paragraphs (d)(6)(iii)(A) through (C), the
State must use the amounts paid for services during the 12-month period
immediately 2 years prior to the first rating period of the transition
period.
(A) Hospitals. For inpatient and outpatient hospital services,
calculate the product of the actual supplemental payments paid and the
ratio achieved by dividing the amount paid through payment rates for
hospital services that are being transitioned from payment in a FFS
delivery system to the managed care contract by the total amount paid
through state plan approved rates for hospital services made in the
State's FFS delivery system. Both the numerator and denominator of the
ratio should exclude any supplemental payments made to the applicable
providers.
(B) Nursing facilities. For nursing facility services, calculate
the product of the actual supplemental payments paid and the ratio
achieved by dividing the amount paid through state plan approved rates
for nursing facility services that are being transitioned from payment
in a FFS delivery system to the managed care contract by the total
amount paid through payment rates for nursing facility services made in
the State's FFS delivery system. Both the numerator and denominator of
the ratio should exclude any supplemental payments made to the
applicable providers.
(C) Physicians. For physician services, calculate the product of
the actual supplemental payments paid and the ratio achieved by
dividing the amount paid through state plan approved rates for
physician services that are being transitioned from payment in a FFS
delivery system to the managed care contract by the total amount paid
through payment rates for physician services made in the State's FFS
delivery system. Both the numerator and denominator of the ratio should
exclude any supplemental payments made to the applicable providers.
(iv) The State may require the MCO, PIHP, or PAHP to make pass-
through payments for Medicaid populations or services that are
initially transitioning from a FFS delivery system to a managed care
delivery system for up to 3 years from the beginning of the first
rating period in which the services were transitioned from payment in a
FFS delivery system to a managed care contract, provided that during
the 3 years, the services continue to be provided under a managed care
contract with an MCO, PIHP, or PAHP.
* * * * *
0
8. Section 438.7 is amended by revising paragraph (c)(3) and adding
paragraph (e) to read as follows:
Sec. 438.7 Rate certification submission.
* * * * *
(c) * * *
(3) The State may increase or decrease the capitation rate per rate
cell, as required in paragraph (c) of this section and Sec.
438.4(b)(4), up to 1.5 percent during the rating period without
submitting a revised rate certification, as required under paragraph
(a) of this section. However, any changes of the capitation rate within
the permissible range must be consistent with a modification of the
contract as required in Sec. 438.3(c) and are subject to the
requirements at Sec. 438.4(b)(1). Notwithstanding the provisions in
paragraph (c) of this section, CMS may
[[Page 72840]]
require a State to provide documentation that modifications to the
capitation rate comply with the requirements in Sec. Sec. 438.3(c) and
(e) and 438.4(b)(1).
* * * * *
(e) Provision of additional guidance. CMS will issue guidance, at
least annually, which includes all of the following:
(1) The Federal standards for capitation rate development.
(2) The documentation required to determine that the capitation
rates are projected to provide for all reasonable, appropriate, and
attainable costs that are required under the terms.
(3) The documentation required to determine that the capitation
rates have been developed in accordance with the requirements of this
part.
(4) Any updates or developments in the rate review process to
reduce State burden and facilitate prompt actuarial reviews.
(5) The documentation necessary to demonstrate that capitation
rates competitively bid through a procurement process have been
established consistent with the requirements of Sec. Sec. 438.4
through 438.8.
0
9. Section 438.8 is amended--
0
a. In paragraph (e)(4) by removing the phrase ``fraud prevention as
adopted'' and adding in its place the phrase ``fraud prevention
consistent with regulations adopted''; and
0
b. Revising paragraph (k)(1)(iii).
The revision reads as follows:
Sec. 438.8 Medical loss ratio (MLR) standards
* * * * *
(k) * * *
(1) * * *
(iii) Fraud prevention activities as defined in paragraph (e)(4) of
this section.
* * * * *
0
10. Section 438.9 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 438.9 Provisions that apply to non-emergency medical
transportation PAHPs.
* * * * *
(b) * * *
(2) The actuarial soundness requirements in Sec. 438.4, except
Sec. 438.4(b)(9).
* * * * *
0
11. Section 438.10 is amended by--
0
a. Revising paragraph (d)(2) and (3);
0
b. Removing paragraph (d)(6)(iv);
0
c. Revising paragraph (f)(1);
0
d. In paragraph (g)(2)(ii)(B) by removing the reference ``paragraph
(g)(2)(i)(A) of this section'' and adding in its place the reference
``paragraph (g)(2)(ii)(A) of this section''; and
0
e. Revising paragraphs (h)(1)(vii) and (h)(3).
The revisions read as follows:
Sec. 438.10 Information requirements.
* * * * *
(d) * * *
(2) Make oral interpretation available in all languages and written
translation available in each prevalent non-English language. Written
materials that are critical to obtaining services for potential
enrollees must include taglines in the prevalent non-English languages
in the State, explaining the availability of written translations or
oral interpretation to understand the information provided, information
on how to request auxiliary aids and services, and the toll-free
telephone number of the entity providing choice counseling services as
required by Sec. 438.71(a). Taglines for written materials critical to
obtaining services must be printed in a conspicuously-visible font
size.
(3) Require each MCO, PIHP, PAHP, and PCCM entity to make its
written materials that are critical to obtaining services, including,
at a minimum, provider directories, enrollee handbooks, appeal and
grievance notices, and denial and termination notices, available in the
prevalent non-English languages in its particular service area. Written
materials that are critical to obtaining services must also be made
available in alternative formats upon request of the potential enrollee
or enrollee at no cost, include taglines in the prevalent non-English
languages in the State and in a conspicuously visible font size
explaining the availability of written translation or oral
interpretation to understand the information provided, information on
how to request auxiliary aids and services, and include the toll-free
and TTY/TDY telephone number of the MCO's, PIHP's, PAHP's, or PCCM
entity's member/customer service unit. Auxiliary aids and services must
also be made available upon request of the potential enrollee or
enrollee at no cost.
* * * * *
(f) * * *
(1) The MCO, PIHP, PAHP, and, when appropriate, the PCCM entity,
must make a good faith effort to give written notice of termination of
a contracted provider to each enrollee who received his or her primary
care from, or was seen on a regular basis by, the terminated provider.
Notice to the enrollee must be provided by the later of 30 calendar
days prior to the effective date of the termination, or 15 calendar
days after receipt or issuance of the termination notice.
* * * * *
(h) * * *
(1) * * *
(vii) The provider's cultural and linguistic capabilities,
including languages (including American Sign Language) offered by the
provider or a skilled medical interpreter at the provider's office.
* * * * *
(3) Information included in--
(i) A paper provider directory must be updated at least--
(A) Monthly, if the MCO, PIHP, PAHP, or PCCM entity does not have a
mobile-enabled, electronic directory; or
(B) Quarterly, if the MCO, PIHP, PAHP, or PCCM entity has a mobile-
enabled, electronic provider directory.
(ii) An electronic provider directory must be updated no later than
30 calendar days after the MCO, PIHP, PAHP, or PCCM entity receives
updated provider information.
* * * * *
0
12. Section 438.54 is amended by adding paragraph (b)(3) to read as
follows:
Sec. 438.54 Managed care enrollment.
* * * * *
(b) * * *
(3) States must provide the demographic information listed in Sec.
438.340(b)(6) for each Medicaid enrollee to the individual's MCO, PIHP,
PAHP, or PCCM entity at the time of enrollment.
* * * * *
0
13. Section 438.56 is amended by revising the paragraph (d)(5) heading
and paragraphs (d)(5)(i) and (iii) to read as follows:
Sec. 438.56 Disenrollment: Requirements and limitations.
* * * * *
(d) * * *
(5) Use of the MCO's, PIHP's, PAHP's grievance procedures. (i) The
State agency may require that the enrollee seek redress through the
MCO's, PHIP's, or PAHP's grievance system before making a determination
on the enrollee's request.
* * * * *
(iii) If, as a result of the grievance process, the MCO, PIHP, or
PAHP approves the disenrollment, the State agency is not required to
make a determination in accordance with paragraph (d)(4) of this
section.
* * * * *
0
14. Section 438.68 is amended by--
0
a. Revising paragraphs (b)(1) introductory text and (b)(1)(iv);
0
b. Removing paragraph (b)(1)(viii); and
0
c. Revising paragraph (b)(2).
[[Page 72841]]
The revisions read as follows:
Sec. 438.68 Network adequacy standards.
* * * * *
(b) * * *
(1) Provider types. At a minimum, a State must develop a
quantitative network adequacy standard for the following provider
types, if covered under the contract:
* * * * *
(iv) Specialist (as designated by the State), adult, and pediatric.
* * * * *
(2) LTSS. States with MCO, PIHP, or PAHP contracts which cover LTSS
must develop a quantitative network adequacy standard for LTSS provider
types.
* * * * *
Sec. 438.236 [Amended]
0
15. Section 438.236 is amended in paragraph (b)(3) by removing the term
``contracting health care professionals'' and adding in its place the
term ``network providers.''
0
16. Section 438.242 is amended by revising paragraph (c)(3) to read as
follows:
Sec. 438.242 Health information systems.
* * * * *
(c) * * *
(3) Submission of all enrollee encounter data, including allowed
amount and paid amount, that the State is required to report to CMS
under Sec. 438.818.
* * * * *
0
17. Section 438.334 is amended by revising paragraphs (b) and (c)(1)
and (3) and adding paragraph (c)(4) to read as follows:
Sec. 438.334 Medicaid managed care quality rating system.
* * * * *
(b) Quality rating system. (1) CMS, after consulting with States
and other stakeholders and providing public notice and opportunity to
comment, will develop a framework for a Medicaid managed care quality
rating system (QRS), including the identification of the performance
measures, a subset of mandatory performance measures, and a
methodology, that aligns where appropriate with the qualified health
plan quality rating system developed in accordance with 45 CFR
156.1120, the Medicare Advantage 5-Star Rating System described in
subpart D of part 422 of this chapter, and other related CMS quality
rating approaches.
(2) CMS, after consulting with States and other stakeholders and
providing public notice and opportunity to comment, may periodically
update the Medicaid managed care QRS framework developed in accordance
with paragraph (b)(1) of this section.
(c) * * *
(1) A state may implement an alternative Medicaid managed care
quality rating system that utilizes different performance measures or
applies a different methodology from that described in paragraph (b) of
this section provided that--
(i) The alternative quality rating system includes the mandatory
measures identified in the framework developed under paragraph (b) of
this section;
(ii) The ratings generated by the alternative quality rating system
yield information regarding MCO, PIHP, and PAHP performance which is
substantially comparable to that yielded by the framework developed
under paragraph (b) of this section to the extent feasible, taking into
account such factors as differences in covered populations, benefits,
and stage of delivery system transformation, to enable meaningful
comparison of performance across States.
(iii) The State receives CMS approval prior to implementing an
alternative quality rating system or modifications to an approved
alternative Medicaid managed care quality rating system.
* * * * *
(3) In requesting CMS approval, the State must include the
following:
(i) The alternative quality rating system framework, including the
performance measures and methodology to be used in generating plan
ratings; and,
(ii) Documentation of the public comment process specified in
paragraphs (c)(2)(i) and (ii) of this section, including discussion of
the issues raised by the Medical Care Advisory Committee and the
public. The request must document any policy revisions or modifications
made in response to the comments and rationale for comments not
accepted; and,
(iii) Other information specified by CMS to demonstrate compliance
with paragraph (c) of this section.
(4) The Secretary, after consulting with States and other
stakeholders, shall issue guidance which describes the criteria and
process for determining if an alternative QRS system is substantially
comparable to the Medicaid managed care quality rating system in
paragraph (b) of this section.
* * * * *
0
18. Section 438.340 is amended--
0
a. By revising paragraphs (b)(2), (b)(3)(i), and (b)(6);
0
b. By removing paragraph (b)(8);
0
c. By redesignating paragraphs (b)(9), (10), and (11) as paragraphs
(b)(8), (9), and (10), respectively;
0
d. In newly redesignated paragraph (b)(9) by removing ``; and'' and
adding a period in its place.
0
e. By revising paragraph (c)(1)(ii); and
0
f. In paragraph (c)(3)(ii) by removing the reference ``paragraph
(b)(11)'' and adding in its place the reference ``paragraph (b)(10)''.
The revisions read as follows:
Sec. 438.340 Managed care State quality strategy
* * * * *
(b) * * *
(2) The State's goals and objectives for continuous quality
improvement which must be measurable and take into consideration the
health status of all populations in the State served by the MCO, PIHP,
PAHP, and PCCM entity described in Sec. 438.310(c)(2).
(3) * * *
(i) The quality metrics and performance targets to be used in
measuring the performance and improvement of each MCO, PIHP, PAHP, and
PCCM entity described in Sec. 438.310(c)(2) with which the State
contracts, including but not limited to, the performance measures
reported in accordance with Sec. 438.330(c). The State must identify
which quality measures and performance outcomes the State will publish
at least annually on the website required under Sec. 438.10(c)(3);
and,
* * * * *
(6) The State's plan to identify, evaluate, and reduce, to the
extent practicable, health disparities based on age, race, ethnicity,
sex, primary language, and disability status. For purposes of this
paragraph (b)(6), ``disability status'' means, at a minimum, whether
the individual qualified for Medicaid on the basis of a disability.
States must include in this plan the State's definition of disability
status and how the State will make the determination that a Medicaid
enrollee meets the standard including the data source(s) that the State
will use to identify disability status.
* * * * *
(c) * * *
(1) * * *
(ii) If the State enrolls Indians in the MCO, PIHP, PAHP, or PCCM
entity described in Sec. 438.310(c)(2), consulting with Tribes in
accordance with the State's Tribal consultation policy.
* * * * *
0
19. Section 438.358 is amended by revising paragraph (b)(1)(iii) to
read as follows:
[[Page 72842]]
Sec. 438.358 Activities related to external quality review.
* * * * *
(b) * * *
(1) * * *
(iii) A review, conducted within the previous 3-year period, to
determine the MCO's, PIHP's, or PAHP's compliance with the standards
set forth in subpart D of this part, the disenrollment requirements and
limitations described in Sec. 438.56, the enrollee rights requirements
described in Sec. 438.100, the emergency and post-stabilization
services requirements described in Sec. 438.114, and the quality
assessment and performance improvement requirements described in Sec.
438.330.
* * * * *
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20. Section 438.362 is amended by adding paragraph (c) to read as
follows:
Sec. 438.362 Exemption from external quality review.
* * * * *
(c) Identification of exempted MCOs. The State must annually
identify, on the website required under Sec. 438.10(c)(3) and in the
same location where the EQR technical reports are posted in accordance
with Sec. 438.364(c)(2)(i), the names of the MCOs exempt from external
quality review by the State, including the beginning date of the
current exemption period, or that no MCOs are exempt, as appropriate.
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21. Section 438.364 is amended by adding paragraph (a)(7) and revising
paragraph (d) to read as follows:
Sec. 438.364 External quality review results.
(a) * * *
(7) The names of the MCOs exempt from external quality review by
the State, including the beginning date of the current exemption
period, or that no MCOs are exempt, as appropriate.
* * * * *
(d) Safeguarding patient identity. The information released under
paragraph (c) of this section may not disclose the identity or other
protected health information of any patient.
0
22. Section 438.400 is amended in paragraph (b) by revising paragraph
(3) of the definition of ``Adverse benefit determination'' to read as
follows:
Sec. 438.400 Statutory basis, definitions, and applicability.
* * * * *
(b) * * *
Adverse benefit determination * * *
(3) The denial, in whole or in part, of payment for a service. A
denial, in whole or in part, of a payment for a service solely because
the claim does not meet the definition of a ``clean claim'' at Sec.
447.45(b) of this chapter is not an adverse benefit determination.
* * * * *
0
23. Section 438.402 is amended by revising paragraph (c)(3)(ii) to read
as follows:
Sec. 438.402 General requirements.
* * * * *
(c) * * *
(3) * * *
(ii) Appeal. The enrollee may request an appeal either orally or in
writing.
0
24. Section 438.406 is amended by revising paragraph (b)(3) to read as
follows:
Sec. 438.406 Handling of grievances and appeals.
* * * * *
(b) * * *
(3) Provide that oral inquiries seeking to appeal an adverse
benefit determination are treated as appeals.
* * * * *
0
25. Section 438.408 is amended by revising paragraph (f)(2) to read as
follows:
Sec. 438.408 Resolution and notification: Grievances and appeals.
* * * * *
(f) * * *
(2) State fair hearing. The enrollee must have no less than 90
calendar days and no more than 120 calendar days from the date of the
MCO's, PIHP's, or PAHP's notice of resolution to request a State fair
hearing.
* * * * *
PART 457--ALLOTMENTS AND GRANTS TO STATES
0
26. The authority citation for part 457 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
27. Section 457.1207 is revised to read as follows:
Sec. 457.1207 Information requirements.
The State must provide, or ensure its contracted MCO, PAHP, PIHP,
PCCM, and PCCM entities provide, all enrollment notices, informational
materials, and instructional materials related to enrollees and
potential enrollees in accordance with the terms of Sec. 438.10 of
this chapter, except that the terms of Sec. 438.10(c)(2),
(g)(2)(xi)(E), and (g)(2)(xii) of this chapter do not apply.
0
28. Section 457.1233 is amended by revising paragraphs (b) and (d) to
read as follows:
Sec. 457.1233 Structure and operation standards.
* * * * *
(b) Subcontractual relationships and delegation. The State must
ensure, through its contracts, that each MCO, PIHP, PAHP, and PCCM
entity complies with the subcontractual relationships and delegation
requirements as provided in Sec. 438.230 of this chapter.
* * * * *
(d) Health information systems. The State must ensure, through its
contracts, that each MCO, PIHP, and PAHP complies with the health
information systems requirements as provided in Sec. 438.242 of this
chapter, except that the applicability date in Sec. 438.242(e) of this
chapter does not apply. The State is required to submit enrollee
encounter data to CMS in accordance with Sec. 438.818 of this chapter.
* * * * *
0
29. Section 457.1240 is amended by revising paragraphs (b), (d), and
(e) to read as follows:
Sec. 457.1240 Quality measurement and improvement.
* * * * *
(b) Quality assessment and performance improvement program. (1) The
State must require, through its contracts, that each MCO, PIHP, and
PAHP establish and implement an ongoing comprehensive quality
assessment and performance improvement program for the services it
furnishes to its enrollees, in accordance with the requirements and
standards in Sec. 438.330 of this chapter, except that the terms of
Sec. 438.330(d)(4) of this chapter (related to dually eligible
beneficiaries) do not apply.
(2) In the case of a contract with a PCCM entity described in
paragraph (f) of this section, Sec. 438.330(b)(2) and (3), (c), and
(e) of this chapter apply.
* * * * *
(d) Managed care quality rating system. The State must determine a
quality rating or ratings for each MCO, PIHP, and PAHP in accordance
with the requirements set forth in Sec. 438.334 of this chapter,
except that the terms of Sec. 438.334(c)(2)(i) and (c)(3) of this
chapter (related to consultation with the Medical Care Advisory
Committee) do not apply.
(e) Managed care quality strategy. The State must draft and
implement a written quality strategy for assessing and improving the
quality of health care and services furnished CHIP enrollees as
described in Sec. 438.340 of this chapter, except that the reference
to consultation with the Medical Care Advisory Committee described in
Sec. 438.340(c)(1)(i) of this chapter does not apply.
* * * * *
[[Page 72843]]
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30. Section 457.1260 is revised to read as follows:
Sec. 457.1260 Grievance system.
(a) Statutory basis and definitions--(1) Statutory basis. This
section implements section 2103(f)(3) of the Act, which provides that
the State CHIP must provide for the application of section 1932(a)(4),
(a)(5), (b), (c), (d), and (e) of the Act (relating to requirements for
managed care) to coverage, State agencies, enrollment brokers, managed
care entities, and managed care organizations. Section 1932(b)(4) of
the Act requires managed care plans to establish an internal grievance
procedure under which an enrollee, or a provider on behalf of such an
enrollee, may challenge the denial of coverage of or payment for
covered benefits.
(2) Definitions. The following definitions from Sec. 438.400(b) of
this chapter apply to this section--
(i) Paragraphs (1) through (5) and (7) of the definition of
``adverse benefit determination''; and
(ii) The definitions of ``appeal'', ``grievance'', and ``grievance
and appeal system''.
(b) General requirements. (1) The State must ensure that its
contracted MCOs, PIHPs, and PAHPs comply with the provisions of Sec.
438.402(a), (b), and (c)(2) and (3) of this chapter with regard to the
establishment and operation of a grievances and appeals system.
(2) An enrollee may file a grievance and request an appeal with the
MCO, PIHP, or PAHP. An enrollee may request a State external review in
accordance with the terms of subpart K of this part after receiving
notice under paragraph (e) of this section that the adverse benefit
decision is upheld by the MCO, PIHP, or PAHP.
(3) If State law permits and with the written consent of the
enrollee, a provider or an authorized representative may request an
appeal or file a grievance, or request a State external review in
accordance with the terms of subpart K of this part, on behalf of an
enrollee. When the term ``enrollee'' is used throughout this section,
it includes providers and authorized representatives consistent with
this paragraph (b).
(c) Timely and adequate notice of adverse benefit determination.
(1) The State must ensure that its contracted MCOs, PIHPs, and PAHPs
comply with the provisions at Sec. 438.404(a) and (b)(1), (2), and (5)
of this chapter (regarding the content of the notice of an adverse
benefit determination).
(2) In addition to the requirements referenced in paragraph (c)(1)
of this section, the notice must explain:
(i) The enrollee's right to request an appeal of the MCO's, PIHP's,
or PAHP's adverse benefit determination, including information on
exhausting the MCO's, PIHP's, or PAHP's one level of appeal described
at Sec. 438.402(b) of this chapter referenced in paragraph (b)(1) of
this section, and the right to request a State external review in
accordance with the terms of subpart K of this part; and
(ii) The procedures for the enrollee to exercise his or her rights
provided under this paragraph (c).
(3) The MCO, PIHP, or PAHP must provide timely written notice to
the enrollee of the adverse benefit determination. The terms of
Sec. Sec. 438.404(c)(6) and 438.210(d)(2) of this chapter apply in the
circumstances of expedited service authorization decisions.
(d) Handling of grievances and appeals. The State must ensure that
its contracted MCOs, PIHPs, and PAHPs comply with the provisions at
Sec. 438.406 of this chapter.
(e) Resolution and notification: Grievances and appeals. (1) The
State must ensure that its contracted MCOs, PIHPs, and PAHPs comply
with the provisions at Sec. 438.408(b) (relating to the timeframe for
resolution of grievances and appeals), (c)(1) and (2) (the extension of
timeframes for resolution of grievances and appeals), (d) (relating to
the format of the notice of resolution for grievances and appeals), and
(e)(1) (relating to the content of the notice of resolution for
grievances and appeals) of this chapter.
(2) Each MCO, PIHP, or PAHP must resolve each grievance and appeal,
and provide notice, as expeditiously as the enrollee's health condition
requires, within State-established timeframes that may not exceed the
timeframes specified in this paragraph (e).
(3) In the case of an MCO, PIHP, or PAHP that fails to adhere to
the notice and timing requirements in this section, the enrollee is
deemed to have exhausted the MCO's, PIHP's, or PAHP's appeals process.
The enrollee may initiate a State external review in accordance with
the terms of subpart K of this part.
(4) For appeals not resolved wholly in favor of an enrollee, in
addition to the information required under paragraph (e)(1) of this
section and Sec. 438.408(e)(1) of this chapter, the content of the
notice of appeal resolution must include the enrollee's right to
request a State external review in accordance with the terms of subpart
K of this part, and how to do so.
(5) Except as provided in paragraph (e)(3) of this section, an
enrollee may request a State external review only after receiving
notice that the MCO, PIHP, or PAHP is upholding the adverse benefit
determination. The State must provide enrollees no less than 90
calendar days and no more than 120 calendar days from the date of the
MCO's, PIHP's, or PAHP's notice of resolution to request a State
external review. The parties to the State external review include the
MCO, PIHP, or PAHP, as well as the enrollee and his or her
representative or the representative of a deceased enrollee's estate.
(f) Expedited resolution of appeals. The State must ensure that its
contracted MCOs, PIHPs, and PAHPs comply with the provisions at Sec.
438.410 of this chapter.
(g) Information about the grievance and appeal system to providers
and subcontractors. The State must ensure that its contracted MCOs,
PIHPs, and PAHPs comply with the provisions at Sec. 438.414 of this
chapter.
(h) Recordkeeping requirements. The State must ensure that its
contracted MCOs, PIHPs, and PAHPs comply with the provisions at Sec.
438.416 of this chapter.
(i) Effectuation of reversed appeal resolutions. If the MCO, PIHP,
or PAHP, or the result of a State external review, in accordance with
the terms of subpart K of this part, reverses a decision to deny,
limit, or delay services, the MCO, PIHP, or PAHP must authorize or
provide the disputed services promptly and as expeditiously as the
enrollee's health condition requires but no later than 72 hours from
the date it receives notice reversing the determination.
0
31. Section 457.1270 is revised to read as follows:
Sec. 457.1270 Sanctions.
(a) General. The State must comply with Sec. Sec. 438.700 through
438.704, 438.706(c) and (d), and 438.708 through 438.730 of this
chapter.
(b) Optional imposition of temporary management. Except as provided
in paragraph (c) of this section, the State may impose temporary
management under Sec. 438.702(a)(2) of this chapter as referenced in
paragraph (a) of this section, only if it finds (through onsite
surveys, enrollee or other complaints, financial status, or any other
source) any of the following:
(1) There is continued egregious behavior by the MCO, including but
not limited to behavior that is described in Sec. 438.700 of this
chapter (as referenced in paragraph (a) of this section), or that
[[Page 72844]]
is contrary to any of the requirements of this subpart.
(2) There is substantial risk to enrollees' health.
(3) The sanction is necessary to ensure the health of the MCO's
enrollees--
(i) While improvements are made to remedy violations under Sec.
438.700 of this chapter as referenced in paragraph (a) of this section.
(ii) Until there is an orderly termination or reorganization of the
MCO.
(c) Required imposition of temporary management. The State must
impose temporary management (regardless of any other sanction that may
be imposed) if it finds that an MCO has repeatedly failed to meet
substantive requirements in this subpart. The State must also grant
enrollees the right to terminate enrollment without cause, as described
in Sec. 438.702(a)(3) of this chapter as referenced in paragraph (a)
of this section, and must notify the affected enrollees of their right
to terminate enrollment.
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32. Section 457.1285 is revised to read as follows:
Sec. 457.1285 Program integrity safeguards.
The State must comply with the program integrity safeguards in
accordance with the terms of subpart H of part 438 of this chapter,
except that the terms of Sec. Sec. 438.604(a)(2) and 438.608(d)(4) of
this chapter do not apply.
Dated: September 14, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: September 21, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-24758 Filed 11-9-20; 11:15 am]
BILLING CODE 4120-01-P
