New CMS rule could re­shape Med­i­caid man­aged care

Modern Healthcare - - NEWS - By Vir­gil Dick­son and Bob Her­man

It’s not yet clear whether the CMS’ sweep­ing pro­posed rule gov­ern­ing Med­i­caid man­aged care will re­solve the cov­er­age and ac­cess prob­lems fac­ing the grow­ing num­ber of low-in­come adults and chil­dren en­rolled in pri­vate Med­i­caid plans. But it’s likely that there will be po­lit­i­cal jock­ey­ing over many of its pro­vi­sions.

Health plans, state Med­i­caid of­fi­cials, con­sumer groups and pol­icy ex­perts are por­ing through the 653page rule re­leased last week, which would cre­ate the big­gest changes in Med­i­caid man­aged-care reg­u­la­tions in more than a decade. It would cap in­surer prof­its, re­quire states to more rig­or­ously su­per­vise the ad­e­quacy of plans’ provider net­works, en­cour­age states to es­tab­lish qual­ity rat­ing sys­tems for plans, al­low more be­hav­ioral health­care in in­sti­tu­tional set­tings and en­cour­age the growth of man­aged long-term care. A fight looms over the rule’s lim­its on how much plans can al­lo­cate for ad­min­is­tra­tion and prof­its. Public com­ments are due by July 27.

Thirty-nine states and the Dis­trict of Columbia out­source their Med­i­caid pro­grams by pay­ing fixed, monthly sums to pri­vate man­aged-care plans, yield­ing $115 bil­lion in rev­enue for in­sur­ers and $2.4 bil­lion in op­er­at­ing prof­its last year, ac­cord­ing to data com­piled by Mark Farrah As­so­ciates and an­a­lyzed by Kaiser Health News. About 46 mil­lion peo­ple, or 73% of all regular Med­i­caid ben­e­fi­cia­ries, are in man­aged-care plans, and that fig­ure will con­tinue to rise through the Af­ford­able Care Act’s ex­pan­sion of Med­i­caid to low- in­come adults, ac­cord­ing to con­sult­ing firm Avalere Health. Mil­lions of kids in the Chil­dren’s Health In­sur­ance Pro­gram also are in man­aged care and would be cov­ered by the pro­posed rule.

States have turned to Med­i­caid man­aged-care plans hop­ing to re­duce costs and get more bud- get pre­dictabil­ity. In­sur­ers, how­ever, have faced crit­i­cism for of­fer­ing in­ad­e­quate provider net­works and deny­ing needed care to pad their bot­tom lines. Be­cause of the wide vari­a­tions in how states run their Med­i­caid man­aged-care pro­grams, there have been “in­con­sis­ten­cies” and “less-than-op­ti­mal re­sults,” the CMS said. Some ex­perts have ques­tioned whether con­tract­ing out Med­i­caid to pri­vate plans has re­ally saved states money.

Last year, HHS’ Of­fice of the In­spec­tor Gen­eral re­ported that states were not en­forc­ing their own rules to en­sure Med­i­caid pa­tients had enough providers to care for them. One man­aged-care en­rollee re­port­edly had no ac­cess to an in-net­work urol­o­gist within 75 miles, and the health plan did not ex­plain how the pa­tient could re­ceive care, the OIG found.

Rules for main­tain­ing ad­e­quate provider net­works were in­cluded in last week’s pro­posed rule. But the CMS mostly punted the task to states, de­spite the states’ pre­vi­ous lack­lus­ter en­force­ment. “The state has the pri­mary re­spon­si­bil­ity for ad­min­is­ter­ing and mon­i­tor­ing the Med­i­caid man­aged-care pro­gram,” the CMS said. It’s un­clear how fi­nan­cially strapped state Med­i­caid pro­grams will re­spond.

At a min­i­mum, Med­i­caid plans’ provider net­works

must have time and dis­tance stan­dards for cer­tain types of providers, in­clud­ing hos­pi­tals, pri­mary-care physi­cians and OB-GYNs, ac­cord­ing to the pro­posed rule. The CMS said time and dis­tance more ac­cu­rately cap­ture whether ben­e­fi­cia­ries have ad­e­quate ac­cess to care than provider-to-en­rollee ra­tios. States must also con­sider whether plans of­fer an ad­e­quate num­ber of providers who speak lan­guages other than English.

The CMS en­cour­aged states to in­clude pe­di­atric pri­mary, spe­cialty and den­tal providers in their net­work rules be­cause of the large num­ber of chil­dren cov­ered un­der Med­i­caid and CHIP.

The short­age of spe­cial­ists has made it chal­leng­ing to es­tab­lish ad­e­quate net­works, par­tic­u­larly in ru­ral ar­eas, in­sur­ers say. Meg Mur­ray, CEO of the As­so­ci­a­tion for Com­mu­nity Af­fil­i­ated Plans, said her group’s 59 not-for-profit

safety net plans have been proac­tively try­ing to ad­dress that is­sue through telemedicine and elec­tronic con­sults. “They are do­ing a lot of work to ex­pand their net­works,” she said.

An­drea Cal­low, a se­nior pol­icy an­a­lyst with con­sumer ad­vo­cacy group Fam­i­lies USA, said the CMS rule over­all is a pos­i­tive devel­op­ment that will im­prove ac­cess to care and ben­e­fi­ciary pro­tec­tions. While her group was pleased with the time and dis­tance net­work-ad­e­quacy re­quire­ments, it would like to see stan­dards set for ap­point­ment wait times, she said.

The CMS rule also sets a med­i­cal-loss ra­tio (MLR) of 85%, mean­ing at least 85 cents of ev­ery pre­mium dollar must be used for med­i­cal care. The re­main­der can go to­ward ad­min­is­tra­tion, mar­ket­ing and profit. Plans would not be pe­nal­ized if they don’t meet the ra­tio, but states could ad­just fu­ture pay­ments down­ward if plans don’t meet the min­i­mum MLR.

Although the health­plan in­dus­try has lob­bied against in­clu­sions of a min­i­mum MLR, ob­servers say the new Med­i­caid re­quire­ment would not have much ef­fect on large na­tional in­sur­ers. About three-quar­ters of states with Med­i­caid man­aged care al­ready re­quire av­er­age MLRs of at least 85%, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion.

“I can’t say we’re sur­prised by this lan­guage,” said Dr. J. Mario Molina, CEO of Molina Health­care, a for-profit in­surer that posted a Med­i­caid MLR of 88.7% in the first quar­ter this year. His com­pany al­ready has some type of MLR pro­vi­sion in many of its state Med­i­caid con­tracts.

Min­i­mum MLRs al­ready are in place for Medi­care, em­ployer and ex­change plans. “You could see this com­ing from years away,” said Mandy Pel­le­grin, a reg­u­la­tory an­a­lyst at Ob­sid­ian Re­search Group.

Wall Street an­a­lysts her­alded the rule as good news

for pub­licly traded in­sur­ers be­cause the pro­posed MLR rule was in line with ex­pec­ta­tions. But the min­i­mum ra­tio could have a big­ger im­pact on smaller re­gional plans, in­clud­ing safety net plans run by public and not­for-profit hos­pi­tals. Their fi­nances fluc­tu­ate be­cause they are more sus­cep­ti­ble to out­lier events, such as a bad flu sea­son. A sur­plus in one year may be needed to off­set losses from an­other.

“If times are tough in that state, they can’t just say, ‘I’ll stop pro­vid­ing ser­vices in that state,’ ” said Kathryn Kuh­merker, vice pres­i­dent for Med­i­caid pol­icy at the As­so­ci­a­tion for Com­mu­nity Af­fil­i­ated Plans and a for­mer New York Med­i­caid direc­tor. “Our safety net health plans of­ten suf­fer more when times are tough.”

There is likely to be a reg­u­la­tory battle over how to de­fine the nu­mer­a­tor in cal­cu­lat­ing the MLR. Plans will ar­gue that they should be al­lowed to in­clude ad­min­is­tra­tive costs re­lated to care man­age­ment as med­i­cal costs, which they say is es­sen­tial to de­liv­er­ing value-based care to pa­tients with chronic con­di­tions.

The pro­posed CMS rule also could sig­nif­i­cantly af­fect ac­cess to be­hav­ioral health­care for Med­i­caid ben­e­fi­cia­ries. Since the cre­ation of Med­i­caid 50 years ago, there has been a cov­er­age ex­clu­sion for be­hav­ioral and sub­stance-abuse treat­ment at in­pa­tient fa­cil­i­ties with more than 16 beds. The new pro­posed rule, how­ever, would al­low states to pay plans for be­hav­ioral care to ben­e­fi­cia­ries who have a stay of no more than 15 days in a so-called in­sti­tu­tion for men­tal dis­ease (IMD).

The IMD ex­clu­sion has cre­ated dif­fi­cul­ties in treat­ing Med­i­caid ben­e­fi­cia­ries suf­fer­ing from men­tal ill­ness, said Mark Co­vall, pres­i­dent and CEO of the Na­tional As­so­ci­a­tion of Psy­chi­atric Health Sys­tems. Pa­tients of­ten en­dure long stays in hos­pi­tal emer­gency de­part­ments and are trans­ferred from one gen­eral hos­pi­tal to an­other, some­times far from a pa­tient’s home, be­cause of bed short­ages.

When th­ese pa­tients are re­ferred to stand-alone psy­chi­atric fa­cil­i­ties, the fa­cil­i­ties can’t deny ad­mis­sion, but they don’t re­ceive Med­i­caid pay­ment be­cause of the IMD ex­clu­sion. As a re­sult, Med­i­caid pa­tients may get lower qual­ity of care and be dis­charged pre­ma­turely. The pro­posed rule “will im­prove the care of th­ese pa­tients, there is no ques­tion,” Co­vall said. But the Na­tional As­so­ci­a­tion of State Men­tal Health Pro­gram Di­rec­tors said the 15-day stay limit was too re­stric­tive. Colorado, Mas­sachusetts, North Carolina, Ore­gon, Ten­nessee and Wis­con­sin al­ready have their man­aged-care com­pa­nies cover in­pa­tient psy­chi­atric stays via waivers, and there are no day lim­its, said Stu­art Gor­don, direc­tor of pol­icy and health­care re­form for the as­so­ci­a­tion.

With long-term care, health plans have con­cerns about a pro­vi­sion in the pro­posed CMS rule that would al­low man­aged-care pa­tients re­ceiv­ing LTC ser­vices to switch to feefor-ser­vice if their provider is not in-net­work. Pa­tient ad­vo­cates had pushed for this pro­vi­sion as a safe­guard. As of 2014, 26 states were us­ing man­aged long-term care, up from eight in 2004, ac­cord­ing to the CMS.

But Jeff My­ers, CEO of Med­i­caid Health Plans of Amer­ica, said this pro­vi­sion could be a dis­in­cen­tive for LTC providers to ne­go­ti­ate con­tracts with plans if they know they can con­tinue to see pa­tients un­der fee-for-ser­vice or an­other plan.

On the other hand, the LTC provider in­dus­try likes that pro­vi­sion. “Many home-care providers have ex­pressed that the plans have re­fused to ne­go­ti­ate and op­er­ate un­der a take-it-or-leave-it ap­proach,” said Wil­liam Dombi, ex­ec­u­tive direc­tor of the Na­tional Coun­cil on Med­i­caid Home Care, a provider ad­vo­cacy group. “This pro­posed rule may bring some bet­ter bal­ance into any ne­go­ti­a­tions.”

The CMS’ pro­posed rule sug­gests that states es­tab­lish a qual­ity rat­ing sys­tem for Med­i­caid plans to help ben­e­fi­cia­ries se­lect plans. The CMS al­ready has a star rat­ing sys­tem for Medi­care plans. But the agency said it would de­fer to the states on this is­sue.

Dr. J. Mario Molina, CEO of Molina Health­care, said he was not sur­prised by the rule’s MLR lan­guage, and that many states al­ready re­quire it as part of their con­tracts.

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