Medicaid and Children's Health Insurance Program (CHIP) Managed Care Final Rule – April 27, 2016

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term stay of no more than 15 days in an Institution for Mental Disease, or IMD. Notably, States will have the option – but are not required – to provide such coverage. Network Adequacy CMS finalized, largely without modification, its proposal to establish network adequacy standards in Medicaid and CHIP managed care for key types of providers, while leaving states flexibility to set the actual standards. Upon implementation, states will be required to establish time and distance standards for primary care (adult and pediatric), OB/GYN, behavioral health (mental health and substance use disorder; adult and pediatric), specialist (adult and pediatric), hospital, pharmacy, pediatric dental, and “additional provider types when it promotes the objectives of the Medicaid program.” CMS finalized the proposed minimum factors that a state must consider in developing its network adequacy standards – including but not limited to anticipated Medicaid enrollment, expected utilization of services, and the number of network providers not accepting new Medicaid patients – but CMS explicitly declined to be overly prescriptive, instead preserving state flexibility to determine network standards. Transparency The Final Rule seeks to improve transparency of Medicaid managed care quality information by requiring states to post on their websites accessible information on managed care plan accreditation status and annual external quality reviews. CMS also requires Medicaid managed care entities to make their provider networks and formularies available on their websites, as well as to provide formularies including tiering information upon request. Medical Loss Ratio CMS finalized its proposal to impose a national MLR of 85 percent on managed care entities in the development of their capitation rates.

This means that insurers must spend at least 85 percent of their Medicaid revenue on medical care and other activities that improve overall quality, while the remaining 15 percent of Medicaid revenue may be spent on other expenses such as marketing, overhead/salaries, and administrative tasks. Notably, 85 percent is the industry standard MLR for the Medicare Advantage program and for large employers in the private health insurance market. States will use the MLR calculation in their rate-setting exercises for future years. Quality Rating Systems To support states’ efforts to advance delivery system reform and improve quality, the Final Rule requires states to establish a Medicaid quality rating system developed by CMS or adopt an alternative Medicaid managed care quality rating system that would be subject to CMS approval.

Through a public notice and comment process, CMS will develop performance measures and a methodology for a Medicaid managed care quality rating system that aligns with the quality indicators for qualified health plans on the Exchanges. States will not be required to implement a quality rating system until three years after CMS issues guidance regarding the measures and methodologies for its rating system. Additionally, CMS chose not to finalize its proposal that would have given states the option to default to the Medicare Advantage Five-Star Rating system for plans serving only dual-eligible beneficiaries. 1.

Medicaid and Children’s Health Insurance Program (CHIP) Programs; Medicaid Managed Care, CHIP Delivered in Managed Care, and Revisions Related to Third Party Liability, [CMS-2390-F] (April 25, 2016). About Hogan Lovells Hogan Lovells is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. Atlantic House, Holborn Viaduct, London EC1A 2FG, United Kingdom Columbia Square, 555 Thirteenth Street, NW, Washington, D.C. 20004, United States of America Disclaimer This publication is for information only. It is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. So that we can send you this email and other marketing material we believe may interest you, we keep your email address and other information supplied by you on a database.

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