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This final rule modernizes the Medicaid managed care regulations to reflect changes in the usage of managed care delivery systems.  The rule aligns the rules governing Medicaid managed care with those of other major sources of coverage, including coverage through Qualified Health Plans and Medicare Advantage plans; implements statutory provisions; strengthens actuarial soundness payment provisions to promote the accountability of Medicaid managed care program rates; ensures appropriate beneficiary protections; and, enhances expectations for program integrity.  This rule also implements provisions of the Children’s Health Insurance Program Reauthorization Act (CHIPRA) and addresses third party liability for trauma codes.

Statement of Need:

This rule modernizes the Medicaid managed care regulations recognizing changes in the usage of managed care delivery systems since the release of the final rule in 2002. As Medicaid managed care programs have developed and matured in the intervening years, States have taken various approaches to implementation. This has resulted in inconsistencies and, in some cases, less than optimal results. To improve consistency and adopt policies and practices from States that have proven the most successful, we include revisions in this rule to strengthen beneficiary protections, support alignment with rules governing managed care in other public and private sector programs, strengthen actuarial soundness and the accountability of rates paid in the Medicaid managed care program, improve quality of care, and implement statutory provisions issued since 2002. The rule also applies some of the Medicaid managed care regulations to the Children’s Health Insurance Program (CHIP).

Summary of the Legal Basis:

Congress enacted specific standards for Medicaid managed care programs in sections 4701 through 4709 of the Balanced Budget Act of 1997 (BBA). The BBA represented the first comprehensive revision to Federal statutes governing Medicaid managed care since the early 1980s. These standards are codified in sections 1903 and 1932 of the Act and implemented in a final rule published June 14, 2002 (67 FR 40989). The Children’s Health Insurance Reauthorization Act of 2009 and the Affordable Care Act applied some of the Medicaid managed care statutory provisions to CHIP.

Alternatives:

We could choose not to make any regulatory changes; however, while the 2002 final rule has been the guiding regulation for Medicaid managed care, many questions and issues have arisen in the intervening years due to the current version’s lack of clarity or detail in some areas. With no guidance in these areas, States have created various standards, leading to inconsistency and, in some cases, less than optimal program performance. Additionally, many issues have arisen from the evolution of managed care that have rendered some provisions nearly obsolete. For example, the existing version gives little acknowledgement to the use of electronic means of communication and no recognition to the recently created health care coverage options offered through the Federal and State marketplaces. This creates gaps that leave States and managed care plans with unclear, non-existent, or confusing guidance and standards for program operation. We believe that with consistent standards and clearly defined flexibilities for States, programs can develop in ways that not only transform the healthcare delivery system and fulfill the mission of the Medicaid program, but can improve the health and wellness of Medicaid enrollees.

Anticipated Costs and Benefits:

The overall economic impact for this rule is estimated to be $112 million in the first year of implementation. Additionally, non-quantifiable benefits include improved health outcomes, reduced unnecessary services, improved beneficiary experience, improved access, and improved program transparency which facilitates better decisionmaking.

Risks:

None. It is necessary to modernize the Medicaid and CHIP managed care and quality regulations to support health care delivery system reform, improve population health outcomes, and improve the beneficiary experience in a cost effective and consistent manner in all states.