CMS Finalizes Sweeping Regulations For Medicaid Access, Managed Care, And HCBS – Healthcare

On Monday, April 22, the Centers for Medicare & Medicaid
Services (CMS) released two highly anticipated final rules.
Together, these rules reshape the federal regulatory landscape for
Medicaid and the Children’s Health Insurance Program (CHIP),
particularly with respect to standards for ensuring access to care,
transparency, and oversight of provider payment rates, creating
opportunities for public input (especially for people enrolled in
Medicaid), quality measurement, and program accountability.

The first rule, which focuses on managed care delivery systems,
is titled “Managed Care Access, Finance, and
Quality” (or the “Managed Care Final Rule”).
The second final rule, which focuses on fee-for-service (FFS)
delivery systems and program improvements for home and
community-based services (HCBS) across delivery systems, is titled
“Ensuring Access to Medicaid Services”
(or the “Access Final Rule”). Although the two rules
largely focus on different delivery systems, they share common
goals and themes, with some provisions in each applying across
multiple delivery systems.

These final rules represent the most significant changes to
federal Medicaid and CHIP regulations since CMS established the
existing regulatory framework for managed care in 2016. These
changes are all the more noteworthy because of the magnitude of
these programs: together, Medicaid and CHIP provide health coverage
to more than 85 million people nationwide. Three out of four of
these individuals receive covered benefits through managed care
plans that contract with the state.

For the most part, CMS finalized the provisions described in its
May 2023 proposed rules with only minor revisions, clarifications,
and technical corrections. However, CMS departed from the proposed
rule in a few notable respects in response to the large volume of
public comments (415 on the Managed Care Proposed Rule and more
than 2,100 on the Access Proposed Rule). 

The final rules officially take effect on July 9, 2024, but for
most provisions, CMS has defined implementation deadlines that vary
from 60 days to six years following this effective date.

This newsletter summarizes significant provisions and
overarching themes across both final rules. A more comprehensive
section-by-section analysis is available through Manatt on
Health (see details below). In addition, Manatt Health is
hosting a three-part public webinar series on these final rules. In
this series, Manatt Health’s multidisciplinary team will
unpack the newly finalized rules, offering key insights and
implications for stakeholders such as Medicaid enrollees,
providers, managed care organizations, and state
governments. 

Key Provisions in the Final Rules

The Managed Care Final Rule includes
provisions that, among other things:

• Strengthen access to care and access monitoring requirements in
  managed care programs by establishing federal minimum standards for
  appointment wait times for certain services, enhancing state
  requirements for access monitoring, and requiring states to publish
  analyses of managed care plans’ aggregate provider payments
  for certain services. Recognizing the rise of telehealth, CMS also
  provides new clarity to states and managed care plans about how to
  account for telehealth when monitoring for timely access and
  network adequacy.




• Codify and revise the federal regulations governing State
  Directed Payments (SDPs)—through which states can establish
  parameters for managed care plans’ provider payments—by
  creating new flexibilities for certain types of SDPs while
  codifying or strengthening the guardrails around
  others. (Manatt will be releasing additional newsletters
  unpacking these changes to SDPs and Medicaid financing).




• Codify and build on recent CMS policy changes regarding
  “in lieu of services” (ILOS), a mechanism through which
  managed care plans can provide alternatives to standard covered
  services when it is medically appropriate and cost-effective.




• Modify Medical Loss Ratio (MLR) methodologies and processes to
  align more closely with comparable MLR requirements for the
  commercial health insurance market, increase accuracy of plan
  reporting for rate-setting purposes, and allow for more consistent
  comparisons across each plan’s different managed care
  business lines and from state to state.




• Establish a national framework and enhance requirements for
  managed care quality rating systems (QRS) to increase
  accountability for plans, assist beneficiaries with plan selection,
  and make various other changes to the existing provisions governing
  states’ managed care quality strategies and quality
  monitoring. Out of all the provisions in the Managed Care Final
  Rule, CMS expects that implementing these QRS requirements will
  require the greatest investments in technology and staff time, for
  both states and managed care plans.

The Access Final Rule includes
provisions that, among other things:

• Create new transparency and consultation requirements for FFS
  provider payment rates, including a requirement for states to
  publish analyses comparing the Medicaid FFS rates for certain
  services against corresponding Medicare FFS rates, the
  establishment of an “interested parties’ advisory
  group” to advise and consult on payment rates for certain
  HCBS, and significant new procedural requirements for certain types
  of FFS rate changes. These provisions replace the current
  requirements for triennial Access Monitoring Review Plans, which
  are rescinded as of the rule’s effective date.




• Modify the procedures for requesting federal approval to reduce
  or restructure FFS rates, by requiring additional supporting
  analyses with respect to state plan amendments (SPAs) that, based
  on a preliminary review, present potential risks to
  beneficiaries’ access to services.




• Strengthen program advisory groups. States must create and
  support a Medicaid Advisory Committee (MAC) comprising diverse
  stakeholders, and a Beneficiary Advisory Council (BAC) comprising
  solely of people with lived experience and reflecting the diverse
  population in the Medicaid program. These two groups—which
  replace the currently required Medical Care Advisory Committee
  (MCAC)—will provide input to the state Medicaid agency on a
  broad scope of program issues such as eligibility, coverage, access
  to care, and quality of care.




• Update HCBS program standards and processes regarding care
  access, quality, and payment, including a requirement that at least
  80% of Medicaid payments for certain home-based services go to
  compensation for the individual direct care workers who provide
  these services (a proposal that drew a large volume of comments
  both for and against, and which was modified in several respects in
  the final rule); new standards and reporting requirements related
  to person-centered service plans, waiting lists, and other access
  measures; a requirement to establish an HCBS grievance system and
  incident management system in FFS (similar to what is already
  required for HCBS delivered through managed care); and a new
  regulatory framework to require state reporting of performance
  measures from the HCBS Quality Measure Set (which has, to date,
  been voluntary). CMS estimates that, for states, implementing the
  updated critical incident system will be by far the costliest
  component of these two final rules.

Key Themes Across the Two Final Rules

Several key themes emerge from the thousands of pages that make
up the proposed and final rules and their accompanying
preambles:

• These rules will significantly increase transparency for
  Medicaid and CHIP program data related to provider payments and
  access to care. States and managed care plans must soon begin
  publishing several new types of data sets and reports, which must
  be publicly available in a standardized format and with relevant
  context.




• The final rules show CMS’s continued emphasis on
  addressing health disparities and advancing health equity.
  Consistent with the U.S. Department of Health and Human
  Services’ (HHS) overall focus on equity in its administration
  of Medicaid and CHIP, Medicare, and the Marketplaces, these rules
  evince an effort to identify and disclose health disparities (e.g.,
  by requiring states to stratify data based on race and other
  demographic factors), emphasize meaningful engagement of people
  enrolled in Medicaid and CHIP (e.g., by supporting enrollee
  participation in advisory groups, requiring enrollee experience
  surveys, and requiring that program data be easy for the public to
  find and understand).




• CMS seeks to align standards and approaches across federally
  regulated health care programs. Across multiple provisions, CMS
  looks to existing standards for Medicare and the Marketplace to
  inform and align Medicaid and CHIP with these standards. Examples
  include the Medicaid/Medicare comparative payment analyses
  mentioned above, as well as CMS’s efforts to align the
  standards and quality measures for Medicaid and CHIP managed care
  more closely with Qualified Health Plans sold on the
  Marketplace.




• The rules impose significant new requirements on states and
  managed care plans, which CMS seeks to mitigate through regulatory
  design, phased-in implementation, and technical assistance. CMS
  estimates that states, plans, and providers will collectively spend
  almost $500 million to implement these rules over the next 10
  years. Many of CMS’s reforms require new or expanded analyses
  and reporting by states and plans, upgraded IT infrastructure, and
  additional state monitoring and oversight responsibilities. For
  states already stretched thin as they unwind the COVID-19
  continuous coverage requirement, these new requirements could pose
  significant challenges, especially in light of CMS’s recently
  finalized reforms for eligibility and enrollment systems. In
  certain areas, CMS also attempts to mitigate administrative burdens
  on states.




• The final rules define new processes for enforcement and
  dispute resolution between states and CMS. The final rules increase
  not only the volume and types of data that will be available for
  CMS oversight, but also the types of procedural mechanisms at
  CMS’s disposal to bring states into compliance

The Managed Care Final Rule and Access Final Rule represent a
significant modernization of the framework for defining, measuring,
and enforcing the standards for access to care in Medicaid and
CHIP. States and managed care plans—and CMS itself—will
be hard at work in the coming years implementing these
requirements, including making policy decisions in areas where the
rules leave room for flexibility. Meanwhile, beneficiaries,
providers, and other stakeholders will be eagerly awaiting the new
reports required under the rule, while also encouraging their state
and local plans to implement the rule in a manner that promotes
adequate provider payments and beneficiary access to care.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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