Federal Register, Volume 81 Issue 61 (Wednesday, March 30, 2016)

[Federal Register Volume 81, Number 61 (Wednesday, March 30, 2016)]
[Rules and Regulations]
[Pages 18390-18445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06876]

[[Page 18389]]

Vol. 81

Wednesday,

No. 61

March 30, 2016

Part V

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 438, 440, 456, et al.

Medicaid and Children's Health Insurance Programs; Mental Health
Parity and Addiction Equity Act of 2008; the Application of Mental
Health Parity Requirements to Coverage Offered by Medicaid Managed Care
Organizations, the Children's Health Insurance Program (CHIP), and
Alternative Benefit Plans; Final Rule

Federal Register / Vol. 81 , No. 61 / Wednesday, March 30, 2016 /
Rules and Regulations

[[Page 18390]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 438, 440, 456, and 457

[CMS-2333-F]
RIN 0938-AS24

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule will address the application of certain
requirements set forth in the Public Health Service Act, as amended by
the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction
Equity Act of 2008, to coverage offered by Medicaid managed care
organizations, Medicaid Alternative Benefit Plans, and Children's
Health Insurance Programs.

DATES: These regulations are effective on May 31, 2016.

FOR FURTHER INFORMATION CONTACT:
John O'Brien, (410) 786-5529, Alternative Benefit Plan.
Debra Dombrowski, (312) 353-1403, Managed Care.
Amy Lutzky, (410) 786-0721.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
II. Background
A. Introduction
B. Legislative Overview
III. Provisions of the Final Rule
A. Definitions
B. Parity Requirements for Aggregate, Lifetime and Annual Limits
C. Parity Requirements for Financial Requirements and Treatment
Limitations
D. Cumulative Financial Requirements
E. Compliance With Other Cost-sharing Rules
F. Nonquantitative Treatment Limitations (NQTLs)
G. Parity for Mental Health and Substance Use Disorder Benefits
in CHIP Programs Covering EPSDT
H. Availability of Information
I. Application to EHBs and Other ABP Benefits
J. ABP State Plan Requirements
K. Application of Parity Requirements to the Medicaid State Plan
L. Scope and Applicability of the Final Rule
M. Scope of Services
N. Increased Cost Exemption
O. Enforcement, Managed Care Rate Setting and Contract Review
and Approval
P. Applicability and Compliance
Q. Utilization Control
R. Institutions for Mental Diseases
S. Medicare-Medicaid Dual Eligible Beneficiaries
IV. Summary of Changes
V. Collection of Information Requirements
VI. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Anticipated Effects
D. Alternatives Considered
E. Accounting Statement and Table
F. Regulatory Flexibility Act
G. Unfunded Mandates Reform Act
H. Federalism
I. Conclusion
Regulations Text

Acronyms, Abbreviations, and Short Forms

Because of the many terms to which we refer by acronym,
abbreviation, or short form in this final rule, we are listing the
acronyms, abbreviation, and short forms used and their corresponding
terms in alphabetical order below:

2008 Extenders Act Tax Extenders and Alternative Minimum Tax Relief
Act of 2008 (Division C)
The Act Social Security Act
The Affordable Care Act Patient Protection and Affordable Care Act
(Pub. L. 111-148, enacted on March 23, 2010), as amended by the
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
The Departments Departments of the Treasury, Labor, and Health and
Human Services
ABP Alternative Benefit Plan
BBA Balanced Budget Act of 1997
CHIP Children's Health Insurance Program
CHIPRA Children's Health Insurance Program Reauthorization Act of
2009
CMS Centers for Medicare and Medicaid Services
The Code Internal Revenue Code of 1986
DOL Department of Labor
DSM Diagnostic and Statistical Manual of Mental Disorders (current
edition)
EHB Essential Health Benefit
EPSDT Early and Periodic Screening, Diagnostic and Treatment
ERISA Employee Retirement Income Security Act of 1974
FFP Federal Financial Participation
FFS Fee for Service
HHS Department of Health and Human Services
ICD International Classification of Diseases
MCE Managed Care Entity
MCO Managed Care Organization
MH Mental Health
MH/SUD Mental Health or Substance Use Disorder
MHPA Mental Health Parity Act of 1996
MHPAEA Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008
NQTL Nonquantitative Treatment Limitation
PAHP Prepaid Ambulatory Health Plan
PHS Act Public Health Service Act
PIHP Prepaid Inpatient Health Plan
SHO State Health Official
SUD Substance Use Disorder
Treasury Department of the Treasury

I. Executive Summary

This final rule addresses the application to Medicaid and the
Children's Health Insurance Program (CHIP) of certain mental health
parity requirements added to the Public Health Service Act (PHS Act) by
the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction
Equity Act of 2008 (MHPAEA) (Pub. L. 110-343, enacted on October 3,
2008). Specifically, this final rule addresses the application of
MHPAEA parity requirements to: (1) Medicaid managed care organizations
(MCOs) as described in section 1903(m) of the Social Security Act (the
Act); (2) Medicaid benchmark and benchmark-equivalent plans (referred
to in this rule as Medicaid Alternative Benefit Plans (ABPs)) as
described in section 1937 of the Act; and (3) Children's Health
Insurance Program (CHIP) under title XXI of the Act.
Under section 1932(b)(8) of the Act, Medicaid MCOs are required to
comply with the requirements of subpart 2 of part A of title XXVII of
the PHS Act, to the same extent that those requirements apply to a
health insurance issuer that offers group health insurance. Subpart 2
includes mental health parity requirements added by MHPAEA that are now
found at section 2726 of the PHS Act (as renumbered; formerly section
2705 of the PHS Act).
Under section 1937(b)(6) of the Act, Medicaid ABPs that are not
offered by an MCO and that provide both medical and surgical benefits
and mental health or substance use disorder (MH/SUD) benefits are
required to ensure that financial requirements and treatment
limitations for such benefits comply with the mental health parity
requirements of the PHS Act (renumbered section 2726(a) of the PHS
Act), in the same manner as such requirements apply to a group health
plan. The section 1937 provision applies only to ABPs that are not
offered by MCOs; ABPs offered by MCOs are already required to comply
with these requirements under section 1932(b)(8) of the Act.
Section 2103(c)(6) of the Act requires that state CHIP plans that
provide both medical and surgical benefits and MH/SUD benefits shall
ensure that financial requirements and treatment limitations for such
benefits comply with mental

[[Page 18391]]

health parity requirements of the PHS Act (referencing renumbered
section 2726(a) of the PHS Act) to the same extent as such requirements
apply to a group health plan. In addition, section 2103(f)(2) of the
Act requires that CHIP benchmark or benchmark equivalent plans comply
with all of the requirements of subpart 2 of part A of the title XXVII
of the PHS Act, which includes the mental health parity requirements of
the PHS Act, insofar as such requirements apply to health insurance
issuers that offer group health insurance coverage.
These final rules incorporate these requirements into our
regulations.

II. Background

A. Legislative History

On September 26, 1996, the Congress enacted the Mental Health
Parity Act of 1996 (Pub. L. 104-204) (MHPA), which required parity in
aggregate lifetime and annual dollar limits for mental health benefits
and medical/surgical benefits. Those mental health parity provisions
were codified in section 712 of ERISA, section 2726 of the PHS Act
(renumbered under section 1001 of the Affordable Care Act), and section
9812 of the Code, and applied to employment-related group health plans
and health insurance coverage offered in connection with a group health
plan. The Balanced Budget Act of 1997 (Pub. L. 105-33, enacted on
August 5, 1997) (BBA) added sections 1932(b)(8) and 2103(f)(2) of the
Act to generally apply certain aspects of MHPA, including the
provisions of section 2726 of the PHS Act, to Medicaid MCOs and CHIP
benefits.
MHPAEA was enacted as sections 511 and 512 of the Tax Extenders and
Alternative Minimum Tax Relief Act of 2008 (Division C of Pub. L. 110-
343) (the 2008 Extenders Act). MHPAEA amended the Employee Retirement
Income Security Act of 1974 (ERISA), the PHS Act, and the Internal
Revenue Code of 1986 (the Code). The changes made by MHPAEA consist of
new standards, including parity for coverage of substance use disorder
benefits, as well as amendments to the existing mental health parity
provisions enacted in MHPA.
In 2009, section 502 of the Children's Health Insurance Program
Reauthorization Act of 2009 (Pub. L. 111-3) (CHIPRA) amended section
2103(c) of the Act by adding paragraph (6), which requires that CHIP
plans that provide both medical and surgical benefits and MH/SUD
benefits comply with the provisions of section 2705(a) of the PHS Act,
as amended by MHPAEA, in the same manner as a group health plan.
The Patient Protection and Affordable Care Act (Pub. L. 111-148)
was enacted on March 23, 2010 and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152) was enacted on March 30,
2010 (collectively referred to as the ``Affordable Care Act''). Section
1001 of the Affordable Care Act reorganized and renumbered certain
provisions of the PHS Act, including renumbering section 2705 of the
PHS Act as section 2726 of the PHS Act. The Affordable Care Act did not
make conforming changes to cross-references to the renumbered
provisions; instead, it contained new cross-references to the former
section numbers. However, there was no indication that Congress
intended to alter the meaning of the existing cross-references. As a
result, we read the cross-references to continue to refer to the same
section originally referenced, as renumbered. We believe it is clear
that the new cross-references were also intended to refer to the
renumbered provisions.
The Affordable Care Act expanded the application of section 2705(a)
of the PHS Act, as amended by MHPAEA, and renumbered as section 2726(a)
of the PHS Act, to benefits in Medicaid ABPs delivered outside of a
MCO. ABPs delivered through an MCO would already have to comply with
these requirements under section 1932(b)(8) of the Act. Also, section
2001(c) of the Affordable Care Act modified the benefit provisions of
section 1937 of the Act. Specifically, section 2001(c) of the
Affordable Care Act added mental health benefits and prescription drug
coverage to the list of benefits that must be included in benchmark-
equivalent coverage; required the inclusion of essential health
benefits (EHBs) beginning in 2014; and directed that plans described in
section 1937 of the Act (now known as ABPs) that include medical/
surgical benefits and MH/SUD benefits ensure that the financial
requirements and treatment limitations applicable to such MH/SUD
benefits comply with the mental health parity provisions of the PHS
Act.
The Departments of Health and Human Services (HHS), Labor, and the
Treasury (collectively the Departments) published interim final
regulations implementing MHPAEA on February 2, 2010 (75 FR 5410), and
final regulations applicable to group health plans and health insurance
issuers on November 13, 2013 (78 FR 68240) (MHPAEA final
regulations).\1\ The MHPAEA final regulations do not apply to Medicaid
MCOs, ABPs, or CHIP state plans.
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\1\ The MHPAEA final regulations generally apply to group health
plans and health insurance issuers on the first day of the first
plan year beginning on or after July 1, 2014. The preamble to the
MHPAEA final regulations stated that each plan or issuer subject to
the interim final regulations, issued on February 2, 2010 (75 FR
5410), must continue to comply with the applicable provisions of the
interim final regulations until the corresponding provisions of
these final regulations become applicable to that plan or issuer (78
FR 68252 and 253). Note: for ease of reference, the citations to
provisions of the MHPAEA final rules throughout this document will
only refer to the provisions adopted by HHS in 45 CFR part 146.
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In 2013, we released a State Health Official (SHO) letter that
provided guidance to states regarding the implementation of
requirements under MHPAEA to Medicaid benchmark and benchmark-
equivalent plans (referred to in the letter as ABPs) as described in
section 1937 of the Act, CHIP under title XXI of the Act, and MCOs as
described in section 1903(m) of the Act.\2\ We previously issued a SHO
letter on November 4, 2009, concerning the application of section 502
of CHIPRA.\3\
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\2\ http://www.medicaid.gov/federal-policy-guidance/downloads/sho-13-001.pdf.
\3\ http://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/SHO110409.pdf.
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In April 2015, we published a proposed rule on the Medicaid and
Children's Health Insurance Programs; Mental Health Parity and
Addiction Equity Act of 2008; the Application of Mental Health Parity
Requirements to Coverage Offered by Medicaid Managed Care
Organizations, the Children's Health Insurance Program (CHIP), and ABPs
(80 FR 19418-19452). In this rule, we are finalizing regulations to
address how the MHPAEA requirements in section 2726 of the PHS Act, as
implemented in the MHPAEA final regulations, apply to MCOs, ABPs, and
CHIP. For a more detailed description of the proposed provisions,
please refer to the proposed rule (80 FR 19418).

B. Stakeholder Input

We received a total of 158 comments from state agencies, advocacy
groups, health care providers, health insurers, health care
associations, and the general public. The comments ranged from general
support or opposition (to various provisions in the proposed rule) to
very specific questions or comments regarding the proposed changes.
After consideration of the comments and feedback received from
stakeholders, we are adopting these final regulations. The following
are brief summaries of each proposed provision, a summary of public
comments received, and our responses to the comments. Comments related
to the paperwork burden and the impact analyses are addressed in the
``Collection of Information

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Requirements'' and ``Regulatory Impact Analysis'' sections in this
preamble.

III. Provisions of the Final Rule and Analysis of and Responses to
Public Comments

The provisions of this final rule generally mirror the policies set
forth in the MHPAEA final regulations to implement the statutory
provisions that require MCOs, ABPs and CHIP to comply with certain
requirements of section 2726 of the PHS Act (mental health parity
requirements).
The following sections, arranged by subject area, include a summary
of the public comments that we received, and our responses.

A. Definitions (Sec. 438.900, Sec. 440.395, Sec. 457.496)

The definitions of terms in the proposed rule and in this final
rule include most terms included in the MHPAEA final regulation at 45
CFR 146.136(a). The proposed rule modified or added several terms to
reflect the terminology used in the Medicaid program and CHIP statutes,
regulations or policies. Some terms that are not relevant to the
Medicaid program or CHIP were not included in the proposed rule. There
were also several proposed terms that modified, added or deleted
language from those definitions in the MHPAEA final regulations. For
example:
We proposed to add the terms ABP and Early and Periodic
Screening, Diagnostic and Treatment (EPSDT) benefits since these terms
are unique to the Medicaid program.
We proposed to add the definition of ``essential health
benefits'', since Medicaid benchmark and benchmark-equivalent plans
(now also known as ABPs) must cover EHBs and MH/SUD services provided
as an EHB must be compliant with parity.
We proposed a different definition for the term ``medical/
surgical benefits,'' to reflect that the state defines these benefits
in the Medicaid and CHIP contexts. Under existing law, the state has
the responsibility of identifying what is a covered benefit for
Medicaid and CHIP; MCOs, PIHPs or PAHPs are responsible for providing
the covered benefits identified by the state. This is different from
the MHPAEA final regulations, where medical/surgical benefits are
defined under the terms of the group health plan or health insurance
coverage and in accordance with applicable federal or state law.
We also proposed that the definitions of ``medical/
surgical benefits,'' ``mental health benefits,'' and ``substance use
disorder benefits'' would clearly exclude long term care services in
the Medicaid and CHIP context. We stated that this clarification was
consistent with the intent of the MHPAEA final regulations, given that
the kinds of long term care services included in benefit packages for
Medicaid and CHIP beneficiaries were not commonly provided in the
commercial market as part of health benefits coverage. We sought
comments on our proposal to exclude long term care services from the
definitions of ``medical/surgical benefits,'' ``mental health
benefits,'' and ``substance use disorder benefits.''
Comment: We received many comments on the proposal to exclude long
term care services from the definitions of ``medical/surgical
benefits,'' ``mental health benefits,'' and ``substance use disorder
benefits.'' A few commenters supported the proposal to exclude long
term care services from the definitions of ``medical/surgical
benefits,'' ``mental health benefits,'' and ``substance use disorder
benefits'' as used in this rule. The commenters requested that
additional guidance regarding the definition of long term care services
be provided to ensure consistency in states' and plans' parity
analyses.
However, a large majority of commenters opposed this approach, and
recommended that the final rule apply parity protections to long term
MH/SUD benefits. Commenters who opposed the proposed rule approach
provided three general concerns. First, many commenters noted that
Medicaid is the nation's largest provider of benefits coverage for
individuals with MH/SUD conditions and the only benefits coverage for
most disabled individuals with these conditions; these commenters
stated that parity protections in Medicaid should be at least as strong
as the rules governing the commercial market. The commenters also
discussed the importance of access to long term care services for the
effective treatment of many MH/SUD conditions, particularly within the
populations served by Medicaid and CHIP programs.
Second, several commenters noted that commercial plans typically do
cover some forms of long term care services for both MH/SUD and
medical/surgical conditions, including skilled nursing, inpatient
rehabilitation, and home health services. From this perspective,
commenters stated that CMS is prohibited from excluding the application
of parity to long term care services because section 1932(b)(8) of the
Act requires Medicaid MCOs to comply with the requirements of MHPAEA
``to the same extent that those requirements apply to a health
insurance issuer that offers group health insurance.'' Underlying this
claim from commenters is the view that commercial insurers of group
health plans would be obligated to meet parity requirements in
connection with coverage of long term care services in order to comply
with PHS Act section 2726. To the extent that Medicaid coverage does
differ from the commercial market, commenters stated that the
regulations must reflect the differences between commercial insurance
and Medicaid and CHIP, as well as the different needs of the
populations that each type of health coverage serves. These commenters
stated that the proposed rule's approach misconstrues the intent and
substance of the parity requirements if parity requirements only apply
to Medicaid and CHIP services that are also covered by commercial
insurance. Commenters suggested that there is no statutory basis for
the interpretation underlying the proposed rule on this point and the
corresponding application that long term services be excluded from the
parity analysis. Commenters also stated that there are many services
covered in the commercial plans that are comparable to long term
services covered by Medicaid such as personal care, where the services
might be covered for medical-surgical conditions, but not for MH/SUD
because they are defined as ``long term care.'' This opens the door for
decisions to exclude coverage or impose different financial or
treatment limitations that would be otherwise prohibited by this rule
but are wholly justified on any plausible rationale that characterizes
the services as long term care.
Third, and finally, many commenters also identified the difficulty
of formulating clear and consistent standards to distinguish between
long term care services and other services across treatment settings,
from both a definitional and an operational perspective; they stated
that it would be administratively difficult to implement a policy that
carved these services out of medical, surgical, MH/SUD benefits to
exclude long term care services from parity protections. Many
commenters also raised concerns that adopting this exclusion without
providing a regulatory definition of long term care services would
allow states and plans to declare a number of services to be long term
care and thus not subject to parity in an inconsistent manner. Having
no consistent definition of long term service would create disparate
policies across states as to which services would

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not be subject to parity and therefore would have allowable
quantitative and nonquantitative treatment limits on services that were
needed on a long term basis. In addition, some services that may be
currently considered intermediate and subject to parity may be
intentionally classified by states or MCOs, PIHPs or PAHPs to be long
term services and excluded from parity. Commenters stated that if all
long term care services are excluded from parity protections, MCOs,
PIHPS and PAHPs may financially benefit from the anticipated cost
savings of shifting away from acute care to long term care and have no
obligation to ensure that there is mental health parity within long
term care benefits. This may also preclude any systematic basis to
audit MCOs, PIHPs or PAHPs compliance with relevant MHPAEA requirements
applied to long term services.
For these reasons, most commenters requested that parity
requirements under this final rule be applied to long term care
services that are within the scope of medical/surgical or mental
health/substance use disorder services, or that if the exclusion were
to be maintained, that very clear definitions and guidelines be
provided regarding the services to be characterized as long term care
services that are excluded from these other classification of services
set forth in this rule.
Response: We agree with the commenters and have revised this final
rule to include long term care services in the definitions of medical/
surgical, mental health, and substance use disorder benefits, and,
thus, to apply parity protections under this final rule to long term
care services. Therefore, long term care services will need to be
included in the appropriate classification(s) of benefits provided for
in this rule for the purposes of the parity analysis. We intend to
provide additional information to states regarding the application of
parity to long term services. This information will assist states in
determining how various medical/surgical and MH/SUD long term services
would be classified in the four areas (inpatient, outpatient, pharmacy
and emergency).
We believe this change will reduce the likelihood that states would
have disparate policies regarding which services would be subject to
parity and could ensure that beneficiaries have similar protections
regardless of where they live. In addition, this prevents states from
applying treatment limits to long term care services needed for MH/SUD
conditions more restrictively than treatment limits are applied for
long term care services for medical/surgical conditions. We also
believe that by requiring the categorization of long term services used
to treat MH/SUD conditions, this final rule could improve beneficiary
access to needed MH/SUD benefits. Finally, finalizing the regulations
in this final rule with this change will provide MCOs and states with
needed clarity regarding the application of parity to these services.
Comment: Many commenters supported the guidance provided in the
proposed rule regarding state-defined MH/SUD benefits. Commenters noted
that requiring state definitions to be consistent with generally
recognized independent standards of current medical practice will help
ensure Medicaid managed care beneficiaries receive clinically
appropriate levels of care. However, several commenters offered
specific recommendations regarding the scope of definitions for
medical/surgical services and MH/SUD services in the proposed rule. For
instance, one commenter recommended that CMS define the scope of MH/SUD
to be consistent with the psychiatric diagnoses listed in the new DSM-5
and in the Diagnostic Classification of Mental Health and Developmental
Disorders Infancy and Early Childhood. Several commenters also
cautioned that Medicaid's medical/surgical benefits should be defined
specifically for the child and adolescent population to ensure
consistent implementation.
Several other commenters recommended that CMS provide a non-
exhaustive list of ``mental health conditions'' that must be included
within a state's definition of ``mental health condition''. They added
that simply stating that this term must be defined consistent with
generally recognized independent standards of medical practice does not
provide sufficient clarity and guidance to states. Commenters suggested
that a non-exhaustive list would give greater clarity and uniformity
among states, thus facilitating the collection and analysis of data and
outcomes measures.
Response: We believe that requiring states to include specific
diagnosis or providing a non-exhaustive list of mental health
conditions in a state's definition of mental health conditions is
beyond the scope of this regulation and CMS authority. Since Medicaid
is a state and federal partnership, we believe that the state, and not
CMS, should identify which conditions are considered medical/surgical
and MH/SUD conditions. Therefore, we do not provide a list (either
exhaustive or non-exhaustive) of mental health conditions in this final
rule. The language in the final regulation provides states guidance
regarding generally recognized independent standards of current medical
practice to determine what conditions are medical/surgical, mental
health, and substance use disorders.
Comment: One commenter suggested that CMS should clarify that
quantitative visit limits do not apply to required services such as
services provided by clinical psychologists and clinical social workers
in FQHCs.
Response: We believe that the current regulation provides
sufficient information regarding the application of parity standards to
treatment limits imposed on MH/SUD services. To the extent permissible
under existing law, states and MCOs may impose quantitative treatment
limits for MH/SUD benefits, so long as these limits are no more
restrictive than the predominant limits applied to substantially all
medical/surgical benefits in each classification; if existing law
prohibits the imposition of any treatment limitation on a service
covered by a Medicaid or CHIP state plan, this rule does not provide
authority to impose such limits merely because parity standards would
be met. This rule allows states to apply quantitative treatment limits,
consistent with other law, to services regardless of the type of
practitioner that renders either a medical/surgical service or MH/SUD
service so long as the parity requirements are met. A discussion of the
mandatory coverage requirements for Medicaid and CHIP is otherwise
outside the scope of this final rule.
Comment: Another commenter recommended that CMS should clarify that
utilization management and prior authorization or concurrent review can
function as ``soft limits'' that allow for an individual to exceed
medical/surgical or MH/SUD benefit limits based on medical necessity.
Response: We are clarifying in this final rule that benefit limits
that allow for an individual to exceed numerical limits for medical/
surgical or MH/SUD benefits based on medical necessity are not
considered to be quantitative treatment limits under this rule, but are
subject to the provisions of this rule governing Nonquantitative
Treatment Limitations (NQTLs) for medical/surgical or MH/SUD benefits.
The processes, strategies, evidentiary standards, or other
considerations that are used to determine whether to apply a soft limit
must be comparable to and applied no more stringently than factors used
in applying the limitation for medical surgical/benefits in the
classification.
Comment: Another commenter suggested that CMS include a list of

[[Page 18394]]

terms that have different meanings in Medicaid and commercial plans and
clarify how these meanings apply in the context of parity protections
provided in Medicaid and the commercial market.
Response: We appreciate the commenter's suggestion. However, we
believe that we provide adequate discussion of the similarities and
differences in the use of terms in Medicaid and commercial plans in the
text of this regulation and other regulations governing Medicaid, CHIP
and the commercial health insurance market.
For the reasons described in the proposed rule and in consideration
of the comments received, we are finalizing the provisions proposed in
Sec. 438.900, Sec. 440.395, and Sec. 457.496 of the proposed rule
with modification. We are finalizing revised definitions of medical/
surgical, mental health, and substance use disorder services so that
they include, rather than exclude, long term care services. Additional
modifications to the definitions proposed in Sec. 457.496 are
discussed in section III.G of this final rule.

B. Parity Requirements for Aggregate Lifetime and Annual Dollar Limits
(Sec. 438.905 and Sec. 457.496(c))

In proposed Sec. 438.905 and Sec. 457.496(c), we addressed the
parity requirements for aggregate lifetime and annual dollar limits for
MCOs (including PIHPs and PAHPs when providing coverage for MCO
enrollees) and CHIP. As noted above, the application of these
requirements under this rule is generally the same as under the MHPAEA
final regulations (45 CFR 146.136(b)). If a regulated entity applies an
aggregate lifetime or annual dollar limit to at least two-thirds of all
medical/surgical benefits, it must either apply the aggregate limit to
both to medical/surgical benefits and to MH/SUD benefits in a manner
that does not distinguish between the medical/surgical and MH/SUD
benefits, or not include an aggregate lifetime or annual dollar limit
on MH/SUD benefits that is less than the aggregate limit on medical/
surgical benefits. If a regulated entity does not include an aggregate
lifetime or annual dollar limit on medical/surgical benefits or
includes a limit that applies to less than one-third of all medical/
surgical benefits, it may not impose an aggregate lifetime or annual
dollar limit, respectively, on MH/SUD benefits. If a regulated entity
applies an aggregate lifetime or annual dollar limit to between one-
third and two-thirds of all medical/surgical benefits, it must either
impose no aggregate lifetime or annual dollar limit on MH/SUD benefits,
or impose an aggregate lifetime or annual dollar limit on MH/SUD
benefits that is no more restrictive than the average limit for
medical/surgical benefits. These requirements do not address the
provisions of section 2711 of the PHS Act, which prohibit imposing
lifetime and annual limits on the dollar value of essential health
benefits.
We noted in the proposed rule that for managed care arrangements,
we are using our authority in section 1902(a)(4) of the Act to require
PIHPs and PAHPs to comply with mental health parity requirements when
providing coverage for MCO enrollees. The proposed regulations included
definitions of ``aggregate lifetime dollar limit'' and ``annual dollar
limit'' at Sec. 438.900, Sec. 440.395(a), and Sec. 457.496(a).
Comment: One commenter suggested that CMS should consider including
a definition of ``coverage unit'' that mirrors the definitions in the
MHPAEA final regulations.
Response: We did not include a definition of coverage unit in this
rule because in Medicaid and CHIP programs, the coverage unit will
always be the individual beneficiary, regardless of marital or family
status.
Comment: Another commenter requested that CMS provide clarification
on the use of aggregate lifetime and annual dollar limits in the
context of section 2711 of the PHS Act, as added by section 1001 of the
Affordable Care Act, which generally prohibits lifetime and annual
limits on the dollar amount of EHB, including MH/SUD services.
Response: Section 2711 of the PHS Act, as added by the Affordable
Care Act, generally prohibits lifetime and annual limits on the dollar
amount of EHB in group health plans and health insurance coverage. As
set forth in section 1302(b) of the Affordable Care Act, the definition
of EHB includes ``mental health and substance use disorder services,
including behavioral health treatment.'' \4\ Thus, notwithstanding the
provisions of MHPAEA that permit aggregate lifetime and annual dollar
limits with respect to MH/SUD benefits as long as those limits are in
accordance with the parity requirements for such limits, such dollar
limits are prohibited with respect to MH/SUD benefits that are covered
as EHB, regardless of the service delivery system within Medicaid
Alternative Benefit Plans.
---------------------------------------------------------------------------

\4\ See section 1302(b)(1)(E) of the Affordable Care Act.
---------------------------------------------------------------------------

Section 2711 of the PHS Act is applied to Medicaid MCOs by section
1932(b)(8) of the Act and to CHIP benchmark or benchmark-equivalent
plans by section 2103(f)(2) of the Act (as section 2711 is part of
subpart 2 of part A of title XXVII of the PHS Act). ABP and CHIP
benefits that are offered through an MCO, or through a PIHP or PAHP
that provides coverage to MCO enrollees are also subject to the
prohibition on lifetime and annual limits. However, the prohibition on
annual and lifetime limits in section 2711 of the PHSA does not apply
to ABPs that are not offered by an MCO or by a PIHP, or PAHP to
enrollees of an MCO.
Regardless of whether services are delivered in managed care or
non-managed care arrangements, all Medicaid ABPs (including benchmark
equivalent and Secretary-approved benchmark plans) and CHIP plans are
statutorily required by sections 1937(b)(6) and 2103(c)(6) of the Act
to meet the financial requirements and treatment limitations components
of the mental health parity provisions set forth at section 2726(a) of
the PHS Act.
Comment: One commenter indicated that CMS should consider the
extent to which Sec. 438.905 appears to sanction aggregate lifetime or
annual dollar limits in the Medicaid program. For example, paragraph
(c) discusses a Medicaid MCO with an annual or lifetime dollar limit on
two-thirds of all medical and surgical benefits. The commenter further
states that it is difficult to imagine how a lifetime limit on two-
thirds of all medical and surgical benefits would meet the sufficiency,
access and comparability requirements of Medicaid.
Response: This final rule neither sanctions nor prohibits aggregate
lifetime and annual dollar limits; this rule merely provides the
standards for applying parity requirements to such limits if the limits
are otherwise authorized. While we agree that a lifetime limit on two-
thirds of all medical and surgical benefits would not likely meet the
sufficiency, access, and comparability requirements of Medicaid,
sufficiency, access, and comparability requirements are outside of the
scope of this final rule.
Comment: One commenter noted that the use of the phrase ``in states
that cover both medical and surgical benefits and mental health and
substance use disorder benefits under their State plan'' is not
necessary. All state Medicaid programs contain at least some mental
health and SUD benefits, because hospital and physician services are
mandatory benefits that include mental health and SUD treatment.
Response: We agree that inpatient hospital and physician services
are mandatory state plan services that

[[Page 18395]]

furnish services to address MH/SUD. However, as noted, under section
1932(b)(8) of the Act, Medicaid MCOs are required to comply with mental
health parity requirements in section 2726 of the PHS Act to the same
extent that those requirements apply to a health insurance issuer that
offers group health insurance. The parity requirements in section 2726
of the PHS Act are limited to group health plans or health insurance
issuers offering group or individual health insurance coverage that
provides both medical and surgical benefits and MH/SUD benefits.
Similarly, section 2103(c)(6) of the Act requires that state CHIP plans
that provide both medical and surgical benefits and MH/SUD benefits
shall ensure that financial requirements and treatment limitations for
such benefits comply with mental health parity requirements of section
2726(a) of the PHS Act to the same extent as such requirements apply to
a group health plan. Therefore, we are retaining the clarifying
language in Sec. Sec. 438.905(a), 438.910(b), 457.496(d)(2), and
457.496(f) of this final rule that these requirements apply to states
that offer both medical and surgical and MH/SUD benefits.
We are finalizing the provisions at Sec. Sec. 438.905 and
457.496(c) about aggregate lifetime and annual limits for Medicaid MCOs
and CHIP as proposed. In the proposed rule, we included under Sec.
438.905 the title of ``General'' under paragraph (a), with paragraph of
``General parity requirement'' under (a)(1). As we do not intend to use
paragraph (a)(2), in the final rule we have removed the paragraph
numbering for (a)(1) and named ``General parity requirement'' simply
under paragraph (a) of this section, rather than including ``General''
in the title.

C. Parity Requirements for Financial Requirements and Treatment
Limitations (Sec. Sec. 438.910, 440.395(b), and 457.496(d))

Sections 438.910, 440.395(b), and 457.496(d) of the proposed rule
set forth parity requirements for financial requirements and treatment
limitations.
1. Clarification of Terms
In the proposed rule, we indicated that ``classification of
benefits'' means a classification as described in Sec. 438.910, Sec.
440.395(b), and Sec. 457.496(d), which describe parity requirements
for financial requirements and treatment limitations. Specifically, we
proposed to modify the classifications of benefits set forth in the
regulations that were adopted by the Departments in the 2010 MHPAEA
final rule (as discussed in section III.C.2). As in the MHPAEA final
regulations, we proposed in this Medicaid and CHIP rule that parity
requirements for financial requirements and treatment limitations be
applied on a classification by classification basis.
We proposed the term ``type'' to refer to financial requirements
and treatment limitations of the same nature. Different types of
financial requirements and treatment limitations include copayments,
coinsurance, annual visit limits, and episode visit limits. We proposed
that a financial requirement or treatment limitation must be compared
only to financial requirements or treatment limitations of the same
type within a classification.
In addition, we proposed the term ``level'' to refer to the
magnitude (such as the dollar, percentage, day, or visit amount) of the
financial requirement or treatment limitation. We did not receive any
comments on the definitions of terms described at Sec. 438.910, Sec.
440.395(b), and Sec. 457.496(d) and are finalizing these terms as
proposed.
2. General Parity Requirement for Financial Requirements and Treatment
Limitations
At proposed Sec. 438.910(b), Sec. 440.395(b)(2), and Sec.
457.496(d)(2), we included general parity provisions to prohibit a MCO,
PIHP or PAHP (when providing benefits to an MCO enrollee), ABP (when
used in a non-managed care arrangement), or CHIP state plan from
applying any financial requirement or treatment limitation to MH/SUD
benefits in any classification that is more restrictive than the
predominant financial requirement or treatment limitation of that type
that is applied to substantially all medical/surgical benefits in the
same classification. For this purpose, the general parity requirement
of MHPAEA would apply separately for each type of financial requirement
or treatment limitation (for example, unit limits are compared to unit
limits, or co-pays are compared to co-pays).
We noted in the proposed rule that the MHPAEA final regulations at
Sec. 146.136(c)(2)(ii) set forth the following classifications of
benefits: inpatient in-network; inpatient out-of-network; outpatient
in-network; outpatient out-of-network; emergency care; and prescription
drugs. We proposed to follow the general structure of the
classifications used in the MHPAEA final regulations with a significant
distinction. Specifically, we proposed to eliminate the in-network and
out-of-network distinctions for the inpatient and outpatient
classifications, and therefore to provide four classifications:
inpatient; outpatient; emergency care; and prescription drugs.
As discussed in this final rule, we maintain this classification
structure. The four classifications in this final rule are the only
classifications to be used for purposes of applying the parity
requirements of MHPAEA to Medicaid and CHIP. Moreover, these
classifications must be used for all financial requirements and
treatment limitations to the extent that a MCO, PIHP, PAHP, ABP, or
CHIP provides benefits in a classification and imposes any separate
financial requirement or treatment limitation (or separate level of a
financial requirement or treatment limitation) for benefits in the
classification. Similar to the MHPAEA final rule, this final rule does
not define what services are included in the inpatient, outpatient, or
emergency care classifications. These terms are subject to the design
of a state's managed care program and their meanings may differ
depending on the benefit packages.
For the purposes of applying parity requirements to Medicaid, we
proposed that the classifications of benefits should relate to how
states construct and manage their Medicaid benefits. All Medicaid
benefits provided should fall into one of the classifications of
benefits. We noted that the MHPAEA final regulations discussed the
application of parity requirements to intermediate services (such as
residential treatment, partial hospitalization, and intensive
outpatient treatment) provided under the health plan. Specifically, the
MHPAEA final regulations required group health plans and issuers to
assign covered intermediate MH/SUD benefits to a benefit classification
in the same manner that they assign comparable intermediate medical/
surgical benefits to a classification. The MHPAEA final regulations do
not specifically define intermediate services; nor do current statutory
and regulatory provisions governing the Medicaid and CHIP programs
define intermediate services within state plan benefits. Therefore, we
did not propose to specify an intermediate classification to be used in
the parity analysis for Medicaid or CHIP programs. As in the MHPAEA
final rule, we proposed to allow the applicable regulated entity (the
MCO, PIHP or PAHP, or state in connection with the ABP, and CHIP) to
assign intermediate level services to any of the classifications
listed, but require that assignment to those classifications be done
using the same standards for both medical/surgical services and MH/SUD
services (see Sec. 438.910(b)(2), Sec. 440.395(b)(2)(ii), and

[[Page 18396]]

Sec. 457.496(d)(2)(ii)). This final rule also requires that the method
used to assign services to the four classifications be reasonable.
We note that similar concerns may arise regarding the
classification of long term care services, given the revised
definitions of mental health benefits and substance use disorder
benefits set forth in this final rule. We did not propose and do not
finalize any specific rules for the classification of long term care
services. This final rule allows the applicable regulated entity (the
MCO, PIHP or PAHP, or state in connection with the ABP, a carve-out
managed care delivery system, and CHIP) to assign long term care
services to any of the four listed classifications, but, as with
intermediate and other services, requires that assignment to those
classifications be done using the same reasonable standards for both
medical/surgical services and MH/SUD services.
Comment: Many commenters provided feedback on this approach. Some
commenters requested that CMS create a new intermediate level services
classification and clarify that intermediate services for MH/SUD must
be covered if similar types of services are covered for medical/
surgical conditions. However, most commenters supported the consistency
of the proposed approach with the MHPAEA final rules, and appreciated
that this approach would give some flexibility to states and health
plans to assign intermediate level services to the four classifications
in the proposed rule. Commenters noted that consistency with the MHPAEA
final rules would make it easier for states and plans to comply. Since
other aspects of the benefit, including financial requirements and
NQTLs, are influenced by the classification a service is put into, this
flexibility would allow states and plans to determine the most
appropriate classification for intermediate services based on the
entire benefit package that is offered.
Response: Similar to the MHPAEA final rule, this final rule does
not define what services are included in the inpatient, outpatient, or
emergency care classifications. Similar to the reasoning provided in
the MHPAEA final regulations, we did not intend to impose a benefit
mandate through the parity requirement in order to require greater
benefits for mental health conditions and substance use disorders than
for medical/surgical conditions. In addition, as noted above, current
statutory and regulatory provisions governing the Medicaid and CHIP
programs do not define intermediate services within state plan
benefits. The definitions of the four classifications used by this rule
are subject to the design of a state's managed care program, and their
meanings may differ depending on the benefit packages. State health
insurance laws may define these terms, and in the event that these are
not defined, we expect each regulated entity within a state to define
these classifications in a similar manner. Further, each regulated
managed care plan (MCOs, PIHPs and PAHPs) or the state in connection
with ABP, or CHIP, must apply these terms uniformly for both medical/
surgical benefits and MH/SUD benefits under Sec. 438.910(b)(2), Sec.
440.395(b)(2)(ii) and Sec. 457.496(d)(2)(ii). Therefore, we are not
including a new intermediate level services classification in this
final rule.
Comment: Some commenters requested that the final rule clearly
state that intermediate services offered in Medicaid and CHIP are
subject to the parity requirements. The commenters urged CMS to provide
guidance regarding MH/SUD intermediate care services and provide
examples and resources that mirror the provisions included in the
MHPAEA final rule. Many commenters also requested guidance on the types
of factors and processes that should be used to classify intermediate
care services into the benefit classifications for parity assessments
to ensure consistency across payers in the application of parity to
these services. Many commenters requested additional examples of
intermediate services that can be classified as inpatient or
outpatient. Commenters expressed particular concern about the need to
define intermediate services clearly if long term care services were
excluded from the final rule. Given the similarities and overlap
between many intermediate services and long term care services,
commenters expressed concern that plans would be able to classify
services as long term care and exclude them from parity protections.
Response: We reiterate that all Medicaid services provided should
be placed into one of the classifications of benefits for the purposes
of this final rule. This final rule does not provide any authority for
a medical/surgical or mental health/substance use disorder benefit to
be classified or characterized as something other than the four
classifications in Sec. 438.910(b)(2), Sec. 440.395(b)(2)(ii) and
Sec. 457.496(d)(2)(ii). In addition, as noted in section III.A, this
final rule includes long term care services in the definitions of
``medical/surgical benefits,'' ``mental health benefits,'' and
``substance use disorder benefits.'' Therefore, the distinction between
intermediate services and long term care services is not material to
the application or enforcement of this final rule. However, we have
amended the provisions at Sec. Sec. 438.910(b)(2), 440.395(b)(2)(ii)
and 457.496(d)(2)(ii) to note that the factors used to classify
services in the four classifications must be reasonable in addition to
being the same for medical/surgical and MH/SUD services. We believe
that this reasonableness requirement should help to allay concerns that
services could be classified according to arbitrary factors in an
attempt to permit the application of discriminatory limitations to MH/
SUD services under this rule.
Comment: One commenter emphasized the difficulty of ensuring parity
requirements across delivery platforms, especially as they relate to
NQTLs and intermediate services. The commenter noted that the line
between intermediate services and long term care services is not always
clear, and stated that medical necessity criteria would need to be
established to differentiate levels of care within long term care
services. The commenter requested additional guidance on how to address
parity requirements for services that are unique to Medicaid and for
which comparable services on the medical/surgical side do not exist.
Response: As noted above, this final rule applies parity
requirements to all intermediate and long term care services. Medical
necessity determinations for long term care services or other services
are an NQTL that must comply with the requirements of this rule. The
parity analysis does not require a one-to-one comparison of a MH/SUD
service to a medical/surgical service, but instead requires that a NQTL
may not be imposed for a MH/SUD benefit in any classification unless,
under the terms of the coverage, as written and in operation, any
factors used in applying the NQTL to the MH/SUD benefit are comparable
to and applied no more stringently than factors used in applying the
same NQTL to medical/surgical benefits in the classification; we
address NQTL standards in greater detail in section F. If questions
persist regarding the development and use of medical necessity criteria
under this rule, and/or methodologies for classifying intermediate and
long term care services into the four benefit classifications provided
in this rule, we may develop further guidance or provide technical
assistance as needed.
Comment: One commenter requested guidance to the states on
developing clinically appropriate intensity of

[[Page 18397]]

service and licensure expectations of facilities that provide
behavioral health services which are not readily classifiable.
Response: This final rule clarifies that mental health parity
requirements under this final rule do not apply to state licensure
laws, and therefore such guidance is beyond the scope of this final
regulation. Clinical determinations regarding medical necessity, such
as the intensity of services that is medically necessary for an
individual, are subject to the NQTL requirements set forth in this
final rule. In addition, any processes, strategies, evidentiary
standards, or other considerations that are used to guide clinical
determinations concerning the appropriate intensity of service are also
subject to the NQTL requirements set forth in this final rule.
As indicated in the responses to comments, we are finalizing these
provisions mostly as proposed. We are finalizing Sec. Sec.
438.910(b)(2), 440.395(b)(2)(ii) and 457.496(d)(2)(ii) with a
modification that requires that the standards used to assign benefits
to a classification be reasonable as well as the same for both medical/
surgical and MH/SUD benefits.
3. Applying the General Parity Requirement to Financial Requirements
and Quantitative Treatment Limitations (Sec. Sec. 438.910(c),
440.395(b)(3), and 457.496(d)(3))
At proposed Sec. Sec. 438.910(c), 440.395(b)(3) and,
457.496(d)(3), we addressed the application of the general parity
requirement of MHPAEA to financial requirements and quantitative
treatment limitations in MCOs, PIHPs, PAHPs, ABP and CHIP state plans.
The general parity requirement at proposed Sec. Sec. 438.910(b),
440.395(b)(2), and 457.496(d)(2) and now finalized in this rule would
prohibit a MCO, PIHP or PAHP (in connection with coverage provided to
an MCO enrollee), or ABP state plan (when used in a non-managed care
arrangement), or CHIP state plan or MCE contracting with a CHIP state
plan from applying any financial requirement or treatment limitation to
MH/SUD benefits in any classification that is more restrictive than the
``predominant'' financial requirement or treatment limitation of that
type applied to ``substantially all'' medical/surgical benefits in the
same classification. In the proposed regulation text (that is,
Sec. Sec. 438.910(c), 440.395(b)(3) and 457.496(d)(3)), we proposed
standards that are the same as those in the MHPAEA final regulations
for determining the portion of medical/surgical benefits subject to a
financial requirement or quantitative treatment limitation for purposes
of the parity analysis. Under the proposed and now final rule, the
portion of medical/surgical benefits in a classification subject to a
financial requirement or quantitative treatment limitation would be
based on the dollar amount of all payments for medical/surgical
benefits in the classification expected to be paid during a specific
year. For MCOs, PIHPS and PAHPs, this means dollar amounts for payment
during a contract year. For ABPs and CHIP state plans, this means
dollar amounts for the year starting the effective date of the approved
ABP or CHIP state plan; effective dates for these plans will vary based
on the date the ABP or CHIP state plan was approved by CMS. For
purposes of this calculation, the MCOs (when such organizations are
responsible for coverage of MH/SUD benefits) or the state (in cases
where PIHPs and PAHPs are used in conjunction with MCOs) must determine
the total amount projected to be expended to determine the two-thirds
threshold.
We included a detailed example to illustrate how our proposal would
work:
Example. Facts. A state is providing a comprehensive service
package through an MCO. The MCO is currently providing coverage of
services with limits that are consistent with the approved state plan.
The MCO benefit package includes:
Inpatient Hospital services for medical/surgical--30 days
per year limit.
Inpatient Hospital services for MH/SUD--30 days per year
limit.
Primary Care Physician Services for medical/surgical--
unlimited.
Specialist Physician Services for medical/surgical--50
visits per year.
Outpatient MH services--20 visits per year limit.
Physical Therapy--20 visits per year limit.
Occupational Therapy--20 visits per year limit.
Emergency Services--Unlimited for medical/surgical or MH/
SUD
The MCO projects its payments as follows for medical/surgical
benefits:

Table 1--Example of Quantitative Treatment Limit
----------------------------------------------------------------------------------------------------------------
Percent of
Percent of total classification
Benefit/classification--Medical/Surgical Projected payment costs subject to a
limit
----------------------------------------------------------------------------------------------------------------
Inpatient Hospital..................................... $400x 100 100
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Inpatient total.................................... 400x 100 100
----------------------------------------------------------------------------------------------------------------
Physician Services..................................... 150x 27 0
Specialist Services.................................... 250x 46 46
Physical Therapy....................................... 75x 13.5 13.5
Occupational Therapy................................... 75x 13.5 13.5
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Outpatient total................................... 550x 100 73
----------------------------------------------------------------------------------------------------------------
Emergency Services..................................... 100x 100 0
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Emergency total.................................... 100x 100 0
----------------------------------------------------------------------------------------------------------------

Example. Conclusion. In this example, the MCO would be able to
maintain some level of day and visit limits on benefits in both the
inpatient and outpatient MH/SUD classifications because both
classifications meet the ``substantially all'' standard--in other
words, more than two-thirds of the medical/surgical benefits in each
classification are subject to those types of limits (100 percent of all
medical/surgical inpatient benefits are subject to a day limit, and 73
percent of all medical/surgical outpatient benefits are subject to a
visit limit).

[[Page 18398]]

With regards to the level of the quantitative treatment limitation
on inpatient MH/SUD services, the MCO may maintain its 30 day limit
because 100 percent of all inpatient medical/surgical benefits are also
subject to a 30 day limit, making it the predominant level.
However, with regards to the level of the quantitative treatment
limitation on outpatient MH/SUD services, the MCO may not maintain its
current limit of 20 visits per year. Of the total amount of outpatient
medical/surgical benefits subject to a visit limit ($400x), 62.5
percent ($250x) are subject to a 50 visit limit (specialist services),
and only 37.5 percent ($150x) are subject to a 20 visit limit (physical
therapy and occupational therapy). Because the 20 visit limitation is
not the predominant level (that is, it does not apply to at least 50
percent of the medical/surgical benefits in the classification subject
to the visit limit), the MCO would need to either remove the visit
limits altogether on outpatient MH/SUD services or increase the visit
limitation to at least 50 visits per year to align with the least
restrictive level of visit limits on outpatient medical/surgical
benefits. Lastly, because there are currently unlimited emergency
visits under the medical/surgical benefits, the MCO would need to
maintain unlimited visits for emergency services for MH/SUD, and would
not be able to impose any limits on MH/SUD unless limits were also
imposed on medical/surgical services and such limits were consistent
with parity requirements.
We received no comments on applying the general parity requirement
to financial requirements and quantitative treatment limitations as
described in Sec. Sec. 438.910(c), 440.395(b)(3), and 457.496(d)(3).
We are finalizing these provisions as proposed.
4. Special Rules for Multi-Tiered Prescription Drug Benefits and Other
Benefits (Sec. Sec. 438.910(c)(2), 440.395(b)(3)(ii),
457.496(d)(3)(ii))
The MHPAEA final regulations at 45 CFR 146.136(c)(3)(iii)(A) permit
plans under certain circumstances to apply different levels of
financial requirements to different tiers of prescription drugs and
still satisfy the parity requirements. The proposed rule would allow a
MCO, PIHP, PAHP, ABP, or CHIP state plan to subdivide the prescription
drug classification into tiers based on reasonable factors as described
in the proposed regulations and without regard to whether a drug is
generally prescribed for medical/surgical benefits or for MH/SUD
benefits.
The MHPAEA final regulations at 45 CFR 146.136(c)(3)(iii)(C) permit
a subclassification for office visits, separate from other outpatient
items and services. Other subclassifications not specifically
permitted, such as separate sub-classifications for generalists and
specialists, cannot be used for purposes of determining parity. As
proposed and finalized in this rule, we will retain this approach to
subclassifications in the application of these parity requirements
established in parts 438, 440 and 457 (that is, to services provided to
enrollees in Medicaid MCOs, and to ABPs and CHIP). After the
subclassification is established, a MCO, PIHP, PAHP, ABP, or CHIP state
plan may not impose any financial requirement or quantitative treatment
limitation on MH/SUD benefits in any sub-classification (for example,
office visits or non-office visits) that is more restrictive than the
predominant financial requirement or quantitative treatment limitation
that applies to substantially all medical/surgical benefits in the sub-
classification, using the parity analysis for financial requirements
and quantitative treatment limitations.
In the MHPAEA final regulations, the Departments recognized that
tiered provider networks have become an important tool for health plan
efforts to manage care and control costs. Therefore, for purposes of
applying the financial requirement and treatment limitation rules under
MHPAEA, the MHPAEA final regulations provide that if a plan (or health
insurance coverage) provides benefits through multiple tiers of in-
network providers (such as an in-network tier of preferred providers
with more generous cost-sharing to participants than a separate in-
network tier of participating providers in any classification), the
plan may divide its benefits furnished on an in-network basis into sub-
classifications that reflect those network tiers, if the tiering is
done without regard to whether a provider is a MH/SUD provider or a
medical/surgical provider. While network tiers may also be used in
Medicaid managed care, we do not believe that the parity standards for
Medicaid managed care need to address such network structures so we did
not propose regulation text to address financial limitations (for
example, different cost-sharing requirements) in that context in this
rule. Medicaid cost-sharing rules apply regardless of network status.
Any quantitative treatment limitation outlined in the contract must be
applied to the service broadly and therefore cannot have separate
limitations based on network tiers. We recognize there may be network
tiers used to commonly refer enrollees or for purposes of building the
network and have varying payment rates to providers, but the use of
multiple network tiers in the context of NQTLs is discussed in section
III.E. of this final rule.
Comment: One commenter stated that network adequacy provisions in
Sec. 438.206 are not specific enough and encouraged CMS to provide
more specificity in the number, types of providers that must be in
network, as well as time and distance requirements in current Medicaid
managed care regulations.
Response: We believe that providing standards that specify the
number and types of providers that must be in the network is beyond the
scope of this rule. These standards are addressed in existing
regulations at Sec. 438.206 and Sec. 438.207.\5\ The parity proposed
rule stated that a plan complying with the network adequacy
requirements of Sec. 438.206(b)(4) will be deemed in compliance with
Sec. 438.910(d)(3). In this final rule we removed the provision to
deem compliance with Sec. Sec. 438.910(d)(3) and 457.496(d)(5) of this
rule (regarding parity requirements for access to out-of-network
providers) where an MCO, PIHP, PAHP, or CHIP state plan is found to be
in compliance with the provider network standard found in Sec.
438.206(b)(4).
---------------------------------------------------------------------------

\5\ We note that CMS proposed changes to Sec. Sec. 438.206 and
438.207 that we believe are consistent with the intent of these
final rules in CMS-2390-P Medicaid and CHIP Programs; Medicaid
Managed Care, CHIP Delivered in Managed Care, Medicaid and CHIP
Comprehensive Quality Strategies, and Revisions Related to Third
Party Liability.
---------------------------------------------------------------------------

As indicated in the responses to the comments, we are finalizing
the provisions regarding multi-tiered prescription drug benefits and
other benefits at Sec. Sec. 438.910(c)(2), 440.395(b)(3)(ii),
457.496(d)(3)(ii) as proposed.

D. Cumulative Financial Requirements (Sec. 438.910(c)(3), Sec.
440.395(b)(3)(iii), Sec. 457.496(d)(3)(iii))

While financial requirements such as copayments and coinsurance
generally apply separately to each covered expense, other financial
requirements (in particular, deductibles) accumulate across covered
expenses. In the case of deductibles, generally an amount of otherwise
covered expenses must be accumulated before the plan pays benefits.
Financial requirements that determine whether and to what extent
benefits are provided based on accumulated amounts were defined in the
proposed rules as cumulative

[[Page 18399]]

financial requirements. As in the MHPAEA final rule at Sec.
146.136(c)(v), we proposed and are finalizing in this final rule that
separate cumulative financial requirements (separate for mental health,
substance use or medical/surgical) will not be permitted for entities
subject to our proposed requirements (namely, MCOs, PIHPs and PAHPs in
connection with coverage provided to MCO enrollees, and in ABP and
CHIP).
However, unlike the MHPAEA final rule for insurers of group health
plans, in the Medicaid and CHIP proposed rule we proposed to permit
quantitative treatment limitations to accumulate separately for
medical/surgical and MH/SUD services as long as they comply with the
general parity requirement. We proposed to allow this separate
accumulation of treatment limits in Medicaid and CHIP for several
reasons. First, benefits for MCO beneficiaries must be provided in at
least the same amount, duration, and scope as set forth in the state
plan. Requiring plans to have cumulative limits across medical/surgical
benefits and MH/SUD benefits within a classification may incentivize
MCOs to retain the quantitative treatment limitation level applied on
the medical/surgical benefits in the state plan as the total cumulative
limit for both medical/surgical and MH/SUD benefits. This would comply
with the requirements of parity, but would not meet the requirements of
providing at least what is in the state plan. In addition, we believe
that requiring quantitative treatment limitations within a
classification of benefits to accumulate jointly toward a unified limit
level may not benefit the enrollee. Specifically, if there were a
combined visit or treatment limit individuals that have co-occurring
disorders may not be able to use the same level of MH/SUD services they
would have been able to use if benefits accumulated separately. In
recognition of the positive beneficiary impact, we proposed and are
finalizing in this rule to permit the MCO, PIHP, or PAHP to maintain
separate quantitative treatment limitations, provided that any such
limit for MH/SUD benefits is no more restrictive than the predominant
limit applied to substantially all medical/surgical benefits in a given
classification.
However, as noted in this section, to align with the MHPAEA final
regulations, we are retaining the proposal that separate cumulative
financial requirements will not be permitted. This is because we also
believe that a unified cumulative deductible is also more beneficial
for the beneficiary and is in recognition that Medicaid programs
generally do not have financial requirements that are cumulative, such
as deductibles, and that financial requirements such as co-pays, which
are common in Medicaid programs, do not typically include cumulative
limits. While we recognize the potential for ABPs to include
deductibles, we note that nearly all group health plans and insurers
had eliminated the use of separate deductibles for MH/SUD benefits by
2011.\6\
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\6\ Final Report: Consistency of Large Employer and Group Health
Plan Benefits with Requirements of the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008. NORC
at the University of Chicago for the Office of the Assistant
Secretary for Planning and Evaluation. This study analyzed
information on large group health plan benefit designs from 2009
through 2011 in several databases maintained by benefits consulting
firms that advise plans on compliance with MHPAEA as well as other
requirements.
---------------------------------------------------------------------------

Comment: A few commenters supported the proposal to follow the
general approach in the MHPAEA final rule, but to allow entities
subject to our proposed requirements to maintain separate accumulation
of quantitative treatment limits. Commenters noted that unified
quantitative treatment limitations that accumulate across entities
would be very difficult for Medicaid managed care plans to administer,
particularly if they do not have contractual relationships with other
entities, and also supported that view that this provision is necessary
to address the complex health needs of Medicaid and CHIP populations.
Response: We appreciate the comments in support of our approach.
As indicated in the response to comments, we are finalizing
Sec. Sec. 438.910(c)(3), 440.395(b)(3)(iii), 457.496(d)(3)(iii) as
proposed.

E. Compliance With Other Cost-Sharing Rules (Sec. 438.910(c)(4))

States and the MCOs, PIHPs and PAHPs that contract with states are
bound by the existing Medicaid and CHIP cost-sharing rules (Sec.
438.108 and part 457, subpart E). As previously indicated, the Medicaid
program and CHIP are held to strict cost-sharing requirements for both
managed care and non-managed care delivery systems. In the proposed
rule, we emphasized that all financial requirements included in a
MHPAEA analysis must also be in compliance with both existing cost-
sharing rules and the requirements of this rule. Compliance with the
parity requirements does not mean that a state, or MCO, PIHP or PAHP
can violate existing cost-sharing requirements. Therefore, some cost-
sharing structures in a state's Medicaid program or CHIP may need to
change to be compliant with the MHPAEA parity standards addressed in
this rule. To clarify this, in Sec. 438.910(c)(4) we reiterated that
requirement with a cross-reference to the cost-sharing rules applicable
to MCOs, PIHPs and PAHPs.
We received no comments on this specific proposal and are
finalizing Sec. 438.910(c)(4) as proposed.

F. Nonquantitative Treatment Limitations (NQTLs) (Sec. 438.910(d),
Sec. 440.395(b)(4), and Sec. 457.496(d)(4) and (d)(5))

MCOs, PIHPs, PAHPs, ABP and CHIP state plans may impose a variety
of limits affecting the scope or duration of benefits that are not
expressed numerically. Nonetheless, such nonquantitative provisions are
also treatment limitations affecting the scope or duration of benefits.
As proposed and now finalized, Sec. Sec. 438.910(d), 440.395(b)(4),
and 457.496(d)(4) prohibit the imposition of any nonquantitative
treatment limitation (NQTL) to MH/SUD benefits unless certain
requirements are met. In addition, the proposed provisions and this
final rule provide an illustrative list of NQTLs, including medical
management standards; prescription drug formulary design; standards for
provider admission to participate in a network; and conditioning
benefits on completion of a course of treatment.
Under the MHPAEA final regulations at Sec. 146.136(c)(4), a NQTL
may not be imposed for MH/SUD benefits in any classification unless,
under the terms of the plan (or health insurance coverage) as written
and in operation, any factors used in applying the NQTL to MH/SUD
benefits in a classification are comparable to and applied no more
stringently than factors used in applying the limitation for medical
surgical/benefits in the classification. For these purposes, factors
mean the processes, strategies, evidentiary standards, or other
considerations used in determining limitations on coverage of services.
We proposed to adopt the same approach to NQTLs in the application
of parity requirements to Medicaid MCOs, PIHPs and PAHPs providing
services to MCO enrollees, ABPs, and CHIP state plans. For states that
are using a non-managed care delivery system for their ABPs and CHIP,
the state (through its ABP and CHIP state plan) may only impose a NQTL
on a MH/SUD benefit in any classification if it has written and
operable processes, strategies, evidentiary standards or other factors
used in applying--to MH/SUD benefits in that classification--the NQTL
that are

[[Page 18400]]

comparable to or less restrictive and applied no more stringently than
any processes, strategies, evidentiary standards, or other factors used
in applying the limitation for medical/surgical services in that
classification. The phrase ``applied no more stringently'' requires
that any processes, strategies, evidentiary standards, or other factors
that are comparable on their face be applied in the same manner to
medical/surgical benefits and MH/SUD benefits.
We proposed and are finalizing in this rule an example of an NQTL
regarding standards for accessing out-of-network providers. As
discussed earlier, in the context of CHIP or ABPs that use a FFS
delivery system or other non-managed care arrangement, absent a waiver,
beneficiaries may choose from any qualified provider that has signed a
Medicaid or CHIP provider agreement and are not limited to a network.
In a Medicaid managed care environment, if a provider network is unable
to provide necessary services covered under the contract to a
particular enrollee, the MCO, PIHP or PAHP must adequately (and on a
timely basis) cover these services out-of-network for the enrollee for
as long as the MCO, PIHP or PAHP is unable to provide them in-
network.\7\ The proposed rule specified that the standard for providing
access to out-of-network services (when they cannot be provided in-
network) is considered to be an NQTL for the purposes of this rule. The
proposed regulation stated that regulated entities providing access to
out-of-network providers for medical/surgical benefits within a
classification must use the same processes, strategies, evidentiary
standards, or other factors in determining access to out-of-network
providers for MH/SUD benefits within the same classification. As
discussed further, we are revising the proposed regulation in this
final rule for consistency with the general NQTL standard, to require
that the factors used in determining access to out-of-network providers
for MH/SUD benefits be comparable to and applied no more stringently
than the factors used in determining access to out-of-network providers
for medical/surgical benefits in the classification, rather than
requiring that the same factors be applied to both sets of benefits.
---------------------------------------------------------------------------

\7\ See Sec. 438.206(b)(4).
---------------------------------------------------------------------------

Finally, the proposed rule provided that if MCOs, PIHPs or PAHPs,
ABPs and CHIP State plans provided through managed care are found to be
in compliance with Sec. 438.206(b)(4), that would be evidence that
they are in compliance with Sec. 438.910(d)(3) and Sec.
457.496(d)(5), although the state will want to review how the plan is
doing this in practice. We noted that the additional example of a NQTL
regarding out-of-network providers is not relevant for states that are
using a non-managed care delivery system for ABPs and CHIP state plan,
since providers must be enrolled in Medicaid or CHIP and would not be
considered out-of-network. As discussed below, we are not finalizing
this approach to deemed compliance in this final rule in Sec. Sec.
438.910(d)(3) and 457.496(d)(5), and instead are clarifying that
regulated entities must comply with both sets of requirements.
We included in the proposed rule the examples, which have been
modified slightly for greater clarity below, to illustrate the
operation of the requirements for NQTLs.
Example 1. Facts. A MCO requires prior authorization that a
treatment is medically necessary for all inpatient medical/surgical
benefits and for all inpatient MH/SUD benefits. In practice, inpatient
benefits for medical/surgical conditions are routinely approved for 7
days, after which a treatment plan must be submitted by the patient's
attending provider and approved by the MCO. Conversely, for inpatient
MH/SUD benefits, routine approval is given only for 1 day, after which
a treatment plan must be submitted by the beneficiary's attending
provider and approved by the MCO.
Example 1. Conclusion. In this example, the MCO violates the NQTL
provision of this rule (Sec. 438.910(d)) because it is applying a
stricter NQTL in practice to MH/SUD benefits than is applied to
medical/surgical benefits.
Example 2. Facts. A MCO applies concurrent review to inpatient care
where there are high levels of variation in length of stay (as measured
by a coefficient of variation exceeding 0.8). In practice, the
application of this standard affects 60 percent of MH/SUDs, but only 30
percent of medical/surgical conditions.
Example 2. Conclusion. In this example, the MCO complies with the
NQTL provisions of this rule because the evidentiary standard used by
the MCO is applied no more stringently for MH/SUD benefits than for
medical/surgical benefits, even though it results in an overall
difference in the application of concurrent review for MH/SUDs than for
medical/surgical conditions.
Example 3. Facts. A MCO requires prior approval that a course of
treatment is medically necessary for outpatient medical/surgical and
MH/SUD benefits and uses comparable criteria in determining whether a
course of treatment is medically necessary. For MH/SUD treatments that
do not have prior approval, no benefits will be paid; for medical/
surgical treatments that do not have prior approval, providers will
only receive a 25 percent reduction in payments for these treatments
from the MCO.
Example 3. Conclusion. In this example, the MCO violates the NQTL
provision of this rule. Although the same NQTL--medical necessity--is
applied both to MH/SUD benefits and to medical/surgical benefits for
outpatient services, it is not applied in a comparable way. The penalty
for failure to obtain prior approval for MH/SUD benefits is not
comparable to the penalty for failure to obtain prior approval for
medical/surgical benefits.
Example 4. Facts. A MCO generally covers medically appropriate
treatments. For both medical/surgical benefits and MH/SUD benefits,
evidentiary standards used in determining whether a treatment is
medically appropriate are based on recommendations made by panels of
experts with appropriate training and experience in the fields of
medicine involved. The evidentiary standards are applied in a manner
that is based on clinically appropriate standards of care for a
condition.
Example 4. Conclusion. In this example, the MCO complies with the
NQTL provision of the rule because the processes for developing the
evidentiary standards used to determine medical appropriateness and the
application of these standards to MH/SUD benefits are comparable to and
are applied no more stringently than for medical/surgical benefits.
This is the result even if the application of the evidentiary standards
does not result in similar numbers of visits, days of coverage, or
other benefits utilized for MH/SUDs as it does for any particular
medical/surgical condition, so long as the outcomes are the result of
consistent application of the guidelines.
Example 5. Facts. Training and state licensing requirements often
vary among types of providers. An MCO applies a general standard that
any provider must meet the minimum requirement related to supervised
clinical experience under applicable state licensure laws to
participate in the MCO's provider network. State law requires master's
level general medical providers to have post-degree, supervised
clinical experience; therefore the MCO requires all master's level
providers in its network (including mental health providers) to have
post-degree, supervised clinical experience.

[[Page 18401]]

State law does not require master's level mental health therapists to
have post-degree, supervised clinical experience; therefore the MCO
requirement to participate in the network is effectively higher than
state law for master's level mental health therapists.
Example 5. Conclusion. In this example, the MCO complies with the
provision of this rule pertaining to NQTLs. The requirement that all
master's-level providers (including mental health providers) must have
supervised post-degree supervised clinical experience to join the
network is permissible because the MCO is consistently applying the
same standard to all providers, even though it may have a disparate
impact on certain mental health providers.
Example 6. Facts. A state contracts with an external utilization
review entity to review inpatient admissions for all beneficiaries
participating in its ABP. All inpatient services in the ABP are
delivered on a FFS basis. The state's utilization review contractor
considers a wide array of factors in designing medical management
techniques for both MH/SUD and medical/surgical inpatient benefits,
such as cost of treatment; high cost growth; variability in cost and
quality; elasticity of demand; provider discretion in determining
diagnosis, or type or length of treatment; clinical efficacy of any
proposed treatment or service; licensing and accreditation of
providers; and claim types with a high percentage of fraud. Based on
application of these factors in a comparable fashion, prior
authorization is required for some (but not all) inpatient MH/SUD
benefits, as well as for some (but not all) medical/surgical benefits.
The evidence considered in developing its medical management techniques
includes consideration of a wide array of recognized medical literature
and professional standards and protocols (including comparative
effectiveness studies and clinical trials). This evidence and how it
was used to develop these medical management techniques is also well
documented by the state's utilization review organization.
Example 6. Conclusion. In this example, the state and its
utilization review contractor comply with the NQTL rules. Under the
terms of the ABP as written and in operation, the processes,
strategies, evidentiary standards, and other factors considered by the
contractor in implementing the prior authorization requirement for MH/
SUD inpatient benefits are comparable to, and applied no more
stringently than, those applied to medical/surgical benefits.
Example 7. Facts. A MCO provides coverage for medically appropriate
medical/surgical benefits, as well as MH/SUD benefits. The MCO excludes
coverage for inpatient SUD services when obtained outside of the state.
There is no similar exclusion for medical/surgical benefits within the
same classification.
Example 7. Conclusion. In this example, the MCO violates the NQTL
provisions of this rule. The MCO is imposing a NQTL that restricts
benefits based on geographic location. Because there is no comparable
exclusion that applies to medical/surgical benefits, this exclusion may
not be applied to MH/SUD benefits.
Example 8. Facts. A state's CHIP program requires prior
authorization for all outpatient MH/SUD services after the ninth visit
and will only approve up to 5 additional visits per authorization. For
outpatient medical/surgical benefits, the state's CHIP program allows
an initial visit without prior authorization. After the initial visit,
benefits must be pre-approved based on the individual treatment plan
recommended by the attending provider based on that individual's
specific medical condition. There is no explicit, predetermined cap on
the amount of additional visits approved per authorization.
Example 8. Conclusion. In this example, the state's CHIP program
violates the NQTL provisions of the rule. Although the same NQTL--prior
authorization to determine medical appropriateness--is applied to both
MH/SUD benefits and medical/surgical benefits for outpatient services,
it is not applied in a comparable way. While the state CHIP plan is
more generous in the number of visits initially provided without pre-
authorization for MH/SUD benefits, treating all MH/SUDs in the same
manner, while providing for individualized treatment of medical
conditions, is not a comparable application of this NQTL.
Example 9. Facts. A state provides an ABP that is compliant with
EHB requirements, including the provision of MH/SUD services. The state
aligns its ABP's outpatient benefits with those described in the state
plan and applies the same prior authorization requirements. For
outpatient MH/SUD services, prior authorization is required for each
individual treatment session. In contrast, for outpatient medical/
surgical services, a series of treatments is provided under a single
authorization.
Example 9. Conclusion. In this example, the state's ABP design does
not comply with the NQTL provisions of this rule. Although the same
NQTL--prior authorization to determine medical appropriateness--is
applied to both MH/SUD benefits and medical/surgical benefits for
outpatient services, it is not applied in a comparable way.
Example 10. Facts. A state's ABP requires preauthorization for all
outpatient substance use disorder services. The state ABP does not
require preauthorization for any medical/surgical services.
Example 10. Conclusion. The state ABP does not comply with the NQTL
requirements in this rule. If a state ABP requires preauthorization for
each outpatient SUD service it cannot remain in compliance if there is
no comparable limitation on medical/surgical services.
Example 11. Facts. In cases where an MCO is unable to provide
necessary outpatient services to a particular enrollee, the MCO
requires that the enrollee must get prior approval in order to see any
outpatient out-of-network provider. The MCO approves the use of an out-
of-network provider for medical/surgical outpatient services if there
is not an in-network provider within 10 miles of the person's
residence. Approval of an out-of-network provider for outpatient MH/SUD
services is only authorized if there is not an in-network provider
within 30 miles of a person's residence.
Example 11. Conclusion. In this example, the MCO violates the NQTL
provisions of this rule. The MCO is imposing a restriction that limits
access to out-of-network providers. Although the same nonquantitative
treatment limitation is applied to both the MH/SUD benefits and to
medical/surgical benefits for outpatient services, it is not applied in
a comparable way.
Example 12. Facts. A state contracts with MCO A to provide coverage
for inpatient and outpatient mental health services to its Medicaid
enrollees. MCO A requires prior authorization in person from MCO A's
staff for all inpatient admissions for any mental health condition. The
state provides medical/surgical benefits to its Medicaid enrollees
through a separate MCO (``MCO B''). MCO B does not require prior
authorization in person but instead provides that authorization for an
inpatient admission may be obtained from MCO B over the phone. The in-
person prior authorization process for MCO A imposes a higher
administrative burden on providers than the telephonic prior
authorization, and in many cases also involves a longer waiting period
for approval.
Example 12. Conclusion. In this example, MCO A violates the NQTL
provisions of this rule. The in-person

[[Page 18402]]

prior authorization requirement in MCO A applies to all inpatient
mental health benefits whereas prior authorization may be obtained more
easily and quickly over the phone for inpatient medical/surgical
benefits in MCO B. MCO A is applying a stricter NQTL in practice to
mental health and substance use disorder benefits than is applied to
medical/surgical benefits.
Example 13. Facts. An MCO includes buprenorphine, a medication for
treating opioid dependence, on its formulary. However, coverage is
limited to one year total over a beneficiary's lifetime. The MCO does
not apply this type of limit (a lifetime limit) to any other
prescription drugs.
Example 13. Conclusion. In this example, the MCO violates the
parity requirements for financial requirements and treatment
limitations in this rule. The lifetime limit on coverage of this
medication does not apply to substantially all medical/surgical
benefits in the prescription drug classification.
Comment: A few commenters proposed additional, very specific
criteria for determinations of whether a NQTL is applied to a given
service. For example, one commenter suggested that the final rule
stipulate that criteria including the following would justify the
application of an NQTL to a MH/SUD service in a classification where
similar NQTLs are not applied to medical/surgical services:
Treatments involving multiple services per session, with
an increasing likelihood of medically unnecessary services with the
higher number of services per session;
Services with highly variable rates of progress for
individuals patients; and
Services with highly variable treatment approaches among
providers.
Response: We believe that the standards proposed and finalized in
this rule and illustrated in the examples above in this section strike
an appropriate balance between the need for clarity and the need to
provide flexibility to regulated entities to determine the most
effective way to structure the covered benefits: a NQTL may not be
imposed for MH/SUD benefits in any classification unless, under the
policies and procedures of the MCO, PIHP, or PAHP, or under the terms
of the ABP or CHIP state plan, as written and in operation, any factors
used in applying the NQTL to MH/SUD benefits in a classification are
comparable to and applied no more stringently than factors used in
applying the limitation for medical surgical/benefits in the
classification. For these purposes, factors mean the processes,
strategies, evidentiary standards, or other considerations used in
determining limitations on coverage of services. Therefore, we are not
providing additional criteria for determination of whether an NQTL is
applied to a given service. If questions arise about the
appropriateness of criteria that are being used to apply NQTLs to MH/
SUD benefits, we will consider whether additional subregulatory
guidance or further rulemaking is needed.
Comment: Many commenters requested additional details to clarify
what constitutes an NQTL and additional examples of typical parity
violations. Most commenters also requested supplementary materials to
provide further guidance, including information regarding typical
violations as they are identified, along with regular and ongoing
technical assistance to states and plans to help them implement the
requirements of parity regarding NQTLs and to minimize the
administrative burden related to this analysis.
Response: We clarify that all NQTLs imposed on MH/SUD benefits by
regulated entities are to be applied in accordance with the
requirements of this rule. We believe that the illustrative list of
NQTLs provided in this final rule (Sec. Sec. 438.910(d)(2),
440.395(b)(4)(ii), and 457.496(d)(4)(ii)) is sufficient to provide an
understanding of the NQTLs that are commonly used in current health
care practices. Given our attempts to align these provisions with the
requirements of the MHPAEA final rules, we encourage interested parties
to review guidance issued by Department of Labor (DOL), Department of
Health and Human Services (HHS) and Department of the Treasury
(Treasury) about application of the parity standards to group health
plans and health insurance issuers. In addition, we will provide
technical assistance to states regarding the implementation of these
provisions and questions or issues that may arise. We will develop
educational materials about the requirements of parity for Medicaid
managed care, ABPs and CHIP programs, and about effective quality
control strategies to ensure that managed care contracts include
provisions that reflect best practices and promote quality of care in
the context of parity. We will also identify and promote best practices
and quality control strategies for states to help managed care
organizations ensure that their benefits and service delivery
strategies adhere to the requirements of parity.
Comment: Many commenters requested additional clarity on the
application of parity requirements to provider networks, including
additional examples. A few commenters noted that the proposed
regulatory language regarding access to out-of-network providers
differed slightly from the language of the general rule for NQTLs.
Proposed Sec. 438.910(d)(3) provided that any MCO, PIHP or PAHP
providing access to out-of-network providers for medical/surgical
benefits within a classification, must use the same processes,
strategies, evidentiary standards, or other factors in determining
access to out-of-network providers for MH/SUD benefits. In contrast,
for other NQTLs the proposed rule required only that the factors used
in applying the NQTL to MH/SUD benefits be comparable to and applied no
more stringently than factors used in applying the limitation to
medical/surgical benefits in the classification.
Response: We have revised this requirement in the final regulatory
language. This final rule has been revised to require that the factors
used to apply the limitation to MH/SUD benefits be ``comparable to''
and applied no more stringently than the factors used in applying the
limitation to medical/surgical benefits in the classification. This
language is in alignment with the general NQTL standard. We believe
that it will reduce administrative burden on regulated entities and
simplify enforcement to apply the same standard to all NQTLs. This
final rule clarifies that the types of factors used to apply the NQTL
will depend on the nature of both the NQTL and the benefit, and that in
some cases it may be appropriate to use the same factors to apply the
NQTL for both medical/surgical and MH/SUD benefits, whereas in other
cases there may not be a single factor or set of factors that can
practically be applied to both medical/surgical and MH/SUD benefits,
and instead factors that are comparable may need to be used.
Comment: Many commenters requested that the rule address access to
in-network providers. Several commenters also requested clarification
regarding the interplay between proposed Sec. 438.910(d)(3) of the
parity rule and Sec. 438.206(b)(4) of the existing managed care rule.
The parity proposed rule stated that a plan complying with the network
adequacy requirements of Sec. 438.206(b)(4) will be deemed in
compliance with Sec. 438.910(d)(3), but commenters noted that Sec.
438.206(b)(4) does not stipulate the same requirements regarding parity
in determining access to MH/SUD and medical/surgical providers. For
this reason, commenters stated that finding

[[Page 18403]]

provider networks to be in compliance with parity based only on
adherence to Sec. 438.206(b)(4) would thwart the intent of the MHPAEA
statute. Commenters also stated that it is unclear what the purpose of
Sec. 438.910(d)(3) is if it requires nothing more than compliance with
existing law.
Response: We agree and in this final rule, we removed the provision
to deem compliance with Sec. Sec. 438.910(d)(3) and 457.496(d)(5) of
this rule (regarding parity requirements for access to out-of-network
providers) where an MCO, PIHP, PAHP, or CHIP state plan is found to be
in compliance with the provider network standard found in Sec.
438.206(b)(4). We clarify that compliance with Sec. 438.910(d)(3) and/
or Sec. 457.496(d)(5) does not affect the requirement to comply with
Sec. 438.206(b)(4). We may provide additional guidance or technical
assistance to states regarding the requirements of Sec. Sec.
438.206(b)(4) and 438.910(d)(3) and 457.496(d)(5) if questions persist.
In response to the comments requesting that the rule address access to
in-network providers, we also note that Sec. Sec. 438.910(d)(2)(iii)
and 457.496(d)(4)(ii)(C) include the example of an NQTL pertaining to
network design for MCOs, PIHPs and PAHPs with multiple network tiers
because although network tiers may not be used to impose financial
requirements or quantitative treatment limitations in Medicaid and
CHIP, we recognize that MCOs, PIHPs and PAHPs may still use them in
developing NQTLs. For example, the MCO, PIHP, or PAHP may use network
tiers when recommending providers to enrollees, or how they structure
their provider directories. MCOs, PIHPs and PAHPs with multiple network
tiers should be constructing them and providing beneficiary access to
them in a way that is consistent with the parity standard for NQTLs.
Comment: Many commenters expressed concerns about the ability of
regulated entities to manage utilization of MH/SUD services under the
proposed requirements. For example, one commenter requested that MCOs
be provided the flexibility to require prior authorization of inpatient
benefits for psychiatric admissions directly from emergency departments
to ensure that enrollees have access to alternative crisis
stabilization options, even where a parallel review is not needed for
medical/surgical admissions.
Response: We disagree and we are finalizing this provision as
discussed. The factors used to determine whether and when the use of
prior authorization is appropriate must be comparable and applied no
more stringently for MH/SUD benefits than they are for medical/surgical
conditions.
Comment: Some commenters raised concerns about situations where
medical/surgical services are provided through FFS and MH/SUD services
are provided by an MCO, PIHP, or PAHP. The commenters expressed concern
that because FFS delivery systems typically use extremely limited NQTL
management of benefits, the MCO, PIHP, or PAHP will not be able to use
any strategies to manage the utilization of MH/SUD services.
Response: Under this final rule, states have the flexibility to
offer benefits through a variety of service delivery systems, and to
employ financial requirements, quantitative treatment limits, and NQTLs
as appropriate in alignment with the requirements of this rule. As
stated earlier, we do not apply mental health parity requirements to
state plan services provided to beneficiaries covered only through a
FFS or PCCM delivery system, even if care for other beneficiaries is
delivered through a managed care delivery system. However, as indicated
in our 2013 SHO letter, we strongly encourage states to consider
changes to the state plan benefit package to comport with the mental
health parity requirements of section 2726 of the PHS Act. Benefits
provided to an individual enrolled in an ABP or CHIP program are
subject to parity regardless of how they receive their services, as
explained in sections G and I.
We understand there could be instances where an MCO enrollee
receives the majority of his or her services through a FFS delivery
system. In those cases, the MCO will still need to deliver any MH/SUD
services in compliance with these regulations; even if that means that
the ability to use NQTLs is limited. However, states that contract with
MCOs typically use them to deliver a comprehensive set of medical/
surgical benefits.
Comment: Some commenters noted that in some delivery systems, the
use of multiple delivery options (MCO, PIHP, and PAHP) results in
segmentation of management of the benefit amongst different delivery
system mechanisms. For example, a state may provide outpatient mental
health benefits through the MCOs for the first 20 visits per year, but
provide all additional visits through the FFS system.
Response: In this situation, because coverage for the service
remains available to the beneficiary, we do not believe that this
arrangement constitutes a quantitative treatment limit. Any
requirements for prior authorization, concurrent review, or other NQTLs
that are applied when the beneficiary begins receiving outpatient
mental health services under FFS would be subject to the general parity
analysis given this beneficiary is an enrollee of an MCO.
Comment: Some commenters requested clarification regarding the use
of NQTLs for MH/SUD services where Diagnosis-Related Group (DRG) based
reimbursement is used for medical/surgical services. Commenters stated
that DRG-based reimbursement typically functions as an alternative to
the use of NQTLs, and stated that it is not commonly used for MH/SUD
benefits due to factors including higher variability in outcomes, lower
predictability of length of stay, and related considerations regarding
payment for MH/SUD services. Commenters questioned whether NQTLs may be
used to manage utilization of MH/SUD services when DRG-based
reimbursement is being used for medical/surgical services.
Response: The application of NQTLs to MH/SUD services is subject to
the requirements of parity under this final rule. Thus, the use of
concurrent review (a type of NQTL) for MH/SUD services in a
classification would have to be based on processes, strategies,
evidentiary standards or other factors that are comparable to and
applied no more stringently than those used by the plan to determine
when to use concurrent review for a medical service in the same
classification. Some acceptable factors may include variability in
outcomes and lower predictability in length of stay. In this scenario,
the regulated entity would need to apply comparable criteria to
medical/surgical services in a classification to determine whether to
apply concurrent review to a MH/SUD service in that classification.
Comment: Many commenters recommended that no restrictions be
allowed for MH/SUD medications that do not exist for medications used
for medical/surgical treatment, including tiered drug formularies and
other mechanisms used to limit access. Other commenters simply
requested clarification regarding the application of the NQTL standard
to prescription drugs, including formulary tiering standards that
include off-label use. Commenters noted that Medicaid programs often
impose limits on medications for MH/SUD, including limits on dosage,
exclusion of certain medications used to treat SUD, lifetime limits on
medications used to treat SUD, and complex initial prior authorization
requirements.

[[Page 18404]]

Response: We note that all of these restrictions constitute
quantitative or nonquantitative treatment limits that are subject to
the parity analysis. However, we are not prohibiting the use of all
quantitative or nonquantitative treatment limits for MH/SUD
medications, as we believe these may be important tools for ensuring
the appropriate management and delivery of effective MH/SUD treatments
and services.
Comment: Many commenters requested that Medicare Part D standards
be integrated into this final rule to ensure non-discriminatory access
to medications used for the treatment of mental illness and substance
use disorders.
Response: While we agree that beneficiaries should have access to
appropriate medications used for their treatment of medical/surgical
and MH/SUD conditions, MHPAEA does not mandate the coverage of specific
treatments, services, or drugs, and instead governs the limitations
imposed on benefits that are offered. We believe that existing
protections in Medicaid and CHIP programs are sufficient to ensure non-
discriminatory access to medications used for the treatment of MH/SUD
conditions. We also note that prescription drug coverage standards
under Medicare Part D arise from different statutory provisions,
funding mechanisms, and program requirements, than Medicaid and CHIP
programs, and therefore are beyond the scope of this final regulation.
Comment: Many commenters requested the inclusion of additional
examples to demonstrate the application of NQTL requirements to
provider reimbursement, noting that reimbursement rates affect the
sufficiency of network adequacy, which can limit access to care. One
commenter noted that Medicaid and CHIP inpatient general acute services
are typically reimbursed using methods tied to diagnosis and severity
rather than category of service, but that this reimbursement
methodology is not typically used for MH/SUD services.
Response: Similar to the guidance provided in the MHPAEA final
rule, we clarify that regulated entities may consider a wide array of
factors in determining provider reimbursement methodologies and rates
for both medical/surgical services and MH/SUD services, such as service
type; geographic market; demand for services; supply of providers;
provider practice size; Medicare reimbursement rates; and training,
experience and licensure of providers. The NQTL provisions require that
these or other factors be applied comparably to and no more stringently
than those applied for medical/surgical services, noting that disparate
results alone do not mean that the NQTLs in use fail to comply with
these requirements.
After consideration of the comments received and further analysis
of the reasons described in the proposed rule, we are revising the
provisions proposed in Sec. 438.910(d)(3) and Sec. 457.496(d)(5) by
finalizing them without the language to deem compliance with Sec.
438.910(d)(3) and Sec. 457.496(d)(5) of this final rule (regarding
parity requirements for access to out-of-network providers) where an
MCO, PIHP, or PAHP is found to be in compliance with the provider
network standard found in Sec. 438.206(b)(4). We are also revising the
provisions in Sec. Sec. 438.910(d)(3) and 457.496(d)(5) to require
that the factors used to apply the limitation to MH/SUD benefits be
``comparable to'' and applied no more stringently than the factors used
in applying the limitation to medical/surgical benefits in the
classification, rather than requiring that the ``same'' factors be
applied to both sets of benefits. We are also finalizing a technical
change in the punctuation and the placement of the word ``and'' in
Sec. 457.496(d)(4)(ii)(G) and (H) to increase clarity in the final
rule regulation text. With the exception of these revisions, as
indicated in the response to comments, we are finalizing the provisions
regarding NQTLs at Sec. Sec. 438.910(d), 440.395(b)(4), and
457.496(d)(4) and (5) as proposed.

G. Parity for Mental Health and Substance Use Disorder Benefits in CHIP
Programs Covering EPSDT (Sec. 457.496(b))

Consistent with section 2103(c)(6)(B) of the Act, we proposed at
Sec. 457.496(b) to deem a separate CHIP compliant with mental health
parity requirements if the state provides EPSDT in accordance with
section 1905(r) of the Act. Proposed Sec. 457.496(a) included a
definition of EPSDT by cross reference to section 1905(r) of the Act,
which specifies the scope of services and supports that must be
provided as well as the medical necessity standard applicable to
individuals entitled to EPSDT. However, to be deemed compliant with the
mental health parity requirements, section 2103(c)(6)(B) of the Act
also requires that a separate CHIP provide EPSDT benefits in accordance
with section 1902(a)(43) of the Act. This requirement was not
adequately addressed in the proposed regulation. Therefore, as
discussed below in this final rule, we are modifying Sec. 457.496(b)
in the final rule to reflect that compliance with the requirements at
section 1902(a)(43) of the Act is also necessary in order for a
separate CHIP to be deemed compliant with parity provisions. We are
also revising several proposed definitions set forth in Sec.
457.496(a) as discussed later in this section of the final rule.
We received the following comments on these proposed provisions.
Comment: The majority of commenters were generally supportive of
the application of parity requirements related to mental health/
substance use disorder (MH/SUD) benefits to CHIP. However, many
commenters expressed concern about deeming CHIP programs compliant
based solely on coverage of EPSDT benefits. In particular, they
emphasized the need for greater oversight of states' compliance with
providing the full range of services included within the scope of
EPSDT, citing lawsuits in which children enrolled in Medicaid allegedly
have been denied access to MH/SUD treatment even though the state is
required to cover MH/SUD services as part of the EPSDT benefit. Some
commenters noted that a few separate CHIP plans indicate that they
provide EPSDT benefits, but in fact, apply limitations or exclude
benefits that must be covered under the EPSDT benefit in Medicaid.
Commenters recommended that CMS scrutinize the coverage under CHIP to
ensure that programs deemed compliant are in fact providing EPSDT
benefits as defined under the Medicaid statute. Commenters were
particularly concerned about the application of treatment limitations,
including NQTLs, to MH/SUD benefits compared to medical/surgical
benefits for children enrolled in separate CHIPs that cover EPSDT under
the CHIP state plan. Some commenters suggested not providing for deemed
compliance at all.
A few commenters were supportive of deeming separate CHIPs as
compliant with MHPAEA strictly based on the state plan indicating that
EPSDT benefits are covered for the population, and were opposed to
considering other criteria, such as an examination of treatment limits,
cost sharing, and NQTLs.
Response: We agree that EPSDT is a critical benefit that ensures
children, adolescents, and young adults under age 21 have access to a
comprehensive benefit package and other medically necessary services
tailored to meet their needs. While we understand some commenters are
concerned that implementation of EPSDT in Medicaid may not fulfill the
requirements of the statute across all states, implementation of EPSDT
in state Medicaid programs is

[[Page 18405]]

a compliance issue that is beyond the scope of this regulation.
However, we appreciate commenters' concerns that it is not
sufficient that the state plan only indicate coverage of EPSDT under a
separate CHIP in order to be deemed compliant with mental health parity
requirements. We also agree with commenters that separate CHIPs that
exclude benefits or place limits on benefits that are not consistent
with the scope of EPSDT under the Medicaid statute should not be
considered eligible for deemed compliance with mental health parity
requirements. Section 2103(c)(6)(B) of the Act provides that CHIPs
covering EPSDT benefits are deemed compliant with parity requirements
under MHPAEA. Specifically, section 2103(c)(6)(B) provides that a
separate CHIP which provides EPSDT benefits and services consistent
with sections 1905(r) and 1902(a)(43) of the Act are deemed compliant
with the mental health parity requirements, and we have retained that
statutorily-prescribed policy in the final regulation.
Section 1905(r) of the Act requires states to provide screening and
diagnostic services as well as any medically necessary health care
services, or treatments covered under section 1905(a) of the Act needed
to correct or ameliorate defects and mental and physical illnesses or
conditions, regardless of whether the service is covered under the
Medicaid state plan. This allows for a broad array of services to be
available under EPSDT such as rehabilitative and therapy services,
counseling, personal care services, immunizations, periodic
comprehensive well-child checkups and screenings for vision, hearing,
and dental care, even if not covered for adults under the Medicaid
state plan. Section 1905(r) of the Act also requires states to provide
screening services at intervals that align with periodicity schedules
that meet reasonable standards of medical or dental practice. Section
1902(a)(43) of the Act requires states to provide and arrange for these
medically necessary screenings, diagnostic services, and treatments,
and to inform individuals under 21 in Medicaid about the availability
of the full range of EPSDT services available to them. Separate CHIP
programs that comply with these statutory requirements will be
considered to provide ``full'' EPSDT in their separate CHIPs and will
be deemed compliant with the parity requirements. Separate CHIPs that
do not comply with all of the statutory requirements in sections
1905(r) and 1902(a)(43) of the Act will not be deemed compliant;
compliance for these programs will be based on satisfaction of the
standards set forth in Sec. 457.496.
In response to commenters' concerns that separate CHIPs will be
deemed compliant with MHPAEA without providing the full scope of EPSDT
benefits and supports, we are modifying Sec. 457.496(b) of the final
regulation to provide, with new language at paragraph (b)(1), that to
be deemed compliant with the mental health parity requirements under
Sec. 457.496, a state must elect in its state plan to cover all EPSDT
services required under section 1905(r) of the Act, as well as meet the
informing and administrative requirements under section 1902(a)(43) of
the Act and the approved State Medicaid plan. We are also adding new
language at paragraph (b)(2) to require that the child health plan
include a description of how the state will comply with the applicable
Medicaid statute and the requirements of paragraph (b)(1)(i). The
exclusion of services for particular conditions or diagnoses is also
not permitted under section 1905(r) of the Act for individuals under 21
entitled to EPSDT services. Therefore, we have added a provision at
Sec. 457.496(b)(1)(ii) to preclude separate CHIPs from excluding any
particular condition, disorder, or diagnosis under EPSDT benefits. We
are also revising the meaning of EPSDT at Sec. 457.496(a) to include
references to both sections 1905(r) and 1902(a)(43) of the Act. We are
not finalizing the proposed text that referred to ``expansion of
Medicaid programs'' which we believe was confusing since the regulation
applies only to separate CHIP programs.
In evaluating whether a state is fully compliant with the statutory
requirements governing EPSDT benefits with respect to children enrolled
in its separate CHIP, we will consider whether there are any
outstanding compliance issues associated with the state's provision of
EPSDT in its Medicaid program. While we recognize that in some states,
the Medicaid and CHIP programs may not be identical and/or administered
by different agencies, what is critical to be deemed compliant with the
mental health parity requirements is that the provision of EPSDT in
CHIP is compliant with the requirements in sections 1902(a)(43) and
1905(r) of the Act. For example, if a separate CHIP covers all benefits
identified in section 1905(a) of the Act in accordance with the
requirements set forth in section 1905(r)(5) of the Act, we would deem
compliance with parity requirements in this final rule only if the
separate CHIP also had procedures to inform individuals of the
availability of those services, provide or arrange for screening
services, and assure necessary transportation as part of the
administration of those benefits as required by section 1902(a)(43) of
the Act.
States that elect to apply any type of NQTLs under their separate
program must ensure that such limits are consistent with EPSDT
requirements at section 1905(r)(5) of the Act. We will closely review
states' NQTLs to ensure that they meet deemed compliance standards
under Sec. 457.496(b). For example, states will have the discretion to
exclude some experimental services, and this type of NQTL would be
unlikely to present a barrier to deemed compliance. Conversely, annual
and lifetime limits are not consistent with Medicaid and/or EPSDT, and
this practice would preclude a state from deemed compliance.
Finally, we have added paragraph (b)(3) to Sec. 457.496 to be
clear that if a state has elected in its state child health plan to
cover EPSDT benefits only for certain children eligible under the state
child health plan, the state is deemed compliant with this section only
with respect to such children.
Comment: Some commenters recommended that the states should submit
documentation beyond state plan assurances to show how they plan to
meet parity requirements. Furthermore, commenters were concerned that
separate CHIPs deemed compliant with parity regulations would apply
NQTLs to MH/SUD benefits in a manner that is not comparable to or is
more restrictive than the NQTLs applied to medical/surgical benefits.
Response: We will develop a state plan amendment (SPA) template for
states to use in indicating how they will comply with the requirements
of Sec. 457.496. For states that report providing EPSDT, we anticipate
asking them to attest that the full EPSDT benefits being offered to
children in the separate CHIP, as described in section 1905(r) of the
Act, are being provided in a manner that is compliant with section
1902(a)(43) of the Act.
States will also be required to affirm in their state plan that the
processes, strategies, evidentiary standards, or other factors used in
applying NQTLs to MH/SUD benefits are comparable to and applied no more
stringently than those used in applying the limitation to medical/
surgical benefits. As a part of the review process, we will work
closely with states to ensure compliance with the parity requirements
and assist states in their efforts to address any inconsistencies
discovered during the review process.

[[Page 18406]]

Comment: Commenters expressed concern about how states not
providing EPSDT in CHIP would document compliance with MHPAEA. One
commenter asked for clarification about the assurances states will
provide when submitting their CHIP state plan amendments to CMS.
Response: For CHIP programs that do not provide full EPSDT benefits
(and therefore do not meet the deeming requirements), a full benefit
and cost sharing analysis of the CHIP state plan must be conducted by
the state to determine compliance with the parity standards in this
final rule. The state's parity analysis must also include an
examination of the processes, strategies, evidentiary standards, and
other factors used in the application of NQTLs to MH/SUD benefits. The
state must ensure these factors are comparable to and applied no more
stringently than those used in applying NQTLs to medical/surgical
benefits in the same classification. We will develop a state plan
template to facilitate this analysis.
Comment: Another commenter expressed concerns about lack of current
tracking of certain mental health benefits that are required under
EPSDT because they are not reported on the CMS-416 form.
Response: The CMS-416 mandatory reporting form does not include a
measure specific to any mental health screenings, diagnostic methods,
or treatments. The CMS-416 is primarily focused on defining the number
of children eligible for EPSDT, the overall number of screenings these
children receive, and oral health and dental care measurements.
However, section 401 of the CHIPRA required that the HHS Secretary
develop a standardized set of measures for voluntary state use relating
to a variety of topics within children's health. The initial Child Core
Set was published in February 2011 and has been expanded to include
measures specific to behavioral health. We will continue our efforts to
collaborate with states to improve the quality of the behavioral health
measures data. Additional information on the Child Core Measurement Set
is available at http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Quality-of-Care/CHIPRA-Initial-Core-Set-of-Childrens-Health-Care-Quality-Measures.html.
Comment: Many commenters recommended clarifying what medically
necessary services separate CHIP programs are required to provide
through EPSDT, such as home services and intensive care coordination.
Response: EPSDT is a required Medicaid benefit for categorically
needy individuals under age 21 that entitles these individuals to
medically necessary services, as described in section 1905(a) of the
Act, to treat physical or mental illnesses or conditions, whether or
not these services are otherwise covered under the Medicaid state plan.
Under section 1905(r)(5) of the Act, the EPSDT benefit includes
services necessary to correct or ameliorate defects and physical or
mental illnesses and conditions discovered by screening services. To be
deemed compliant with the parity requirements under Sec. 457.496(b) of
the final regulations, the coverage of EPSDT under a separate CHIP
requires the same scope of coverage that a child covered by Medicaid
would receive--that is, a CHIP enrollee would have to be entitled to
all benefits and services described in section 1905(a) of the Act if
medically necessary and consistent with section 1905(r) of the Act. We
believe that including a list of specific services that are required to
be provided under EPSDT is outside of the scope of this regulation.
Additional information on the scope of benefits required under the
EPSDT benefit can be found in ``EPSDT--A Guide for States: Coverage in
the Medicaid Benefit for Children and Adolescents,'' available at
http://www.medicaid.gov/medicaid-chip-program-information/by-topics/benefits/downloads/epsdt_coverage_guide.pdf.
Comment: One commenter noted that applied behavior analysis (ABA)
is another service that is considered a medically necessary service
that must be provided under EPSDT.
Response: Whether or not a specific service is medically necessary
for a particular child is beyond the scope of this final rule. However,
we direct the commenter to the CMCS Informational Bulletin
``Clarification of Medicaid Coverage of Services to Children with
Autism'' at https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/CIB-07-07-14.pdf, and the frequently asked question issuance entitled
``Services to Address Autism'', which discusses the provision of ABA
therapy under EPSDT, available at http://www.medicaid.gov/Federal-Policy-Guidance/downloads/FAQ-09-24-2014.pdf.
Comment: Many commenters expressed concern that the exclusion of
coverage for services related to specific diagnoses is not considered a
treatment limitation under this rule. Commenters believed that
excluding benefits for certain diagnoses or conditions would directly
conflict with current Medicaid regulations that prohibit discrimination
based on diagnosis and could lead to states not fulfilling their
obligations. Many commenters believed that states would view the
proposed regulation as superseding current regulations. To avoid this
confusion, many commenters suggested adding clarifying language that
the proposed regulation does not trump the state's obligation to comply
with current Medicaid regulations regarding discrimination based on
diagnosis or other legislation such as the Americans with Disabilities
Act (ADA). Other commenters recommended not including the exclusion in
the final regulations.
Response: In this final rule we maintain the definition of
``treatment limitation'' set forth at Sec. 457.496(a) in the proposed
rule under which a permanent exclusion of all benefits for a particular
condition or disorder is not a treatment limitation. This definition
aligns with the definition of ``treatment limitation'' provided in the
MHPAEA final regulations (the final rules applicable outside of
Medicaid and CHIP, as defined in section II of this final rule). As
previously discussed, we agree that states providing EPSDT benefits in
their separate CHIP must be compliant with the all requirements
associated with EPSDT in the Medicaid statute. Exclusion of treatment
for any conditions is not permitted under section 1905(r) of the Act
for individuals under age 21 who are enrolled in Medicaid, so if a
separate CHIP excludes coverage for particular conditions, disorders,
or diagnoses, that separate CHIP will not be considered as providing
EPSDT benefits consistent with section 1905(r)(5) of the Act.
Therefore, states which exclude treatment for particular conditions,
disorders, or diagnoses cannot be deemed compliant with the mental
health parity requirements under Sec. 457.496(b) of the final
regulations. In response to comments, we have added language in Sec.
457.496(b)(1)(ii) to expressly provide that a separate CHIP cannot be
deemed compliant with mental health parity requirements under the final
regulation if it excludes benefits for a particular condition,
disorder, or diagnosis.
In considering the comments received, we are finalizing the
provisions proposed in Sec. 457.496(a) with modifications to revise
the definition of EPSDT benefits to specify that, for the purposes of
Sec. 457.496, EPSDT benefits means benefits defined in section 1905(r)
of the Act that are provided in accordance with section 1902(a)(43) of
the Act to mirror the statutory requirement in section 2103(c)(6)(B) of
the Act regarding deemed compliance. Additional changes to proposed
definitions in

[[Page 18407]]

paragraph (a) include the modification of ``CHIP State Plan'' to
``State Plan'' in order to use terminology consistent with existing
CHIP regulations.
Furthermore, Sec. 457.496(b) is being finalized with substantive
changes and a technical change to clarify the standards which must be
met to be deemed compliant with Sec. 457.496, including the provision
of all EPSDT benefits as defined in section 1905(r) of the Act, and
compliance with requirements for providing EPSDT benefits in accordance
with section 1902(a)(43) of the Act. Additional language is also being
incorporated to clarify that the state plan must include a description
of how the state will comply with the EPSDT deeming requirements in
Sec. 457.496(b).

H. Availability of Information (Sec. 438.915, Sec. 440.395(d), Sec.
457.496(e))

Under the MHPAEA final regulations at Sec. 146.136 (d)(1), the
criteria for medical necessity determinations made under a group health
plan or health insurance coverage for MH/SUD benefits must be made
available by the plan administrator or the health insurance issuer
offering such coverage in accordance with regulations to any current or
potential participant, beneficiary, or contracting provider upon
request, in accordance with section 2726(a)(4) of the PHS Act. Under
the same authority, the MHPAEA final regulations also require at Sec.
146.136(d)(2) that the reason for any denial under a group health plan
or health insurance coverage of reimbursement or payment for services
for MH/SUD benefits in the case of any participant or beneficiary be
made available, upon request or as otherwise required, by the plan
administrator or the health insurance issuer to the participant or
beneficiary. The proposed rule also addressed these issues.
We proposed to apply these disclosure requirements imposed on the
health insurance issuer under MHPAEA and the MHPAEA final regulations
regarding availability of information in a similar manner to MCOs and
to PIHPs and PAHPs that provide coverage to MCO enrollees. As proposed
and finalized in this rule in Sec. 438.915(a), MCOs, PIHPs, and PAHPs
subject to parity requirements must make their medical necessity
criteria for MH/SUD benefits available to any enrollee, potential
enrollee or contracting provider upon request. We proposed that MCOs,
PIHPs, and PAHPs found to be in compliance with Sec. 438.236(c),which
requires dissemination by MCOs, PIHPs and PAHPs of practice guidelines
to all affected providers, and, upon request to enrollees and potential
enrollees, will be deemed to meet this requirement. In addition, we
proposed in Sec. 438.915(b) to require MCOs, PIHPs, or PAHPs to make
available the reason for any denial of reimbursement or payment for
services for MH/SUD benefits to the enrollee. As noted in the proposed
rule, Sec. 438.210(c) already requires each contract with an MCO,
PIHP, or PAHP to provide for the MCO, PIHP, or PAHP to notify the
requesting provider and give the enrollee written notice of any
decision by the MCO, PIHP, or PAHP to deny a service authorization
request or to authorize a service in an amount, duration, or scope that
is less than requested.
Although the statute that applies MHPAEA to ABPs does not include
specific provisions regarding the availability of plan information, in
the proposed rule we proposed to use our authority under section
1902(a)(4) of the Act to extend this provision to all ABPs, as well as
those ABPs with services delivered through MCOs, PIHPs and all PAHP.
This final rule retains this provision. At Sec. 440.395(c)(1), we
proposed that all states delivering ABP services through a non-MCO must
make available to beneficiaries and contracting providers on request
the criteria for medical necessity determinations for MH/SUD benefits.
Similarly, Sec. 440.395(c)(2) in the proposed rule required the state
to make available to the enrollee the reason for any denial of
reimbursement or payment for services for MH/SUD benefits. For the same
reasons, using our authority under section 2101(a) of the Act, we
proposed at Sec. 457.496(e) to require disclosure, upon request, to
any current or potential CHIP enrollee or contracting provider of the
criteria for medical necessity determinations and to require that the
reason for any denial of reimbursement or payment for MH/SUD benefits
be made available to the enrollee. As proposed, the CHIP rule would
also apply to managed care plans, so we included a provision in that
proposal for deeming compliance with the parity disclosure requirement
if the managed care entity complied with Sec. 438.236(c) disclosure
requirements. We also proposed for CHIP plans that other laws requiring
disclosure would still apply.
The MHPAEA final regulations at Sec. 146.136(d)(2) state that non-
federal governmental group health plans (or health insurance coverage
offered in connection with such plans) that provide the reason for
claim denial in a form and manner consistent with the requirements of
29 CFR 2560.503-1 for group health plans will be found in compliance
with the MHPAEA disclosure requirements for denials.\8\ The standards
at 29 CFR 2560.503-1 do not themselves apply to Medicaid; we did not
propose in this rule to make them applicable as a condition for deemed
compliance because similar requirements are already applicable under
existing law. MCOs, PIHPs, PAHPs and states are required to give a
``reason'' for any adverse benefit determinations under requirements
for notices in, respectively, Sec. 438.404 and Sec. 431.210. The
information provided in this disclosure of the reason for the adverse
benefit determination must be made in compliance with these and all
other provisions of applicable federal or state law.
---------------------------------------------------------------------------

\8\ The requirements of 29 CFR 2560.503-1 are applicable to
ERISA plans, as well as all non-grandfathered group health plans and
health insurance issuers in the group and individual markets,
through the claims and appeals regulations adopted under the
Affordable Care Act. See 78 FR 68247 for a full discussion.
---------------------------------------------------------------------------

For similar reasons, the proposed rule did not make claim denial
requirements of 29 CFR 2560.503-1 a condition of deemed compliance for
CHIP programs. CHIP enrollees have an opportunity for an external
review of denials, reduction or suspension of health services under
Sec. 457.1130.
We requested comments on any additional provisions concerning the
availability of plan information or notice of adverse determinations
that may be necessary to facilitate compliance with MHPAEA for MCOs,
PIHPs, PAHPs, ABPs, and CHIP.
Comment: Some commenters expressed concern that the requirements
for MCOs, PIHPs, and PAHPs that are specific to parity compliance were
less stringent than the disclosure requirements that apply to
commercial plans under the final MHPAEA rule. The commenters
recommended that the final rule be revised to set more specific
standards for the release of medical necessity determinations.
Response: We disagree and believe the proposed rule set forth the
same standards regarding availability of medical necessity information
for MCOs and to PIHPs and PAHPs that provide coverage to MCO enrollees
that are imposed on the health insurance issuer through section 2726 of
the PHS Act and the MHPAEA final regulations. We proposed and are
finalizing the regulation at Sec. 438.915(a) to provide that MCOs,
PIHPs and PAHPs subject to MHPAEA requirements must make their medical
necessity criteria for MH/SUD benefits available to any enrollee,

[[Page 18408]]

potential enrollee or contracting provider upon request.
Comment: Some commenters were concerned that the proposed rule did
not have the same claims denial requirements as required for group
health plans. The commenters recommended that CMS require MCOs, PIHPs,
and PAHPs to provide the reason for a claim denial in a form and manner
consistent with the requirements of 29 CFR 2560.503-1. In addition,
some commenters suggested that CMS establish a firm timeframe for the
release of such information and for the release of claims denials.
Several commenters recommended that CMS establish penalties for
Medicaid MCOs, CHIP plans and ABPs that fail to make plan information
available in a timely and easily accessible manner.
Response: As we stated in the proposed rule, the provisions under
29 CFR 2560.503-1 do not themselves apply to Medicaid and CHIP and we
did not see a reason to propose to extend those provisions to Medicaid
and CHIP. There is a disclosure requirement applicable in Medicaid and
CHIP. MCOs, PIHPs, PAHPs and states are required to give a ``reason''
for any adverse benefit determinations under requirements for notices
in, respectively, Sec. 438.404 and Sec. 431.210. CHIP enrollees have
an opportunity for an external review of denials, reduction or
suspension of health services under Sec. 457.1130. There are current
rules that do require states to provide notice of adverse action within
certain timeframes and (Sec. 432.211 and Sec. 432.213). In addition,
there is specific information that must be included in a notice of
action to a beneficiary including: The action, reason for the action,
right to appeal and the right to continue benefits pending the result
of the appeal (Sec. 438.404). Therefore, we do not believe it is
necessary or appropriate to adopt additional general disclosure
standards in this rule.
Comment: Many commenters expressed concern that the proposed rule
would not provide beneficiaries, providers and stakeholders with
comparable information regarding medical necessity standards for
medical/surgical service, and therefore, would not provide sufficient
information to compare medical necessity requirements for MH/SUD
against similar requirements for medical/surgical services. The
commenters recommended the rule should specify that information about
criteria used for making medical necessity determinations for
comparable medical/surgical treatment should be provided to plan
beneficiaries and providers upon request.
Response: The current managed care rules Sec. 438.236 do require
Medicaid managed care plans to provide practice guidelines (including
medical/surgical and MH/SUD) to enrollees and potential enrollees.
Additionally, Sec. 431.210 and Sec. 438.404 require MCOs, PIHPs,
PAHPs and states (for state fair hearings) to provide the reason for a
denial. In addition, under Sec. 438.404 beneficiaries can be provided
medical necessity criteria for medical/surgical benefits as well as MH/
SUD benefits. In addition, Sec. 438.402 allows providers acting on
behalf of beneficiaries to file a grievance to request and receive
information.
In regards to CHIP, under Sec. 457.1130 and Sec. 457.1180,
beneficiaries have the right to an external review related to health
service matters and must receive a notice that includes the reasons why
a determination was made. We believe these requirements allow
beneficiaries to request and receive the necessary medical necessity
information especially in terms of a denial to make a determination
that access to the service is in compliance with these rules.
Comment: Some commenters expressed concern that transparency should
not be predicated upon Medicaid and CHIP beneficiaries having the
knowledge and wherewithal to request information from health plans
after specific services have been denied. These commenters made several
recommendations to improve this transparency. Some commenters
recommended that plans be required to provide beneficiaries and, when
appropriate, providers with written criteria for medical necessity
determinations whenever requests for MH/SUD services are denied rather
than requiring beneficiaries request this information.
Response: We agree that transparency is important and we would like
to remind beneficiaries and providers that they can request that
information at any time. However, providing written criteria for
medical necessity determinations to all beneficiaries when services are
denied may be overwhelming for all beneficiaries and may be
administratively burdensome for states and MCOs, PIHPs and PAHPs.
Therefore, we are not imposing a requirement in this final rule to
provide beneficiaries and, when appropriate, providers with written
criteria for medical necessity determinations whenever requests for MH/
SD services are denied.
Comment: Commenters recommended that MCOs, PIHPs, and PAHPs should
be required to publish their medical necessity criteria for MH/SUD
treatment and medical/surgical treatment on their Web sites and in
other formats easily accessible to consumers, families, and treatment
providers including requirements for persons with limited English
proficiency or disabilities. Some commenters made other recommendations
to improve health plans' transparency, including a request that MCOs,
PIHPs, and PAHPs should be required to periodically publish information
about denial rates for inpatient and outpatient MH/SUD treatment and
denial rates for inpatient and outpatient medical/surgical treatment
which would allow states to identify possible issues with parity
compliance and to take necessary actions to ensure that the provisions
of this rule are enforced.
Response: We believe that existing requirements in Sec. 438.236
(governing the adoption, dissemination and application of practice
guidelines by MCOs, PIHPs and PAHPs) as well as the requirements in
Sec. 438.10 mandating that member materials be provided in alternative
formats is sufficient for providing the necessary information to
beneficiaries. We also believe that the language in Sec. 438.10 can be
interpreted to include posting information on the Web site as that
modality becomes more available to individuals enrolled in Medicaid.
However, we would encourage states to post this information regarding
practice guidelines on their Web site. We are providing technical
assistance to states regarding the data and information that would be
helpful to review to identify possible issues with plans' efforts to
understand and comply with parity. Further, we believe that data
regarding denial rates across classifications will be important
information for states to analyze and determine if there are potential
issues with complying with the provisions of this rule and taking
corrective action when appropriate with their MCOs, PIHPs, or PAHPs.
Comment: Several commenters raised concerns that additional
requirements regarding the availability of information could have
unintended consequences. One example of such consequences included
duplicating or complicating existing efforts to ensure transparency and
adequate information to enrollees; another example suggested that
additional requirements would make it more difficult for members to
navigate the available information and could also divert plan resources
away from Medicaid beneficiaries who were enrolled in managed care.
Several commenters noted that current

[[Page 18409]]

Medicaid regulations already provide sufficient protections for
Medicaid and CHIP enrollees regarding medical necessity determinations
indicating that CMS already requires Medicaid MCOs to notify the
requesting provider and/or give the enrollee written notice of any
decision to deny a service authorization request or to authorize a
service in an amount, duration, or scope that is less than requested.
In addition, the commenters indicated that the Medicaid program already
has disclosure requirements concerning the availability of plan
information and notice of adverse determinations and those should be
followed instead of increasing the administrative burden for states and
plans by creating new requirements specific to parity. The commenters
stated that creating additional or new requirements would increase the
administrative and operational burden for both plans and states. One
commenter recommended that if additional guidance was needed,
subregulatory guidance, such as a State Medicaid Director Letter, could
address some of the complexities around availability of information
such as medical necessity and adverse determination notices. Another
commenter recommended that CMS engage states, accreditation
organizations, and Medicaid managed care plans to better understand
activities already occurring before layering on additional monitoring
requirements on states and plans.
Response: We believe that current Medicaid and CHIP regulations
provide sufficient disclosure to current beneficiaries; the proposed
regulation solidifies a provider's ability to obtain medical necessity
information. The current provisions require MCOs, PIHPs or PAHPs to
provide their medical necessity criteria for mental health and
substance disorder benefits to beneficiaries and affected providers. We
proposed and are finalizing Sec. 438.915(a) that will require the plan
administrators to provide such medical necessity criteria to any
contracting provider. We believe that an affected provider in Sec.
438.236(c) is consistent with this definition because given certain
referral practices in place within an MCO, PIHP or PAHP; providers may
need to understand practice guidelines for more than their area of
expertise.
Comment: One commenter expressed concern regarding issues with
sharing medical necessity criteria because the proposed provisions (and
this final rule) require provision of medical necessity criteria or
practice guidelines to enrollees and prospective enrollees as well as
participating providers. Specifically, this commenter recommended that
CMS specify that licensed and proprietary criteria should not be made
available unless such criteria are relevant to specific treatments or
services and are requested by current or prospective insured patients,
or healthcare providers with appropriate notice of disclosure of
confidential and proprietary information.
Response: We agree with the commenter that this final rule requires
information regarding the medical necessity criteria for specific
treatments be made available upon request to current or prospective
beneficiaries or health care provider; this final rule does not require
that this information be more broadly disseminated to the general
public.
Comment: Another commenter recommended that CMS require states to
engage all stakeholders in an open and public process on the state's
plans to comply with the parity requirements.
Response: While the regulation requires states to post information
on their parity analysis on the state Web site, the proposed rule did
not address stakeholder engagement regarding states' efforts to
determine if MCOs or other delivery systems were parity compliant.
Without prior notice and opportunity for comment, we do not believe it
appropriate to finalize a requirement that states develop stakeholder
engagement processes regarding their efforts to review compliance with
the final regulation. However, we do encourage states to undertake
these efforts and to include stakeholders as much as possible.
Comment: One commenter recommended that CMS require states to
educate both beneficiaries and providers regarding any new benefit
changes.
Response: We agree that beneficiary education is important which is
shown in current managed care regulations under Sec. 438.10. Section
438.10(f) currently specifies that enrollees must be notified of their
benefits available under the MCO, PIHP or PAHP contract, how to obtain
a prior authorization, how the enrollee can obtain benefits including
benefits that are available under the state plan but not covered under
the contract. Enrollees must be notified at the time of enrollment and
also at any time a change to the benefits or processes listed here is
considered significant.
Comment: Another commenter recommended CMS consider including, or
clarifying, the ability of a Medicaid beneficiary to designate a
personal representative with the legal authority to request information
from the MCOs regarding medical necessity criteria and the basis of
service denials.
Response: Currently parents or legal guardians of children
participating in the Medicaid or CHIP program may request the medical
necessity criteria or receive information on service denials.
Individuals that have a power of attorney for an individual would also
have authority to make these requests. In addition, Sec. 438.406(b)(4)
provides that the enrollee and his or her representative must be
included in the appeals process.
As indicated in the response to comments, we are finalizing the
provisions regarding availability of information at Sec. 438.915,
Sec. 440.395(d), Sec. 457.496(e) as proposed with a technical change
in Sec. 457.496(e)(1) to use the term ``deemed'' in place of
``determined.'' There was an oversight of an inconsistency between the
corresponding Medicaid regulations at Sec. 438.915 that has been
corrected in this final rule.

I. Application to EHBs and Other ABP Benefits (Sec. 440.395(c), Sec.
440.395(e)(1))

Section 1937(b)(6) of the Act, as added by section 2001(c) of the
Affordable Care Act, and implemented through regulations at Sec.
440.345(c) directs that ABPs that provide both medical and surgical
benefits and MH or SUD benefits must comply with certain parity
requirements. Further, ABPs must provide the 10 EHBs, including MH/SUD
services. As states determine their ABP service package, states must
use all of the EHB services from the base-benchmark plan selected by
the state to define EHBs, consistent with the applicable requirements
in 45 CFR part 156.
Section 1937 of the Act offers flexibility for states to provide
medical assistance by designing different benefit packages, including
other services beyond the EHBs for different groups of eligible
individuals, as long as each benefit package contains all of the EHBs
and meets certain other requirements, including parity provisions under
section 2726 of the PHS Act.
While we did not request comment specifically on this section, we
did receive many comments on ABPs. For the reasons set forth below, we
are finalizing the proposed provisions at paragraphs (c) and (e)(1),
with modification, which we describe below.
Comment: Several commenters remarked on various topics regarding
the intersections between MHPAEA requirements and ABPs. Several
commenters requested that we clarify if parity requirements differ by
type of ABP such as ABPs that offer only state

[[Page 18410]]

plan benefits or ABPs that serve medically frail beneficiaries and have
benefits that are more than the state plan benefits.
Response: Consistent with the proposed rule, the final regulation
requires every approved ABP to meet parity requirements, regardless of
the benefit package offered by the ABP. In final Sec. 440.395, we
address ABPs that are provided other than through a managed care
delivery system and in final Sec. 438.900 through Sec. 438.930, we
address ABPs that are delivered through MCOs, PIHPs and PAHPs. As noted
throughout this rule, the parity standards are virtually identical in
these different regulations.
Comment: Additional commenters noted that section 1937(b)(6)(B) of
the Act specifies that ABP coverage providing EPSDT should be deemed
compliant with parity.
Response: We agree with the commenter. We are therefore finalizing
Sec. 440.395(c) to implement the statutory deeming provision for ABPs.
Comment: Many commenters believed that CMS afforded states too much
discretion regarding how parity analyses are conducted for EHB in ABPs
and provided too little oversight of state processes used and how
services are offered (that is, whether services are offered through
managed care contracts or in fee for service (FFS) arrangements).
Several commenters requested that CMS provide more structured
requirements or a mandatory methodology for such analyses in ABPs; one
commenter wanted CMS to conduct a comprehensive review of EHBs in all
ABPs with special attention on intermediate behavioral healthcare
services.
Response: We are not adding additional requirements or a mandatory
methodology in this final rule with regard to our proposal that states
oversee the parity analysis for EHBs in ABPs. This final rule provides
that states have oversight responsibility for ensuring parity in ABPs,
similar to their responsibility for ensuring parity in managed care
contracts. However, we will provide technical assistance to states
regarding the implementation of these provisions and questions or
issues that may arise. This technical assistance may include the
identification and promotion of best practices, tools, and/or other
assistance for analyzing ABPs for compliance with the requirements of
this rule.
Comment: One commenter noted that the proposed rule NQTL
requirements for ABPs mirrors the requirements for group health
insurance plans, offering states flexibility in designing NQTLs on a
benefit by benefit basis.
Response: We appreciate the commenter's feedback and agree this was
the intent of the proposed rule and is maintained in the final rule.
Comment: One commenter asked CMS to confirm that Sec. 440.396
Benchmark and Benchmark-Equivalent Coverage that was reviewed and
approved by CMS has been determined to be in compliance with parity.
Response: We have reviewed all approved ABPs for parity compliance
and states have attested to their compliance with MHPAEA in the ABP
SPAs. New SPA applications that are submitted to create ABPs will be
reviewed by CMS to determine if the plan complies with this final rule.
Comment: Many commenters requested clarification and examples about
how parity applied to long term services and supports in ABPs for EHB.
The commenters believe that many of the EHBs in ABPs include long term
services and that the Affordable Care Act does not allow such long term
benefits offered for SUD/mental health to be more restrictive than long
term medical/surgical benefits.
Response: We have included long term services and supports in the
definition of medical/surgical benefits, mental health benefits and
substance use disorder benefits as such terms are defined and used in
this final rule. (See section III.A. of this final rule for a more
detailed discussion). Therefore, this rule is clear that parity
standards apply to these services.
As indicated in the response to comments, we are finalizing the
substance of the applicability standard as proposed in Sec.
440.395(d)(1); we note that this provision is being designated as Sec.
440.395(e)(1) in this final rule because of the addition of regulation
text to address EPSDT in the context of ABPs and the parity
requirements. In addition, a comma was added to this text (which
follows the word ``PAHP'') for grammatical reasons. Further, we are
finalizing regulation text, in Sec. 440.395(c), to deem compliance
with the parity provisions when an ABP covers EPSDT.

J. ABP State Plan Requirements (Sec. 440.395(e)(3))

We proposed to require states using ABPs to provide sufficient
information in the ABP state plan amendment to assure and document
compliance with parity provisions. The requirement was included in the
proposed rule at Sec. 440.395(d)(3) and is being re-designated as
Sec. 440.395(e)(3) in the final rule.
Comment: Some commenters stated that there is no stipulation in the
preamble or proposed regulations that define a required methodology
and/or documentation of the analysis to determine if an ABP complied
with parity where ABPs are provided on a FFS basis. The commenters
maintained that the state has no responsibility to the public to
disclose its documentation of compliance other than providing
sufficient information to CMS.
Response: To clarify, where ABPs are provided on a FFS basis, this
regulation would require states to provide sufficient information in
the ABP state plan amendment request to assure and document compliance
with parity requirements. We will review the plan amendment to assure
compliance with parity requirements and EHB anti-discrimination
provisions.
We are finalizing this provision as proposed, with a different
designation, at Sec. 440.395(e)(3).

K. Application of Parity Requirements to the Medicaid State Plan

The provisions of section 2726 of the PHS Act that are incorporated
through sections 1932 and 1937 of the Act do not apply directly to the
benefit design for Medicaid fee-for-service and non-ABP state plan
services. Under the proposed rule, the requirements would apply to the
benefits offered by the MCO (or, as discussed above, if benefits are
carved out, to all benefits provided to MCO enrollees regardless of
service delivery system) but did not apply to all Medicaid state plan
benefit designs; for states that did not use an MCO at all in
connection with delivery of services, the proposed rule at Sec.
438.900 through Sec. 438.930 would have not been applicable. States
that have individuals enrolled in MCOs and have MH/SUD services offered
through FFS would, under the proposed rule, have the option of amending
their non-ABP state plan to be consistent with the proposed regulations
or offering MH/SUD services through a managed care delivery system
(MCOs, PIHPs, and/or PAHPs) to be compliant with the proposed rules.
As noted in the proposed rule, for beneficiaries who are not
enrolled in a MCO, and thus not covered by section 1932(b)(8) of the
Act, this rule would not affect coverage (other than when the services
are part of an ABP). However, we encourage states to provide state plan
benefits in a way that comports with the mental health parity
requirements of section 2726 of the PHS Act.
Comment: Many commenters expressed gratitude to CMS for including
important language in the

[[Page 18411]]

proposed rule encouraging states to provide state Medicaid plan
benefits in compliance with parity even when they are not required to
do so under the MHPAEA or regulations. Many commenters supported
application of parity requirements to all benefits for Medicaid managed
care enrollees, including benefits that are provided by PIHPs, PAHPs,
or FFS. Some commenters recommended that CMS work closely with states
to ensure that all Medicaid beneficiaries have strong coverage for MH/
SUD services.
Response: We will to continue to provide support and technical
assistance to states to strengthen coverage of MH/SUD services for all
Medicaid participants even when states are not required to do so
through this rule.
Comment: Many commenters encouraged CMS to apply parity protections
beyond what is required under federal law. The commenters indicated
that CMS should encourage states to apply parity benefits equally for
all Medicaid enrollees, regardless of whether they are enrolled in
managed care, ABPs or traditional FFS. Some commenters were concerned
that individuals being served entirely in the FFS environment are being
denied the same protections as individuals who get some portion of
their care through a managed care arrangement. The commenters
maintained that the proposed rule did not promote a level playing field
between managed care arrangements and FFS. In addition, the commenters
stated that exempting Medicaid FFS from the proposed mental health
parity requirements will create inequality in service delivery for
Medicaid beneficiaries and could have serious implication for the
viability of Medicaid managed care plans. A commenter suggested that
requiring Medicaid FFS to comply with the parity requirements outlined
in the proposed rule would allow for continuity of care, increased
access to care and services, care coordination and improved quality of
MH/SUD services for all beneficiaries.
Response: We acknowledge that this final rule does not provide the
same protections to Medicaid beneficiaries receiving only FFS benefits
as it does for those enrolled in MCOs. However, section 1932(b)(8) of
the Act does not provide authority to apply parity protections to
beneficiaries who are not enrolled in an MCO and section 1937 of the
Act limits the application of parity requirements to ABPs.
While the provisions of this rule do not apply directly to the
benefit design for Medicaid non-ABP state plan services, the
requirements would apply to all benefits provided to the majority of
Medicaid participants because that majority of enrollees are MCO
enrollees. The rule, as proposed and as finalized, imposes parity
requirements in terms of the total benefits package provided to MCO
enrollees, regardless of service delivery system. States that have
individuals enrolled in MCOs and have MH/SUD services offered through
FFS will have the option of amending their non-ABP state plan to be
consistent with these regulations or offering MH/SUD services through a
managed care delivery system (MCOs, PIHPs, and/or PAHPs) to be
compliant with these final rules. We also encourage states that have
some beneficiaries not enrolled in an MCO to offer these beneficiaries
the protections afforded under parity.
Comment: Some commenters strongly suggested that CMS work with
states and other interested parties to find alternative means to
ensuring quality and access to MH/SUD services in states that have
chosen to provide those services outside of a managed care product.
Response: As indicated above, the provisions of the Act impose
parity requirements in limited cases. Therefore, we can only encourage
states to take the necessary actions to apply parity to MH/SUD benefits
for FFS beneficiaries. States can choose to maintain these services on
a FFS basis in their state plan and make the necessary changes to their
state plan to comply with this final regulation. Nothing in this final
regulation prohibits states from including additional MH/SUD services
in their state plan or in managed care arrangements.
Comment: Many commenters stated that CMS's proposed mental health
parity rules impermissibly encroach on states' flexibility to decide
how to operate their Medicaid programs. The commenters indicated that
the various delivery system arrangements that states use will become
significantly more complex and difficult to administer under CMS's
proposal to apply the mental health parity standards to state plan
services delivered outside of a Medicaid MCO. Specifically, in some
states, the administrative complexity of applying the rules to services
delivered outside of an MCO may drive behavioral health services into
the MCO contracts to the detriment of a longstanding, publicly operated
service delivery system. Another commenter indicated that requiring
that all state plan MH/SUD services to be included in all MCO contracts
diminishes the state's flexibility and ability to develop new and
innovative programs based on new evidence-based models. The commenter
suggested that the state's flexibility to develop new models should be
preserved.
Response: We disagree that the proposed mental health parity rules
impermissibly encroach on states' flexibility to decide how to operate
their Medicaid programs. We maintain that applying various parity
provisions across the different delivery systems would allow states the
most flexibility in designing delivery systems while ensuring that
parity in coverage of medical/surgical and MH/SUD services is provided
to MCO enrollees. Under this final rule, parity requirements apply to
the entire package of services MCO enrollees receive, whether from the
MCO, PIHP, PAHP, or FFS. If states carve out some MH/SUD services from
the MCO contract and furnish those services by PIHPs, PAHPs, or through
FFS, we are applying the parity requirements to the entire package of
services MCO enrollees receive. Requiring the standards for parity to
be applied to the overall package of benefits received by MCO enrollees
will allow MCOs to comply with MHPAEA requirements without requiring
inclusion of additional MH/SUD benefits in the MCO benefit package, as
long as these MH/SUD benefits are provided elsewhere within the
delivery system. In states where MH/SUD benefits are provided across
multiple delivery systems (including FFS), states are required under
Sec. 438.920(b)(1) to review the full scope of benefits provided to
MCO enrollees to ensure compliance with the parity requirements. As
part of complying with this regulation, we expect states to work with
their MCOs (or PIHPs and PAHPs) to determine the best method of
achieving compliance with parity requirements for benefits provided to
the MCO enrollees. Based on the commenter noting that services may be
driven into the MCO and in light of our policy in this final rule, we
reviewed the proposed Sec. 438.920(b)(2) and discovered that proposed
(b)(2) was written to indicate a state responsibility only when some
services are carved out of the MCO. We finalize this rule without that
limitation; all states, regardless of how services are delivered to MCO
enrollees; have the responsibility to ensure that the program is in
compliance with these requirements. We believe that because of this
oversight requirement and the flexibility found in these final rules,
the state should not have incentives to either move benefits into the
MCO or

[[Page 18412]]

outside of the MCO for purposes of complying with these rules. Because
of these reasons we are finalizing Sec. 438.920(b)(2) in the final
rule with revisions to require states to monitor the program in any
instance where an enrollee is receiving benefits through an MCO.
For MH/SUD benefits offered through FFS, states would not
necessarily be required to amend their non-ABP state plan to meet
parity requirements, but could use their existing state plan or waiver
services to achieve parity when individuals are receiving some benefits
(whether MH/SUD or medical/surgical) from a MCO and also some benefits
through FFS (or through PIHPs or PAHPs)). However, if a state did not
have MH/SUD benefits in every classification in which medical/surgical
benefits are provided across all authorities, the state would have to
choose either to offer these services through a MCO, PIHP or PAHP or
amend its state plan (or a waiver of its state plan) to include these
benefits to achieve compliance with proposed Sec. 438.920(a) and (b).
Comment: Several commenters indicated that the Medicaid statute
provides that each Medicaid managed care organization shall comply with
the mental health parity requirements. The commenters indicated that
Congress did not mean for the statute to be interpreted the way it was
in the proposed rule and that only individuals that received all of
their services through the MCO would be subject to the requirements in
these rules. The commenters stated that CMS acknowledges the Congress'
intent, but nonetheless applies the mental health parity rules more
broadly based on the section 1902(a)(4) authority to provide for
methods of administration that are necessary for the proper and
efficient operation of the Medicaid state plan. The commenters stated
that CMS cannot use its section 1902(a)(4) authority to specify
Medicaid methods of administration that are inconsistent with a clear
congressional directive.
Response: We disagree that this rule is contrary to the purpose of
section 1932(b)(8) of the Act. We also disagree that the authority of
section 1902(a)(4) cannot be employed to link the delivery systems that
would furnish MH/SUD services to individuals enrolled in a Medicaid MCO
to ensure that enrollees in an MCO receive benefits that are consistent
with the parity standards. To ensure that the goal of parity is met and
avoid incentives to carve out all MH/SUD services from an MCO contract,
we are requiring, through our authority in section 1902(a)(4) of the
Act to specify methods necessary for the proper and efficient operation
of the state plan, that if MH/SUD state plan services are provided to
MCO enrollees through a PIHP, PAHP, or under FFS Medicaid (because such
services are carved out of the MCO contract scope), MCO enrollees will
still receive the MHPAEA parity protections with respect to MH/SUD
state plan services. We are committed to and agree with commenters'
recommendations to work with states and other interested parties to
ensure quality and access to mental health and SUD services in states
that have chosen to provide those services outside of a managed care
product.
Comment: Several commenters requested CMS to clarify in the final
rule that only beneficiaries receiving both their MH/SUD and medical
surgical benefits through a FFS delivery system are not provided parity
protections.
Response: To clarify, the rule does not apply to Medicaid state
plan beneficiaries who are not enrolled in an MCO, and thus, not
covered by section 1932(b)(8) of the Act. However, this rule does apply
to all beneficiaries enrolled in ABPs and CHIP, regardless of the
benefit delivery system. We encourage states to provide all state plan
benefits in a way that comports with the mental health parity
requirements of section 2726 of the PHS Act.
Comment: A commenter recommended CMS develop a chart for
beneficiaries, providers, authorized representatives and plans to
explain which insurance arrangements must meet parity and which do not.
The commenter indicated there is much confusion among beneficiaries
about whether MHPAEA applies to such plans as Medicare, Department of
Defense and Federal Employee Health Benefits Program.
Response: We appreciate the commenters' recommendations for CMS to
provide further guidance to states on ensuring and applying parity
requirements through all service delivery systems in Medicaid and CHIP
programs, including to individuals receiving services as part of an
ABP. We will be providing additional information and technical
assistance to states and MCOs regarding this final rule. Medicare,
Department of Defense, and the Federal Employee Health Benefits
Programs are outside the scope of this rule.
Comment: A few commenters requested further guidance for ensuring
parity for services authorized as part of a mental health
rehabilitation and mental health targeted case management as a package
of services and when services needed outside of the package are
referred to the MCO organization for prior authorization.
Response: In this final regulation we are requiring states to apply
parity to all MH/SUD services offered in their non-ABP state plan for
individuals that are enrolled in an MCO.
As indicated throughout this final rule, we are finalizing the
overall scope of the parity requirements as proposed. Specifically, the
parity requirements will apply to benefits provided to MCO enrollees
(regardless of the delivery system of those benefits), to ABPs and to
CHIP. As discussed in the responses to comment, Sec. 438.920(b)(2) is
being finalized with changes to require states to monitor the program
in any instance where an enrollee is receiving benefits through an MCO.

L. Scope and Applicability of the Final Rule (Sec. 438.920(a) and (b),
Sec. 440.395(e)(2), and Sec. 457.496(f)(1))

Sections 438.920, 440.395(d), and 457.496(f) of the proposed rule
addressed the applicability and scope of the rule. Specifically:
Section 438.920(a) proposed that the requirements of the
subpart apply to delivery of Medicaid services when an MCO is used to
deliver some or all of the Medicaid services; section 438.920(b)
proposed state responsibilities when the MCO delivers only some of the
Medicaid services. Section 438.920(b)(1) proposed that in the cases
where some services are delivered outside of the MCO, the state must
complete the parity analysis and provide evidence to the public. States
completing the parity analysis must do so consistently with the
parameters discussed in this rule, meaning they need to review the MH/
SUD benefits to ensure they are included in the contracts with
limitations or financial requirements that are no more stringent than
the predominant limitations or financial requirements applied to
substantially all of the medical/surgical benefits provided to the MCO
enrollees. Under section 439.920(b)(2), we proposed that the state must
ensure that MCO enrollees receive services in compliance with subpart K
when the MCO did not provide all medical/surgical and mental health/
substance use disorder benefits. Our proposal contemplated that these
responsibilities could be met through appropriate reporting from the
MCOs in order for the state to adequately oversee the program.
Proposed Sec. 440.395(d)(1) indicated that Sec. 440.395
applied to ABPs that are not delivered through managed care.

[[Page 18413]]

Proposed Sec. 457.496(f)(1) indicated that Sec. 457.496
applied to CHIP state plans, including when benefits are furnished
under a contract with MCEs.
The tri-Department MHPAEA final rules state that if a group health
plan or health insurance coverage provides MH/SUD benefits in any
classification of benefits, MH/SUD benefits must be provided in every
classification in which medical/surgical benefits are provided. Under
our proposed amendments to part 438, for parity standards to apply, a
beneficiary must be enrolled in an MCO, as defined in Sec. 438.2,
under a Medicaid contract. Enrollment in a PIHP or PAHP alone would not
be not sufficient for parity to apply if a beneficiary were not also
enrolled in an MCO. The proposed rule noted that whether the MCO
provides medical/surgical or MH/SUD benefits under that contract is
irrelevant for the MCO coverage to trigger parity requirements.
While many Medicaid MCOs are contracted to offer benefits in each
of the classifications of benefits described in this rule, there are
other state-initiated ``carve out'' arrangements (for example, PIHPs,
PAHPs, or FFS) in which the MCOs are only contracted to provide
benefits in one MH/SUD classification, while PIHPs, PAHPs, FFS, or a
combination of all three provide coverage of benefits in other
classifications; the division of coverage might be across the
classifications identified in Sec. 438.910(b), Sec.
440.395(b)(2)(ii), and Sec. 457.496(d)(2) or might be based on the
nature of services as medical/surgical services, mental health services
or substance use disorder services. For example, MCOs in these carve-
out arrangements could have contracts that include MH/SUD benefits in
the prescription drug and emergency care classifications of benefits,
but some or all of the MH/SUD outpatient or inpatient benefits may be
covered instead through a PIHP, PAHP, or FFS delivery system.
In instances where the MH/SUD services are delivered through
multiple managed care delivery vehicles, we proposed in Sec.
438.920(a) that parity provisions apply across the managed care
delivery systems; this rule was proposed to apply for managed care
delivery in the Medicaid program and in CHIP. Coverage parity
requirements would apply to the entire package of services MCO
enrollees receive, whether from the MCO, PIHP, PAHP, or FFS. If states
carve out some MH/SUD services from the MCO contract and furnish those
services by PIHPs, PAHPs, or FFS, we proposed to apply the foregoing
parity requirements to the entire package of services MCO enrollees
receive. Requiring the standards for parity to be applied to the
overall package of benefits received by MCO enrollees allows MCOs to
comply with these requirements without requiring inclusion of
additional MH/SUD benefits in the MCO benefit package, as long as these
MH/SUD benefits are provided elsewhere within the delivery system. In
states where MH/SUD benefits are provided across multiple delivery
systems (including FFS), we proposed in Sec. 438.920(b)(1) that states
would be required to review the full scope of benefits provided to MCO
enrollees to ensure compliance with the requirements of this rule. We
noted that we would expect states to work with their MCOs (or PIHPs and
PAHPs) to determine the best method of achieving compliance with these
parity requirements for benefits provided to the MCO enrollees. For MH/
SUD benefits offered through FFS, states would not be required under
the proposed rule to amend their non-ABP state plan to meet parity
requirements, but could use their existing state plan or waiver
services to achieve parity when individuals are receiving some MH/SUD
benefits from a MCO (including PIHPs or PAHPs) and also some benefits
through FFS. However, if a state does not have MH/SUD benefits in every
classification in which medical/surgical benefits are provided across
all authorities, the state would have to choose either to offer these
services through a MCO, PIHP or PAHP or to amend its state plan (or a
waiver of its state plan) to include these benefits to achieve
compliance with proposed Sec. 438.920(a) and (b). Applying various
parity provisions across the different delivery system allows states
the most flexibility in designing delivery systems while ensuring that
parity in medical/surgical and MH/SUD services is provided to MCO
enrollees. Given that there are many different delivery system
configurations that carve out MH/SUD services, this allows compliance
with parity requirements while reducing incentives for states to
completely carve in all MH/SUD benefits to a MCO or carve out or
terminate coverage of MH/SUD services.
In states where the MCO has responsibility for offering all
medical/surgical and MH/SUD benefits, we noted in the proposed rule
that compliance with our proposal would mean that the MCO is
responsible for undertaking the parity analysis and working with the
state on changes found to be necessary to the MCO contract for it to be
compliant with parity requirements. Underlying our proposal was an
anticipation that states would need to include contract provisions in
these MCO contracts to make sure they can see the results of the parity
analysis completed by the MCO and have adequate oversight of the
program to ensure that enrollees are receiving services in compliance
with these rules so they can be in compliance with the rules as amended
in Sec. 438.920(b)(2). In states where some or all MH/SUD benefits are
provided to MCO enrollees through PIHPs, PAHPs, or FFS, we proposed in
Sec. 438.920(b)(1) that the state would have the responsibility for
undertaking the parity analysis across these delivery systems and
determining if the existing benefits and any financial or treatment
limitations are consistent with MHPAEA. The state, based on this
analysis, would have to make the necessary changes to ensure compliance
with parity requirements for its Medicaid MCO enrollees. We also
proposed in Sec. 438.920(b)(1) that the state provide documentation of
its compliance with this analysis to the general public within 18
months of the effective date of this rule.
For ABPs and CHIP state plans, we proposed to require states to
apply the provisions of this rule across all delivery systems to ensure
that beneficiaries have access to MH/SUD benefits in every
classification in which medical/surgical benefits are provided. If
states offer services through an ABP or CHIP state plan with various
delivery systems (managed care and non-managed care), the state must
apply the provisions of the rule across the delivery systems utilized
for its ABP and CHIP state plan. The proposed rule included an example
of how the proposal would apply across the delivery system in Medicaid:
Example 1. Facts. A Medicaid MCO enrollee can access Medicaid
benefits in the following way at any given time during their MCO
enrollment:
The MCO comprehensive benefits include inpatient medical/
surgical benefits; outpatient medical/surgical benefits; emergency for
medical/surgical and MH/SUD benefits; and prescription drugs for
medical/surgical and MH/SUD benefits.
The PIHP carve out benefits include inpatient MH benefit
and the outpatient MH benefit.
The PAHP carve out benefits include outpatient SUD
benefits.
The FFS system provides access to inpatient SUD benefits.
For purposes of this example, we assume there are no financial
requirements or treatment limitations

[[Page 18414]]

imposed on any of the benefits in any of the delivery systems noted
above.
Example 1. Conclusion. In this example, the MCO, PIHP or PAHP would
not need to add any additional services to its benefit package because
the MCO enrollee has access to MH/SUD services through PIHPs, PAHPs and
FFS. The state is responsible for undertaking the parity analysis
across delivery systems and making sure the coverage complies with
parity requirements under Sec. 438.920(a) and (b). The example would
apply in the same way to a CHIP enrollee.
Comment: We received several comments regarding the proposal to
apply the protections of MHPAEA to all MCO enrollees regardless of the
delivery system for MH/SUD services. Most comments received were in
support of CMS' interpretation and expressed that if CMS limited the
protections of MHPAEA to apply only to the benefits provided by the
MCO, this would not fulfill the intent of the law. In contrast, some
commenters did not support CMS' interpretation and felt that the rule
should require all services for both medical/surgical and MH/SUD
conditions to be provided by the MCO, based primarily on the premise
that it is easier to provide a level of care coordination that is
appropriate for the needs of people requiring intensive levels of MH/
SUD services if all benefits are provided by one entity.
Response: We appreciate the comments related to the application of
this rule to all MCO enrollees regardless of how the MH/SUD services
are delivered. We believe that our interpretation is in line with the
intent of section 1932(b)(8) of the Act and allows the most flexibility
to states to determine the best delivery system in their state.
Therefore, we are maintaining this interpretation in the final rule. In
any system that the state chooses, we recommend that the state pay
close attention to the care coordination aspects of the program to
ensure that medical/surgical services and MH/SUD services are
coordinated and integrated to the greatest extent possible.
Comment: One commenter suggested CMS require parity compliance for
all managed care entities that contract with a PIHP or PAHP to deliver
behavioral health services. This would include primary care case
management (PCCM) entities or providers.
Response: While we encourage states to apply parity broadly across
the state plan and to any service delivery system, section 1932(b)(8)
of the Act only applies MHPAEA parity requirements to MCOs; therefore,
we cannot extend its reach to services provided to beneficiaries who do
not enroll with MCOs. In situations where a state uses a PCCM program
to provide medical/surgical services and uses a PIHP or PAHP to provide
MH/SUD services (meaning that the state does not use an MCO at all),
the state would not be required to meet the requirements in part 438
this final rule. Similarly, accountable care collaborative models using
managed FFS authority such as PCCM are not considered MCO contracts
under the definition provided in Sec. 438.2, and therefore, are not
required to comply with part 438, subpart K. However, as noted above,
we do encourage states to consider applying the MHPAEA protections to
the state plan so that individuals using a PCCM will still benefit from
provisions in this final rule.
Comment: Some commenters were unclear if parity requirements were
applicable, and if so how those requirements would be applied, to
section 1115 demonstrations and other waiver authorities. Commenters
were concerned because many states use these programs to provide a
variety of services to vulnerable populations or to treat specific
behavioral health conditions, such as autism spectrum disorder.
Response: Parity requirements set forth in this final regulation
apply to MCOs and ABP regardless of the authority a state employs for
its Medicaid program. While we welcome Demonstrations and other Waivers
that that seek better outcomes for beneficiaries in need of MH/SUD, we
believe these parity requirements are necessary to provide adequate
protections for beneficiaries enrolled in demonstration and waiver
programs. Therefore, we will not approve any Waivers of the parity
requirements set forth in this final regulation in a request for an
1115 Waiver.
Comment: We received several comments about who should be
responsible for the parity analysis in varying situations. Some
commenters believed that the state should be able to delegate the
responsibility to other parties when using a carve-out system, such as
the entities themselves or county agencies, whereas other commenters
believed that the state Medicaid Agency should be the sole party
completing the parity analyses, even in the case where the MCO is
providing all medical/surgical and MH/SUD benefits within its contract.
Some comments expressed concern that even in the case of a carve-out
system, the MCO will end up needing to do the parity analysis, which
commenters believe will create delays in the 18-month timeline for
compliance.
Response: We considered affording the state the option of choosing
who would have responsibility for the parity analysis in situations
when the MCO does not provide all MH/SUD services, but we were
concerned about the timeliness and consistency of the parity reviews if
the state was not responsible for this analysis under the regulation.
Therefore, we are finalizing text in Sec. 438.920(b)(1) to require the
state to perform the parity analysis when the MCO is not providing all
MH/SUD services to Medicaid beneficiaries; this is the scope and intent
of the regulation text requiring states to review all services to
ensure compliance with the rule and implicit in the requirement for the
state to provide documentation of that compliance. The state may use
third parties to gather information and make a preliminary parity
analysis on its behalf, but the state must review and accept that
preliminary analysis. And, the state will be responsible for providing
documentation supporting compliance with these rules when submitting
the MCO contracts to us for review and approval. To the extent that a
state chooses to use contractor or other resources to complete the
analysis, we would expect the state to answer any questions about the
analysis and we will hold the state accountable for its accuracy and
completeness.
When the MCO provides all medical/surgical and MH/SUD benefits, the
statute imposes the parity compliance on the MCO. It is implicit in our
final rule, at Sec. 438.920(a), that the MCO perform the analysis in
those circumstances. We believe that states should be aware of the
timeframe for completing the parity analysis and the outcomes when the
MCO does it to be sure the state oversees the delivery of benefits in a
manner that is compliant with these rules, including implementing any
appropriate contract changes. States should be sure to include contract
provisions in their MCO contracts in these cases to be sure they get
the necessary reporting during the 18-month implementation period.
Comment: One commenter stated that, in cases where an MCO does the
parity analysis, the MCO could simply provide an assurance of
compliance. This commenter noted that the proposed rule did not require
the MCO to tell the state Medicaid Agency what changes needed to be
made to their contracts, and that the state Medicaid Agency would need
to determine those changes based on their regulatory oversight.
Response: While we agree that the final rule does not require
specific

[[Page 18415]]

documentation from the MCOs when they complete the parity analysis, we
believe that it would be in the interest of the states to require the
MCOs to report the findings and the analysis that they complete. We
encourage states to include contract provisions that they believe are
necessary during the implementation period to get the information
necessary to make changes to the contract that would demonstrate
compliance with these rules. We are not including any additional
regulatory reporting requirements in this rule as we believe states
should be at liberty to collect the appropriate reporting they deem
necessary for the oversight and implementation of their programs
consistent with these requirements. We are available to help states
consider contract language to achieve this if necessary during the 18
month transition period.
Comment: The proposed rule would have required states to provide
documentation to CMS with their contract submission in cases where some
or all MH/SUD benefits are provided to MCO enrollees through PIHPs,
PAHPs, or FFS. We received several comments requesting guidance on what
documents must be provided with contracts and state plan amendments to
document compliance with the requirements of this rule. Some commenters
requested that these documents be required to be submitted on an annual
basis. Commenters also raised concerns about situations where the MCO
provides the full scope of services, stating that an assurance of
parity compliance from the state in these cases is insufficient and
creates inconsistency in documentation of compliance requirements.
Another commenter requested that CMS provide technical assistance to
states as they complete their parity analyses in order to give ``best
practices'' in determining compliance.
Response: We will provide technical assistance and tools for states
and MCOs that clarify expectations around the types of documentation
that must be submitted with the MCO contracts and ABP state plan
amendments to demonstrate compliance with parity. MCO contracts are
typically submitted on an annual basis, and should include materials
that demonstrate that the state is confident in the parity analysis. We
do not believe that the parity analysis needs to be completed on an
annual basis if the state can show that the plans or state did not
change their operations in a way that would affect compliance with this
rule. We will use the submitted documentation as part of our MCO
contract review and approval process. As noted in a previous response,
states should consider including provisions in their contract for MCOs
to report on the outcome of the parity analysis to ensure that parity
is achieved and can be overseen appropriately. States may want to
consider requiring the MCOs to complete the analysis in a way that is
consistent with how the state completes the analysis for its ABP or
CHIP state plans.
Comment: We received some comments noting that, in the proposed
rule, states were only required to review MH/SUD services to ensure the
full scope of services meets the requirements. Commenters believed that
states need to review both the medical/surgical criteria and the MH/SUD
criteria to determine full compliance with this rule.
Response: We agree with the commenters, and in the final rule we
have revised to Sec. 438.920(b)(1) to provide that the state must
review both medical/surgical and MH/SUD benefits provided to determine
compliance with the final rules where in the proposed rule we only
indicated that the state would review the MH/SUD benefits. States
should consider including contract provisions in all MCO and applicable
PIHP and PAHP contracts to achieve this requirement.
Comment: One commenter expressed concern over the term ``scope of
services,'' citing the fact that it has become a term of art within the
context of parity and may be misconstrued when reviewing the regulation
text in Sec. 438.920(b).
Response: We appreciate that ``scope of services'' may have
different meanings in different contexts, but we believe that for the
purposes of this regulation, it is sufficiently clear that we mean the
full set of benefits available to the Medicaid beneficiary.
Comment: We received several comments that requested that CMS
require states to publicly report on the progress of compliance during
the 18-month period between the publication date of the final rule and
date of compliance, and to make sure states engage the public on the
progress towards compliance with the requirements of this rule. Several
commenters urged CMS to develop a common methodology for federal and
state regulators to provide identifiable transparent information on
parity compliance investigations to encourage uniform compliance
practices. Commenters requested that CMS post the compliance plans on
Medicaid.gov and on state Medicaid Web sites, and to closely monitor
states on their progress.
Response: To make compliance information available to the public
more quickly, and to simplify compliance deadlines across requirements
for MCOs, ABPs, and CHIP, we have changed the date by which states must
provide such information from 18 months from the effective date of the
final rule to 18 months from the publication date of the final rule.
Because the provisions of the final rule do not become effective until
60 days after publication, this change will ensure that information
regarding states' compliance with this subpart becomes available to the
public in a timely manner.
As specified in Sec. 438.920(b)(1) of this final rule, states must
make documentation available to the public within 18 months after the
publication of this final rule about compliance with these rules; this
means that states must report how they are complying in order to
document compliance. We have clarified in the final regulation at Sec.
438.920(b)(1) that this documentation must be updated when benefits
change.
We do not require through regulation that states consult with
stakeholders on how to comply with these rules because in doing so we
believe we would have needed to specify how and when that public input
process occurred which could create further delays in the
implementation timeline, making it longer than 18 months. Although we
are not requiring states to work with stakeholders and other public
interests to determine the best way to comply with these rules, we
believe that states will need to discuss options with stakeholders in
their current delivery systems to be able to ascertain the best
delivery system for any additional benefits that may be required. We
also encourage states to have discussions with stakeholders other than
their providers and plans to ensure they achieve compliance in the best
way for their beneficiaries. We do not believe we also need to post the
materials on Medicaid.gov, as states will be posting their
documentation on their own Web sites. Posting on state Web sites is
more targeted and would be more effective in facilitating discussions
with the stakeholders in that state. We are not mandating the use of a
common methodology for state oversight of parity compliance, given the
diversity of approaches that states use to structure their treatment
delivery systems, and given our desire to provide states flexibility to
tailor their administrative processes to the context and needs in their
state. However, as noted in other sections, we will make technical

[[Page 18416]]

assistance available to states that wish to discuss compliance
strategies.
Comment: We received comments about the use of a Web site for the
location of where states make the documentation of compliance available
to the public. One commenter noted that the use of a Web site would be
too administratively burdensome on states and questioned why this
particular provision would be called out when others do not require to
be posted on a state's Web site. Another commenter requested that CMS
clarify in the text of the regulation that the state must use a Web
site, noting that the proposed language only indicates that the state
must make the documentation available but did not specify the location.
Response: We believe that the use of a Web site operated by the
state is consistent with other managed care proposed rules and in line
with other requirements. Therefore, we are modifying the regulation in
this final rule to require, in Sec. 438.920(b)(1), that the documents
demonstrating compliance must be made available to the general public
through the state's Web site.
As indicated in the response to comments here and in other
sections, we are finalizing these provisions in Sec. 438.920(a) and
(b), Sec. 440.395(e), and Sec. 457.496(f)(1) as proposed with several
revisions. We revised Sec. 438.920(b)(1) to clarify that the state
must review both medical/surgical and MH/SUD services delivered to MCO
enrollees to determine compliance with the final rules and we revised
Sec. 438.920(b)(2) to clarify that the state needs to complete
oversight to ensure enrollees receive services in compliance with these
rules in every instance that there is an enrollee of an MCO. The
requirements of Sec. 457.496(f)(1) were also modified to require
states to indicate in their state plan the standard used, such as state
guidelines or the most current versions of the DSM or ICD, when
classifying benefits into their respective category as a medical/
surgical, mental health, or substance abuse disorder benefit. The
intent of this requirement is to capture this information within the
state plan in order to increase transparency and facilitate our
understanding of the state's parity analysis during our review of their
compliance SPA. Furthermore, the collection of this standard is
consistent with the approach taken in CHIP to describe other required
benefits provided in separate CHIPs. We are also finalizing Sec.
438.920(b)(1) with a change in the date by which the state must publish
the documentation of its compliance with part 438, subpart K and a
requirement for the state to update its analysis and documentation.

M. Scope of Services (Sec. 438.920(c), Sec. 440.395(e)(2), Sec.
457.496(f)(2))

In the proposed rule, we included provisions relating to the scope
of the parity requirements for Medicaid MCOs and CHIP state plans that
were similar to the provisions set forth in the MHPAEA final
regulations (Sec. 146.136(e)(3)). Specifically, the proposed
regulations did not require a MCO, PIHP, or PAHP to provide any MH/SUD
benefits for conditions or disorders beyond the conditions or disorders
that are covered as required by their contract with the state. For
MCOs, PIHPs, or PAHPs that provide benefits for one or more specific MH
conditions or SUDs under their contracts, the proposed regulations did
not require the MCO, PIHP, or PAHP to provide benefits for additional
MH conditions or SUDs. The proposed regulations did not affect the
terms and conditions relating to the amount, duration, or scope of MH/
SUD benefits under the MCO, PIHP or PAHP contract except as
specifically provided in Sec. 438.905 and Sec. 438.910 of part K. For
states providing benefits through ABPs, we clarified in proposed Sec.
440.395(d)(2) (which is being re-designated as Sec. 440.395(e)(2) in
this final rule), that Sec. 440.395 does not require a state to
provide any specific MH/SUD benefits; however in providing coverage
through an ABP, the state must include EHBs based on the applicable EHB
reference benchmark plan, including the ten EHBs specifically required
in Sec. 440.347.
Comment: We received comments requesting that CMS strengthen its
requirements around prescription drug coverage for MH/SUD conditions
and require that the full range of mental health and addiction
medications approved by the FDA must be covered.
Response: Under Federal Medicaid law, states are required to comply
with the requirements of section 1927(g)(1) of the Act to the extent
that they provide assistance for covered outpatient drugs under their
Medicaid FFS programs or Medicaid managed care plans. Therefore, states
are required to provide coverage of all drugs that meet the definition
of covered outpatient drugs as outlined in section 1927 of the Act,
when such drugs are prescribed for medically accepted indications,
including those indicated for the treatment of mental health conditions
and substance use disorders. Consistent with section 1927(d) of the
Act, state Medicaid FFS programs and Medicaid managed care plans have
the discretion to establish certain utilization management techniques
that include preferred drug lists and prior authorization processes for
the coverage of covered outpatient drugs.
However, under the requirements of this rule, a regulated entity
may not impose NQTLs (including prior authorization or other
utilization management strategies) for drugs used to treat MH/SUD
conditions unless any processes, strategies, evidentiary standards, or
other factors used in applying the NQTL to the MH/SUD benefit are
comparable to, and are applied no more stringently than, the processes,
strategies, evidentiary standards, or other factors used in applying
the limitation for medical/surgical benefits in the same
classification. Similarly, under certain circumstances, regulated
entities may apply different levels of financial requirements and
treatment limitations to different tiers of prescription drugs and
still satisfy the parity requirements. Regulated entities may subdivide
the prescription drug classification into tiers based on reasonable
factors as described in this rule and without regard to whether a drug
is generally prescribed for medical/surgical benefits or for MH/SUD
benefits.
Comment: We received a few comments that wanted CMS to encourage
states to cover MH/SUD services through a broad range of providers as a
way to ensure adequate access to services.
Response: Although we believe that this comment is outside the
scope of this rule, we have issued guidance over the past several years
and provided states with information to encourage access to mental
health and substance use services, including clarifications regarding
additional agencies and practitioners that can render MH/SUD services.
Comment: One commenter expressed concern with language at Sec.
438.920(c)(1) that stated that MCOs are not required to provide any
services beyond what is described in their contract. This commenter
believed that this could provide a loophole for MCOs looking to reduce
benefits.
Response: We included this provision based on the ability of the
state to determine compliance with the requirements in Subpart K of 42
CFR part 438 across multiple delivery systems. If a state is using a
PIHP, PAHP, or FFS benefits to comply with these rules, the MCO should
not also have to provide additional benefits on the basis that its
contract, on its own, does not comply with the requirements in this
subpart. We believe that other areas of 42 CFR part 438 protect against

[[Page 18417]]

the MCO arbitrarily reducing benefits, most notably Sec. 438.210,
which provides that the MCO may not arbitrarily deny or reduce the
amount, duration or scope of a required service solely because of the
diagnosis of a beneficiary.
As indicated in the response to comments, we are finalizing the
provisions regarding scope of services at Sec. 438.920(c), Sec.
440.395(e)(2), and Sec. 457.496(f)(2) as proposed.

N. Increased Cost Exemption

The proposed rule did not include an increased cost exemption for
MCOs, PIHPs, or PAHPs. However, the proposed rule did include changes
to payment provisions in part 438 to allow states to include the cost
of providing additional services or removing or aligning treatment
limitations in their actuarially sound rate methodology where such
costs are necessary to comply with the MHPAEA parity provisions. These
proposed changes to the managed care rate setting process would give
states and MCOs the ability to fully comply with these mental health
parity requirements by giving them flexibility to provide services
compliant with this regulation or remove or align service limits. We
stated that the Medicaid program rather than the plan should bear the
costs of these changes, and proposed to provide up to 18 months after
the date of the publication of the final rule for states to establish
compliance with the provisions of this final rule (see discussion in
section P: ``Applicability and Compliance''). This would allow states
to take the actions to make the policy and budgetary changes needed for
compliance. The proposed rule also excluded permission for states
delivering services through an ABP or CHIP State plan to apply for a
cost exemption due to the mandatory delivery of EHB and the requirement
that ABPs be compliant with MHPAEA.
Comment: Many commenters agreed that an increased cost exemption
for parity was not needed. The commenters supported building in
increased costs associated with parity into the state's rate setting
structure. In addition, the commenters recommended that the regulation
require a behavioral health medical loss ratio of 90 percent for
clinical services, MH/SUD services and activities that improve health
care quality in their MCO contracts. One commenter recommended that CMS
allow cost exemptions for administrative expenses to MCOs in instances
where states may not develop rates that adequately support the
additional care management and coordination required to ensure
compliance with parity requirements.
Response: We affirm that this rule does not include an increased
cost exemption for MCOs, PIHPs, or PAHPs. We do not expect Medicaid
managed care entities to incur any net increase in costs because we are
finalizing a provision stating that the costs of complying with parity
requirements may be taken into account within an actuarially sound
payment methodology. However, recommendations regarding requirements
for medical loss ratios or reimbursement rates are beyond the scope of
this final regulation.
Comment: Many commenters disagreed with denying states access to a
cost exemption. The commenters maintained that MHPAEA allows group
health plans and insurance issuers to seek a cost exemption, and the
Medicaid statute specifies that the mental health requirements apply to
Medicaid MCOs, ABPs, and CHIP ``insofar as such requirements apply and
are effective with respect to a health insurance issuer that offers
group health insurance coverage,'' or ``in the same manner as such
requirements apply to a group health plan.'' The commenters explained
that there was no basis for CMS to apply MHPAEA to Medicaid and CHIP,
but then for CMS to refuse to apply MHPAEA's cost exemption provision.
The commenters suggested that although MCOs may receive increased
capitation payments to comply with the parity requirements in this
final rule, there is still an increased cost for the state (and the
federal government). In addition, the commenters indicated that it does
not make sense to prevent ABPs from accessing the cost exemption simply
because they must cover EHBs and must comply with parity requirements.
The commenters reasoned that Federal law also requires commercial group
plans to comply with MHPAEA, and it requires commercial small group and
individual plans to cover EHBs, but that does not exclude them from
seeking for a cost exemption under MHPAEA. The commenters applied the
same logic to CHIP.
Response: As we proposed, we are not extending the cost exemption
provision to MCOs, PIHPs, PAHPs, or states. We require MCOs to be paid
on an actuarially sound basis, which would include the cost of adding
services or removing or aligning treatment limitations in managed care
benefits so long as those additional benefits are necessary to comply
with mental health parity requirements. States have the ability to make
changes to their capitation payments during the course of the contract
year to account for unexpected changes in benefits, costs, and
utilization if they find that the assumptions included in the initial
rate development are different than actual experience. This final rule
authorizes states, in instances where they choose not to change their
state plan, to include the cost of services that are necessary to
comply with this rule but are beyond what is specified in the state
plan into the development of actuarially sound rates. This is different
from the circumstances of the commercial market and removes the
rationale for an increased cost exemption for Medicaid MCOs, PIHPs, and
PAHPs. States may also choose to use a risk mitigation strategy in
their rates the first year(s) that the additional benefits are added to
a MCO, PIHP, or PAHP contract. This would ensure that any over- or
under-payments are reconciled at the end of the year and give the state
a more accurate sense of the utilization of services for future years
of rate setting.
As indicated in the response to comments, as proposed, we do not
include provisions in the final rule for an increased cost exemption.

O. Enforcement, Managed Care Rate Setting (Sec. 438.6(e)) and Contract
Review and Approval (Sec. 438.6(n))

Proposed Sec. 438.6(e) allowed a state's rate-setting structure to
account for services covered by an MCO, PIHP, or PAHP in excess of
services and/or treatment limits that are listed in the State plan if
such services are necessary for the MCO, PIHP or PAHP to comply with
this rule. However, the proposed rule only allowed the state to adjust
its capitation rates to provide for additional services to the extent
that these services would not be included but for the requirements of
this rule.
Proposed Sec. 438.6(n) required states to include contract
provisions requiring compliance with parity requirements in all
applicable MCO, PIHP, and PAHP contracts. We noted that we expected
states, in order to comply with the proposal, to include a methodology
for the MCO, PIHP, or PAHP to establish and demonstrate compliance with
parity requirements within the contracts. This methodology would have
to provide a mechanism for all MCOs, PIHPs, or PAHPs included in the
delivery system to work together to ensure that any MCO enrollee in a
state is provided access to a set of benefits that meets the
requirements of this rule regardless of the MH/SUD benefits provided by
the MCO. If it was not shown through the MCO contract itself that an
enrollee has access to parity-compliant MH/SUD

[[Page 18418]]

services in each classification in which medical and surgical services
are provided, the state would be asked to provide supplemental
materials to the MCO contract or an amendment to the contract to
demonstrate that the standards provided here are met.
If a state did not adequately demonstrate that an MCO's contract
and practices are in compliance with the proposed rule, CMS proposed to
defer federal financial participation (FFP) on expenditures for the MCO
contract because compliance with section 1932 is a requirement for FFP
payment under section 1903(m)(2)(A)(xii) of the Act. Where there are
services outside of the MCO contract that are needed to demonstrate
compliance, the state would be required to show how the MCO enrollees
are provided all the services needed to comply with the requirements in
this rule.
Comment: We received a number of comments in support of CMS's
proposal to allow states to include the costs of coming into compliance
with the requirements of this rule into the actuarially sound
capitation rates paid to the MCO, PIHP or PAHP providing MH/SUD
services under Sec. 438.6(e). One commenter noted that CMS can use its
review and approval of managed care contracts to ensure FFP is being
used solely for state plan items and services and those services
necessary to satisfy the parity requirements. Commenters further stated
that they believe the costs of coming into compliance will be minimal,
and over time may save money as timely access to MH/SUD services may
reduce the need for costly emergency and crisis care. One commenter
added that this was an opportunity for plans to enhance care
coordination, to the extent that these requirements ensure access to a
wider range of specialists than previously covered. Some commenters
requested that CMS require states to include the cost of any additional
services in Sec. 438.6(e)(3) rather than providing states the option
to adjust these rates. Other commenters believed that the language was
too broad and CMS should follow the guidance issued in the 2013 State
Health Official letter which encouraged states to make changes to their
state plan. Finally, others thought that the language was sufficiently
clear and strongly requested that CMS refrain from adopting more
prescriptive language regarding what additional benefits may be
included because it is clear that the services need to be included to
ensure parity.
Response: We believe that allowing capitation rates to reflect
additional compliance costs related to non-state plan services was
necessary for plans and states to meet the requirements of Subpart K
when changes to the Medicaid state plan are not required by federal
law. We do not agree that it is necessary to explicitly amend Sec.
438.6(e)(3) as suggested by the commenter to achieve this result,
because we believe it will be inherent in 438.6(n). If services are
necessary beyond what is included in the state plan to ensure
compliance with this rule, states and their actuaries must take the
expected reasonable and appropriate cost of those additional services
into consideration while setting actuarially sound rates. In addition,
as noted in other areas of the rule, states have the flexibility to
include those additional services either through the MCO, PIHP, or PAHP
benefit package, or they can add them to the state plan by completing a
state plan amendment. To make the payment rate adjustment under Sec.
438.6(e)(3) a requirement could prohibit states from making changes to
their state plan which could allow for a broader application of parity
than is required through this rule.
Comment: We received several comments requesting model contract
language that states can use to be able to demonstrate compliance with
these rules. Contract language is requested to clarify which additional
MH/SUD services plans would be required to provide when a carve-out
approach is used, and to require states to reimburse the plan in an
actuarially sound manner.
Response: Considering there are a number of different models the
states can choose to demonstrate compliance, we would not be able to
provide model contract language for every situation. However, we are
working with a contractor to develop technical assistance materials,
and we are available to states during the transition period if states
would like to discuss their plans for compliance and possible contract
language.
Comment: We received a number of comments requesting CMS to provide
more clarity on what documentation it expects states to provide to show
that it complies with the regulations when submitting MCO contracts.
Response: We will release subregulatory guidance around
documentation that will be required to show compliance with these
regulations. Additionally, we are working with a contractor to develop
tools and provide technical assistance to states in completing the
analysis of their delivery systems to ensure the benefit design and
medical management techniques meet the requirements of these rules.
Comment: We received some comments requesting CMS clarify its role
in oversight of these regulations and urged CMS to improve enforcement
in the commercial market, as well as for Medicaid and CHIP.
Response: Oversight of commercial products and compliance with the
tri-Department MHPAEA final rules are outside the scope of this final
rule.
As with other Medicaid MCO contracts and state plan amendments, we
will review associated and relevant documents submitted by the state.
This will include the review of the MCO contracts and SPA documents, as
well as any documentation of the parity analysis the state has done to
determine that their system and/or benefit design meet the requirements
of this rule. States will be the primary oversight entity to ensure
that services are delivered in compliance with these rules.
Beneficiaries and/or stakeholders should first direct any issues
related to compliance with this rule to the state. We are willing to
accept complaints around compliance with this rule and we may discuss
these issues with states to determine if any corrective actions need to
take place.
Comment: There were several comments that CMS should specify that
CMS, states, MCOs, PIHPs, and PAHPs pay particular attention to MH/SUD
parity requirements for children and adolescents as a distinct
population group. The commenters encouraged CMS and states, when
assessing compliance with these rules, to obtain input on delivery of
services from child and adolescent MH/SUD providers, including
pediatric medical providers. In addition, the commenters strongly
suggested CMS regularly monitor pediatric MH/SUD network adequacy,
access standards for children and adolescents (including inpatient
admission), EPSDT service coverage mandate and prior authorization
criteria, data showing the number of reasons for child and adolescent
denials, and pre- and post-utilization patterns by children of
intensive home and community based services, and inpatient MH/SUD
services.
Response: This final rule does not create specific oversight
requirements for distinct population groups, nor does it provide for
access reviews to needed services. States are required to ensure
compliance with the requirements of this rule for all enrollees whose
benefits are subject to this rule. However, we will provide technical
assistance to states upon request to assist with the implementation of
this rule. If questions

[[Page 18419]]

or confusion persist about the requirements of this rule for pediatric
populations, we may provide tools or guidance to respond to those
questions. CHIP and ABP programs that include full coverage of EPSDT,
in the same manner as in regular Medicaid coverage, will be deemed
compliant with this rule in accordance with the statutory authority.
However, we will review a state's assurance carefully as a part of the
CHIP or ABP SPA review process to ensure compliance with all EPSDT
requirements, including the methods and procedures for implementing the
EPSDT benefit. We also anticipate providing clarification through
subregulatory guidance to states about the proper implementation of the
EPSDT benefit. With regard to the comments on the issue of monitoring
access to services that issue is outside the scope of this final rule.
We are engaged in separate rulemaking to strengthen state and federal
reviews of beneficiary access to needed services.
Comment: We received a number of comments that requested CMS
strengthen its oversight role of the rate setting process to ensure
that rates are set on an actuarially sound basis when services beyond
the state plan are included. These comments included a variety of
suggested approaches and requirements, including: Not requiring MCOs to
cover additional services until actuarially sound rates are in place;
greater transparency about how states will accommodate the additional
costs of compliance in their rate setting approaches; requirements that
rates be set based on the specific benefit set instead of a historical
look-back; development of a template that translates service changes
into rate-setting formulations; annual end-of-year reconciliations of
the increased costs associated with the additional benefits added to be
in compliance with this rule compared to capitation rates; requiring
states to consult with MCOs to select appropriate proxy data prior to
development of the capitation rates; or requiring a robust analysis of
past and projected claims experience.
Response: We believe that these comments stem from a perceived lack
of transparency on the rate setting process in general, and that the
majority of these concerns are not specific to this rule. These issues
are beyond the scope of this rule; we note that we are working to
increase the transparency and oversight of Medicaid managed care rate
setting. We believe that the suggestions included in the comments are
all helpful, but that no single approach will be appropriate for all
states, and therefore, decline to require a specific methodology for
including additional services required by parity into the capitation
rates. States should work with their MCOs, PIHPs and PAHP as well as
their actuaries when they develop their rates, which are required to be
actuarially sound.
Comment: One commenter expressed concern that the rate setting
provisions in this rule may limit states' ability to pursue innovation,
and stated that states should remain free to continue to allow MCOs to
provide additional non-covered services, in-lieu of covered benefits,
or value added additional benefits with their savings.
Response: We do not believe that this rule limits a state's ability
to pursue innovation by allowing MCOs to offer additional services not
specified under the state plan or contract, commonly referred to as in-
lieu of benefits or value added benefits. States and MCOs are still
permitted to provide these benefits under this rule. This final rule
only specifies that states must include the cost of additional benefits
necessary for compliance with parity in the capitation rate development
process. Comments about the rate setting process in general are outside
the scope of this final rule.
Comment: CMS should articulate penalties for violations of parity
and publish announcements about the remedies implemented and sanctions
imposed to deter parity non-compliance.
Response: In the proposed rule and as remains in the final rule,
where there are services outside of the MCO contract that are needed to
demonstrate compliance, the state is required to show how the MCO
enrollees are expected to receive all the services needed to comply
with the requirements in this rule. States would be able to do this by
providing evidence of the other services provided through a FFS system,
or included in contracts with other types of managed care entities such
as through a PIHP or a PAHP. We would also expect that the state
provide the analysis that shows services provided through the MCO meet
the requirements of this final rule. We clarify our intent that this
demonstration would be a precondition to CMS approval of the MCO
contract under Sec. 438.6. If the state cannot provide evidence of
this compliance outside of the MCO contract, then the state has not
demonstrated that the contract complies with parity requirements and we
will not approve the contract until evidence of compliance is provided.
We may defer claims for FFP in expenditures for capitation rates paid
based on unapproved MCO contracts in this circumstance.
Comment: Some commenters expressed concern about the potential to
defer FFP on MCO contracts when a carve-out delivery system is in place
and the MCO is not the party that is determined to be out of
compliance. These commenters requested that in these cases states be
required to continue to pay the contracting plan actuarially sound
capitation payments.
Response: Payment obligations under contracts between the state and
the MCO are governed by state law, and contracts are subject to CMS
approval. States and plans will want to discuss payment arrangements to
ensure both parties understand if and when payments to the MCOs may or
may not be paid which could include instances where a compliance issue
with these rules is discovered either in the MCO contract or another
delivery system that the MCO enrollee receives services from.
Comment: Several commenters recommend that CMS instruct states to
establish specific capitation rates for children and adolescents due to
concerns about assuring network participation for appropriate providers
for that age range, recognizing other pediatric providers not typically
considered MH/SUD providers, and accounting for appropriate utilization
of MH/SUD services through EPSDT in those specific rate cells.
Response: Current rules, at Sec. 438.6(c)(3)(iii), require that
when states set actuarially sound rates they must apply rate cells by
eligibility category, age, gender, locality and risk adjustment or
explain why they are not applicable. We do not require states to use a
specific rate cell structure when developing their rates for MCOs,
PIHPs, and PAHPs. States will want to consider all factors of their
program when determining their rate cell structure and ensure that it
is done in compliance with the managed care rules and in consideration
of anticipated utilization of a benefit package in compliance with this
final rule.
Comment: We received several comments about care coordination when
states are using a carve-out system. This includes ensuring there is
appropriate care coordination with providers of all types, including
pediatric primary care providers, other managed care entities, and MH/
SUD providers. Commenters urged CMS to consider care coordination as
service costs to ensure they are included in the costs when developing
actuarially sound capitation rates.
Response: Care coordination is typically considered part of the
non-benefit costs when developing

[[Page 18420]]

actuarially sound capitation payments, though states have some ability
to include care coordination as a service if they include targeted case
management in the benefit package. When states develop their non-
benefit costs, including care coordination, states should consider the
costs directly related to providing the services covered by the
contract. Additionally, when states include targeted case management as
a benefit, they must adequately price the service. Requiring states to
account for care coordination as a service is outside the scope of this
regulation.
Comment: Some commenters requested that CMS provide additional
guidance on care coordination with pediatric primary care providers and
how states should require their plans to coordinate with these provider
types.
Response: We do not believe there is any one way to provide
appropriate care coordination for individuals with MH/SUD conditions.
However, we do agree that when services are better coordinated and all
providers caring for the individual are informed of treatment planning,
the beneficiary is likely to have better outcomes. Therefore, we
encourage states to include contract provisions to ensure that MCOs,
PIHPs and PAHPs work to coordinate among themselves and with providers
to deliver an integrated set of benefits to enrollees. For more detail
regarding care coordination in a Medicaid managed care environment,
please refer to Sec. 438.208.
Comment: We received several comments requesting that CMS
prioritize oversight and transparency in the delivery of services,
including pharmacy services and formulary design/benefit tiering.
Commenters requested that CMS carefully monitor claims data to quickly
identify and remedy any problems.
Response: States provide the first level of oversight under this
rule, and we expect states to monitor all aspects of service delivery
to ensure compliance with this rule. We are always available for
technical assistance to states for assistance in monitoring and if
necessary to develop corrective action plans if issues are identified.
In addition, we will review all areas of compliance with this rule,
including whether the delivery of pharmacy services is compliant with
parity requirements. As with other service classifications under this
rule, states will be required to provide evidence that covered pharmacy
benefits meet the requirements of this rule. We may consider using data
reported through CMS claims and encounter data reporting systems to
monitor service delivery, and we will work with states if any issues
are identified.
Comment: Some commenters expressed concern that plans and states
may put in place additional administrative measures or limits on
medical/surgical benefits as a way to comply with these rules.
Commenters requested that we put in place a maintenance-of-effort
provision, or a requirement that states and plans can only comply with
this rule by reducing restrictions on MH/SUD services to ensure that
plans are not able to use administrative processes to deny access to
services.
Response: MCOs must provide benefits in the same amount, duration,
and scope as the benefits offered under the state plan. States may have
some restrictions on services provided under their state plan,
particularly services that are optional. If a state chooses to reduce
or restrict the amount, duration or scope of covered medical/surgical
services it must do so through an amendment to its state plan. When
reducing benefits in the state plan, a state must meet sufficiency
requirements, so any reduction in medical/surgical benefits must be
reviewed and approved by CMS. Consistent with the experience we have
seen in the commercial market around reductions of benefits, we believe
that states will not typically choose to go through the state plan
amendment process to reduce medical/surgical benefits in order to make
it easier for MCO coverage to meet the requirements of this rule. As
some commenters noted previously, states may also realize savings over
time because of increased access to MH/SUD services.
Comment: One commenter requested that CMS undertake an annual
state-by-state analysis of benefit packages to determine that states
and MCOs are in compliance with the requirements of this rule.
Response: Although we agree that regular monitoring of the
provisions of this rule is important, we do not agree that this needs
to be done on an annual basis. All managed care contracts must be
reviewed and approved to be in compliance with these rules. However,
mature programs do not make frequent changes in their operation that
would cause them to come out of compliance with this final rule. We may
ask a state to affirm that the delivery system is still in compliance
at any time, including during the state plan amendment process and
annual contract reviews; further we will undertake reviews as needed.
However, states will be permitted to attest that there are no changes
in benefit design or requirements that affect parity compliance.
Comment: A few commenters requested that additional reporting
requirements be included to increase health plan transparency and
enhance enforcement for NQTLs.
Response: We believe that sufficient guidance exists regarding the
recording of NQTLs in plan materials to provide transparency to
beneficiaries and the public. We will make technical assistance
available to states to help them develop strategies for providing
proper oversight of parity requirements regarding the application of
NQTLs to MH/SUD benefits.
Comment: One commenter requested that CMS require states to share
with MCOs the methodology the state used to determine that the delivery
system was in compliance with this rule.
Response: As states will be required to report publicly, under
Sec. 438.920(b)(1), how they are complying with the requirements in
this final rule in cases where not all benefits are provided through
the MCO, we believe that MCOs will be able to see the information just
as other stakeholders do. As plans in that delivery system (such as
MCOs, PIHPs and PAHPs) will be reporting information to the state for
the state to complete the analysis, the plans will have an opportunity
to discuss the methodology with the state to report information; we
anticipate that discussions will occur as the nature and extent of the
analysis will determine the nature and scope of the underlying data
needed from plans. We do not believe our regulation should require
states to share the methodology with the plans just as we are not
requiring the MCOs to share their methodology with the state in
instances where all benefits are provided through the MCO through this
rule.
Comment: One commenter was concerned that CMS did not propose to
include additional administrative funding within the capitated rate
setting process to cover the costs of providing the additional services
through the MCO, PIHP or PAHP.
Response: As part of an actuarially sound rate setting process,
states should cover the costs of providing what is included in the
contract. If a state believes that additional administrative funding is
necessary on the part of the MCO, PIHP or PAHP to provide any
additional services necessary to comply with this rule, those costs
should be included as part of their regular rate setting process.
Comment: One commenter requested that CMS revise Sec. 438.6(n) to
state that contracts must ``specify that services

[[Page 18421]]

must be provided in compliance with Subpart K'' as opposed to requiring
that they ``ensure that enrollees receive services that are compliant
with subpart K.''
Response: We agree that the use of ``ensure'' when discussing
contract provisions is not consistent with other provisions in Sec.
438.6 and that it is more appropriate to target the requirement on the
provision, rather than the receipt, of services. To be consistent with
the phrasing throughout Sec. 438.6 and to address the commenter's
concern that a contract cannot ensure that appropriate services are
received, we are finalizing Sec. 438.6(n) with modifications to state
that contracts must provide for services to be delivered in compliance
with subpart K.
Comment: One commenter encouraged state departments of insurance to
take a stronger role in monitoring parity compliance. For example, the
commenter requested that a report be made to the state department of
insurance when a plan has medical necessity criteria that are more
stringent than generally accepted medical standards.
Response: We believe that states may choose to use a number of ways
to monitor compliance with these rules. A state Medicaid agency may
choose to use the state department of insurance to help monitor
compliance, but we are not requiring this approach. It is not within
the scope of this final rule to address how state departments of
insurance may have a role in monitoring compliance by private insurers
or group health plans with the tri-Department MHPAEA rules.
Comment: One commenter requested CMS postpone the application of
these rules until there is an opportunity for stakeholders to comment
on the combined impact of these changes with the proposed changes to
rate setting requirements included in the proposed rule titled
``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'' (80 FR 31098 through 31297).
Response: We do not believe that an opportunity for states and
stakeholders to comment on the combination of these two proposed rules
is needed. The changes proposed to Medicaid managed care rate setting
in the proposed rule entitled ``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'' (80 FR
31098 through 31297) are intended to increase the overall transparency
of the rate setting process and should not impact the specific
provisions of this rule. We have included the rate setting provisions
that are specific to compliance with parity standards in this final
rule.
Comment: One commenter requested that CMS broaden the scope of the
payment for services to MCOs so that it also includes payment to
providers.
Response: We believe that payment to providers is addressed through
our discussion of NQTLs in this rule. Payments for services are
negotiated between the health care provider and the MCO, PIHP, or PAHP,
and plans and providers have the autonomy to negotiate payment rates so
long as they are adequate to cover services in an amount, duration and
scope that is at least equal to what is provided in the state plan
which is consistent with Sec. 438.210.
As indicated in the response to comments, we are finalizing the
provisions regarding enforcement and managed care rate setting at Sec.
438.6(e) and the provisions regarding contract review and approval at
Sec. 438.6(n) as proposed, with the exception of the revision in Sec.
438.6(n) to target contract requirements on the provision, rather than
the receipt, of services.

P. Applicability and Compliance (Sec. 438.930, Sec. 440.395(d), Sec.
457.496(f))

The proposed rule noted that MCOs, PIHPs, PAHPs, and states would
have up to 18 months after publication of the final rule to establish
compliance with the provisions of the final rule before we would take
enforcement action. Specifically, we proposed as follows:
Managed care: Although the requirements of MHPAEA have
applied to Medicaid MCOs through section 1932(b)(8) of the Act since
2008, for Medicaid MCOs, PIHPs, or PAHPs with existing contracts,
states would have to establish compliance with the specific provisions
in this final rule no later than the beginning of the contract year
starting 18 months after the publication of the final rule. New managed
care contracts, or amendments, would be required to be compliant.
ABPs: Although the requirements of MHPAEA have applied
since January 1, 2014, states would have up to 18 months after the
publication of the final rule to establish that its ABPs are compliant
with provisions in the final rule.
CHIP: The requirements of MHPAEA have applied to CHIP
since October 1, 2009, however, states would have up to 18 months after
the publication date of the final rule for CHIP plans to establish
compliance with provisions in the final rule.
Comment: Commenters recommended a range of timeframes for states to
come into compliance with these final regulations from 6 months to 24
months. Many of these commenters suggested that states that illustrate
that they are making a good faith effort at compliance should be
granted an extension no matter what the final rule states in terms of
timeline for compliance. Several commenters noted that they believed
the 18-month timeline would be sufficient to come into compliance. One
commenter noted that the rules lacked a timeline for CMS to complete
its review and approval process for state compliance. Depending on
policies and structures, states will need to conduct thorough policy
analysis and may need state plan amendments, systems changes and
contract revisions.
An overwhelming number of commenters urged CMS to shorten the
timeframe for states to come into compliance with the parity rules.
Many referenced the fact that the proposed rule comes more than 5 years
after the MHPAEA parity protections were applied to MCOs in 2008.
States have been aware since passage of MHPAEA that its requirements
apply to Medicaid MCOs and CHIP programs. Additionally states have
known that these requirements apply to Medicaid ABPs since the passage
of the Affordable Care Act in 2010. Recommendations to CMS from these
commenters proposed a range of 6 to 12 months for states to come into
compliance with this final regulation.
Several commenters recommended to CMS that health plans and their
subcontractors not be penalized as a result of a state Medicaid agency
experiencing delays in implementing the final rule in the required
timeline. Additionally, it was requested that CMS allow plans an
additional six months after a state has completed the parity analysis
and developed the necessary standards to come into compliance.
Response: We are finalizing Sec. 438.930 with a modification from
the proposed text; Sec. 438.930, as finalized, states that contracts
with MCOs, PIHPs, and PAHPs offering Medicaid state plan services to
enrollees, and those entities, must comply with the requirements of
this subpart no later than 18 months after the date of publication of
this final rule. The proposed rule required such compliance no later
than the beginning of the contract year starting 18 months after the
date of publication of this final

[[Page 18422]]

rule. Because a contract year could begin just before the date of
publication of this final rule, the proposed rule could potentially
have allowed a plan an additional period of up to 12 months beyond
expected compliance date (that is, roughly 18 months after the
publication date of this final rule) before being subject to any CMS
enforcement action. Therefore, this change responds to commenter
concerns about delays in implementation by ensuring that necessary
changes are implemented no more than 18 months after the date of
publication of this final rule. This change also aligns the compliance
date for MCOs, PIHPs, and PAHPs with the compliance dates proposed for
ABPs and CHIP, finalized here in Sec. 440.395(e)(4) and Sec.
457.496(g). We note that it is common practice for states to amend MCO
contracts mid-year, so we do not anticipate that it will cause an undue
burden to states to make any needed changes to their MCO, PIHP, or PAHP
contracts by the stated compliance date.
For ABPs and CHIP, we will finalize the proposed policy to allow 18
months from the publication date of this final rule for states to
establish compliance with the provisions of this final rule. While we
understand that many commenters believe that states and MCOs should be
complying with parity given the statute and subregulatory guidance, we
believe that the regulations will require states and plans to make
additional changes to their benefits and how they manage these
benefits. In addition, the major reasons for allowing states 18 months
to establish compliance with these rules are still relevant, including
states' ability to get the necessary information to perform the parity
analysis across delivery systems. As noted in other sections of the
preamble, we may decline to approve MCO contracts and defer FFP if the
state cannot establish that the benefits and delivery system are
compliant with these rules. States may want to consider including
penalties in their contracts if it is found that one of the managed
care plans is the reason for the non-compliance.
Comment: Many commenters suggested that CMS include in the final
rule language describing the CMS process for review and oversight of
state attestations of compliance including benchmarks for states to
follow for complying with this final regulation. The commenters
recommended that benchmarks include the state's actions to bring
coverage into compliance with the final regulation. Recommended actions
included having all MCO contracts implemented or renewed prior to the
deadline in order to fully comply, ensuring that all FFS CHIP and ABP
coverage meets parity and that states have taken all steps for
compliance except some of the more time consuming steps such as
renegotiating MCO contracts or passing authorizing legislation.
Response: We understand the utility of providing states with
guidance about the states' role in ensuring that compliance is achieved
in a timely manner. We have procured a contractor to provide technical
assistance as requested by the states that may include toolkits or
guidance regarding the creation of a parity implementation plan.
As indicated in the response to comments, we are finalizing the
provisions regarding applicability and compliance at Sec. 438.930,
Sec. 440.395(d), Sec. 457.496(f) as proposed, with two exceptions.
First, we are finalizing the ABP compliance provision with a different
paragraph designation, Sec. 440.395(e). Second, we are modifying the
MCO compliance provision to align with the timing in final Sec.
440.395(e) and Sec. 457.496(g), applicable to ABPs and CHIP
respectively.

Q. Utilization Control

Current Medicaid regulations concerning utilization control include
requirements for the review of need for admission into mental hospitals
(Sec. 456.171). These regulations specifically require medical and
other professionals within the Medicaid agency (or its designee) to
evaluate each beneficiary's need for admission into inpatient services
in a mental hospital. There is not a similar requirement for the
Medicaid agency to review each beneficiary's medical/surgical admission
to other hospitals. States have indicated that this regulation presents
challenges to achieving parity for inpatient services rendered in a
mental hospital. We proposed to eliminate Sec. 456.171 (namely, the
current regulatory language that requires Medicaid agencies to evaluate
each applicant's or beneficiary's need for admission into inpatient
services in a mental hospital by reviewing and assessing the hospital's
medical, psychiatric and social evaluations). A state could continue
these evaluations, but would have to ensure that the standards and
processes are consistent with the provisions in this regulation
regarding nonquantitative treatment limits when parity requirements
under this rule are applicable.
Comment: Several commenters supported the elimination of the
requirement at Sec. 456.171 regarding the Medicaid agency review of
the need for admission to a mental hospital. The commenters supported
the elimination of required review for inpatient admissions because the
requirement would be inconsistent with the proposed rule's provisions
that utilization management techniques need to be applied in a
comparable and no more restrictive manner with respect to mental health
and substance use services as compared to medical/surgical services.
Response: This final rule removes the Medicaid regulation at Sec.
456.171 which prescribed requirements for medical and other
professionals within the Medicaid agency (or its designee) evaluating
the need for admission of each applicant or beneficiary into inpatient
services in a mental hospital. The Medicaid agency (or its designee)
was required to review and assess the hospital's medical, psychiatric,
and social evaluations. There was not a similar requirement for the
Medicaid agency to review the hospital's evaluation of each applicant's
or beneficiary's need for medical/surgical admissions. As a result,
this requirement presented a challenge to achieving parity for
inpatient services rendered in a mental hospital.
Comment: Some commenters opposed the elimination of the requirement
at Sec. 456.171. Specifically, the commenters believed in the
importance of this pre-admission evaluation to protect individual
rights, which is also required under state law. The commenters
recognized that the proposed rule allowed states to continue these
evaluations as long as the standards and processes for nonquantitative
treatment limitations are also met, but were concerned that this may
prove difficult to impossible to do. The commenters were concerned that
removing the ability for appropriate evaluation of inpatient admissions
could remove a certain level of protection for the individual that the
regulation currently provides.
Another commenter recommended against the elimination of
evaluations of medical necessity of inpatient psychiatric hospital
admissions proposed within the proposed regulations. The commenter
maintained that the elimination of these evaluations could compromise
states' and MCOs' ability to ensure that the services provided are
necessary and appropriate within the context of the entire spectrum of
behavioral health care provided within the state.
Response: This final rule eliminates the requirement at Sec.
456.171. Eliminating this requirement will still allow states to
evaluate individuals

[[Page 18423]]

need for admission to inpatient psychiatric facilities. However the
factors used in states' reviews of the inpatient hospital evaluations
for admission must be comparable to and applied no more stringently
than factors used in applying the limitation for medical surgical/
benefits in the classification. As stated in this final regulation,
factors mean the processes, strategies, evidentiary standards, or other
considerations used in determining limitations on coverage of services.
The phrase ``applied no more stringently'' requires that any processes,
strategies, evidentiary standards, or other factors that are comparable
on their face be applied in the same manner to medical/surgical
benefits and MH/SUD benefits.
Comment: One commenter recommended removing the federal
preadmission requirement from 42 CFR part 441 Subpart D, Inpatient
Psychiatric Services for Individuals Under Age 21 in Psychiatric
Facilities or Programs. In addition, this commenter requested CMS use
precise language to avoid confusion and misperceptions that Institution
for Mental Disease (IMD) exclusion does not apply to children under 21.
Response: To clarify, the final rule does not make changes to the
certification of need and other requirements applicable to the
Inpatient Psychiatric Services for Individuals under Age 21 benefit
described at Sec. 440.160 and Subpart D Sec. 441.150 through 441.182.
The Inpatient Psychiatric Services for Individuals under Age 21 benefit
remains an exception to the IMD exclusion.
As indicated in the response to comments, we are finalizing the
removal of Sec. 456.171 as proposed.

R. Institutions for Mental Disease

The IMD exclusion is a statutory prohibition on providing Medicaid
matching funds for services provided to individuals aged 21 to 64 who
are inpatients in IMDs. IMDs are defined in statute as any hospital,
nursing facility, or other institution of more than 16 beds, that is
primarily engaged in providing diagnosis, treatment, or care of persons
with mental diseases, including medical attention, nursing care, and
related services. This exclusion has been in place since Medicaid was
established in 1965 and was based on amendments to the statute that
predated Medicaid and prohibited cash assistance payments for services
for individuals in IMDs. The proposed regulation did not address the
IMD payment exclusion. We received several comments on the
applicability of this regulation on our IMD payment policy. While we
understand commenters' concerns, we are not making changes to this rule
on this topic for the reasons set forth below.
Comment: Many commenters suggested that CMS revisit IMD policies.
The commenters stated that the Medicaid payment exclusion for services
in IMDs is a barrier to equitable access to inpatient behavioral health
services. The commenters indicated that federal action is needed to
remove this obstacle to parity and ensure Medicaid programs can meet
the needs of beneficiaries with mental health and substance use
disorders across the continuum of care. Several commenters recommended
that CMS pursue congressional action to repeal or grant exceptions to
the IMD exclusion for psychiatric patients admitted emergently to
acute, short-stay psychiatric hospitals regardless of their bed size. A
few commenters recommended that the final rule should clearly state
that the IMD exclusion does not or should not apply to SUD residential
or detoxification services or psychiatric patients admitted to crisis
stabilization or other short-term residential rehabilitation services
regardless of bed size. Another commenter indicated that the IMD
exclusion precludes providers from creating specialized, centers of
excellence for treating mental health and substance use disorders when
24-hour care is needed.
Response: The text following section 1905(a)(29) of the Act
provides that FFP is not available for any medical assistance under
title XIX for services provided to an individual ages 21 to 64 who is a
patient in an IMD facility. Under this broad exclusion, FFP is
generally unavailable for the cost of services (regardless of whether
the services address physical or mental health) provided either inside
or outside the IMD while the individual is a patient in the facility.
Comment: Several commenters were concerned about the IMD exclusion
from a parity standpoint because there is no comparable restriction for
medical/surgical benefits, and therefore, the exclusion unnecessarily
serves to limit access to services based upon a quantitative
restriction. Other commenters requested guidance about how to apply the
IMD exclusion alongside this rule's guidance that restrictions based on
facility type are a NQTL. Commenters also requested information about
how parity protections apply to the full range of MH/SUD services
typically provided in facilities that fall under the IMD exclusion.
Response: The payment exclusion for Medicaid services provided to
beneficiaries in IMDs is a statutory requirement established by the
Congress in 1965 and therefore beyond the scope of this regulation. The
full range of covered services, including MH/SUD services, could be
provided to beneficiaries when they are in facilities that are not
IMDs.
Comment: Several commenters recommended reconciling the IMD
exclusion with the parity rules in the ABP context by interpreting the
Medicaid statute as not applying the IMD exclusion to ABPs. The
commenters maintained that CMS's current position is inconsistent with
section 1937 of the Act, which provides that ABP coverage is provided
notwithstanding * * * any other provision of Title XIX that ``would be
directly contrary to [section 1937].'' These commenters also state that
section 1937 of the Act requires that ABPs cover EHBs, which must
include MH/SUD services based on the benefits in a commercial benchmark
plan that is likely to cover some services in psychiatric hospitals or
other facilities that would be considered IMDs.
Response: States must offer services under ABPs that reflect the
ten EHB categories, including MH/SUD services (42 CFR 440.347). As this
final rule states, we did not intend to require states to include
specific services within EHB categories offered through an ABP. Nor did
we specifically require coverage of any particular inpatient or
residential mental health services or treatment settings as part of
``inpatient services'' provided that the coverage complies with MHPAEA
parity requirements. States may, however, be required to provide
inpatient or residential mental health services that are included in
the section 1937 coverage plan that is the basis for the ABP, or that
are included in the base-benchmark plan selected by states to define
EHBs for Medicaid. We clarified in the preamble of the final rule 42
CFR part 440 published in the Federal Register on July 15, 2013 (78 FR
42197) and we clarify for this rule that the IMD payment exclusion
applies to all medical assistance, even medical assistance furnished
through an ABP. To provide required coverage, a state may thus have to
demonstrate that the coverage of inpatient (residential) mental health
services is provided in integrated environments that include treatment
of both physical and mental health conditions and patients. Finally, we
clarify that the requirement that all ABPs comply with MHPAEA parity

[[Page 18424]]

requirements includes compliance with MHPAEA requirements regarding
treatment limits.
Comment: Many commenters requested that CMS clarify how parity
could be achieved given the coverage and payment exclusion for services
to individuals in IMDs. The commenters requested clarification on
access to out-of-network benefits where networks are inadequate.
Response: To clarify, in a Medicaid managed care environment, if a
provider network is unable to provide necessary services covered under
the contract to a particular enrollee, the MCO, PIHP, or PAHP must
adequately (and on a timely basis) cover these services out-of-network
for the enrollee as long as the MCO, PIHP, or PAHP is unable to provide
them in-network. Therefore if a beneficiary needs a specific service
covered under the contract but the service or provider is not available
in the current network, such as inpatient mental health services, the
MCO, PIHP, or PAHP will need to cover such services in a non-network
hospital that provides inpatient mental health services. However, the
IMD payment exclusion would apply regardless of whether the facility
that provides inpatient mental health services is in network or out-of-
network.
Comment: Several commenters requested guidance about how to align
parity requirements with policies that will be finalized regarding IMDs
in the Medicaid managed care proposed rule.
Response: Because the proposed rule, 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 (80 FR 31098
through 31297) has not yet been finalized, we are unable to comment on
the alignment of those requirements with this final rule at this time.
When the Medicaid managed care rule is finalized, CMS will provide
guidance and technical assistance as needed to help states understand
the interplay between the requirements of these rules.
Comment: A few commenters urged CMS to continue to examine, through
the Medicaid Emergency Psychiatric Demonstration project, whether
eliminating or restricting the scope of the IMD exclusion can improve
access to care and help reduce costs.
Response: In December 2013, we provided an interim Report to
Congress on the Medicaid Emergency Psychiatric Demonstration
project,\9\ and we will submit a final report in 2016. This report will
provide information on the impact that this demonstration project had
on access to care and the cost of these services.
---------------------------------------------------------------------------

\9\ This interim report can be accessed online at http://innovation.cms.gov/files/reports/mepd_rtc.pdf.
---------------------------------------------------------------------------

For the reasons indicated in the response to comments, we do not
include provisions in the final rule that are specific to IMDs.

S. Medicare-Medicaid Dual Eligible Beneficiaries

We received a number of comments about individuals who are dually
eligible for both Medicaid and Medicare and the provision of both
Medicaid and Medicare benefits to such beneficiaries. Mental health
parity requirements under section 2726 of the PHS Act do not apply to
Medicare Parts A, B, or D services covered by Medicaid MCOs, such as
those covered by integrated plans for Medicare-Medicaid beneficiaries.
The proposed rule noted that Medicare benefits are controlled by the
Medicare statute and regulations, which are not within the scope of
this rule.
Comment: Several commenters stated that it would be impractical, if
not impossible, to isolate Medicare benefits from Medicaid benefits for
the purposes of determining which aspects of a Medicare-Medicaid
integrated care model must comply with MHPAEA. Other commenters noted
that administrative difficulties that could arise under the proposed
policy, including the complexity of applying NQTL standards to drugs
covered by Medicaid but not covered by Medicare Part D. The commenters
raised concerns that situations like this could result in increased
fragmentation at a time when CMS has taken steps to better integrate
coverage for Medicare-Medicaid beneficiaries. The commenters encouraged
CMS to ensure that a beneficiary's entire benefit package of items and
services meets parity standards, regardless of the entity or program
that is responsible for financing the care, stating that this approach
would ensure equitable access to MH/SUD by beneficiaries across all
programs, and would also support issuers and states in meeting
compliance standards.
Response: The MHPAEA statute does not apply to Medicare, and we
lack the statutory authority to apply this rule to Medicare benefits.
In states participating in the CMS Financial Alignment Initiative that
are implementing a capitated model in which beneficiaries are enrolled
in managed care plans, we will provide technical assistance as needed
about how to structure and assess those plans for compliance with
MHPAEA.
For the reasons indicated in the response to comments, we do not
include provisions in the final rule that are specific to coverage
provided to Medicare-Medicaid beneficiaries.

IV. Summary of Changes

For the most part, this rule finalizes the provisions of the
proposed rule. Those provisions of this final rule that differ from the
proposed rule are as follows:
We have revised the definitions in Sec. 438.900, Sec.
440.395(a) and Sec. 457.496(a) so that long term services are included
in the definition of medical/surgical benefits, mental health benefits,
and substance use disorder benefits and that the provisions of this
final regulation apply to these services.
We are finalizing Sec. 438.910(b)(2), Sec.
440.395(b)(2)(ii) and Sec. 457.496(d)(2)(ii) with a modification that
requires the standards used to assign mental health/substance use
disorder benefits to a classification be reasonable as well as the same
as the standards used for medical/surgical benefits.
We have revised Sec. 438.910(d)(3) and Sec.
457.496(d)(5) to eliminate the deeming provision; as finalized these
rules do not provide that MCOs or CHIP state plans will be deemed in
compliance with parity solely based on adherence to Sec.
438.206(b)(4); this revision clarifies that the requirements of these
two provisions are complementary.
We have also revised the language in Sec. 438.910(d)(3)
and Sec. 457.496(d)(5), as proposed it included a requirement to use
the ``same'' standards regarding access to out-of-network providers, to
more closely align with the general requirement for NQTLs; the rule is
finalized to require the use of ``comparable'' standards.
We have revised Sec. 438.6(n) to require MCO contracts to
provide for services to be delivered in compliance with this rule and
new subpart K, rather than requiring those contracts to ensure that
enrollees actually receive such services.
We have modified Sec. 438.905(a) to change the heading
and delete designation of (a)(1).
We have revised Sec. 438.920(b)(1) to clarify that states
have to review both medical/surgical benefits and MH/SUD benefits when
completing the parity analysis. We have also specified in Sec.
438.920(b)(1) that information on compliance with the rule must be made

[[Page 18425]]

available on a state's Web site, that such documentation must be
provided within 18 months of the date of publication of this final
rule, and that the documentation must be updated with any change in
MCO, PIHP, PAHP or Medicaid state plan benefits. Minor revisions have
also been made to the wording of this provision.
We have revised Sec. 438.920(b)(2) to require the state
to ensure that all services be delivered to the enrollees of the MCO in
compliance with this rule, regardless of whether the MCO covers all
services or only a portion of the services.
We have modified Sec. 438.930 to provide that contracts
with MCOs, PIHPs, and PAHPs offering Medicaid state plan services to
enrollees, and those entities, must comply with the requirements of
this subpart no later than 18 months after the date of publication of
this final rule, regardless whether that date is the start or middle of
a contract year.
Consistent with the statute, we have added a new provision
at Sec. 440.395(c) to state that when ABPs are offering EPSDT
services, they will be deemed in compliance with parity. We have also
redesignated the remaining paragraphs and references accordingly.
We have modified Sec. 440.935(d)(1) to replace
``Alternative Benefit Plans'' with ``ABPs'' in the heading.
We have revised 440.395(e)(2) to reflect that Essential
Health Benefits are defined to potentially include more than the
minimum 10 EHBs.
We have modified Sec. 457.496 throughout to replace
``CHIP state plans'' with ``state plan.''
We have added clarifying language to the definition of
EPSDT benefits within Sec. 457.496(a) to indicate that states must
provide services described in section 1905(r) of the Act in manner that
is compliant with section 1902(a)(43) of the Act.
We have modified Sec. 457.496(b) to specify the
requirements states must follow in order for their separate CHIP to be
deemed compliant with the MHPAEA parity requirements. These
modifications include not excluding benefits on the basis of condition
or diagnosis, and including a description of their efforts to comply
with the deeming requirements within the state plan.. We also provide
that if a state has elected in its state child health plan to cover
EPSDT benefits only for certain children eligible under the state child
health plan, the state is deemed compliant with this section only with
respect to such children.
We have modified Sec. 457.496(d)(5) to refer to
``providers for mental health or substance use disorder benefits''
instead of ``providers for mental health and substance use disorder
benefits.''
We have modified Sec. 457.496(f)(1) to specify that
states must describe the standard being used to define medical/
surgical, MH, and SUD benefits in their state plan.
We have modified Sec. 457.496(f)(1) to replace ``State
Medicaid agency'' with ``State.''
We have added a new Sec. 457.496(f)(1)(i) and (ii) and
redesignated the remaining provisions of this section.
We have revised the regulatory text as applicable
throughout to replace the acronym ``MH/SUD'' with the full phrase
``mental health and substance use disorder'' or ``mental health or
substance use disorder

V. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA), 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. To
fairly evaluate whether an information collection 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 April 10, 2015, proposed rule (80 FR 19418) we solicited
public comment on each of the section 3506(c)(2)(A) required issues for
the following information collection requirements. PRA-related comments
were received as indicated below in section V.D. under ``Comments
Associated with the Proposed Collection of Information Requirements.''
While the changes that were made as a result of these comments did not
revise the majority of the proposed requirements and burden estimates,
burden for the requirements under Sec. 438.920 (specific to performing
and posting the parity analysis on the state's Web site) have been
added to this final rule based on the comments received. Commenters
raised concerns that the cost analysis of the proposed rule fails to
consider the administrative cost to the states of providing MH/SUD
services through MCOs and through FFS delivery systems. The proposed
rule did not set forth such burden since we requested comments on our
proposed approach.

A. Wage Estimates

To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' (BLS) May 2014 National Occupational Employment and Wage
Estimates for all salary estimates (www.bls.gov/oes/current/oes_nat.htm). In this regard, Table 2 presents the mean hourly wage,
the cost of fringe benefits, and the adjusted hourly wage.

Table 2--Hourly Wage Estimates *
----------------------------------------------------------------------------------------------------------------
Fringe benefit
Occupation title Occupation Mean hourly (at 100%) (per Adjusted
code wage hour) hourly wage
----------------------------------------------------------------------------------------------------------------
Business Operations Specialists................. 13-1000 $33.69 $33.69 $67.38
Medical Secretaries............................. 43-6013 16.12 16.12 32.24
Social Scientists and Related Workers........... 19-3099 38.48 38.48 76.96
----------------------------------------------------------------------------------------------------------------
* The wage estimates from the proposed rule have been revised to account for more recent BLS data.

We have adjusted all 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, there is no practical alternative and
we believe that doubling the hourly wage to estimate total cost is

[[Page 18426]]

a reasonably accurate estimation method.

B. Information Collection Requirements (ICRs)

1. ICRs Regarding the Availability of Information and the Criteria for
Medical Necessity Determinations (Sec. 438.915(a), Sec.
440.395(c)(1), and Sec. 457.496(e)(1))
Sections 438.915(a), 440.395(c)(1), and 457.496(e)(1) require that
the medical necessity determination criteria used by regulated entities
for MH/SUD benefits be made available to potential participants,
beneficiaries, or contracting providers upon request.
In the tri-Department MHPAEA final rule, the regulatory impact
analysis (78 FR 68253 through 68266) quantified the costs for health
insurance issuers and group health plans to disclose medical necessity
criteria. For consistency and comparability, we are using the same
method for determining this rule's disclosure costs, with adjustments
to account for Medicaid MCOs, PIHPs and PAHPs, ABPs and CHIP, and the
population covered.
Labor Costs for Medical Necessity Disclosures. Consistent with our
proposed rule, we are unable to estimate with certainty the number of
requests for medical necessity criteria disclosures that will be
received by regulated entities. While we did not receive any public
comments on this point, the MHPAEA final rule's impact analysis set
forth assumptions that we believe are relevant for calculating costs
for the Medicaid and CHIP program. The impact analysis assumed that
each plan would receive 3 medical necessity criteria disclosure
requests for every 1,000 beneficiaries. This assumption equated to
0.003 requests per enrollee which was applied to the number of
beneficiaries enrolled in Medicaid MCOs (33.1 million), ABP (8.7
million) and CHIP (5.7 million) to project 142,403 expected requests
(99,328 for MCOs + 26,100 for ABPs +16,975 for CHIP).
To estimate the time it will take medical staff to respond to each
request, we used the assumption in the MHPAEA final rule's impact
analysis. Specifically, we assumed that it took a staff member (in this
case, a medical secretary) 5 minutes to respond to the request. In this
rule, this results in a total annual burden of 11,867 hours (142,403
requests x 5 min/60) at a cost of $382,592.08 (11,867 hours x $32.24/
hour) for all Medicaid and CHIP programs. The state costs for this
burden is $153,037 (state match is 40 percent of costs).
Mailing and Supply Costs. The MHPAEA final rule's impact analysis
estimated that 38 percent of the requests would be delivered
electronically with de minimis cost. The remaining requests would
require materials, printing, and postage amounting to approximately 66
cents per request. We believe that the same mailing and supply costs
per request will apply to the disclosure requirements of this rule. As
shown in Table 3, mailing and supply costs are $58,272 (88,291
responses x $.66). State share for this cost is $23,309. Total state
share costs are $176,346 ($153,037 in labor costs and $23,309 in
mailing costs)
Table 3 also displays the added burden estimates, nationally and
per program, for Medicaid MCOs and CHIP to comply with the medical
necessity determination criteria's disclosure procedures. These
estimates reflect the requests for medical necessity determination
criteria's disclosure procedures by beneficiaries or contracting
providers. The number of enrollees for MCOs/HIOs is based on the CMS
national breakout as of July 2012 while the number for ABPs is based on
the estimated enrollment growth due to Medicaid expansion (``National
Health Expenditure Projections 2012-2022,'' CMS).\10\ CHIP enrollment
is based on Medicaid and CHIP Payment and Access Commission's 2014
estimates.
---------------------------------------------------------------------------

\10\ Estimates are based on the most recent data available at
the time of the analysis.

Table 3--National and per Program Burden for the Medical Necessity Determination Criteria's Disclosure Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
expected Mailed
requests Time (@5 responses Mailing and
Plan type Number of (0.003 min/ Labor cost (62% of supply cost Total cost State costs
enrollees requests response) ($)@$32.24/hr expected ($)@$0.66/ *
per (hours) enrollees) mailing
enrollee)
--------------------------------------------------------------------------------------------------------------------------------------------------------
MCO/HIO...................................... 33,109,462 99,328 8,277 $266,850.48 61,584 $40,645 $307,496 $122,998
ABP.......................................... 8,700,000 26,100 2,175 70,122.00 16,182 10,680 80,802 32,321
CHIP......................................... 5,658,460 16,975 1,415 45,619.60 10,525 6,947 52,567 21,027
----------------------------------------------------------------------------------------------------------
Total.................................... 47,467,922 142,403 11,867 382,592.08 88,291 58,272 440,865 176,346
--------------------------------------------------------------------------------------------------------------------------------------------------------

Submitting Requests for Medical Necessity Disclosures (Potential
Participants, Beneficiaries, and Contracting Providers). Table 4
displays the added burden estimates, nationally and per program, for
Medicaid and CHIP potential participants, beneficiaries and providers
to request the medical necessity determination criteria. It is
difficult to determine the financial impact on providers since the
proportion of providers that would submit this request is unknown and
the staff costs in these agencies would vary based on the level of
professional (physician, licensed clinician, or medical claims staff)
that may request this information.

[[Page 18427]]

Table 4--National and per Potential Participant, Beneficiaries and Provider Burden for the Medical Necessity
Determination Criteria's Disclosure Requirements
----------------------------------------------------------------------------------------------------------------
Number of
expected
Number of requests Time (@15 min/
Plan type enrollees (0.003 request)
requests per (hours)
enrollee)
----------------------------------------------------------------------------------------------------------------
MCO/HIO......................................................... 33,109,462 99,328 24,832
ABP............................................................. 8,700,000 26,100 6,525
CHIP............................................................ 5,658,460 16,975 4,244
Total....................................................... 47,467,922 142,403 35,601
----------------------------------------------------------------------------------------------------------------

The aforementioned requirements and burden will be submitted to OMB
for approval under control number 0938-1280 (CMS-10556).
2. ICRs Regarding the Availability of Information and Reason for Any
Denial (Sec. Sec. 438.915(b), 440.395(c)(2), and 457.496(e)(2))
MHPAEA requires that the reason for any denial--under a group
health plan or health insurance coverage--of reimbursement or payment
for MH/SUD benefits must be made available (upon request or as
otherwise required) by the plan administrator (or the health insurance
issuer) to the beneficiary in accordance with MHPAEA regulations (45
CFR 146.136(d)(2)).
This final rule only addresses disclosure of information concerning
the denial of reimbursement or payment for MH/SUD benefits. We believe
that these requirements are already met by complying with existing
disclosure requirements in parts 438 and 431, and therefore, do not
create any new or revised requirements or burden beyond what is
currently approved by OMB under control number 0938-1080 (CMS-10307).
We also believe that these requirements are already met for CHIP by
complying with existing notification and disclosure requirements in
Sec. 457.110 and Sec. 457.1130, and therefore, do not create any
requirements or burden beyond what is currently approved by OMB under
control number 0938-1148 (CMS-10398 #34) (formerly, CMS-R-211, control
number 0938-0707). For ABPs, these provisions do not create any new or
revised third-party disclosure requirements beyond what is currently
approved by OMB under control number 0938-1188 (CMS-10434).
3. ICRs Regarding Parity in Mental Health and Substance Use Disorder
Benefits in Alternative Benefit Plans (Sec. 440.395)
When a state plan provides for an ABP, the state must provide
sufficient information in an ABP state plan amendment (Sec. 440.300)
request to assure compliance with the requirements of (Sec.
440.395(e)(3)), including the application of parity to treatment
limitations as addressed in this rule. The ABP state Plan Application
is employed by states to identify benefits offered to Medicaid
beneficiaries receiving services under section 1937 of the Act. The
application requires that states identify the MH/SUD services that will
be offered under the plan. The plan also collects information on any
limitations (quantitative and nonquantitative treatment limitations)
and financial requirements across all benefit categories (including all
medical/surgical services).
The parity requirements in Sec. 440.395 do not impose any new or
revised reporting, recordkeeping, or third-party disclosure
requirements for 10 or more states since only one state and three
territories operates their ABP state plan in FFS, and therefore, do not
require additional OMB review under the authority of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.). These states that
operate the ABP programs in a fee-for-service only delivery system
would not have to perform an additional parity analysis across the
various delivery systems. States that operate their ABP programs
through a managed care arrangement would be required to attest that
they are compliant with parity, and to solicit comments on their ABP
state plan (which includes requests for comments on this attestation),
but that attestation is in an existing PRA: OMB under control number
0938-1188 (CMS-10434). While states are required to solicit public
comment, we maintain that the information collection requirement is
exempt from the requirements of the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.) since we estimate fewer than ten annual
respondents (5 CFR 1320.3(c)). As ABPs are most often used by states to
expand Medicaid to the adult population, we project that this would
apply to no more than 1 to 2 states per year.
4. ICRs Regarding State Plan Amendments (SPAs)
This rule does not impose any new or revised SPA-specific
reporting, recordkeeping, or third-party disclosure requirements and
therefore does not require additional OMB review under the authority of
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The rule
does not require a state to amend its current non-ABP SPA since states
have the option of including additional services necessary to meet
parity requirements in the MCO, PIHP or PAHP contracts. The burden for
amending such contracts is set out below under Sec. 438.6(n).
The currently approved ABP SPA template was designed to capture the
MHPAEA final rule classifications and identify if there are specific
treatment limitations or financial requirements. The ABP SPA template's
information collection requirements and burden are not affected by this
rule and are approved by OMB under control number 0938-1188 (CMS-
10434).
States are required to review their respective CHIP state plans to
determine if they are in compliance with federal law, and states must
submit a CHIP SPA to make the necessary changes to the state plan to
comply with changes in federal law as described in Sec. 457.60(a).
Section 502 of the CHIPRA amended section 2103(c) of the Act, which was
described in SHO letters #09-014 and #13-001. Many states have
performed parity analyses based on that guidance and submitted SPAs to
come into compliance with MHPAEA.
However, as described in section III. G of this final rule, we plan
on developing state plan pages specific to MHPAEA, so all states with a
separate CHIP must submit a SPA to update their state plan. We
anticipate that up to 42 states will need to submit a SPA, which may
add up to 160 hrs. of additional burden on states based on the
estimated burden of submitting a SPA (80 hrs.)

[[Page 18428]]

approved by OMB under control number 0938-1148 (CMS-10398 #34)
(formerly CMS-R-211, control number 0938-0707). This additional SPA
burden is estimated to cost $12,313.60 (160 hrs x $76.96/hr.) for a
social science analyst to submit a complete SPA package; however, the
final costs for the states will be much lower because in CHIP it is
important to take into account the Federal government's contribution to
the cost of administering CHIP. States receive an enhanced FMAP for
administering their CHIP program that now includes a 23 percentage
increase beginning in FFY 2016, which was maintained through the
passage of the Medicare Access and CHIP Reauthorization Act of 2015
(MACRA). The average enhanced FMAP has increased to 92.7 percent,
decreasing the state's share of this additional burden to a nominal
cost of $898.89 ($12,313.60 x 0.073). When ready, the SPA template
along with the associated requirements and burden will be submitted to
OMB for approval under control number 0938-1148 (CMS-10398 #34). This
is a preliminary estimate that is based on our experience with existing
SPA templates.
5. ICRs Regarding State Health Official (SHO) Letters SHO #09-014
(November 4, 2009) and SHO #13-001 (January 16, 2013)
The January 2013 SHO letter addressed the application of the MHPAEA
requirements in Medicaid and expanded upon the CHIP guidance that was
provided in the November 2009 letter regarding section 502 of CHIPRA.
Since the letters are discussed in section II.A. of this final rule (as
background), we wish to clarify that this rule does not include any new
or revised reporting, recordkeeping, or third-party disclosure
requirements pertaining to either of the letters. Consequently, the PRA
does not apply.
6. ICRs Regarding Contract Requirements (Sec. 438.6(n))
In Sec. 438.6(n), states are now required to include contract
provisions in all applicable MCO, PIHP, and PAHP contracts to comply
with part 438, subpart K. We estimate a one-time state burden of 30
minutes at $67.38/hour for a business operations specialist to amend
each contract with provisions that implement the requirements outlined
in part 438, subpart K. Applicable to 36 states (which is the number of
states that have an MCO model), and to a total of 602 contracts in
those states, in aggregate we estimate 301 hours (602 contracts x 0.5
hours) and $20,281 (301 hours x $67.38/hr.). State costs for this
burden is $8,112 (40 percent of costs are state match). The
requirements and burden will be submitted to OMB for approval under
control number 0938-1280 (CMS-10556).
7. ICRs for State Responsibilities (Sec. 438.920)
In any instance where the full scope of medical/surgical and MH/SUD
services are not provided through the MCO, Sec. 438.920 specifies that
the state must review the MH/SUD and medical/surgical benefits provided
through the MCO, PIHP, PAHP, and fee-for service (FFS) coverage to
ensure that the full scope of services available to all enrollees of
the MCO complies with the requirements in this subpart K. The state is
also expected to review the parity analysis provided by an MCO that is
responsible for delivering all MH/SUD Medicaid services. The state must
provide documentation of compliance with the requirements under this
subpart to the general public and post this information on the state's
Medicaid Web site. The 36 states that have an MCO model would be
responsible for developing or reviewing the benefits offered by MCOs,
PIHPs, PAHPs and FFS to ensure the benefits offered to enrollees of the
MCO comply with requirements in this subpart. We estimate a state
burden of 8 hours at $67.38/hour for a business operations specialist
to perform this analysis and document compliance and, on an ongoing
basis, update the documentation. In aggregate, we estimate 384 hours
(36 states x 8 hours) and $19,405 (288 hours x $67.38/hr.). State costs
for this burden is $7,762. The requirements and burden will be
submitted to OMB for approval under control number 0938-1280 (CMS-
10556).

C. Summary of Burden Estimates

Table 5--Annual Recordkeeping and Reporting Requirements
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Hourly labor Total Total
OMB Potential Total annual cost of labor cost mailing Total State
Regulation section(s) under title 42 of the CFR control respondents responses Burden per response burden reporting ($/ of and supply cost share
No. (hours) hr) reporting costs *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
438.915(a), 440.395(c)(1), and 457.496(e)(1) 0938-1280 602 142,403 5 min........................... 11,867 32.24 $382,592 $58,272 $440,864 176,346
(States and Plans).
438.915(a), 440.395(c)(1), and 457.496(e)(1) 0938-1280 47,467,922 142,403 15 min.......................... 35,601 N/A N/A N/A N/A .........
(Potential participants, beneficiaries and
providers).
438.6(n) (States).............................. 0938-1280 36 602 30 min.......................... 301 67.38 20,281 0 20,281 8,112
438.920 (States)............................... 0938-1280 36 36 8 hours......................... 288 67.38 19,405 0 19,405 7,762
457.496 (State Plan Amendments................. 0938-1148 42 2 80 hours........................ 160 76.96 12,314 0 12,314 899
------------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... .......... 47,468,638 285,446 88 hrs 50 min................... 48,217 ............ 434,592 58,272 492,864 193,119
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This rule does not set forth any capital/maintenance costs.

D. Comments Associated With the Proposed Collection of Information
Requirements

Comment: Two commenters expressed concerns that the cost analysis
of the proposed rule fails to consider the administrative cost to the
states of providing MH/SUD services through MCOs and through FFS
delivery systems. They stated that significant administrative costs
would be associated with creating new ongoing reporting mechanisms for
states and MCOs to provide detailed information on their quantitative
and nonquantitative limits across multiple MCOs and the FFS structure,
perform

[[Page 18429]]

the parity analysis, post on the states Web site and report to CMS.
Commenters also stated that these requirements would require state
staff to review the rule, review each contract, develop appropriate
language needed in each contract, and process the amended contract
through the administrative channels. The actual time needed to address
this would be many times greater than the proposed estimate.
Response: We recognize that the administrative burden of
implementing this rule will vary across states and MCOs, and intend for
the numbers cited above are a national estimate of burden across all
impacted entities. We note that efficiencies can be achieved regarding
implementation of this rule through the use of standardized processes,
and that technical assistance provided to states is intended to help to
reduce the administrative burden. However, we do agree with the
commenters that there will be an additional burden to states to perform
and/or review the parity analysis, document compliance and post it to
the state's Web site. We have included the projections of this
additional burden in section V.B.7 of this final rule.

E. Submission of PRA-Related Comments

We submitted a copy of this final rule's information collection and
recordkeeping requirements to OMB for review and approval. The
requirements are not effective until they have been formally approved
by the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit CMS' Web
site at www.cms.hhs.gov/[email protected]">www.cms.hhs.gov/[email protected], or call the Reports
Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please identify the rule (CMS-
2333-F) and submit your comments to the OMB desk officer via one of the
following transmissions:
Mail: OMB, Office of Information and Regulatory Affairs; Attention:
CMS Desk Officer.
Fax Number: 202-395-5806 OR
Email: [email protected].
ICR-related comments are due April 29, 2016.

VI. Regulatory Impact Analysis

A. Statement of Need

This final rule addresses the applicability of the requirements
under the MHPAEA to Medicaid non-managed care benchmark and benchmark-
equivalent plans (referred to in this final rule as Medicaid ABPs) as
described in section 1937 of the Act, CHIP under title XXI of the Act,
and Medicaid MCOs as described in section 1932 of the Act.
In 2013, we released a SHO letter that provided guidance to states
regarding the implementation of requirements under MHPAEA to Medicaid
benchmark and benchmark-equivalent plans (referred to in this letter as
ABPs), CHIP, and Medicaid MCOs.
Final regulations implementing MHPAEA were published in the tri-
Department MHPAEA final regulations that do not apply to Medicaid MCOs,
ABPs, or CHIP state plans.
We believe that in absence of a regulation specific to the
application of the parity requirements under MHPAEA to Medicaid and
CHIP, states would not be compelled to implement the necessary changes
to these programs, resulting in an inequity between beneficiaries who
have MH/SUD conditions in the commercial market (including the state
and federal marketplace) and Medicaid and CHIP. Even for states that
are attempting to comply with parity requirements under MHPAEA, the
absence of regulation could lead to inconsistent state-specific
policies.
This final rule provides the specificity and clarity needed to
effectively implement the policies set forth by MHPAEA and prevent the
use of prohibited limits on coverage, including nonquantitative
treatment limitations that disproportionately limit coverage of
treatment for MH/SUD conditions. The Department's assessment of the
expected economic effects of this final rule is discussed in detail
below.

B. Overall Impact

We have examined the impacts 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) and the Congressional Review Act (5 U.S.C. 804(2)).
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). Section
3(f) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule: (1) (Having
an annual effect on the economy of $100 million or more in any 1 year,
or adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or state, local or tribal governments or communities (also
referred to as ``economically significant''); (2) creating a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raising novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year). We estimate that this final rule is ``economically significant''
as measured by the $100 million threshold, and hence, also a major rule
under the Congressional Review Act. Accordingly, we have prepared a
RIA, which to the best of our ability presents the costs and benefits
of the rulemaking.
Because the application of parity requirements to ABPs; MCOs and
PIHPs and PAHPs providing services to MCO enrollees; and the CHIP is
likely to have an effect on the economy of $100 million or more in any
given year, this final rule is economically significant within the
meaning of section 3(f)(1) of the Executive Order as elaborated below,
we believe the benefits of the rule justify the costs.

C. Anticipated Effects

This final rule would benefit approximately 22.3 million Medicaid
beneficiaries and 880,000 CHIP beneficiaries in 2016, based on service
utilization estimates from 2012 Medicaid and CHIP enrollment. We expect
that a significant benefit associated with the application of the
parity requirements under MHPAEA and these final regulations will be
derived from applying parity requirements to the quantitative treatment
limits such as annual or lifetime day or visit limits. Applying parity
requirements to visit or stay limits will help ensure that vulnerable
populations--those accessing substantial amounts of MH/SUD

[[Page 18430]]

services--have better access to appropriate care. Among adults aged 18
through 64 with Medicaid coverage, approximately 9.6 percent have a
serious mental illness, 30.5 percent have any mental illness, and 11.9
percent have a substance use disorder.\11\ Among CHIP beneficiaries,
approximately 8 percent of children experience serious behavioral or
emotional difficulties.\12\
---------------------------------------------------------------------------

\11\ Calculations were based on the Substance Abuse and Mental
Health Services Administration (SAMHSA) National Survey of Drug Use
and Health.
\12\ Pastor P.N., Reuben C.A., Duran C.R. Identifying Emotional
And Behavioral Problems in Children Aged 4-17 Years: United States,
2001-2007. National Health Statistics Report No. 48. Hyattsville,
MD: National Center for Health Statistics; 2012.
---------------------------------------------------------------------------

Evidence-based treatment for severe and persistent mental illness,
and for substance use disorders, often requires prolonged (possibly
lifetime) treatment that consists of pharmacotherapy, supportive
counseling, and often rehabilitative services. Individuals with severe
MH/SUD conditions often quickly exhaust their benefits under Medicaid
managed care. In addition, CHIP programs may restrict coverage, such as
covering only 40 hours of psychotherapy or 5 days of detoxification per
year. These coverage restrictions often result in people forgoing
outpatient treatment and a higher likelihood of non-adherence to
treatment regimes, which produce poor health and welfare outcomes and
create the potential for increased hospitalization
costs.^{13 14} For those with substance use disorders,
treatment retention is of key importance when assessing outcomes, where
those who stayed in treatment longer had more success in decreasing
their substance use.^{15 16} In 2011, approximately 8 percent
of adults with Medicaid coverage reported at least one occurrence in
the past 12 months of feeling the need for MH/SUD treatment or
counseling but not receiving it.\17\ Between 2007 and 2009,
approximately 72 percent of children in Medicaid with a potential
mental health need did not receive mental health services.\18\ The most
frequently cited reasons for not seeking MH/SUD treatment are cost and/
or a lack of health insurance coverage, low perceived need, stigma, or
structural barriers (for example, no transportation, did not know where
to go).^{19 20} Removing quantitative limits on treatment may
be particularly beneficial for individuals with severe mental illness
and substance use disorders who may need to receive more services than
the average individual.^{21 22} Improved coverage may also
reduce the financial burden on individuals and families, particularly
those families of children with mental health service needs.\23\
Finally, improving coverage of MH/SUD treatment may also improve
employment, productivity, and earnings among those with these
conditions.\24\ Wang, et al, found that implementing a care program for
those identified with depression yielded not only enhanced clinical
outcomes relative to depression, but also produced positive outcomes
relative to decreased sick leave and increased productivity.\25\
Similarly, the State of Washington implemented a substance abuse
treatment program for those receiving Aid to Families with Dependent
Children (AFDC), and found that access to treatment increased earnings
for those with jobs, as well as increased rates of employment.\26\
---------------------------------------------------------------------------

\13\ Medication-Assisted Treatment for Opioid Addiction in
Opioid Treatment Programs. Rockville (MD): Substance Abuse and
Mental Health Services Administration (US); 2005. Treatment
Improvement Protocol (TIP) Series, No. 43.
\14\ Trivedi A.N., Swaminathan S, Mor V. Insurance parity and
the use of outpatient mental health care following a psychiatric
hospitalization. JAMA. 2008 Dec 24;300(24):2879-85.
\15\ Simpson D, Joe G.W., Rowan-Szal G. Drug abuse treatment
retention and process effects on follow-up outcomes. Drug and
Alcohol Dependence. 1997b;47(3):227-235.
\16\ Hartel D.M., Schoenbaum E.E. Methadone treatment protects
against HIV infection: Two decades of experience in the Bronx, New
York City. Public Health Reports. 1998;113(Suppl. 1):107-115.
\17\ Substance Abuse and Mental Health Services Administration
(SAMHSA). Behavioral Health United States 2012. HHS Publication No.
(SMA)13-4797. Rockville, MD: SAMHSA; 2013.
\18\ GAO. Children's Mental Health: Concerns Remain about
Appropriate Services for Children in Medicaid and Foster Care.
December 2012. http://www.gao.gov/assets/660/650716.pdf. Accessed
June 27, 2014.
\19\ Affordability Most Frequent Reason for Not Receiving Mental
Health Services. Rockville (MD): Substance Abuse and Mental Health
Services Administration (US); 2013. The NSDUH Report Data Spotlight.
\20\ Results from the 2012 National Survey on Drug Use and
Health: Summary of National Findings and Detailed Tables. Rockville
(MD): Substance Abuse and Mental Health Services Administration
(US); 2013.
\21\ Zuvekas S.H., Banthin J.S, Selden T.M. How would mental
health parity affect the marginal price of care? Health Serv Res.
2001 Feb;35(6):1207-27. Review.
\22\ McConnell K.J. The effect of parity on expenditures for
individuals with severe mental illness. Health Serv Res. 2013
Oct;48(5):1634-52. doi: 10.1111/1475-6773.12058. Epub 2013 Apr 5.
\23\ Barry C.L., Busch S.H. Do state parity laws reduce the
financial burden on families of children with mental health care
needs? Health Serv Res. 2007 Jun;42(3 Pt 1):1061-84.
\24\ Dunigan R, Acevedo A, Campbell K, Garnick D.W., Horgan
C.M., Huber A, Lee M.T., Panas L, Ritter G.A. Engagement in
outpatient substance abuse treatment and employment outcomes. J
Behav Health Serv Res. 2014 Jan;41(1):20-36. doi: 10.1007/s11414-
013-9334-2.
\25\ Wang P, Simon G.E., Avorn J, Azocar F, Ludman E.J.,
McCulloch J, Petukhova M.Z., Kessler R.C. Telephone screening,
outreach and care management for depressed workers and impact on
clinical and work productivity outcomes. JAMA 2007;298(12):1401-11.
\26\ Wickizer TM, Campbell K, Krupski A, Stark K. Employment
outcomes among AFDC recipients treated for substance abuse in
Washington State. Milbank Q. 2000;78(4):585-608, iv. PubMed PMID:
11191450.
---------------------------------------------------------------------------

Application of parity requirements may also result in changes to
payers' utilization management approaches, specifically when requiring
preauthorization of mental health services. It was found that even when
approval for continued access to mental health services was in essence
guaranteed, patients required to obtain prior approval sought out less
treatment, perhaps believing they ``should not'' access further needed
treatment.\27\ Hodgkin, et al, found that removal of utilization
management approaches (including preauthorization for the first set of
mental health visits) increased use of mental health services.\28\
Cuffel, et al, note that there are various reasons for why an approach
like preauthorization can impact provider behavior relative to mental
health service. Providers may believe that the preauthorization process
is too laborious and not worth their time; they may fear that those
reviewing the request will penalize them for submitting a
preauthorization request; they may assume that the set limits on
services preclude additional requests for services; providers may
believe that the initial limits are in place as an implied
recommendation towards shorter treatment cycles; and some may believe
requests for preauthorization simply will not be approved at all.\29\
Liu, et al, found a significant correlation between preauthorization
processes and the probability of ending mental health treatment
prematurely.\30\
---------------------------------------------------------------------------

\27\ Liu, X., R. Sturm, and B.J. Cuffel. 2000. ``The Impact of
Prior Authorization on Outpatient Utilization in Managed Behavioral
Health Plans.'' Medical Care Research Review 57: 182-95.
\28\ Hodgkin D., Merrick E.L., Horgan C.M., Garnick D.W.,
McLaughlin T.J. ``Does Type of Gatekeeping Model Affect Access to
Outpatient Specialty Mental Health Services?.'' Health Services
Research 42. 1 (2007): 104-123.
\29\ Cuffel, B., McCulloch, J., Wade, R., Tam, L., Brown-
Mitchell, R., & Goldman, W. (2000). Patients' and providers'
perceptions of outpatient treatment termination in a managed
behavioral health organization. Psychiatric Services, 51(4), 469-
473.
\30\ Liu, X., Sturm, R., Cuffel, B. (2000) The impact of prior
authorization on outpatient utilization in managed behavioral health
plans. Med Care Res Rev. Jun;57(2):182-95.
---------------------------------------------------------------------------

Application of parity requirements under MHPAEA may also have
benefits in terms of reduced medical costs. Mental health and physical
health are interrelated, and individuals with poor mental health are
likely to have physical

[[Page 18431]]

health problems as well.^{31 32 33} Increased access to and
utilization of MH/SUD benefits may result in a reduction of medical and
surgical costs for individuals with mental health conditions and
substance use disorders (so called ``medical cost offsets''). For
example, after receiving treatment, individuals with substance use
disorders may experience fewer hospitalizations and emergency room
visits stemming from unintended injuries such as accidents and drug
overdose. The evidence that treatment results in medical care offsets
is stronger for substance abuse treatment than for mental health
treatment. For example, an evaluation on the expansion of substance
abuse treatment in Washington State's Medicaid program found per member
per month savings of $160 to $385 depending on the welfare cohort.\34\
Another study done on welfare clients in Washington State found that
those accessing substance use disorder treatment had on average $2500
less in medical costs than those who did not access treatment. This
estimated savings equaled the cost of SUD treatment for individuals
accessing SUD treatment.\35\ While a similar reduction in medical costs
may be expected from mental health treatment, most empirical studies
have not found a significant medical cost offset from mental health
treatment.^{36 37}
---------------------------------------------------------------------------

\31\ Druss BG, Walker ER. Mental disorders and medical
comorbidity. Synth Proj Res Synth Rep. 2011 Feb;(21):1-26. Review.
\32\ National Institute on Drug Abuse. (December 2012). Medical
Consequences of Drug Abuse. Retrieved from http://www.drugabuse.gov/related-topics/medical-consequences-drug-abuse.
\33\ Bouchery, E.E., Harwood, H.J., Sacks, J.J., Simon, C.J., &
Brewer, R.D. (2011). Economic costs of excessive alcohol consumption
in the US, 2006. American Journal of Preventive Medicine, 41(5),
516-524.
\34\ Wickizer, T.M., Mancuso, D., & Huber, A. (2012). Evaluation
of an innovative Medicaid health policy initiative to expand
substance abuse treatment in Washington State. Medical Care Research
and Review, 69(5), 540-559.
\35\ Wickizer, T.M., Krupski, A., Stark, K.D., Mancuso, D., &
Campbell, K. (2006). The effect of substance abuse treatment on
Medicaid expenditures among general assistance welfare clients in
Washington State. Milbank Quarterly,84(3), 555-576.
\36\ Simon GE, Katzelnick DJ. Depression, use of medical
services and cost-offset effects. J Psychosom Res. 1997
Apr;42(4):333-44. Review.
\37\ Sturm R. Economic grand rounds: The myth of medical cost
offset. PsychiatryServ. 2001 Jun;52(6):738-40.
---------------------------------------------------------------------------

1. Costs
a. Cost Associated With Increased Utilization of MH/SUD Benefits
A primary objective of Congress in enacting MHPAEA was to eliminate
barriers that impeded access to and utilization of MH/SUD benefits.
Cost increases and increases in capitated rates may occur as a result
of increased access and utilization from the application of parity
requirements and these regulations, but the evidence suggests that any
increases will not be large. The impact of parity requirements will
depend on the extent to which MCOs, ABPs, and CHIP plans lack benefits
in some classifications or manage these benefits inconsistent with such
parity requirements.
In the April 30, 2010 final rule on State Flexibility for Medicaid
Benefit Packages (75 FR 23068), the assumptions utilized in modeling
the estimated economic impact of the associated provisions took into
account the costs of the benefit package for the new adult group served
through ABPs. Coverage of these benefits was already accounted for in
the April 30, 2010 final rule, and therefore, does not need to be
repeated here. Because we approved ABPs only after ensuring compliance
with MHPAEA, we project that this regulation will result in no
additional costs to ABPs.
(1) Effect of Removing Non-Compliant Quantitative Treatment Limitations
A review of Medicaid managed care benefits in all 50 states and the
District of Columbia revealed that a subset of states (18 states) had
Medicaid managed care plans that imposed quantitative treatment limits
on outpatient visits, inpatient stays, and intermediate services (for
example, intensive outpatient treatment). As indicated in the preamble,
some of these quantitative treatment limits are a result of what is
currently in a state's Medicaid plan.
A review of CHIP plans indicated that most are already compliant
with MHPAEA. CHIP plans that include Medicaid EPSDT are already
required to cover mental health and substance abuse services as needed
and they are deemed compliant with MHPAEA parity requirements for
financial requirements and treatment limitations. It is not permissible
to apply annual or lifetime limits to the EPSDT benefit. CHIP stand-
alone programs are also already compliant with MHPAEA because of
changes to treatment limitations for both MH/SUD benefits and medical
and surgical benefits required under the Affordable Care Act.\38\ Among
CHIP plans that are Medicaid expansion plans, we found only one to have
an explicit quantitative limit.\39\
---------------------------------------------------------------------------

\38\ Sarata AK. Mental health parity and the Patient Protection
and Affordable Care Act of 2010. Washington, DC: Congressional
Research Service; 2011.
\39\ McConnell KJ, Gast SH, Ridgely MS, Wallace N, Jacuzzi N,
Rieckmann T, McFarland BH, McCarty D. Behavioral health insurance
parity: does Oregon's experience presage the national experience
with the Mental Health Parity and Addiction Equity Act? Am J
Psychiatry 2012 Jan;169(1):31-8.
---------------------------------------------------------------------------

We conducted an analysis to determine how the use of services might
increase if quantitative limits on Medicaid MCO and CHIP programs were
eliminated. Where quantitative limits exist that are non-compliant with
parity requirements, states also have the option to align these limits
for MH/SUD and medical/surgical benefits consistent with the provisions
of this final rule. However, to estimate the highest possible cost
impact that could be expected, we simulated the effect of removing
visit and day limits in states with limits for treatment users by
anticipating that utilization would increase for beneficiaries who were
near or exceeded current limits to equal utilization patterns observed
in states without limits for Medicaid managed care beneficiaries. This
simulation indicated the maximum impact of removing quantitative day
and visit limits on MH/SUD services by Medicaid MCOs to be $109.0
million nationwide (including federal and state costs) in undiscounted
dollars in 2016. Using a similar approach, we estimated the maximum
impact of removing quantitative limits on CHIP expenditures to be $42.1
million in undiscounted dollars in 2016.
However, these estimates are the largest possible cost impacts and
the actual impact is likely to be lower. One reason is that some states
with quantitative limits may have mechanisms in place for beneficiaries
to obtain hospital days or outpatient visits beyond the state's limit
if such care is determined to be medically necessary. In practice, we
anticipate a potentially lower impact than estimated currently, given
that quantitative limits may already be routinely exceeded. We found
that in most of the 18 states with visit limits, a number of recipients
(ranging from 5 to 20 percent) used services beyond the treatment
limit, suggesting that exceptions to the quantitative limits may occur
in these states. This does not appear to be the case in all states,
because in a few states with visit limits ranging from approximately 24
to 40 visits, only 1 or 2 percent of recipients exceeded the limit.
There are no studies to date on how the application of federal
parity requirements affects Medicaid spending.

[[Page 18432]]

However information from states that have passed state-specific parity
legislation (which includes application to Medicaid) provides
additional support for the projected impact of these regulations on
service utilization and spending. For instance, an evaluation of the
Oregon parity law found no significant increases in aggregate
behavioral health spending or in the percent of individuals using
behavioral health services associated with its implementation.\40\ The
evaluators surmised that the flexibility in quantitative limits prior
to the parity law may be one reason that the implementation of parity
did not lead to large increases in spending. Specifically, they found
that prior to the implementation of the state parity law; approximately
5 percent of beneficiaries with any behavioral health visits exceeded
the specified limits of that plan.
---------------------------------------------------------------------------

\40\ McConnell KJ, Gast SH, Ridgely MS, Wallace N, Jacuzzi N,
Rieckmann T, McFarland BH, McCarty D. Behavioral health insurance
parity: does Oregon's experience presage the national experience
with the Mental Health Parity and Addiction Equity Act? Am J
Psychiatry 2012 Jan;169(1):31-8.
---------------------------------------------------------------------------

Vermont's parity law is also very similar to MHPAEA. A study of
Vermont's parity law found that the share of spending on mental and
substance use disorders increased from 2.30 percent to 2.47 percent of
total spending for one health plan.\41\
---------------------------------------------------------------------------

\41\ Rosenbach M, Lake T, Young C, et al. Effects of the Vermont
Mental Health and Substance Abuse Parity Law. DHHS Pub. No. SMA 03-
3822, Rockville, MD: Substance Abuse and Mental Health Services
Administration; 2003.
---------------------------------------------------------------------------

Finally, a recent evaluation of the effect of MHPAEA on the
commercial market revealed a modest increase in spending on substance
use disorder treatment per enrollee ($9.99, 95 percent CI: 2.54,
18.21), but no significant change in the percent of individuals using
substance use disorder services.\42\
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\42\ Busch SH, Epstein AJ, Harhay MO, Fiellin DA, Un H, Leader D
Jr, Barry CL. The effects of federal parity on substance use
disorder treatment. Am J Manag Care. 2014 Jan;20(1):76-82.
---------------------------------------------------------------------------

(2) Effect of Classification of Services Requirements
This final rule requires that if the state provides for MH/SUD
services under the state plan, MH/SUD services must be provided to MCO
enrollees in every classification in which medical/surgical benefits
are provided. After reviewing the MH/SUD services provided under
Medicaid managed care plans, we identified only two states providing
for MH/SUD services under the state plan in which MH/SUD services were
excluded from a classification in which medical/surgical benefits are
provided. In both states, the excluded services were substance abuse
inpatient services. For the purposes of this analysis, we assumed that
substance abuse inpatient services would need to be included to the
extent that they were provided in a distinct part or unit of a general
hospital or facility with 16 or fewer beds. Using data on current use
of Medicaid substance use disorder inpatient services and the cost of
those services from Medicaid claims data, we estimated that the
additional coverage for these services would have led to an increase of
$11.7 million nationwide in undiscounted dollars in 2012.
Table 6 displays the total costs of removing non-compliant QTLs by
service and meeting classification of services requirements in 2012.

Table 6--Details of Estimated Costs of Meeting QTL and Classification of Services Requirements in 2012
----------------------------------------------------------------------------------------------------------------
Inpatient Outpatient Intermediate Administrative Total
----------------------------------------------------------------------------------------------------------------
Mental Health--Medicaid ($million/year)
----------------------------------------------------------------------------------------------------------------
$19.8 $62.3 $0 $0.3 $82.4
----------------------------------------------------------------------------------------------------------------
Mental Health--CHIP ($million/year)
----------------------------------------------------------------------------------------------------------------
$0 30.8 0.4 0.04 31.2
----------------------------------------------------------------------------------------------------------------
Substance Use Disorder--Medicaid ($million/year)
----------------------------------------------------------------------------------------------------------------
$11.7 0 0 0 11.7
----------------------------------------------------------------------------------------------------------------
Substance Use Disorder--CHIP ($million/year)
----------------------------------------------------------------------------------------------------------------
$0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Total Costs of Removing Quantitative Limits in 2012 ($mill125.3ear)
----------------------------------------------------------------------------------------------------------------
Note: Administrative costs are listed once for Medicaid and CHIP because the expense is all-inclusive for each
program; costs are not broken down by service.

Costs for complying with parity rules for each service category
were estimated based on a simulation of additional utilization states
may incur as a result of removing quantitative treatment limits.\43\
For the analysis of intermediate services, we examined limits on
partial hospitalization and intensive outpatient care.
---------------------------------------------------------------------------

\43\ We chose to estimate the cost of removing these limits
rather than the cost of aligning these limits with the predominant
level of the quantitative limit that applies to substantially all
medical/surgical benefits in the classification for simplicity,
given the complexity of applying the full analysis to every benefit
in every state, and because in most cases, less than two-thirds of
the medical/surgical benefits in that classification are subject to
a quantitative limit.
---------------------------------------------------------------------------

These figures are calculated based on 2012 Medicaid and CHIP
expenditures, which equate to approximately $125.3 million in
additional costs as a result of parity compliance. Given that total
Medicaid and CHIP expenditures in 2012 were $552.6 billion, the impact
of this rule would increase Medicaid and CHIP spending by about 0.02
percent each year. As total Medicaid and CHIP expenditures increase
over time, the cost impact of mental health parity is expected to rise
proportionally. Accordingly, to determine the anticipated impact of
mental health parity in cost in future years, we applied growth in
Medicaid and CHIP expenditures from the mid-session review of the
President's FY 2016 budget to this cost.\44\ Due to the

[[Page 18433]]

complexity and uncertainty of predicting changes to Medicaid enrollment
and spending if CHIP authorization expires, our estimate assumes that
CHIP will be reauthorized in its present form through FY2020. Costs for
2016 through 2020 are displayed in Table 7.
---------------------------------------------------------------------------

\44\ President's Budget for Fiscal Year 2016, available at
http://www.whitehouse.gov/omb/budget.

Table 7--Estimated Costs of CMS-2333 FY 2016-2020
[In millions]
----------------------------------------------------------------------------------------------------------------
FY 2016 FY2017 FY 2018 FY 2019 FY 2020
----------------------------------------------------------------------------------------------------------------
Federal......................... 116.0 121.9 128.7 137.1 131.8
State........................... 50.5 53.3 56.5 59.7 76.5
-------------------------------------------------------------------------------
Total....................... 166.5 175.2 185.3 196.8 208.3
----------------------------------------------------------------------------------------------------------------

(3) Effect of Medical Cost Offsets
As described above, the cost of improving access to MH/SUD
treatment may be offset by a decline in the expenditures on treatments
for medical conditions resulting from substance use disorders. There is
strong evidence from Medicaid programs to assume a cost offset
resulting from improved access to substance use disorder benefits. In
contrast, the evidence for cost offset resulting from improved access
to mental health benefits is weaker. We anticipate that, on balance,
costs stemming from increased utilization of substance use disorder
services resulting from application of parity requirements will be
largely offset by the savings from reduced medical costs, yielding very
little increase in overall costs from increased utilization of
substance use disorder services. However, given the difficulty of
quantifying the precise cost impact of this reduced use of medical
services that is expected to result from enhanced access to substance
use disorder services, we have not included any cost offset in our
estimates.
Comment: One commenter believed that proper implementation of
parity may save money as more beneficiaries will be able to access
appropriate care for their conditions, resulting in fewer emergency
department visits and hospitalizations as well as improved physical
health.
Response: As noted above, we agree that in many cases, additional
spending on MH/SUD services may result in savings from reduced medical/
surgical costs.
b. Effect of Aligning NQTLs
Under the MHPAEA final rules, medical management can be applied to
MH/SUD benefits if the processes, strategies, evidentiary standards, or
other factors used in applying medical management are comparable to,
and are applied no more stringently than, the processes, strategies,
evidentiary standards, or other factors used in applying medical
management to medical and surgical benefits. It is difficult to
determine whether, at baseline, Medicaid MCOs, PIHPs, PAHPs, ABPs and
CHIP programs are applying medical management more stringently to MH/
SUD benefits than to medical and surgical benefits. A state-by-state
search of available Medicaid documents indicated that most states that
use inpatient utilization management techniques for MH/SUD services,
such as prior approval or continuing utilization review for inpatient
stays, have similar restrictions for medical and surgical conditions.
Surveys of commercial plans have also found that inpatient managed care
restrictions, such as pre-admission prior approval, are common for
medical and surgical admissions.^{45 46} There may be important
distinctions in the processes, strategies, evidentiary standards, or
other factors between MH/SUD services and medical and surgical
services, but current data do not indicate that this is the case in a
way that would lead to a clear cost impact.
---------------------------------------------------------------------------

\45\ Baker C.A., Diaz IS. Managed care plans and managed care
features: data from the EBS to the NCS. Compensation and Working
Conditions Spring 2011:30-6.
\46\ Claxton, G., DiJulio, B., Whitmore, H., Pickreign, J.,
McHugh, M., Finder, B., & Osei-Anto, A. (2009). Job-based health
insurance: costs climb at a moderate pace. Health Aff
2009;28(6):w1002-12.
---------------------------------------------------------------------------

Moreover, if some Medicaid plans have stricter management controls
for MH/SUD services than for medical services, there is scant evidence
at this time as to how utilization management will evolve with the
application of parity requirements and whether stricter controls would
result in higher costs.\47\ For example, stricter controls may lead to
underutilization of sub-acute levels of care for MH/SUD conditions,
leading to the worsening of both MH/SUD conditions and medical or
surgical conditions that ultimately require more costly acute levels of
care. Studies of the effect of utilization review and prior approval on
MH/SUD inpatient services have revealed mixed results, with some
studies showing that these managed care techniques result in lower
costs, quantities of treatment, or both, and other studies finding only
weak or no effects, or effects that are short
term.^{48 49 50 51} As noted above, the studies of Oregon and
Vermont, whose parity laws include similar restrictions on medical
management, have not shown increases in costs resulting from
application of these laws. There is uncertainty regarding the level of
increased costs that will result from application of the parity
requirement for NQTLs, but there is evidence that any increases may be
small.
---------------------------------------------------------------------------

\47\ Hodgkin D. The impact of private utilization management and
psychiatric care: a review of the literature. Journal of Mental
Health Administration 1992;19(2):143-57.
\48\ Dickey B, Azeni H. Impact of managed care on mental health
services. Health Aff 1992 Fall;11(3):197-204.
\49\ Frank R.G., Brookmeyer R. Managed mental health care and
patterns of inpatient utilization for treatment of affective
disorders. Soc Psychiatry Psychiatric Epidemiol 1995 Aug;30(5):220-
3.
\50\ Wickizer T.M., Lessler D, Travis K.M. Controlling inpatient
psychiatric utilization through managed care. Am J Psychiatry
1996;153:339-45.
\51\ Wickizer T.M., Lessler D. Do treatment restrictions imposed
by utilization management increase the likelihood of readmission for
psychiatric patients? Med Care 1998;36(6):844-50.
---------------------------------------------------------------------------

2. Transfers Resulting From Increased Access Under Medicaid
Transfer payments are monetary payments from one group to another
that do not affect total resources available to society. There is a
potential that application of parity requirements under MHPAEA will
result in transfers among different government entities. MH/SUD
services receive greater funding from public sources, such as Medicaid,
federal government block grants, state government general funds, and
local government funding, than do medical and surgical services.\52\
Over time, MH/SUD spending has been shifting away from state and local

[[Page 18434]]

funding, toward federal financing, especially Medicaid.\53\ The
potential increase in the availability of MH/SUD services under
Medicaid and CHIP as a result of the MHPAEA parity requirements may
result in a reduction in use of, and spending on, services financed by
other public sources such as state and local governments and federal
block grants.\54\ Limited sound evidence exists about the size of this
effect on states.
---------------------------------------------------------------------------

\52\ Levit KR, Mark TL, Coffey RM, Frankel S, Santora P,
Vandivort-Warren R, Malone K. Federal spending on behavioral health
accelerated during recession as individuals lost employer insurance.
Health Aff 2013 May;32(5):952-62.
\53\ Levit KR, Mark TL, Coffey RM, Frankel S, Santora P,
Vandivort-Warren R, Malone K. Federal spending on behavioral health
accelerated during recession as individuals lost employer insurance.
Health Aff 2013 May;32(5):952-62.
\54\ Frank RG, Goldman HH, Hogan M. Medicaid and mental health:
be careful what you ask for. Health Aff 2003 Jan-Feb;22(1):101-13.
---------------------------------------------------------------------------

D. Alternatives Considered

We considered several other approaches for providing guidance to
states regarding the application of the MHPAEA to Medicaid MCOs, ABPs,
and CHIP. As stated in the preamble of this final rule, under our
current policies, there is no way to ensure that MCO enrollees receive
state plan benefits in a way that fully complies with MHPAEA. This is
because section 1932(b)(8) of the Act does not apply to the design of
the traditional Medicaid state plan, and state plans thus may be
designed in a way that does not comply with MHPAEA requirements. Under
current guidance, we have said that if an MCO is simply properly
applying state plan benefits, there is no violation of section
1932(b)(8) of the Act even if that benefit design does not conform to
MHPAEA, because the MCO did not adopt that benefit design and thus was
not at fault in its non-compliance. As explained above, we do not
believe that this policy effectuates Congressional intent in enacting
section 1932(b)(8) of the Act. Further, we believe that implementation
of the statute requires that MCO enrollees receive benefits in a manner
that complies with MHPAEA.
We considered requiring that all state plan MH/SUD services be
included under MCO contracts as the way to ensure that MCO enrollees
receive the full protections of MHPAEA. However, we believe that this
final rule allows states the most flexibility when applying mental
health parity requirements to their Medicaid services across delivery
systems. Given that there are many different delivery system
configurations that carve out MH/SUD services, this approach allows
states to comport with parity requirements for MCO enrollees without
completely carving out MH/SUD services from their MCO or dropping MH/
SUD coverage altogether.
Also, under current statutes, regulations and policies, states
would not be required under federal law to apply MHPAEA provisions to
PIHPs and PAHPs (many of which provide MH/SUD services) since these
arrangements were not specifically addressed in section 1932(b)(8) of
the Act, and MHPAEA does not directly apply to such contracts.
Consideration of these unique state MH/SUD delivery systems is an
important distinction in Medicaid when compared to the commercial
market. Further, because the statutory provisions making mental health
parity requirements applicable to MCOs do not explicitly address these
situations, additional interpretation is needed.
In addition to the delivery system issues, states would not be
required to remove or align limits on services that were in the state
plan for individuals enrolled in an MCO. As stated previously in this
regulation, these limits are carried through in the development of
rates, and cost of services outside of the state plan or a waiver of
the state plan cannot be included. Without the change in this rule,
individuals enrolled in an MCO could still be subject to treatment
limitations that are not compliant with parity requirements, which we
believe is inconsistent with the intent of Congress in requiring in
section 1932(b)(8) of the Act that MCOs deliver services in a manner
consistent with MHPAEA requirements and the policies regarding
application of MHPAEA to ABPs and CHIP that operate in a FFS
arrangement. In addition, without these changes to the managed care
rate setting process, it will be difficult for MCOs to comply with
statutory requirements regarding financial requirements and treatment
limitations.
Finally, there are mental health parity provisions that are not
applicable to the FFS delivery systems for Medicaid ABP benefits; these
include annual and lifetime dollar limits, availability of plan
information, and access to out-of-network providers.
In addition, we considered the ability to provide guidance and
enforce the provisions of MHPAEA's application to Medicaid and CHIP
through sub-regulatory guidance. Over the past 6 years, we have used
two SHO letters to provide guidance to states regarding MHPAEA and
Medicaid and CHIP. While states and other stakeholders found this
guidance useful, there were many questions or concerns regarding the
lack of specificity regarding application of MHPAEA parity requirements
to Medicaid and CHIP. There were several issues that states raised
regarding this sub-regulatory guidance. One issue was the actuarial
soundness requirements, which mandate that MCO payments be based on
services as covered under state plans. Another was additional
clarification of NQTLs and states' concerns regarding existing federal
and state policies that required utilization management strategies that
were inconsistent with the intent of MHPAEA. States also raised
additional questions regarding application of MHPAEA parity
requirements to other delivery systems including PIHPs, PAHPs, and FFS.
We do not believe that additional subregulatory guidance would provide
the necessary authority for MCOs and states to implement or enforce
MHPAEA parity requirements for Medicaid beneficiaries enrolled in an
MCO.

E. Accounting Statement and Table

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4/), in Table 8 we have
prepared an accounting statement showing the classification of the
impacts associated with implementation of this final rule.
The projected impact on costs in 2016 was calculated by multiplying
the percent anticipated increase in cost due to the application of
parity requirements by expected Medicaid expenditures in 2016. Based on
our analysis, the parity rule will lead to an increase of approximately
0.03 percent in total Medicaid spending each year over 10 years. In
2016, Medicaid expenditures overall are projected to equal
approximately $540.3 billion.\55\ Thus, the undiscounted cost of the
rule is estimated to be $178.1 million in 2016, and to rise
proportionate to the growth in overall Medicaid spending in future
years. These costs are split between the federal and state governments
based on the population covered and the statutory matching rate.
---------------------------------------------------------------------------

\55\ Centers for Medicare & Medicaid Services. National Health
Expenditure Projections 2012-2022. Forecast Summary. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf.
Accessed June 25, 2014.

[[Page 18435]]

TABLE 8--Accounting Statement: Classification of Estimated Benefit, Costs, and Transfers
----------------------------------------------------------------------------------------------------------------
Units
-----------------------------------------------
Category Estimates Discount rate Period
Year dollar (%) covered
----------------------------------------------------------------------------------------------------------------
Transfers From Federal Government to Providers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)............ 126.5 2016 7 2016-2020
126.8 2016 3 2016-2020
----------------------------------------------------------------------------------------------------------------
Transfers From State Government to Providers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)............ 58.5 2016 7 2016-2020
59.0 2016 3 2016-2020
----------------------------------------------------------------------------------------------------------------
Note. The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals.

F. Regulatory Flexibility Act (RFA)

The RFA requires agencies to analyze options for regulatory relief
for small entities, if a rule has a significant impact on a substantial
number of small entities. The great majority of hospitals and most
other health care providers and suppliers are small entities, either by
being nonprofit organizations or by meeting the SBA definition of a
small business (having revenues of less than $7.5 million to $38.5
million in any 1 year). States are not included in the definition of a
small entity. This final rule does not change the rates at which
providers would be reimbursed for any additional treatments and
services that may be required, and MCOs, PIHPs, and PAHPs will be paid
on an actuarially sound basis for any additional coverage that they
will be required to provide. As indicated previously in this final
rule, the increased costs will be borne by states and the federal
government, which are not considered small entities. Therefore, the
Secretary has determined that this final rule will not have a
significant economic impact on a substantial number of small entities
as that term is used in the RFA.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis 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 of a metropolitan
statistical area and has fewer than 100 beds. The Secretary has
determined that this final rule will not have a significant impact on
the operations of a substantial number of small rural hospitals.

G. Unfunded Mandates Reform Act (UMRA)

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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. Currently,
that is approximately $144 million. UMRA does not address the total
cost of a rule. Rather, it focuses on certain categories of cost,
mainly those ``Federal mandate'' costs resulting from (A) imposing
enforceable duties on state, local, or tribal governments, or on the
private sector, or (B) increasing the stringency of conditions in, or
decreasing the funding of, state, local, or tribal governments under
entitlement programs. The average state share of total Medicaid
spending in 2016 is projected to be 38.2 percent. The total cost impact
of this rule is estimated to be $178.1 million in 2016. Therefore, the
total cost to states is projected to be approximately $68.0 million.
Therefore, this final rule is not subject to UMRA.

H. Federalism

Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a final rule that imposes substantial
direct requirement costs on state and local governments, preempts state
law, or otherwise has federalism implications.
In the Secretary's view, this final rule has Federalism
implications, because it has direct effects on the states, the
relationship between the federal government and states, or on the
distribution of power and responsibilities among various levels of
government. However, in the Secretary's view, the Federalism
implications of this final rule are substantially mitigated because,
with regards to MCOs, ABPs, and CHIP, the Secretary expects that many
states already offer benefits under their state plan and MCO contracts
that meet or exceed the Federal mental health parity standards that
would be implemented in this rule.
Throughout the process of developing these regulations, to the
extent feasible within the relevant provisions of the Act, PHS Act and
MHPAEA, the Secretary has attempted to balance the latitude for states
to structure their state plan services and MCO contracts according to
the needs and preferences of the state, and the Congress' intent to
provide uniform minimum protections to Medicaid and CHIP beneficiaries
in every state. By doing so, it is the Secretary's view that this final
rule complies with the requirements of Executive Order 13132.

I. Conclusion

In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 438

Grant programs-health, Medicaid, Reporting and recordkeeping
requirements.

42 CFR Part 440

Grant programs-health, Medicaid reporting.

42 CFR Part 456

Administrative practice and procedure, Drugs, Grant programs-
health, Health facilities, 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:

[[Page 18436]]

PART 438--MANAGED CARE

0
1. The authority citation for part 438 continues to read as follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).

0
2. Section 438.6 is amended by revising paragraph (e) and adding
paragraph (n) to read as follows:

Sec. 438.6 Contract requirements.

* * * * *
(e) Additional services that may be covered by a MCO, PIHP, or
PAHP. A MCO, PIHP, or PAHP may cover, for enrollees, services that are
in addition to those covered under the state plan as follows:
(1) Any services necessary for compliance by the MCO, PIHP, or PAHP
with the requirements of subpart K of this part and only to the extent
such services are necessary for the MCO, PIHP, or PAHP to comply with
Sec. 438.910; and
(2) Any services that the MCO, PIHP, or PAHP voluntarily agrees to
provide.
(3) Only the costs associated with services in paragraph (e)(1) of
this section may be included when determining the payment rates under
paragraph (c) of this section.
* * * * *
(n) Parity in mental health and substance use disorder benefits.
(1) All MCO contracts, and any PIHP and PAHP contracts providing
services to MCO enrollees, must provide for services to be delivered in
compliance with the requirements of subpart K of this part insofar as
those requirements are applicable.
(2) Any State providing any services to MCO enrollees using a
delivery system other than the MCO delivery system must provide
documentation of how the requirements of subpart K of this part are met
with the submission of the MCO contract for review and approval under
paragraph (a) of this section.

0
3. Subpart K is added to part 438 to read as follows:
Subpart K--Parity in Mental Health and Substance Use Disorder Benefits
Sec.
438.900 Meaning of terms.
438.905 Parity requirements for aggregate lifetime and annual dollar
limits.
438.910 Parity requirements for financial requirements and treatment
limitations.
438.915 Availability of information.
438.920 Applicability.
438.930 Compliance dates.

Subpart K--Parity in Mental Health and Substance Use Disorder
Benefits

Sec. 438.900 Meaning of terms.

For purposes of this subpart, except where the context clearly
indicates otherwise, the following terms have the meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the
total amount of specified benefits that may be paid under a MCO, PIHP,
or PAHP.
Annual dollar limit means a dollar limitation on the total amount
of specified benefits that may be paid in a 12-month period under a
MCO, PIHP, or PAHP.
Cumulative financial requirements are financial requirements that
determine whether or to what extent benefits are provided based on
accumulated amounts and include deductibles and out-of-pocket maximums.
(However, cumulative financial requirements do not include aggregate
lifetime or annual dollar limits because these two terms are excluded
from the meaning of financial requirements.)
Early and Periodic Screening, Diagnostic and Treatment (EPSDT)
benefits are benefits defined in section 1905(r) of the Act.
Financial requirements include deductibles, copayments,
coinsurance, or out-of-pocket maximums. Financial requirements do not
include aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits for items or services for
medical conditions or surgical procedures, as defined by the State and
in accordance with applicable Federal and State law, but do not include
mental health or substance use disorder benefits. Any condition defined
by the State as being or as not being a medical/surgical condition must
be defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the International Classification of Diseases (ICD) or State
guidelines). Medical/surgical benefits include long term care services.
Mental health benefits means benefits for items or services for
mental health conditions, as defined by the State and in accordance
with applicable Federal and State law. Any condition defined by the
State as being or as not being a mental health condition must be
defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the Diagnostic and Statistical Manual of Mental Disorders
(DSM), the most current version of the ICD, or State guidelines).
Mental health benefits include long term care services.
Substance use disorder benefits means benefits for items or
services for substance use disorders, as defined by the State and in
accordance with applicable Federal and State law. Any disorder defined
by the State as being or as not being a substance use disorder must be
defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the DSM, the most current version of the ICD, or State
guidelines). Substance use disorder benefits include long term care
services.
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under a
plan or coverage. (See Sec. 438.910(d)(2) for an illustrative list of
nonquantitative treatment limitations.) A permanent exclusion of all
benefits for a particular condition or disorder, however, is not a
treatment limitation for purposes of this definition.

Sec. 438.905 Parity requirements for aggregate lifetime and annual
dollar limits.

(a) General parity requirement. Each MCO, PIHP, and PAHP providing
services to MCO enrollees must comply with paragraphs (b), (c), or (e)
of this section for all enrollees of a MCO in States that cover both
medical/surgical benefits and mental health or substance use disorder
benefits under the State plan. This section details the application of
the parity requirements for aggregate lifetime and annual dollar
limits.
(b) MCOs, PIHPs, or PAHPs with no limit or limits on less than one-
third of all medical/surgical benefits. If a MCO, PIHP, or PAHP does
not include an aggregate lifetime or annual dollar limit on any
medical/surgical benefits or includes an aggregate lifetime or annual
dollar limit that applies to less than one-third of all medical/
surgical benefits provided to enrollees through a contract with the
State, it may not impose an aggregate lifetime or annual dollar limit,
respectively, on mental health or substance use disorder benefits.
(c) MCOs, PIHPs, or PAHPs with a limit on at least two-thirds of
all medical/surgical benefits. If a MCO,

[[Page 18437]]

PIHP, or PAHP includes an aggregate lifetime or annual dollar limit on
at least two-thirds of all medical/surgical benefits provided to
enrollees through a contract with the State, it must either--
(1) Apply the aggregate lifetime or annual dollar limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health or substance use disorder benefits in a manner that
does not distinguish between the medical/surgical benefits and mental
health or substance use disorder benefits; or
(2) Not include an aggregate lifetime or annual dollar limit on
mental health or substance use disorder benefits that is more
restrictive than the aggregate lifetime or annual dollar limit,
respectively, on medical/surgical benefits.
(d) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this section, the determination of whether
the portion of medical/surgical benefits subject to an aggregate
lifetime or annual dollar limit represents one-third or two-thirds of
all medical/surgical benefits is based on the total dollar amount of
all combinations of MCO, PIHP, and PAHP payments for medical/surgical
benefits expected to be paid under the MCO, PIHP, or PAHP for a
contract year (or for the portion of a contract year after a change in
benefits that affects the applicability of the aggregate lifetime or
annual dollar limits). Any reasonable method may be used to determine
whether the dollar amount expected to be paid under the MCOs, PIHPs,
and PAHPs will constitute one-third or two-thirds of the dollar amount
of all payments for medical/surgical benefits.
(e) MCO, PIHP, or PAHP not described in this section--(1) In
general. A MCO, PIHP, or PAHP that is not described in paragraph (b) or
(c) of this section for aggregate lifetime or annual dollar limits on
medical/surgical benefits, must either--
(i) Impose no aggregate lifetime or annual dollar limit, on mental
health or substance use disorder benefits; or
(ii) Impose an aggregate lifetime or annual dollar limit on mental
health or substance use disorder benefits that is no more restrictive
than an average limit calculated for medical/surgical benefits in the
following manner. The average limit is calculated by taking into
account the weighted average of the aggregate lifetime or annual dollar
limits, as appropriate, that are applicable to the categories of
medical/surgical benefits. Limits based on delivery mechanisms, such as
inpatient/outpatient treatment or normal treatment of common, low-cost
conditions (such as treatment of normal births), do not constitute
categories for purposes of this paragraph (e)(1)(ii). In addition, for
purposes of determining weighted averages, any benefits that are not
within a category that is subject to a separately-designated dollar
limit under the contract are taken into account as a single separate
category by using an estimate of the upper limit on the dollar amount
that a MCO, PIHP, or PAHP may reasonably be expected to incur for such
benefits, taking into account any other applicable restrictions.
(2) Weighting. For purposes of this paragraph (e), the weighting
applicable to any category of medical/surgical benefits is determined
in the manner set forth in paragraph (d) of this section for
determining one-third or two-thirds of all medical/surgical benefits.

Sec. 438.910 Parity requirements for financial requirements and
treatment limitations.

(a) Clarification of terms--(1) Classification of benefits. When
reference is made in this section to a classification of benefits, the
term ``classification'' means a classification as described in
paragraph (b)(2) of this section.
(2) Type of financial requirement or treatment limitation. When
reference is made in this section to a type of financial requirement or
treatment limitation, the reference to type means its nature. Different
types of financial requirements include deductibles, copayments,
coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and
lifetime day and visit limits. See paragraph (d)(2) of this section for
an illustrative list of nonquantitative treatment limitations.
(3) Level of a type of financial requirement or treatment
limitation. When reference is made in this section to a level of a type
of financial requirement or treatment limitation, level refers to the
magnitude of the type of financial requirement or treatment limitation.
(b) General parity requirement--(1) General rule and scope. Each
MCO, PIHP and PAHP providing services to MCO enrollees in a State that
covers both medical/surgical benefits and mental health or substance
use disorder benefits under the State plan, must not apply any
financial requirement or treatment limitation to mental health or
substance use disorder benefits in any classification that is more
restrictive than the predominant financial requirement or treatment
limitation of that type applied to substantially all medical/surgical
benefits in the same classification furnished to enrollees (whether or
not the benefits are furnished by the same MCO, PIHP, or PAHP). Whether
a financial requirement or treatment limitation is a predominant
financial requirement or treatment limitation that applies to
substantially all medical/surgical benefits in a classification is
determined separately for each type of financial requirement or
treatment limitation. The application of the rules of this paragraph
(b) to financial requirements and quantitative treatment limitations is
addressed in paragraph (c) of this section; the application of the
rules of this paragraph (b) to nonquantitative treatment limitations is
addressed in paragraph (d) of this section.
(2) Classifications of benefits used for applying rules. If an MCO
enrollee is provided mental health or substance use disorder benefits
in any classification of benefits described in this paragraph (b)(2),
mental health or substance use disorder benefits must be provided to
the enrollee in every classification in which medical/surgical benefits
are provided. In determining the classification in which a particular
benefit belongs, a MCO, PIHP, or PAHP must apply the same reasonable
standards to medical/surgical benefits and to mental health or
substance use disorder benefits. To the extent that a MCO, PIHP, or
PAHP provides benefits in a classification and imposes any separate
financial requirement or treatment limitation (or separate level of a
financial requirement or treatment limitation) for benefits in the
classification, the rules of this section apply separately for that
classification for all financial requirements or treatment limitations.
The following classifications of benefits are the only classifications
used in applying the rules of this section:
(i) Inpatient. Benefits furnished on an inpatient basis.
(ii) Outpatient. Benefits furnished on an outpatient basis. See
special rules for office visits in paragraph (c)(2) of this section.
(iii) Emergency care. Benefits for emergency care.
(iv) Prescription drugs. Benefits for prescription drugs. See
special rules for multi-tiered prescription drug benefits in paragraph
(c)(2) of this section.
(c) Financial requirements and quantitative treatment limitations--
(1) Determining ``substantially all'' and ``predominant''--(i)
Substantially all. For purposes of this section, a type of financial
requirement or quantitative treatment limitation is considered to

[[Page 18438]]

apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. If a type of
financial requirement or quantitative treatment limitation does not
apply to at least two-thirds of all medical/surgical benefits in a
classification, then that type cannot be applied to mental health or
substance use disorder benefits in that classification.
(ii) Predominant. (A) If a type of financial requirement or
quantitative treatment limitation applies to at least two-thirds of all
medical/surgical benefits in a classification as determined under
paragraph (c)(1)(i) of this section, the level of the financial
requirement or quantitative treatment limitation that is considered the
predominant level of that type in a classification of benefits is the
level that applies to more than one-half of medical/surgical benefits
in that classification subject to the financial requirement or
quantitative treatment limitation.
(B) If, for a type of financial requirement or quantitative
treatment limitation that applies to at least two-thirds of all
medical/surgical benefits in a classification, there is no single level
that applies to more than one-half of medical/surgical benefits in the
classification subject to the financial requirement or quantitative
treatment limitation, the MCO, PIHP, or PAHP may combine levels until
the combination of levels applies to more than one-half of medical/
surgical benefits subject to the financial requirement or quantitative
treatment limitation in the classification. The least restrictive level
within the combination is considered the predominant level of that type
in the classification. (For this purpose, a MCO, PIHP, or PAHP may
combine the most restrictive levels first, with each less restrictive
level added to the combination until the combination applies to more
than one-half of the benefits subject to the financial requirement or
treatment limitation.)
(iii) Portion based on MCO, PIHP or PAHP payments. For purposes of
this section, the determination of the portion of medical/surgical
benefits in a classification of benefits subject to a financial
requirement or quantitative treatment limitation (or subject to any
level of a financial requirement or quantitative treatment limitation)
is based on the total dollar amount of all combinations of MCO, PIHP,
and PAHP payments for medical/surgical benefits in the classification
expected to be paid under the MCOs, PIHPs, and PAHPs for a contract
year (or for the portion of a contract year after a change in benefits
that affects the applicability of the financial requirement or
quantitative treatment limitation).
(iv) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of MCO, PIHP, or PAHP payments includes
all payments for claims that would be subject to the deductible if it
had not been satisfied. For any out-of-pocket maximum, the dollar
amount of MCO, PIHP, or PAHP payments includes all payments associated
with out-of-pocket payments that are taken into account towards the
out-of-pocket maximum as well as all payments associated with out-of-
pocket payments that would have been made towards the out-of-pocket
maximum if it had not been satisfied. Similar rules apply for any other
thresholds at which the rate of MCO, PIHP, or PAHP payment changes.
(v) Determining the dollar amount of MCO, PIHP, or PAHP payments.
Subject to paragraph (c)(1)(iv) of this section, any reasonable method
may be used to determine the dollar amount expected to be paid under a
MCO, PIHP, or PAHP for medical/surgical benefits subject to a financial
requirement or quantitative treatment limitation (or subject to any
level of a financial requirement or quantitative treatment limitation).
(2) Special rules--(i) Multi-tiered prescription drug benefits. If
a MCO, PIHP, or PAHP applies different levels of financial requirements
to different tiers of prescription drug benefits based on reasonable
factors determined in accordance with the rules in paragraph (d)(1) of
this section (relating to requirements for nonquantitative treatment
limitations) and without regard to whether a drug is generally
prescribed for medical/surgical benefits or for mental health or
substance use disorder benefits, the MCO, PIHP, or PAHP satisfies the
parity requirements of this section for prescription drug benefits.
Reasonable factors include cost, efficacy, generic versus brand name,
and mail order versus pharmacy pick-up/delivery.
(ii) Sub-classifications permitted for office visits, separate from
other outpatient services. For purposes of applying the financial
requirement and treatment limitation rules of this section, a MCO,
PIHP, or PAHP may divide its benefits furnished on an outpatient basis
into the two sub-classifications described in this paragraph
(c)(2)(ii). After the sub-classifications are established, the MCO,
PIHP or PAHP may not impose any financial requirement or quantitative
treatment limitation on mental health or substance use disorder
benefits in any sub-classification that is more restrictive than the
predominant financial requirement or quantitative treatment limitation
that applies to substantially all medical/surgical benefits in the sub-
classification using the methodology set forth in paragraph (c)(1) of
this section. Sub-classifications other than these special rules, such
as separate sub-classifications for generalists and specialists, are
not permitted. The two sub-classifications permitted under this
paragraph (c)(2)(ii) are:
(A) Office visits (such as physician visits); and
(B) All other outpatient items and services (such as outpatient
surgery, facility charges for day treatment centers, laboratory
charges, or other medical items).
(3) No separate cumulative financial requirements. A MCO, PIHP, or
PAHP may not apply any cumulative financial requirement for mental
health or substance use disorder benefits in a classification that
accumulates separately from any established for medical/surgical
benefits in the same classification.
(4) Compliance with other cost-sharing rules. Each MCO, PIHP, and
PAHP must meet the cost-sharing requirements in Sec. 438.108 when
applying Medicaid cost-sharing.
(d) Nonquantitative treatment limitations--(1) General rule. A MCO,
PIHP, or PAHP may not impose a nonquantitative treatment limitation for
mental health or substance use disorder benefits in any classification
unless, under the policies and procedures of the MCO, PIHP, or PAHP as
written and in operation, any processes, strategies, evidentiary
standards, or other factors used in applying the nonquantitative
treatment limitation to mental health or substance use disorder
benefits in the classification are comparable to, and are applied no
more stringently than, the processes, strategies, evidentiary
standards, or other factors used in applying the limitation for
medical/surgical benefits in the classification.
(2) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include -
(i) Medical management standards limiting or excluding benefits
based on medical necessity or medical appropriateness, or based on
whether the treatment is experimental or investigative;
(ii) Formulary design for prescription drugs;
(iii) For MCOs, PIHPs, or PAHPs with multiple network tiers (such
as preferred providers and participating providers), network tier
design;

[[Page 18439]]

(iv) Standards for provider admission to participate in a network,
including reimbursement rates;
(v) MCO, PIHP, or PAHP methods for determining usual, customary,
and reasonable charges;
(vi) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols);
(vii) Exclusions based on failure to complete a course of
treatment;
(viii) Restrictions based on geographic location, facility type,
provider specialty, and other criteria that limit the scope or duration
of benefits for services provided under the MCO, PIHP, or PAHP; and
(ix) Standards for providing access to out-of-network providers.
(3) Application to out-of-network providers. Any MCO, PIHP or PAHP
providing access to out-of-network providers for medical/surgical
benefits within a classification, must use processes, strategies,
evidentiary standards, or other factors in determining access to out-
of-network providers for mental health or substance use disorder
benefits that are comparable to, and applied no more stringently than,
the processes, strategies, evidentiary standards, or other factors in
determining access to out-of-network providers for medical/surgical
benefits.

Sec. 438.915 Availability of information.

(a) Criteria for medical necessity determinations. The criteria for
medical necessity determinations, made by a MCO or by a PIHP or PAHP
providing services to an MCO enrollee, for mental health or substance
use disorder benefits must be made available by the MCO, PIHP, or PAHP
administrator to any enrollee, potential enrollee, or contracting
provider upon request. MCOs, PIHPs, and PAHPs operating in compliance
with Sec. 438.236(c) will be deemed compliant with the requirements in
this paragraph (a).
(b) Reason for any denial. The reason for any denial by a MCO,
PIHP, or PAHP of reimbursement or payment for services for mental
health or substance use disorder benefits in the case of any enrollee
must be made available by the MCO, PIHP, or PAHP administrator to the
enrollee.
(c) Provisions of other law. Compliance with the disclosure
requirements in paragraphs (a) and (b) of this section is not
determinative of compliance with any other provision of applicable
Federal or State law.

Sec. 438.920 Applicability.

(a) MCOs, PIHPs, and PAHPs. The requirements of this subpart apply
to each MCO, PIHP, and PAHP offering services to enrollees of a MCO, in
States covering medical/surgical and mental health or substance use
disorder services under the State plan. These requirements regarding
coverage for services that must be provided to enrollees of an MCO
apply regardless of the delivery system of the medical/surgical, mental
health, or substance use disorder services under the State plan.
(b) State responsibilities. (1) In any instance where the full
scope of medical/surgical and mental health and substance use disorder
services are not provided through the MCO, the State must review the
mental health and substance use disorder and medical/surgical benefits
provided through the MCO, PIHP, PAHP, and fee-for service (FFS)
coverage to ensure the full scope of services available to all
enrollees of the MCO complies with the requirements in this subpart.
The State must provide documentation of compliance with requirements in
this subpart to the general public and post this information on the
State Medicaid Web site by October 2, 2017. Such documentation must be
updated prior to any change in MCO, PIHP, PAHP or FFS State plan
benefits.
(2) The State must ensure that all services are delivered to the
enrollees of the MCO in compliance with this subpart.
(c) Scope. This subpart does not--
(1) Require a MCO, PIHP, or PAHP to provide any mental health
benefits or substance use disorder benefits beyond what is specified in
its contract, and the provision of benefits by a MCO, PIHP, or PAHP for
one or more mental health conditions or substance use disorders does
not require the MCO, PIHP or PAHP to provide benefits for any other
mental health condition or substance use disorder;
(2) Require a MCO, PIHP, or PAHP that provides coverage for mental
health or substance use disorder benefits only to the extent required
under 1905(a)(4)(D) of the Act to provide additional mental health or
substance use disorder benefits in any classification in accordance
with this section; or
(3) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the Medicaid MCO, PIHP, or PAHP contract except as specifically
provided in Sec. Sec. 438.905 and 438.910.

Sec. 438.930 Compliance dates.

In general, contracts with MCOs, PIHPs, and PAHPs offering Medicaid
State plan services to enrollees, and those entities, must comply with
the requirements of this subpart no later than October 2, 2017.

PART 440--SERVICES: GENERAL PROVISIONS

0
4. The authority citation for part 440 continues to read as follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).

0
5. Section 440.395 is added to read as follows:

Sec. 440.395 Parity in mental health and substance use disorder
benefits.

[[Page 18440]]

defined by the State under the terms of the ABP and in accordance with
applicable Federal and State law, but does not include mental health or
substance use disorder benefits. Any condition defined by the state as
being or as not being a medical/surgical condition must be defined to
be consistent with generally recognized independent standards of
current medical practice (for example, the most current version of the
International Classification of Diseases (ICD) or State guidelines).
Medical/surgical benefits include long term services.
Mental health benefits means benefits for items or services for
mental health conditions, as defined by the State under the terms of
the ABP and in accordance with applicable Federal and State law. Any
condition defined by the State as being or as not being a mental health
condition must be defined to be consistent with generally recognized
independent standards of current medical practice (for example, the
most current version of the Diagnostic and Statistical Manual of Mental
Disorders (DSM), the most current version of the ICD, or State
guidelines. Mental health benefits include long term care services.
Substance use disorder benefits means benefits for items or
services for substance use disorder, as defined by the State under the
terms of the ABP and in accordance with applicable Federal and State
law. Any disorder defined by the State as being or as not being a
substance use disorder must be defined to be consistent with generally
recognized independent standards of current medical practice (for
example, the most current version of the DSM, the most current version
of the ICD, or State guidelines). Substance use disorder benefits
include long term care services.
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under
an ABP. (See paragraph (b)(4)(ii) of this section for an illustrative
list of nonquantitative treatment limitations.) A permanent exclusion
of all benefits for a particular condition or disorder, however, is not
a treatment limitation for purposes of this definition.
(b) Parity requirements for financial requirements and treatment
limitations--(1) Clarification of terms--(i) Classification of
benefits. When reference is made in this paragraph (b) to a
classification of benefits, the term ``classification'' means a
classification as described in paragraph (b)(2)(ii) of this section.
(ii) Type of financial requirement or treatment limitation. When
reference is made in this paragraph (b) to a type of financial
requirement or treatment limitation, the reference to type means its
nature. Different types of financial requirements include deductibles,
copayments, coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and
lifetime day and visit limits. See paragraph (b)(4)(ii) of this section
for an illustrative list of nonquantitative treatment limitations.
(iii) Level of a type of financial requirement or treatment
limitation. When reference is made in this paragraph (b) to a level of
a type of financial requirement or treatment limitation, level refers
to the magnitude of the type of financial requirement or treatment
limitation.
(2) General parity requirement--(i) General rule. A State may not
apply within an ABP any financial requirement or treatment limitation
to mental health or substance use disorder benefits in any
classification that is more restrictive than the predominant financial
requirement or treatment limitation of that type applied to
substantially all medical/surgical benefits in the same classification.
Whether a financial requirement or treatment limitation is a
predominant financial requirement or treatment limitation that applies
to substantially all medical/surgical benefits in a classification is
determined separately for each type of financial requirement or
treatment limitation. The application of the rules of this paragraph
(b)(2) to financial requirements and quantitative treatment limitations
is addressed in paragraph (b)(3) of this section; the application of
the rules of this paragraph (b)(2) to nonquantitative treatment
limitations is addressed in paragraph (b)(4) of this section.
(ii) Classifications of benefits used for applying rules. ABPs must
include mental health or substance use disorder benefits in every
classification of benefits described in this paragraph (b)(2)(ii) in
which medical/surgical benefits are provided. In determining the
classification in which a particular benefit belongs, the State must
apply the same reasonable standards to medical/surgical benefits and to
mental health or substance use disorder benefits. To the extent that a
State provides ABP benefits in a classification and imposes any
separate financial requirement or treatment limitation (or separate
level of a financial requirement or treatment limitation) for benefits
in the classification, the rules of this paragraph (b) apply separately
for that classification for all financial requirements or treatment
limitations. The following classifications of benefits are the only
classifications used in applying the rules of this paragraph (b):
(A) Inpatient. Benefits furnished on an inpatient basis.
(B) Outpatient. Benefits furnished on an outpatient basis. See
special rules for office visits in paragraph (b)(3)(ii)(B)(1) of this
section.
(C) Emergency care. Benefits for emergency care.
(D) Prescription drugs. Benefits for prescription drugs. See
special rules for multi-tiered prescription drug benefits in paragraph
(b)(3)(ii) of this section.
(3) Financial requirements and quantitative treatment limitations--
(i) Determining ``substantially all'' and ``predominant''--(A)
Substantially all. For purposes of this paragraph (b), a type of
financial requirement or quantitative treatment limitation is
considered to apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. If a type of
financial requirement or quantitative treatment limitation does not
apply to at least two-thirds of all medical/surgical benefits in a
classification, then that type cannot be applied to mental health or
substance use disorder benefits in that classification.
(B) Predominant--(1) If a type of financial requirement or
quantitative treatment limitation applies to at least two-thirds of all
medical/surgical benefits in a classification as determined under
paragraph (b)(3)(i)(A) of this section, the level of the financial
requirement or quantitative treatment limitation that is considered the
predominant level of that type in a classification of benefits is the
level that applies to more than one-half of medical/surgical benefits
in that classification subject to the financial requirement or
quantitative treatment limitation.
(2) If, for a type of financial requirement or quantitative
treatment limitation that applies to at least two-thirds of all
medical/surgical benefits in a classification, there is no single level
that applies to more than one-half of medical/surgical benefits in the
classification subject to the financial requirement or quantitative
treatment

[[Page 18441]]

limitation, the State may combine levels until the combination of
levels applies to more than one-half of medical/surgical benefits
subject to the financial requirement or quantitative treatment
limitation in the classification. The least restrictive level within
the combination is considered the predominant level of that type in the
classification. (For this purpose, a State may combine the most
restrictive levels first, with each less restrictive level added to the
combination until the combination applies to more than one-half of the
benefits subject to the financial requirement or treatment limitation.)
(C) Portion based on ABP payments. For purposes of this paragraph
(b), the determination of the portion of medical/surgical benefits in a
classification of benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation) is based on
the dollar amount of all ABP payments for medical/surgical benefits in
the classification expected to be paid under the ABP for the plan year
(or for the portion of the plan year after a change in ABP benefits
that affects the applicability of the financial requirement or
quantitative treatment limitation).
(D) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of ABP payments includes all payments for
claims that would be subject to the deductible if it had not been
satisfied. For any out-of-pocket maximum, the dollar amount of ABP
payments includes all payments associated with out-of-pocket payments
that are taken into account towards the out-of-pocket maximum as well
as all payments associated with out-of-pocket payments that would have
been made towards the out-of-pocket maximum if it had not been
satisfied. Similar rules apply for any other thresholds at which the
rate of payment changes.
(E) Determining the dollar amount of ABP payments. Subject to
paragraph (b)(3)(i)(D) of this section, any reasonable method may be
used to determine the dollar amount expected to be paid for medical/
surgical benefits subject to a financial requirement or quantitative
treatment limitation (or subject to any level of a financial
requirement or quantitative treatment limitation).
(ii) Special rules--(A) Multi-tiered prescription drug benefits. If
a State or plan administrator applies different levels of financial
requirements to different tiers of prescription drug benefits based on
reasonable factors determined in accordance with the rules in paragraph
(b)(4)(i) of this section (relating to requirements for nonquantitative
treatment limitations) and without regard to whether a drug is
generally prescribed for medical/surgical benefits or for mental health
or substance use disorder benefits, the ABP satisfies the parity
requirements of this paragraph (b) for prescription drug benefits.
Reasonable factors include cost, efficacy, generic versus brand name,
and mail order versus pharmacy pick-up/delivery.
(B) Sub-classifications permitted for office visits, separate from
other outpatient services. For purposes of applying the financial
requirement and treatment limitation rules of this paragraph (b), a
State may divide its benefits furnished on an outpatient basis into the
two sub-classifications described in this paragraph (b)(3)(ii)(B).
After the sub-classifications are established, the State may not impose
any financial requirement or quantitative treatment limitation on
mental health or substance use disorder benefits in any sub-
classification that is more restrictive than the predominant financial
requirement or quantitative treatment limitation that applies to
substantially all medical/surgical benefits in the sub-classification
using the methodology set forth in paragraph (b)(3)(i) of this section.
Sub-classifications other than these special rules, such as separate
sub-classifications for generalists and specialists, are not permitted.
The two sub-classifications permitted under this paragraph
(b)(3)(ii)(B) are:
(1) Office visits (such as physician visits); and
(2) All other outpatient items and services (such as outpatient
surgery, laboratory services, or other medical items).
(iii) No separate cumulative financial requirements. A State may
not apply any cumulative financial requirement for mental health or
substance use disorder benefits in a classification that accumulates
separately from any established for medical/surgical benefits in the
same classification.
(iv) Compliance with other cost-sharing rules. States must meet the
requirements of Sec. Sec. 447.50 through 447.57 of this chapter when
applying Medicaid cost-sharing.
(4) Nonquantitative treatment limitations--(i) General rule. A
State may not impose a nonquantitative treatment limitation for mental
health or substance use disorder benefits in any classification unless,
under the terms of the ABP as written and in operation, any processes,
strategies, evidentiary standards, or other factors used in applying
the nonquantitative treatment limitation to mental health or substance
use disorder benefits in the classification are comparable to, and are
applied no more stringently than, the processes, strategies,
evidentiary standards, or other factors used in applying the limitation
for medical/surgical benefits in the classification.
(ii) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include--
(A) Medical management standards limiting or excluding benefits
based on medical necessity or medical appropriateness, or based on
whether the treatment is experimental or investigative;
(B) Formulary design for prescription drugs;
(C) Standards for provider admission to participate in a network,
including reimbursement rates;
(D) Methods for determining usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols);
(F) Exclusions based on failure to complete a course of treatment;
and
(G) Restrictions based on geographic location, facility type,
provider specialty, and other criteria that limit the scope or duration
of benefits or services provided under the ABP.
(c) ABP providing EPSDT benefits. An ABP that provides EPSDT
benefits is deemed to be compliant with the parity requirements for
financial requirements and treatment limitations with respect to
individuals entitled to such benefits. Annual or lifetime limits are
not permissible in EPSDT benefits.
(d) Availability of information--(1) Criteria for medical necessity
determinations. The criteria for medical necessity determinations made
by the State for beneficiaries served through the ABP for mental health
or substance use disorder benefits must be made available by the State
to any beneficiary or Medicaid provider upon request.
(2) Reason for any denial. The reason for any denial made by the
State in the case of a beneficiary served through an ABP of
reimbursement or payment for services for mental health or substance
use disorder benefits must be made available by the State to the
beneficiary.
(3) Provisions of other law. Compliance with the disclosure
requirements in paragraphs (d)(1) and (2) of this section is not
determinative of compliance with any other provision of applicable
Federal or State law.
(e) Applicability--(1) ABPs. The requirements of this section apply
to

[[Page 18442]]

States providing benefits through ABPs. For those States providing ABPs
through an MCO, PIHP, or PAHP, the rules of 42 CFR part 438, subpart K
also apply, and approved contracts will be viewed as evidence of
compliance with the requirements of this section.
(2) Scope. This section does not--
(i) Require a State to provide any specific mental health benefits
or substance use disorder benefits; however, in providing coverage
through an ABP, the State must include EHBs, including the ten EHBs as
required in Sec. 440.347, which include mental health and substance
use disorder benefits; or
(ii) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the ABP except as specifically provided in paragraph (b) of this
section.
(3) State plan requirement. If a State plan provides for an ABP,
the State must provide sufficient information in ABP State plan
amendment requests to assure compliance with the requirements of this
subpart.
(4) Compliance dates--(i) In general. ABP coverage offered by
States must comply with the requirements of this section no later than
October 2, 2017.
(ii) [Reserved]

PART 456--UTILIZATION CONTROL

0
6. The authority citation for part 456 continues to read as follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302), unless otherwise noted.

Sec. 456.171 [Removed and Reserved]

0
7. Section 456.171 is removed and reserved.

PART 457--ALLOTMENTS AND GRANTS TO STATES

0
8. The authority citation for part 457 continues to read as follows:

Authority: Section 1102 of the Social Security Act (42 U.S.C.
1302).

0
9. Section 457.496 is added to subpart D to read as follows:

Sec. 457.496 Parity in mental health and substance use disorder
benefits.

(a) Meaning of terms. For purposes of this section, except where
the context clearly indicates otherwise, the following terms have the
meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the
total amount of specified benefits that may be paid under a State plan
or a Managed Care Entity (MCE) (as defined at Sec. 457.10) that
contracts with the State plan. State plans must meet the requirements
of Sec. 457.480.
Annual dollar limit means a dollar limitation on the total amount
of specified benefits that may be paid in a 12-month period under a
State plan or a MCE that contracts with a State plan. State plans must
meet the requirements at Sec. 457.480.
Cumulative financial requirements are financial requirements that
determine whether or to what extent benefits are provided based on
accumulated amounts and include deductibles and out-of-pocket maximums.
(However, cumulative financial requirements do not include aggregate
lifetime or annual dollar limits because these two terms are excluded
from the meaning of financial requirements.)
Early and Periodic Screening, Diagnostic and Treatment (EPSDT)
benefits has the meaning defined in section 1905(r) of the Act and must
be provided in accordance with section 1902(a)(43) of the Act.
Financial requirements include deductibles, copayments,
coinsurance, or out-of-pocket maximums. Financial requirements do not
include aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits for items or services for
medical conditions or surgical procedures, as defined under the terms
of the State plan in accordance with applicable Federal and State law,
but does not include mental health or substance use disorder benefits.
Any condition defined by the State plan as being or not being a
medical/surgical condition must be defined to be consistent with
generally recognized independent standards of current medical practice
(for example, the most current version of the International
Classification of Diseases (ICD) or generally applicable State
guidelines). Medical/surgical benefits include long term care services.
Mental health benefits means benefits for items or services that
treat or otherwise address mental health conditions, as defined under
the terms of the State plan in accordance with applicable Federal and
State law, and consistent with generally recognized independent
standards of current medical practice. Standards of current medical
practice can be based on the most current version of the DSM, the most
current version of the ICD, or generally applicable State guidelines.
The term includes long term care services.
State Plan has the meaning assigned at Sec. 457.10 and Sec.
457.50.
Substance use disorder benefits means benefits for items or
services for substance use disorder, as defined under the terms of the
State plan in accordance with applicable Federal and State law, and
consistent with generally recognized independent standards of current
medical practice. Standards of current medical practice can be based on
the most current version of the DSM, the most current version of the
ICD, or generally applicable State guidelines. The term includes long
term care services.
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under
the State plan. (See paragraph (d)(4)(ii) of this section for an
illustrative list of nonquantitative treatment limitations.) A
permanent exclusion of all benefits for a particular condition or
disorder, however, is not a treatment limitation for purposes of this
definition.
(b) State plan providing EPSDT benefits. (1) A State child health
plan is deemed to be in compliance with this section if--
(i) The State elects in the State child health plan to cover
Secretary-approved coverage defined in Sec. 457.450(a) that includes
all EPSDT benefits, as defined in section 1905(r) of the Act, in
accordance with the requirement applied under section 1905(r)(5) of the
Act to provide necessary health care, diagnostic services, treatment,
and other measures described in section 1905(a) of the Act to correct
or ameliorate defects and physical and mental illnesses and conditions
discovered by the screening services, as well as the informing and
administrative requirements under 1902(a)(43) of the Act and the
approved State Medicaid plan; and
(ii) The State child health plan does not exclude EPSDT benefits
for any particular condition, disorder, or diagnosis.
(2) The child health plan must include a description of how the
State will comply with paragraph (b)(1)(i) of this section.
(3) If a State has elected in its state plan to cover EPSDT
benefits only for certain populations enrolled in the state child
health plan, the State is deemed compliant with this section only with
respect to such children.
(c) Parity requirements for aggregate lifetime and annual dollar
limits. This paragraph (c) details the application of the parity
requirements for aggregate

[[Page 18443]]

lifetime and annual dollar limits. A State plan that provides both
medical/surgical benefits and mental health or substance use disorder
benefits must comply with paragraph (c)(1), (2), or (4) of this
section.
(1) Plan with no limit or limits on less than one-third of all
medical/surgical benefits. If a State plan does not include an
aggregate lifetime or annual dollar limit on any medical/surgical
benefits or includes an aggregate lifetime or annual dollar limit that
applies to less than one-third of all medical/surgical benefits, it may
not impose an aggregate lifetime or annual dollar limit, respectively,
on mental health or substance use disorder benefits.
(2) State plans with a limit on at least two-thirds of all medical/
surgical benefits. If a State plan includes an aggregate lifetime or
annual dollar limit on at least two-thirds of all medical/surgical
benefits, it must either--
(i) Apply the aggregate lifetime or annual dollar limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health or substance use disorder benefits in a manner that
does not distinguish between the medical/surgical benefits and mental
health or substance use disorder benefits; or
(ii) Not include an aggregate lifetime or annual dollar limit on
mental health or substance use disorder benefits that is more
restrictive than the aggregate lifetime or annual dollar limit,
respectively, on medical/surgical benefits. (For cumulative limits
other than aggregate lifetime or annual dollar limits, see paragraph
(d)(3)(iii) of this section prohibiting separately accumulating
cumulative financial requirements.)
(3) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this paragraph (c), the determination of
whether the portion of medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit represents one-third or two-
thirds of all medical/surgical benefits is based on the dollar amount
of all plan payments for medical/surgical benefits expected to be paid
under the State plan for the State plan year (or for the portion of the
plan year after a change in plan benefits that affects the
applicability of the aggregate lifetime or annual dollar limits). Any
reasonable method may be used to determine whether the dollar amount
expected to be paid under the State plan will constitute one-third or
two-thirds of the dollar amount of all plan payments for medical/
surgical benefits.
(4) Plan not described in this section--(i) In general. A State
plan that is not described in paragraph (c)(1) or (2) of this section
for aggregate lifetime or annual dollar limits on medical/surgical
benefits, must either--
(A) Impose no aggregate lifetime or annual dollar limit, as
appropriate, on mental health or substance use disorder benefits; or
(B) Impose an aggregate lifetime or annual dollar limit on mental
health or substance use disorder benefits that is no more restrictive
than an average limit calculated for medical/surgical benefits in the
following manner. The average limit is calculated by taking into
account the weighted average of the aggregate lifetime or annual dollar
limits, as appropriate, that are applicable to the categories of
medical/surgical benefits. Limits based on delivery systems, such as
inpatient/outpatient treatment or normal treatment of common, low-cost
conditions (such as treatment of normal births), do not constitute
categories for purposes of this paragraph (c)(4)(i)(B). In addition,
for purposes of determining weighted averages, any benefits that are
not within a category that is subject to a separately-designated dollar
limit under the plan are taken into account as a single separate
category by using an estimate of the upper limit on the dollar amount
that a plan may reasonably be expected to incur for such benefits,
taking into account any other applicable restrictions under the plan.
(ii) Weighting. For purposes of this paragraph (c)(4), the
weighting applicable to any category of medical/surgical benefits is
determined in the manner set forth in paragraph (c)(3) of this section
for determining one-third or two-thirds of all medical/surgical
benefits.
(d) Parity requirements for financial requirements and treatment
limitations--(1) Clarification of terms--(i) Classification of
benefits. When reference is made in this paragraph (d) to a
classification of benefits, the term ``classification'' means a
classification as described in paragraph (d)(2)(ii) of this section.
(ii) Type of financial requirement or treatment limitation. When
reference is made in this paragraph (d) to a type of financial
requirement or treatment limitation, the reference to type means its
nature. Different types of financial requirements include deductibles,
copayments, coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and
lifetime day and visit limits. See paragraph (d)(4)(ii) of this section
for an illustrative list of nonquantitative treatment limitations.
(iii) Level of a type of financial requirement or treatment
limitation. When reference is made in this paragraph (d) to a level of
a type of financial requirement or treatment limitation, level refers
to the magnitude of the type of financial requirement or treatment
limitation.
(2) General parity requirement--(i) General rule. A State plan or a
MCE that contracts with CHIP through its State plan that provides both
medical/surgical benefits and mental health or substance use disorder
benefits, including when such benefits are delivered through an MCE,
may not apply any financial requirement or treatment limitation to
mental health or substance use disorder benefits in any classification
that is more restrictive than the predominant financial requirement or
treatment limitation of that type applied to substantially all medical/
surgical benefits in the same classification. Whether a financial
requirement or treatment limitation is a predominant financial
requirement or treatment limitation that applies to substantially all
medical/surgical benefits in a classification is determined separately
for each type of financial requirement or treatment limitation. The
application of the rules of this paragraph (d)(2) to financial
requirements and quantitative treatment limitations is addressed in
paragraph (d)(3) of this section; the application of the rules of this
paragraph (d)(2) to nonquantitative treatment limitations is addressed
in paragraph (d)(4) of this section.
(ii) Classifications of benefits used for applying rules. If a
State plan provides mental health or substance use disorder benefits in
any classification of benefits described in this paragraph (d)(2)(ii),
mental health or substance use disorder benefits must be provided in
every classification in which medical/surgical benefits are provided.
In determining the classification in which a particular benefit
belongs, the same reasonable standards must apply to medical/surgical
benefits and to mental health or substance use disorder benefits. To
the extent that a State plan provides benefits in a classification and
imposes any separate financial requirement or treatment limitation (or
separate level of a financial requirement or treatment limitation) for
benefits in the classification, the rules of this paragraph (d) apply
separately for that classification for all financial requirements or
treatment limitations. The following classifications of benefits are
the only classifications used in applying the rules of this paragraph
(d):
(A) Inpatient. Benefits furnished on an inpatient basis.

[[Page 18444]]

(B) Outpatient. Benefits furnished on an outpatient basis. See
special rules for office visits in paragraph (d)(3)(iii) of this
section.
(C) Emergency care. Benefits for emergency care.
(D) Prescription drugs. Benefits for prescription drugs. See
special rules for multi-tiered prescription drug benefits in paragraph
(d)(3)(iii) of this section.
(3) Financial requirements and quantitative treatment limitations--
(i) Determining ``substantially all'' and ``predominant''--(A)
Substantially all. For purposes of this paragraph (d), a type of
financial requirement or quantitative treatment limitation is
considered to apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. If a type of
financial requirement or quantitative treatment limitation does not
apply to at least two-thirds of all medical/surgical benefits in a
classification, then that type cannot be applied to mental health or
substance use disorder benefits in that classification.
(B) Predominant. (1) If a type of financial requirement or
quantitative treatment limitation applies to at least two-thirds of all
medical/surgical benefits in a classification as determined under
paragraph (d)(3)(i)(A) of this section, the level of the financial
requirement or quantitative treatment limitation that is considered the
predominant level of that type in a classification of benefits is the
level that applies to more than one-half of medical/surgical benefits
in that classification subject to the financial requirement or
quantitative treatment limitation.
(2) If, for a type of financial requirement or quantitative
treatment limitation that applies to at least two-thirds of all
medical/surgical benefits in a classification, there is no single level
that applies to more than one-half of medical/surgical benefits in the
classification subject to the financial requirement or quantitative
treatment limitation, the State plan (or health insurance issuer) may
combine levels until the combination of levels applies to more than
one-half of medical/surgical benefits subject to the financial
requirement or quantitative treatment limitation in the classification.
The least restrictive level within the combination is considered the
predominant level of that type in the classification. (For this
purpose, a State plan may combine the most restrictive levels first,
with each less restrictive level added to the combination until the
combination applies to more than one-half of the benefits subject to
the financial requirement or treatment limitation.)
(C) Portion based on plan payments. For purposes of this paragraph
(d), the determination of the portion of medical/surgical benefits in a
classification of benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation) is based on
the dollar amount of all State plan payments and combinations of MCE
payments for medical/surgical benefits in the classification expected
to be paid under the plan or MCE or combination that contracts with the
State plan for the plan year (or for the portion of the plan year after
a change in plan benefits that affects the applicability of the
financial requirement or quantitative treatment limitation).
(D) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of a State plan payments includes all
plan payments for claims that would be subject to the deductible if it
had not been satisfied. In accordance with the cumulative cost-sharing
maximum in Sec. 457.560, or any other out-of-pocket maximum in the
State plan, the dollar amount of plan payments includes all State plan
payments associated with out-of-pocket payments that are taken into
account towards the out-of-pocket maximum as well as all plan payments
associated with out-of-pocket payments that would have been made
towards the out-of-pocket maximum if it had not been satisfied. Similar
rules apply for any other thresholds at which the rate of health plan
payment changes.
(E) Determining the dollar amount of State plan payments. Subject
to paragraph (d)(3)(i)(D) of this section, any reasonable method may be
used to determine the dollar amount expected to be paid under a State
plan for medical/surgical benefits subject to a financial requirement
or quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation).
(ii) Special rules--(A) Multi-tiered prescription drug benefits. If
a State plan applies different levels of financial requirements to
different tiers of prescription drug benefits based on reasonable
factors determined in accordance with the rules in paragraph (d)(4)(i)
of this section (relating to requirements for nonquantitative treatment
limitations) and without regard to whether a drug is generally
prescribed for medical/surgical benefits or for mental health or
substance use disorder benefits, the health plan satisfies the parity
requirements of this paragraph (d) for prescription drug benefits.
Reasonable factors include cost, efficacy, generic versus brand name,
and mail order versus pharmacy pick-up/delivery.
(B) Sub-classifications permitted for office visits, separate from
other outpatient services. For purposes of applying the financial
requirement and treatment limitation rules of this paragraph (d), a
State plan may divide its benefits furnished on an outpatient basis
into the two sub-classifications described in this paragraph
(d)(3)(ii)(B). After the sub-classifications are established, the State
plan may not impose any financial requirement or quantitative treatment
limitation on mental health or substance use disorder benefits in any
sub-classification that is more restrictive than the predominant
financial requirement or quantitative treatment limitation that applies
to substantially all medical/surgical benefits in the sub-
classification using the methodology set forth in paragraph (d)(3)(i)
of this section. Sub-classifications other than these special rules,
such as separate sub-classifications for generalists and specialists,
are not permitted. The two sub-classifications permitted under this
paragraph (d)(3)(ii)(B) are:
(1) Office visits (such as physician visits); and
(2) All other outpatient items and services (such as outpatient
surgery, facility charges for day treatment centers, laboratory
charges, or other medical items).
(iii) No separate cumulative financial requirements. A State plan
may not apply any cumulative financial requirement for mental health or
substance use disorder benefits in a classification that accumulates
separately from any established for medical/surgical benefits in the
same classification.
(4) Nonquantitative treatment limitations--(i) General rule. A
State plan may not impose a nonquantitative treatment limitation for
mental health or substance use disorder benefits in any classification
unless, under the terms of the CHIP State plan as written and in
operation, any processes, strategies, evidentiary standards, or other
factors used in applying the nonquantitative treatment limitation to
mental health or substance use disorder benefits in the classification
are comparable to, and are applied no more stringently than, the
processes, strategies, evidentiary standards, or other factors used in
applying the limitation for medical/surgical benefits in the
classification.

[[Page 18445]]

(ii) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include--
(A) Medical management standards limiting or excluding benefits
based on medical necessity or medical appropriateness, or based on
whether the treatment is experimental or investigative;
(B) Formulary design for prescription drugs;
(C) For plans with multiple network tiers (such as preferred
providers and participating providers), network tier design;
(D) Standards for provider admission to participate in a network,
including reimbursement rates;
(E) Plan methods for determining usual, customary, and reasonable
charges;
(F) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols);
(G) Exclusions based on failure to complete a course of treatment;
(H) Restrictions based on geographic location, facility type,
provider specialty, and other criteria that limit the scope or duration
of benefits for services provided under the plan or coverage; and
(I) Standards for providing access to out-of-network providers.
(5) Application to out-of-network providers. Any State plan
providing access to out-of-network providers for medical/surgical
benefits within a classification must use processes, strategies,
evidentiary standards, or other factors in determining access to out-
of-network providers for mental health or substance use disorder
benefits that are comparable to, and applied no more stringently than,
the processes, strategies, evidentiary standards, or other factors in
determining access to out-of-network providers for medical/surgical
benefits.
(e) Availability of plan information--(1) Criteria for medical
necessity determinations. The criteria for medical necessity
determinations made under a State plan including when benefits are
furnished through a MCE contractor for mental health or substance use
disorder benefits must be made available by the plan administrator (or
the State offering the coverage) to any current enrollee or potential
enrollee or contracting provider upon request. Health plans operating
in compliance with Sec. 438.236(c) of this chapter will be deemed
compliant with the requirements in this paragraph (e).
(2) Reason for any denial. The reason for any denial under a health
plan of reimbursement or payment for services for mental health or
substance use disorder benefits in the case of any enrollee must be
made available by the plan administrator or the State to the enrollee.
(3) Provisions of other law. Compliance with the disclosure
requirements in paragraphs (e)(1) and (2) of this section is not
determinative of compliance with any other provision of applicable
Federal or State law.
(f) Applicability--(1) State plans. The requirements of this
section apply to State plans offering medical/surgical benefits and
mental health or substance use disorder benefits to their enrollees
including when benefits are furnished under a contract with MCEs. If,
under an arrangement or arrangements to provide State plan benefits any
enrollee can simultaneously receive coverage for medical/surgical
benefits and coverage for mental health or substance use disorder
benefits, then the requirements of this section apply separately for
each combination of medical/surgical benefits and of mental health or
substance use disorder benefits that any enrollee can simultaneously
receive from the State.
(i) Standard for defining benefits. States must indicate the
standard used for defining the following benefits in the State plan:
(A) Medical/surgical benefits.
(B) Mental health benefits.
(C) Substance use disorder benefits.
(ii) [Reserved]
(2) Scope. This section does not--
(i) Require a State plan or a MCE that contracts with a State plan
to provide any mental health benefits or substance use disorder
benefits, and the provision of benefits by a State plan or a MCE that
contracts with a State plan for one or more mental health conditions or
substance use disorders does not require the plan or health insurance
coverage under this section to provide benefits for any other mental
health condition or substance use disorder;
(ii) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the State plan or a MCE that contracts with a CHIP State plan
except as specifically provided in paragraphs (c) and (d) of this
section.
(g) Compliance dates--(1) In general. State plans (including those
that contract with a MCE) must comply with the requirements of this
section no later than October 2, 2017.
(2) [Reserved].

Dated: February 4, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: February 22, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-06876 Filed 3-29-16; 8:45 am]
BILLING CODE 4120-01-P