[Federal Register Volume 83, Number 220 (Wednesday, November 14, 2018)]
[Proposed Rules]
[Pages 57264-57299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24626]



[[Page 57263]]

Vol. 83

Wednesday,

No. 220

November 14, 2018

Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





42 CFR Parts 438 and 457





Medicaid Program; Medicaid and Children's Health Insurance Plan (CHIP) 
Managed Care; Proposed Rule

  Federal Register / Vol. 83 , No. 220 / Wednesday, November 14, 2018 / 
Proposed Rules  

[[Page 57264]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 438 and 457

[CMS-2408-P]
RIN 0938-AT40


Medicaid Program; Medicaid and Children's Health Insurance Plan 
(CHIP) Managed Care

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule advances CMS' efforts to streamline the 
Medicaid and Children's Health Insurance Plan (CHIP) managed care 
regulatory framework and reflects a broader strategy to relieve 
regulatory burdens; support state flexibility and local leadership; and 
promote transparency, flexibility, and innovation in the delivery of 
care. These proposed revisions of the Medicaid and CHIP managed care 
regulations are intended to ensure that the regulatory framework is 
efficient and feasible for states to implement in a cost-effective 
manner and ensure that states can implement and operate Medicaid and 
CHIP managed care programs without undue administrative burdens.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on January 14, 2019.

ADDRESSES: In commenting, please refer to file code CMS-2408-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2408-P, P.O. Box 8016, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2408-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 

John Giles, (410) 786-1255, for Medicaid Managed Care Operations.
Jennifer Sheer, (410) 786-1769, for the Medicaid Managed Care Quality 
provisions.
Melissa Williams, (410) 786-4435, for the CHIP provisions.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Medicaid Managed Care

A. Background

    States may implement a managed care delivery system using four 
types of federal authorities--sections 1915(a), 1915(b), 1932(a), and 
1115(a) of the Social Security Act (the Act); each is described briefly 
below.
    Under section 1915(a) of the Act, states can implement a voluntary 
managed care program by executing a contract with organizations that 
the state has procured using a competitive procurement process. To 
require beneficiaries to enroll in a managed care program to receive 
services, a state must obtain approval from CMS under two primary 
authorities:
     Through a state plan amendment that meets standards set 
forth in section 1932(a) of the Act, states can implement a mandatory 
managed care delivery system. This authority does not allow states to 
require beneficiaries who are dually eligible for Medicare and Medicaid 
(dually eligible), American Indians/Alaska Natives (except as permitted 
in section 1932(a)(2)(C) of the Act), or children with special health 
care needs to enroll in a managed care program. State plans, once 
approved, remain in effect until modified by the state.
     We may grant a waiver under section 1915(b) of the Act, 
permitting a state to require all Medicaid beneficiaries to enroll in a 
managed care delivery system, including dually eligible beneficiaries, 
American Indians/Alaska Natives, or children with special health care 
needs. After approval, a state may operate a section 1915(b) waiver for 
a 2-year period (certain waivers can be operated for up to 5 years if 
they include dually eligible beneficiaries) before requesting a renewal 
for an additional 2- (or 5-) year period.
    We may also authorize managed care programs as part of 
demonstration projects under section 1115(a) of the Act that include 
waivers permitting the state to require all Medicaid beneficiaries to 
enroll in a managed care delivery system, including dually eligible 
beneficiaries, American Indians/Alaska Natives, and children with 
special health care needs. Under this authority, states may seek 
additional flexibility to demonstrate and evaluate innovative policy 
approaches for delivering Medicaid benefits, as well as the option to 
provide services not typically covered by Medicaid. Such flexibility is 
approvable only if the objectives of the Medicaid statute are likely to 
be met, and the demonstration is subject to evaluation.
    These authorities may permit states to operate their programs 
without complying with the following standards of Medicaid law outlined 
in section of 1902 of the Act:
     Statewideness [section 1902(a)(1) of the Act]: States may 
implement a managed care delivery system in specific areas of the State 
(generally counties/parishes) rather than the whole state;
     Comparability of Services [section 1902(a)(10) of the 
Act]: States may provide different benefits to people enrolled in a 
managed care delivery system; and
     Freedom of Choice [section 1902(a)(23)(A) of the Act]: 
States may generally require people to receive their Medicaid services 
only from a managed care plan's network of providers or primary care 
provider.
    In the May 6, 2016 Federal Register (81 FR 27498), we published the 
``Medicaid and Children's Health Insurance Program (CHIP) Programs; 
Medicaid Managed Care, CHIP

[[Page 57265]]

Delivered in Managed Care, and Revisions Related to Third Party 
Liability'' final rule (hereinafter referred to as ``the 2016 final 
rule'') that modernized the Medicaid and CHIP managed care regulations 
to reflect changes in the use of managed care delivery systems. The 
2016 final rule aligned many of the rules governing Medicaid and CHIP 
managed care with those of other major sources of coverage; implemented 
applicable statutory provisions; strengthened actuarial soundness 
payment provisions to promote the accountability of managed care 
program rates; strengthened efforts to reform delivery systems that 
serve Medicaid and CHIP beneficiaries; and enhanced policies related to 
program integrity.
    In the January 18, 2017 Federal Register (82 FR 5415), we published 
the ``Medicaid Program; The Use of New or Increased Pass-Through 
Payments in Medicaid Managed Care Delivery Systems'' final rule (the 
2017 pass-through payments final rule) that made changes to the pass-
through payment transition periods and the maximum amount of pass-
through payments permitted annually during the transition periods under 
Medicaid managed care contract(s) and rate certification(s). That final 
rule prevented increases in pass-through payments and the addition of 
new pass-through payments beyond those in place when the pass-through 
payment transition periods were established in the final Medicaid 
managed care regulations.
    Since publication of the 2016 final rule, the landscape for 
healthcare delivery continues to change, and states are continuing to 
work toward reforming healthcare delivery systems to address the unique 
challenges and needs of their local citizens. To that end, the 
Department of Health and Human Services (HHS) and CMS issued a letter 
\1\ to the nation's Governors on March 14, 2017, affirming the 
continued HHS and CMS commitment to partnership with states in the 
administration of the Medicaid program, and noting key areas where we 
would improve collaboration with states and move toward more effective 
program management. In that letter, we committed to a thorough review 
of the managed care regulations to prioritize beneficiary outcomes and 
state priorities.
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    \1\ Letter to the nation's Governors on March 14, 2017: https://www.hhs.gov/sites/default/files/sec-price-admin-verma-ltr.pdf.
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    Since our issuance of that letter, stakeholders have expressed that 
the current federal regulations are overly prescriptive and add costs 
and administrative burden to state Medicaid programs with little 
improvements in outcomes for beneficiaries. As part of the agency's 
broader efforts to reduce administrative burden, we undertook a review 
to analyze the current managed care regulations to ascertain if there 
were ways to achieve a better balance between appropriate federal 
oversight and state flexibility, while also maintaining critical 
beneficiary protections, ensuring fiscal integrity, and improving the 
quality of care for Medicaid beneficiaries. This proposed rule is the 
result of that review and seeks to streamline the managed care 
regulations by reducing unnecessary and duplicative administrative 
burden and further reducing federal regulatory barriers to help ensure 
that state Medicaid agencies are able to work efficiently and 
effectively to design, develop, and implement Medicaid managed care 
programs that best meet each state's local needs and populations.

B. Provisions of the Proposed Rule

    This preamble discusses our proposed changes in the context of the 
current law. Throughout this document, the term ``PAHP'' is used to 
mean a prepaid ambulatory health plan that does not exclusively provide 
non-emergency medical transportation services. Whenever this document 
is referencing a PAHP that exclusively provides non-emergency medical 
transportation services, it would be specifically addressed as a ``Non-
Emergency Medical Transportation (NEMT) PAHP.''
1. Standard Contract Requirements (Sec.  438.3)
    In the 2016 final rule, we added a new provision at 42 CFR 438.3(t) 
requiring that contracts with a managed care organization (MCO), 
prepaid inpatient health plan (PIHP), or PAHP that cover Medicare-
Medicaid dually eligible enrollees provide that the MCO, PIHP, or PAHP 
sign a Coordination of Benefits Agreement (COBA) and participate in the 
automated crossover claim process administered by Medicare. The purpose 
of this provision was to promote efficiencies for providers by allowing 
providers to bill once, rather than sending separate claims to Medicare 
and the Medicaid MCO, PIHP, or PAHP.
    Since publication of the 2016 final rule, we have heard from a 
number of states that, prior to the rule, had effective processes in 
place to identify and send appropriate crossover claims to their 
managed care plans from the crossover file the states received from us. 
Medicaid beneficiaries can be enrolled in multiple managed care plans 
and/or the state's fee-for-service (FFS) program. For example, a 
beneficiary may have medical care covered by an MCO, dental care 
covered by a PAHP, and behavioral health care covered by the state's 
FFS program. However, when a managed care plan enters into a crossover 
agreement with Medicare, as required in Sec.  438.3(t), we then send 
crossover claims for Medicaid managed care enrollees of that plan to 
the managed care plans, as well as to the state Medicaid agency. When 
this occurs, the managed care plan(s) may receive claims for services 
that are not the contractual responsibility of the managed care plan. 
Additionally, states noted that having all claims sent to the managed 
care plan(s) can result in some claims being sent to the wrong plan 
when beneficiaries change plans. These states have expressed that to 
discontinue existing effective processes for routing crossover claims 
to their managed care plans to comply with this provision adds 
unnecessary costs and burden to the state and plans, creates confusion 
for payers and providers, and delays provider payments.
    To address these concerns, we propose to revise Sec.  438.3(t) to 
remove the requirement that managed care plans must enter into a COBA 
directly and instead would require contracts with managed care plans to 
specify the methodology by which the state would ensure that the 
managed care plans receive all appropriate crossover claims for which 
they are responsible. Under this proposal, states would be able to 
determine the method that best meets the needs of their program, 
whether by requiring the managed care plans to enter into a COBA and 
participate in the automated claims crossover process directly or by 
using an alternative method by which the state forwards appropriate 
crossover claims it receives from Medicare to each MCO, PIHP, or PAHP. 
Additionally, we propose to include a requirement that, if the state 
elects to use a methodology other than requiring the MCO, PIHP, or PAHP 
to enter into a COBA with Medicare, that methodology must ensure that 
the submitting provider is promptly informed on the state's remittance 
advice that the claim has been sent to the MCO, PIHP, or PAHP for 
payment consideration.
2. Actuarial Soundness Standards (Sec.  438.4)
a. Option To Develop and Certify a Rate Range (Sec.  438.4(c))
    As noted in the 2016 final rule, before the 2016 final rule was 
published, we

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considered any capitation rate paid to a managed care plan that fell 
anywhere within the certified rate range to be actuarially sound (81 FR 
27567). However, to make the rate setting and the rate approval process 
more transparent, we changed that process in the 2016 final rule at 
Sec.  438.4 to require that states develop and certify as actuarially 
sound each individual rate paid per rate cell to each MCO, PIHP, or 
PAHP with enough detail to understand the specific data, assumptions, 
and methodologies behind that rate (81 FR 27567). We noted that states 
could continue to use rate ranges to gauge an appropriate range of 
payments on which to base negotiations with an MCO, PIHP, or PAHP, but 
would have to ultimately provide certification to CMS of a specific 
rate for each rate cell, rather than a rate range (81 FR 27567). We 
believed that this change would enhance the integrity of the Medicaid 
rate-setting process and align Medicaid policy more closely with 
actuarial practices used in setting rates for non-Medicaid plans (81 FR 
27568).
    Since publication of the 2016 final rule, we have heard from 
stakeholders that the requirement to certify a capitation rate per rate 
cell, rather than to certify a rate range, has the potential to 
diminish states' ability to obtain the best rates when contracts are 
procured through competitive bidding. For example, we heard from one 
state that historically competitively bid the administrative component 
of the capitation rate that the requirement to certify a capitation 
rate per rate cell would not permit the state, and therefore, the 
federal government, to realize a lower rate that could have been 
available through the state's previous procurement process. States that 
negotiate dozens of managed care plans' rates annually have also cited 
the potential burden associated with losing the flexibility to certify 
rate ranges. Our 2016 Medicaid Managed Care Enrollment Report shows 
that 15 states submitted rate certifications on 20 plans or more, and 
one state (California) submitted rate certifications for 130 plans.\2\ 
States have claimed that the elimination of rate ranges could 
potentially increase administrative costs and burden to submit separate 
rate certifications and justifications for each capitation rate paid 
per rate cell.
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    \2\ See 2016 Medicaid Managed Care Enrollment Report, Table 5 
Enrollment by Program and Plan as of 2016, pages 24-84, available at 
https://www.medicaid.gov/medicaid/managed-care/enrollment/index.html.
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    To address states' concerns while ensuring that rates are 
actuarially sound and federal resources are spent appropriately, we 
propose to add Sec.  438.4(c) to provide an option for states to 
develop and certify a rate range per rate cell within specified 
parameters. We have designed our proposal to address our previously 
articulated concerns over the lack of transparency when large rate 
ranges were used by states to increase or decrease rates paid to the 
managed care plans without providing further notification to CMS or the 
public of the change. The proposed rate range option at new paragraph 
(c) would allow states to certify a rate range per rate cell subject to 
specific limits and would require the submission of a rate 
recertification if the state determines that changes are needed within 
the rate range during the rate year. Under our proposal, an actuary 
must certify the upper and lower bounds of the proposed rate range as 
actuarially sound.
    Specifically in Sec.  438.4(c)(1), we propose the specific 
parameters for the use of rate ranges: (1) The rate certification 
identifies and justifies the assumptions, data, and methodologies 
specific to both the upper and lower bounds of the rate range; (2) the 
upper and lower bounds of the rate range are certified as actuarially 
sound consistent with the requirements of part 438; (3) the upper bound 
of the rate range does not exceed the lower bound of the rate range 
multiplied by 1.05; (4) the rate certification documents the state's 
criteria for paying MCOs, PIHPs, and PAHPs at different points within 
the rate range; and (5) compliance with specified limits on the state's 
ability to pay managed care plans at different points within the rate 
range. States using this option would be prohibited from paying MCOs, 
PIHPs, and PAHPs at different points within the certified rate range 
based on the willingness or agreement of the MCOs, PIHPs, or PAHPs to 
enter into, or adhere to, intergovernmental transfer (IGT) agreements, 
or the amount of funding the MCOs, PIHPs, or PAHPs provide through 
IGTs. We are proposing these specific conditions and limitations on the 
use of rate ranges to address our concerns noted above; that is, that 
rates are actuarially sound and ensure appropriate stewardship of 
federal resources, while also permitting limited state flexibility to 
use certified rate ranges. We believe that the conditions and 
limitations on the use of rate ranges as set forth in this proposed 
rule strike the appropriate balance between prudent fiscal and program 
integrity and state flexibility. We invite comment on these specific 
proposals and whether additional conditions should be considered to 
ensure that rates are actuarially sound. Finally, we would like to 
emphasize that this proposal would require states to demonstrate in 
their rate certification how the upper and lower bounds of the rate 
range are actuarially sound.
    Under proposed Sec.  438.4(c)(2)(i), states certifying a rate range 
would be required to document the capitation rates, prior to the start 
of the rating period for the applicable MCO, PIHP, and PAHP, at points 
within the certified rate range consistent with the state's criteria in 
proposed paragraph (c)(1)(iv). States electing to use a rate range 
would have to submit rate certifications to CMS prior to the start of 
the rating period and they must comply with all other regulatory 
requirements including Sec.  438.4, except Sec.  438.4(b)(4) as 
specified. During the contract year, states using the rate range option 
in Sec.  438.4(c)(1) would not be able to modify capitation rates 
within the plus or minus 1.5 percent range allowed under Sec.  
438.7(c)(3); we propose to codify this as Sec.  438.4(c)(2)(ii). This 
proposed provision would enable CMS to give states the flexibility and 
administrative simplification to use certified rate ranges. While the 
use of rate ranges is not standard practice in rate development, this 
proposed change aligns with standard rate development practices by 
requiring recertification when states elect to modify capitation rates 
within a rate range during the rating year. States wishing to modify 
the capitation rates within a rate range during the rating year would 
be required, in proposed Sec.  438.4(c)(2)(iii), to provide a revised 
rate certification demonstrating that the criteria for initially 
setting the rate within the range, as described in the initial rate 
certification, were not applied accurately; that there was a material 
error in the data, assumptions, or methodologies used to develop the 
initial rate certification and that the modifications are necessary to 
correct the error; or that other adjustments are appropriate and 
reasonable to account for programmatic changes.
    We acknowledge that our proposal has the potential to reintroduce 
some of the risks that were identified in the 2016 final rule related 
to the use of rate ranges in the Medicaid program. In the 2016 final 
rule, we generally prohibited the use of rate ranges, including changes 
limited to a de minimis plus or minus 1.5 percent range permitted under 
Sec.  438.7(c)(3) that was finalized in the rule to provide some 
administrative relief to states with respect to small changes in the 
capitation rates, to eliminate any potential ambiguity in

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rate setting and to be consistent with our goal to make the rate 
setting and rate approval processes more transparent. We specifically 
noted in the 2016 final rule that states have used rate ranges to 
increase or decrease rates paid to the managed care plans without 
providing further notification to CMS or the public of the change or 
certification that the change was based on actual experience incurred 
by the MCOs, PIHPs, or PAHPs that differed in a material way from the 
actuarial assumptions and methodologies initially used to develop the 
capitation rates (81 FR 27567-27568).
    We further noted in the 2016 final rule that the prohibition on 
rate ranges was meant to enhance the integrity and transparency of the 
rate setting process in the Medicaid program, and to align Medicaid 
policy more closely with the actuarial practices used in setting rates 
for non-Medicaid health plans. We noted that the use of rate ranges was 
unique to Medicaid managed care and that other health insurance 
products that are subject to rate review submit and justify a specific 
premium rate. We stated in the 2016 final rule our belief that once a 
managed care plan has entered into a contract with the state, any 
increase in funding for the contract should correspond with something 
of value in exchange for the increased capitation payments. We also 
provided additional context that our policy on rate ranges was based on 
the concern that some states have used rate ranges to increase 
capitation rates paid to managed care plans without changing any 
obligations within the contract or certifying that the increase was 
based on managed care plans' actual expenses during the contract 
period. In the 2016 final rule, we reiterated that the prohibition on 
rate ranges was consistent with the contracting process where managed 
care plans are agreeing to meet obligations under the contract for a 
fixed payment amount (81 FR 27567-27568).
    The specific risks described above are still concerns for CMS, as 
such we have proposed specific conditions and limitations on the use of 
rate ranges in this proposed rule to address our concerns. Our rate 
range proposal is intended to prevent states from using rate ranges to 
shift costs to the federal government. There are some states that 
currently make significant retroactive changes to the contracted rates 
at or after the end of the rating period. As we noted in the 2016 final 
rule, we do not believe that these changes are made to reflect changes 
in the underlying assumptions used to develop the rates (for example, 
the utilization of services, the prices of services, or the health 
status of the enrollee), but rather we are concerned that these changes 
are used to provide additional reimbursements to the plans or to some 
providers (81 FR 27834). Additionally, we believe the rate ranges 
compliant with our proposal will be actuarially sound, unlike the rate 
ranges that were permissible prior to the 2016 final rule. As noted in 
the 2016 final rule, 14 states used rate ranges with a width of 10 
percent or smaller (that is, the low end and the high end of the range 
were within 5 percent of the midpoint of the range), but in some 
states, the ranges were as wide as 30 percent (81 FR 27834). We believe 
that our proposal would limit excessive ranges because proposed Sec.  
438.4(c)(1)(i) and (ii) would require the upper and lower bounds of the 
rate range to be certified as actuarially sound and that the rate 
certification would identify and justify the assumptions, data, and 
methodologies used to set the bounds. While we believe that this 
proposal would strike the right balance between state flexibility and 
our statutory responsibility to ensure that managed care capitation 
rates are actuarially sound, we also understand that our proposed 
approach may reintroduce undue risk in Medicaid rate-setting.
    Therefore, we are requesting public comments on our proposal in 
general and on our proposed approach. We request public comment on the 
value of the additional state flexibility described in this proposal 
relative to the potential for the identified risks described here and 
in the 2016 final rule, including other unintended consequences that 
could arise from this proposal that we have not yet identified or 
described. We request public comment on whether additional conditions 
or limitations on the use of rate ranges would be appropriate to help 
mitigate the risks we have identified. We also request public comment 
from states on the utility of state flexibility in this area--
specifically, we are asking states to provide specific comments about 
their policy needs and clear explanations describing how utilizing rate 
ranges effectively meets these needs or whether current regulatory 
requirements on rate ranges are sufficiently flexible to meet their 
needs. We are also asking states to provide quantitative data to help 
CMS quantify the benefits and risks associated with this proposal. We 
also encourage states and other stakeholders to comment on the need, 
benefits, risks, and proposed risk mitigations described in this 
proposed revision.
b. Capitation Rate Development Practices That Increase Federal Costs 
and Vary With the Rate of Federal Financial Participation (FFP) (Sec.  
438.4(b)(1) and (d))
    In the 2016 final rule, at Sec.  438.4(b), we set forth the 
standards that capitation rates must meet to be approved as actuarially 
sound capitation rates eligible for FFP under section 1903(m) of the 
Act. Section 438.4(b)(1) requires that capitation rates be developed in 
accordance with generally accepted actuarial principles and practices 
and meet the standards described in Sec.  438.5 dedicated to rate 
development standards. In the 2016 final rule (81 FR 27566), we 
acknowledged that states may desire to establish minimum provider 
payment rates in the contract with the managed care plan. We also 
explained that because actuarially sound capitation rates must be based 
on the reasonable, appropriate, and attainable costs under the 
contract, minimum provider payment expectations included in the 
contract would necessarily be built into the relevant service 
components of the rate. However, we finalized in the regulation at 
Sec.  438.4(b)(1) a prohibition on different capitation rates based on 
the FFP associated with a particular population as part of the 
standards for capitation rates to be actuarially sound. We explained in 
the 2015 proposed rule (80 FR 31120) that different capitation rates 
based on the FFP associated with a particular population represented 
cost-shifting from the state to the federal government and were not 
based on generally accepted actuarial principles and practices.
    In the 2016 final rule (81 FR 27566), we adopted Sec.  438.4(b)(1) 
largely as proposed and provided additional guidance and clarification 
in response to public comments. We stated that the practice intended to 
be prohibited in Sec.  438.4(b)(1) was variance in capitation rates per 
rate cell that was due to the different rates of FFP associated with 
the covered populations. We also provided an example in the 2016 final 
rule. In the example, we explained that we have seen rate 
certifications that set minimum provider payment requirements or 
established risk margins for the managed care plans only for covered 
populations eligible for higher percentages of FFP. We provided in the 
final rule that such practices, when not supported by the application 
of valid rate development standards, were not permissible. We further 
explained that the regulation would not prohibit the state from having 
different capitation rates per rate cell based on differences

[[Page 57268]]

in the projected risk of populations under the contract or based on 
different payment rates to providers that were required by federal law 
(for example, section 1932(h) of the Act). In the 2016 final rule, we 
stated that, as finalized, Sec.  438.4(b)(1) provided that any 
differences among capitation rates according to covered populations 
must be based on valid rate development standards and not on network 
provider reimbursement requirements that apply only to covered 
populations eligible for higher percentages of FFP (81 FR 27566).
    Since publication of the 2016 final rule, we have continued to hear 
from stakeholders that more guidance is needed regarding the regulatory 
standards finalized in Sec.  438.4(b)(1). At least one state has 
indicated that if arrangements that vary provider reimbursement pre-
date the differences in FFP for different covered populations, the 
regulation should not be read to prohibit the resulting capitation 
rates. While we believe that the existing text of Sec.  438.4(b)(1) is 
sufficiently clear, we also want to be responsive to the comments from 
stakeholders and to eliminate any potential loophole in the regulation. 
Therefore, we are proposing to revise Sec.  438.4(b)(1) and to add a 
new paragraph Sec.  438.4(d) to clearly specify our standards for 
actuarial soundness. First and foremost, we are not changing the 
existing regulatory standard or text in Sec.  438.4(b)(1) that 
capitation rates must have been developed in accordance with the 
standards specified in Sec.  438.5 and generally accepted actuarial 
principles and practices. We are proposing to revise the remainder of 
Sec.  438.4(b)(1).
    We are proposing that any differences in the assumptions, 
methodologies, or factors used to develop capitation rates for covered 
populations must be based on valid rate development standards that 
represent actual cost differences in providing covered services to the 
covered populations. Further, we are proposing that any differences in 
the assumptions, methodologies, or factors used to develop capitation 
rates must not vary with the rate of FFP associated with the covered 
populations in a manner that increases federal costs consistent with 
proposed Sec.  438.4(d) described below. This proposal is intended to 
eliminate any ambiguity in the regulation and clearly specify our 
intent that variation in the assumptions, methodologies, and factors 
used to develop rates must be tied to actual cost differences and not 
to any differences that increase federal costs and vary with the rate 
of FFP. We intend the phrase ``assumptions, methodologies, and 
factors'' to cover the methods and data used to develop the actuarially 
sound capitation rates.
    In conjunction with our proposed revisions to Sec.  438.4(b)(1), we 
are also proposing a new paragraph (d) in this section to provide 
specificity regarding the rate development practices that increase 
federal costs and vary with the rate of FFP. We are proposing in Sec.  
438.4(d) a regulatory requirement that requires an evaluation of any 
differences in the assumptions, methodologies, or factors used to 
develop capitation rates for MCOs, PIHPs, and PAHPs that increase 
federal costs and vary with the rate of FFP associated with the covered 
populations. This evaluation must be conducted for the entire managed 
care program and include all managed care contracts for all covered 
populations. We are proposing to require this evaluation across the 
entire managed care program and all managed care contracts for all 
covered populations to protect against state managed care contracting 
practices that may cost-shift to the federal government. Specifically, 
this would entail comparisons of each managed care contract to others 
in the state's managed care program to ensure that variation among 
contracts does not include rate setting methods or policies that would 
be prohibited under this proposal.
    Additionally, we are proposing at Sec.  438.4(d)(1) regulation text 
to clearly list certain rate development practices that increase 
federal costs and are prohibited under our proposal for Sec.  
438.4(b)(1) and (d): (1) A state may not use higher profit margin, 
operating margin, or risk margin when developing capitation rates for 
any covered population, or contract, than the profit margin, operating 
margin, or risk margin used to develop capitation rates for the covered 
population, or contract, with the lowest average rate of FFP; (2) a 
state may not factor into the development of capitation rates the 
additional cost of contractually required provider fee schedules, or 
minimum levels of provider reimbursement, above the cost of similar 
provider fee schedules, or minimum levels of provider reimbursement, 
used to develop capitation rates for the covered population, or 
contract, with the lowest average rate of FFP; and (3) a state may not 
use a lower remittance threshold for a medical loss ratio for any 
covered population, or contract, than the remittance threshold used for 
the covered population, or contract, with the lowest average rate of 
FFP. We are proposing Sec.  438.4(d)(1) to be explicitly clear about 
certain rate development practices that increase federal costs and vary 
with the rate of FFP. We note that this proposal would explicitly 
prohibit these specific rate development practices under any and all 
scenarios, and under this proposal, we would find these rate 
development practices to be in violation of our regulatory standards 
for actuarially sound capitation rates; we also note that the rate 
development practices proposed under Sec.  438.4(d)(1) are not intended 
to represent an exhaustive list of practices that increase federal 
costs and vary with the rate of FFP, as we recognize that there may be 
additional capitation rate development practices that have the same 
effect and would also be prohibited under this proposed rule. We 
believe that this proposal will ensure that our regulatory standards 
for actuarial soundness are consistent with our intent, and that cost-
shifting from the state to the federal government does not occur.
    Finally, in proposed Sec.  438.4(d)(2), we are proposing to specify 
that CMS may require a state to provide written documentation and 
justification, during our review of a state's capitation rates, that 
any differences in the assumptions, methodologies, or factors used to 
develop capitation rates for covered populations or contracts, not 
otherwise referenced in proposed (d)(1), represent actual cost 
differences based on the characteristics and mix of the covered 
services or the covered populations. This proposal is consistent with 
our proposal at Sec.  438.7(c)(3), to add regulatory text to specify 
that the adjustments to capitation rates would also be subject to the 
requirements at Sec.  438.4(b)(1), and to require a state to provide 
documentation for adjustments permitted under proposed Sec.  
438.7(c)(3) to ensure that modifications to a final certified 
capitation rate comply with our proposed regulatory requirements. We 
are specifically requesting public comments on these proposed revisions 
to Sec.  438.4(b)(1) and new proposed Sec.  438.4(d), including on 
whether these proposed changes are sufficiently clear regarding the 
rate development practices that are prohibited in Sec.  438.4(b)(1).
3. Rate Development Standards: Technical Correction (Sec.  
438.5(c)(3)(ii))
    In the 2016 final rule, we finalized at Sec.  438.5(c)(3) an 
exception to the base data standard at Sec.  438.5(c)(2) in recognition 
of circumstances where states may not be able to meet the standard at 
(c)(2). We explained in the 2016 final rule preamble (81 FR 27574) that 
states requesting the exception under Sec.  438.5(c)(3) must submit a 
description of why the exception is

[[Page 57269]]

needed and a corrective action plan detailing how the state would bring 
their base data into compliance no more than 2 years after the rating 
period in which the deficiency was discovered.
    Regrettably, the regulation text regarding the corrective action 
timeline at Sec.  438.5(c)(3)(ii) was not as consistent with the 
preamble or as clear as we intended. The regulation text finalized in 
2016 provides that the state must adopt a corrective action plan to 
come into compliance ``no later than 2 years from the rating period for 
which the deficiency was identified.'' The preamble text described the 
required corrective action plan as detailing how the problems ``would 
be resolved in no more than 2 years after the rating period in which 
the deficiency was discovered.'' This discrepancy resulted in ambiguity 
that confused some stakeholders as to when the corrective action plan 
must be completed and their base data must be in compliance. To remove 
this ambiguity, we propose to replace the word ``from'' at Sec.  
438.5(c)(3)(ii) with the phrase ``after the last day of.'' We also note 
that the preamble used the term ``discovered'', while the regulatory 
text used the term ``identified.'' We propose to retain the term 
``identified'' in the regulatory text since we believe this term is 
more appropriate in this context. We believe that this proposed change 
would clarify the corrective action plan timeline for states to achieve 
compliance with the base data standard; that is, states would have the 
rating year for which the corrective action period request is made, 
plus 2 years following that rating year to develop rates using the 
required base data. For example, if the state's rate development for 
calendar year 2018 does not comply with the base data requirements, the 
state would have 2 calendar years after the last day of the 2018 rating 
period to come into compliance. This means that the state's rate 
development for calendar year 2021 would need to use base data that is 
compliant with Sec.  438.5(c)(2).
    We solicit comment on our proposal and whether any additional 
clarification is necessary.
4. Special Contract Provisions Related to Payment (Sec.  438.6)
a. Risk-Sharing Mechanism Basic Requirements (Sec.  438.6(b))
    In the ``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'' proposed rule (the 2015 proposed 
rule) (80 FR 31098, June 1, 2015), we proposed to redesignate the basic 
requirements for risk contracts previously in Sec.  438.6(c)(2) as 
Sec.  438.6(b). In Sec.  438.6(b)(1), we proposed a non-exhaustive list 
of risk-sharing mechanisms (for example, reinsurance, risk corridors, 
and stop-loss limits) and required that all such mechanisms be 
specified in the contract. In the preamble, we stated our intent to 
interpret and apply Sec.  438.6(b)(1) to any mechanism or arrangement 
that has the effect of sharing risk between the MCO, PIHP, or PAHP, and 
the state (80 FR 31122). We did not receive comments on paragraph 
(b)(1) and finalized the paragraph as proposed in the 2016 final rule 
(81 FR 27578) with one modification.
    In the 2016 final rule, we included at Sec.  438.6(c)(5)(i) the 
standard from the then-current rule (adopted in 2002 in the ``Medicaid 
Program; Medicaid Managed Care: New Provisions'' final rule (67 FR 
40989, June 14, 2002) (hereinafter referred to as the ``2002 final 
rule'')) that risk-sharing mechanisms must be computed on an 
actuarially sound basis. That element of the 2016 final rule was 
inadvertently omitted in the 2015 proposed rule. As managed care 
contracts are risk-based contracts, mechanisms that share or distribute 
risk between the state and the managed care plan are inherently part of 
the capitation rates paid to plans for bearing the risk. Therefore, the 
risk-sharing mechanisms should be developed in conjunction with the 
capitation rates and using the same actuarially sound principles and 
practices.
    Risk-sharing mechanisms are intended to address the uncertainty 
inherent in setting capitation rates prospectively. As such, we 
expected states to identify and apply risk-sharing requirements prior 
to the start of the rating period. Because we believed that the final 
rule was clear on the prospective nature of risk-sharing and our 
expectations around the use of risk-sharing mechanisms, we did not 
specifically prohibit retroactive use. However, since publication of 
the 2016 final rule, we have found that some states have applied new or 
modified risk-sharing mechanisms retrospectively; for example, some 
states have sought approval to change rates after the claims experience 
for a rating period became known to the state and the managed care 
plan. We acknowledge the challenges in setting prospective capitation 
rates and encourage the use of appropriate risk-sharing mechanisms. In 
selecting and designing risk-sharing mechanisms, states and their 
actuaries are required to only use permissible strategies, use 
appropriate utilization and price data, and establish reasonable risk-
sharing assumptions.
    Despite a state's best efforts to set accurate and appropriate 
capitation rates, unexpected events can occur during a rating period 
that necessitate a retroactive adjustment to the previously paid rates. 
When this occurs, Sec.  438.7(c)(2) provides the requirements for 
making a retroactive rate adjustment. Section 438.7(c)(2) clarifies 
that the retroactive adjustment must be supported by an appropriate 
rationale and that sufficient data, assumptions, and methodologies used 
in the development of the adjustment must be described in sufficient 
detail and submitted in a new rate certification along with the 
contract amendment.
    To address the practice of adopting or amending risk-sharing 
mechanisms retroactively, we propose to amend Sec.  438.6(b)(1) to 
require that risk-sharing mechanisms be documented in the contract and 
rate certification documents prior to the start of the rating period. 
As described in the 2017 Medicaid Managed Care Rate Development 
Guide,\3\ we believe it is important to include a description in the 
rate certification, especially if the development of risk-sharing 
mechanisms has any implications for the Medical Loss Ratio (MLR) and 
items that factor into the assumptions for certification of the final 
capitation rate for each risk contract. To ensure clarity, we are also 
proposing to amend the regulation at Sec.  438.6(b)(1) to explicitly 
prohibit retroactively adding or modifying risk-sharing mechanisms 
described in the contract or rate certification documents after the 
start of the rating period.
---------------------------------------------------------------------------

    \3\ Centers for Medicare & Medicaid Services. 2017 Medicaid 
Managed Care Rate Development Guide. https://www.medicaid.gov/medicaid/managed-care/downloads/2017-medicaid-managed-care-rate-development-guide.pdf.
---------------------------------------------------------------------------

    We acknowledge that our proposed requirement that risk-sharing 
mechanisms be documented in a state's contract and rate certification 
documents prior to the start of the rating period means, as a practical 
matter, that states electing to use risk-sharing mechanisms would have 
to submit contracts and rate certifications to CMS prior to the start 
of the rating period. We note here that section 1903(m)(2)(A)(iii) of 
the Act, as well as implementing regulations at Sec.  438.806, require 
that the Secretary must provide prior approval for MCO contracts that 
meet certain value thresholds before states can claim FFP. This 
longstanding requirement is

[[Page 57270]]

implemented in the regulation at Sec.  438.806(c), which provides that 
FFP is not available for an MCO contract that does not have prior 
approval from CMS. CMS has, since the early 1990s, interpreted and 
applied this requirement by not awarding FFP until the contract has 
been approved and permitting FFP back to the initial date of a contract 
approved after the start of the rating period if an approvable contract 
were in place between the state and the managed care plan. This 
practice is reflected in the State Medicaid Manual, Sec.  2087.
    Lastly, the proposed change would make Sec.  438.6(b)(1) more 
consistent with Sec.  438.7(b)(5), which requires the rate 
certification to describe all risk-adjustment methodologies. While risk 
mitigation methodologies (which address which parties bear the risk of 
financial loss under the contract) are not risk-adjustment 
methodologies (which address compensation based on the health status of 
enrollees), we believe they have a similar impact on payment to the 
managed care plan and that the same rules about being described in the 
rate certification should apply. The current regulation text in Sec.  
438.6(b)(1) is not explicit that risk mitigation methodologies be in 
the rate certification and our proposal would revise the regulation to 
explicitly include this requirement.
    We solicit comments on these proposed changes.
b. Delivery System and Provider Payment Initiatives Under MCO, PIHP, or 
PAHP Contracts (Sec.  438.6(a) and (c))
    As finalized in the 2016 final rule, Sec.  438.6(c)(1) permits 
states to, under the circumstances enumerated in Sec.  438.6(c)(1)(i) 
through (iii), direct the managed care plan's expenditures under the 
contract. Among other criteria, such directed payment arrangements 
require prior approval by CMS, per Sec.  438.6(c)(2); our approval is 
based on meeting the standards listed in Sec.  438.6(c)(2), including 
that the state expects the directed payment to advance at least one of 
the goals and objectives in the state's quality strategy for its 
Medicaid managed care program. We have been reviewing and approving 
directed payment arrangements submitted by states since the 2016 final 
rule, and we have observed that a significant number of them require 
managed care plans to adopt minimum rates, and that most commonly, 
these minimum rates are those specified under an approved methodology 
in the Medicaid state plan. Additionally, most of these types of 
directed payment arrangements seek to accomplish the same goal in the 
state's quality strategy--to ensure adequate access to providers.
    Due to the frequency and similarities of these types of directed 
payment arrangements, we believe that they should be specifically 
addressed in Sec.  438.6(c)(1)(iii). Therefore, at Sec.  438.6(a), we 
propose to add a definition for ``state plan approved rates'' to mean 
amounts calculated as a per unit price of services described under CMS 
approved rate methodologies in the state plan. We also propose to 
revise Sec.  438.6(c)(1)(iii)(A) to specifically reference a directed 
payment arrangement that is based on an approved state plan rate 
methodology. As with all directed payment arrangements under Sec.  
438.6(c), a directed payment arrangement established under proposed 
paragraph (c)(1)(iii)(A) would have to be developed in accordance with 
Sec.  438.4, the standards specified in Sec.  438.5, and generally 
accepted actuarial principles and practices.
    We note here that supplemental payments contained in a state plan 
are not, and do not constitute, state plan approved rates as proposed 
in Sec.  438.6(a); we propose to include a statement to this effect 
under proposed paragraph (c)(1)(iii)(A). For the purposes of this 
proposed rule, a rate described in the approved rate methodology 
section of the state plan would reflect only the per unit price of 
particular services. Supplemental payments are not calculated or paid 
based on the number of services rendered, and therefore, are separate 
and distinct from state plan approved rates under this proposed rule. 
We also propose to define supplemental payments in Sec.  438.6(a) as 
amounts paid by the State in its FFS Medicaid delivery system to 
providers that are described and approved in the state plan or under a 
waiver and are in addition to the amounts calculated through an 
approved state plan rate methodology.
    Further, we propose to redesignate current paragraph Sec.  
438.6(c)(1)(iii)(A) as (c)(1)(iii)(B) and to include a revision to 
distinguish a minimum fee schedule for network providers that provide a 
particular service from use of the state plan approved rates. Proposed 
paragraphs (c)(1)(iii)(A) and (B) would now recognize two distinct 
minimum fee schedule directed payment arrangements. To accommodate our 
proposal, we also propose to redesignate current paragraphs 
(c)(1)(iii)(B) and (C) as paragraphs (c)(1)(iii)(C) and (D), 
respectively.
    As we have reviewed and approved directed payment arrangements 
submitted by states since publication of the 2016 final rule, we have 
observed that our regulation does not explicitly address some types of 
potential directed payments that states are seeking to implement. For 
example, some states are experimenting with payment models that use a 
cost-based reimbursement, a Medicare equivalent reimbursement, an 
average commercial rate reimbursement, or reimbursement based on 
another market-based standard. To encourage states to continue 
developing payment models that produce optimal results for their local 
markets and to clarify how the regulatory standards apply in such 
cases, we are also proposing to add a new paragraph Sec.  
438.6(c)(1)(iii)(E) that would allow states to require managed care 
plans to adopt a cost-based rate, a Medicare equivalent rate, a 
commercial rate, or other market-based rate for network providers that 
provide a particular service under the contract. We believe that 
authorizing these additional types of payment models for states to 
implement would eliminate any need for states to modify their payment 
models as only minimum or maximum fee schedules to fit neatly into the 
construct of the current rule. In addition, adopting regulation text 
specific to these other methodologies for specific fee schedules is 
consistent with our policy to provide flexibility to the state where 
possible.
    Along with the proposed changes in Sec.  438.6(c)(1)(iii)(A), we 
are also proposing a corresponding change to the approval requirements 
in Sec.  438.6(c)(2). In the 2016 final rule, we established an 
approval process that requires states to demonstrate in writing that 
payment arrangements adopted under Sec.  438.6(c)(1)(i) through (iii) 
meet the criteria specified in Sec.  438.6(c)(2) prior to 
implementation. Since implementing this provision of the 2016 final 
rule, states have noted that the approval process for contract 
arrangements that include only minimum rate methodologies that are 
already approved by CMS and included in the Medicaid state plan are 
substantially the same as the approval requirements under the Medicaid 
state plan. Some states have stated that the written approval process 
in Sec.  438.6(c)(2) is unnecessary given that a state would have 
already justified the rate methodology associated with particular 
services in the Medicaid state plan (or a state plan amendment) to 
receive approval by CMS that the rates are efficient, economical, and 
assure quality of care under section 1902(a)(30)(A) of the Act.
    Therefore, to avoid unnecessary and duplicative federal approval 
processes, we propose to eliminate the prior

[[Page 57271]]

approval requirement for payment arrangements that are based on state 
plan approved rates. To do so, we propose to redesignate existing 
paragraph (c)(2)(ii) as (c)(2)(iii), add a new paragraph (c)(2)(ii), 
and to redesignate paragraphs Sec.  438.6(c)(2)(i)(A) through (F) as 
(c)(2)(ii)(A) through (F), respectively. We also propose to revise the 
remaining paragraph at Sec.  438.6(c)(2)(i) to require, as in the 
current regulation, that all contract arrangements that direct the 
MCO's, PIHP's, or PAHP's expenditures under paragraphs (c)(1)(i) 
through (iii) must be developed in accordance with Sec.  438.4, the 
standards specified in Sec.  438.5, and generally accepted actuarial 
principles and practices; we propose to delete the remaining regulatory 
text from current paragraph (c)(1)(i).
    In proposed new paragraph (c)(2)(ii), we would specify prior 
approval requirements for payment arrangements under paragraphs 
(c)(1)(i), (ii), and (iii)(B) through (E). For reasons discussed above, 
the amended paragraph (c)(2)(ii) would also explicitly provide that 
payment arrangements under paragraph (c)(1)(iii)(A) do not require 
prior approval from CMS; although, we propose to retain the requirement 
that such payment arrangements continue to meet the criteria in 
paragraphs (c)(2)(ii)(A) through (F). We believe that this proposed 
revision would reduce administrative burden for many states by 
eliminating the need to obtain written approval prior to implementation 
of this specific directed payment arrangement that utilizes previously 
approved rates in the state plan. With the redesignation of paragraph 
(c)(2)(ii)(A) through (F), we propose to keep in place the existing 
requirements for CMS approval to be granted.
    In the 2016 final rule, we specified at paragraph Sec.  
438.6(c)(2)(ii)(C) that contract arrangements which direct expenditures 
made by the MCO, PIHP, or PAHP under paragraphs (c)(1)(i) or (c)(1)(ii) 
for delivery system or provider payment initiatives may not direct the 
amount or frequency of expenditures by managed care plans. We believed 
that this requirement was necessary to deter states from requiring 
managed care plans to reimburse particular providers specified amounts 
with specified frequencies. However, based on our experience in 
reviewing and approving directed payment arrangements since the 2016 
final rule, we now recognize that this provision may have created 
unintended barriers to states pursuing innovative payment models. Some 
states have adopted or are pursuing payment models, such as global 
payment initiatives, which are designed to move away from a volume-
driven system to a system focused on value and population health. 
Moreover, some of these payment models attempt to build on existing pay 
for performance or integrated care programs, or align with programs 
implemented by other payers at the state level. These innovative 
payment models can require that the state direct the amount or 
frequency of expenditures by the managed care plan to achieve the 
state's goals for improvements in quality, care, and outcomes under the 
payment model.
    We believe that these innovative payment models necessitate 
acknowledging the complexity and variation in local market forces and 
that states need more flexible parameters to effectively negotiate 
these complex payment arrangements and achieve a more comprehensive 
transition from volume to value. Therefore, we propose to delete 
existing Sec.  438.6(c)(2)(ii)(C) which would permit states to direct 
the amount or frequency of expenditures made by managed care plans 
under paragraphs (c)(1)(i) or (c)(1)(ii). As a conforming change, we 
would redesignate existing Sec.  438.6(c)(2)(ii)(D) as Sec.  
438.6(c)(2)(iii)(C).
    In the 2016 final rule at existing Sec.  438.6(c)(2)(i)(F) 
(redesignated to paragraph Sec.  438.6(c)(2)(ii)(F) in this proposed 
rule), we established that a contract arrangement directing a managed 
care plan's expenditures may not be renewed automatically. While Sec.  
438.6(c)(2)(i)(F) does not permit for the automatic renewal of a 
contract arrangement described in paragraph (c)(1), it does not 
prohibit states from including payment arrangements in a contract for 
more than one rating period. We have received numerous payment 
arrangement proposals from states requesting a multi-year approval of 
their payment arrangement to align with their delivery system reform 
efforts or contract requirements.
    To provide additional guidance to states on the submission and 
approval process for directed payments, on November 2, 2017, we issued 
a CMCS Informational Bulletin (CIB) entitled ``Delivery System and 
Provider Payment Initiatives under Medicaid Managed Care Contracts'' 
(available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib11022017.pdf). The CIB explained that based on our 
experience with implementation of Sec.  438.6(c)(2), we recognize that 
some states are specifically pursuing multi-year payment arrangements 
to transform their health care delivery systems. The CIB also described 
that states can develop payment arrangements under Sec.  438.6(c)(1)(i) 
and (ii), which are intended to pursue delivery system reform, over a 
period of time that is longer than one year so long as the state 
explicitly identifies and describes how the payment arrangement would 
vary or change over the term of the arrangement.
    We understand that some payment arrangements, particularly value-
based purchasing arrangements or those tied to larger delivery system 
reform efforts, can be more complex and may take longer for a state to 
implement. Setting the payment arrangement for longer than a one-year 
term would provide a state with more time to implement and evaluate 
whether the arrangement meets the state's goals and objectives to 
advance its quality strategy under Sec.  438.340. As stated in the CIB, 
we interpret the regulatory requirements under Sec.  438.6(c) to permit 
multi-year payment arrangements when certain criteria are met. We set 
out the criteria in the CIB for multi-year approvals of certain 
directed payment arrangements, and we now propose to codify those 
criteria in a new Sec.  438.6(c)(3).
    Specifically, we propose in new paragraph (c)(3)(i) that we would 
condition a multi-year approval for a payment arrangement under 
paragraphs (c)(1)(i) and (ii) on the following criteria: (1) The state 
has explicitly identified and described the payment arrangement in the 
contract as a multi-year payment arrangement, including a description 
of the payment arrangement by year, if the payment arrangement varies 
by year; (2) the state has developed and described its plan for 
implementing a multi-year payment arrangement, including the state's 
plan for multi-year evaluation, and the impact of a multi-year payment 
arrangement on the state's goal(s) and objective(s) in the state's 
quality strategy in Sec.  438.340; and (3) the state has affirmed that 
it will not make any changes to the payment methodology, or magnitude 
of the payment, described in the contract for all years of the multi-
year payment arrangement without CMS prior approval. If the state 
determines that changes to the payment methodology, or magnitude of the 
payment, are necessary, the state must obtain prior approval of such 
changes using the process in paragraph (c)(2). We note that in addition 
to codifying criteria for the approval of multi-year payment 
arrangements, the proposed new paragraph (c)(3)(i) addresses any 
potential ambiguity in the 2016 final rule regarding the permissibility 
of states to enter into multi-year payment arrangements with managed 
care plans. However, the proposed paragraph

[[Page 57272]]

(c)(3)(i) would not change the requirement that a payment arrangement 
that directs a managed care plan's expenditures must meet all of the 
approval requirements in Sec.  438.6(c)(2), including that the payment 
arrangement must be developed in accordance with Sec.  438.4, the 
standards specified in Sec.  438.5, and generally accepted actuarial 
principles and practices.
    Finally, in alignment with our guidance in the November CIB, we 
propose to specify at paragraph (c)(3)(ii) that the approval of a 
payment arrangement under paragraph (c)(1)(iii) of this section would 
be for one rating period. As explained above, while we understand and 
acknowledge that value-based purchasing payment arrangements or those 
tied to larger delivery system reform efforts can be more complex and 
may take longer for a state to implement, we believe that more 
traditional payment arrangements and fee schedules under paragraph 
(c)(1)(iii) should continue to be reviewed and evaluated on an annual 
basis by both states and CMS. We believe that it is important to 
continue ensuring that such payment arrangements under paragraph 
(c)(1)(iii) continue to be consistent with states' and our goals and 
objectives for directed payments under Medicaid managed care contracts.
    We solicit comments on these proposals.
c. Pass-Through Payments Under MCO, PIHP, and PAHP Contracts (Sec.  
438.6(d))
    In the 2016 final rule, and the 2017 pass-through payment final 
rule (82 FR 5415), we finalized a policy to limit state direction of 
payments, including pass-through payments, at Sec.  438.6(c) and (d). 
We defined pass-through payments at Sec.  438.6(a) as any amount 
required by the state, and considered in calculating the actuarially 
sound capitation rate, to be added to the contracted payment rates paid 
by the MCO, PIHP, or PAHP to hospitals, physicians, or nursing 
facilities that is not for the following purposes: A specific service 
or benefit provided to a specific enrollee covered under the contract; 
a provider payment methodology permitted under Sec.  438.6(c)(1)(i) 
through (iii) for services and enrollees covered under the contract; a 
subcapitated payment arrangement for a specific set of services and 
enrollees covered under the contract; graduate medical education (GME) 
payments; or federally-qualified health center (FQHC) or rural health 
clinic (RHC) wrap around payments. We noted in our 2017 pass-through 
payment final rule that a distinguishing characteristic of a pass-
through payment is that a managed care plan is contractually required 
by the state to pay providers an amount that is disconnected from the 
amount, quality, or outcomes of services delivered to enrollees under 
the contract during the rating period of the contract (82 FR 5416).\4\ 
When managed care plans only serve as a conduit for passing payments to 
providers independent of delivered services, such payments reduce 
managed care plans' ability to control expenditures, effectively use 
value-based purchasing strategies, implement provider-based quality 
initiatives, and generally use the full capitation payment to manage 
the care of enrollees.
---------------------------------------------------------------------------

    \4\ Medicaid Program; The Use of New or Increased Pass-Through 
Payments in Medicaid Managed Care Delivery Systems, Final Rule, (82 
FR 5415-5429, January 18, 2017).
---------------------------------------------------------------------------

    In the 2016 final rule, we also noted that section 1903(m)(2)(A) of 
the Act requires that capitation payments to managed care plans be 
actuarially sound and clarified our interpretation of that standard as 
meaning that payments under the managed care contract must align with 
the provision of services to beneficiaries covered under the contract. 
We clarified the statutory and regulatory differences between payments 
made on a FFS basis and on a managed care basis (81 FR 27588). We 
provided an analysis and comparison of section 1902(a)(30)(A) of the 
Act regarding FFS payments and implementing regulations that impose 
aggregate upper payment limits (UPL) on rates for certain types of 
services or provider types to section 1903(m)(2)(A) regarding the 
requirement that capitation payments in managed care contracts be 
actuarially sound and implementing regulations that require payments to 
align with covered services delivered to eligible populations. Based on 
that analysis, we concluded that pass-through payments are not 
consistent with our regulatory standards for actuarially sound rates 
because they do not tie provider payments with the provision of 
services. Despite this conclusion, we acknowledged in the 2016 final 
rule that, for many states, pass-through payments have been approved in 
the past as part of Medicaid managed care contracts and served as a 
critical source of support for safety-net providers caring for Medicaid 
beneficiaries (81 FR 27589). We therefore adopted a transition period 
for states that had already transitioned services or eligible 
populations into managed care and had pass-through payments in their 
managed care contracts as part of the regulations that generally 
prohibit the use of pass-through payments in actuarially sound 
capitation rates. Although Sec.  438.6(d) is not explicitly limited to 
pass-through payments in the context of an established managed care 
program, the use of pass-through payments in place as of the 2016 final 
rule as an upper limit on permitted pass-through payments during the 
transition periods described in Sec.  438.6(d) effectively precludes 
new managed care programs from adopting pass-through payments.
    We used the 2016 final rule to identify the pass-through payments 
in managed care contract(s) and rate certification(s) that are eligible 
for the pass-through payment transition period. We provided a detailed 
description of the policy rationale (81 FR 27587 through 27592) for why 
we established pass-through payment transition periods and limited 
pass-through payments to hospitals, nursing facilities, and physicians, 
and this policy rationale has not changed. We focused on the three 
provider types identified in Sec.  438.6(d) because these are the most 
common provider types to which states make supplemental payments within 
federal UPLs under state plan authority.
    Since implementation of the 2016 and 2017 final rules, we have 
worked with many states that have not transitioned some or all services 
or eligible populations from their FFS delivery system into a managed 
care program. Data from the CMS Medicaid Managed Care Data Collection 
System (MMCDCS) show that a large and growing majority of states 
contract with MCOs and that states are also rapidly expanding their use 
of MCOs to reach larger geographic areas, serve more medically complex 
beneficiaries, and deliver long-term services and supports (LTSS). 
Nationally, two-thirds (68.1 percent) of all Medicaid beneficiaries 
were enrolled in comprehensive MCOs in 2016, up from 65.5 percent in 
2015. According to MMCDCS data, as of July 2016, 37 states have 50 
percent or more of their Medicaid populations enrolled in a 
comprehensive MCO, up from 34 states in 2015; while 26 states have 20 
percent or more of their Medicaid populations in FFS, and three of 
those states have 100 percent (Alaska and Connecticut) or almost 100 
percent (Wyoming) of their Medicaid populations in FFS.\5\
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    \5\ Medicaid Managed Care Enrollment and Program 
Characteristics, 2016; Updated Spring 2018. Available at https://www.medicaid.gov/medicaid/managed-care/downloads/enrollment/2016-medicaid-managed-care-enrollment-report.pdf.
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    Some states would like to begin to transition some services or 
eligible

[[Page 57273]]

populations from FFS to managed care, but would also like to continue 
to make supplemental payments to hospitals, physicians, or nursing 
facilities. We recognize the challenges associated with transitioning 
supplemental payments into payments based on the delivery of services 
or value-based payment structures. The transition from one payment 
structure to another requires robust provider and stakeholder 
engagement, broad agreement on approaches to care delivery and payment, 
establishing systems for measuring outcomes and quality, planning, and 
evaluating the potential impact of change on Medicaid financing 
mechanisms. We also recognize that implementing value-based payment 
structures or other, delivery system reform initiatives, and addressing 
transition issues, including ensuring adequate base rates, is central 
to both delivery system reform and to strengthening access, quality, 
and efficiency in the Medicaid program.
    To address states' requests to continue making supplemental 
payments for certain services and assist states with transitioning some 
or all services or eligible populations from a FFS delivery system into 
a managed care delivery system, we propose to add a new Sec.  
438.6(d)(6) that would allow states to make pass-through payments under 
new managed care contracts during a specified transition period if 
certain criteria are met. Here and in the regulation text proposed at 
Sec.  438.6(d)(6), we refer to transitioning services from FFS Medicaid 
to Medicaid managed care plan(s); this phrasing refers both to when a 
state expands the scope of its managed care program in terms of 
services (for example, offering behavioral health services in Medicaid 
managed care that were previously provided under Medicaid FFS for 
populations that are already enrolled in managed care) and populations 
(that is, adding new populations to Medicaid managed care when 
previously those populations received all Medicaid services through 
FFS).
    Specifically, we propose in Sec.  438.6(d)(6)(i) through (iii) that 
states may require managed care plans to make pass-through payments, as 
defined in Sec.  438.6(a), to network providers that are hospitals, 
nursing facilities, or physicians, when Medicaid populations or 
services are initially transitioning or moving from a Medicaid FFS 
delivery system to a Medicaid managed care delivery system, provided 
the following requirements are met: (1) The services will be covered 
for the first time under a Medicaid managed care contract and were 
previously provided in a Medicaid FFS delivery system prior to the 
first rating period, as defined in Sec.  438.2, of the specified pass-
through payment transition period; (2) the state made supplemental 
payments, as defined in Sec.  438.6(a), to hospitals, nursing 
facilities, or physicians for those specific services that will be 
covered for the first time under a Medicaid managed care contract 
during the 12-month period immediately 2 years prior to the first 
rating period of the pass-through payment transition period (this 12-
month period is the same standard that is currently codified in 
existing pass-through payment regulations at Sec.  438.6(d)(2) in 
relation to the calculation of the base amount for hospital pass-
through payments under Sec.  438.6(d)(3)); and (3) the aggregate amount 
of the pass-through payments that the state requires the managed care 
plan to make is less than or equal to the amounts calculated in 
proposed paragraphs (d)(6)(iii)(A), (B), or (C) for the relevant 
provider type for each rating period of the pass-through payment 
transition period--this requirement means that the aggregate amount of 
the pass-through payments for each rating period of the specified pass-
through payment transition period that the state requires the managed 
care plan to make must be less than or equal to the payment amounts 
attributed to and actually paid as FFS supplemental payments to 
hospitals, nursing facilities, or physicians during the 12-month period 
immediately 2 years prior to the first rating period of the pass-
through payment transition period for each applicable provider type.
    We also propose at Sec.  438.6(d)(6)(iv) that the state may require 
the MCO, PIHP, or PAHP to make pass-through payments for Medicaid 
populations or services that are transitioning from a FFS delivery 
system to a managed care delivery system for up to 3 years from the 
beginning of the first rating period in which the services were 
transitioned from payment in a FFS delivery system to a managed care 
contract, provided that during the 3 years, the services continue to be 
provided under a managed care contract with an MCO, PIHP, or PAHP.
    We propose paragraphs (d)(6)(iii)(A), (B) and (C) to address the 
maximum aggregate pass-through payment amounts to hospitals, nursing 
facilities, and physicians for each rating period of the specified 3-
year pass-through payment transition period; that is, we propose three 
paragraphs to determine the maximum aggregate amount of the pass-
through payments for each rating period of the 3-year pass-through 
payment transition period that the state can require the managed care 
plan to make to ensure that pass-through payments under proposed Sec.  
438.6(d)(6) are less than or equal to the payment amounts attributed to 
and actually paid as FFS supplemental payments to hospitals, nursing 
facilities, or physicians, respectively, during the 12-month period 
immediately 2 years prior to the first rating period of the pass-
through payment transition period for each applicable provider type. 
This means that the aggregate pass-through payments under the new 3-
year pass-through payment transition period must be less than or equal 
to the payment amounts attributed to and actually paid as FFS 
supplemental payments in Medicaid FFS.
    To include pass-through payments in the managed care contract(s) 
and capitation rates(s) under proposed new paragraph (d)(6), the state 
would have to calculate and demonstrate that the aggregate amount of 
the pass-through payments for each rating period of the pass-through 
payment transition period is less than or equal to the amounts 
calculated in proposed paragraphs (d)(6)(iii)(A), (B), or (C) for the 
relevant provider type. In Sec.  438.6(d)(6)(iii), we propose that for 
determining the amount of each component for the calculations contained 
in proposed paragraphs (d)(6)(iii)(A), (B), and (C), the state must use 
the amounts paid for services during the 12-month period immediately 2 
years prior to the first rating period of the pass-through payment 
transition period. As a practical matter, the proposed calculation 
would require the state to use Medicaid Management Information System 
(MMIS) adjudicated claims data from the 12-month period immediately 2 
years prior to the first rating period of the pass-through payment 
transition period. This timeframe and use of 2-year old data was chosen 
so that the state has complete utilization data for the service type 
that would be subject to the pass-through payments. The proposed 
calculation would also require the state to restrict the amount used in 
each component of the calculation to the amount actually paid through a 
supplemental payment for each applicable provider type. We note that 
our proposal would generally refer to the same provider types as 
Medicaid FFS specified under 42 CFR part 447. The calculation process 
under these proposed paragraphs would involve 4 basic steps:
     Step 1: For each applicable provider type, identify the 
actual payment amounts that were attributed to and actually paid as FFS 
supplemental payments during the 12-month period

[[Page 57274]]

immediately 2 years prior to the first rating period of the pass-
through payment transition period.
     Step 2: Divide (a) the payment amounts paid through 
payment rates for the services that are being transitioned from payment 
in FFS to the managed care contract for each applicable provider type 
by (b) the total payment amounts paid through payment rates for 
services provided in FFS for each applicable provider type to determine 
the ratio. In determining these amounts, the state must use the amounts 
paid for each provider type during the 12-month period immediately 2 
years prior to the first rating period of the pass-through payment 
transition period.
     Step 3: Multiply the amount in Step 1 by the ratio 
produced by Step 2.
     Step 4: The aggregate amount of pass-through payments that 
the state may require the MCO, PIHP, or PAHP to make for each rating 
period of the 3-year pass-through payment transition period must be 
demonstrated to be less than or equal to the result achieved in Step 3.
    Following the above steps, we offer the following formula to help 
illustrate the aggregate amount of pass-through payments for each 
rating period of the pass-through payment transition period for each 
applicable provider type:
[GRAPHIC] [TIFF OMITTED] TP14NO18.000

    To demonstrate how the calculation is performed, we provide the 
following example in which we assume that a state Medicaid program paid 
$60 million in claims in FFS for inpatient hospital services in CY 
2016. To acknowledge the Medicaid FFS UPL, we assume that those same 
services would have been reimbursed at $100 million using Medicare 
payment principles. The difference between the amount that Medicare 
would have paid and the amount Medicaid actually paid in claims is $40 
million. For Step 1, of the $40 million difference, the state actually 
paid $20 million in supplemental payments to inpatient hospitals in CY 
2016. For this example, we assume that CY 2016 is the 12-month period 
immediately 2 years prior to the first rating period of the pass-
through payment transition period in which inpatient hospital services 
will be transitioned to a managed care contract; therefore, we assume 
the pass-through payments are for CY 2018. This transition to managed 
care could be either by moving Medicaid beneficiaries from FFS to 
coverage under managed care contracts that cover inpatient hospital 
services or by moving inpatient hospital services into coverage under 
managed care contracts.
    Next, in Step 2, the state determines the ratio of the payment 
amounts paid in FFS for inpatient hospital services that will be 
transitioned from payment in a FFS delivery system to the managed care 
contract within the specific provider category and requisite period in 
relation to the total payment amounts paid in FFS for all inpatient 
hospital services within the same provider category during the same 
period. For example, if the state paid $36 million in FFS for inpatient 
hospital services for a specific population out of the $60 million in 
total claims paid in FFS for inpatient hospital services during 2016, 
and the state wants to transition the population associated with the 
$36 million in paid claims to the managed care contract, then the ratio 
is $36 million divided by $60 million, or 60 percent.
    In Step 3, the state would multiply the $20 million in actual 
supplemental payments paid by 60 percent, resulting in $12 million, 
which is the amount described in Step 4 as the total amount that the 
state would be permitted to require the managed care plans to make in 
pass-through payments to inpatient hospitals for each rating period 
during the pass-through payment transition period described in proposed 
paragraph (d)(6)(iv).
    In an effort to provide network providers, states, and managed care 
plans with adequate time to design and implement payment systems that 
link provider reimbursement with services, we also propose, in new 
paragraph (d)(6)(iv), to allow states a transition period for up to 3 
years to transition FFS supplemental payments into payments linked to 
services and utilization under the managed care contract. We are 
proposing the 3-year pass-through payment transition period to provide 
states with time to integrate pass-through payment arrangements into 
allowable payment structures under actuarially sound capitation rates, 
including value-based purchasing, enhanced fee schedules, Medicaid-
specific delivery system reform, or the other approaches consistent 
with Sec.  438.6(c). A state may elect to use a shorter transition 
period but would be permitted a maximum of 3 years to phase out the 
pass-through payments. We believe that the proposed 3-year pass-through 
payment transition period in paragraph (d)(6)(iv) is appropriate 
because states have not yet transitioned these services (and 
corresponding supplemental payments) into managed care contracts; 
therefore, states should be in a better position to design payment 
structures that appropriately account for these payments during the 
transition to managed care (unlike the current pass-through payments 
rules, which only provide transition periods for pass-through payments 
that were already incorporated into managed care contracts and rates 
prior to the adoption of specific limits on the state direction of 
payments made by managed care plans). We specifically invite comment on 
whether the 3-year pass-through payment transition period is the 
appropriate transition time.
    Unlike the 2016 final rule, this proposal would not set a specific 
calendar date by which states must end pass-through payments; rather, 
our proposal would provide a transition period for up to 3 years from 
the beginning of the first rating period in which the services were 
transitioned from payment in a FFS delivery system to a managed care 
contract, provided that during the 3 years, the services continue to be 
provided under a managed care contract with an MCO, PIHP, or PAHP. By 
providing states, network providers, and managed care plans time and 
flexibility to integrate current pass-through payment arrangements into 
permissible managed care payment structures, states would be able to 
avoid disruption to safety-net provider systems that they have 
developed in their Medicaid programs.
    We solicit comments on our proposals.

[[Page 57275]]

d. Payments to MCOs and PIHPs for Enrollees That Are a Patient in an 
Institution for Mental Disease (IMD) (Sec.  438.6(e))
    Under the policies we adopted in the 2016 final rule at Sec.  
438.6(e), we permitted FFP for a full monthly capitation payment to an 
MCO or PIHP for an enrollee aged 21 to 64 who received inpatient 
treatment in an institution for mental disease (IMD) for part of the 
month when certain requirements are met, including a requirement that 
the stay in the IMD be for no more than 15 days in the month for which 
the capitation payment is made (81 FR 27563). Since publication of the 
2016 final rule, we have heard from states and other stakeholders that 
FFP should be provided for capitation payments made for months that 
include stays longer than 15 days, especially on behalf of Medicaid 
enrollees who may require substance use disorder (SUD) treatment as a 
result of the ongoing opioid crisis.
    We considered proposing changes to the regulation at Sec.  
438.6(e); however, after careful review, we still believe that the 
underlying legal analysis regarding the transfer of risk that 
underpinned the policy in the 2016 final rule is appropriate. We have 
also conducted a literature and data review since publication of the 
rule but could not identify any new data sources other than those we 
relied upon in the 2016 final rule that supported 15 days (81 FR 
27560). We request public comment on additional data sources that we 
should review. We also have concerns about the potential for cost-
shifting to the federal government. Therefore, to address concerns 
expressed by Medicaid directors regarding the 15-day limit in the 
context of SUD treatment and the ongoing opioid crisis, we encourage 
states to apply for a section 1115(a) SUD demonstration to enable 
states to receive FFP for longer lengths of stay in IMDs. In November 
2017, we developed the current section 1115(a) SUD demonstration 
initiative \6\ that greatly simplified the application and approval 
process, offered more streamlined and flexible components, and included 
enhanced monitoring and evaluation features. We have already approved 
several states and are actively working with additional states that 
have indicated an interest in applying.
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    \6\ SMD #17-003: Strategies to Address the Opioid Epidemic: 
https://www.medicaid.gov/federal-policy-guidance/downloads/smd17003.pdf.
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5. Rate Certification Submission (Sec.  438.7)
    Section 438.7(c)(3) gives states flexibility to make de minimis 
rate adjustments during the contract year by enabling states to 
increase or decrease the capitation rate certified per rate cell by 1.5 
percent (resulting in an overall 3 percent range) without submitting a 
revised rate certification. We stated in the 2016 final rule that the 
fluctuation of plus or minus 1.5 percent does not change the actuarial 
soundness of a capitation rate as that percentage is generally not more 
than the risk margin incorporated into most states' rate development 
process and reasoned that the resulting rate would remain actuarially 
sound (81 FR 27568). By giving states the flexibility to make small 
adjustments around the certified rate, we intended to ease the 
administrative burden of rate review on states while meeting our goals 
of transparency and integrity in the rate-setting process.
    Since the publication of the 2016 final rule, some stakeholders 
have expressed a desire for CMS to clearly express that once a state 
has certified the final capitation rate paid per rate cell under each 
risk contract, the state can adjust the certified rate plus or minus 
1.5 percent at any time within the rating period without submitting 
justification to CMS. We clarify here that when states are adjusting a 
final certified rate within the contract year within the range of 1.5 
percent up or down from the final certified rate, states do not need to 
submit a revised rate certification or justification to CMS, unless 
documentation is specifically requested by CMS in accordance with our 
proposed revisions in paragraph (c)(3). Proposed Sec.  438.7(c)(3) 
would include the existing text authorizing the state to increase or 
decrease the capitation rate per rate cell up to 1.5 percent without 
submitting a revised rate certification. Proposed paragraph (c)(3) 
would also retain the remaining text in current Sec.  438.7(c)(3) that 
such adjustments to the final certified rate must be consistent with a 
modification of the contract as required in Sec.  438.3(c) and adds new 
proposed text to specify that the adjustments would also be subject to 
the requirements at Sec.  438.4(b)(1), and that we would be able to 
require a state to provide documentation for adjustments permitted 
under Sec.  438.7(c)(3) to ensure that modifications to a final 
certified capitation rate comply with the requirements in Sec. Sec.  
438.3(c) and (e), and 438.4(b)(1).
    In the 2016 final rule, we highlighted our concerns that different 
capitation rates based on the FFP associated with a particular 
population could be indicative of cost shifting from the state to the 
federal government and were not consistent with generally accepted 
actuarial principles (81 FR 27566). The rate development standards we 
instituted with the final rule sought to eliminate such practices. The 
+/- 1.5 percent rate changes permitted in Sec.  438.7(c)(3) are not 
intended to be used by states to shift costs to the federal government. 
To ensure against cost shifting, we are explicitly requiring that any 
changes of the capitation rate within the permissible 1.5 percent are 
subject to the requirement in Sec.  438.4(b)(1), which prohibits 
differing capitation rates based on FFP and requires that any proposed 
differences among capitation rates according to covered populations be 
based on valid rate development standards and not based on the rate of 
FFP associated with the covered populations. In addition, Sec.  
438.4(b)(1) requires that rates be developed in accordance with Sec.  
438.5 and generally accepted actuarial principles and practices; using 
this cross-reference to regulate mid-year changes of capitation rates 
within the +/- 1.5 percent range ensures that these changes are not 
arbitrary or designed to shift costs to the federal government. The 
proposed regulation permits CMS to require documentation as to how the 
adjusted rate is consistent with that requirement and other criteria 
related to the actuarial soundness of rates.
    Nationally, states are expanding their managed care programs to 
include more Medicaid beneficiaries, and both plans and states have 
requested additional guidance regarding our rate review and approval 
process. We believe that additional guidance can serve to enhance the 
efficiency of the review and approval process for states and CMS alike, 
particularly for states that are new to Medicaid managed care. When 
states first transition from a FFS delivery system to a managed care 
delivery system, they often need extra assistance to enable them to be 
more efficient in developing procurement processes and to increase 
their likelihood of setting actuarially sound capitation rates. 
Additionally, competitive procurement processes can be costly and time 
consuming when considering the scope and number of stakeholders 
involved in the process. Rate setting can be particularly challenging 
when it is part of the competitive bidding process. As such, we believe 
that additional guidance from CMS may benefit those

[[Page 57276]]

states and us in the rate review and approval process.
    To respond to these needs, we propose to add Sec.  438.7(e) to 
commit CMS to, at least annually, issuing guidance that describes: (1) 
The federal standards for capitation rate development; (2) the 
documentation required to determine that the capitation rates are 
projected to provide for all reasonable, appropriate, and attainable 
costs that are required under the terms of a contract; (3) the 
documentation required to determine that the capitation rates have been 
developed in accordance part 438; (4) any updates or developments in 
the rate review process to reduce state burden and facilitate prompt 
actuarial reviews; and (5) the documentation necessary to demonstrate 
that capitation rates competitively bid through a procurement process 
have been established consistently with the requirements of Sec.  438.4 
through Sec.  438.8. We note here that CMS would not adopt new 
requirements in this guidance; such guidance would only interpret the 
regulations and specify procedural rules for complying with the 
requirements in the rule, such as the information provided in rate 
certifications. This guidance will be published as part of the annual 
rate guide for Medicaid managed care under the PRA package, CMS-10398 
#37, OMB control number 0938-1148.
    Although we have published rate review guidance every year since 
2014, particularly for those areas described in proposed Sec.  
438.7(e)(1) through (3), we propose to codify this practice in Sec.  
438.7(e) to demonstrate our commitment to efficient review and approval 
processes. Although the current rate review guidance has not previously 
addressed those areas described in proposed Sec.  438.7(e)(4) and (5), 
we propose that annual guidance include these because states have 
specifically requested guidance in these areas. We will continue to 
work with states to ensure greater transparency regarding the rate 
review process and ensure that states are optimally informed to prepare 
and submit rate certifications for our review and approval.
    We solicit comments on our proposals and whether additional areas 
of guidance would be helpful to states.
6. Medical Loss Ratio (MLR) Standards: Technical Correction (Sec.  
438.8)
    In the 2015 proposed rule (80 FR 31109), we proposed at Sec.  
438.8(e)(4) that expenditures related to fraud prevention activities, 
as set forth in Sec.  438.608(a)(1) through (5), (7), (8) and (b), may 
be attributed to the numerator but would be limited to 0.5 percent of 
MCO's, PIHP's, or PAHP's premium revenues. The MLR numerator is defined 
in Sec.  438.8(e); the numerator of an MCO's, PIHP's, or PAHP's MLR for 
a MLR reporting year is the sum of the MCO's, PIHP's, or PAHP's 
incurred claims; the MCO's, PIHP's, or PAHP's expenditures for 
activities that improve health care quality; and fraud prevention 
activities. This proposal was never finalized and does not align with 
the MLR requirements for Medicare or the private market. We proposed a 
corresponding requirement, at paragraph (k)(1)(iii), for submission by 
each managed care plan of data showing the expenditures for activities 
described in Sec.  438.608(a)(1) through (5), (7), (8) and (b). In the 
2016 final rule (81 FR 27530), we did not finalize Sec.  438.8(e)(4) as 
proposed, and instead finalized Sec.  438.8(e)(4) to provide that MCO, 
PIHP, or PAHP expenditures on activities related to fraud prevention, 
as adopted for the private market at 45 CFR part 158, would be 
incorporated into the Medicaid MLR calculation in the event the private 
market MLR regulations were amended. However, we erroneously finalized 
Sec.  438.8(k)(1)(iii) as proposed instead of referencing the updated 
finalized regulatory language in Sec.  438.8(e)(4). Therefore, we are 
proposing in this rule to revise Sec.  438.8(k)(1)(iii) to replace 
``expenditures related to activities compliant with Sec.  438.608(a)(1) 
through (5), (7), (8) and (b)'' with ``fraud prevention activities as 
defined in Sec.  438.8(e)(4)'' to be consistent with our changes to 
Sec.  438.8(e)(4) in the previous final rule. We are also proposing to 
correct a technical error in paragraph (e)(4) by removing the phrase 
``fraud prevention as adopted'' and adding in its place the phrase 
``fraud prevention consistent with regulations adopted'' to clarify the 
regulatory text.
7. Non-Emergency Medical Transportation PAHPs (Sec.  438.9)
    In the 2016 final rule, at Sec.  438.9(b)(2), we inadvertently 
failed to exempt NEMT PAHPs from complying with Sec.  438.4(b)(9). 
Section 438.9(b) generally exempts NEMT PAHPs from complying with 
regulations in part 438 unless the requirement is listed. Under the 
regulation, NEMT PAHPs are not required to comply with the MLR 
standards. Therefore, we believe that the inclusion of all of Sec.  
438.4 in Sec.  438.9(b)(2) causes a conflict because Sec.  438.4(b)(9) 
specifically addresses states' responsibility to develop capitation 
rates to achieve a medical loss ratio of at least 85 percent. To 
eliminate that conflict, we propose to revise Sec.  438.9(b)(2) by 
adding ``except Sec.  438.4(b)(9).''
8. Information Requirements (Sec.  438.10)
a. Language and Format (Sec.  438.10(d))
    In the 2016 final rule, we finalized provisions at Sec.  
438.10(d)(2), (d)(3), and (d)(6)(iv), requiring that states and managed 
care plans include taglines in prevalent non-English languages and in 
large print in all written materials for potential enrollees and 
enrollees. Based on print document guidelines from the American 
Printing House for the Blind, Inc., we defined large print to mean no 
smaller than 18-point font (81 FR 27724).\7\ Taglines required to be 
large print are those that explain the availability of written 
translation or oral interpretation, how to request auxiliary aids and 
services for individuals who have limited English proficiency or a 
disability, and the toll-free phone number of the entity providing 
choice counseling services.
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    \7\ American Printing House for the Blind, Inc. Print Document 
Guidelines. http://www.aph.org/research/design-guidelines/.
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    Our goal remains to ensure that materials for enrollees and 
potential enrollees are accessible for individuals who are vision-
impaired. However, since the publication of the final rule, states and 
plans have found that requiring taglines in 18-point font size 
sometimes increases overall document length, thereby decreasing the 
ease of use by enrollees and eliminating the use of certain effective 
formats such as postcards and trifold brochures.
    To address these issues, we propose to replace the requirement to 
include taglines on ``all written materials'' with a requirement for 
taglines only on materials for potential enrollees that ``are critical 
to obtaining services'' in Sec.  438.10(d)(2). This proposed change 
aligns the documents that require taglines with the documents that must 
be translated into prevalent non-English languages and facilitates the 
use of smaller, more user-friendly documents. We note that states have 
the ability to require taglines on any additional materials that they 
choose, as including taglines only on documents that are critical to 
obtaining services is a minimum standard.
    Additionally, we propose to revise Sec.  438.10(d)(2) by deleting 
the definition of large print as ``no smaller than 18-point'' and 
adopting the ``conspicuously visible'' standard for taglines that is 
codified at 45 CFR 92.8(f)(1), a regulation implementing section 1557 
of the Patient Protection and Affordable Care Act of 2010 (PPACA) (Pub. 
L. 111-148, enacted March 23, 2010 as

[[Page 57277]]

amended by the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111-152, enacted March 30, 2010)).\8\ Section 1557 of the 
PPACA prohibits discrimination on the basis of race, color, national 
origin, sex, age, or disability in certain health programs, including 
Medicaid. We believe that adopting a more flexible requirement would 
encourage states to use effective forms of written communication and 
avoid unnecessarily long documents. For example, taglines in a font 
size smaller than 18-point would permit states to more easily use 
postcards and tri-fold brochures, which may be more effective for 
relaying certain information since they are shorter and offer more 
design options for visual appeal. We note again that states would 
retain the ability to create additional requirements for greater 
specificity of font size for taglines for written materials subject to 
Sec.  438.10 as long as they meet the standard of conspicuously-visible 
and comply with all other federal non-discrimination standards, 
including providing auxiliary aids and services to ensure effective 
communications for individuals with disabilities.
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    \8\ Nondiscrimination in Health Programs and Activities final 
rule (81 FR 31375).
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    In Sec.  438.10(d)(3), we propose to make the same substantive 
changes proposed for Sec.  438.10(d)(2) above, as well as to reorganize 
the paragraph for clarity. We believe that combining the requirements 
for the provision of alternative formats, taglines, and inclusion of 
the managed care plan's member/customer service unit telephone number 
into one sentence in paragraph (d)(3), would improve readability and 
clarity.
    Section 438.10(d)(6) addresses requirements for all written 
materials provided by states and MCOs, PIHPs, PAHPs, primary care case 
management (PCCM) and PCCM entities to enrollees and potential 
enrollees. As we are proposing to limit the tagline requirement to 
materials that are critical to obtaining services, we propose to delete 
Sec.  438.10(d)(6)(iv).
b. Information for All Enrollees of MCOs, PIHPs. PAHPs, and PCCM 
Entities: General Requirements (Sec.  438.10(f))
    In the comprehensive revision to federal regulations governing 
Medicaid managed care in 2002, we required notice to enrollees of a 
provider's termination within 15 days of a covered plan's receipt or 
issuance of the termination notice (67 FR 41015). For purposes of this 
provision, an affected enrollee is one who received his or her primary 
care from, or was seen on a regular basis by, the terminated provider. 
We established the 15-day time-period following receipt of notice 
because we wanted to ensure that enrollees received notice of the 
provider terminations in advance given the reality that providers often 
give little notice of their plans to terminate participation in a 
network (67 FR 41015). Section 438.10(f)(1) requires that a managed 
care plan must make a good-faith effort to provide notice of the 
termination of a contracted in-network provider to each affected 
enrollee within 15 days of receipt or issuance of the termination 
notice. However, there can be circumstances when plans or providers 
send a termination notice to meet their contractual obligations but 
continue negotiating in an effort to resolve the issue(s) that 
triggered the decision to commence termination procedures. If the 
issue(s) can be amicably resolved, then the termination notice is 
sometimes rescinded and the provider remains in the network. In these 
situations, the issuance of notices by a state to enrollees before 
resolution efforts have been attempted, can cause alarm and confusion 
for enrollees who believe that they need to locate a new provider.
    In an effort to prevent unnecessary notices from being sent to 
enrollees, proposed Sec.  438.10(f)(1) would change the requirement 
that managed care plans issue notices within 15 calendar days after 
receipt or issuance of the termination notice to the later of 30 
calendar days prior to the effective date of the termination or 15 
calendar days after the receipt or issuance of the notice. For example, 
if the plan receives a termination notice from a provider on March 1 
for a termination that is effective on May 1, the proposed regulation 
would contemplate written notice to enrollees be provided by April 1 
(30 days prior to effective date) or by March 16 (within 15 days of 
receipt of the termination notice), whichever is later. In this 
example, the managed care plan would have to issue a notice to the 
enrollees by April 1, since it is later.
c. Information for All Enrollees of MCOs, PIHPs. PAHPs and PCCM 
Entities: Enrollee Handbooks (Sec.  438.10(g))
    In the 2016 final rule, an erroneous reference was included in 
Sec.  438.10(g)(2)(ii)(B) to ``. . . paragraph (g)(2)(i)(A). . . .'' 
Because there is no such paragraph as Sec.  438.10(g)(2)(i)(A), we 
propose in this rule to correct the reference to ``. . . paragraph 
(g)(2)(ii)(A). . . .''
d. Information for All Enrollees of MCOs, PIHPs. PAHPs and PCCM 
Entities: Provider Directories (Sec.  438.10(h))
    In the 2016 final rule, we added the requirement at Sec.  
438.10(h)(1)(vii) that managed care plans include information in their 
provider directories on whether the provider has completed cultural 
competence training. We added this requirement to the final rule in 
recognition of the linguistic and cultural diversity of Medicaid 
beneficiaries (81 FR 27724). After the final rule was published, the 
21st Century Cures Act (Pub. L. 114-255, enacted December 13, 2016) 
(the Cures Act) amended section 1902 of the Act,\9\ to add requirements 
for publication of a FFS provider directory.\10\ Now that the Congress 
has established new standards for provider directories in FFS Medicaid, 
we believe that it is beneficial to Medicaid managed care enrollees to 
align the requirements for Medicaid managed care with the FFS 
directories, especially since many managed care enrollees also receive 
some services on a FFS basis. The proposed amendment would require that 
the information in the directory include the physician's or provider's 
cultural and linguistic capabilities, including the languages spoken by 
the physician or provider or by the skilled medical interpreter 
providing interpretation services at the physician's or provider's 
office. The statute does not require information on whether the 
provider has completed cultural competence training. Therefore, we 
propose to amend Sec.  438.410(h)(1)(vii) to eliminate the phrase ``and 
whether the provider has completed cultural competence training.''
---------------------------------------------------------------------------

    \9\ Section 1902(a)(83)(A)(ii)(II) of the Act.
    \10\ Section 5006 of the Cures Act added paragraph 
(83)(A)(ii)(II) to section 1902(a) of the Act.
---------------------------------------------------------------------------

    In the 2016 final rule, we finalized at Sec.  438.10(h)(3) 
requirements that information in a paper directory must be updated at 
least monthly and electronic provider directories must be updated no 
later than 30 calendar days of receiving updated provider information. 
In paragraph (h)(1), we clarified that paper provider directories need 
only be provided upon request, and we encouraged plans to find 
efficient ways to provide accurate directories within the required 
timeframes (81 FR 27729).
    Since the publication of the 2016 final rule, states and managed 
care plans have raised concerns about the cost of reprinting the entire 
directory monthly. While the final rule did not require that the 
directory be reprinted in its entirety monthly, many managed care plans

[[Page 57278]]

were forced to do so to recognize savings from printing in large 
quantities. To address this inefficiency, as well as to provide managed 
care plans with another option for reducing the number of paper 
directories requested by enrollees due to the lack of access to a 
computer, we propose to modify the requirements for updating the paper 
provider directory that would permit less than monthly updates to paper 
directories if the managed care plan offers a mobile-enabled, 
electronic directory.
    Research has shown that 64 percent of U.S. adults living in 
households with incomes less than $30,000 a year owned smartphones in 
2016.\11\ Further, lower-income adults are more likely to rely on a 
smartphone for access to the internet, because they are less likely to 
have an internet connection at home.\12\ Recent studies show that the 
majority of Americans have used their smartphones to access information 
about their health,\13\ and consider online access to health 
information important.\14\ We believe that providing mobile-enabled 
access to online provider directories may provide additional value to 
enrollees by allowing them to access the information anytime, anywhere 
which is not feasible with a paper directory. Mobile applications for 
beneficiaries are increasingly available in programs serving older 
adults and individuals with disabilities and include access to Medicare 
marketing materials \15\ and medical claims on Blue Button \16\ to 
empower enrollees to better manage and coordinate their healthcare. For 
enrollees that request a paper directory, we believe the quarterly 
updates will not significantly disadvantage them as other avenues for 
obtaining provider information are readily available, such as the 
managed care plan's customer service or the state's beneficiary support 
system.
---------------------------------------------------------------------------

    \11\ http://www.pewinternet.org/fact-sheet/mobile/.
    \12\ Id.
    \13\ http://www.pewresearch.org/fact-tank/2015/04/30/racial-and-ethnic-differences-in-how-people-use-mobile-technology/.
    \14\ https://www.ncbi.nlm.nih.gov/pubmed/27413120.
    \15\ 2016 Medicare Marketing Guideline 100.6. https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/2017MedicareMarketingGuidelines2.pdf.
    \16\ http://bluebuttonconnector.healthit.gov/.
---------------------------------------------------------------------------

    To reflect this change and modify the requirements for updating the 
paper provider directory to permit less than monthly updates if the 
managed care plan offers a mobile-enabled directory, we propose several 
revisions to Sec.  438.10(h)(3). First, we propose to add paragraphs 
(i) and (ii) to Sec.  438.10(h)(3) which would delineate requirements 
for paper directories from those for electronic directories. Second, we 
propose to add paragraphs (i)(A) and (B) which would reflect, 
respectively, that monthly updates are required if a plan does not 
offer a mobile enabled directory and that only quarterly updates are 
required for plans that do offer a mobile enabled directory. Lastly, we 
propose to make ``directories'' singular (``directory'') at Sec.  
438.10(h)(3)(ii) which would avoid implying that a managed care plan 
must have more than one directory of providers.
    We remind managed care plans that some individuals with 
disabilities, who are unable to access web applications or require the 
use of assistive technology to access the internet, may require 
auxiliary aids and services to access the provider directory. In 
keeping with the requirement that managed care plans must provide 
auxiliary aids and services to ensure effective communication for 
individuals with disabilities consistent with section 504 of the 
Rehabilitation Act of 1973 (Pub. L. 93-112, enacted on September 26, 
1973) and section 1557 of the PPACA, these individuals should, upon 
request, be given the most current provider directories in the same 
accessible format (paper or electronic) that they receive other 
materials.
    We encourage managed care plans to perform direct outreach to 
providers on a regular basis to improve the accuracy of their provider 
data and to ensure that all forms of direct enrollee assistance (such 
as telephone assistance, live web chat, and nurse help lines) are 
effective, easily accessible, and widely publicized.
9. Disenrollment: Requirements and Limitations (Sec.  438.56)
    We inadvertently included PCCMs and PCCM entities in paragraph 
Sec.  438.56(d)(5) related to grievance procedures. Because PCCMs and 
PCCM entities are not required by Sec.  438.228, which does impose such 
a requirement on MCOs, PIHPs and PAHPs, to have an appeals and 
grievance process, we propose to revise Sec.  438.56(d)(5) to delete 
references to PCCMs and PCCM entities. We note that states may impose 
additional requirements on their managed care plans but believe that 
our regulations should be internally consistent on this point.
10. Network Adequacy Standards (Sec.  438.68)
    As discussed in the 2015 proposed rule (80 FR 31144 through 31146), 
we proposed a new Sec.  438.68 to stipulate that a state must establish 
network adequacy standards for specified provider types. We proposed in 
Sec.  438.68(b)(1) that states develop and enforce time and distance 
standards for specified provider types (if covered under the contract). 
In that proposed rule, we explained that states were encouraged to use 
other measures in addition to time and distance. In response to 
comments on the 2015 proposed rule, we declined to set other national 
requirements or specific benchmarks for time and distance (for example, 
30 miles or 30 minutes) in the 2016 final rule (81 FR 27661). Instead, 
we noted that we believed it best not to be overly prescriptive and 
give states the flexibility to build upon the required time and 
distance standards as they deem appropriate and meaningful for their 
programs and populations. (81 FR 27661).
    In the 2015 proposed rule discussion of the requirement now 
codified at Sec.  438.68(b)(2), we requested comment on network 
adequacy standards for LTSS. As noted in the final rule, commenters 
recommended that we adopt some form of network adequacy standards for 
LTSS, but the comments were few in number and lacked consensus 
regarding specific standards that have been used or that have proven 
adequate to assure network adequacy. For these reasons, we stated that 
the best strategy was for states to develop their own time and distance 
standards for LTSS provider types to which a beneficiary travels. 
Similarly, we did not require any specific type of minimum network 
adequacy standard for LTSS provider types that travel to the 
beneficiary, and instead deferred such an analysis to the states (81 FR 
27665).
    As states have worked to comply with the final rule, they have 
alerted us to increasing concerns about the appropriateness of 
uniformly applying time and distance standards. In some situations, 
time and distance may not be the most effective type of standard for 
determining network adequacy and some states have found that time and 
distance analysis produces results that do not accurately reflect 
provider availability. For example, a state that has a heavy reliance 
on telehealth in certain areas of the state may find that a provider to 
enrollee ratio is more useful in measuring meaningful access, as the 
enrollee could be well beyond a normal time and distance standard but 
can still easily access many different providers on a virtual basis. A 
2017 Brookings/Schaefer Center report notes that in some clinical 
areas, telemedicine

[[Page 57279]]

could make proximity measures obsolete, or counterproductive.\17\
---------------------------------------------------------------------------

    \17\ Hall, Mark, A. and Ginsburg, Paul, B. A Better Approach to 
Regulating Provider Network Adequacy (September 2017). Available at 
https://www.brookings.edu/wp-content/uploads/2017/09/regulatory-options-for-provider-network-adequacy.pdf.
---------------------------------------------------------------------------

    To address states' concerns and ensure that states use the most 
effective and accurate standards for their programs, we propose to 
revise Sec.  438.68(b)(1) and (b)(2) by deleting the requirements for 
states to set time and distance standards and adding a more flexible 
requirement that states set a quantitative minimum access standard for 
specified health care providers and LTSS providers. We believe that 
this change would enable states to choose from a variety of 
quantitative network adequacy standards that meet the needs of their 
respective Medicaid programs in more meaningful and effective ways. 
Quantitative standards that states may elect to use include, but are 
not limited to, minimum provider-to-enrollee ratios; maximum travel 
time or distance to providers; a minimum percentage of contracted 
providers that are accepting new patients; maximum wait times for an 
appointment; hours of operation requirements (for example, extended 
evening or weekend hours); and combinations of these quantitative 
measures. We believe it is particularly important that states have 
flexibility for the standards for LTSS programs given the often very 
limited supply of providers and the potential functional limitations of 
the LTSS population. We encourage states to solicit stakeholder input 
in the development of their network standards. By proposing these 
changes, the requirements for network adequacy standards would be 
consistent for all provider types. As such, we propose to remove 
paragraphs Sec.  438.68(b)(2)(i) and (b)(2)(ii), and reflect all LTSS 
network adequacy requirements in Sec.  438.68(b)(2).
    We propose to use the broader standard of ``a quantitative network 
adequacy standard'' rather than ``time and distance,'' because each 
type of standard addresses a different issue. For example, a time and 
distance standard addresses how long or far an enrollee may have to 
travel for care, whereas ``wait-times for an appointment'' address the 
availability or capacity of providers in the network to serve enrollees 
in a timely manner. We encourage states to use the quantitative 
standards in combination--not separately--to ensure that there are not 
gaps in access to and availability of services for enrollees.
    Section 438.68(b)(1) specifies the provider types for which states 
are required to establish network adequacy standards. Section 
438.68(b)(1)(iv) requires states to establish time and distance 
standards for ``specialist, adult and pediatric.'' As noted in the 
final rule, we believe that states should set network adequacy 
standards that are appropriate at the state level and are best suited 
to define the number and types of providers that fall into the 
``specialist'' category based on differences under managed care 
contracts, as well as state Medicaid programs. Therefore, we believe it 
would be inappropriate for us to define ``specialist'' at the federal 
level (81 FR 27661). Since the publication of the 2016 final rule, we 
have received numerous questions from states and other stakeholders 
about who should define the types of providers to be included as 
specialists. We are clarifying with this proposal that states have the 
authority under the final rule to define ``specialist'' in whatever way 
they deem most appropriate for their programs. To make this authority 
clear, we propose to revise Sec.  438.68(b)(1)(iv) to add ``(as 
designated by the state)'' after ``specialist.'' This proposed change 
would eliminate potential uncertainty regarding who has responsibility 
to select the provider types included in this category for the purposes 
of network adequacy. In addition, the proposed modification to Sec.  
438.68(b)(1)(iv) would reduce the burden on a state by eliminating the 
need to set a standard for every possible specialist, as a few states 
interpreted the text of the final rule.
    In Sec.  438.68(b)(1)(viii), we require states to establish time 
and distance standards for ``additional provider types when it promotes 
the objectives of the Medicaid program, as determined by CMS, for the 
provider type to be subject to time and distance access standards.'' In 
the 2016 final rule, we finalized the language in Sec.  
438.68(b)(1)(viii) because it provided the flexibility to address 
future national provider workforce shortages and future network 
adequacy standards (81 FR 27660). Additionally, we noted that if we 
ever elected to utilize this provision to identify additional provider 
types, we would only do so after soliciting public input (81 FR 27660). 
Since the 2016 final rule was published, states have expressed concern 
that if we rely on this authority and its flexibility of identifying 
``additional provider types,'' managed care plans may have to assess 
network adequacy and possibly build network capacity without sufficient 
time. Based on these comments, we propose to remove Sec.  
438.68(b)(1)(viii) to eliminate any uncertainty states may have 
regarding this requirement.
11. Adoption of Practice Guidelines (Sec.  438.236)
    In the 2016 final rule, we attempted to remove the terminology 
``contracting health care professionals'' throughout the rule because 
it is not defined in any regulation or statute and we believed that use 
of ``network provider'' as defined in Sec.  438.2 was more accurate. We 
inadvertently missed removing the term at Sec.  438.236(b)(3). To 
correct this, we propose to remove the words ``contracting health care 
professionals'' and insert ``network providers'' in Sec.  
438.236(b)(3).
12. Enrollee Encounter Data (Sec.  438.242(c))
    In Sec.  438.242(b)(3) of the final rule, we required that all 
contracts between a state and an MCO, PIHP, or PAHP provide for the 
submission of all enrollee encounter data that the state is required to 
submit to CMS under Sec.  438.818. Since the final rule, some states 
and managed care plans have expressed concern about, and been hesitant 
to submit, certain financial data--namely, the allowed amount and the 
paid amount. Managed care plans consider this information to be 
proprietary and inappropriate for public disclosure. We understand this 
concern but emphasize the importance of these data for proper 
monitoring and administration of the Medicaid program, particularly for 
capitation rate setting and review, financial management, and encounter 
data analysis. Additionally, the allowed and paid amounts of claims are 
routinely included on explanation of benefits provided to enrollees; 
thus making this information already publicly available. To clarify the 
existing requirement and reflect the importance of this data, we 
propose to revise Sec.  438.242(c)(3) to explicitly include ``allowed 
amount and paid amount.'' We note that the proposed change to Sec.  
438.242(c)(3) would in no way change the rights of federal or state 
entities using encounter data for program integrity purposes to access 
needed data. Nor would it change the disclosure requirements for 
explanation of benefits notices or other disclosures to enrollees about 
their coverage.
    The health insurance industry has consistently asserted that the 
contractual payment terms between managed care plans and providers is 
confidential and trade secret information and that the disclosure of 
this information could cause harm to

[[Page 57280]]

the competitive position of the managed care plan or provider. We 
recognize the significance of managed care plans' concerns and commit 
to treating this data as trade secret when the requirements for such a 
classification are met. CMS recognizes the significance of the volume 
of data collected in the Transformed Medicaid Statistical Information 
System (T-MSIS) and takes its obligations seriously to protect from 
disclosure information that is protected under federal law. Our goal in 
proposing to explicitly name allowed and paid amount in Sec.  
438.242(b)(3) is to ensure that the scope of the collection of 
encounter data is clear. We affirm our commitment to safeguarding data 
protected by federal law from inappropriate use and disclosure.
13. Medicaid Managed Care Quality Rating System (QRS) (Sec.  438.334)
    In the 2016 final rule (81 FR 27686), we established at Sec.  
438.334 the authority to require states to operate a Medicaid managed 
care quality rating system (QRS) and incorporated this provision in its 
entirety into CHIP at Sec.  457.1240(d). The regulation provides that 
CMS, in consultation with states and other stakeholders, develop a QRS 
framework, including the identification of performance measures and 
methodologies, which states could adopt. States have the option to use 
the CMS-developed framework or establish a state-specific QRS producing 
substantially comparable information about plan performance subject to 
CMS approval of the alternative system.
    Several policy objectives are supported by the QRS requirement. 
First, implementation of a QRS provides a vehicle to hold states and 
plans accountable for the care provided to Medicaid and CHIP 
beneficiaries. Second, a QRS empowers beneficiaries by providing them 
with information about the plans in their state, enabling them to be 
more informed health care consumers. Third, a QRS provides an important 
tool for states to drive improvements in plan performance and the 
quality of care provided by their programs.
    Since publication of the 2016 final rule, we have begun the early 
stages of a stakeholder engagement process needed for the CMS-developed 
framework. We have conducted interactive listening sessions with 
various stakeholders, including state and health plan stakeholder 
groups directors, and interviewed several beneficiaries. We also have 
convened a diverse technical expert panel (TEP) to meet periodically to 
advise CMS on the framework, objectives, measures, and methodologies 
for the CMS-developed QRS. The TEP includes representatives from state 
Medicaid and CHIP agencies, plans, beneficiary advocates, and quality 
measurement experts. We expect that this robust engagement of states 
and other stakeholders would continue through the publication of the 
notice of a proposed QRS framework called for in the current 
regulations at Sec.  438.334(b).
    The requirement in the current regulations that all Medicaid and 
CHIP QRS yield substantially comparable information serves to enable 
comparison of plans performance across states. States and beneficiary 
advocates have expressed strong support for this goal. In addition, the 
standardization of measures and methodologies necessary to generate 
comparable information would reduce burden on plans with products in 
multiple states. During our early stakeholder engagement sessions, 
however, the technical and methodological complexities of producing 
substantially comparable information to enable meaningful comparisons 
between plans across states, was raised--challenges which are 
heightened by the heterogeneous nature of states' Medicaid and CHIP 
programs. Some states expressed concern that the 2016 final rule may 
not have struck the optimal balance between the interests of 
standardization and state flexibility. We agree, and therefore, are 
proposing to make several revisions to the QRS regulations at Sec.  
438.334 (note that we propose no changes to Sec.  457.1240(d), 
therefore all proposed changes would apply equally to both a state's 
Medicaid and CHIP programs). These revisions are intended to better 
balance the goal of facilitating inter-state comparisons of plan 
performance and reducing plan burden with the need for state 
flexibility and the practical challenges inherent in producing 
comparable ratings across states.
    Specifically, we propose to revise the requirement in Sec.  
438.334(c)(1)(i) (redesignated as paragraph (c)(1)(ii) in this proposed 
rule) that an alternative state QRS produce substantially comparable 
information to that yielded by the CMS-developed QRS to require that 
the information yielded be substantially comparable to the extent 
feasible to enable meaningful comparison across states, taking into 
account differences in state programs that complicate achieving 
comparability. We also propose to add a new paragraph (c)(4) to 
explicitly provide that we would engage with states and other 
stakeholders in developing subregulatory guidance on what it means for 
an alternative QRS to yield substantially comparable information, and 
how a state would demonstrate it meets the standard. We also propose 
revisions to paragraph (b) to provide that, in developing the CMS-
developed QRS framework in consultation with states and other 
stakeholders and using public notice and an opportunity to comment, we 
would identify a set of mandatory performance measures. We propose to 
redesignate Sec.  438.334(c)(1)(i) and (c)(1)(ii) as paragraphs 
(c)(1)(ii) and (c)(1)(iii), respectively, and add new paragraph 
(c)(1)(i) which would provide that a state alternative QRS must include 
the mandatory measures identified in the framework. Recognizing the 
challenges that exist in achieving comparable ratings across states, we 
believe that identifying a uniform set of mandatory measures which are 
key to high-quality Medicaid and CHIP programs in any state would be 
critical. The QRS is subject to the Paperwork Reduction Act approval 
process, including notice and comment under the PRA, and is included in 
CMS-10553, OMB Control Number 0938-1281. States would retain 
flexibility to include additional measures important to serving their 
quality goals and meeting the needs of their beneficiaries and 
stakeholder communities. We note that Medicaid and CHIP QRS and our 
recently-launched Scorecard Initiative serve related goals, and we 
expect to coordinate the measures selected for the Scorecard initiative 
and those selected for the CMS-developed QRS.
    The current regulation provides that the CMS-developed QRS would 
``align with the summary indicators'' used by the QRS developed for the 
qualified health plans (QHP) in the Federally-Facilitated Exchange 
(FFE) (hereinafter referred to as the ``QHP QRS''). In the QRS 
listening sessions and TEP meetings held to date, states and other 
stakeholders have raised that, because the populations served by the 
QHPs, Medicaid and CHIP are different (with both Medicaid and CHIP 
serving a significantly higher proportion of children and Medicaid 
serving a significantly greater proportion of older adults and 
individuals with disabilities), complete alignment with the QHP QRS may 
not make sense for Medicaid and CHIP. Therefore, we propose to revise 
Sec.  438.334(b) to provide that the CMS-developed QRS would align with 
the QHP QRS where appropriate. Some stakeholders also have suggested 
that the Medicaid and CHIP QRS also should align, where appropriate, 
with the Medicare Advantage 5-Star Rating System and the

[[Page 57281]]

Medicare-Medicaid Plan (MMP) Financial Alignment Initiative integrated 
Star Rating strategy (currently in development) in order to reduce 
reporting burden on plans that operate in the other markets, as well as 
offering Medicaid and CHIP managed care plans. We agree that aligning 
the Medicaid and CHIP QRS with these other rating systems, to the 
extent appropriate given the different populations served by each 
program and benefit variations between programs, would reduce burden 
and confusion for plan issuers, which may offer products in more than 
one program. Therefore, we propose revisions at Sec.  438.334(b) that 
the CMS-developed QRS also align, where appropriate, to other CMS 
approaches to rating managed care plans. Alignment will be determined 
as part of the ongoing development of the proposed measures and 
methodologies and will be addressed in the QRS-specific rulemaking.
    Currently, Sec.  438.334 requires states to obtain our approval 
prior to implementing an alternative QRS. Pre-approval enables us to 
determine if an alternative QRS complies with the regulation and meets 
the ``substantially comparable'' standard before a state invests 
resources into QRS implementation. However, some states have expressed 
concern about having enough time to implement a QRS if prior approval 
from CMS is required. To reduce the upfront administrative burden on 
states and speed time for implementation, we propose to revise the 
current introductory language in Sec.  438.334(c)(1) and (c)(1)(ii) to 
eliminate the requirement that states obtain prior approval before 
implementing an alternative QRS. In addition, the use of mandatory 
measures in addition to state-selected measures provides some assurance 
about the comparability of the alternative QRS developed by the state. 
Instead of prior CMS approval, we propose at Sec.  438.334(c)(3) that 
states would, upon CMS request, submit their alternative QRS framework, 
including the performance measures and methodology to be used in 
generating plan ratings; documentation of the public comment process 
described in Sec.  438.334(c)(2)(i) and (ii) including issues raised by 
the Medical Care Advisory Committee and the public, any policy 
revisions or modifications made in response to the comments, and 
rationale for comments not accepted; and other information specified by 
CMS to demonstrate compliance with Sec.  438.334(c). As part of our 
general oversight responsibilities, we would still review states' 
alternative QRS and work with states on any identified deficiencies. 
This approach is similar to the oversight process CMS uses for states' 
eligibility verification plans (Sec.  435.945(j), incorporated into the 
CHIP requirements by reference at Sec.  457.380(i)), which requires 
states to submit eligibility verification plans to CMS for finalization 
upon request, in a manner and format prescribed by CMS.
    We solicit comments on these proposals.
14. Managed Care State Quality Strategy (Sec.  438.340)
    Current Sec.  438.340 sets forth the minimum elements of a managed 
care state quality strategy and the requirements for development, 
evaluation, revision and public display of the quality strategy. Each 
state contracting with an MCO, PIHP, or PAHP as defined in Sec.  438.2 
or with a risk-bearing PCCM entity, as described in Sec.  
438.310(c)(2), must draft and implement a written quality strategy for 
assessing and improving the quality of health care and services 
furnished by the MCO, PIHP, PAHP, or PCCM entity. Section 438.340(b) 
sets forth the minimum elements of a managed care state quality 
strategy.
    In the 2016 final rule, we expanded the previous state managed care 
quality strategy requirements, which applied to states contracting with 
MCOs and PIHPs, to also apply to states contracting with PAHPs or PCCM 
entities described in Sec.  438.310(c)(2). As part of that revision, 
and to conform to other changes in this part, we added paragraph 
(b)(8), which requires a description of how the state would assess the 
performance and quality outcomes achieved by each PCCM entity described 
in Sec.  438.310(c)(2). This paragraph was intended to capture the 
application of all relevant areas of the state's quality strategy to 
risk-bearing PCCM entities, in conformance with the inclusion of PCCM 
entities at Sec.  438.340(a). We intended that states which contract 
with PCCM entities described in Sec.  438.310(c)(2) would design and 
describe all of the quality strategy elements to include PCCM entities 
as appropriate; for example, within the state's goals and objectives 
for continuous quality improvement in paragraph (b)(2). We similarly 
intended that other aspects of the managed care quality strategy would 
apply equally to these PCCM entities, including Sec.  438.340(b)(3)(i) 
(relating to quality metrics and performance targets); Sec.  
438.340(b)(6) (relating to the state's plan to identify, evaluate and 
reduce health disparities and to provide demographic information to 
managed care plans); and Sec.  438.340(c)(1)(ii) (regarding Tribal 
consultation for states who enroll Indians in PCCM entities). However, 
current Sec.  438.340(b)(2), (b)(3)(i), (b)(6) and (c)(1)(ii) do not 
explicitly reference PCCM entities, resulting in possible confusion 
about the application of these quality strategy elements to states 
which contract with PCCM entities. Our intention in the 2016 final rule 
was to apply these provisions equally to PCCM entities. Therefore, we 
propose to add PCCM entities described in Sec.  438.310(c)(2) to the 
list of managed care plans identified in Sec.  438.340(b)(2), 
(b)(3)(i), (b)(6) and (c)(1)(ii). We also propose for greater clarity 
to delete Sec.  438.340(b)(8) and to redesignate paragraphs (b)(9), 
(b)(10), and (b)(11) as paragraphs (b)(8), (b)(9), and (b)(10), 
respectively.
    We do not propose to add a reference to PCCM entities described in 
Sec.  438.310(c)(2) to Sec.  438.340(b)(1) because the regulations 
cross-referenced in paragraph (b)(1)--that is, Sec.  438.68 (relating 
to state-defined network adequacy), Sec.  438.206 (relating to 
availability of service standards), and Sec.  438.236 (relating to 
clinical practice guidelines)--do not apply to PCCM entities. 
Similarly, we do not propose to add PCCM entities to the list of 
managed care entities in Sec.  438.340(b)(3)(ii) (related to 
performance improvement projects (PIPs)) because states are not 
required under Sec.  438.330(d) to require that PCCM entities conduct 
PIPs. However, since states have the option to require PIPs for PCCM 
entities, we encourage states that choose to have their PCCM entities 
conduct PIPs to describe these PIPs in their managed care quality 
strategy.
    Section 438.340(b)(6) of the current regulations requires that 
states include, as an element of the managed care quality strategy, 
their plan to identify, evaluate, and reduce, to the extent 
practicable, health disparities based on six demographic factors (age, 
race, ethnicity, sex, primary language, and disability status). It also 
requires states to transmit this demographic information for each 
Medicaid enrollee to the enrollee's managed care plan at the time of 
enrollment into the plan. Section 438.340(b)(6) currently provides that 
``disability status,'' for the purposes of this paragraph, means 
whether the individual qualified for Medicaid on the basis of a 
disability.
    We are concerned that this definition of ``disability status'' may 
be unintentionally narrow. For example, some individuals with 
disabilities may not be eligible for Medicaid on the basis of 
disability, or their disability status may change over time. Others may 
not

[[Page 57282]]

be disabled under the definition used by the Medicaid program, but may 
be considered disabled under other state or federal laws or regulations 
(for example, the Americans with Disabilities Act). We believe states 
should provide a managed care plan with the most accurate, complete, 
and current demographic information about an enrollee available to the 
state, regardless of whether this information is from an enrollee's 
Medicaid eligibility application or from another source. We recognize 
that the most common source of information about an individual's 
disability status will be that obtained during the application process, 
and states are not required to actively seek out sources of information 
not readily available to the state. However, if states have other or 
more current sources of information for these six demographic factors, 
states would be expected to use and transmit that more current 
information.
    Therefore, we propose to remove the sentence defining disability 
status from Sec.  438.340(b)(6) in addition to adding the reference to 
PCCM entities described in Sec.  438.310(c)(2). Under the proposed 
revised regulation, qualifying for Medicaid on the basis of disability 
would be one source of information to determine a beneficiary's 
disability status, but not necessarily the only source of this 
information. We note that this requirement for states to provide 
demographic information for each Medicaid enrollee to the managed care 
plan at the time of enrollment is a minimum standard; we encourage 
states to send updated demographic information to an enrollee's managed 
care plan whenever updated demographic information is available to the 
state.
    We solicit comments on these proposals.
15. Activities Related to External Quality Review (Sec.  438.358)
    Section 438.358(b)(1) sets forth the mandatory external quality 
review (EQR)-related activities states must require for their MCOs, 
PIHPs, and PAHPs. Section 438.358(b)(1)(iii) requires a review, 
conducted within the previous 3-year period, to determine the MCO's, 
PIHP's, or PAHP's compliance with certain managed care standards. In 
the 2016 final rule, the cross-citation in Sec.  438.358(b)(1)(iii) to 
standards at Sec.  438.204(g) was replaced with a streamlined cross-
reference to part 438 subpart D (81 FR 27706). We noted that the 
streamlining of the cross-reference did not propose a significant 
change from what comprises the current compliance review activity. 
Subpart D previously had contained cross-references to all of the 
applicable standards for access to care and structure and operations 
that are contained in subparts A, B, C, and F. However, several of 
those cross-references within subpart D were removed in the 2016 final 
rule, specifically references to Sec.  438.56 (Disenrollment 
requirements and limitations), Sec.  438.100 (Enrollee rights), and 
Sec.  438.114 (Emergency and post-stabilization services). The removal 
of these cross-references from subpart D inadvertently dropped 
reference citations for these critical standards from the EQR 
compliance review. This was not our intention, as these sections have 
been included in the EQR protocol for the compliance review activity 
since the initial release of the protocols in 2003 and in all 
subsequent revisions of the protocols. Therefore, we propose a 
technical correction to add directly to Sec.  438.358(b)(1)(iii) the 
three cross-references to Sec. Sec.  438.56, 438.100 and 438.114.
    We solicit comments on these proposals.
16. Exemption From External Quality Review (Sec.  438.362)
    Section 438.362 implements section 1932(c)(2)(C) of the Act, which 
provides that a state may exempt an MCO from undergoing an EQR when 
certain conditions are met. First, the MCO must have a current Medicare 
contract under part C of Title XVIII or under section 1876 of the Act, 
as well as the current Medicaid contract under section 1903(m) of the 
Act. Second, the two contracts must cover all or part of the same 
geographic area within the state. Third, the Medicaid contract must 
have been in effect for at least 2 consecutive years before the 
effective date of the exemption and during those 2 years, the MCO has 
been found to be performing acceptable for the quality, timeliness, and 
access to health care services it provides to Medicaid beneficiaries. 
Neither the statute nor Sec.  438.362 requires states to exempt plans 
from EQR; this is provided only as an option for states. States have 
discretion to require all their managed care plans to undergo EQR, even 
those that appear eligible for an exemption under this section.
    In the 2016 final rule (81 FR 27713), we received comments 
regarding limiting the use of exemption which also raised transparency 
concerns. Since the issues raised in the comments were outside the 
scope of that rulemaking, we encouraged, but did not require, states to 
make public which Medicaid health plans have been exempted from EQR 
under Sec.  438.362 and for how long. We indicated we would consider 
proposing in future rulemaking, a requirement that states post this 
information publicly. Therefore, we propose to add Sec.  438.362(c) to 
require that states annually identify on their website, in the same 
location where EQR technical reports are posted, the names of the MCOs 
it has exempted from EQR, and when the current exemption period began. 
We believe that posting this information on the state's website would 
not present a burden to states since states already make exemption 
determinations, inform their EQRO of which plans are exempted from EQR, 
and maintain EQR information on their website, activities which are 
already accounted for in the associated information collections.
    As an alternative, we are considering revising Sec.  438.364(a) 
(External Quality Review Results-Information that must be produced) to 
require that states identify the exempted plans and the beginning date 
of the current exemption period in the annual EQR technical report. 
This identification could be in addition to or as an alternative to 
posting this information directly on the state's website. We could 
revise paragraph (a)(i) to add a sentence incorporating the same 
information we propose to add to Sec.  438.362.
    We solicit comments on this proposal. We also welcome information 
about how states are currently using the exemption provision and how 
states currently make that information publicly available.
17. External Quality Review Results (Sec.  438.364)
    On page 27886 of the Medicaid and Children's Health Insurance 
Program (CHIP) Programs; Medicaid Managed Care, CHIP Delivered in 
Managed Care, and Revisions Related to Third Party Liability final rule 
(81 FR 27498, May 6, 2018), we made a technical error in the regulation 
text of Sec.  438.364(d) (Safeguarding patient identity). In this 
paragraph, we inadvertently referenced paragraph (b) of this section 
(Revision) instead of referencing paragraph (c) of this section 
(Availability of Information). Accordingly, we propose to revise Sec.  
438.364(d) to reflect the correct reference.
18. Grievance and Appeal System: Statutory Basis and Definitions (Sec.  
438.400)
    In the 2016 final rule, we finalized at Sec.  438.400(b)(3) the 
definition of an ``adverse benefit determination'' including denials in 
whole or in part of payment for service. The term adverse

[[Page 57283]]

benefit determination was proposed and finalized in the 2016 final rule 
as a replacement for the term ``action,'' which had been defined with 
the same definition in the 2002 rule. Under Sec.  438.404(a), managed 
care plans are required to give enrollees timely notice of an adverse 
benefit determination in writing and consistent with the requirements 
in Sec.  438.10 generally. Given the broad meaning of the term ``denial 
of a payment,'' some managed care plans may be generating a notice to 
each enrollee for every denied claim, even those that are denied for 
purely administrative reasons (such as missing the National Provider 
Identifier, missing the enrollee's sex, or because the claim is a 
duplicate) and which generate no financial liability for the enrollee. 
Issuing notices of such adverse benefit determinations for which the 
enrollee has no financial liability nor interest in appealing simply to 
comply with Sec.  438.404(a) may create administrative and economic 
burdens for plans, and unnecessary confusion and anxiety for enrollees 
who frequently misunderstand the notices as statements of financial 
liability.
    To alleviate unnecessary burden on the managed care plans and 
enrollees, we propose to add language in Sec.  438.400(b)(3), that 
would indicate that a denial, in whole or in part, of a payment for a 
service because the claim does not meet the definition of a clean claim 
at Sec.  447.45(b) \18\ is not an adverse benefit determination. As 
such, the notice requirements in Sec.  438.404 would not be triggered. 
We believe this proposed modification would eliminate burden on plans 
to send unnecessary notices and avoid anxiety for enrollees receiving 
such notices. This proposed change is not expected to expose enrollees 
to financial liability without notice, or jeopardize their access to 
care or rights to an appeal.
---------------------------------------------------------------------------

    \18\ Under Sec.  447.5(b), a clean claim means one that can be 
processed without obtaining additional information from the provider 
of the service or from a third party. It includes a claim with 
errors originating in a States claim system. It does not include a 
claim from a provider who is under investigation for fraud or abuse, 
or a claim under review for medical necessity.
---------------------------------------------------------------------------

    While notices to enrollees for claims that do not comply with the 
clean claim definition in Sec.  447.45(b) would not be required under 
our proposed amendment to Sec.  438.400(b)(3), the notice requirements 
for all future claims (including resubmission of the same claim) would 
have to be independently determined. For example, if a provider 
resubmits a clean claim after the initial one was not processed because 
it did not comply with the requirements in Sec.  447.45(b), and the 
managed care plan subsequently issues an adverse benefit determination, 
the managed care plan would still be required to issue a timely notice 
under Sec.  438.404(a) for the second claim. Whether an adverse benefit 
determination notice is required would have to be determined for each 
claim, regardless of whether notices were required for previously 
submitted claims.
    We solicit comments on our proposal.
19. Grievance and Appeal System: General Requirements (Sec. Sec.  
438.402 and 438.406)
    In the 2016 final rule, we adopted the requirement that an oral 
appeal must be followed by a written, signed appeal at Sec.  
438.402(c)(3)(ii).\19\ This requirement was also included at Sec.  
438.406(b)(3), regarding handling of grievances and appeals, where 
managed care plans must treat oral inquiries seeking to appeal an 
adverse benefit determination as appeals and that such oral inquiries 
must be confirmed in writing. We received comments to the proposed rule 
that stated that the written, signed requirements added an unnecessary 
barrier to enrollees filing an appeal with the managed care plan. At 
that time, we believed that this requirement was necessary to ensure 
appropriate and accurate documentation of enrollees' appeals. While the 
resolution timeframe for an oral appeal begins on the date of the oral 
appeal, managed care plans cannot issue a resolution until the enrollee 
submits the written, signed appeal (81 FR 27511). Managed care plans 
have found that some enrollees may take too long to submit the written, 
signed appeal, while others fail to submit the written appeal at all. 
This creates problems for managed care plans who must invest resources 
to encourage enrollees to submit the documentation, as well as 
uncertainty for managed care plans as to how to comply with Sec.  
438.406 (Handling Grievances and Appeals) in cases when the enrollee 
does not submit the written, signed appeal.
---------------------------------------------------------------------------

    \19\ Redesignated from Sec.  438.402(b)(3)(ii) in the 2002 final 
rule (67 FR 41110).
---------------------------------------------------------------------------

    After the opportunity to hear from states regarding their 
experience with this requirement, we propose to eliminate the 
requirement for enrollees to submit a written, signed appeal after an 
oral appeal is submitted. We believe the removal of the requirement 
would reduce barriers for enrollees who would not have to write, sign, 
and submit the appeal, decrease the economic and administrative burden 
on plans, and would expedite the appeals process. This proposed change 
would also harmonize the managed care appeal process with the state 
fair hearing process.\20\
---------------------------------------------------------------------------

    \20\ Section 431.221(a)(1)(i) requires state Medicaid agencies 
to permit an individual or authorized representative of the 
individual to submit state hearing requests via different 
modalities--including telephone--without requiring a subsequent 
written, signed appeal.
---------------------------------------------------------------------------

    We considered retaining the written, signed appeal requirement, but 
permitting the managed care plan to proceed with the process in the 
absence of it, if the managed care plan demonstrates that a good faith 
effort was made to obtain the written, signed appeal. However, we 
believed that demonstrating a good faith effort increased burden on the 
states and plans with no additional benefit for the enrollee. 
Therefore, we are proposing the elimination of the written, signed 
appeal requirement in Sec. Sec.  438.402(c)(3)(ii) and 438.406(b)(3), 
as we believe the elimination of the written requirement benefits all 
parties involved. Although we are proposing to eliminate the 
requirement that an oral appeal must be followed by a written, signed 
appeal, as we noted in the 2016 final rule, we continue to expect 
managed care plans to treat oral appeals in the same manner as written 
appeals (81 FR 27511). We are proposing to retain the current 
regulatory language in Sec.  438.406(b)(3) that specifies that oral 
inquiries seeking to appeal an adverse benefit determination are 
treated as appeals.
20. Resolution and Notification: Grievances and Appeals (Sec.  438.408)
    In the 2016 final rule, we revised the timeframe for enrollees to 
request a state fair hearing to 120 calendar days at Sec.  
438.408(f)(2). We adopted this timeframe because we believed it would 
give enrollees more time to gather the necessary information, seek 
assistance for the state fair hearing process, and make the request for 
a state fair hearing (81 FR 27516). However, we have heard from 
stakeholders that the 120-calendar day requirement has created an 
inconsistency in filing timeframes between Medicaid FFS and managed 
care, creating administrative burdens for states and confusion for 
enrollees. The FFS rule limits the timeframe beneficiaries have to 
request a hearing to no more than 90 days (Sec.  431.221(d)).\21\ It 
was not our intent to burden states with additional tracking of the 
fair hearing process in multiple systems, on multiple timeframes. Nor 
do

[[Page 57284]]

we want to confuse enrollees in states where some services are provided 
through FFS and others through managed care.
---------------------------------------------------------------------------

    \21\ 42 CFR 431.221(d) states that the agency must allow the 
applicant or beneficiary a reasonable time, not to exceed 90 days 
from the date that notice of action is mailed, to request a hearing.
---------------------------------------------------------------------------

    Therefore, we propose to revise Sec.  438.408(f)(2) to stipulate 
that the timeframe for enrollees to request a state fair hearing would 
be no less than 90 calendar days and no greater than 120 calendar days 
from the date of the MCO's, PIHP's, or PAHP's notice of resolution. We 
believe the proposed revision would allow states that wish to align 
managed care with the FFS filing timeframe to do so while not 
jeopardizing the enrollee's ability to gather information and prepare 
for a state hearing. This proposal would also allow states that have 
already implemented the 120-calendar day timeframe to maintain that 
timeframe without the need for additional changes.
    We solicit comments on our proposal.

II. Children's Health Insurance Program (CHIP) Managed Care

A. Background

    The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 
111-5, enacted February 17, 2009), the Children's Health Insurance 
Program Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3, enacted on 
February 4, 2009), and the PPACA made applicable to CHIP several 
Medicaid managed care provisions in section 1932 of the Act, including 
section 1932(a)(4), Process for Enrollment and Termination and Change 
of Enrollment; section 1932(a)(5), Provision of Information; section 
1932(b), Beneficiary Protections; 1932(c), Quality Assurance Standards; 
section 1932(d), Protections Against Fraud and Abuse; and section 
1932(e), Sanctions for Noncompliance. In addition, the PPACA applied to 
CHIP sections 1902(a)(77) and 1902(kk) of the Act related to provider 
and supplier screening, oversight, and reporting. Our 2016 final rule 
implemented these statutory provisions and built on initial guidance 
provided in State Health Official (SHO) letters 09-008 and 09-013, 
issued on August 31, 2009 and October 21, 2009, respectively. The 
provisions in the 2016 final rule both reflected and superseded this 
earlier guidance.
    Since the publication of the 2016 final rule, and subsequent 
technical corrections to the rule in a correction notice published on 
January 3, 2017 (82 FR 37) (the 2017 correction notice), we have 
observed the need for additional minor technical or clarifying changes 
to the CHIP managed care provisions, primarily to clarify that certain 
Medicaid requirements do not apply to CHIP. These changes are described 
in more detail below.

B. Updates to CHIP Managed Care

1. Compliance Dates for Part 457 Managed Care Provisions
    The compliance section of the preamble to the 2016 final rule 
states that unless otherwise noted, states would not be held out of 
compliance with new requirements in part 457 of this final rule until 
CHIP managed care contracts as of the state fiscal year beginning on or 
after July 1, 2018, so long as they comply with the previously 
applicable regulations (that is, the regulations in place before the 
2016 final rule). (81 FR 27499). Some stakeholders have expressed that 
the compliance section as drafted is not clear about when states need 
to comply with the CHIP managed care regulations. We clarify here that, 
except as otherwise noted, compliance with the revisions to the CHIP 
managed care regulations in part 457 under the 2016 final rule is 
required as of the first day of the state fiscal year beginning on or 
after July 1, 2018, regardless of whether or not the managed care 
contract in effect is a multi-year contract entered into a previous 
fiscal year or is a new contract effective for the first state fiscal 
year beginning on or after that date.
2. Information Requirements (Sec.  457.1207)
    Section 457.1207 sets forth the CHIP requirements for providing 
enrollment notices, informational materials, and instructional 
materials for enrollees and potential enrollees of managed care 
entities by adopting the Medicaid requirements in Sec.  438.10 by 
cross-reference. We inadvertently failed to exclude three cross 
references that should not apply to CHIP.
    Section 438.10(c)(2) requires states to utilize the state's 
beneficiary support system as specified in Sec.  438.71. CHIP does not 
adopt the beneficiary support system requirements; therefore, we did 
not intend that states would be required to use these systems for CHIP 
enrollees and we propose to modify the language in Sec.  457.1207 to 
reflect this technical correction.
    Section 438.10(g)(2)(xi)(E) requires that enrollee handbook notify 
enrollees that, when requested, benefits will continue when the 
enrollee files an appeal or state fair hearing (also known as ``aid 
paid pending''). CHIP does not adopt the Medicaid appeals process known 
as ``aid paid pending'' and we intended to exclude the requirement to 
notify CHIP enrollees of this requirement from the handbook, as the 
option does not exist in CHIP (we explicitly exclude this provision in 
Sec.  457.1260). We propose to modify the language in Sec.  457.1207 to 
reflect this technical correction.
    Additionally, Sec.  438.10(g)(2)(xii) requires that the enrollee 
handbooks for MCOs, PIHPs, PAHPs, and PCCM entities must provide 
information on how to exercise an advance directive, as set forth in 
Sec.  438.3(j). CHIP does not adopt advanced directive requirements, 
and therefore, we did not intend that plans would be required to notify 
CHIP enrollees on how to exercise advanced directives and we propose to 
modify the language in Sec.  457.1207 to reflect this technical 
correction.
    We solicit comments on these proposals.
3. Structure and Operations Standards (Sec.  457.1233)
    In the 2016 final rule, at Sec.  457.1233(b), we adopted the 
provisions in Sec.  438.230 related to MCO, PIHP, PAHP and PCCM entity 
requirements for contracting with subcontractors. However, in Sec.  
457.1233(b) we inadvertently included PCCMs instead of PCCM entities. 
We propose to revise Sec.  457.1233 in this rulemaking to conform to 
the requirement that Sec.  438.230 applies to PCCM entities.
    Also, at Sec.  457.1233(d), we adopted the provisions in Sec.  
438.242 that require states operating a separate CHIP to collect 
enrollee encounter data from managed care plans. In finalizing Sec.  
438.242, we also intended to apply to CHIP the requirements of Sec.  
438.818, which is cross-referenced in Sec.  438.242 and requires the 
submission of enrollee encounter data to CMS. We propose to revise 
Sec.  457.1233 in this rulemaking to make explicit our intention to 
apply the terms of Sec.  438.818 to CHIP.
    Finally, in the 2016 final rule at Sec.  457.1233(d) we made a 
technical error regarding the CHIP applicability date. Our cross-
reference to Sec.  438.242 inadvertently applied the Medicaid 
applicability date of July 1, 2017 for the health information system 
requirements instead of the later compliance date generally applicable 
to CHIP (which is as of the first day of the state fiscal year 
beginning on or after July 1, 2018) that was specified in the 2016 
final rule (``Except as otherwise noted, states will not be held out of 
compliance with new requirements in part 457 of this final rule until 
CHIP managed care contracts as of the state fiscal year beginning on or 
after July 1, 2018, so long as they comply with the corresponding 
standard(s) in part 457 contained in the parts 430 through 481, edition 
revised

[[Page 57285]]

as of October 1, 2015.'') and discussed in detail in section II.B.1 of 
this proposed rule. Therefore, we also propose to revise Sec.  
457.1233(d) to address this technical correction.
    We solicit comments on our proposals.
4. Quality Measurement and Improvement (Sec.  457.1240)
    In the 2016 final rule, we aligned CHIP quality measurement and 
improvement standards (with minor exceptions) for CHIP MCOs, PIHPs and 
PAHPs with the Medicaid standards at Sec. Sec.  438.330, 438.332, 
438.334, and 438.340 by adopting references to those sections in Sec.  
457.1240(b). Where appropriate, Sec.  457.1240 of the 2016 final rule 
also applied these Medicaid standards to PCCM entities. However, we 
inadvertently missed a cross-reference to one of the Medicaid 
standards--Sec.  438.330(b)(2), relating to the collection and 
submission of quality performance measurement data--which we intended 
to apply to PCCM entities. We propose revisions to Sec.  457.1240(b) to 
correct this omission and reflect application of Sec.  438.330(b)(2) to 
PCCM entities in CHIP. The proposed changes in Sec.  438.340, as 
discussed in the preamble at section I.B.13 of this proposed rule, are 
addressed with regard to CHIP in section II.B.8. of this proposed rule.
    Additionally, we inadvertently failed to exclude references to 
consultation with the state's Medical Care Advisory Committee when 
drafting or revising the state's quality strategy in Sec.  
438.330(c)(1)(i) and if the state chooses to use an alternative managed 
care QRS in Sec.  438.334(c)(2)(i) and (c)(3). Consultation with the 
Medical Care Advisory Committee is required for Medicaid under Sec.  
431.12. However, CHIP is not subject to Sec.  431.12, and therefore, 
the consultation requirements in Sec.  438.330(c)(1)(i) and Sec.  
438.334(c)(2)(i) and (c)(3) are not applicable to CHIP. We propose to 
revise Sec.  457.1240 to correct these errors.
    We solicit comments on our proposal.
5. Grievance System (Sec.  457.1260)
    In the 2016 final rule, we aligned CHIP with the Medicaid grievance 
and appeals provisions in subpart F of part 438, by incorporating those 
subpart F, part 438 provisions into Sec.  457.1260, with two 
substantive exceptions. First, Sec.  457.1260 provides that references 
to ``state fair hearings'' in the part 438 provisions should be read as 
referring to part 457, subpart K (which imposes certain CHIP applicant 
and enrollee protections). Second, Sec.  457.1260 excludes the 
applicability date in Sec.  438.400(c) from applying in the CHIP 
context. Since that 2016 final rule, we have become aware of a number 
of issues related to how Sec.  457.1260 currently incorporates the 
requirements applicable to Medicaid managed care plans and we are 
proposing here to amend Sec.  457.1260 to address those concerns.
    To avoid a lengthy list of excluded provisions from a general 
incorporation of subpart F of part 438, we are proposing new regulation 
text that incorporates specific provisions from subpart F of part 438, 
does not incorporate the specific paragraphs and provisions that have 
raised the issues detailed below, and fills in the blanks of how MCEs 
in state CHIPs must establish and operate their grievance and appeals 
system. No revisions are proposed to CHIP's current incorporation of 
Sec.  438.406, Sec.  438.410, Sec.  438.412 or Sec.  438.416. CHIP did 
not adopt Sec.  438.420 in the 2016 final rule. The proposed revisions 
address the following items in Sec.  438.400, Sec.  438.402, Sec.  
438.404, Sec.  438.408, and Sec.  438.424:
     Definition of adverse benefit determination (Sec.  
438.400): We inadvertently failed to exclude a reference to paragraph 
(6) of the definition of adverse benefit determination in Sec.  
438.400. This paragraph includes in the definition of adverse benefit 
determination the denial of enrollee's request to exercise his or her 
choice to obtain services outside the network under Sec.  438.52. We 
did not adopt Sec.  438.52 in CHIP, and therefore, this should not have 
been included in the definition of adverse benefit determination for 
CHIP. Our proposed regulation text at Sec.  457.1260(a)(2) incorporates 
the definitions adopted in Sec.  438.400 excluding this one provision 
in the definition of adverse benefit determination.
     External medical reviews (Sec.  438.402): At Sec.  
457.1120(a), CHIP already provides states with two options to conduct 
an external review of a health services matter and we inadvertently 
applied to CHIP an additional, optional external medical review in the 
Medicaid rule at Sec.  438.402(c)(1)(i)(B). We now realize that this 
additional external medical review has been incorporated under our 
current regulation text. Therefore, within Sec.  457.1260(b) which 
corresponds to Sec.  438.402, we do not include the Medicaid external 
medical review provisions (Sec.  438.402(c)(1)(B)) from the list of 
appeal and grievance provisions that we are proposing to incorporate in 
proposed Sec.  457.1260. In addition, proposed Sec.  457.1260(b)(2) 
through (4) replace Sec.  438.402(c)(1)(i)(A), (c)(1)(ii), and (c)(2), 
respectively, by substituting references to ``state fair hearings'' 
from the Medicaid rules for references to part 457, subpart K (which 
imposes certain CHIP applicant and enrollee protections, including the 
external review). This approach is substantively consistent with the 
current rule. Our proposed regulation text, at Sec.  457.1260(b), 
continues to incorporate Medicaid grievance and appeals system 
establishment and operation rules in Sec.  438.402(a), (b), (c)(2) and 
(3).
     Timing of notice of adverse benefit determinations (Sec.  
438.404): We have realized that there may have been some confusion 
about whether states should follow the timing of notice of adverse 
benefit determination requirements described in Sec.  438.404(c)(1) or 
Sec.  457.1180. We propose to clarify that we did not intend to 
incorporate the requirements of 42 CFR part 431, subpart E into CHIP 
from Sec.  438.404(c)(1) and that states may continue, under proposed 
Sec.  457.1260(c)(3), to provide timely written notice for termination, 
suspension, or reduction of previously authorized CHIP-covered 
services, which mirrors the timing of notice requirements in Sec.  
457.1180. We propose that for denials and limitations of services, the 
timing of notices would continue to follow Sec.  438.404(c)(3). In 
addition, proposed Sec.  457.1260(c)(2) replaces Sec.  438.404(b)(3) by 
substituting the reference to ``state fair hearings'' with the 
reference to part 457, subpart K. However, our proposed regulation 
text, at Sec.  457.1260(c), continues to incorporate the notice 
requirements of Medicaid adverse benefit determination rules in Sec.  
438.404(a), (b)(1), (2), and (4) through (6), and (c)(2) through (6).
     Resolution and notification (Sec.  438.408): Proposed 
Sec.  457.1260(e)(2) mirrors the language of Sec.  438.408(a) but we 
have proposed a restatement of the text within Sec.  457.1260 so that 
the use of ``this section'' in the text now refers to the language in 
Sec.  457.1260 in lieu of Sec.  438.408. In addition, proposed Sec.  
457.1260(e)(3) through (7) replace Sec.  438.408(b)(3), (e)(2), (f)(1), 
(f)(1)(i), and (f)(2), respectively, by substituting references to 
``state fair hearings'' for references to part 457, subpart K. For the 
reasons discussed above, we do not include the Medicaid external 
medical review provisions (Sec.  438.408(f)(1)(ii)) from the list of 
appeal and grievance provisions that we are proposing to incorporate in 
proposed Sec.  457.1260. However, our proposed regulation text, at 
Sec.  457.1260(e), continues to incorporate the resolution and 
notification requirements of Medicaid grievance and appeals rules in

[[Page 57286]]

Sec.  438.408(b), (c)(1) and (2), (d), (e)(1), and (f)(3).
     Services not furnished (Sec.  438.424): The current 
regulation inadvertently incorporates and applies the Medicaid standard 
at Sec.  438.424(b), which requires a state to pay for disputed 
services furnished while an appeal is pending--which we did not intend 
to apply to CHIP. The Medicaid rule at Sec.  438.420, regarding the 
continuation of benefits while an appeal is pending is not a policy 
that we wish to incorporate into CHIP. Therefore, the CHIP regulation 
at Sec.  457.1260 should not include either Sec.  438.420 or Sec.  
438.424(b), which provides that a state must pay for those disputed 
services furnished while the appeal is pending if the decision to deny 
authorization of the services is reversed. Therefore, in proposed Sec.  
457.1260, we do not incorporate Sec.  438.420 or Sec.  438.424(b). 
However, proposed Sec.  457.1260(h) mirrors Sec.  438.424(a) except for 
substituting the reference to ``state fair hearings'' with the 
reference to part 457, subpart K.
    Accordingly, we propose to revise Sec.  457.1260 to better reflect 
CMS policy for CHIP. We solicit comment on whether our more detailed 
regulation text, which incorporates specific provisions of subpart F of 
part 438, is sufficiently clear and detailed for the appropriate 
administration of grievances and appeals in the CHIP context.
    We solicit comments on our proposal.
6. Sanctions (Sec.  457.1270)
    In the 2016 final rule, CHIP adopted the Medicaid requirements 
related to sanctions in part 438 subpart I at Sec.  457.1270. We 
inadvertently did not include a provision in Sec.  457.1270 that states 
may choose to establish sanctions for PCCMs and PCCM entities as 
specified in Sec.  438.700(a). In addition, we did not indicate that 
references in Sec.  438.706(a)(1) and (b) should be read to refer to 
the requirements of subpart L of part 457, rather than references to 
sections 1903(m) and 1932 of the Act. We are revising the language of 
Sec.  457.1270 to reflect these technical changes.
    We solicit comments on our proposal.
7. Program Integrity Safeguards (Sec.  457.1285)
    Section 457.1285 sets forth the CHIP requirements for providing 
enrollment notices, informational materials, and instructional 
materials for enrollees and potential enrollees of managed care 
entities by adopting the Medicaid requirements in subpart H of part 
438, except for the terms of Sec.  438.604(a)(2), by cross-reference. 
We inadvertently failed to exclude one cross reference that should not 
apply to CHIP. CHIP does not adopt the Medicaid actuarial soundness 
requirements, therefore, states do not need to use the specified plan 
information collected in Sec.  438.608(d)(1) and (3) for setting 
actuarially sound capitation rates as required by Medicaid in Sec.  
438.608(d)(4) and we are seeking to modify the language of Sec.  
457.1285 to reflect this technical correction.
    We solicit comments on our proposal.
8. CHIP Conforming Changes To Reflect Medicaid Managed Care Proposals
    In the 2016 final rule, CHIP adopted many of the Medicaid 
regulations via cross-reference. We are proposing in this rulemaking to 
revise some of these Medicaid regulations. While we are not revising 
the cross-references to these regulations, we wanted to highlight that 
the changes proposed to the following Medicaid regulations in this 
rulemaking also would apply, by existing cross-reference, to CHIP. We 
welcome comments on the proposed changes as they apply to CHIP:
     MLR standards (Sec.  438.8(k)): As discussed in section 
I.B.6. of this proposed rule, we proposed revisions to Sec.  
438.8(k)(1)(iii) and (e)(4). Section 438.8(k) is incorporated into the 
CHIP regulations in Sec.  457.1203(e) and (f).
     Information requirements (Sec.  438.10): As discussed in 
section I.B.8 of this proposed rule, we proposed several revisions to 
Sec.  438.10. Section 438.10 is incorporated into the CHIP regulations 
at Sec. Sec.  457.1206(b)(2) (via cross-reference to Sec.  457.1207), 
457.1207, and 457.1210(c)(5) (via cross-reference to Sec.  457.1207).
     Disenrollment: Requirements and limitations (Sec.  
438.56): As discussed in section I.B.9. of this proposed rule, we 
proposed revisions to Sec.  438.56(d)(5) by deleting ``PCCMs or PCCM 
entities.'' Section 438.56 is adopted in CHIP at Sec.  457.1212.
     Network adequacy standards (Sec.  438.68): As discussed in 
section I.B.10. of this proposed rule, we are proposing revisions to 
the provider-specific network adequacy standards in Sec.  438.68(b). 
The Medicaid network adequacy standards are applied to CHIP per Sec.  
457.1218.
     Practice guideline (Sec.  438.236): As discussed in the 
preamble at section I.B.11. of this proposed rule, we proposed 
revisions to Sec.  438.236(b)(3) by deleting contracting health care 
professionals and replacing it with network providers. Section 438.236 
is incorporated into the CHIP regulations at Sec.  457.1233(c).
     Health information systems (Sec.  438.242): As discussed 
in section I. B.12. of this proposed rule, we are proposing revisions 
to the health information systems requirements in Sec.  438.242. 
Section 438.242 is adopted in CHIP at Sec.  457.1233(d).
     Medicaid managed care QRS (Sec.  438.334): As discussed in 
the section I.B.13. of this proposed rule, we proposed revisions to 
Sec.  438.334(b), (c)(1), and (c)(1)(ii), redesignating current 
paragraphs (c)(1)(i) and (c)(1)(ii) as (c)(1)(ii) and (c)(1)(iii), 
respectively, and adding new paragraph (c)(1)(i). We also proposed 
revisions to redesignated paragraph (c)(1)(ii) and adding new paragraph 
(c)(4). Section 438.334 is adopted in CHIP at Sec.  457.1240(d).
     Managed care State quality strategy (Sec.  438.340): As 
discussed in the preamble at section I.B.14. of this proposed rule, we 
proposed revisions to Sec.  438.340(b)(2), (b)(3)(i), (b)(6), and 
(c)(1)(ii).We also proposed removing Sec.  438.340(b)(8), and 
redesignating paragraphs (b)(9), (b)(10), and (b)(11) as paragraphs 
(b)(8), (b)(9) and (b)(10), respectively. Section 438.340 is 
incorporated into the CHIP regulations at Sec.  457.1240(e).
     Activities related to EQR (Sec.  438.358): As discussed in 
section I.B.15. of this proposed rule, we proposed revisions to Sec.  
438.358(b)(1)(iii). Section 438.358 is incorporated into the CHIP 
regulations at Sec.  457.1250(a).
     EQR Results (Sec.  438.364(d)): As discussed in section 
I.B.17 of this proposed rule, we proposed revisions to Sec.  
438.364(d). Section 438.364 is incorporated into CHIP regulations at 
Sec.  457.1250(a).
     Statutory basis, definitions, and applicability (Sec.  
438.400): As discussed in section I.B.18. of this proposed rule, we 
proposed revisions to Sec.  438.400(b)(3). Section 438.400 is 
incorporated into the CHIP regulations at Sec.  457.1260.
     General requirements (Sec. Sec.  438.402 and 438.406): As 
discussed in section I.B.19. of this proposed rule, we proposed 
revisions to Sec. Sec.  438.402(c)(3)(ii) and 438.406(b)(3). Sections 
438.402 and 438.406 are incorporated in CHIP in Sec.  457.1260.

III. 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

[[Page 57287]]

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.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).

A. Background

    The burden associated with the requirements under part 438 is the 
time and effort it would take each of the state Medicaid programs to 
comply with this proposed rule. This proposed rule would revise certain 
Medicaid managed care regulations based on state and consumer 
experience with the requirements adopted in the 2016 final rule (81 FR 
27497) in order to reflect a broader strategy to relieve regulatory 
burdens; support state flexibility and local leadership; and promote 
transparency, flexibility, and innovation in the delivery of care.
    To estimate the burden for these proposals in part 438, we utilized 
state submitted data for enrollment in managed care plans for CY 2016. 
The enrollment data reflected 54,588,095 enrollees in MCOs, 17,941,681 
enrollees in PIHPs or PAHPs, and 5,399,640 enrollees in PCCMs, for a 
total of 80,184,501 managed care enrollees. This includes duplicative 
counts when enrollees are enrolled in multiple managed care plans 
concurrently. This data also showed 42 states that contract with 519 
MCOs, 14 states that contract with 134 PIHPs or PAHPs, 19 states that 
contract with 21 non-emergency transportation PAHPs, 18 states with 26 
PCCM or PCCM entities, and 20 states that contract with one or more 
managed care plans for managed LTSS) Many states contract with more 
than one entity; however, we de-duplicated the counts to determine that 
40 states contract with MCOs, PIHPs, or PAHPs; and 47 states contract 
with MCOs, PIHPs, PAHPs, or PCCMs. To estimate the burden for these 
proposals in part 457, we utilized state submitted data for enrollment 
in managed care plans for CY 2016. The enrollment data reflected 
9,013,687 managed care enrollees. This data also showed that 32 states 
use managed care entities for CHIP enrollment.

B. Wage Estimates

    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics' May 2017 National Occupational Employment and Wage 
Estimates for Direct Health and Medical Insurance Carriers (NAICS 
524114) (https://www.bls.gov/oes/current/naics5_524114.htm). Table 1 
presents the mean hourly wage, the cost of fringe benefits (calculated 
at 100 percent of salary), and the adjusted hourly wage.

                                    Table 1--Occupation Titles and Wage Rates
----------------------------------------------------------------------------------------------------------------
                                                                                                     Adjusted
                Occupation title                    Occupation      Mean hourly   Fringe benefit  hourly wage ($/
                                                       code         wage ($/hr)       ($/hr)            hr)
----------------------------------------------------------------------------------------------------------------
Actuary.........................................         15-2011          $49.81          $49.81          $99.62
Business Operations Specialist..................         13-1000           34.11           34.11           68.22
Computer Programmer.............................         15-1131           43.42           43.42           86.84
General Operations Mgr..........................         11-1021           72.51           72.51          145.02
Office and Administrative Support Worker........         43-9000           19.02           19.04           38.08
----------------------------------------------------------------------------------------------------------------

    As indicated, we are adjusting 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 a reasonably accurate estimation method.

C. Proposed Information Collection Requirements (ICRs)

1. ICRs Regarding Standard Contract Requirements (Sec.  438.3)
    Proposed amendments to Sec.  438.3(t) would permit states to choose 
between requiring their MCOs, PIHPs, and PAHPs to sign a COBA with 
Medicare, or requiring an alternative method for ensuring that each 
MCO, PIHP, or PAHP receives all appropriate crossover claims. If the 
state elects to use a methodology other than requiring the MCO, PIHP, 
or PAHP to enter into a COBA with Medicare, that methodology must 
ensure that the submitting provider is promptly informed on the state's 
remittance advice that the claim has been sent to the MCO, PIHP, or 
PAHP for payment consideration. We estimate it would take 1 hour for a 
programmer to implement the message on the remittance advice. If 10 
states elect to pursue an alternative method, we estimate an aggregate 
one-time state burden of 10 hrs (10 states x 1 hour) and $860.84 (10 
hrs x $86.84 for a computer programmer). As this would be a one-time 
expense, we annualize this amount to 3.33 hrs and $286.95.
    Additionally, for states that elect to require an alternative 
method, the proposed amendments to Sec.  438.3(t) would also alleviate 
managed care plans in those states of the burden of obtaining a COBA. 
We estimate 6 states with 25 plans may elect this option and save 4 
hours per plan by a Business Operations Specialist -100 hrs (25 plans x 
4 hrs) and -$6,822 (100 hrs x $68.22/hr). As this would be a one-time 
savings, we annualize this amount to -1.33 hrs and -$2,274.
2. ICRs Regarding Special Contract Provisions Related to Payment (Sec.  
438.6)
    Proposed amendments to Sec.  438.6(c) would remove the requirement 
for states to obtain prior approval for directed payment arrangements 
that utilize a state approved FFS fee schedule. To obtain prior 
approval, states submit a preprint (OMB control #0938-1148 (CMS-10398 
#52)) to CMS. We estimate that 20 states may elect annually to request 
approval for 40 directed payments that utilize a state approved FFS fee 
schedule. By eliminating the requirement that states submit a preprint 
for each arrangement, we estimate that a state could save 1 hour per 
directed payment arrangement for a Business Operations Specialist at 
$68.22/hr. We estimate an annual savings of -40 hours (20 states x 2 
preprints each x 1 hour per preprint) and -$2,728.80 (40 hours x 
$68.22/hr).

[[Page 57288]]

3. ICRs Regarding Information Requirements (Sec.  438.10)
    Proposed amendments to Sec.  438.10(d)(2) and (d)(3) would no 
longer require states or plans to add taglines in prevalent languages 
to all written materials, nor to use 18-point font size. Instead, 
states and plans would have the ability to include taglines only on 
materials critical to obtaining services and could select any font size 
they deem to be conspicuously visible. While we have no data indicating 
how many states experienced increased document length or an increase in 
postage costs as a result of these requirements, we believe that this 
proposed revision will likely reduce paper, toner, and postage costs 
for some states. If we assume that in the aggregate, this change may 
save one sheet of paper, printer toner, and increased postage (per 
ounce) per enrollee, we estimate a savings of -$12,009,380.89 ((-
$272,940.47 = $.005 x 54,588,095) + (-$272,940.47 = 0.005 x 54,588,095) 
+ (-$11,463,499.95 = $.21 x 54,588,095)). These estimates are based on 
commonly available prices for bulk paper and toner purchases.
4. ICRs Regarding Network Adequacy Standards (Sec.  438.68)
    Proposed amendments to Sec.  438.68(a) would eliminate a 
requirement that states develop time and distance standards for 
provider types set forth in Sec.  438.68(b)(1) and for LTSS providers 
if covered in the MCO, PIHP, or PAHP contract; the proposal would 
replace the requirement to adopt time and distance standards with a 
requirement to adopt a quantitative standard to evaluate network 
adequacy. We previously estimated in the 2016 final rule that states 
would spend 10 hr in the first year developing the network adequacy 
standards for the provider types specified in Sec.  438.68(b)(1) and 
did not estimate additional burden for states after the first year (81 
FR 27777). We further estimated a one-time state burden of 10 
additional hrs at $64.46/hr for a business operations specialist to 
develop LTSS standards. We propose to eliminate the time and distance 
requirement and replace it with a more flexible requirement that states 
develop any quantitative network adequacy standard for the same 
provider types. Since time and distance is a quantitative network 
adequacy standard, for states that used time and distance prior to the 
2016 final rule or for those that have adopted time and distance in 
order to comply with the 2016 final rule, discontinuing the use of time 
and distance is merely an option that they may elect. Additionally, as 
clarified in the 2016 final rule (81 FR 27661), states have always had 
the ability to have network adequacy standards in addition to time and 
distance if they choose. We believe the proposed change increases 
flexibility for states without affecting burden on states.
5. ICRs for Grievance and Appeal System: Statutory Basis, Definitions, 
and Applicability
    Proposed amendments to Sec.  438.400(b) would revise the definition 
of an ``adverse benefit determination'' to exclude claims that do not 
meet the definition of ``clean claim'' at Sec.  447.45(b), thus 
eliminating the requirement for the plan to send an adverse benefit 
notice. While we have no data on the number of adverse benefit notices 
are sent due to denials of unclean claims, we believe that at least one 
unclean claim may be generated for half of all enrollees; thus, this 
proposal could reduce paper, toner, and postage costs for some states. 
If we assume that in the aggregate, this change may save one sheet of 
paper, printer toner, and increased postage (per ounce) per enrollee, 
we estimate a savings of -$10,644,678.32 ((-$136,470.23 = $.005 x 
27,294,047) + (-$136,470.23 = 0.005 x 27,294,047) + (-$10,371,737.86 = 
$.38 x 27,294,047)). These estimates are based on commonly available 
prices for bulk paper and toner purchases and bulk postage rates.
6. ICRs Regarding Grievance and Appeal System: General Requirements 
(Sec.  438.402)
    Proposed amendments to Sec. Sec.  438.402(c)(3)(ii) and 
438.406(b)(3) would no longer require enrollees to follow up an oral 
appeal with a written appeal. This change would alleviate the burden on 
plans to follow up with enrollees that do not submit the written 
appeal. We estimate that plans may have an Office and Administrative 
Support Worker spend up to 2 hours per appeal calling or sending 
letters to enrollees in an effort to receive the written appeal. We 
estimate that 300 plans in 20 states have an average of 200 oral 
appeals that are not followed up with a written appeal. We estimate an 
aggregate annual private sector burden reduction of -120,000 hours (300 
plans x 200 appeals x 2 hrs) and -$4,569,600 (- 120,000 hrs x $38.08/
hour).
7. ICRs Regarding Information Requirements (Sec.  457.1207)
    Section 438.10(d)(2) and (d)(3) are adopted by cross-;reference in 
the CHIP regulations at Sec.  457.1207. As discussed above, proposed 
amendments to Sec.  438.10(d)(2) and (d)(3) would remove requirements 
for states or plans to add taglines in prevalent languages to all 
written materials, nor to use 18-point font size. Instead, states and 
plans would have the ability to include taglines only on materials 
critical to obtaining services and could select any font size they deem 
to be conspicuously visible. As discussed above, while we have no data 
indicating how many states experienced increased document length and/or 
an increase in postage costs as a result of these requirements, we 
believe that this proposed revision will likely reduce paper, toner, 
and postage costs for some states. If we assume that in the aggregate, 
this change may save one sheet of paper, printer toner, and increased 
postage (per ounce) per enrollee, we estimate a savings of -
$1,983,013.15 ((-$45,068.44 = $.005 x 9,013,687) + (-$45,068.44 = $.005 
x 9,013,687) + (-$1,892,876.27 = $.21 x 9,013,687)). These estimates 
are based on commonly available prices for bulk paper and toner 
purchases.
8. ICRs for Grievance and Appeal System: Definitions (Sec.  457.1260)
    Section 438.400(b) is adopted by cross-reference in the CHIP 
regulations at Sec.  457.1260. As discussed above, proposed amendments 
to Sec.  438.400(b) would revise the definition of an ``adverse benefit 
determination'' to exclude claims that do not meet the definition of 
``clean claim'' at Sec.  447.45(b), thus eliminating the requirement 
for the plan to send an adverse benefit notice. As also discussed 
above, while we have no data on the number of adverse benefit notices 
are sent due to denials of unclean claims, we believe that at least one 
unclean claim may be generated for half of all enrollees; thus, this 
proposal could reduce paper, toner, and postage costs for some states. 
If we assume that in the aggregate, this change may save one sheet of 
paper, printer toner, and increased postage (per ounce) per enrollee, 
we estimate a savings of -$1,757,669.16 ((-$22,534.22 = $.005 x 
4,506,844) + (-$22,534.22 = $.005 x 4,506,844) + (-$1,712,600.72 = $.38 
x 4,506,844)). These estimates are based on commonly available prices 
for bulk paper and toner purchases and bulk postage rates.

D. Summary of Proposed Burden and Burden Reduction Estimates

    Tables 2 and 3 set out our proposed annual burden and burden 
reduction estimates. While the annual burden estimates are unchanged 
over the 3-year approval period, the one-time estimates have been 
annualized by 3 to account

[[Page 57289]]

for OMB's 3-year approval period. The burden and burden reduction 
associated with this proposed rule would be included in revised PRA 
packages. PRA package CMS-10108 would continue to contain all of part 
438 except for those related to subpart E. Provisions related to 
quality measurement and improvement (Sec. Sec.  438.310, 438.320, 
438.330, 438.332, 438.334, and 438.340) would remain in the separate 
CMS-10553. Provisions related to EQR (Sec. Sec.  438.350, 438.352, 
438.354, 438.356, 438.358, 438.360, 438.362, 438.364, and 438.370) 
would remain in the separate CMS-R-305 and are unchanged by this 
proposed rule. The proposed CHIP managed care regulation burden would 
remain in PRA package CMS-10554.

                                                  Table 2--Summary of Annual Proposed PRA-Related Requirement and Burden Under 42 CFR Part 438
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Burden
                                             Number of    Number of     per      Total  annual    Labor    Cost  ($)                                               Annualized   Annualized costs
                CFR section                 respondents   responses   response       hours       rate  $/     per       Total cost ($)           Frequency            hours           ($)
                                                                      (hours)                       hr      response
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   438.3(t)...........................           10          10          1              10     $86.84     $86.84            $860.84  Once....................       0.333            $286.95
Sec.   438.3(t)...........................            6          25         -4            -100      68.22    -272.88             -6,822  Once....................      -1.333             -2,274
Sec.   438.6(c)...........................           20           2         -1             -40      68.22     -68.22          -2,728.80  Annual..................         -40          -2,728.80
Sec.   438.10(d)(2-3).....................           42  54,588,095        n/a             n/a        n/a      0.005        -272,940.47  Annual..................         n/a        -272,940.47
Sec.   438.10(d)(2-3).....................           42  54,588,095        n/a             n/a        n/a      0.005        -272,940.47  Annual..................         n/a        -272,940.47
Sec.   438.10(d)(2-3).....................           42  54,588,095        n/a             n/a        n/a       0.21     -11,463,499.95  Annual..................         n/a     -11,463,499.95
Sec.   438.400(b).........................           42  27,294,047        n/a             n/a        n/a      0.005        -136,470.23  Annual..................         n/a        -136,470.23
Sec.   438.400(b).........................           42  27,294,047        n/a             n/a        n/a      0.005        -136,470.23  Annual..................         n/a        -136,470.23
Sec.   438.400(b).........................           42  27,294,047        n/a             n/a        n/a       0.38        -10,371,738  Annual..................         n/a        -10,371,738
Sec.   438.402(c)(3)(i)...................          300      60,000         -2        -120,000      38.08     -76.16         -4,569,600  Annual..................    -120,000         -4,569,600
                                           -----------------------------------------------------------------------------------------------------------------------------------------------------
    Total.................................  ...........  ..........  .........        -120,130  .........    -329.81     -27,232,349.31  ........................  ..........     -27,228,375.20
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                  Table 3--Summary of Annual Proposed PRA-Related Requirement and Burden Under 42 CFR Part 457
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Burden
                                              Number of    Number of     per       Total      Labor    Cost  ($)                                                 Annualized    Annualized costs
                CFR section                  respondents   responses   response    annual    rate  $/     per       Total cost  ($)            Frequency            hours            ($)
                                                                       (hours)     hours        hr      response
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   457.1207............................           32   9,013,687        n/a        n/a        n/a     $0.005          -$45,068.44  Annual..................         n/a          -$45,068.44
Sec.   457.1207............................           32   9,013,687        n/a        n/a        n/a      0.005           -45,068.44  Annual..................         n/a           -45,068.44
Sec.   457.1207............................           32   9,013,687        n/a        n/a        n/a       0.21        -1,892,876.27  Annual..................         n/a        -1,892,876.27
Sec.   457.1260............................           32   4,506,844        n/a        n/a        n/a      0.005           -22,534.22  Annual..................         n/a           -22,534.22
Sec.   457.1260............................           32   4,506,844        n/a        n/a        n/a      0.005           -22,534.22  Annual..................         n/a           -22,534.22
Sec.   457.1260............................           32   4,506,844        n/a        n/a        n/a       0.38        -1,712,600.72  Annual..................         n/a        -1,712,600.72
                                            ----------------------------------------------------------------------------------------------------------------------------------------------------
    Total..................................  ...........  ..........  .........  .........  .........  .........  ...................  ........................  ..........        -3,740,682.31
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

E. Exempt ICRs

1. Fewer Than 10 Respondents
    While the requirements under Sec. Sec.  438.7, 438.10(h)(3), and 
438.408(f)(2) are subject to the PRA, in each instance we estimate 
fewer than 10 respondents would engage in the optional activities to 
take advantage of the flexibility proposed in this proposed rule in 
connection with the proposed amendments to these regulation sections. 
Consequently, the information collection requirements are exempt (5 CFR 
1320.3(c)) from the PRA requirements (44 U.S.C. 3501 et seq.).
    Proposed amendments to Sec.  438.7 would require states that make 
modifications to the capitation rate within the permissible 1.5 percent 
range to submit documentation if requested by CMS. We do not expect to 
have reason to request documentation for more than 5 certifications 
from 1-5 states per year.
    Proposed amendments to Sec.  438.10(h)(3) would allow states to 
only update paper directories quarterly if they have a mobile-enable 
provider directory. Given the costs of developing a mobile-enabled 
provider directory, and the modest cost reduction associated with 
updating monthly versus quarterly, as well as the cost savings 
associated with printing on demand, we estimate that fewer than 10 
states would opt to require their plans to utilize this provision.
    Proposed amendments to Sec.  438.408(f)(2) would change the 
timeframe in which an enrollee must request a state fair hearing from 
120 calendar days to no fewer than 90 calendar days and no greater than 
120 calendar days. As most states have already implemented the 120-
calendar day timeframe for managed care, and the proposed change 
imposes no requirement for states to change their filing timeframe, we 
believe that fewer than 10 respondents would elect to change the 
timeframe for enrollees to request a state fair hearing.
    If you comment on these information collections, that is, 
reporting, recordkeeping or third-party disclosure requirements, we 
request that you please submit your comments electronically as 
specified in the ADDRESSES section of this proposed rule. However, all 
comments received within the 60-day comment period provided for by the 
PRA will be reviewed and considered.
    Comments must be received on/by January 14, 2019.

IV. Response to Comments

    Because of the large number of public comments, we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We would consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we would respond to 
the comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    As described in detail in section I.B. of this proposed rule, many 
of the revisions to part 438 outlined in this proposed rule are part of 
the agency's broader efforts to reduce administrative burden and to 
achieve a better balance between appropriate federal oversight and 
state flexibility, while also maintaining critical beneficiary 
protections, ensuring fiscal integrity, and improving the quality of 
care for Medicaid beneficiaries. This proposed rule seeks to streamline 
the managed care regulations by reducing unnecessary and duplicative 
administrative burden and further reducing federal regulatory barriers 
to

[[Page 57290]]

help ensure that state Medicaid agencies are able to work efficiently 
and effectively to design, develop, and implement Medicaid managed care 
programs that best meet each state's local needs and populations.

B. Overall Impact

    We have examined the impact of this 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), the Congressional 
Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing 
Regulation and Controlling Regulatory Costs (January 30, 2017).
    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). A 
regulatory impact analysis (RIA) must be prepared for rules with 
economically significant effects ($100 million or more in any 1 year). 
Based on our analysis, this rule does not reach the economic threshold, 
and thus, is not considered a major rule.
    We have examined the proposed provisions in this rule and 
determined that most of the proposed revisions to part 438 outlined in 
this proposed rule are expected to reduce administrative burden as we 
noted in the COI (see section IV. of this proposed rule). Aside from 
our analysis on burden reduction in the COI, we believe that the only 
provision in this proposed rule that we should specifically analyze in 
this regulatory impact analysis is the proposed revision to managed 
care pass-through payments because of the general magnitude associated 
with managed care payments and our previous efforts to analyze 
financial impacts associated with managed care pass-through payments.
    The May 6, 2016 final rule (81 FR 27830) and the January 18, 2017 
pass-through payment final rule (82 FR 5425) both contained regulatory 
impact analyses that discussed the financial and economic effects of 
pass-through payments. In the May 6, 2016 final rule, we did not 
project a significant fiscal impact for Sec.  438.6(d). When we 
reviewed and analyzed the May 6, 2016 final rule, we concluded that 
states would have other mechanisms to build in the amounts currently 
provided through pass-through payments in approvable ways, such as 
approaches consistent with Sec.  438.6(c). If a state was currently 
building in $10 million in pass-through payments to hospitals under 
their current managed care contracts, we assumed that the state would 
incorporate the $10 million into their managed care rates in 
permissible ways rather than spending less in Medicaid managed care. We 
expected that the long pass-through payment transition periods provided 
under the May 6, 2016 final rule would help states to integrate 
existing pass-through payments into actuarially sound capitation rates 
or permissible Medicaid financing structures, including enhanced fee 
schedules or the other approaches consistent with Sec.  438.6(c) that 
tie managed care payments to services and utilization covered under the 
contract.
    In the January 18, 2017 pass-through payment final rule, we noted 
that a number of states had integrated some form of pass-through 
payments into their managed care contracts for hospitals, nursing 
facilities, and physicians. We also noted that as of the effective date 
of the May 6, 2016 final rule, we estimated that at least eight states 
had implemented approximately $105 million in pass-through payments for 
physicians annually; we estimated that at least three states had 
implemented approximately $50 million in pass-through payments for 
nursing facilities annually; and we estimated that at least 16 states 
had implemented approximately $3.3 billion in pass-through payments for 
hospitals annually. We noted that the amount of pass-through payments 
often represented a significant portion of the overall capitation rate 
under a managed care contract, and that we had seen pass-through 
payments that had represented 25 percent, or more, of the overall 
managed care contract and 50 percent of individual rate cells. In our 
analysis of that final rule, we concluded that while it was difficult 
for CMS to conduct a detailed quantitative analysis given considerable 
uncertainty and lack of data, we believed that without the pass-through 
payment final rule, which prohibited new and increased pass-through 
payments that were not in place as of the effective date of the May 6, 
2016 final rule, states would continue to increase pass-through 
payments in ways that were not consistent with the pass-through payment 
transition periods established in the May 6, 2016 final rule.
    Since there is still considerable uncertainty regarding accurate 
and reliable pass-through payment data, we are only including a 
qualitative discussion for the proposed revisions in this RIA. Under 
proposed Sec.  438.6(d)(6), we are proposing to assist states with 
transitioning some or all services or eligible populations from a 
Medicaid FFS delivery system into a Medicaid managed care delivery 
system by allowing states to make pass-through payments under new 
managed care contracts during a specified transition period if certain 
criteria in the proposed rule are met. One of the proposed requirements 
in the rule is that the aggregate amount of the pass-through payments 
for each rating period of the transition period that the state requires 
the managed care plan to make must be less than or equal to the payment 
amounts attributed to and actually paid as Medicaid FFS supplemental 
payments to hospitals, nursing facilities, or physicians in Medicaid 
FFS. This means that under this new pass-through payment transition 
period, the aggregate payments added to Medicaid managed care contracts 
as pass-through payments must be budget neutral to the aggregate 
payments transitioned from Medicaid FFS. We also note that under the 
new pass-through payment transition period, states would only have 3 
years to include these payments as pass-through payments before needing 
to transition the payments into allowable payment structures under 
actuarially sound capitation rates.
    We acknowledge that relative to the current pass-through payment 
baseline, this proposed rule permits states to incorporate new pass-
through payments under a new transition period when states are 
transitioning some or all services or eligible populations from a 
Medicaid FFS delivery system into a Medicaid managed care delivery 
system; however, the net financial impact to state and federal 
governments, and the Medicaid program, must be zero given the proposed 
requirements in this rule that aggregate pass-through payments under 
the new transition period must be less than or equal to the payment 
amounts attributed to and actually paid as Medicaid FFS supplemental 
payments in Medicaid FFS. Since this proposal only permits payment 
amounts attributed to Medicaid FFS to be made under Medicaid managed 
care contracts, this is not an increase in Medicaid payments; rather, 
these payments only represent a movement of funding across Medicaid 
delivery systems for a limited and targeted amount of time when

[[Page 57291]]

Medicaid populations or services are initially transitioning from a 
Medicaid FFS delivery system to a Medicaid managed care delivery 
system. Without this proposed transition period, we believe that 
existing federal pass-through payment requirements could incentivize 
states to retain some Medicaid populations and/or Medicaid services in 
their Medicaid FFS programs. We also believe that some states may 
choose to delay implementation of Medicaid managed care programs, 
especially if states have not already been working with stakeholders 
regarding existing Medicaid FFS supplemental payments. As we noted in 
our proposal, we want to ensure that federal pass-through payment rules 
do not unintentionally incent states to keep populations or services in 
Medicaid FFS, and we do not want federal rules to unintentionally 
create barriers that prevent states from moving populations or services 
into Medicaid managed care. As noted in the 2016 final rule (81 FR 
27852), potential benefits to the changes in the Medicaid managed care 
rule include improved health outcomes for Medicaid enrollees through 
improved care coordination and case management, as well as improved 
access to care. We believe that this limited and targeted transition 
period will help states further these goals.
    Finally, as noted throughout this rule, this limited and targeted 
transition period is only available if the state actually made Medicaid 
FFS supplemental payments to hospitals, nursing facilities, or 
physicians during the 12-month period immediately 2 years prior to the 
first rating period of the transition period, and the aggregate amount 
of the pass-through payments that the state requires the managed care 
plan to make must be less than or equal to the amounts paid under 
Medicaid FFS. As noted in our proposal, states would be required to 
calculate and demonstrate that the aggregate amount of the pass-through 
payments for each rating period of the transition period is less than 
or equal to the amounts attributed to and actually paid as Medicaid FFS 
supplemental payments to hospitals, nursing facilities, or physicians. 
As a practical matter, states would be required to use MMIS-adjudicated 
claims data from the 12-month period immediately 2 years prior to the 
first rating period of the transition period for the purposes of these 
calculations, and we would verify that the pass-through payment amounts 
are permissible under these proposed rules, including that the 
aggregate payments added to Medicaid managed care contracts as pass-
through payments must be budget neutral to the aggregate payments 
transitioned from Medicaid FFS. Therefore, we are not projecting a 
specific fiscal impact to state or federal governments, or the Medicaid 
program, as we expect the net financial impact of the proposed 
provision to be budget neutral. We request public comments on our 
assumptions and analysis here.

C. Anticipated Effects

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.5 million to $38.5 million in any 1 year. Individuals and 
states are not included in the definition of a small entity. We believe 
that all Medicaid managed care plans have annual revenues in excess of 
$38.5 million; therefore, we do not believe that this proposed rule 
will have a significant economic impact on a substantial number of 
small businesses. We seek comment on this belief.
    In addition, section 1102(b) of the Act requires CMS to prepare an 
RIA 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 603 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 a Metropolitan Statistical Area and has fewer than 
100 beds. We do not anticipate that the provisions in this proposed 
rule will have a substantial economic impact on most hospitals, 
including small rural hospitals. The proposed provisions in this rule 
place no direct requirements on individual hospitals, and we note that 
any impact on individual hospitals will vary according to each 
hospital's current and future contractual relationships with MCOs, 
PIHPs, and PAHPs. We expect that any additional burden (or burden 
reduction) on small rural hospitals should be negligible. We seek 
comment on this analysis and our assumptions. Therefore, we are not 
preparing an analysis for section 1102(b) of the Act because we have 
determined, and the Secretary certifies, that this proposed rule would 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    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. In 2018, that 
is approximately $150 million. We believe that this proposed rule will 
have no consequential effect on state, local, or tribal governments or 
on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirements costs on state 
and local governments, preempts state law, or otherwise has federalism 
implications. Since this proposed rule does not impose any substantial 
costs on state or local governments, the requirements of Executive 
Order 13132 are not applicable.
    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of 
Executive Order 13771 requires an agency, unless prohibited by law, to 
identify at least two existing regulations to be repealed when the 
agency publicly proposes for notice and comment, or otherwise issues, a 
new regulation. In furtherance of this requirement, section 2(c) of 
Executive Order 13771 requires that the new incremental costs 
associated with new regulations shall, to the extent permitted by law, 
be offset by the elimination of existing costs associated with at least 
two prior regulations. Many of the revisions to part 438 outlined in 
this proposed rule are expected to reduce administrative burden; 
therefore, if the rule is finalized as proposed, we expect that this 
rule would, on net, be an E.O. 13771 deregulatory action.

D. Alternatives Considered

    One alternative we considered was leaving the 2016 final rule as it 
is today; however, since the rule was finalized in 2016, we continued 
to hear from stakeholders that the 2016 final rule was overly 
prescriptive and included provisions that were not cost-effective for 
states to implement. As a result, we undertook a review of the current 
regulations to ascertain if there were ways to achieve a better balance 
between appropriate federal oversight and state flexibility, while also 
maintaining critical beneficiary protections, ensuring fiscal 
integrity, and improving the quality of care for Medicaid 
beneficiaries. This proposed rule is the result of that review and 
seeks to streamline the managed care regulations by reducing 
unnecessary

[[Page 57292]]

and duplicative administrative burden and further reducing federal 
regulatory barriers to help ensure that state Medicaid agencies are 
able to work efficiently and effectively to design, develop, and 
implement Medicaid managed care programs that best meet each state's 
local needs and populations.
    We are seeking comment on a number of requirements included in this 
proposed rule to identify potential alternatives to proposed 
provisions.

E. Uncertainties

    We have attempted to provide a framework for common definitions and 
processes associated with the statutory provisions being implemented by 
this rule. It is possible that some states may need to use alternative 
definitions to be consistent with state law, and we are seeking comment 
on these kinds of issues with the intent to modify and add to the 
common terminology proposed in this rule as appropriate based on the 
comments received.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

F. Accounting Statement

    As discussed in this RIA, the benefits, costs, and transfers of 
this proposed rule are identified in Table 4.

                                                              Table 4--Accounting Statement
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Units
                Category                      Primary      Low estimate    High estimate ------------------------------------------------      Notes
                                             estimate                                      Year dollars    Discount rate  Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified..........................  Benefits include: Consistency with the statutory requirements in section 1903(m) of the Act and regulations
                                          for actuarially sound capitation rates; improved transparency in rate development processes; greater
                                          incentives for payment approaches that are based on the utilization and delivery of services to enrollees
                                          covered under the contract, or the quality and outcomes of such services; improved support for delivery system
                                          reform that is focused on improved care and quality for Medicaid beneficiaries; and improved health outcomes
                                          for Medicaid enrollees through improved care coordination and case management, as well as improved access to
                                          care.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized $ millions/year....          -30.97  ..............  ..............            2017  ..............          Annual
                                         ---------------------------------------------------------------------------------------------------------------
Non-Quantified..........................  Costs to state or federal governments should be negligible. Burden and/or burden reduction estimates
                                          associated with the activities (other than information collection as defined in the Paperwork Reduction Act)
                                          that would be necessary for generating the benefits listed above.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified..........................  Relative to the current pass-through payment baseline, this proposed rule permits states to incorporate new
                                          pass-through payments under a new transition period when states are transitioning some or all services or
                                          eligible populations from a FFS delivery system into a managed care delivery system; however, the net
                                          financial impact to state and federal governments, and the Medicaid program, must be zero given the proposed
                                          requirements in this rule that aggregate pass-through payments under the new transition period must be less
                                          than or equal to the payment amounts attributed to and actually paid as FFS supplemental payments in Medicaid
                                          FFS. Therefore, we are not projecting a specific fiscal impact to state or federal governments, as we expect
                                          the net financial impact of the proposed provision to be budget neutral.
--------------------------------------------------------------------------------------------------------------------------------------------------------

List of Subjects

42 CFR Part 438

    Grant programs--health, 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 proposes to amend 42 CFR chapter IV as set forth 
below:

PART 438--MANAGED CARE

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

    Authority: 42 U.S.C. 1302.

0
2. Section 438.3 is amended by revising paragraph (t) to read as 
follows:


Sec.  438.3  Standard contract requirements.

* * * * *
    (t) Requirements for MCOs, PIHPs, or PAHPs responsible for 
coordinating benefits for dually eligible individuals. In a State that 
enters into a Coordination of Benefits Agreement (COBA) with Medicare 
for Medicaid, an MCO, PIHP, or PAHP contract that includes 
responsibility for coordination of benefits for individuals dually 
eligible for Medicaid and Medicare must specify the methodology by 
which the State would ensure that the appropriate MCO, PIHP, or PAHP 
would receive all applicable crossover claims for which the MCO, PIHP, 
or PAHP is responsible. If the State elects to use a methodology other 
than requiring the MCO, PIHP, or PAHP to enter into a COBA with 
Medicare, that methodology must ensure that the submitting provider is 
promptly informed on the State's remittance advice that the claim has 
been sent to the MCO, PIHP, or PAHP for payment consideration.
* * * * *
0
3. Section 438.4 is amended by--
0
a. Revising paragraph (b)(1); and
0
b. Adding paragraphs (c) and (d).
    The revisions and additions read as follows:


Sec.  438.4  Actuarial soundness.

* * * * *
    (b) * * *
    (1) Have been developed in accordance with the standards specified

[[Page 57293]]

in Sec.  438.5 of this chapter and generally accepted actuarial 
principles and practices. Any differences in the assumptions, 
methodologies, or factors used to develop capitation rates for covered 
populations must be based on valid rate development standards that 
represent actual cost differences in providing covered services to the 
covered populations. Any differences in the assumptions, methodologies, 
or factors used to develop capitation rates must not vary with the rate 
of Federal financial participation (FFP) associated with the covered 
populations in a manner that increases Federal costs consistent with 
paragraph (d) of this section.
* * * * *
    (c) Option to develop and certify a rate range. (1) Notwithstanding 
the provision at paragraph (b)(4) of this section, the State may 
develop and certify a range of capitation rates per rate cell as 
actuarially sound, when all of the following conditions are met:
    (i) The rate certification identifies and justifies the 
assumptions, data, and methodologies specific to both the upper and 
lower bounds of the rate range.
    (ii) Both the upper and lower bounds of the rate range must be 
certified as actuarially sound consistent with the requirements of this 
part.
    (iii) The upper bound of the rate range does not exceed the lower 
bound of the rate range multiplied by 1.05.
    (iv) The rate certification documents the State's criteria for 
paying MCOs, PIHPs, and PAHPs at different points within the rate 
range.
    (v) The State does not use as a criterion for paying MCOs, PIHPs, 
and PAHPs at different points within the rate range any of the 
following:
    (A) The willingness or agreement of the MCOs, PIHPs, or PAHPs or 
their network providers to enter into, or adhere to, intergovernmental 
transfer (IGT) agreements; or
    (B) The amount of funding the MCOs, PIHPs, or PAHPs or their 
network providers provide through IGT agreements.
    (2) When a State develops and certifies a range of capitation rates 
per rate cell as actuarially sound consistent with the requirements of 
this paragraph (c), the State must:
    (i) Document the capitation rates, prior to the start of the rating 
period, for the MCOs, PIHPs, and PAHPs at points within the rate range, 
consistent with the criteria in paragraph (c)(1)(iv) of this section.
    (ii) Not modify the capitation rates under Sec.  438.7(c)(3).
    (iii) Not modify the capitation rates within the rate range, unless 
the State provides a revised rate certification, which demonstrates 
that--
    (A) The criteria in paragraph (c)(1)(iv) of this section, as 
described in the initial rate certification, were not applied 
accurately;
    (B) There was a material error in the data, assumptions, or 
methodologies used to develop the initial rate certification and that 
the modifications are necessary to correct the error; or
    (C) Other adjustments are appropriate and reasonable to account for 
programmatic changes.
    (d) Capitation rate development practices that increase Federal 
costs and vary with the rate of Federal financial participation (FFP). 
The determination that differences in the assumptions, methodologies, 
or factors used to develop capitation rates for MCOs, PIHPs, and PAHPs 
increase Federal costs and vary with the rate of FFP associated with 
the covered populations must be evaluated for the entire managed care 
program and include all managed care contracts for all covered 
populations.
    (1) Capitation rate development practices that increase Federal 
costs and vary with the rate of FFP are prohibited, including but not 
limited to, the following:
    (i) A State may not use higher profit margin, operating margin, or 
risk margin when developing capitation rates for any covered 
population, or contract, than the profit margin, operating margin, or 
risk margin used to develop capitation rates for the covered 
population, or contract, with the lowest average rate of FFP;
    (ii) A State may not factor into the development of capitation 
rates the additional cost of contractually required provider fee 
schedules, or minimum levels of provider reimbursement, above the cost 
of similar provider fee schedules, or minimum levels of provider 
reimbursement, used to develop capitation rates for the covered 
population, or contract, with the lowest average rate of FFP; and
    (iii) A State may not use a lower remittance threshold for a 
medical loss ratio for any covered population, or contract, than the 
remittance threshold used for the covered population, or contract, with 
the lowest average rate of FFP.
    (2) CMS may require a State to provide written documentation and 
justification that any differences in the assumptions, methodologies, 
or factors used to develop capitation rates for covered populations or 
contracts, not otherwise referenced in paragraphs (d)(1)(i) through 
(iii) of this section, represent actual cost differences based on the 
characteristics and mix of the covered services or the covered 
populations.
0
4. Section 438.5 is amended by revising paragraph (c)(3)(ii) to read as 
follows:


Sec.  438.5  Rate development standards.

* * * * *
    (c) * * *
    (3) * * *
    (ii) States that request an exception from the base data standards 
established in this section must set forth a corrective action plan to 
come into compliance with the base data standards no later than 2 years 
after the last day of the rating period for which the deficiency was 
identified.
* * * * *
0
5. Section 438.6 is amended--
0
a. In paragraph (a) by adding the definitions of ``State plan approved 
rates'' and ``Supplemental payments'' in alphabetical order;
0
b. By revising paragraphs (b)(1), (c)(1)(iii), and (c)(2); and
0
c. By adding paragraphs (c)(3) and (d)(6).
    The revisions and additions read as follows:


Sec.  438.6  Special contract provisions related to payment.

    (a) * * *
* * * * *
    State plan approved rates means amounts calculated as a per unit 
price of services described under CMS approved rate methodologies in 
the Medicaid State plan.
    Supplemental payments means amounts paid by the State in its FFS 
Medicaid delivery system to providers that are described and approved 
in the State plan or under a waiver thereof and are in addition to the 
amounts calculated through an approved State plan rate methodology.
* * * * *
    (b) * * *
    (1) If used in the payment arrangement between the State and the 
MCO, PIHP, or PAHP, all applicable risk-sharing mechanisms, such as 
reinsurance, risk corridors, or stop-loss limits, must be documented in 
the contract and rate certification documents for the rating period 
prior to the start of the rating period, and must be developed in 
accordance with Sec.  438.4, the rate development standards in Sec.  
438.5, and generally accepted actuarial principles and practices. Risk-
sharing mechanisms may not be added

[[Page 57294]]

or modified after the start of the rating period.
* * * * *
    (c) * * *
    (1) * * *
    (iii) The State may require the MCO, PIHP, or PAHP to:
    (A) Adopt a minimum fee schedule for network providers that provide 
a particular service under the contract using State plan approved rates 
as defined in paragraph (a) of this section. Supplemental payments 
contained in a State plan are not, and do not constitute, State plan 
approved rates.
    (B) Adopt a minimum fee schedule for network providers that provide 
a particular service under the contract using rates other than the 
State plan approved rates defined in paragraph (a) of this section.
    (C) Provide a uniform dollar or percentage increase for network 
providers that provide a particular service under the contract.
    (D) Adopt a maximum fee schedule for network providers that provide 
a particular service under the contract, so long as the MCO, PIHP, or 
PAHP retains the ability to reasonably manage risk and has discretion 
in accomplishing the goals of the contract.
    (E) Adopt a cost-based rate, a Medicare equivalent rate, a 
commercial rate, or other market-based rate for network providers that 
provide a particular service under the contract.
    (2) Process for approval. (i) All contract arrangements that direct 
the MCO's, PIHP's, or PAHP's expenditures under paragraphs (c)(1)(i) 
through (iii) of this section must be developed in accordance with 
Sec.  438.4, the standards specified in Sec.  438.5, and generally 
accepted actuarial principles and practices.
    (ii) Contract arrangements that direct the MCO's, PIHP's, or PAHP's 
expenditures under paragraphs (c)(1)(i), (ii), and (c)(1)(iii)(B) 
through (E) of this section must have written approval prior to 
implementation. Contract arrangements that direct the MCO's, PIHP's, or 
PAHP's expenditures under paragraph (c)(1)(iii)(A) of this section do 
not require written approval prior to implementation but are required 
to meet the criteria in paragraphs (c)(2)(ii)(A) through (F) of this 
section. To obtain written approval, a State must demonstrate, in 
writing, that the arrangement--
    (A) Is based on the utilization and delivery of services;
    (B) Directs expenditures equally, and using the same terms of 
performance, for a class of providers providing the service under the 
contract;
    (C) Expects to advance at least one of the goals and objectives in 
the quality strategy in Sec.  438.340;
    (D) Has an evaluation plan that measures the degree to which the 
arrangement advances at least one of the goals and objectives in the 
quality strategy in Sec.  438.340;
    (E) Does not condition network provider participation in contract 
arrangements under paragraphs (c)(1)(i) through (iii) of this section 
on the network provider entering into or adhering to intergovernmental 
transfer agreements; and
    (F) May not be renewed automatically.
    (iii) Any contract arrangements that direct the MCO's, PIHP's, or 
PAHP's expenditures under paragraph (c)(1)(i) or (ii) of this section 
must also demonstrate, in writing, that the arrangement--
    (A) Must make participation in the value-based purchasing 
initiative, delivery system reform or performance improvement 
initiative available, using the same terms of performance, to a class 
of providers providing services under the contract related to the 
reform or improvement initiative;
    (B) Must use a common set of performance measures across all of the 
payers and providers; and
    (C) Does not allow the State to recoup any unspent funds allocated 
for these arrangements from the MCO, PIHP, or PAHP.
    (3) Approval timeframes. (i) Approval of a payment arrangement 
under paragraph (c)(1)(i) and (ii) of this section is for one rating 
period unless a multi-year approval is requested and meets all of the 
following criteria:
    (A) The State has explicitly identified and described the payment 
arrangement in the contract as a multi-year payment arrangement, 
including a description of the payment arrangement by year, if the 
payment arrangement varies by year.
    (B) The State has developed and described its plan for implementing 
a multi-year payment arrangement, including the State's plan for multi-
year evaluation, and the impact of a multi-year payment arrangement on 
the State's goals and objectives in the State's quality strategy in 
Sec.  438.340.
    (C) The State has affirmed that it will not make any changes to the 
payment methodology, or magnitude of the payment, described in the 
contract for all years of the multi-year payment arrangement without 
CMS prior approval. If the State determines that changes to the payment 
methodology, or magnitude of the payment, are necessary, the State must 
obtain prior approval of such changes under paragraph (c)(2) of this 
section.
    (ii) Approval of a payment arrangement under paragraph (c)(1)(iii) 
of this section is for one rating period.
    (d) * * *
    (6) Pass-through payments for States transitioning services and 
populations from a fee-for-service delivery system to a managed care 
delivery system. Notwithstanding the restrictions on pass-through 
payments in paragraphs (d)(1), (3), and (5) of this section, a State 
may require the MCO, PIHP, or PAHP to make pass-through payments to 
network providers that are hospitals, nursing facilities, or physicians 
under the contract, for each rating period of the transition period for 
up to 3 years, when Medicaid populations or services are initially 
transitioning from a fee-for-service (FFS) delivery system to a managed 
care delivery system, provided the following requirements are met:
    (i) The services will be covered for the first time under a managed 
care contract and were previously provided in a FFS delivery system 
prior to the first rating period of the transition period.
    (ii) The State made supplemental payments, as defined in paragraph 
(a) of this section, to hospitals, nursing facilities, or physicians 
during the 12-month period immediately 2 years prior to the first year 
of the transition period.
    (iii) The aggregate amount of the pass-through payments that the 
State requires the MCO, PIHP, or PAHP to make is less than or equal to 
the amounts calculated in paragraphs (d)(6)(iii)(A), (B), or (C) of 
this section for the relevant provider type for each rating period of 
the transition period. In determining the amount of each component for 
the calculations contained in paragraphs (d)(6)(iii)(A) through (C), 
the State must use the amounts paid for services during the 12-month 
period immediately 2 years prior to the first rating period of the 
transition period.
    (A) Hospitals. For inpatient and outpatient hospital services, 
calculate the product of the actual supplemental payments paid and the 
ratio achieved by dividing the amount paid through payment rates for 
hospital services that are being transitioned from payment in a FFS 
delivery system to the managed care contract by the total amount paid 
through payment rates for hospital services made in the State's FFS 
delivery system.
    (B) Nursing facilities. For nursing facility services, calculate 
the product of the actual supplemental payments paid and the ratio 
achieved by dividing the amount paid through payment rates for nursing 
facility services that are being transitioned from payment in a FFS

[[Page 57295]]

delivery system to the managed care contract by the total amount paid 
through payment rates for nursing facility services made in the State's 
FFS delivery system.
    (C) Physicians. For physician services, calculate the product of 
the actual supplemental payments paid and the ratio achieved by 
dividing the amount paid through payment rates for physician services 
that are being transitioned from payment in a FFS delivery system to 
the managed care contract by the total amount paid through payment 
rates for physician services made in the State's FFS delivery system.
    (iv) The State may require the MCO, PIHP, or PAHP to make pass-
through payments for Medicaid populations or services that are 
initially transitioning from a FFS delivery system to a managed care 
delivery system for up to 3 years from the beginning of the first 
rating period in which the services were transitioned from payment in a 
FFS delivery system to a managed care contract, provided that during 
the 3 years, the services continue to be provided under a managed care 
contract with an MCO, PIHP, or PAHP.
* * * * *
0
6. Section 438.7 is amended by revising paragraph (c)(3) and adding 
paragraph (e) to read as follows:


Sec.  438.7  Rate certification submission.

* * * * *
    (c) * * *
    (3) The State may increase or decrease the capitation rate per rate 
cell, as required in paragraph (c) of this section and Sec.  
438.4(b)(4), up to 1.5 percent without submitting a revised rate 
certification, as required under paragraph (a) of this section. 
However, any changes of the capitation rate within the permissible 
range must be consistent with a modification of the contract as 
required in Sec.  438.3(c) and are subject to the requirements at Sec.  
438.4(b)(1). Notwithstanding the provisions in paragraph (c) of this 
section, CMS may require a State to provide documentation that 
modifications to the capitation rate comply with the requirements in 
Sec. Sec.  438.3(c) and (e), and 438.4(b)(1).
* * * * *
    (e) Provision of additional guidance. CMS will issue guidance, at 
least annually, which includes all of the following:
    (1) The Federal standards for capitation rate development.
    (2) The documentation required to determine that the capitation 
rates are projected to provide for all reasonable, appropriate, and 
attainable costs that are required under the terms.
    (3) The documentation required to determine that the capitation 
rates have been developed in accordance with the requirements of this 
part.
    (4) Any updates or developments in the rate review process to 
reduce State burden and facilitate prompt actuarial reviews.
    (5) The documentation necessary to demonstrate that capitation 
rates competitively bid through a procurement process have been 
established consistent with the requirements of Sec. Sec.  438.4 
through 438.8.
0
7. Section 438.8 is amended--
0
a. In paragraph (e)(4) by removing the phrase ``fraud prevention as 
adopted'' and adding in its place the phrase ``fraud prevention 
consistent with regulations adopted''; and
0
b. Revising paragraph (k)(1)(iii).
    The revision reads as follows:


Sec.  438.8  Medical loss ratio (MLR) standards

* * * * *
    (k) * * *
    (1) * * *
    (iii) Fraud prevention activities as defined in paragraph (e)(4) of 
this section.
* * * * *
0
8. Section 438.9 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  438.9  Provisions that apply to non-emergency medical 
transportation PAHPS.

* * * * *
    (b) * * *
    (2) The actuarial soundness requirements in Sec.  438.4, except 
Sec.  438.4(b)(9).
* * * * *
0
9. Section 438.10 is amended by--
0
a. Revising paragraphs (d)(2) and (3);
0
b. Removing paragraph (d)(6)(iv);
0
c. Revising paragraph (f)(1);
0
d. In paragraph (g)(2)(ii)(B) by removing the reference ``paragraph 
(g)(2)(i)(A) of this section'' and adding in its place the reference 
``paragraph (g)(2)(ii)(A) of this section'' and
0
e. Revising paragraphs (h)(1)(vii) and (h)(3).
    The revisions read as follows:


Sec.  438.10  Information requirements.

* * * * *
    (d) * * *
    (2) Make oral interpretation available in all languages and written 
translation available in each prevalent non-English language. Written 
materials that are critical to obtaining services for potential 
enrollees must include taglines in the prevalent non-English language 
in the State, explaining the availability of written translations or 
oral interpretation to understand the information provided and the 
toll-free telephone number of the entity providing choice counseling 
services as required by Sec.  438.71(a). Taglines for written materials 
critical to obtaining services must be printed in a conspicuously-
visible font size.
    (3) Require each MCO, PIHP, PAHP, and PCCM entity to make its 
written materials that are critical to obtaining services, including, 
at a minimum, provider directories, enrollee handbooks, appeal and 
grievance notices, and denial and termination notices, available in the 
prevalent non-English languages in its particular service area. Written 
materials that are critical to obtaining services must also be made 
available in alternative formats upon request of the potential enrollee 
or enrollee at no cost, include taglines in the prevalent non-English 
languages in the State and in a conspicuously visible font size 
explaining the availability of written translation or oral 
interpretation to understand the information provided, and include the 
toll-free and TTY/TDY telephone number of the MCO's, PIHP's, PAHP's or 
PCCM entity's member/customer service unit. Auxiliary aids and services 
must also be made available upon request of the potential enrollee or 
enrollee at no cost.
* * * * *
    (f) * * *
    (1) The MCO, PIHP, PAHP and, when appropriate, the PCCM entity, 
must make a good faith effort to give written notice of termination of 
a contracted provider to each enrollee who received his or her primary 
care from, or was seen on a regular basis by, the terminated provider. 
Notice to the enrollee must be provided by the later of 30 calendar 
days prior to the effective date of the termination, or 15 calendar 
days after receipt or issuance of the termination notice.
* * * * *
    (h) * * *
    (1) * * *
    (vii) The provider's cultural and linguistic capabilities, 
including languages (including American Sign Language) offered by the 
provider or a skilled medical interpreter at the provider's office.
* * * * *
    (3) Information included in--
    (i) A paper provider directory must be updated at least--
    (A) Monthly, if the MCO, PIHP, PAHP, or PCCM entity does not have a 
mobile-enabled, electronic directory; or
    (B) Quarterly, if the MCO, PIHP, PAHP, or PCCM entity has a mobile-
enabled, electronic provider directory.

[[Page 57296]]

    (ii) An electronic provider directory must be updated no later than 
30 calendar days after the MCO, PIHP, PAHP, or PCCM entity receives 
updated provider information.
* * * * *
0
10. Section 438.56 is amended by revising the heading of paragraph 
(d)(5), and paragraphs (d)(5)(i) and (iii), to read as follows:


Sec.  438.56  Disenrollment: Requirements and limitations.

* * * * *
    (d) * * *
    (5) Use of the MCO's, PIHP's, PAHP's grievance procedures. (i) The 
State agency may require that the enrollee seek redress through the 
MCO's, PHIP's, or PAHP's grievance system before making a determination 
on the enrollee's request.
* * * * *
    (iii) If, as a result of the grievance process, the MCO, PIHP, or 
PAHP approves the disenrollment, the State agency is not required to 
make a determination in accordance with paragraph (d)(4) of this 
section.
* * * * *
0
11. Section 438.68 is amended by--
0
a. Revising paragraph (b)(1) introductory text, and paragraph 
(b)(1)(iv);
0
b. Removing paragraph (b)(1)(viii); and
0
c. Revising paragraph (b)(2).
    The revisions read as follows:


Sec.  438.68  Network adequacy standards.

* * * * *
    (b) * * *
    (1) At a minimum, a State must develop a quantitative network 
adequacy standard for the following provider types, if covered under 
the contract:
* * * * *
    (iv) Specialist (as designated by the State), adult and pediatric.
* * * * *
    (2) LTSS. States with MCO, PIHP, or PAHP contracts which cover LTSS 
must develop a quantitative network adequacy standard for LTSS provider 
types.
* * * * *


Sec.  438.236  [Amended]

0
12. Section 438.236 is amended in paragraph (b)(3) by removing the term 
``contracting health care professionals'' and adding in its place the 
term ``network providers.''
0
13. Section 438.242 is amended by revising paragraph (c)(3) to read as 
follows:


Sec.  438.242  Health information systems.

* * * * *
    (c) * * *
    (3) Submission of all enrollee encounter data, including allowed 
amount and paid amount, that the State is required to report to CMS 
under Sec.  438.818.
* * * * *
0
14. Section 438.334 is amended by -
0
a. Revising paragraphs (b) and (c)(1) introductory text;
0
b. Redesignating paragraphs (c)(1)(i) and (ii), as paragraphs 
(c)(1)(ii) and (iii), respectively;
0
c. Adding a new paragraph (c)(1)(i);
0
d. Revising newly redesignated paragraph (c)(1)(ii), and paragraphs 
(c)(2) and (3); and
0
e. Adding new paragraph (c)(4).
    The revisions and additions read as follows:


Sec.  438.334  Medicaid managed care quality rating system.

* * * * *
    (b) Quality rating system. CMS, in consultation with States and 
other stakeholders and after providing public notice and opportunity to 
comment, will develop a framework for a Medicaid managed care quality 
rating system (QRS), including the identification of a set of mandatory 
performance measures and a methodology, that aligns where appropriate 
with the qualified health plan quality rating system developed in 
accordance with 45 CFR 156.1120, the Medicare Advantage 5-Star Rating 
System, and other related CMS quality rating approaches.
    (c) * * *
    (1) A State may implement an alternative Medicaid managed care 
quality rating system that utilizes different performance measures or 
applies a different methodology from that described in paragraph (b) of 
this section provided that--
    (i) The alternative quality rating system includes the mandatory 
measures identified in the framework developed under paragraph (b) of 
this section; and,
    (ii) The ratings generated by the alternative quality rating system 
yield information regarding MCO, PIHP, and PAHP performance which is 
substantially comparable to that yielded by the framework developed 
under paragraph (b) of this section to the extent feasible, taking into 
account such factors as differences in covered populations, benefits, 
and stage of delivery system transformation, to enable meaningful 
comparison of performance across States.
* * * * *
    (2) Prior to implementing an alternative quality rating system, or 
modification of an alternative quality rating system, the State must--
    (i) Obtain input from the State's Medical Care Advisory Committee 
established under Sec.  431.12 of this chapter; and,
    (ii) Provide an opportunity for public comment of at least 30 days 
on the proposed alternative Medicaid managed care quality rating system 
or modification.
    (3) Upon request, a State must submit to CMS a copy of the 
alternative quality rating system framework, including the performance 
measures and methodology to be used in generating plan ratings; 
documentation of the public comment process specified in paragraphs 
(c)(2)(i) and (ii) of this section, including issues raised by the 
Medical Care Advisory Committee and the public, any policy revisions or 
modifications made in response to the comments, and the rationale for 
comments not accepted; and other information specified by CMS to 
demonstrate compliance with this paragraph (c).
    (4) The Secretary, in consultation with States and other 
stakeholders, shall issue guidance which describes the criteria and 
process for determining if an alternative QRS system is substantially 
comparable to the Medicaid managed care quality rating system in 
paragraph (b) of this section.
* * * * *
0
15. Section 438.340 is amended--
0
a. By revising paragraphs (b)(2), (b)(3)(i), and (b)(6);
0
b. By removing paragraph (b)(8);
0
c. By redesignating paragraphs (b)(9), (10), and (11), as paragraphs 
(b)(8), (9) and (10), respectively;
0
d. By revising paragraph (c)(1)(ii); and
0
e. In paragraph (c)(3)(ii) by removing the reference ``paragraph 
(b)(11)'' and adding in its place the reference ``paragraph (b)(10)''.
    The revisions read as follows:


Sec.  438.34  Managed care State quality strategy.

* * * * *
    (b) * * *
    (2) The State's goals and objectives for continuous quality 
improvement which must be measurable and take into consideration the 
health status of all populations in the State served by the MCO, PIHP, 
PAHP, and PCCM entity described in Sec.  438.310(c)(2).
    (3) * * *
    (i) The quality metrics and performance targets to be used in 
measuring the performance and improvement of each MCO, PIHP, PAHP, and 
PCCM entity described in

[[Page 57297]]

Sec.  438.310(c)(2) with which the State contracts, including but not 
limited to, the performance measures reported in accordance with Sec.  
438.330(c). The State must identify which quality measures and 
performance outcomes the State would publish at least annually on the 
website required under Sec.  438.10(c)(3); and,
* * * * *
    (6) The State's plan to identify, evaluate, and reduce, to the 
extent practicable, health disparities based on age, race, ethnicity, 
sex, primary language, and disability status. States must identify this 
demographic information for each Medicaid enrollee and provide it to 
the MCO, PIHP, PAHP, or PCCM entity described in Sec.  438.310(c)(2) at 
the time of enrollment.
* * * * *
    (c) * * *
    (1) * * *
    (ii) If the State enrolls Indians in the MCO, PIHP, PAHP, or PCCM 
entity described in Sec.  438.310(c)(2), consulting with Tribes in 
accordance with the State's Tribal consultation policy.
* * * * *
0
16. Section 438.358 is amended by revising paragraph (b)(1)(iii) to 
read as follows:


Sec.  438.358  Activities related to external quality review.

* * * * *
    (b) * * *
    (1) * * *
    (iii) A review, conducted within the previous 3-year period, to 
determine the MCO's, PIHP's, or PAHP's compliance with the standards 
set forth in subpart D of this part, the disenrollment requirements and 
limitations described in Sec.  438.56, the enrollee rights requirements 
described in Sec.  438.100, the emergency and post-stabilization 
services requirements described in Sec.  438.114, and the quality 
assessment and performance improvement requirements described in Sec.  
438.330.
* * * * *
0
17. Section 438.362 is amended by adding paragraph (c) to read as 
follows:


Sec.  438.362  Exemption from external quality review.

* * * * *
    (c) Identification of exempted MCOs. The State must annually 
identify, on the website required under Sec.  438.10(c)(3) and in the 
same location as the EQR technical reports per Sec.  438.364(c)(2)(i), 
the names of the MCOs exempt from external quality review by the State, 
including the beginning date of the current exemption period.
0
18. Section 438.364 is amended by revising paragraph (d) to read as 
follows:


Sec.  438.364  External quality review results.

* * * * *
    (d) Safeguarding patient identity. The information released under 
paragraph (c) of this section may not disclose the identity or other 
protected health information of any patient.
0
19. Section 438.400 is amended in paragraph (b) by revising paragraph 
(3) of the definition of ``Adverse benefit determination'' to read as 
follows:


Sec.  438.400  Statutory basis, definitions, and applicability.

* * * * *
    (b) * * *
    Adverse benefit determination * * *
    (3) The denial, in whole or in part, of payment for a service. A 
denial, in whole or in part, of a payment for a service because the 
claim does not meet the definition of a ``clean claim'' at Sec.  
447.45(b) of this chapter is not an adverse benefit determination.
* * * * *
0
20. Section 438.402 is amended by revising paragraph (c)(3)(ii) to read 
as follows:


Sec.  438.402  General requirements.

* * * * *
    (c) * * *
    (3) * * *
    (ii) Appeal. The enrollee may request an appeal either orally or in 
writing.
0
21. Section 438.406 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  438.406  Handling of grievances and appeals.

* * * * *
    (b) * * *
    (3) Provide that oral inquiries seeking to appeal an adverse 
benefit determination are treated as appeals.
* * * * *
0
22. Section 438.408 is amended by revising paragraph (f)(2) to read as 
follows:


Sec.  438.408  Resolution and notification: Grievances and appeals.

* * * * *
    (f) * * *
    (2) State fair hearing. The enrollee must have no less than 90 
calendar days and no more than 120 calendar days from the date of the 
MCO's, PIHP's, or PAHP's notice of resolution to request a State fair 
hearing.
* * * * *

PART 457--ALLOTMENTS AND GRANTS TO STATES

0
23. The authority citation for part 457 is revised to read as follows:

    Authority: 42 U.S.C. 1302.

0
24. Section 457.1207 is revised to read as follows:


Sec.  457.1207  Information requirements.

    The State must provide, or ensure its contracted MCO, PAHP, PIHP, 
PCCM and PCCM entities provide, all enrollment notices, informational 
materials, and instructional materials related to enrollees and 
potential enrollees in accordance with the terms of Sec.  438.10 of 
this chapter, except that the terms of Sec.  438.10(c)(2), 
(g)(2)(xi)(E) and (g)(2)(xii) of this chapter do not apply.
0
25. Section 457.1233 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec.  457.1233  Structure and operation standards.

* * * * *
    (b) Subcontractual relationships and delegation. The State must 
ensure, through its contracts, that each MCO, PIHP, PAHP, and PCCM 
entity complies with the subcontractual relationships and delegation 
requirements as provided in Sec.  438.230 of this chapter.
* * * * *
    (d) Health information systems. The State must ensure, through its 
contracts, that each MCO, PIHP, and PAHP complies with the health 
information systems requirements as provided in Sec.  438.242 of this 
chapter, except that the applicability date of Sec.  438.242(e) of this 
chapter does not apply. The State is required to submit enrollee 
encounter data to CMS in accordance with Sec.  438.818 of this chapter.
* * * * *
0
26. Section 457.1240 is amended by revising paragraph (b) to read as 
follows:


Sec.  457.1240  Quality measurement and improvement.

* * * * *
    (b) Quality assessment and performance improvement program. The 
State must require, through its contracts, that each MCO, PIHP, and 
PAHP must establish and implement an ongoing comprehensive quality 
assessment and performance improvement program for the services it 
furnishes to its enrollees as provided in Sec.  438.330 of this 
chapter, except that:
    (1) The terms of Sec.  438.330(d)(4) of this chapter (related to 
dually eligible beneficiaries) do not apply.
    (2) The reference to consultation with the Medical Care Advisory 
Committee

[[Page 57298]]

described in Sec.  438.330(c)(1)(i) of this chapter does not apply.
    (3) The terms of Sec.  438.334(c)(2)(i) of this chapter (related to 
consultation with the Medical Care Advisory Committee) do not apply.
    (4) The reference to consultation with the Medical Care Advisory 
Committee described in Sec.  438.334(c)(3) of this chapter does not 
apply.
    (5) In the case of a contract with a PCCM entity described in 
paragraph (f) of this section, Sec.  438.330(b)(2) and(3), (c), and (e) 
of this chapter apply.
* * * * *
0
27. Section 457.1260 is revised to read as follows:


Sec.  457.1260  Grievance system.

    (a) Statutory basis and definitions--(1) Statutory basis. This 
section implements section 2103(f)(3) of the Act, which provides that 
the State CHIP must provide for the application of subsections section 
1932(a)(4), (a)(5), (b), (c), (d), and (e) of the Act (relating to 
requirements for managed care) to coverage, State agencies, enrollment 
brokers, managed care entities, and managed care organizations. Section 
1932(b)(4) of the Act requires managed care plans to establish an 
internal grievance procedure under which an enrollee, or a provider on 
behalf of such an enrollee, may challenge the denial of coverage of or 
payment for covered benefits.
    (2) Definitions. The following definitions from Sec.  438.400(b) of 
this chapter apply to this section--
    (i) Paragraphs (1) through (5) and (7) of the definition of Adverse 
benefit determination; and
    (ii) The definitions of appeal, grievance, and grievance and appeal 
system.
    (b) General requirements. (1) The State must ensure that its 
contracted MCOs, PIHPs, and PAHPs comply with the provisions of Sec.  
438.402(a), (b), (c)(2) and (3) of this chapter with regard to the 
establishment and operation of a grievances and appeals system.
    (2) An enrollee may file a grievance and request an appeal with the 
MCO, PIHP, or PAHP. An enrollee may request a State external review in 
accordance with the terms of subpart K of part 457 of this chapter 
after receiving notice under Sec.  438.408 of this chapter that the 
adverse benefit is upheld.
    (3) In the case of an MCO, PIHP, or PAHP that fails to adhere to 
the notice and timing requirements specified in Sec.  438.408 of this 
chapter, the enrollee is deemed to have exhausted the MCO's, PIHP's, or 
PAHP's appeals process. The enrollee may initiate a State external 
review in accordance with the terms of subpart K of this part.
    (4) If State law permits and with the written consent of the 
enrollee, a provider or an authorized representative may request an 
appeal or file a grievance, or request a State external review in 
accordance with the terms of subpart K of this part, on behalf of an 
enrollee. When the term ``enrollee'' is used throughout this rule, it 
includes providers and authorized representatives consistent with this 
paragraph.
    (c) Timely and adequate notice of adverse benefit determination. 
(1) The State must ensure that its contracted MCOs, PIHPs, and PAHPs 
comply with the provisions at Sec.  438.404(a), (b)(1), (2), and (4) 
through (6), and (c)(2) through (6) of this chapter.
    (2) The notice must explain the enrollee's right to request an 
appeal of the MCO's, PIHP's, or PAHP's adverse benefit determination, 
including information on exhausting the MCO's, PIHP's, or PAHP's one 
level of appeal described at Sec.  438.402(b) of this chapter and the 
right to request a State external review in accordance with the terms 
of subpart K of this part.
    (3) For termination, suspension, or reduction of previously 
authorized CHIP-covered services, the MCO, PIHP, or PAHP must provide 
timely written notice.
    (d) Handling of grievances and appeals. The State must ensure that 
its contracted MCOs, PIHPs, and PAHPs comply with the provisions at 
Sec.  438.406 of this chapter.
    (e) Resolution and notification: Grievances and appeals. (1) The 
State must ensure that its contracted MCOs, PIHPs, and PAHPs comply 
with the provisions at Sec.  438.408(b), (c)(1) and (2), (d), (e)(1), 
and (f)(3) of this chapter.
    (2) Each MCO, PIHP, or PAHP must resolve each grievance and appeal, 
and provide notice, as expeditiously as the enrollee's health condition 
requires, within State-established timeframes that may not exceed the 
timeframes specified in this section.
    (3) In the case of an MCO, PIHP, or PAHP that fails to adhere to 
the notice and timing requirements of this section, the enrollee is 
deemed to have exhausted the MCO's, PIHP's, or PAHP's appeals process. 
The enrollee may initiate a State external review in accordance with 
the terms of subpart K of this part.
    (4) For appeals not resolved wholly in favor of the enrollees, the 
content of the notice of appeal resolution required in Sec.  438.408(e) 
of this chapter must include the following:
    (i) The right to request a State external review in accordance with 
the terms of subpart K of this part, and how to do so.
    (ii) The right to request and receive benefits while the review is 
pending, and how to make the request.
    (iii) That the enrollee may, consistent with State policy, be held 
liable for the cost of those benefits if the hearing decision upholds 
the MCO's, PIHP's, or PAHP's adverse benefit determination.
    (5) An enrollee may request a State external review only after 
receiving notice that the MCO, PIHP, or PAHP is upholding the adverse 
benefit determination.
    (6) In the case of an MCO, PIHP, or PAHP that fails to adhere to 
the notice and timing requirements in Sec.  438.408 of this chapter and 
this section, the enrollee is deemed to have exhausted the MCO's, 
PIHP's, or PAHP's appeals process. The enrollee may initiate a State 
external review.
    (7) The enrollee must request a State external review no later than 
120 calendar days from the date of the MCO's, PIHP's, or PAHP's notice 
of resolution.
    (f) Expedited resolution of appeals. The State must ensure that its 
contracted MCOs, PIHPs, and PAHPs comply with the provisions at Sec.  
438.410 of this chapter.
    (g) Information about the grievance and appeal system to providers 
and subcontractors. The State must ensure that its contracted MCOs, 
PIHPs, and PAHPs comply with the provisions at Sec.  438.414 of this 
chapter.
    (h) Recordkeeping requirements. The State must ensure that its 
contracted MCOs, PIHPs, and PAHPs comply with the provisions at Sec.  
438.416 of this chapter.
    (i) Services not furnished while the appeal is pending. If the MCO, 
PIHP, or PAHP, or the result of a State external review in accordance 
with the terms of subpart K of this part reverses a decision to deny, 
limit, or delay services that were not furnished while the appeal was 
pending, the MCO, PIHP, or PAHP must authorize or provide the disputed 
services promptly and as expeditiously as the enrollee's health 
condition requires but no later than 72 hours from the date it receives 
notice reversing the determination.
0
28. Section 457.1270 is revised to read as follows:


Sec.  457.1270  Sanctions.

    (a) The State must comply with Sec. Sec.  438.700 through 438.704, 
Sec.  438.706(c) and (d), and Sec. Sec.  438.708 through 438.730 of 
this chapter.
    (b) Optional imposition of sanction. If the State imposes temporary

[[Page 57299]]

management under Sec.  438.702(a)(2) of this chapter, the State may do 
so only if it finds (through onsite surveys, enrollee or other 
complaints, financial status, or any other source) any of the 
following:
    (1) There is continued egregious behavior by the MCO, including but 
not limited to behavior that is described in Sec.  438.700 of this 
chapter, or that is contrary to any of the requirements of this 
subpart.
    (2) There is substantial risk to enrollees' health.
    (3) The sanction is necessary to ensure the health of the MCO's 
enrollees--
    (i) While improvements are made to remedy violations under Sec.  
438.700 of this chapter.
    (ii) Until there is an orderly termination or reorganization of the 
MCO.
    (c) Required imposition of sanction. The State must impose 
temporary management (regardless of any other sanction that may be 
imposed) if it finds that an MCO has repeatedly failed to meet 
substantive requirements in this subpart. The State must also grant 
enrollees the right to terminate enrollment without cause, as described 
in Sec.  438.702(a)(3) of this chapter, and must notify the affected 
enrollees of their right to terminate enrollment.
0
29. Section 457.1285 is revised to read as follows:


Sec.  457.1285  Program integrity safeguards.

    The State must comply with the program integrity safeguards in 
accordance with the terms of subpart H of part 438 of this chapter, 
except that the terms of Sec.  438.604(a)(2) and (d)(4) of this chapter 
do not apply.

    Dated: October 31, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 2, 2018.
Alex M. Azar II.,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-24626 Filed 11-8-18; 11:15 am]
BILLING CODE 4120-01-P