[Federal Register Volume 89, Number 92 (Friday, May 10, 2024)]
[Rules and Regulations]
[Pages 41002-41285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08085]
[[Page 41001]]
Vol. 89
Friday,
No. 92
May 10, 2024
Part IV
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
42 CFR Parts 430, 438, and 457
Medicaid Program; Medicaid and Children's Health Insurance Program
(CHIP) Managed Care Access, Finance, and Quality; Final Rule
Federal Register / Vol. 89 , No. 92 / Friday, May 10, 2024 / Rules
and Regulations
[[Page 41002]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 430, 438, and 457
[CMS-2439-F]
RIN 0938-AU99
Medicaid Program; Medicaid and Children's Health Insurance
Program (CHIP) Managed Care Access, Finance, and Quality
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule will advance CMS's efforts to improve access
to care, quality and health outcomes, and better address health equity
issues for Medicaid and Children's Health Insurance Program (CHIP)
managed care enrollees. The final rule addresses standards for timely
access to care and States' monitoring and enforcement efforts, reduces
State burdens for implementing some State directed payments (SDPs) and
certain quality reporting requirements, adds new standards that will
apply when States use in lieu of services and settings (ILOSs) to
promote effective utilization and that specify the scope and nature of
ILOSs, specifies medical loss ratio (MLR) requirements, and establishes
a quality rating system for Medicaid and CHIP managed care plans.
DATES:
Effective Dates: These regulations are effective on July 9, 2024.
Applicability Dates: In the Supplemental Information section of
this final rule, we provide a table (Table 1), which lists key changes
in this final rule that have an applicability date other than the
effective date of this final rule.
FOR FURTHER INFORMATION CONTACT:
Rebecca Burch Mack, (303) 844-7355, Medicaid Managed Care.
Laura Snyder, (410) 786-3198, Medicaid Managed Care State Directed
Payments.
Alex Loizias, (410) 786-2435, Medicaid Managed Care State Directed
Payments and In Lieu of Services and Settings.
Elizabeth Jones, (410) 786-7111, Medicaid Medical Loss Ratio.
Jamie Rollin, (410) 786-0978, Medicaid Managed Care Program
Integrity.
Rachel Chappell, (410) 786-3100, and Emily Shockley, (410) 786-
3100, Contract Requirements for Overpayments.
Carlye Burd, (720) 853-2780, Medicaid Managed Care Quality.
Amanda Paige Burns, (410) 786-8030, Medicaid Quality Rating System.
Joshua Bougie, (410) 786-8117, and Chanelle Parkar, (667) 290-8798,
CHIP.
SUPPLEMENTARY INFORMATION:
Applicability and Compliance Timeframes
States are required to comply by the effective date of the final
rule or as otherwise specified in regulation text.
States will not be held out of compliance with the changes adopted
in this final rule until the applicability date indicated in regulation
text for each provision so long as they comply with the corresponding
standard(s) in 42 CFR parts 438 and 457 contained in the 42 CFR, parts
430 to 481, effective as of October 1, 2023. The following is a summary
of the applicability dates in this final rule:
BILLING CODE 4120-01-P
[[Page 41003]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.000
[[Page 41004]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.001
BILLING CODE 4120-01-C
I. Medicaid and CHIP Managed Care
A. Background
As of September 2023, the Medicaid program provided essential
health care coverage to more than 88 million \1\ individuals, and, in
2021, had annual outlays of more than $805 billion. In 2021, the
Medicaid program accounted for 18 percent of national health
expenditures.\2\ The program covers a broad array of health benefits
and services critical to underserved populations, including low- income
adults, children, parents, pregnant individuals, the elderly, and
people with disabilities. For example, Medicaid pays for approximately
42 percent of all births in the U.S.\3\ and is the largest payer of
long-term services and supports (LTSS),\4\ services to treat substance
use disorder, and services to prevent and treat the Human
Immunodeficiency Virus.\5\ Ensuring beneficiaries can access covered
services is a crucial element of the Medicaid program. Depending on the
State and its Medicaid program structure, beneficiaries access their
health care services using a variety of care delivery systems; for
example, fee-for-service (FFS) and managed care, including through
demonstrations and waiver programs. In 2021, 74.6 percent \6\ of
Medicaid beneficiaries were enrolled in comprehensive managed care
plans; the remaining individuals received all or some services through
FFS.
---------------------------------------------------------------------------
\1\ September 2023 Medicaid and CHIP Enrollment Snapshot.
Accessed at http://www.medicaid.gov/sites/default/files/2023-10/september-2023-medicaid-chip-enrollment-trend-snapshot.pdf.
\2\ CMS National Health Expenditure Fact Sheet. Accessed at
https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet.
\3\ National Center for Health Statistics. Key Birth Statistics
(2020 Data. Final 2022 Data forthcoming). Accessed at https://www.cdc.gov/nchs/nvss/births.htm.
\4\ Colello, Kirsten J. Who Pays for Long-Term Services and
Supports? Congressional Research Service. Updated June 15, 2022.
Accessed at https://crsreports.congress.gov/product/pdf/IF/IF10343.
\5\ Dawson, L. and Kates, J. Insurance Coverage and Viral
Suppression Among People with HIV, 2018. September 2020. Kaiser
Family Foundation. Accessed athttps://www.kff.org/hivaids/issue-brief/insurance-coverage-and-viral-suppression-among-people-with-hiv-2018/.
\6\ https://www.medicaid.gov/medicaid/managed-care/enrollment-report/index.html.
---------------------------------------------------------------------------
With a program as large and complex as Medicaid, to promote
consistent access to health care for all beneficiaries across all types
of care delivery systems in accordance with statutory requirements,
access regulations need to be multi-factorial. Strategies to enhance
access to health care services should reflect how people move through
and interact with the health care system. We view the continuum of
health care access across three dimensions of a person-centered
framework: (1) enrollment in coverage; (2) maintenance of coverage; and
(3) access to high-quality services and supports. Within each of these
dimensions, accompanying regulatory, monitoring, and/or compliance
actions may be needed to ensure access to health care is achieved and
maintained.
In early 2022, we released a request for information (RFI) \7\ to
collect feedback on a broad range of questions that examined topics
such as: challenges with eligibility and enrollment; ways we can use
data available to measure, monitor, and support improvement efforts
related to access to services; strategies we can implement to support
equitable and timely access to providers and services; and
opportunities to use existing and new access standards to help ensure
that Medicaid and CHIP payments are sufficient to enlist enough
providers. Some of the most common feedback we received through the RFI
related to promoting cultural competency in access to and the quality
of services for beneficiaries across all dimensions of health care and
using payment rates as a driver to increase provider participation in
Medicaid and CHIP programs. Commenters were also interested in
opportunities to align approaches for payment regulation and compliance
across Medicaid and CHIP delivery systems and services.
---------------------------------------------------------------------------
\7\ CMS Request for Information: Access to Coverage and Care in
Medicaid & CHIP. February 2022. For a full list of question from the
RFI, see https://www.medicaid.gov/medicaid/access-care/downloads/access-rfi-2022-questions.pdf.
---------------------------------------------------------------------------
As noted above, the first dimension of access focuses on ensuring
that eligible people are able to enroll in the Medicaid program. Access
to Medicaid enrollment requires that a potential beneficiary knows if
they are or may be eligible for Medicaid, is aware of Medicaid coverage
options, and is able to easily apply for and enroll in coverage. The
second dimension of access in this continuum relates to maintaining
coverage once the beneficiary is enrolled in the Medicaid program.
Maintaining coverage requires that eligible beneficiaries are able to
stay enrolled in the program without interruption, or that they know
how to and can smoothly transition to other health coverage, such as
CHIP, Marketplace coverage, or Medicare, when they are no longer
eligible for Medicaid coverage. In September 2022, we published a
proposed rule, Streamlining the Medicaid, Children's Health Insurance
Program, and Basic Health Program Application, Eligibility,
Determination, Enrollment, and
[[Page 41005]]
Renewal Processes (87 FR 54760; hereinafter the ``Streamlining
Eligibility & Enrollment proposed rule'') to simplify the processes for
eligible individuals to enroll and retain eligibility in Medicaid,
CHIP, or the Basic Health Program (BHP).\8\ This rule was finalized on
March 27, 2024.\9\
---------------------------------------------------------------------------
\8\ We finalized several provisions from the proposed rule in a
September 2023 Federal Register publication entitled Streamlining
Medicaid; Medicare Savings Program Eligibility Determination and
Enrollment. See 88 FR 65230.
\9\ https://www.federalregister.gov/public-inspection/2024-06566/medicaid-program-streamlining-the-medicaid-childrens-health-insurance-program-and-basic-health.
---------------------------------------------------------------------------
The third dimension is access to services and supports and was
addressed in a proposed rule published on May 3, 2023 (88 FR 28092); we
are finalizing it in this final rule. This final rule is focused on
addressing additional critical elements of access: (1) potential access
(for example, provider availability and network adequacy); (2)
beneficiary utilization (the use of health care and health services);
and (3) beneficiaries' perceptions and experiences with the care they
did or did not receive. These terms and definitions build upon our
previous efforts to examine how best to monitor access.\10\
---------------------------------------------------------------------------
\10\ Kenney, Genevieve M., Kathy Gifford, Jane Wishner, Vanessa
Forsberg, Amanda I. Napoles, and Danielle Pavliv. ``Proposed
Medicaid Access Measurement and Monitoring Plan.'' Washington, DC:
The Urban Institute. August 2016. Accessed at https://www.medicaid.gov/sites/default/files/2019-12/monitoring-plan.pdf.
---------------------------------------------------------------------------
In addition to the three above referenced rulemakings (the
Streamlining Eligibility & Enrollment proposed rule, this final rule on
managed care, and the Ensuring Access to Medicaid Services proposed
rule), we are also engaged in non-regulatory activities to improve
access to health care services across Medicaid delivery systems.
Examples of these activities include best practices toolkits and other
resources for States, such as the ``Increasing Access, Quality, and
Equity in Postpartum Care in Medicaid and CHIP'' Toolkit \11\ and
direct technical assistance to States through learning collaboratives,
affinity groups and individual coaching to implement best practices,
including the Infant Well-Child Learning Collaborative \12\ and the
Foster Care Learning Collaborative.\13\ As noted earlier, the
Streamlining Eligibility & Enrollment proposed rule addresses the first
two dimensions of access to health care: (1) enrollment in coverage and
(2) maintenance of coverage. Through that proposed rule, we sought to
streamline Medicaid, CHIP and BHP eligibility and enrollment processes,
reduce administrative burden on States and applicants toward a more
seamless eligibility and enrollment process, and increase the
enrollment and retention of eligible individuals. Through the Ensuring
Access to Medicaid Services final rule, and this final rule involving
managed care, we outline additional steps to address the third
dimension of the health care access continuum: access to services. This
rule also addresses quality and financing of services in the managed
care context. We sought to address a range of access-related challenges
that impact how beneficiaries are served by Medicaid across all its
delivery systems.
---------------------------------------------------------------------------
\11\ https://www.medicaid.gov/medicaid/quality-of-care/quality-improvement-initiatives/maternal-infant-health-care-quality/postpartum-care/index.html.
\12\ https://www.medicaid.gov/medicaid/quality-of-care/quality-improvement-initiatives/well-child-care/index.html.
\13\ https://www.medicaid.gov/medicaid/quality-of-care/quality-improvement-initiatives/foster-care-learning-collaborative/index.html.
---------------------------------------------------------------------------
The volume of Medicaid beneficiaries enrolled in a managed care
program in Medicaid has grown from 81 percent in 2016 to 85 percent in
2021, with 74.6 percent of Medicaid beneficiaries enrolled in
comprehensive managed care organizations in 2021.\14\ We note that
States may implement a Medicaid managed care delivery system using four
Federal authorities--sections 1915(a), 1915(b), 1932(a), and 1115(a) of
the Social Security Act (the Act); each is described briefly below.
---------------------------------------------------------------------------
\14\ https://www.medicaid.gov/medicaid/managed-care/enrollment-report/index.html.
---------------------------------------------------------------------------
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 (SPA) 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 beneficiaries), 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 a 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 demonstrations
are approvable only if it is determined that the demonstration would
promote the objectives of the Medicaid statute and the demonstration is
subject to evaluation.
The above authorities all permit States to operate their Medicaid
managed care 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)(B) 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.
States that elect to operate a separate CHIP may employ a managed
care delivery system as long as such coverage meets the requirements of
section 2103 of the Act. Specific statutory references to managed care
programs are set out at sections 2103(f)(3) and 2107(e)(1)(N) and (R)
of the Act, which apply specific provisions of sections 1903 and 1932
of the Act related to Medicaid managed care to separate CHIPs. States
that elect Medicaid expansion CHIPs that operate within a managed care
delivery system
[[Page 41006]]
are subject to requirements under section 1932 of the Act.
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 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. The 2016 final rule
applied many of the Medicaid managed care rules to separate CHIP,
particularly in the areas of access, finance, and quality through
cross-references to 42 CFR part 438.
On July 29, 2016, we published the CMCS Informational Bulletin
(CIB) concerning ``The Use of New or Increased Pass-Through Payments in
Medicaid Managed Care Delivery Systems.'' \15\ 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 (hereinafter referred to as ``the 2017
final rule''). In the 2017 final rule, we finalized changes to the
transition periods for pass-through payments. Pass-through payments are
defined 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. The 2017 final rule codified the
information in the CIB and gave States the option to eliminate
physician and nursing facility payments immediately or phase down these
pass-through payments over the 5-year transition period if they prefer
and specified 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 2016 final rule.
---------------------------------------------------------------------------
\15\ https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib072916.pdf.
---------------------------------------------------------------------------
In the November 13, 2020 Federal Register (85 FR 72754), we
published the ``Medicaid Program; Medicaid and Children's Health
Insurance Program (CHIP) Managed Care'' final rule (hereinafter
referred to as the ``2020 final rule'') which streamlined the Medicaid
and CHIP managed care regulatory framework to relieve regulatory
burdens; support State flexibility and local leadership; and promote
transparency, flexibility, and innovation in the delivery of care. The
rule was intended to ensure that the regulatory framework was 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.
Since publication of the 2020 final rule, the COVID-19 public
health emergency (PHE) challenged States' ability to ensure
beneficiaries' access to high-quality care, ensure adequate provider
payment during extreme workforce challenges, and provide adequate
program monitoring and oversight. On January 28, 2021, Executive Order
(E.O.) 14009, Strengthening Medicaid and the Affordable Care Act, was
signed establishing the policy objective to protect and strengthen
Medicaid and the Affordable Care Act (ACA) and to make high-quality
health care accessible and affordable for every American. It directed
executive departments and agencies to review existing regulations,
orders, guidance documents, policies, and any other similar agency
actions to determine whether such agency actions are inconsistent with
this policy. On April 25, 2022, Executive Order 14070, Continuing To
Strengthen Americans' Access to Affordable, Quality Health Coverage,
was signed directing agencies with responsibilities related to
Americans' access to health coverage to review agency actions to
identify ways to continue to expand the availability of affordable
health coverage, to improve the quality of coverage, to strengthen
benefits, and to help more Americans enroll in quality health coverage.
This final rule aims to fulfill Executive Orders 14009 and 14070 by
helping States to use lessons learned from the PHE and build stronger
managed care programs to better meet the needs of the Medicaid and CHIP
populations by improving access to and quality of care provided.
This rule finalizes new standards to help States improve their
monitoring of access to care by requiring the establishment of new
standards for appointment wait times, use of secret shopper surveys,
use of enrollee experience surveys, and requiring States to submit a
managed care plan analysis of payments made by plans to providers for
specific services, to monitor plans' network adequacy more closely. It
finalizes standards that will apply when States use in lieu of services
and settings to promote effective utilization and that specify the
scope and nature of these services and settings. It also finalizes
provisions that reduce burden for States that choose to direct MCOs,
PIHPs, or PAHPs in certain ways to use their capitation payments to pay
specified providers specified amounts (known as State directed
payments), enhance quality, fiscal and program integrity of State
directed payments, address impermissible redistribution arrangements
related to State directed payments, and add clarity to the requirements
related to medical loss ratio calculations. To improve transparency and
provide valuable information to enrollees, providers, and CMS, this
rule finalizes State website requirements for content and ease of use.
Lastly, this final rule will make quality reporting more transparent
and meaningful for driving quality improvement, reduce burden of
certain quality reporting requirements, and establish State
requirements for implementing a Medicaid and CHIP quality rating system
aimed at ensuring monitoring of performance by Medicaid and CHIP
managed care plans and empowering beneficiary choice in managed care.
Finally, we believe it is important to acknowledge the role of
health equity within this final rule. Medicaid and CHIP provided
coverage for nearly 55 million people from racial and ethnic minority
backgrounds in 2020. In 2020, Medicaid enrollees were also more likely
to live in a rural community and over ten percent of enrollees spoke a
[[Page 41007]]
primary language other than English, while approximately eleven percent
qualified for benefits based on disability status.\16\ Consistent with
Executive Order 13985 \17\ Advancing Racial Equity and Support for
Underserved Communities Through the Federal Government, we are working
to advance health equity across CMS programs consistent with the goals
and objectives we have outlined in the CMS Framework for Health Equity
2022-2032 \18\ and the HHS Equity Action Plan.\19\ That effort includes
increasing our understanding of the needs of those we serve to ensure
that all individuals have access to equitable care and coverage.
---------------------------------------------------------------------------
\16\ CMS Releases Data Briefs That Provide Key Medicaid
Demographic Data for the First Time, https://www.cms.gov/blog/cms-releases-data-briefs-provide-key-medicaid-demographic-data-first-time.
\17\ Executive Order 13985, https://www.whitehouse.gov/briefing-room/presidentialactions/2021/01/20/executive-order-advancingracial-equity-and-support-or-underservedcommunities-through-the-federal-government/.
\18\ CMS Framework for Health Equity 2022-2032: https://www.cms.gov/files/document/cmsframework-health-equity.pdf.
\19\ HHS Equity Action Plan, https://www.hhs.gov/sites/default/files/hhs-equity-action-plan.pdf.
---------------------------------------------------------------------------
A key part of our approach will be to work with States to improve
measurement of health disparities through the stratification of State
reporting on certain measures to identify potential differences in
access, quality, and outcomes based on demographic factors like race,
ethnicity, age, rural/urban status, disability, language, sex, sexual
orientation, and gender identity, as well as social determinants of
health (SDOH).
The ``Medicaid Program and CHIP; Mandatory Medicaid and Children's
Health Insurance Program (CHIP) Core Set Reporting'' final rule
(hereinafter referred to as the ``Mandatory Medicaid and CHIP Core Set
Reporting final rule'') was published in the August 31, 2023 Federal
Register (88 FR 60278). In that rule, we finalized that the Secretary
would specify, through annual subregulatory guidance, which measures in
the Medicaid and CHIP Child Core Set, the behavioral health measures of
the Medicaid Adult Core Set, and the Health Home Core Sets, States will
be required to stratify, and by which factors, such as race, ethnicity,
sex, age, rural/urban status, disability, language or other factors
specified by the Secretary. CMS also finalized a phased-in timeline for
stratification of measures in these Core Sets. In the Medicaid Program;
Ensuring Access to Medicaid Services final rule, published elsewhere in
the Federal Register, we also finalized a similar phased-in timeline
and process for mandatory reporting and stratification of the home and
community-based services (HCBS) Quality Measure Set.
Measuring health disparities, reporting these results, and driving
improvements in quality are cornerstones of our approach to advancing
health equity and aligning with the CMS Strategic Priorities.\20\ In
this final rule, we establish our intent to align with the
stratification factors required for Core Set measure reporting, which
we believe will minimize State and managed care plan burden to report
stratified measures. To further reduce burden on States, we will permit
States to report using the same measurement and stratification
methodologies and classifications as those in the Mandatory Medicaid
and CHIP Core Set Reporting final rule and the Ensuring Access to
Medicaid Services final rule. We believe these measures and
methodologies are appropriate to include in States' Managed Care
Program Annual Report (MCPAR) because Sec. 438.66(e)(2) requires
information on and an assessment of the operation of each managed care
program, including an evaluation of managed care plan performance on
quality measures. Reporting these measures in the MCPAR would minimize
State and provider burden while allowing more robust CMS monitoring and
oversight of the quality of the health care provided at a managed care
plan and program level. We anticipate publishing additional
subregulatory guidance and adding specific fields in MCPAR to
accommodate this measure and data stratification reporting to simplify
the process for States.
---------------------------------------------------------------------------
\20\ CMS Strategic Plan 2022, https://www.cms.gov/cms-strategic-plan.
---------------------------------------------------------------------------
Finally, we are clarifying and emphasizing our intent that if any
provision of this final rule is held to be invalid or unenforceable by
its terms, or as applied to any person or circumstance, or stayed
pending further agency action, it shall be severable from this final
rule and not affect the remainder thereof or the application of the
provision to other persons not similarly situated or to other,
dissimilar circumstances. Through this rule, we adopt provisions that
are intended to and will operate independently of each other, even if
each serves the same general purpose or policy goal. Where a provision
is necessarily dependent on another, the context generally makes that
clear (such as by a cross-reference to apply the same standards or
requirements).
B. Summary of the Provisions of the Proposed Rule and Analysis of and
Responses to Public Comments
For convenience, 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, which is a
subset of what is ordinarily included under the term PAHP. Whenever
this document is referencing a PAHP that exclusively provides non-
emergency medical transportation services, it is specifically
identified as a ``Non-Emergency Medical Transportation (NEMT) PAHP.''
Throughout this document, the use of the term ``managed care plan''
includes managed care organizations (MCOs), prepaid inpatient health
plans (PIHPs), and prepaid ambulatory health plans (PAHPs) (as defined
above) and is used only when the provision under discussion applies to
all three arrangements. An explicit reference is used in the preamble
if the provision applies to primary care case managers (PCCMs) or PCCM
entities.
For CHIP, the preamble uses ``CHIP'' when referring collectively to
separate child health programs and title XXI Medicaid expansion
programs. We use ``separate CHIP'' specifically in reference to
separate child health programs and also in reference to any proposed
changes in subpart L of part 457, which are only applicable to separate
child health programs operating in a managed care delivery system. In
this final rule, all proposed changes to Medicaid managed care
regulations are equally applicable to title XXI Medicaid expansion
managed care programs as described at Sec. 457.1200(c).
We received a total of 415 timely comments from State Medicaid and
CHIP agencies, advocacy groups, health care providers and associations,
health insurers, managed care plans, health care associations, and the
general public. The following sections, arranged by subject area,
include a summary of the comments we received and our responses to
those comments. In response to the May 3, 2023 proposed rule, some
commenters chose to raise issues that were beyond the scope of our
proposals. In this final rule, we are not summarizing or responding to
those comments.
[[Page 41008]]
1. Access (42 CFR 438.2, 438.10, 438.66, 438.68, 438.206, 438.207,
438.214, 438.602, 457.1207, 457.1218, 457.1230, 457.1250, and 457.1285)
a. Enrollee Experience Surveys (Sec. Sec. 438.66(b), 438.66(c),
457.1230(b) and 457.1207)
In the 2016 final rule, we renamed and expanded Sec. 438.66 State
Monitoring Requirements to ensure that States had robust systems to
monitor their managed care programs, utilize the monitoring results to
make program improvements, and report to CMS annually the results of
their monitoring activities. Existing regulations at Sec. 438.66(c)(5)
require States to use the data collected from their monitoring
activities to improve the performance of their managed care programs,
including results from any enrollee or provider satisfaction surveys
conducted by the State or managed care plan. Some States currently use
surveys to gather direct input from their managed care enrollees, which
we believe is a valuable source of information on enrollees' actual and
perceived access to services. As a general matter, disparities in
access to care related to demographic factors such as race, ethnicity,
language, or disability status are, in part, a function of the
availability of the accessible providers who are willing to provide
care and are competent in meeting the needs of populations in medically
underserved communities. Surveys can focus on matters that are
important to enrollees and for which they are the best and, sometimes,
only source of information. Patient experience surveys can also focus
on how patients experienced or perceived key aspects of their care, not
just on how satisfied they were with their care. For example,
experience surveys can focus on asking patients whether or how often
they accessed health care, barriers they encountered in accessing
health care, and their experience including communication with their
doctors, understanding their medication instructions, and the
coordination of their health care needs. Some States already use
enrollee experience surveys and report that the data are an asset in
their efforts to assess whether the managed care program is meeting its
enrollees' needs.
One of the most commonly used enrollee experience survey in the
health care industry, including for Medicare Advantage (MA)
organizations, is the Consumer Assessment of Healthcare Providers and
Systems (CAHPS[supreg]).\21\ CAHPS experience surveys are available for
health plans, dental plans, and HCBS programs, as well as for patient
experience with providers such as home health, condition specific care
such as behavioral health, or facility-based care such as in a
hospital. Surveys specially designed to measure the impact of LTSS on
the quality of life and outcomes of enrollees are the National Core
Indicators-Aging and Disabilities (NCI-AD[supreg]) Adult Consumer
SurveyTM \22\ and the National Core Indicators[supreg]--
Intellectual and Developmental Disabilities (NCI-I/DD). Whichever
survey is chosen by a State, it should complement data gathered from
other network adequacy and access monitoring activities to provide the
State with a more complete assessment of their managed care programs'
success at meeting their enrollees' needs. To ensure that States'
managed care program monitoring systems, required at Sec. 438.66(a),
appropriately capture the enrollee experience, we proposed to revise
Sec. 438.66(b)(4) to explicitly include ``enrollee experience'' as
something that must be addressed under a State's managed care
monitoring system. Section 438.66(c)(5) currently requires States to
use the results from any enrollee or provider satisfaction surveys they
choose to conduct to improve the performance of its managed care
program. To ensure that States have the data from an enrollee
experience survey to include in their monitoring activities and improve
the performance of their managed care programs, we proposed to revise
Sec. 438.66(c)(5) to require that States conduct an annual enrollee
experience survey. To reflect this, we proposed to revise Sec.
438.66(c)(5) to add ``an annual'' before ``enrollee'' and add
``experience survey conducted by the State'' after ``enrollee.'' We
also proposed to replace ``or'' with ``and'' to be explicit that use of
provider survey results alone would not be sufficient to comply with
Sec. 438.66(c)(5). While we encourage States and managed care plans to
utilize provider surveys, we did not propose to mandate them at this
time. We believe other proposals in the proposed rule, such as enrollee
surveys and secret shopper surveys, may yield information that will
inform our decision on the use of provider surveys in the future. We
invited comment on whether we should mandate the use of a specific
enrollee experience survey, define characteristics of acceptable survey
instruments, and the operational considerations of enrollee experience
surveys States use currently.
---------------------------------------------------------------------------
\21\ The acronym ``CAHPS'' is a registered trademark of the
Agency for Healthcare Research and Quality.
\22\ NCI-AD Adult Consumer SurveyTM is a copyrighted
tool.
---------------------------------------------------------------------------
To reflect these proposals in MCPAR requirements at Sec.
438.66(e), we proposed conforming edits in Sec. 438.66(e)(2)(vii). We
proposed to include the results of an enrollee experience survey to the
list of items that States must evaluate in their report and add
``provider'' before ``surveys'' to distinguish them from enrollee
experience surveys. Additionally, consistent with the transparency
proposals described in section I.B.1.g. of this final rule, we proposed
to revise Sec. 438.66(e)(3)(i) to require that States post the report
required in Sec. 438.66(e)(1) on their website within 30 calendar days
of submitting it to CMS. Currently Sec. 438.66(e)(3)(i) only requires
that the report be posted on the State's website but does not specify a
timeframe; we believe that adding further specificity about the timing
of when the report should be posted will be helpful to interested
parties and bring consistency to this existing requirement. This
proposal is authorized by section 1902(a)(6) of the Act, which requires
that States provide reports, in such form and containing such
information, as the Secretary may from time to time require.
For an enrollee experience survey to yield robust, usable results,
it should be easy to understand, simple to complete, and readily
accessible for all enrollees that receive it; therefore, we believe
they should meet the interpretation, translation, and tagline criteria
in Sec. 438.10(d)(2). Therefore, we proposed to add enrollee
experience surveys as a document subject to the requirements in Sec.
438.10(d)(2). This will ensure that enrollees that receive a State's
enrollee experience survey will be fully notified that oral
interpretation in any language and written translation in the State's
prevalent languages will be readily available, and how to request
auxiliary aids and services, if needed.
These proposals are authorized by section 1932(b)(5) of the Act
which requires each managed care organization to demonstrate adequate
capacity and services by providing assurances to the State and CMS that
they have the capacity to serve the expected enrollment in their
service area, including assurances that they offer an appropriate range
of services and access to preventive and primary care services for the
population expected to be enrolled in such service area, and maintain a
sufficient number, mix, and geographic distribution of providers of
services. The authority for our proposals is extended to prepaid
inpatient health plans (PIHPs) and prepaid ambulatory health plans
(PAHPs) through
[[Page 41009]]
regulations based on our authority under section 1902(a)(4) of the Act.
Because enrollee experience survey results will provide direct and
candid input from enrollees, States and managed care plans could use
the results to determine if their networks offer an appropriate range
of services and access as well as if they provide a sufficient number,
mix, and geographic distribution of providers to meet their enrollees'
needs. Enrollee experience survey data will enable managed care plans
to assess whether their networks are providing sufficient capacity as
experienced by their enrollees and that assessment will inform the
assurances that the plan is required to provide to the State and CMS.
These proposals are also authorized by section 1932(c)(1)(A)(i) and
(iii) of the Act which require States that contract with MCOs to
develop and implement a quality assessment and improvement strategy
that includes: standards for access to care so that covered services
are available within reasonable timeframes and in a manner that ensures
continuity of care and adequate primary care and specialized services
capacity and procedures for monitoring and evaluating the quality and
appropriateness of care and services to enrollees and requirements for
provision of quality assurance data to the State. Data from enrollee
experience surveys will enable States to use the results to evaluate
whether their plans' networks are providing access to covered services
within reasonable timeframes and in a manner that ensures continuity of
care. These data will also inform the development and maintenance of
States' quality assessment and improvement strategies and will be
critical to States' monitoring and evaluation of the quality and
appropriateness of care and services provided to enrollees.
We remind States that in addition to the mandatory external quality
review (EQR) activities under Sec. 438.358(b), there is an existing
optional EQR activity under Sec. 438.358(c)(2) for the administration
or validation of consumer or provider surveys of quality of care.
States that contract with MCOs and use external quality review
organizations (EQROs) to administer or validate the proposed enrollee
experience surveys may be eligible to receive up to a 75 percent
enhanced Federal match, pursuant to Sec. 438.370, to reduce the
financial burden of conducting or validating the proposed enrollee
survey(s).
We requested comment on the cost and feasibility of implementing
enrollee experience surveys for each managed care program as well as
the extent to which States already use enrollee experience surveys for
their managed care programs.
We proposed that States would have to comply with Sec. 438.66(b)
and (c) no later than the first managed care plan rating period that
begins on or after 3 years after the effective date of the final rule
as we believe this is a reasonable timeframe for compliance. We
proposed this applicability date in Sec. 438.66(f).
Since we did not adopt MCPAR for separate CHIPs, we do not plan to
adopt the new Medicaid enrollee experience survey requirements proposed
at Sec. 438.66(b) and (c) for separate CHIPs. However, States
currently collect enrollee experience data for CHIP through annual
CAHPS surveys as required at section 2108(e)(4) of the Act. Currently,
there are no requirements for States to use these data to evaluate
their separate CHIP managed care plans network adequacy or to make
these survey results available to beneficiaries to assist in selecting
a managed care plan. We believed that enrollee experience data can
provide an invaluable window into the performance of managed care plans
and assist States in their annual review and certification of network
adequacy for separate CHIP MCOs, PIHPs, and PAHPs. For this reason, we
proposed to amend Sec. 457.1230(b) to require States to evaluate
annual CAHPS survey results as part of the State's annual analysis of
network adequacy as described in Sec. 438.207(d). Since States already
collect CAHPS survey data for CHIP and will likely not need the same
timeframe to implement as needed for implementing the proposed Medicaid
enrollee experience surveys requirement, we proposed for the provision
at Sec. 457.1230(b) to be applicable 60 days after the effective date
of the final rule. However, we are open to a later applicability date
such as 1, 2, or 3 years after the effective date of the final rule. We
invited comment on the appropriate applicability date for this
provision.
We also believe that access to enrollee experience data is critical
in affording separate CHIP beneficiaries the opportunity to make
informed decisions when selecting their managed care plan(s). To this
end, we proposed at Sec. 457.1207 to require States to post
comparative summary results of CAHPS surveys by managed care plan
annually on State websites as described at Sec. 438.10(c)(3). The
posted summary results must be updated annually and allow for easy
comparison between the managed care plans available to separate CHIP
beneficiaries. We sought public comment on other approaches to
including CHIP CAHPS survey data for the dual purposes of improving
access to managed care services and enabling beneficiaries to have
useful information when selecting a managed care plan.
We summarize and respond to public comments received on Enrollee
experience surveys (Sec. Sec. 438.66(b) and (c), and 457.1230(b))
below.
Comment: We received many supportive comments on our proposal for
States to conduct an annual enrollee experience survey. Commenters
agreed that enrollees are often the best source of information about
their care and best able to provide insights about how to improve the
quality of the care they receive. Many commenters were particularly
supportive of requiring written survey materials to comply with the
interpretation, translation, and tagline criteria in Sec. 438.10(d)(2)
so that surveys are fully accessible and easy to read and understand.
Many commenters also supported reporting the results in the MCPAR and
requiring States to post them on their website within 30 days of
submission.
Response: We appreciate the comments in support of our proposal for
annual enrollee surveys and the applicability of Sec. 438.10(d)(2) to
facilitate participation by enrollees that require reasonable
accommodations and interpretation or translation. We believe this will
be critical to helping enrollees respond to the surveys and produce
more robust and actionable results. We also appreciate the confirmation
that including the survey results in the MCPAR and posting them on the
State's website timely is the best option to make the results
consistently presented and available.
Comment: A few commenters encouraged CMS to require States to
include a representative sample of enrollees who are dually eligible
for Medicaid and Medicare, in marginalized populations, or had chronic
conditions in the experience surveys and require that results be
disaggregated by population and other key demographics. Several
commenters recommended that we ensure that surveys are not too long,
the questions are not too complex, and that the survey is distributed
and available in multiple ways (mailing, phone, or email).
Response: We thank commenters for these thoughtful suggestions and
encourage States to utilize them to improve the comprehensiveness and
utility of the survey results. We may consider some of these
suggestions in future rulemaking.
Comment: Some commenters stated that the proposed annual enrollee
[[Page 41010]]
experience survey would be duplicative of other surveys currently done
by States and would contribute to enrollee survey fatigue. Commenters
offered several suggestions, including not requiring an annual survey
and letting States choose the cadence, as well as aligning Medicare and
Medicaid surveys particularly for aligned plans. One commenter
suggested that States be permitted to use surveys administered by their
managed care plans while another recommended that States use
independent survey vendors.
Response: We understand commenters' concerns about survey fatigue
for enrollees and the downward impact that could have on response
rates. After considering the comments, we are finalizing Sec.
438.66(c)(5) with an exemption for Medicaid managed care plans in which
all enrollees are enrolled in a Medicare Advantage (MA) dual eligible
special needs plan (D-SNP) subject to the condition in Sec.
422.107(e)(1)(i). In such circumstances, we already require annual
CAHPS surveys for enrollees in D-SNPs, and all enrollees sampled for
the CAHPS survey would be dually eligible individuals within the same
State. Where States choose not to conduct an experience survey based on
this exemption, the requirement still applies at Sec. 438.66(c) that
States use data to improve the performance of their Medicaid managed
care programs, but when all enrollees are enrolled in a D-SNP subject
to the condition in Sec. 422.107(e)(1)(i), the data on enrollee
experiences would come from the D-SNP's CAHPS results. States can
require through the State Medicaid agency contract at Sec. 422.107
that D-SNPs share CAHPS results with the State.
Allowing States to utilize existing annual experience surveys will
reduce the risk of survey fatigue and enable the collection of annual
experience surveys without placing an unreasonable demand on enrollees.
Comment: Some commenters encouraged CMS to also require States to
survey providers as part of their annual surveying process to provide
accurate information on root-cause analyses for issues with access.
Commenters suggested the creation and administration of a family
caregiver experience survey, the inclusion of questions directly
related to mental health access or preferences for in-person services
vs. telehealth services, and population specific surveys. A commenter
recommended that CMS specify that the survey instrument must assess MCO
performance for customer service, provider access, availability of
benefits, any out-of-pocket cost burden, and the availability of
language services and disability accommodations.
Response: We thank commenters for these suggestions and encourage
States to consider including these in their monitoring and oversight
strategy. Provider surveys, while not required at this time, can be a
rich source of information on managed care plan performance on topics
that enrollees cannot provide. We encourage States to use robust
provider surveys as a complement to enrollee surveys to capture a
comprehensive view of the operations of their managed care programs. We
believe the additional topic areas or surveys suggested by commenters
would enable States to collect new types of information to better
inform their monitoring and oversight activities.
Comment: Some commenters recommended that CMS mandate a specific
survey instrument such as CAHPS[supreg] while some other commenters
stated that CMS should not specify a survey instrument and give States
the flexibility to use surveys that capture the topic areas most
relevant to their programs. Others recommended requiring CAHPS to
reduce burden and improve comparability, although some commenters noted
increasing concerns with low response rates to CAHPS surveys. Some
commenters noted that many States have been doing experience surveys
for years and have refined their questions over time to gather the most
valuable and needed data. A few commenters suggested that, at a
minimum, CMS should define characteristics of an acceptable survey or
develop evidence-based questions that States can use in their surveys.
A few commenters stated that given the prevalent and successful
adoption of National Core Indicators[supreg]--Intellectual and
Developmental Disabilities (NCI-I/DD) and National Core Indicators--
Aging and Disabilities (NCI-ADTM), CMS should align
expectations for the experience of care surveys for managed care with
the approved HCBS measure set, including NCI. One commenter requested
that CMS provide technical guidance on the sample methodology, targets
for the consumer satisfaction index, and the baseline template for an
enrollee experience survey.
Response: While we understand the concern about comparability among
States, we believe that States capturing information that is specific
to their programs and populations is critical for these surveys to
inform the development and execution of effective monitoring and
oversight activities. We expect that enrollee survey responses that are
detailed and specific will be more likely to be utilized by States to
make program improvements as required in Sec. 438.66(c). Standardized
surveys such as CAHPS, NCI-I/DD, and NCI-AD may be sufficient for
monitoring, oversight, and quality improvement activities of some
programs, but not others, such as those with a narrow set of
populations or benefits. As such, we believe we should allow States to
select the enrollee experience survey that will best aid in their
monitoring, oversight, and quality improvement activities. At this
time, we do not believe we should define minimum survey characteristics
or satisfaction index, develop evidence-based questions, or provide a
template. Rather, we will monitor implementation of this requirement
and may propose to revise Sec. 438.66 to include this type of detail
in future rulemaking. Furthermore, the MAC QRS as specified in Sec.
438.510, is requiring the full CAHPS Health Plan survey (both Adult and
Child Surveys) in the initial mandatory measure set for the plans
included in the MAC QRS. (See section I.B.6.e.) The CAHPS survey in the
MAC QRS is a standardized instrument through which beneficiaries
provide information about their experience with their managed care
plan. The MAC QRS itself will, once it is implemented by all States
that contract with an applicable managed care plan, provide
standardized information and quality performance data to support users
in comparing enrollee experience data for Medicaid (and/or CHIP)
managed care plans available within a State and in making comparisons
among plans with similar benefits across States.
Comment: One commenter recommended that States be required to
collect enrollees' preferred languages during the Medicaid enrollment
process and share it with plans so that enrollee surveys may be
administered in the relevant language.
Response: We acknowledge that collecting preferred languages is
ideally done at the time of eligibility determination or enrollment.
However, applicants are not legally required to provide that
information. As such, States and managed care plans should attempt to
collect the information whenever they are in contact with an enrollee
and store the information in their system so that any information
provided to enrollees, including experience surveys, is in their
preferred language.
Comment: One commenter requested that States with small percentages
of enrollees in managed care be exempted from conducting an enrollee
experience survey.
[[Page 41011]]
Response: We do not agree that States with small managed care
programs should be exempted from conducting an enrollee experience
survey. Regardless of the number of enrollees in a program, their
direct input is valuable to States and managed care plans to ensure
that they are meeting the needs of their covered populations.
Comment: One commenter suggested that States share information
gathered from enrollee experience surveys with managed care plans to
support continuous improvement in enrollee experiences across all
plans.
Response: We agree and, although summary results will be provided
by States in their annual MCPARs (which are published on their websites
as required in 42 CFR 438.66(e)(3)(i)), we encourage States to share
the detailed response data with their plans as soon as they are
available. Improving managed care programs and enrollees' experience is
a shared responsibility between CMS, the State, and its managed care
plans and that is best fulfilled through collaboration and shared
goals.
Comment: One commenter suggested that States be permitted to use
surveys administered by their managed care plans while another
recommended that States use independent survey vendors.
Response: States may elect to use an independent survey vendor;
however, we decline to finalize that requirement in this rule to avoid
additional burden on States. We will evaluate the results of the
enrollee experience surveys and may use that information to inform
future policy. We are finalizing Sec. 438.66(c)(5) as a State
obligation to facilitate consistency in administration within managed
care programs. However, we will evaluate survey results and may revisit
this policy in future rulemaking.
Comment: One commenter recommended that enhanced FFP be made
available to cover the cost of administering the secret shopper
surveys.
Response: We do not have the authority to provide enhanced FFP as
the level of FFP available for Medicaid expenditures is specified in
statute.
Comment: One commenter supported requiring States to include their
most recent CHIP CAHPS survey results in their annual analysis of
network adequacy and to post comparative summary results of CAHPS
surveys by managed care plan annually on State websites to be
applicable 60 days after the effective date of the final rule.
Response: We appreciate the support for our applicability date
proposal.
Comment: Many commenters recommended that CMS delay the
requirements to post CHIP CAHPS survey results and evaluate network
adequacy requirements as described in Sec. Sec. 457.1207 and
457.1230(b), respectively. The commenters stated concerns about State
administrative burden (that is, staff training) and the additional time
needed for States to disaggregate Medicaid and CHIP data. Commenters
recommended a range of implementation timelines, from 1 to 2 years
following the effective date of the final rule. Another commenter noted
that they do not believe they will be able to meet the proposed
deadline for posting CHIP CAHPS survey results without technical
assistance from CMS.
Response: We appreciate the commenters' suggestion to extend the
implementation deadline for these provisions and recognize the
administrative burden these proposals may put on States. After
consideration of the public comments we received, we are finalizing an
implementation date of 2 years after the effective date of the final
rule for the proposals at Sec. Sec. 457.1230(b) and 457.1207. We
believe extending the implementation date to 2 years following the
effective date of the final rule will provide States with adequate time
to conduct the network adequacy analysis. As always, we are available
to provide technical assistance if needed.
Comment: Many commenters supported our proposal to post CHIP CAHPS
survey data. Specifically, one commenter noted MCOs serving Medicaid
populations already participate in the CHIP CAHPS survey to capture
feedback from enrollees. The commenter noted that they believe that
leveraging the CAHPS survey would improve comparability across plans
while minimizing the administrative burden on plans to implement a new
survey.
Response: We appreciate the robust number of comments in support of
our proposal to require posting of comparative CHIP enrollee survey
experience information by MCO. We agree that capturing information that
is specific to each State's programs and populations is critical to
inform the development and execution of effective monitoring and
oversight activities.
Comment: One commenter had concerns about the administrative burden
of collecting and reporting CHIP enrollee information in CHIP CAHPS
surveys because low enrollment may make it challenging for States to
collect statistically representative data at the subgroup level. The
commenter recommended that States sample a sufficient number of
beneficiaries to ensure survey results are representative while
weighing considerations related to cost-effectiveness.
Response: We understand the commenter's concern and acknowledge the
administrative burden of collecting and reporting this information. We
note that our minimum enrollment threshold policy at 438.515(a)(1)(i)
for Medicaid, incorporated into separate CHIP regulations through a
cross-reference at Sec. 457.1240(d), requires States to collect data
from contracted managed care plans that have 500 or more enrollees. We
will provide guidance on when quality ratings should be suppressed due
to lower enrollment in the technical resource manual. We believe CHIP
CAHPS surveys are an important tool that States, and managed care plans
can use to ensure they are meeting the needs of their covered
populations regardless of program size.
After consideration of the public comments we received, we are
finalizing Sec. Sec. 438.66(b), and (f), and 457.1230(b) as proposed,
except that we are finalizing an implementation date of 2 years after
the effective date of the final rule for the proposals at Sec. Sec.
457.1230(b) and 457.1207. We are also finalizing Sec. 438.66(c)(5) to
permit States to use a CAHPS survey as required for Medicare Advantage
D-SNPs.
b. Appointment Wait Time Standards (Sec. Sec. 438.68(e) and 457.1218)
In the 2020 final rule, we revised Sec. 438.68(b)(1) and (2) by
replacing the requirement for States to set time and distance standards
with a more flexible requirement that States set a quantitative network
adequacy standard for specified provider types. We noted that
quantitative network adequacy standards that States may elect to use
included 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
encouraged 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. (85 FR 72802)
Ensuring that it provides timely access to high-quality services in
a manner that is equitable and consistent is central to an effective
Medicaid and CHIP program. States and managed care plans have sometimes
been challenged
[[Page 41012]]
to ensure that networks can provide all covered services in a timely
manner.\23\ During the PHE, managed care plans faced many new
challenges ensuring access to covered services and those challenges
shed light on opportunities for improvement in monitoring timely
access. These challenges include workforce shortages, changes in
providers' workflows and operating practices, providers relocating
leaving shortages in certain areas, and shifts in enrollee utilization
such as delaying or forgoing preventive care. Some of these challenges
have changed the delivery of health care services, requiring States and
managed care plans to adjust their monitoring, evaluation, and planning
strategies to ensure equitable access to all covered services.
---------------------------------------------------------------------------
\23\ https://oig.hhs.gov/oei/reports/oei-02-11-00320.pdf;
https://oig.hhs.gov/oei/reports/oei-02-13-00670.pdf.
---------------------------------------------------------------------------
On February 17, 2022, we issued a request for information \24\
(RFI) soliciting public input on improving access in Medicaid and CHIP,
including ways to promote equitable and timely access to providers and
services. Barriers to accessing care represented a significant portion
of comments received, with common themes related to providers not
accepting Medicaid and recommendations calling for us to set specific
quantitative access standards. Many commenters urged us to consider
developing a Federal standard for timely access to providers and
services but giving State Medicaid and CHIP agencies the flexibility to
impose more stringent requirements. A recently published study \25\
examined the extent to which Medicaid managed care plan networks may
overstate the availability of physicians in Medicaid and evaluated the
implications of discrepancies in the ``listed'' and ``true'' networks
for beneficiary access. The authors concluded that findings suggest
that current network adequacy standards might not reflect actual access
and that new methods are needed that account for physicians'
willingness to serve Medicaid patients. Another review of 34 audit
studies demonstrated that Medicaid is associated with a 1.6-fold lower
likelihood in successfully scheduling a primary care appointment and a
3.3-fold lower likelihood in successfully scheduling a specialty
appointment when compared with private insurance.\26\
---------------------------------------------------------------------------
\24\ CMS Request for Information: Access to Coverage and Care in
Medicaid & CHIP. February 2022. For a full list of question from the
RFI, see https://www.medicaid.gov/medicaid/access-care/downloads/access-rfi-2022-questions.pdf.
\25\ https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2021.01747.
\26\ W. Hsiang, A. Lukasiewicz, and M. Gentry, ``Medicaid
Patients Have Greater Difficulty Scheduling Health Care Appointments
Compared With Private Insurance Patients: A Meta-Analysis,'' SAGE
Journals, April 5, 2019, available at https://journals.sagepub.com/doi/full/10.1177/0046958019838118.
---------------------------------------------------------------------------
Based on the RFI comments received, research, engagement with
interested parties, and our experience in monitoring State managed care
programs, we are persuaded about the need for increased oversight of
network adequacy and overall access to care and proposed a new
quantitative network adequacy standard. Specifically, we proposed to
redesignate existing Sec. 438.68(e) regarding publication of network
adequacy standards to Sec. 438.68(g) and create a new Sec. 438.68(e)
titled ``Appointment wait time standards.''
At Sec. 438.68(e)(1)(i) through (iv), we proposed that States
develop and enforce wait time standards for routine appointments for
four types of services: outpatient mental health and substance use
disorder (SUD)--adult and pediatric, primary care--adult and pediatric,
obstetrics and gynecology (OB/GYN), and an additional type of service
determined by the State (in addition to the three listed) in an
evidence-based manner for Medicaid. We included ``If covered in the
MCO's, PIHP's, or PAHP's contract'' before the first three service
types (paragraphs (e)(1)(i) through (iii)) to be clear that standards
only need to be developed and enforced if the service is covered by the
managed care plan's contract, but the fourth service (paragraph
(e)(1)(iv)) must be one that is covered by the plan's contract. For
example, we understand that primary care and OB/GYN services are likely
not covered by a behavioral health PIHP; therefore, a State will not be
required to set appointment wait time standards for primary care and
OB/GYN providers for the behavioral health PIHP and will only have to
set appointment wait time standards for mental health and SUD
providers, as well as one State-selected provider type. To ensure that
our proposal to have States set appointment wait time standards for
mental health and SUD, as well as one State-selected provider type for
behavioral PIHPs and PAHPs is feasible, we requested comment on whether
behavioral health PIHPs and PAHPs include provider types other than
mental health and SUD in their networks. Although we believe behavioral
health PIHPs and PAHPs may include other provider types, we wanted to
validate our understanding. We proposed to adopt the proposed wait time
standards for separate CHIP through an existing cross-reference at
Sec. 457.1218. We proposed primary care, OB/GYN, and mental health and
SUD because they are indicators of core population health; therefore,
we believe requiring States to set appointment wait time standards for
them will have the most impact on access to care for Medicaid and CHIP
managed care enrollees.
At Sec. 438.68(e)(1)(iv), we proposed that States select a
provider type in an evidence-based manner to give States the
opportunity to use an appointment wait time standard to address an
access challenge in their local market. We did not propose to specify
the type of evidence to be used; rather, we defer to States to consider
multiple sources, such as encounter data, appeals and grievances, and
provider complaints, as well as to consult with their managed care
plans to select a provider type. We believe proposing that States
select one of the provider types subject to an appointment wait time
standard will encourage States and managed care plans to analyze
network gaps effectively and then innovate new ways to address the
challenges that impede timely access. States will identify the provider
type(s) they choose in existing reporting in MCPAR, per Sec.
438.66(e), and the Network Adequacy and Access Assurances Report
(NAAAR), per Sec. 438.207(d).
To be clear that the appointment wait time standards proposed in
Sec. 438.68(e) cannot be the quantitative network adequacy standard
required in Sec. 438.68(b)(1), we proposed to add ``. . . , other than
for appointment wait times . . .'' in Sec. 438.68(b)(1). We did not
propose to define routine appointments in this rule; rather, we defer
to States to define it as they deem appropriate. We encouraged States
to work with their managed care plans and their network providers to
develop a definition of ``routine'' that will reflect usual patterns of
care and current clinical standards. We acknowledged that defining
``urgent'' and ``emergent'' for appointment wait time standards could
be much more complex given the standards of practice by specialty and
the patient-specific considerations necessary to determine those
situations. We invited comments on defining these terms should we
undertake additional rulemaking in the future. We clarified that
setting appointment wait time standards for routine appointments as
proposed at Sec. 438.68(e)(1) will be a minimum; States are encouraged
to set additional appointment wait time standards for other types of
[[Page 41013]]
appointments. For example, States may consider setting appointment wait
time standards for emergent or urgent appointments as well.
To provide States with flexibility to develop appointment wait time
standards that reflect the needs of their Medicaid and CHIP managed
care populations and local provider availability while still setting a
level of consistency, we proposed maximum appointment wait times at
Sec. 438.68(e)(1): State developed appointment wait times must be no
longer than 10 business days for routine outpatient mental health and
substance use disorder appointments at Sec. 438.68(e)(1)(i) and no
longer than 15 business days for routine primary care at Sec.
438.68(e)(1)(ii) and OB/GYN appointments at Sec. 438.68(e)(1)(iii). We
did not propose a maximum appointment wait time standard for the State-
selected provider type. These proposed maximum timeframes were informed
by standards for individual health insurance coverage offered through
Federally-Facilitated Marketplaces (FFMs) established under the
Affordable Care Act that will begin in 2025 of 10 business days for
behavioral health and 15 business days for primary care services; we
noted that we elected not to adopt the FFMs' appointment wait time
standard of 30 business days for non-urgent specialist appointments as
we believe focusing on primary care, OB/GYN, and mental health and SUD
is the most appropriate starting place for Medicaid and CHIP managed
care standards. These proposed timeframes were also informed by
engagement with interested parties, including comments in response to
the RFI. We proposed to require appointment wait times for routine
appointments only in this rule as we believe that providers utilize
more complex condition and patient-specific protocols and clinical
standards of care to determine scheduling for urgent and emergent care.
We may address standards for other types of appointments in future
rulemaking and hope that information from the use of appointment wait
time standards for routine appointments will inform future proposals.
In developing this proposal, we considered appointment wait time
standards between 30 calendar days and 45 calendar days. Some
interested parties stated that these standards would be more
appropriate for routine appointments and would more accurately reflect
current appointment availability for most specialties. However, we
believe 30 calendar days and 45 calendar days as the maximum wait time
may be too long as a standard; we understand it may be a realistic
timeframe currently for some specialist appointments, but we were not
convinced that they should be the standard for outpatient mental health
and SUD, primary care, and OB/GYN appointments. We invited comment on
aligning with FFM standards at 10 and 15 business days, or whether wait
time standards should differ, and if so, what standards will be the
most appropriate.
To make the appointment wait time standards as effective as
possible, we deferred to States on whether and how to vary appointment
wait time standards for the same provider type; for example, by adult
versus pediatric, telehealth versus in-person, geography, service type,
or other ways. However, we proposed that wait time standards must, at a
minimum, reflect the timing proposed in Sec. 438.68(e)(1). We
encouraged States to consider the unique access needs of certain
enrollees when setting their appointment wait time standards to
facilitate obtaining meaningful results when assessing managed care
plan compliance with the standards.
As a general principle, we sought to align across Medicaid managed
care, CHIP managed care, the FFMs, and Medicare Advantage (MA) when
reasonable to build consistency for individuals who may change coverage
over time and to enable more effective and standardized comparison and
monitoring across programs. Proposing 90 percent compliance with a 10-
and 15-business day maximum appointment wait time standards will be
consistent with standards set for qualified health plans (QHPs) on the
FFMs for plan year 2025.\27\ However, we note that for MA, CMS expects
MA plans to set reasonable standards for primary care services for
urgently needed services or emergencies immediately; services that are
not emergency or urgently needed, but in need of medical attention
within one week; and routine and preventive care within 30 days.\28\
---------------------------------------------------------------------------
\27\ 45 CFR 156.230(a)(2)(i)(B); Draft 2025 Letter to Issuers in
the Federally-facilitated Exchanges, chapter 2, section 3.iii.b,
available at https://www.cms.gov/files/document/2025-draft-letter-issuers-11-15-2023.pdf.
\28\ MCM Chapter 4 (www.cms.gov).
---------------------------------------------------------------------------
To ensure that managed care plans' contracts reflect their
obligation to comply with the appointment wait time standards, we
proposed to revise Sec. 438.206(c)(1)(i) to include appointment wait
time standards as a required provision in MCO, PIHP, and PAHP contracts
for Medicaid, which is included in separate CHIP regulations through an
existing cross-reference at Sec. 457.1230(a). We believe this was
necessary since our proposal at Sec. 438.68(e)(1) to develop and
enforce appointment wait time standards is a State responsibility; this
revision to Sec. 438.206(c)(1)(i) will specify the corresponding
managed care plan responsibility.
We proposed to revise the existing applicability date in Sec.
438.206(d) for Medicaid, which is applicable for separate CHIPs through
an existing cross-reference at Sec. 457.1230(a) and a proposed cross-
reference at Sec. 457.1200(d), to reflect that States will have to
comply with Sec. 438.206(c)(1)(i) no later than the first managed care
plan rating period that begins on or after 4 years after the effective
date of the final rule. We believe this is a reasonable timeframe for
compliance.
Current requirements at Sec. 438.68(c)(1) and (2) for Medicaid,
and through a cross-reference at Sec. 457.1218 for separate CHIP,
direct States to consider 12 elements when developing their network
adequacy standards. We reminded States that Sec. 438.68(c)(1)(ix)
includes the availability and use of telemedicine, e-visits, and/or
other evolving and innovative technological solutions as an element
that States must consider when developing their network adequacy
standards. Services delivered via telehealth seek to improve a
patient's health through two-way, real time interactive communication
between the patient and the provider. Services delivered in this manner
can, for example, be used for assessment, diagnosis, intervention,
consultation, and supervision across distances. Services can be
delivered via telehealth across all populations served in Medicaid
including, but not limited to children, individuals with disabilities,
and older adults. States have broad flexibility to cover telehealth
through Medicaid and CHIP, including the methods of communication (such
as telephonic or video technology commonly available on smart phones
and other devices) to use.\29\ States need to balance the use of
telehealth with the availability of providers that can provide in-
person care and enrollees' preferences for receiving care to ensure
that they establish network adequacy standards under Sec. 438.68 that
accurately reflect the practical use of both types of care in their
State. Therefore, States should review encounter data to gauge
telehealth use by enrollees over time and the availability of
telehealth appointments by providers and account for that information
when developing
[[Page 41014]]
their appointment wait time standards. We also reminded States that
they have broad flexibility for covering services provided via
telehealth and may wish to include quantitative network adequacy
standards or specific appointment wait time standards for telehealth in
addition to in-person appointment standards, as appropriate based on
current practices and the extent to which network providers offer
telehealth services. Although States have broad flexibility in this
area, we reminded States of their responsibility under section 504 of
the Rehabilitation Act and section 1557 of the Affordable Care Act to
ensure effective communications for patients with disabilities for any
telehealth services that are offered and to provide auxiliary aids and
services at no cost to the individual to ensure that individuals with
disabilities are able to access and utilize services provided via
telehealth; we also reminded States of their responsibilities under
Title VI of the Civil Rights Act of 1964, including the obligation to
take reasonable steps to ensure meaningful language access for persons
with limited English proficiency when providing telehealth
services.\30\
---------------------------------------------------------------------------
\29\ https://www.medicaid.gov/medicaid/benefits/downloads/medicaid-chip-telehealth-toolkit.pdf.
\30\ U.S. Department of Justice, Civil Rights Division and
Department of Health and Human Services, Office for Civil Rights,
``Guidance on Nondiscrimination in Telehealth: Federal Protections
to Ensure Accessibility to People with Disabilities and Limited
English Proficient Persons,'' July 29, 2022, available online at
https://www.hhs.gov/civil-rights/for-individuals/disability/guidance-on-nondiscrimination-in-telehealth/index.html.
---------------------------------------------------------------------------
Current Medicaid regulations at Sec. 438.68(e), and through a
cross-reference at Sec. 457.1218 for separate CHIP, require States to
publish the network adequacy standards required by Sec. 438.68(b)(1)
and (2) on their websites and to make the standards available upon
request at no cost to enrollees with disabilities in alternate formats
or through the provision of auxiliary aids and services. To ensure
transparency and inclusion of the new proposed appointment wait time
standards in this provision, we proposed several revisions: to
redesignate Sec. 438.68(e) to Sec. 438.68(g); to replace ``and'' with
a comma after ``(b)(1);'' add ``(b)'' before ``(2)'' for clarity; and
add a reference to (e) after ``(b)(2).'' We believe these changes make
the sentence clearer and easier to read. Lastly, Sec. 438.68(e)
currently includes ``. . . the website required by Sec. 438.10.'' For
additional clarity in redesignated Sec. 438.68(g), we proposed to
replace ``438.10'' with ``Sec. 438.10(c)(3)'' to help readers more
easily locate the requirements for State websites. These proposed
changes apply equally to separate CHIP managed care through existing
cross-references at Sec. Sec. 457.1218 and 457.1207.
At Sec. 438.68(e)(2), which is included in separate CHIP
regulations through an existing cross-reference at Sec. 457.1218, we
proposed that managed care plans will be deemed compliant with the
standards established in paragraph (e)(1) when secret shopper results,
described in section I.B.1.c. of this final rule, reflect a rate of
appointment availability that meets State established standards at
least 90 percent of the time. By proposing a minimum compliance rate
for appointment wait time standards, we will provide States with
leverage to hold their managed care plans accountable for ensuring that
their network providers offer timely appointments. Further, ensuring
timely appointment access 90 percent of the time will be an important
step toward helping States ensure that the needs of their Medicaid and
CHIP populations are being met timely. As with any provision of part
438 and subpart L of part 457, we may require States to take corrective
action to address noncompliance.
To ensure that appointment wait time standards will be an effective
measure of network adequacy, we believe we needed some flexibility to
add provider types to address new access or capacity issues at the
national level. Therefore, at Sec. 438.68(e)(3), which is included in
separate CHIP regulations through an existing cross-reference at Sec.
457.1218, we proposed that CMS may select additional types of
appointments to be added to Sec. 438.68(e)(1) after consulting with
States and other interested parties and providing public notice and
opportunity to comment. From our experience with the COVID-19 PHE, as
well as multiple natural disasters in recent years, we believe it
prudent to explicitly state that we may utilize this flexibility as we
deem appropriate in the future.
We recognized that situations may arise when an MCO, PIHP, or PAHP
may need an exception to the State established provider network
standards, including appointment wait times. Prior to this final rule,
Sec. 438.68(d) provided that, to the extent a State permitted an
exception to any of the provider-specific network standards, the
standard by which an exception will be evaluated and approved must be
specified in the MCO, PIHP, or PAHP contract and must be based, at a
minimum, on the number of providers in that specialty practicing in the
MCO's, PIHP's, or PAHP's service area. We proposed to make minor
grammatical revisions to Sec. 438.68(d)(1) by deleting ``be'' before
the colon and inserting ``be'' as the first word of Sec.
438.68(d)(1)(i) and (ii), which is included in separate CHIP
regulations through an existing cross-reference at Sec. 457.1218. We
also proposed to add a new standard at Sec. 438.68(d)(1)(iii) for
Medicaid, and through an existing cross-reference at Sec. 457.1218 for
separate CHIP, for reviews of exception requests, which will require
States to consider the payment rates offered by the MCO, PIHP, or PAHP
to providers included in the provider group subject to the exception.
Managed care plans sometimes have difficulty building networks that
meet network adequacy standards due to low payment rates. We believe
that States should consider whether this component is a contributing
factor to a plan's inability to meet the standards required by Sec.
438.68(b)(1) and (2) and (e), when determining whether a managed care
plan should be granted an exception. We reminded States of their
obligation at Sec. 438.68(d)(2) to monitor enrollee access on an
ongoing basis to the provider types in managed care networks that
operate under an exception and report their findings as part of the
annual Medicaid MCPAR required at Sec. 438.66(e).
Our proposal for States to develop and enforce appointment wait
time standards proposed at Sec. 438.68(e) and the accompanying secret
shopper surveys of plan's compliance with them (described in section
I.B.1.c. of this final rule) proposed at Sec. 438.68(f) are authorized
by section 1932(b)(5) of the Act, and is extended to PIHPs and PAHPs
through regulations based on our authority under section 1902(a)(4) of
the Act, and authorized for CHIP through section 2103(f)(3) of the Act.
We believed that secret shopper surveys could provide unbiased,
credible, and representative data on how often network providers are
offering routine appointments within the State's appointment wait time
standards and these data will aid managed care plans as they assess
their networks, under Sec. 438.207(b), and provide an assurance to
States that their networks have the capacity to serve the expected
enrollment in their service area and that it offers appropriate access
to preventive and primary care services for their enrollees. States
should find the results of the secret shopper surveys a rich source of
information to assess compliance with the components of their quality
strategy that address access to care and determine whether covered
services are available within reasonable timeframes, as required in
section 1932(c)(1)(A)(i) of the Act and required
[[Page 41015]]
for CHIP through section 2103(f)(3) of the Act.
Section 1932(d)(5) of the Act requires that, no later than July 1,
2018, contracts with MCOs and PCCMs, as applicable, must include a
provision that providers of services or persons terminated (as
described in section 1902(kk)(8) of the Act) from participation under
this title, title XVIII, or title XXI must be terminated from
participating as a provider in any network. Although States have had to
comply with this provision for several years, we believe we should
reference this important provision in 42 CFR part 438, as well as use
our authority under section 1902(a)(4) of the Act to apply it to PIHPs
and PAHPs. To do this, we proposed a new Sec. 438.214(d)(2) to reflect
that States must ensure through their MCO, PIHP, and PAHP contracts
that providers of services or persons terminated (as described in
section 1902(kk)(8) of the Act) from participation under this title,
title XVIII, or title XXI must be terminated from participating as a
provider in any Medicaid managed care plan network.
We proposed that States comply with Sec. 438.68(b)(1), (e), and
(g) no later than the first MCO, PIHP, or PAHP rating period that
begins on or after 3 years after the effective date of the final rule
as we believe this is a reasonable timeframe for compliance. We
proposed that States comply with Sec. 438.68(f) no later than the
first MCO, PIHP, or PAHP rating period that begins on or after 4 years
after the effective date of the final rule. We proposed that States
comply with Sec. 438.68(d)(1)(iii) no later than the first MCO, PIHP,
or PAHP rating period that begins on or after 2 years after the
effective date of the final rule. We have proposed these applicability
dates in Sec. 438.68(h) for Medicaid, and for separate CHIPs through
an existing cross-reference at Sec. 457.1218 and a proposed cross-
reference at Sec. 457.1200(d).
We summarize and respond to public comments received on appointment
wait time standards (Sec. Sec. 438.68(e) and 457.1218) below.
Comment: Many commenters supported our proposals related to
appointment wait time standards in Sec. 438.68(e) for Medicaid, and
through cross-reference at Sec. 457.1218 for separate CHIPs, and
affirmed that development and enforcement of appointment wait times
would contribute to improved access to enrollees.
Response: We appreciate the support for our proposals and believe
that appointment wait time standards will complement the quantitative
network adequacy standards already implemented and enrich the data
available to States for monitoring access to care.
Comment: Many commenters supported requiring appointment wait time
standards but suggested that 10- and 15-business days may not be the
appropriate standards. Most commenters that offered alternatives
recommended either 30 business days--which is consistent with Medicare
Advantage for routine appointments--or 30- and 45-days. A few
recommended other maximum timeframes as high as 90 days. Some
commenters stated that although aligning Medicaid managed care wait
time standards with those of the FFMs seems a reasonable approach given
the churn between the programs, the FFMs have not yet implemented the
10- and 15-business day standards so there is no data to verify whether
they are realistic. A few commenters noted that they believe that
Medicaid standards should not be significantly shorter than the average
wait time for physician services in the United States generally. One
commenter recommended that CMS collect data to calculate a baseline
over a multi-year period and then use that to inform the development of
a benchmark for improved access that is both feasible and meaningful.
Response: We appreciate the many comments on our 10- and 15-
business day appointment wait time proposal. In developing this
proposal, we considered other appointment wait time standards including
30 business days and 45 business days. However, we believe 30 business
days and 45 business days as the maximum wait time may be too long as a
standard; we understand it may be a realistic timeframe currently for
other types of appointments but we were not convinced that they should
be the standard for outpatient mental health and SUD, primary care, and
OB/GYN appointments as these appointment types are the most commonly
used, are indicators of core population health, and very often prevent
the need for urgent or emergent care. We acknowledge that we do not yet
have compliance data from the FFMs to substantiate that 10- and 15-
business day appointment wait time standards are achieveable or
appropriate for Medicaid and CHIP managed care programs. However, we
believe that any alignment with the FFMs strengthens managed care plan
and provider performance due to the high overlap between the programs.
Many issuers offering QHPs also offer Medicaid and CHIP managed care
plans and may be able to find efficiencies in their policies and
practices. Similarly, payers that have QHPs and Medicaid and CHIP
managed care plans often have many of the same providers in both
networks, and having similar standards eases administrative burden on
the providers. We agree that monitoring data over time is important and
will help us assess whether the 10- and 15-business day standards need
revision or if other systemic efforts are needed to improve appointment
wait times, such as national initiatives to increase the provider
supply. However, we believe we should finalize the new requirements and
collect data concurrently to generate the most useful results.
Comment: Some commenters recommended that CMS define ``routine''
for appointment wait time standards for consistency in implementation
and results while others supported letting States define it to be
reflective of their local markets.
Response: We understand commenters' concerns regarding consistency
in implementation and interpreting the results of secret shopper
surveys for compliance with appointment wait times. Currently,
Medicaid, CHIP, Medicare, and the FFMs do not have a codified
definition for a ``routine'' appointment. We believe that providers use
many factors, including current specialty-specific clinical standards
to assess appointment requests. We encourage States to work with their
managed care plans and their network providers and even other States to
develop a definition of ``routine'' appointment to ensure consistency
within and across their managed care programs. At a minimum, we expect
any definition of a ``routine'' appointment to include appointments for
services such as well-child visits, annual gynecological exams, and
medication management. We decline to adopt a definition of ``routine''
that States would be required to use in this final rule but will review
data from the secret shopper surveys and may consider adding a
definition in future guidance or rulemaking.
Comment: Some commenters recommended that CMS define ``urgent'' and
``emergent'' and include these types of appointments in the appointment
wait time standards as well. A few commenters suggested that CMS refine
the appointment wait time standards by specifying existing patient
appointments separately from new patient appointments given that new
patients often need an extended initial visit which is often not
available within 10- or 15-business days.
[[Page 41016]]
Response: We decline to define ``urgent'' and ``emergent'' as we
are not implementing appointment wait time standards in Sec. 438.68(e)
and through cross-reference at Sec. 457.1218 for urgent or emergent
appointments. We did not propose appointment wait time standards for
urgent or emergent appointments given the potential for serious harm
when there is a need for such care. We believe it is prudent to start
with less time-sensitive appointments and use secret shopper data to
inform any potential future rulemaking on urgent or emergent wait time
standards. However, we remind States and managed care plans that
``emergency medical condition'' is defined in Sec. Sec. 438.114(a) and
457.10 as a medical condition manifesting itself by acute symptoms of
sufficient severity (including severe pain) that a prudent layperson,
who possesses an average knowledge of health and medicine, could
reasonably expect the absence of immediate medical attention to result
in the following: (i) Placing the health of the individual (or, for a
pregnant woman, the health of the woman or her unborn child) in serious
jeopardy; (ii) Serious impairment to bodily functions; or (iii) Serious
dysfunction of any bodily organ or part. As noted in the prior
response, we will review data from the secret shopper surveys to
determine if adding additional definitions could improve appointment
wait time compliance or measurement.
We appreciate commenters' suggestion to add specificity to
appointment availability by separately measuring for new and existing
patients. However, we do not want to make developing and implementing
appointment wait time standards unnecessarily complicated, particularly
since this will be a new way of assessing access for some States.
States are welcome to add this level of detail to their appointment
wait time standards, but we decline to require it in this final rule.
States that set appointment wait time standards separately for new and
existing patients must ensure that both standards comply with the
maximum wait times in Sec. 438.68(e).
Comment: A few commenters recommended that States obtain input from
interested parties to aide in choosing the fourth appointment type.
Response: We agree with commenters and encourage States to consult
with a wide range of interested parties--including their Medicaid and
CHIP managed care plans, other plan types, providers, enrollees, and
local advocacy organizations--when determining which provider or
specialty to select to comply with Sec. Sec. 438.68(e)(1)(iv) and
457.1218.
Comment: One commenter questioned how appointment wait time
standards apply to dual eligible special needs plans (D-SNPs) and how
they intersect with existing Medicare requirements. The commenter noted
concern that, without clarification, there could be confusion on secret
shopper surveys and enforcement of wait time standards.
Response: We appreciate the comment and the opportunity to clarify.
The appointment wait time standards finalized in Sec. 438.68(e) apply
to routine appointments with certain types of Medicaid and CHIP managed
care network providers. For Medicaid managed care plans that are also
D-SNPs in Medicare Advantage, States are only required by Sec.
438.68(e)(1)(i) through (iii) to apply appointment wait time standards
if the MCO, PIHP or PAHP is the primary payer. Any requirements on D-
SNPs for services under the D-SNP contract with CMS are addressed in
Medicare Advantage regulations.
Comment: A few commenters suggested that instead of measuring
compliance with appointment wait time standards linked to remedy plans,
CMS should provide incentives to providers that meet certain wait time
standards. These commenters noted this would be far more effective than
approaching it from a punitive perspective. Commenters also recommended
that managed care plans look at other policies and practices that
impact provider contracting and appointment availability such as timely
credentialing, accurate and timely claims payment, and inefficient and
redundant prior authorization processes.
Response: We agree that managed care plans offering incentives to
providers that meet appointment wait time standards is a very useful
suggestion and encourage managed care plans to consider it as part of
developing a more comprehensive approach to appointment availability.
There are many processes used by managed care plans that influence a
provider's willingness to be part of a network and managed care plans
should continually monitor processes that may jeopardize their
networks' stability and take action to address them. However, we do not
agree that the results from secret shopper surveys should be used for
incentives alone. We believe that remedy plans will help States and
managed care plans address identified access concerns and secret
shopper survey results will provide timely data to inform the
development of robust and effective remedy plans. We acknowledge that
remedy plans should not be the only tool used by states and managed
care plans and support the use of multifaceted approaches to improve
access.
Comment: Some commenters recommended that CMS require managed care
plans to include a hold harmless provision in their network provider
contracts so that network providers cannot be held responsible for the
managed care plan's compliance with appointment wait time standards.
Commenters stated concern that some managed care plans may impose some
type of penalty on network providers that do not offer appointments
that comply with the appointment wait time standards and that these
actions could have the unintended consequence of worsening enrollees'
access to care as physician practices are forced to see fewer Medicaid
patients or opt out of being network providers.
Response: We appreciate commenters raising this concern and while
it is not immediately clear to us why managed care plans would believe
punitive action on network providers would be an effective way to
encourage providers to offer more timely appointments, we defer to
States and managed care plans to determine the appropriateness of a
hold harmless provision in network contracts. As we note in the prior
comment, strengthening managed care plan networks through timely
credentialing, accurate and timely claims payment, and efficient prior
authorization processes would seem a far more productive way to support
providers to improve or expand access. States and managed care plans
should collaborate to bolster relationships with providers and focus on
the shared goal of improving access.
Comment: One commenter suggested that we revise Sec. 438.68(e) to
use ``services'' instead of ``provider types'' to allow PCPs that do
gynecological services to be counted towards compliance for primary
care, as well as OB/GYN.
Response: We appreciate this comment and agree that ``services''
instead of ``provider types'' in Sec. 438.68(e)(1) would be clearer
and more consistent with Sec. Sec. 438.68(a) and 438.206. Using
``services'' would also be more consistent with managed care plan
contracts' specification of ``covered services.'' Our intent in
proposing and finalizing appointment wait time standards is assessing
access to care, not to limit the types of providers that could offer
the services in paragraphs (e)(1)(i) through (iii). Understanding the
scope of services subject to appointment wait time standards can be
useful when
[[Page 41017]]
incorporated into the secret shopper survey by producing more detailed
results and a truer view of access as experienced by enrollees. We
accordingly are adopting the commenter's suggestion to use ``services''
instead of ``provider types'' in the final version of Sec.
438.68(e)(1) and, for consistency, (e)(3).
To ensure consistency in Sec. 438.68(d) with the adoption of
``services, we are finalizing minor wording revisions. In paragraph
(d)(1), we are removing ``provider-specific'' to be more inclusive of
all network standards in Sec. 438.68; in (d)(1)(iii), we are adding
``or for the service type;'' and in paragraph (d)(2), we are adding
``or service'' after ``provider type'' for consistency with Sec.
438.68(e)(1).
Comment: We received numerous suggestions for variations on our
proposed wait time standards. One commenter recommended setting
appointment wait time standards for obstetrical services based on
trimesters, such as appointments within 14 calendar days in the first
trimester, 7 calendar days in second trimester, and 3 calendar days in
the third trimester. Another commenter recommended that CMS permit
States to define an appointment wait time standard for additional
behavioral health specialists, facility types, or service types, either
inpatient or outpatient, as long as the specialist, facility, or
service type identified in the State-defined standard is distinct from
the broader group of outpatient mental health and SUD providers subject
to the 10-business day standard.
Response: States have the flexibility to develop appointment wait
time standards by using more detailed criteria as long as the
additional level of detail does not create a standard that exceeds the
maximum timeframes in Sec. 438.68(e). For example, requiring
obstetrical appointments within 14, 7, and 3 calendar days is
acceptable as none of them exceed the 15- calendar day limit in Sec.
438.68(e)(1)(iii). Additionally, States can also include additional
wait time standards for other services beyond the requirement in
(e)(1)(iv) for a State-selected type, but they cannot replace or
supplant the services in Sec. 438.68(e)(1)(i)-(iii).
Comment: A few commenters recommended that the appointment wait
time standards in Sec. 438.68(e)(1) use ``calendar days'' instead of
``business days'' for ease of application and monitoring. One commenter
recommended adding appointment wait time standards for HCBS, which is
rendered 24/7 thus making ``calendar days'' more appropriate.
Response: We decline to accept the commenters' suggestion as we
believe that requiring appointment wait time standards only for routine
appointments in this final rule makes ``business days'' appropriate.
Additionally, using ``business'' days is consistent with standards for
the FFMs and Medicare Advantage, which reduces burden on States,
managed care plans, and providers. Should we consider revising Sec.
438.68(e) in future rulemaking to address HCBS, we will consider the
impact of using a calendar day standard.
Comment: Some commenters recommended that there be an exception
process for rural areas or health professional shortage areas (HPSAs),
as they will present some very large challenges for managed care plans
to meet the appointment wait time standards due to provider shortages.
One commenter recommended that CMS add more specificity to Sec.
438.68(d) so that States use exceptions consistently.
Response: We understand that provider shortages, particularly
prevalent in rural areas and HPSAs, present challenges to ensuring
timely access. This is why we believe requiring the use of appointment
wait time standards and measuring compliance with them is important and
should produce valuable information that can help States and managed
care plans develop effective solutions. However, we acknowledge that
implementing standards, analyzing results, and developing solutions to
access issues that need improvement will take time and in the interim,
States may want a mechanism to identify known access challenges.
Existing regulations at Sec. 438.68(d) permit States to use an
exception process for any of the provider-specific network standards
required in Sec. 438.68. The flexibility to permit States to decide if
and/or when to use an exception process was codified in the 2016 final
rule. States have been using exception processes that meet the needs of
their programs and may find this provision useful as areas for
improvement are identified and remedy plans are implemented.
Comment: Some commenters did not support requiring appointment wait
time standards; they stated that one of the most common reasons for
access issues is a shortage of providers in an area or a specialty and
that appointment wait time standards cannot address provider supply.
Commeters stated particular concerns for mental health and SUD, rural
areas, and HPSAs. These commenters stated that appointment wait time
standards will generate a significant amount of burden for States,
plans, and providers with little, if any, improvement in access. Some
commenters raised concerns that appointment wait time standards will
increase pressure on providers and lead to burn out, expand patient
panels to unmanageable levels, and potentially drive providers out of
Medicaid. One commenter stated that national standards without
consideration for regional variances, market makeup, or workforce
constraints, are overly rigid and, despite States' and plans' best
efforts, may simply prove unachievable. Another stated that States must
have the autonomy to design and implement their own standards to
account for State-specific conditions. Commenters recommended that CMS
partner with other agencies such as the Health Resources and Services
Administration to promote growth of the provider supply nationally.
Response: We acknowledge that States developing and enforcing
appointment wait time standards will not solve all access issues.
However, we believe they can be effective for the majority of the
routine appointments for services that we are finalizing. While some
States already enforce appointment wait time standards, we know that it
will be new and impose some new burden initially for other States. We
believe the effort will have a positive impact on access once the
standards are implemented and the State, managed care plans, and
providers are taking a coordinated approach towards the same goal. We
also believe that there are opportunities for managed care plans to
ease provider burden to enable them to provide timely appointments such
as by ensuring timely, efficient credentialing processes, ensuring that
prior authorization is used effectively and meaningfully, and by
ensuring timely and accurate claims payment. We believe we provide
States the ability to account for regional variances, State-specific
conditions, market makeup, or workforce constraints in two ways: by
only providing the maximum appointment wait time with States setting
the exact standard within that parameter for three types of services
and by allowing States to set the wait time standard for an additional
State-selected service. We reflect these in Sec. 438.68(e) with ``[. .
.]State-established timeframes but no longer than[. . .]'' and Sec.
438.68(e)(1)(iv) with ``[. . .]State-established timeframes.'' We
intentionally drafted Sec. 438.68(e) to provide parameters for
appointment wait time standards while also giving States the ability to
customize the
[[Page 41018]]
standards for their specific markets, populations, and programs.
Lastly, broader efforts are underway to address access nationally. For
example, on July 25, 2023, the Department of Agriculture announced
USDA's Emergency Rural Health Care Grants \31\ to help strengthen rural
America's health care infrastructure. Additionally, we released a
proposed rule on September 1, 2023 proposing minimum staffing standards
for long-term care facilities and Medicaid institutional payment
transparency reporting.\32\
---------------------------------------------------------------------------
\31\ https://www.usda.gov/media/press-releases/2023/07/25/biden-harris-administration-helps-expand-access-rural-health-care.
\32\ https://www.federalregister.gov/public-inspection/2023-18781/medicare-and-medicaid-programs-minimum-staffing-standards-for-long-term-care-facilities-and-medicaid.
---------------------------------------------------------------------------
Comment: Many commenters suggested revising the compliance date for
appointment wait time standards from the first rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after 3 years
after the effective date of the final rule. We received comments
suggesting an applicability date as soon as 1 year after the final
rule's effective date and a few for applicability dates in excess of 5
years.
Response: We appreciate the comments on our proposed applicability
date. We considered all of the access provisions in the final rule and
have chosen applicability dates that balance the needs of enrollees
with the level of effort necessary to effectively implement each
provision. We believe finalizing the applicability date of the first
rating period for contracts with MCOs, PIHPs and PAHPs beginning on or
after 3 years after the effective date of the final rule is appropriate
for appointment wait time standards in Sec. 438.68(e).
Comment: We received a few comments in response to our request in
the preamble on whether behavioral health PIHPs and PAHPs include other
services that would enable States to select another service to fulfill
Sec. 438.68(e)(1)(iv). Commenters clarified that most behavioral
health PIHPs and PAHPs do not include other covered services, and
therefore, States would be unable to comply with Sec.
438.68(e)(1)(iv).
Response: We appreciate commenters clarifying this for us as we
want to ensure that the regulation text is accurate. To reflect this,
we will finalize a revision to Sec. 438.68(e)(1)(iv) to add ``and
covered in the MCO's, PIHP's, or PAHP's contract'' after ``[. . .]other
than those listed in paragraphs (e)(1)(i) through (iii) of this
section.'' This will clarify that States do not need to develop
appointment wait time standards or perform secret shopper surveys for
services other than mental health and SUD for PIHPs and PAHPs that
cover mental health and SUD services only.
Comment: One commenter stated that CMS does not have the authority
to set national appointment wait time standards because section
1932(c)(1)(A)(i) of the Act authorizes States to develop standards for
access to care, not the Secretary.
Response: We clarify for the commenter that the text at Sec.
438.68(e) requires States to develop appointment wait time standards
and that Sec. 438.68(e)(i) through (iii) only establish the maximum
times within which States must set their standards.
Comment: We received several comments supportive of including
appointment wait time standards as a required provision in MCO, PIHP,
and PAHP contracts in Sec. 438.206(c)(1)(i).
Response: We thank commenters for their support. We note a drafting
error in the proposed rule for the applicability date for Sec.
438.206(c)(1)(i) as specified in Sec. 438.206(d). We proposed an
applicability date in Sec. 438.206(d) of the first rating period that
begins on or after 4 years after July 9, 2024; however; to align with
the requirement for States to develop and enforce appointment wait time
standards at Sec. 438.68(b), managed care plan contracts need to
reflect the appointment wait time standards on the same timeframe.
Because Sec. 438.68(b) was proposed and is being finalized as the
first rating period beginning on or after 3 years after July 9, 2024,
so should Sec. 438.206(c)(1)(i) as specified in Sec. 438.206(d).
Therefore, in this final rule, Sec. 438.206(d) is being finalized as
applicable on the first rating period beginning on or after 3 years
after July 9, 2024.
Comment: One commenter suggested that CMS strengthen Federal
requirements to ensure children enrolled in CHIP managed care plans
have timely access to all covered services, when available, and
encouraged CMS to further define specialists as being pediatric
specialists. The commenter noted that they believe pediatric
specialists are often not included in CHIP MCO networks if the State or
Federal standard does not specifically require them. Therefore, CHIP
MCOs may be able to satisfy network adequacy requirements by including
adult specialists, despite their inability to adequately care for the
specialized needs of pediatric patients.
Response: We appreciate the commenters' concern for strengthening
requirements to ensure children enrolled in managed care plans have
timely access to all covered services, when available. We currently
define pediatric specialist in Medicaid at Sec. 438.68(b)(iv), which
is incorporated into CHIP regulations through cross-reference at Sec.
457.1218. We remind States that the standards described in Medicaid at
Sec. 438.68(b)(iv) and in CHIP through cross-reference at Sec.
457.1218 are the minimum standards that a State must meet to comply
with their annual quality review. If a State has identified
deficiencies in pediatric specialist availability, States have the
option to develop higher standards than the Federal minimum.
After reviewing the public comments, we are finalizing Sec.
438.68(e) as proposed except for a revision to use ``services'' instead
of ``provider types'' in Sec. 438.68(e)(1) and (e)(3) and to add ``and
covered in the MCO's, PIHP's, or PAHP's contract'' to Sec.
438.68(e)(1)(iv). We are also finalizing minor conforming changes in
Sec. 438.68(d)(1) and (2). We are finalizing Sec. 438.206(d), which
is applicable for separate CHIPs through an existing cross-reference at
Sec. 457.1230(a) and a proposed cross-reference at Sec. 457.1200(d),
as ``. . . the first rating period that begins on or after 3 years
after July 9, 2024 . . .'' We are finalizing Sec. Sec. 438.68(h),
438.206(c) and 457.1218 as proposed.
c. Secret Shopper Surveys (Sec. Sec. 438.68(f), 457.1207 and 457.1218)
We recognized that in some States and for some services, Medicaid
beneficiaries face significant gaps in access to care. Evidence
suggested that in some localities and for some services, it takes
Medicaid beneficiaries longer to access medical appointments compared
to individuals with other types of health coverage.\33\ This may be
exacerbated by difficulties in accessing accurate information about
managed care plans' provider networks; although Medicaid and CHIP
managed care plans are required to make regular updates to their online
provider directories in accordance with Sec. Sec. 438.10(h)(3) and
457.1207 respectively, analyses of these directories suggest that a
significant share of provider listings include inaccurate information
on, for example, how to contact the provider, the provider's network
participation, and whether the provider is accepting new
[[Page 41019]]
patients.\34\ Relatedly, analyses have shown that the vast majority of
services delivered to Medicaid beneficiaries are provided by a small
subset of health providers listed in managed care plan provider
directories, with a substantial share of listed providers delivering
little or no care for Medicaid beneficiaries.\35\ Some measures of
network adequacy may not be as meaningful as intended if providers are
``network providers'' because they have a contract with a managed care
plan, but in practice are not actually accepting new Medicaid enrollees
or impose a cap on the number of Medicaid enrollees they will see.
---------------------------------------------------------------------------
\33\ W. Hsiang, A. Lukasiewicz, and M. Gentry, ``Medicaid
Patients Have Greater Difficulty Scheduling Health Care Appointments
Compared With Private Insurance Patients: A Meta-Analysis,'' SAGE
Journals, April 5, 2019, available at https://journals.sagepub.com/doi/full/10.1177/0046958019838118.
\34\ A. Burman and S. Haeder, ``Directory Accuracy and Timely
Access in Maryland's Medicaid Managed Care Program,'' Journal of
Health Care for the Poor and Underserved, available at https://pubmed.ncbi.nlm.nih.gov/35574863/ A. Bauman and S. Haeder,
``Potemkin Protections: Assessing Provider Directory Accuracy and
Timely Access for Four Specialties in California,'' Journal of
Health Politics, Policy and Law, 2022, available at https://pubmed.ncbi.nlm.nih.gov/34847230/.
\35\ A. Ludomirsky, et. al., ``In Medicaid Managed Care
Networks, Care is Highly Concentrated Among a Small Percentage of
Physicians,'' Health Affairs, May 2022, available at https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2021.01747.
---------------------------------------------------------------------------
To add a greater level of validity and accuracy to States' efforts
to measure network adequacy and access, we proposed to require States
to use secret shopper surveys as part of their monitoring activities.
Secret shopper surveys are a form of research that can provide high-
quality data and actionable feedback to States and managed care plans
and can be performed either as ``secret'' meaning the caller does not
identify who they are performing the survey for or ``revealed'' meaning
the caller identifies the entity for which they are performing the
survey. While both types of surveys can produce useful results, we
believe the best results are obtained when the survey is done as a
secret shopper and the caller pretends to be an enrollee (or their
representative) trying to schedule an appointment. Results from these
surveys should be unbiased, credible, and reflect what it is truly like
to be an enrollee trying to schedule an appointment, which is a
perspective not usually provided by, for example, time and distance
measures or provider-to-enrollee ratios. Many States and managed care
plans currently use some type of survey to monitor access; however, we
believe there should be some consistency to their use for Medicaid
managed care programs to enable comparability.
To ensure consistency, we proposed a new Sec. 438.68(f) to require
that States use independent entities to conduct annual secret shopper
surveys of managed care plan compliance with appointment wait time
standards proposed at Sec. 438.68(e) and the accuracy of certain data
in all managed care plans' electronic provider directories required at
Sec. 438.10(h)(1). These proposed changes apply equally to separate
CHIPs through existing cross-references at Sec. Sec. 457.1218 and
457.1207. We believe that the entity that conducts these surveys must
be independent of the State Medicaid or CHIP agency and its managed
care plans subject to the survey to ensure unbiased results. Therefore,
at Sec. 438.68(f)(3)(i), we proposed to consider an entity to be
independent of the State if it is not part of the State Medicaid agency
and, at Sec. 438.68(f)(3)(ii), to consider an entity independent of a
managed care plan subject to a secret shopper survey if the entity is
not an MCO, PIHP, or PAHP; is not owned or controlled by any of the
MCOs, PIHPs, or PAHPs subject to the surveys; and does not own or
control any of the MCOs, PIHPs, or PAHPs subject to the surveys. Given
the valuable data the proposed secret shopper surveys could provide
States, we believe requiring the use of an independent entity to
conduct the surveys is critical to ensure unbiased results.
We also proposed to require States to use secret shopper surveys to
determine the accuracy of certain provider directory information in
MCOs', PIHPs', and PAHPs' most current electronic provider directories
at Sec. 438.68(f)(1)(i). Since we believe that paper directory usage
is dwindling due to the ever-increasing use of electronic devices and
because electronic directory files are usually used to produce paper
directories, we are not requiring secret shopper validation of paper
directories. Rather, we proposed in Sec. 438.68(f)(1)(i)(A) through
(C) to require surveys of electronic provider directory data for
primary care providers, OB/GYN providers, and outpatient mental health
and SUD providers, if they are included in the managed care plan's
provider directories. We proposed these provider types because they are
the provider types with the highest utilization in many Medicaid
managed care programs.
To ensure that a secret shopper survey can be used to validate
directory data for every managed care plan, we proposed in Sec.
438.68(f)(1)(i)(D) to require secret shopper surveys for provider
directory data for the provider type selected by the State for its
appointment wait time standards in Sec. 438.68(e)(1)(iv). We
acknowledged that the State-chosen provider type may vary across
managed care plan types and thus, States may have to select multiple
provider types to accommodate all their managed care programs. For
example, a State may select a provider type from their MCOs'
directories that is not a provider type included in their mental health
PIHP's directories; just as the State may select a provider type from
their behavioral health PIHPs' directories that is not a provider type
included in their dental PAHPs' directories. We noted that the State-
chosen provider type cannot vary among plans of the same type within
the same managed care program. Although this degree of variation
between States will limit comparability, we believe that the value of
validating provider directory data outweighs this limitation and that
having results for provider types that will be important to State-
specific access issues will be a rich source of data for States to
evaluate managed care plan performance and require the impacted plan to
implement timely remediation, if needed.
At Sec. 438.68(f)(1)(ii)(A) through (D), we proposed to require
that States use independent entities to conduct annual secret shopper
surveys to verify the accuracy of four pieces of data in each MCO,
PIHP, or PAHP electronic provider directory required at Sec.
438.10(h)(1): the active network status with the MCO, PIHP, or PAHP;
the street address as required at Sec. 438.10(h)(1)(ii); the telephone
number as required at Sec. 438.10(h)(1)(iii); and whether the provider
is accepting new enrollees as required at Sec. 438.10(h)(1)(vi). We
believe these are the most critical pieces of information that
enrollees rely on when seeking network provider information.
Inaccuracies in this information can have a tremendously detrimental
effect on enrollees' ability to access care since finding providers
that are not in the managed care plan's network, have inaccurate
addresses and phone numbers, or finding providers that are not
accepting new patients listed in a plan's directory can delay their
ability to contact a network provider and ultimately, receive care.
To maximize the value of using secret shopper surveys to validate
provider directory data, identified errors must be corrected as quickly
as possible. Therefore, at Sec. 438.68(f)(1)(iii) and (iv)
respectively, we proposed that States must receive information on all
provider directory data errors identified in secret shopper surveys no
later than 3 business days from identification by the entity conducting
the secret shopper survey and that States must then send that data to
the applicable managed care plan within 3 business days of receipt. We
also proposed in Sec. 438.68(f)(1)(iii) that
[[Page 41020]]
the information sent to the State must be ``sufficient to facilitate
correction'' to ensure that enough detail is provided to enable the
managed care plans to quickly investigate the accuracy of the data and
make necessary corrections. We note that States could delegate the
function of forwarding the information to the managed care plans to the
entity conducting the secret shopper surveys so that the State and
managed care plans receive the information at the same time. This will
hasten plans' receipt of the information, as well as alleviate State
burden. To ensure that managed care plans use the data to update their
electronic directories, we proposed at Sec. 438.10(h)(3)(iii) to
require MCOs, PIHPs, and PAHPs to use the information from secret
shopper surveys required at Sec. 438.68(f)(1) to obtain corrected
information and update provider directories no later than the
timeframes specified in Sec. 438.10(h)(3)(i) and (ii), and included in
separate CHIP regulations through an existing cross-reference at Sec.
457.1207. While updating provider directory data after it has been
counted as an error in secret shopper survey results will not change a
managed care plan's compliance rate, it will improve provider directory
accuracy more quickly and thus, improve access to care for enrollees.
To implement section 5123 of the Consolidated Appropriations Act,
2023,\36\ which requires that managed care plans' and PCCM entities'
(if applicable) provider directories be searchable and include specific
information about providers, we proposed to revise Sec. 438.10(h)(1)
by adding ``searchable'' before ``electronic form'' to require that
managed care plans' and PCCM entities' (if applicable) electronic
provider directories be searchable. We also proposed to add paragraph
(ix) to Sec. 438.10(h)(1) to require that managed care plans' and PCCM
entities' (if applicable) provider directories include information on
whether each provider offers covered services via telehealth. These
proposals will align the text in Sec. 438.10(h) with section
1932(a)(5) of the Act, as amended by section 5123 of the Consolidated
Appropriations Act, 2023. Section 5123 of the Consolidated
Appropriations Act, 2023 specifies that the amendments to section
1932(a)(5) of the Act will take effect on July 1, 2025; therefore, we
proposed that States comply with the revisions to Sec. 438.10(h)(1)
and new (h)(1)(ix) by July 1, 2025.
---------------------------------------------------------------------------
\36\ https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf.
---------------------------------------------------------------------------
Our proposals for a secret shopper survey of provider directory
data proposed at Sec. 438.68(f)(1) are authorized by section
1932(a)(5)(B)(i) of the Act for Medicaid and through section 2103(f)(3)
of the Act for CHIP, which require each Medicaid MCO to make available
the identity, locations, qualifications, and availability of health
care providers that participate in their network. The authority for our
proposals is extended to PIHPs and PAHPs through regulations based on
our authority under section 1902(a)(4) of the Act. We proposed that
secret shopper surveys include verification of certain providers'
active network status, street address, telephone number, and whether
the provider is accepting new enrollees; these directory elements
reflect the identity, location, and availability, as required for
Medicaid in section 1932(a)(5)(B)(i) of the Act and required for CHIP
through section 2103(f)(3) of the Act. Although the statute does not
explicitly include ``accurate'' to describe ``the identity, locations,
qualifications, and availability of health care providers,'' we believe
it is the intent of the text and therefore, utilizing secret shopper
surveys to identify errors in provider directories will help managed
care plans ensure the accuracy of the information in their directories.
Further, our proposal at Sec. 438.10(h)(3)(iii) for managed care plans
to use the data from secret shopper surveys to make timely corrections
to their directories will also be consistent with statutory intent to
reflect accurate identity, locations, qualifications, and availability
information. Secret shopper survey results will provide vital
information to help managed care plans fulfill their obligations to
make the identity, locations, qualifications, and availability of
health care providers that participate in the network available to
enrollees and potential enrollees.
We believe using secret shopper surveys could also be a valuable
tool to help States meet their enforcement obligations of appointment
wait time standards, required in Sec. 438.68(e). Secret shopper
surveys are perhaps the most commonly used tool to assess health care
appointment availability and can produce unbiased, actionable results.
At Sec. 438.68(f)(2), we proposed to require States to determine each
MCO's, PIHP's, and PAHP's rate of network compliance with the
appointment wait time standards proposed in Sec. 438.68(e)(1). We also
proposed in Sec. 438.68(f)(2)(i) that, after consulting with States
and other interested parties and providing public notice and
opportunity to comment, we may select additional provider types to be
added to secret shopper surveys of appointment wait time standards. We
believe that after reviewing States' assurances of compliance and
accompanying analyses of secret shopper survey results as proposed at
Sec. 438.207(d), and through an existing cross-reference at Sec.
457.1230(b) for separate CHIP, we may propose additional provider types
be subject to secret shopper surveys in future rulemaking.
In section I.B.1.b. of this final rule above, we noted that States
need to balance the use of telehealth with the availability of
providers that can provide in-person care and enrollees' preferences
for receiving care to ensure that they establish network adequacy
standards under Sec. 438.68(e) that accurately reflect the practical
use of telehealth and in-person appointments in their State. To ensure
that States reflect this, in Sec. 438.68(f)(2)(ii) we proposed that
appointments offered via telehealth only be counted towards compliance
with appointment wait time standards if the provider also offers in-
person appointments and that telehealth visits offered during the
secret shopper survey be separately identified in the survey results.
We believe it is appropriate to prohibit managed care plans from
meeting appointment wait time standards with telehealth appointments
alone and by separately identifying telehealth visits in the results
because this will help States determine if the type of appointments
being offered by providers is consistent with expectations and
enrollees' needs. We note that this proposal differs from the draft
requirement for QHPs in the FFMs beginning in 2025, which does not take
telehealth appointments into account for purposes of satisfying the
appointment wait time standards.\37\ Managed care encounter data in
Transformed Medicaid Statistical Information system (T-MSIS) reflect
that most care is still provided in-person and that use of telehealth
has quickly returned to near pre-pandemic levels. We believe by
explicitly proposing to limit the counting of telehealth visits to meet
appointment wait time standards, as well as the segregation of
telehealth and in-person appointment data, secret shopper survey
results will produce a more accurate reflection of what enrollees'
experience when attempting to access care. We considered aligning
appointment wait times and telehealth visits with the process used by
MA for
[[Page 41021]]
demonstrating overall network adequacy, which permits MA organizations
to receive a 10-percentage point credit towards the percentage of
beneficiaries residing within published time and distance standards for
the applicable provider specialty type and county when the plan
includes one or more telehealth providers that provide additional
telehealth benefits. See Sec. 422.116. However, we believe our
proposed methodology will provide States and CMS with more definitive
data to assess the use of telehealth and enrollee preferences and will
be the more appropriate method to use at this time. We requested
comment on this proposal.
---------------------------------------------------------------------------
\37\ 45 CFR 156.230; 2025 Draft Letter to Issuers in the
Federally facilitated Exchanges, available at https://www.cms.gov/files/document/2025-draft-letter-issuers-11-15-2023.pdf.
---------------------------------------------------------------------------
Secret shopper surveys of plans' compliance with appointment wait
time standards proposed at Sec. 438.68(f)(2) is authorized by section
1932(b)(5) of the Act for Medicaid and through section 2103(f)(3) of
the Act for CHIP, because secret shopper surveys could provide
unbiased, credible, and representative data on how often network
providers are offering routine appointments within the State's
appointment wait time standards. This data should aid managed care
plans as they assess their networks, pursuant to Sec. 438.207(b), and
provide an assurance to States that their networks have the capacity to
serve the expected enrollment in their service area. States should find
the results of the secret shopper surveys a rich source of information
to assess compliance with the components of their quality strategy that
address access to care and determine whether covered services are
available within reasonable timeframes, as required in section
1932(c)(1)(A)(i) of the Act for Medicaid and section 2103(f)(3) of the
Act for CHIP.
It is critical that secret shopper survey results be obtained in an
unbiased manner using professional techniques that ensure objectivity.
To reflect this, we proposed at Sec. 438.68(f)(3) that any entity that
conducts secret shopper surveys must be independent of the State
Medicaid agency and its managed care plans subject to a secret shopper
survey. In Sec. 438.68(f)(3)(i) and (ii), we proposed the criteria for
an entity to be considered independent: Section 438.68(f)(3)(i)
proposes that an entity cannot be a part of any State governmental
agency to be independent of a State Medicaid agency and Sec.
438.68(f)(3)(ii) proposes that to be independent of the managed care
plans subject to the survey, an entity will not be an MCO, PIHP, or
PAHP, will not be owned or controlled by any of the MCOs, PIHPs, or
PAHPs subject to the surveys, and will not own or control any of the
MCOs, PIHPs, or PAHPs subject to the surveys. We proposed to define
``independent'' by using criteria that is similar, but not as
restrictive, as the criteria used for independence of enrollment
brokers and specified at Sec. 438.810(b)(1). We believe this
consistency in criteria will make it easier for States to evaluate the
suitability of potential survey entities. We reminded States that the
optional EQR activity at Sec. 438.358(c)(5) could be used to conduct
the secret shopper surveys proposed at Sec. 438.68(f) and for secret
shopper surveys conducted for MCOs, States may be able to receive
enhanced Federal financial participation (FFP), pursuant to Sec.
438.370.
Secret shopper surveys can be conducted in many ways, using varying
levels of complexity and gathering a wide range of information. We
wanted to give States flexibility to design their secret shopper
surveys to produce results that not only validate managed care plans'
compliance with provider directory data accuracy as proposed at Sec.
438.68(f)(1) and appointment wait time standards at Sec. 438.68(f)(2),
but also provide States the opportunity to collect other information
that will assist them in their program monitoring activities and help
them achieve programmatic goals. To provide this flexibility, we
proposed a limited number of methodological standards for the required
secret shopper surveys. In Sec. 438.68(f)(4), we proposed that secret
shopper surveys use a random sample and include all areas of the State
covered by the MCO's, PIHP's, or PAHP's contract. We believe these are
the most basic standards that all secret shopper surveys must meet to
produce useful results that enable comparability between plans and
among States. We proposed in Sec. 438.68(f)(4)(iii) that secret
shopper surveys to determine plan compliance with appointment wait time
standards will have to be completed for a statistically valid sample of
providers to be clear that a secret shopper surveys must be
administered to the number of providers identified as statistically
valid for each plan. To ensure consistency, equity, and context to the
final compliance rate for each plan, we believe it is important that
inaccurate provider directory data not reduce the number of surveys
administered. Therefore, as a practical matter, if the initial data
provided by a State to the entity performing the survey does not permit
surveys to be completed for a statistically valid sample, the State
must provide additional data to enable completion of the survey for an
entire statistically valid sample. We did not believe this provision
needed to apply to secret shopper surveys of provider directory data
proposed in paragraph (f)(1) since the identification of incorrect
directory data is the intent of those surveys and should be reflected
in a plan's compliance rate.
Because we believe secret shopper survey results can produce
valuable data for States, managed care plans, enrollees, and other
interested parties, we proposed at Sec. 438.68(f)(5), that the results
of these surveys be reported to CMS and posted on the State's website.
Specifically, at Sec. 438.68(f)(5)(i), we proposed that the results of
the secret shopper surveys of provider directory data validation at
Sec. 438.68(f)(1) and appointment wait time standards at Sec.
438.68(f)(2) must be reported to CMS annually using the content, form,
and submission times proposed in Sec. 438.207(d). At Sec.
438.68(f)(5)(ii), we proposed that States post the results on the
State's website required at Sec. 438.10(c)(3) within 30 calendar days
of the State submitting them to CMS. We believe using the existing
report required at Sec. 438.207(d) will lessen burden on States,
particularly since we published the NAAAR template \38\ in July 2022
and are also developing an electronic reporting portal to facilitate
States' submissions. We anticipate revising the data fields in the
NAAAR \39\ to include specific fields for secret shopper results,
including the provider type chosen by the State as required in Sec.
438.68(e)(1)(iv) and (f)(1)(i)(D). This proposal is authorized by
section 1902(a)(6) of the Act which requires that States provide
reports, in such form and containing such information, as the Secretary
may from time to time require.
---------------------------------------------------------------------------
\38\ https://www.medicaid.gov/medicaid/managed-care/downloads/network-assurances-template.xlsx.
\39\ https://www.medicaid.gov/medicaid/managed-care/guidance/
medicaid-and-chip-managed-care-reporting/
index.html#NETWORK:~:text=Report.%20%C2%A0The%20current-
,excel%20template,-(XLSX%2C%20218.99%20KB.
---------------------------------------------------------------------------
We recognize that implementing secret shopper surveys will be a
significant undertaking, especially for States not already using them;
but we believe that the data produced by successful implementation of
them will be a valuable addition to States' and CMS's oversight
efforts. As always, technical assistance will be available to help
States effectively implement and utilize secret shopper surveys. We
invited comment on the type of technical assistance that will be most
useful for States, as well as States' best practices and lessons
learned from using secret shopper surveys.
We also proposed in Sec. 438.68(h) that States would have to
comply with
[[Page 41022]]
Sec. 438.68(f) no later than the first MCO, PIHP, or PAHP rating
period that begins on or after 4 years after the effective date of the
final rule.
We summarize and respond to public comments received on Secret
shopper surveys (Sec. Sec. 438.68(f), 457.1207, 457.1218) below.
Comment: Many commenters supported requiring States to use secret
shopper surveys to validate compliance with appointment wait time
standards and to verify the accuracy of certain provider directory
data. Commenters stated that these surveys would provide valuable
information on the access provided by plan networks and provide a
mechanism to drive improvements in accuracy and specificity of provider
directories. Another commenter stated that the results of secret
shopper surveys would provide accurate and transparent plan information
that is vital to ensuring Medicaid managed care populations have access
to the care they need. A few commenters stated the proposed
requirements would bring much-needed consistency to the way these
surveys are conducted which should lead to uniform identification and
quick correction of inaccurate information.
Response: We thank commenters for their support to require secret
shopper surveys as proposed in Sec. 438.68(f). We believe that all
interested parties will benefit from an independent evaluation of the
degree to which managed care plans' networks provide timely
appointments and the accuracy of provider directory data. The results,
particularly for provider directory data, will enable timely
corrections that will improve access.
Comment: Many commenters supported the use of independent entities
to perform the secret shopper surveys. Commenters stated that this
would ensure that surveys were conducted in an impartial manner and
would produce more reliable results. One commenter recommended that we
also include ``any direct or indirect relationship'' to our definition
of ``independence,'' consistent with Sec. 438.810(b)(2)(i).
Response: We appreciate the supportive comments; our intent in
including an independence requirement for the surveyors was to improve
the validity of the results and to assure interested parties that the
results presented an objective assessment of routine appointment
availability for their managed care plan and its network providers. We
decline to modify the definition of ``independence'' in this final
rule. We acknowledge a more robust definition is appropriate in Sec.
438.810(b)(2) for enrollment brokers, but do not believe the same level
is warranted for secret shopper surveys. Enrollment brokers are
responsible for providing information to enrollees to assist them in
making informed decisions when selecting a managed care plan. Because
enrollees are often limited to changing their managed care plans
annually and because managed care plans receive a capitation payment
for each enrollee enrolled in their plan, ensuring that enrollment
brokers are independent of the managed care plans from which enrollees
can choose is critical to ensure that enrollees receive information and
assistance in an unbiased manner and that the enrollees' best interest
is prioritized. We do not believe the same level of risk exists with
secret shopper surveys. Additionally, we have been made aware that
States are sometimes challenged to find entities that meet the
requirements in Sec. 438.810 to fulfill the functions of an enrollment
broker and we did not want to impose those same challenges on States
when procuring secret shopper survey vendors. We believe the functions
of an enrollment broker and a secret shopper survey vendor are
sufficiently different to warrant a different level of requirements for
independence.
Comment: One commenter recommended using revealed shopper surveys
instead of secret shopper surveys. Another commenter recommended that
CMS produce standardized definitions, methodologies, and templates for
use in conducting secret shopper surveys.
Response: We appreciate the comments but decline to adopt them in
this final rule. We believe that secret shopper surveys capture
information that is unbiased, credible, and reflect what enrollees
experience when trying to schedule an appointment. This is not possible
with a revealed survey and, therefore, is less likely to fulfill our
goal of assessing appointment availability or encountering incorrect
provider directory data as enrollees do. To the suggestion that we
publish definitions, methodologies, and templates, we do not believe
that is necessary as we believe States have sufficient experience in
using secret shopper surveys or can rely on the expertise of outside
entities. Further, while we are finalizing a minimum set of
methodological standards for secret shopper surveys in Sec.
438.68(f)(4), we believe States should have some latitude to customize
their surveys beyond the minimum requirements to capture information
and details that impact their programs and populations. We believe that
being overly prescriptive may lessen the surveys' utility.
Comment: A few commenters recommended requiring implementation
sooner than the rating period for contracts with MCOs, PIHPs, and PAHPs
that begins on or after 4 years after the effective date, while other
commenters recommended extending implementation beyond 4 years. A few
commenters stated that a shorter timeframe was reasonable because some
States already use secret shopper surveys for certain aspects of their
program.
Response: We appreciate the range of comments on the applicability
date. Because secret shopper surveys will be used to measure compliance
with appointment wait time standards and provider directory accuracy,
we intentionally proposed an applicability date that was 1 year after
the applicability date for appointment wait time standards. We clarify
that States can comply with Sec. 438.68(f) sooner than the first
rating period for contracts with MCOs, PIHPs, or PAHPs beginning on or
after 4 years after the effective date of the rule and we encourage
them to do so, particularly for surveys of provider directory data
accuracy. We considered all of the access provisions in the final rule
and have chosen applicability dates for each provision that balance the
needs of enrollees with the level of effort necessary to effectively
implement each one. We believe finalizing the applicability date as the
first rating period for contracts with MCOs, PIHPs, or PAHPs beginning
on or after 4 years after the effective date of the final rule is
appropriate for Sec. 438.68(f).
Comment: A few commenters stated that dually eligible individuals
must navigate multiple provider networks and directories with Medicare
serving as the primary payer of most services for which the secret
shopper survey will evaluate appointment availability. These commenters
recommended that secret shopper surveys for integrated D-SNPs should
account for Medicare as a primary payer for many of the services
evaluated in the survey and the challenges due to misalignment of
provider networks.
Response: We clarify that network adequacy standards and any
associated secret shopper surveys only apply for services for which the
Medicaid managed care plan is the primary payer. Section 438.68(e) and
(f) do not apply for services for which Traditional Medicare, a D-SNP,
or another Medicare Advantage plan has primary responsibility for
dually eligible Medicaid managed care plan enrollees.
[[Page 41023]]
Comment: A few commenters stated that many States already do some
form of secret shopper surveys and requested CMS to clarify if existing
secret shopper surveys will meet the requirements of Sec. 438.68(f).
Response: It is possible that States' existing secret shopper
surveys may satisfy the requirements of Sec. 438.68(f); however, that
is an assessment that each State would have to make by evaluating each
existing survey's content and methodology to ensure that it complies
with all requirements in Sec. 438.68(f).
Comment: Some commenters recommended that CMS prohibit duplicative
or multiple provider surveys. If CMS finalizes the requirement for
States to utilize secret shopper surveys to determine timely access
compliance, these commenters believe potential duplication must be
addressed to prevent over burdening providers' staff and detracting
from the time they have available to take actual patients' phone calls.
Response: We understand the commenters' concern and agree that
States should make every effort to supply provider data to their survey
entities that does not generate repeated calls to the same provider for
multiple managed care plans. We acknowledge this may not always be
possible in small geographic areas or areas with few providers.
However, as Sec. 438.68(f)(4)(iii) only requires a statistically valid
sample of providers be included in each survey, we believe that the
level of repeat calls to the same provider will be minimal.
Comment: We received many comments on our proposal that managed
care plans must meet a 90 percent compliance threshold. Some commenters
noted that they believe that 90 percent will likely prove exceedingly
difficult to attain, particularly given the national shortages of
providers of certain services and in certain geographic areas. These
commenters recommended that CMS adopt a lower percentage in initial
years and then adjust it as plans and providers acclimate to the new
standards; suggestions included compliance rates from 50 percent to 75
percent. Other commenters supported a 90 percent compliance rate
believing that it was appropriate for access to the services proposed.
Some commenters also stated that aligning with FFM standards was
effective and efficient given the high overlap of managed care plans
between Medicaid and the FFMs.
Response: We acknowledge that achieving a 90 percent compliance
rate is a high standard, but we believe that as we are finalizing
appointment wait time standards for only four types of services
(primary care, OB/GYN, mental health and SUD, and a State chosen one),
three of which are the most commonly used on a frequent and repetitive
basis, we believe it is critically important that managed care plans
have robust networks for these services with sufficient capacity to
provide timely appointments to meet the needs of the plan's enrollees.
Additionally, as commenters noted, there is a high overlap of managed
care plans between Medicaid and the FFMs, so efficiencies are likely
achievable that will aid in meeting requirements for both products.
Additionally, we intentionally proposed an applicability date for
secret shopper surveys in Sec. 438.68(f)(2) that was 1 year after the
applicability date for appointment wait time standards in Sec.
438.68(e)(1) to give managed care plans time to ensure that their
networks are able to meet established standards. Given the importance
for enrollees to be able to access routine appointments for the
required services in a timely manner, we are finalizing a 90 percent
compliance rate in Sec. 438.68(e)(2).
Comment: A few commenters recommended a range of revisions to Sec.
438.68(f) including adding additional services or all plan covered
services to the secret shopper survey requirement. Other commenters
suggested additional fields for surveys of provider directory data. One
commenter recommended that CMS allow State-derived studies to continue
which focus on key areas based on State needs instead of specifying
provider types and directory fields.
Response: We believe that it is important to consistently focus the
requirements for appointment wait time standards and secret shopper on
the same provider and service types. This will enable coordinated and
focused approaches and strategies. We believe it prudent to start with
a core set of the most used services and let States and managed care
plans evaluate and refine their network management activities to ensure
appropriate access rather than be overly broad and dilute the impact of
their efforts. After reviewing secret shopper survey data, we may
include additional services in Sec. 438.68(e)(1) in future rulemaking.
Comment: A few commenters stated that conducting annual studies of
appointment availability for the same services does not allow
initiatives based on the previous year's results to be implemented and
assessed for effectiveness before the next study is done. A few
commenters also stated that requiring an annual secret shopper survey
does not consider seasonality.
Response: We acknowledge that not all areas for improvement
identified in a secret shopper survey can be remedied within a year, as
we reflected in Sec. 438.207(f)(2). However, there are some that can
be and conducting an annual secret shopper survey enables timely
reporting of the results of managed care plans' successful efforts to
improve access. To the comment on the impact of seasonality on secret
shopper results, we acknowledge that some provider types are more
impacted by seasonal fluctuations in appointment requests than others.
We believe States can take that into consideration when they schedule
their secret shopper surveys and, if done consistently from year to
year, the impact should be consistent and not disproportionate.
Comment: A few commenters recommended that CMS make clear to States
that the secret shopper surveys are to be used to collect the
information proposed in this rule only and not use them to collect and
make public any information about reproductive health care services.
Response: We confirm that the secret shopper surveys required at
Sec. 438.68(f) are to be used to collect information within the scope
and intent of this final rule and not used to collect any other
information or make public information beyond information on the
performance of MCOs, PIHPs, and PAHPs in meeting wait time standards.
Comment: Some commenters recommended that CMS clarify whether the
secret shopper survey requires that appointments be offered by a
specific provider or by any provider in the practice that is in the
managed care plan's network. For example, if a patient wants an
appointment and a specific provider does not have availability but
other comparable providers in the practice do, an appointment with
another provider should be counted as meeting the appointment wait time
standard. One commenter contended that secret shopper surveys are not
the best tool to identify providers that do not see Medicaid enrollees
(despite being in a plan's directory) or see only a minimal number.
This commenter recommended using what the commenter believes were more
productive approaches such as claims data analysis to identify
providers in directories that do not bill Medicaid, analysis of hours
authorized in a treatment plan versus hours of services delivered and
analyzing direct feedback from members.
Response: We appreciate commenters raising this issue and giving us
the opportunity to clarify our intent. We did not specify that the
appointment wait
[[Page 41024]]
time standard had to be met by the specific provider in the directory,
but rather that a routine appointment for primary care services, OB/GYN
services, mental health and SUD services, and the State-chosen service
type must be offered within established timeframes. We understand that
while a specific provider may be listed in the directory, that provider
may not have availability when an appointment is requested. Our goal
with the initial implementation of the appointment wait time standards
and secret shopper surveys is to determine if enrollees can access care
when they request it. As such, we believe that being offered an
appointment by any provider in a practice is sufficient for determining
compliance with appointment wait time standards.
However, we want to clarify that when verifying the accuracy of
provider directory data, secret shopper surveys must verify the
published information. Meaning, if the provider directory lists Dr. X,
then the active network status, address, phone number, and open panel
status for Dr. X must be verified; a directory reflecting accurate
information for other providers in the same practice is not sufficient
for Dr. X's data to be considered ``accurate'' for compliance with
Sec. 438.68(f)(1)(ii). In the proposed rule preamble, we acknowledged
the issue of providers being listed in managed care plan directories
but delivering little or no care for Medicaid enrollees (88 FR 28101).
This issue could be addressed in secret shopper surveys of appointment
wait times and we encourage States to build their surveys to include
this level of detail. However, we did not specifically require this in
Sec. 438.68(f) as we believe secret shopper surveys that verify
provider directory data will capture this information. We believe there
are efficiencies that can be utilized between the appointment wait time
and provider directory data surveys, such as by requesting an
appointment and verifying the information in 438.68(f)(ii) in the same
call to a provider, that will reflect a more robust and accurate
picture of access to providers listed in managed care plans' provider
directories. We agree with the commenter's suggestions for other
methods that can be used to validate network providers' availability
and utilization to ensure that they are ``active'' network providers.
However, we believe the commenters' suggestions should be used in
addition to the secret shopper surveys to further refine and
contextualize the secret shopper results.
Comment: Some commenters recommended that CMS require the entity
conducting the secret shopper surveys and States to send the applicable
information on provider directory data errors on a schedule other than
the proposed 3-business days. Suggestions ranged from 6 days to
monthly. One commenter recommended that CMS consider an approach that
allows States to receive and report managed care plan errors in an
aggregate or summarized form on a quarterly basis in addition to an
individual 6-day communication to managed care plans. One commenter
recommended that States be permitted to select their own timeframe for
when data would be sent to managed care plans. One commenter suggested
that managed care plans should be given a seven-day grace period to
correct directory data errors before it is counted against their final
accuracy rate.
Response: We appreciate the range of comments on our proposals in
Sec. 438.68(f)(1)(iii) and (iv) on the timeframes for directory data
identified in secret shopper surveys to be sent to States and managed
care plans. As we stated in the proposed rule preamble, inaccuracies in
the information subject to a secret shopper survey can have a
tremendously detrimental effect on enrollees' ability to access care
since finding providers that are not in the managed care plan's
network, have inaccurate addresses and phone numbers, or finding
providers that are not accepting new patients listed in a plan's
directory can delay their ability to contact a network provider that
can provide care (88 FR 28102). We acknowledge that 3 business days is
a fast turnaround time but we believe it's reasonable given that: (1)
the information from the survey vendor will be transmitted
electronically; (2) we explicitly stated that States could delegate the
function of forwarding the information to the managed care plans to the
entity conducting the secret shopper surveys so that the State and
managed care plans receive the information at the same time; and (3)
given that the applicability date for secret shopper surveys is the
first rating period for MCOs, PIHPs, or PAHPs that begins on or after 4
years after the effective date of the rule, States and managed care
plans have ample time to establish processes for this data exchange. We
do not agree with the commenter that managed care plans should have a
grace period in which to make corrections before the error is counted.
The point of using secret shopper surveys is to assess enrollees'
experience when they utilize a plan's provider directory; therefore,
not calculating an accurate error rate undermines the goal of the
survey.
Comment: A few commenters stated that 3 business days was not
sufficient time for managed care plans to make corrections to
inaccurate directory data.
Response: We appreciate commenters raising this concern as it seems
the preamble may have been unclear on this issue to some readers.
Section 438.68(f)(1)(iii) specifies that States must receive
information on errors in directory data identified in secret shopper
surveys no later than 3 business days from the day the error is
identified. Section 438.68(f)(1)(iv) requires States to send that
information to the applicable managed care plan no later than 3
business days from receipt. As such, the 3 business day timeframes are
for data transmission, not correction of the erroneous data. Section
438.10(h)(3)(iii) specifies that managed care plans must use the
information received from the State to update provider directories no
later than the timeframes specified in Sec. 438.10(h)(3)(i) and (ii)
and included in separate CHIP regulations through an existing cross-
reference at Sec. 457.1207.
Comment: Some commenters opposed requiring secret shopper surveys
and stated that utilizing secret shopper surveys requires significant
State resources to contract with third party survey organizations,
provide limited accuracy, and ultimately are not a meaningful way of
advancing the goal of directory accuracy. A few commenters stated that
secret shopper surveys are not effective for addressing the root causes
of access issues and cause provider burden and dissatisfaction. One
commenter believed that the burden would be particularly apparent for
behavioral health providers, who often operate small businesses
independently without staffing support. One commenter recommended just
collecting attestations from plans, consistent with the approach in the
2024 Notice of Benefit and Payment Parameters final rule for QHPs on
the FFMs.
Response: We understand commenters' concerns. However, despite
existing regulations on network adequacy and access in Sec. Sec.
438.68 and 438.206 and monitoring and reporting requirements in
Sec. Sec. 438.66 and 438.207, we continue to hear from enrollees and
other interested parties that managed care plan networks do not provide
access to covered services that meets the needs of covered populations.
As we noted in the proposed rule preamble, external studies document
findings that suggest that current network adequacy standards might not
reflect actual access
[[Page 41025]]
and that new methods are needed that account for physicians'
willingness to serve Medicaid patients. Additionally, 34 audit studies
demonstrated that Medicaid is associated with a 1.6-fold lower
likelihood in successfully scheduling a primary care appointment (88 FR
28098). We believe that proactive steps are necessary to address areas
that need improvement, and we believe provisions in this final rule,
including requirements for secret shopper surveys to assess the
accuracy of provider directory data and compliance with appointment
wait time standards, are an important first step. The use of secret
shopper surveys is consistent with the proposed requirements for QHPs
on the FFMs as specified in the 2025 Draft Letter to Issuers in the
Federally-facilitated Exchanges.\40\
---------------------------------------------------------------------------
\40\ https://www.cms.gov/files/document/2025-draft-letter-issuers-11-15-2023.pdf.
---------------------------------------------------------------------------
Comment: We received a wide range of comments and suggestions on
the methodology for secret shopper surveys including: entities
conducting secret shopper surveys need to be equipped with the same
information that a Medicaid enrollee would have including Medicaid
program name, plan name, member ID number, and date of birth; much of
the value of a secret shopper survey depends on how a question is
worded and requested; familiarity of office scheduling staff with
secret shopper surveys- particularly when surveyors are unable to
provide necessary information indicating they are real patients; and
survey questions may need to account for factors such as providers that
generally rely on electronic rather than telephone appointments.
Response: We appreciate the many comments that shared valuable
input on secret shopper survey methodologies. We encourage States to
consider these and collaborate with the survey entity when designing
their surveys. We encourage States to consider providing sufficient
details to their survey entity such as a verifiable Medicaid ID number
to enable them to respond to requests for such information.
Comment: One commenter noted that given the mandatory nature of
EQRO provider data validation activities Sec. 438.358(b)(1)(iv), it is
unclear how the proposed secret shopper survey will add any value to
the existing policy framework or is not duplicative of existing
processes. The commenter recommended that CMS require States to
administer the CAHPS[supreg] survey which includes questions focused on
appointment availability and access to care to prevent secret shopper
surveys outside of CAHPS[supreg] inadvertently negatively impacting
CAHPS[supreg] results due to duplicative data collection, different
survey methodologies, and inconsistent results across different surveys
measuring appointment availability.
Response: We do not agree that secret shopper surveys would be
duplicative of provider data validation activities in Sec.
438.358(b)(1)(iv). As stated in the CMS EQR Protocols published in
February 2023,\41\ the activities in protocol 4 include validating the
data and methods used by managed care plans to assess network adequacy,
validating the results and generating a validation rating, and
reporting the validation findings in the annual EQR technical report.
These activities are different than the secret shopper surveys
finalized in Sec. 438.68(f) which will verify appointment access and
the accuracy of directory data directly with a provider's office. We
are unclear why the commenter noted their belief that secret shopper
surveys outside of CAHPS[supreg] could inadvertently negatively impact
CAHPS[supreg] results due to duplicative data collection, different
survey methodologies, and inconsistent results. We acknowledge that no
single tool to measure access is perfect, which is why the managed care
regulations in 42 CFR part 438 require multiple tools that will provide
a more comprehensive and contextualized view of access for each
program.
---------------------------------------------------------------------------
\41\ https://www.medicaid.gov/medicaid/quality-of-care/medicaid-managed-care/quality-of-care-external-quality-review/index.html.
---------------------------------------------------------------------------
Comment: Many commenters supported posting the results of secret
shopper surveys on States' websites and noted it will help individual
patients and patient advocates better understand if there are
individual or systemic issues. Some commenters appreciated our
requiring that the results of secret shopper surveys be included in the
NAAAR as that will make it easier to locate and provide context for the
other network adequacy information in the report. A few commenters
suggested that States' NAAARs also be posted on Medicaid.gov.
Response: We believe that reporting secret shopper survey results
in the NAAAR is a logical and low burden option for States and will
provide a consistent place for interested parties to locate them. We
appreciate the suggestion to also include States' NAAARs on
Medicaid.gov. Currently, there are challenges with producing the MCPAR
and NAAAR as documents that are compliant with sections 504 and 508 of
the Rehabilitation Act; thus, they cannot currently be posted on
Medicaid.gov. Efforts are underway to resolve these issues for MCPARs
which are collected through the web-based portal, and we expect that
when we are collecting NAAARs through a web-based portal, we will be
able to resolve the current formatting challenges to produce compliant
documents that can be posted.
Comment: A few commenters recommended that CMS not implement secret
shopper surveys pending further decisions on development of a National
Directory of Healthcare Providers and Services, the subject of a CMS
request for information released in October 2022. These commenters
stated that using a national directory to validate provider data would
greatly reduce duplicative calls to providers that participate in
multiple managed care plans and lessen burden on providers.
Response: We acknowledge that work on the National Directory of
Healthcare Providers and Services is ongoing. We agree that if or when
a national directory is available, there likely will be efficiencies
that can be leveraged to lessen burden on providers and States.
However, we believe that inaccurate directory data has been an issue
for too long and has a great impact on access; as such, we do not agree
that delaying the secret shopper requirement in Sec. 438.68(f)(1) is
appropriate.
Comment: One commenter requested clarification on how the proposed
wait time standards interact with services that States ``carve out'' of
managed care plan contracts (that is, services delivered in FFS) and
requested that CMS issue guidance to ensure secret shopper surveys only
assess compliance with appointment wait times for covered services.
Response: As specified in Sec. 438.68(e)(1)(i) through (iii),
appointment wait time standards must be established for routine
appointments if the required services are covered by the managed care
plan's contract. To make this clear, we explicitly include ``If covered
in the MCO's, PIHP's, or PAHP's contract,[. . .]'' in paragraphs
(e)(1)(i) through (iii). Therefore, secret shopper surveys must not
include services that are not covered in a managed care plan's
contract.
Comment: Some commenters supported our proposal to only count
telehealth appointments toward wait time standards if the provider also
offered in-person appointments. One commenter noted that telehealth
should not replace in-person care, as there are some significant equity
concerns and telehealth is not a one-size-fits-all solution. Many other
commenters stated that all telehealth appointments should
[[Page 41026]]
be counted towards a plan's compliance rate and that this is especially
important for mental health and SUD appointments. Other commenters
recommended that CMS adopt the ten percent credit toward a plan's
compliance rate as is used by Medicare Advantage. A few commenters
recommended that States be permitted to determine how much telehealth
appointments should be counted toward a plan's compliance score.
Response: We thank commenters for their comments on this important
aspect of secret shopper surveys. As we stated in the preamble, we
acknowledge the importance of telehealth, particularly for mental
health and SUD services. However, we do not believe that managed care
plans should be able to provide services via telehealth only. Managed
care encounter data in T-MSIS reflects that most care is still provided
in-person and that use of telehealth has quickly returned to near pre-
pandemic levels. We believe limiting the counting of telehealth visits
to meet appointment wait time standards, as well as the segregation of
telehealth and in-person appointment data, is the correct approach to
use. While increased reliance on telehealth can and should be part of
the solution to address access deficiencies and used to address a
network adequacy or access issue for a limited time, it should be used
in concert with other efforts and strategies to address the underlying
access issue. We do not believe that relying solely on telehealth is an
appropriate way to meet all enrollees' care needs in the long term. We
will monitor information over time, such as encounter data, secret
shopper survey results, MCPAR submissions, and NAAAR submissions to
inform potential future revisions to Sec. 438.68(f)(2)(ii). We do not
believe adopting Medicare Advantage's ten-percentage point credit
methodology would be appropriate as it is designed to apply to time and
distance standards--which are substantially different than appointment
wait time standards.
Comment: One commenter recommended that CMS require that
appointment wait time data evaluations be disaggregated by key social,
demographic, and geographic variables to identify and address any
access discrepancies for specific subpopulations.
Response: We decline to add these additional requirements on secret
shopper survey results in this final rule; however, we believe data
disaggregated as suggested by the commenter could provide States with
valuable information about their programs. We encourage States to
consider these suggestions as they develop their surveys.
After reviewing the public comments, we are finalizing Sec. Sec.
438.68(f), 457.1207, and 457.1218 as proposed.
d. Assurances of Adequate Capacity and Services--Provider Payment
Analysis (Sec. Sec. 438.207(b) and 457.1230(b))
We believe there needs to be greater transparency in Medicaid and
CHIP provider payment rates for States and CMS to monitor and mitigate
payment-related access barriers. There is considerable evidence that
Medicaid payment rates, on average, are lower than Medicare and
commercial rates for the same services and that provider payment
influences access, with low rates of payment limiting the network of
providers willing to accept Medicaid patients, capacity of those
providers who do participate in Medicaid, and investments in emerging
technology among providers that serve large numbers of Medicaid
beneficiaries. However, there is no standardized, comprehensive, cross-
State comparative data source available to assess Medicaid and CHIP
payment rates across clinical specialties, managed care plans, and
States. Given that a critical component of building a managed care plan
network is payment, low payment rates can harm access to care for
Medicaid and CHIP enrollees in multiple ways. Evidence suggests that
low Medicaid physician fees limit physicians' participation in the
program, particularly for behavioral health and primary care
providers.42 43 Relatedly, researchers have found that
increases in the Medicaid payment rates are directly associated with
increases in provider acceptance of new Medicaid patients. In short,
two key drivers of access--provider network size and capacity--are
inextricably linked with Medicaid provider payment levels and
acceptance of new Medicaid patients.44 45 While many factors
affect provider participation, given the important role that payment
rates play in assuring access, greater transparency is needed to
understand when and to what extent provider payment may influence
access in State Medicaid and CHIP programs to specific provider types
or for Medicaid and CHIP beneficiaries enrolled in specific plans.
---------------------------------------------------------------------------
\42\ Holgash K, Heberlein M. Physician acceptance of new
Medicaid patients. Washington (DC): Medicaid and CHIP Payment and
Access Commission; 2019 Jan 24. Available from https://www.macpac.gov/wp-content/uploads/2019/01/Physician-Acceptance-of-New-Medicaid-Patients.pdf.
\43\ Zuckerman S, Skopec L, and Aarons J. Medicaid Physician
Fees Remained Substantially Below Fees Paid by Medicare in 2019.
Health Aff (Millwood). 2021;40(2). doi:10.1377/hlthaff.2020.00611.
\44\ National Bureau of Economic Research, ``Increased Medicaid
Reimbursement Rates Expand Access to Care,'' October 2019, available
at https://www.nber.org/bh-20193/increased-medicaid-reimbursement-rates-expand-access-care.
\45\ Zuckerman S, Skopec L, and Aarons J. Medicaid Physician
Fees Remained Substantially Below Fees Paid by Medicare in 2019.
Health Aff (Millwood). 2021;40(2). doi:10.1377/hlthaff.2020.00611.
---------------------------------------------------------------------------
We also believe that greater transparency and oversight is
warranted as managed care payments have grown significantly as a share
of total Medicaid payments; in FY 2021, the Federal government spent
nearly $250 billion on payments to managed care plans.\46\ With this
growth, we seek to develop, use, and facilitate State use of data to
generate insights into important, provider rate related indicators of
access. Unlike FFS Medicaid and CHIP programs, managed care plans
generally have the ability to negotiate unique reimbursment rates for
individual providers. Generally, unless imposed by States through a
State-directed payment or mandated by statute (such as Federally
qualified health center (FQHC) payment requirements established under
section 1902(bb) of the Act), there are no Federal regulatory or
statutory minimum or maximum limits on the payment rates a managed care
plan can negotiate with a network provider. As such, there can be
tremendous variation among plans' payment rates, and we often do not
have sufficient visibility into those rates to perform analyses that
will promote a better understanding of how these rates are impacting
access. Section 438.242(c)(3) for Medicaid, and through cross-reference
at Sec. 457.1233(d) for separate CHIP, requires managed care plans to
submit to the State all enrollee encounter data, including allowed
amounts and paid amounts, that the State is required to report to us.
States are then required to submit those data to T-MSIS as required in
Sec. 438.818 for Medicaid, and through cross-reference at Sec.
457.1233(d) for separate CHIP. However, variation in the quantity and
quality of T-MSIS data, particularly for data on paid amounts, remains.
We believe that provider payment rates in managed care are inextricably
linked with provider network sufficiency and capacity and proposed a
process through which managed care plans must report, and States must
review and analyze, managed care payment rates to
[[Page 41027]]
providers as a component of States' responsibility to ensure network
adequacy and enrollee access consistent with State and Federal
standards. Linking payment levels to quality of care is consistent with
a strategy that we endorsed in our August 22, 2022 CIB \47\ urging
States to link Medicaid payments to quality measures to improve the
safety and quality of care.
---------------------------------------------------------------------------
\46\ Congressional Budget Office, ``Baseline Projections--
Medicaid,'' May 2022, available at https://www.cbo.gov/system/files/2022-05/51301-2022-05-medicaid.pdf.
\47\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib08222022.pdf.
---------------------------------------------------------------------------
To ensure comparability in managed care plans' payment analyses, in
our May 3, 2023 proposed rule, we proposed to require a payment
analysis that managed care plans would submit to States per Sec.
438.207(b)(3) and States would be required to review and include in the
assurance and analysis to CMS per Sec. 438.207(d). Specifically, we
proposed to replace the periods at the end of Sec. 438.207(b)(1) and
(2) with semi-colons and add ``and'' after Sec. 438.207(b)(2) to make
clear that (b)(1) through (3) will all be required for Medicaid managed
care, and for separate CHIP through an existing cross-reference at
Sec. 457.1230(b).
At Sec. 438.207(b)(3) for Medicaid, and for separate CHIP through
an existing cross-reference at Sec. 457.1230(b), we proposed to
require that MCOs, PIHPs, and PAHPs submit annual documentation to the
State that demonstrates a payment analysis showing their level of
payment for certain services, if covered by the managed care plan's
contract. We proposed that the analysis use paid claims data from the
immediate prior rating period to ensure that all payments are captured,
including those that are negotiated differently than a plan's usual fee
schedule. We also believe that using claims data ensures that
utilization is considered to prevent extremely high or low payments
from inappropriately skewing the results. We acknowledged that paid
claims data will likely not be complete within 180 days of the end of a
rating period, which is when this analyis is proposed to be reported by
the State in Sec. 438.207(d)(3)(ii). However, we believe that the data
are sufficiently robust to produce a reasonable percentage that
reflects an appropriate weighting to each payment based on actual
utilization and could be provided to the State far enough in advance of
the State submitting its reporting to CMS to be incorporated. We
believe this analysis of payments provides States and CMS with vital
information to assess the adequacy of payments to providers in managed
care programs, particularly when network deficiencies or quality of
care issues are identified or grievances are filed by enrollees
regarding access or quality.
In Sec. 438.207(b)(3)(i) for Medicaid, and for separate CHIP
through an existing cross-reference at Sec. 457.1230(b), we proposed
to require each MCO, PIHP, and PAHP to use paid claims data from the
immediate prior rating period to determine the total amount paid for
evaluation and management current procedural terminology (CPT) codes
for primary care, OB/GYN, mental health, and SUD services. Due to the
unique payment requirements in section 1902(bb) of the Act for FQHCs
and rural health clinics (RHCs), we proposed in Sec. 438.207(b)(3)(iv)
to exclude these provider types from the analysis. We further proposed
that this analysis provide the percentage that results from dividing
the total amount the managed care plan paid by the published Medicare
payment rate for the same codes on the same claims. Meaning, the
payment analysis will reflect the comparison of how much the managed
care plan paid for the evaluation and managment CPT codes to the
published Medicare payment rates including claim-specific factors such
as provider type, geographic location where the service was rendered,
and the site of service. In Sec. 438.207(b)(3)(i)(A) for Medicaid, and
for separate CHIP through an existing cross-reference at Sec.
457.1230(b), we also proposed that the plans will include in the
analysis separate total amounts paid and separate comparison
percentages to Medicare for primary care, OB/GYN, mental health, and
substance use disorder services for ease of analysis and clarity.
Lastly in Sec. 438.207(b)(3)(i)(B) for Medicaid, and for separate CHIP
through an existing cross-reference at Sec. 457.1230(b), we proposed
that the percentages be reported separately if they differ between
adult and pediatric services. We believe the proposals in Sec.
438.207(b)(3)(i)(A) and (B) would ensure sufficient detail in the data
to enable more granular analysis across plans and States, as well as to
prevent some data from obscuring issues with other data. For example,
if payments for adult primary care are significantly lower than
pediatric primary care, providing separate totals and comparison
percentages will prevent the pediatric data from artificially inflating
the adult totals and percentages. We believe this level of detail will
be necessary to prevent misinterpretation of the data.
We proposed in Sec. 438.207(b)(3)(ii) for Medicaid, and for
separate CHIP through an existing cross-reference at Sec. 457.1230(b),
to require that the payment analysis provide the total amounts paid for
homemaker services, home health aide services, and personal care
services and the percentages that results from dividing the total
amount paid by the amount the State's Medicaid or CHIP FFS program
would have paid for the same claims. We proposed two differences
between this analysis and the analysis in Sec. 438.207(b)(3)(i):
first, this analysis will use all codes for the services as there are
no evaluation and management CPT codes for these LTSS; and second, we
proposed the comparison be to Medicaid or CHIP FFS payment rates, as
applicable, due to the lack of comparable Medicare rates for these
services. We proposed these three services as we believe these have
high impact to help keep enrollees safely in the community and avoid
institutionalization. Again, we believe this analysis of payment rates
will be important to provide States and CMS with information to assess
the adequacy of payments to providers in managed care programs,
particularly when enrollees have grievances with services approved in
their care plans not being delivered or not delivered in the authorized
quantity. We requested comment on whether in-home habilitation services
provided to enrollees with I/DD should be added to this analysis.
We believe that managed care plans could perform the analyses in
Sec. 438.207(b)(3)(i) and (ii) by: (1) Identifying paid claims in the
prior rating period for each required service type; (2) identifying the
appropriate codes and aggregating the payment amounts for the required
service types; and (3) calculating the total amount that will be paid
for the same codes on the claims at 100 percent of the appropriate
published Medicare rate, or Medicaid/CHIP FFS rate for the analysis in
Sec. 438.207(b)(3)(ii), applicable on the date of service. For the
aggregate percentage, divide the total amount paid (from (2) above) by
the amount for the same claims at 100 percent of the appropriate
published Medicare rate or Medicaid/CHIP FFS, as appropriate (from (3)
above). We believe this analysis would require a manageable number of
calculations using data readily available to managed care plans.
To ensure that the payment analysis proposed in Sec. 438.207(b)(3)
is appropriate and meaningful, we proposed at paragraph (b)(3)(iii) for
Medicaid, and for separate CHIP through an existing cross-reference at
Sec. 457.1230(b), to exclude payments for claims for the services in
paragraph (b)(3)(i) for which the managed care
[[Page 41028]]
plan is not the primary payer. A comparison to payment for cost sharing
only or payment for a claim for which another payer paid a portion will
provide little, if any, useful information.
The payment analysis proposed at Sec. 438.207(b)(3) is authorized
by sections 1932(c)(1)(A)(ii) and 2103(f)(3) of the Act, which requires
States' quality strategies to include an examination of other aspects
of care and service directly related to the improvement of quality of
care. The authority for our proposals is extended to PIHPs and PAHPs
through regulations based on our authority under section 1902(a)(4) of
the Act. Because the proposed payment analysis will generate data on
each managed care plan's payment levels for certain provider types as a
percent of Medicare or Medicaid FFS rates, States could use the
analysis in their examination of other aspects of care and service
directly related to the improvement of quality of care, particularly
access. Further, sections 1932(c)(1)(A)(iii) and 2103(f)(3) of the Act
authorize the proposals in this section of this final rule as enabling
States to compare payment data among managed care plans in their
program, which could provide useful data to fulfill their obligations
for monitoring and evaluating quality and appropriateness of care.
We also proposed to revise Sec. 438.207(g) to reflect that managed
care plans will have to comply with Sec. 438.207(b)(3) no later than
the first rating period that begins on or after 2 years after the
effective date of the final rule as we believe this is a reasonable
timeframe for compliance.
We summarize and respond to public comments received on Assurances
of adequate capacity and services--Provider payment analysis
(Sec. Sec. 438.207(b) and 457.1230(b)) below.
Comment: Many commenters supported our proposal for a managed care
plan payment analysis in Sec. 438.207(b)(3). Commenters noted they
believe it will provide greater insight into how Medicaid provider
payment levels affect access to care. One commenter stated that it was
abundantly clear that low provider payment rates harm Medicaid
beneficiaries, as they limit provider participation. Some commenters
stated the payment analysis can contribute to identifying and
redressing gaps in access. One commenter stated that Medicaid FFS and
Medicare rates are a matter of public knowledge and the rates paid by
managed care plans should be as well.
Response: We agree that managed care programs should have
comparable transparency on provider payment to Medicaid and CHIP FFS
programs and the analysis finalized at Sec. 438.207(b)(3) for
Medicaid, and for separate CHIP through an existing cross-reference at
Sec. 457.1230(b) is an important step. We acknowledge an oversight in
the wording of Sec. 438.207(b)(3)(i) in the proposed regulation text.
The preamble noted how the necessary calculations could be produced and
included ``For the aggregate percentage, divide the total amount paid
(from 2. above) by the amount for the same claims at 100 percent of the
appropriate published Medicare rate or Medicaid/CHIP FFS, as
appropriate (from 3. Above).'' (88 FR 28105) Unfortunately, ``amount
paid by the'' was erroneously omitted in (b)(3)(i) so that the sentence
did not reflect the two components needed to produce a percentage. To
correct this, we are finalizing Sec. 438.207(b)(3)(i) to state that
the payment analysis must provide the total amount paid for evaluation
and management CPT codes in the paid claims data from the prior rating
period for primary care, OB/GYN, mental health, and substance use
disorder services, as well as the percentage that results from dividing
the total amount paid by the published Medicare payment rate for the
same services.
Comment: Many commenters did not support our proposal for a managed
care plan payment analysis in Sec. 438.207(b)(3). A few commenters
stated that CMS should rely on States to work with their contracted
managed care plans in evaluating which factors they believe are most
relevant to access in their specific areas, and in determining what
types of comparative data (whether it is payment information or other
metrics) would be most useful and cost effective for such evaluations.
Some commenters were concerned that the comparison CMS is requesting
will be misleading, statistically invalid, present an incomplete
narrative on provider payment, and will dissuade participation by
providers in the Medicaid program which is contrary to CMS's stated
goals. Commenters believe that comparing payment on a per code level is
likely to result in a volume of information that is overwhelming for a
member of the general public and unlikely to yield information that is
beneficial.
Response: We understand why States would prefer to be able to
select which factors they believe are most relevant to access in their
specific areas for evaluation and determine which types of comparative
data would be most useful. However, we believe for these analyses to be
useful, there must be consistency, and permitting each State to conduct
a unique analysis would not achieve that. We do not agree with
commenters that state that the analysis will be misleading,
statistically invalid, or produce too much information for most
interested parties as we intentionally kept the scope of service types
and results required to be produced very limited. For example, Sec.
438.207(b)(3)(i)(A) and (B) requires a separate total and percentage
for primary care, obstetrics and gynecology, mental health, and
substance use disorder services, with a potential breakout of these
percentages by adult and pediatric services. If a managed care plan's
calculations do not produce a different percentage for pediatric
services for a service type, then the managed care plan would only need
to produce four totals and four percentages--one total and one
percentage for primary care, obstetrics and gynecology, mental health,
and substance use disorder services. If a managed care plan's
calculations produce a different percentage for pediatric services,
then the managed care plan would need to produce two percentages for
each type of service. We do not believe that producing this few results
will be misleading, invalid, or overwhelming for most interested
parties. We also do not believe that the results of these analyses will
dissuade providers from joining managed care plans' networks. We are
confident that providers will be able to interpret the data
appropriately and are familiar enough with managed care plan
contracting practices to base their network participation decisions on
specific information provided to them as part of network contract
exploration and negotiation.
Comment: We received numerous comments on the proposed
applicability date of the first rating period for contracts with MCOs,
PIHPs, or PAHPs beginning on or after 2 years after the effective date
of the rule. Some commenters recommended that CMS finalize an
applicability date at least 2 years following the release of any
relevant subregulatory guidance. Other commenters recommended an
applicability date sooner than 2 years after the effective date of the
rule. Some commenters recommended that CMS pilot the payment analysis
with a small subset of evaluation and management (E/M) codes, stating
that this would allow CMS to address key implementation challenges
before requiring national reporting on the broader subset of codes.
Response: We appreciate the input on our applicability date
proposal. Given that almost all managed care plans evaluate their
provider payment rates
[[Page 41029]]
annually when the Medicare payment rates are published, we do not
believe that managed care plans will have an inordinate amount of
burden performing the analysis finalized in Sec. 438.207(b)(3). While
we may publish guidance on performing the analysis in the future, it is
not immediately planned and so we cannot predicate the applicability
date on it. To the comments suggesting that we finalize a sooner
applicability date, we do not believe that would be prudent given the
other requirements being finalized in this rule that will impact
managed care plans. We encourage managed care plans to use the time
between the final rule and the first rating period that begins on or
after 2 years after the effective date to develop the necessary
calculations and data extracts. As always, we are available to provide
technical assistance if needed.
Comment: Many commenters suggested ways to revise the payment
analysis to produce different or more detailed results including:
requiring the analysis for all payments to all provider types and for
all services for which there is a network adequacy requirement; adding
psychotherapy codes, psychological testing, and neuropsychological
testing; showing the different payment rates between physicians and
nurse practitioners; capturing average payment rates broken out by
geographic and population areas; comparing Medicaid payment rates to
commercial insurance rates; and publishing the average payment rate per
service.
Response: We appreciate these suggestions and encourage States to
include them in addition to the analysis required in Sec.
438.207(b)(3) for Medicaid, and for separate CHIP through an existing
cross-reference at Sec. 457.1230(b). Expanding the required analysis
to include some or all of these layers of detail could prove very
helpful to States and managed care plans in their network adequacy and
access monitoring and improvement activities. To give managed care
plans time to develop their analyses to comply with the final rule, we
decline to add any of the suggested revisions to Sec. 438.207(b)(3)
for Medicaid, and for separate CHIP through an existing cross-reference
at Sec. 457.1230(b), at this time, but may consider them in future
rulemaking.
Comment: Several commenters stated concern about proprietary and
confidential data being released in the payment analysis and noted that
CMS must ensure that data are protected from inappropriate disclosure.
One commenter stated that any claims of the purported proprietary or
confidential nature of these provider payment rates should be summarily
dismissed, particularly given that the contractors are using public
funds. This commenter further contended that concerns that rate
transparency is inflationary have not been seen with increasing
transparency for commercial insurance provider payments; to the extent
this does occur in Medicaid, it is needed. Another commenter stated
concern that a requirement to publicly post the report of the results
would make this information readily available to anyone in the State,
including interested parties that are hostile to Medicaid and/or access
to specific types of services and could expose some services and/or
provider types to politically motivated attempts to decrease their
payment rates.
Response: We appreciate commenters raising these issues. The
provider payment analysis as finalized in this rule at Sec.
438.207(b)(3) for Medicaid, and for separate CHIP through an existing
cross-reference at Sec. 457.1230(b), will produce only aggregate
results without revealing specific payments or specific providers. As
specified in Sec. 438.207(b)(3)(i) for Medicaid, and for separate CHIP
through an existing cross-reference at Sec. 457.1230(b), the analysis
would produce the total amount paid for E/M codes in the paid claims
data from the prior rating period, as well as the percentage that
results from dividing the total amount paid by the published Medicare
payment rate for the same services. Although the resulting totals and
percentages must be categorized as primary care, OB/GYN, mental health,
or substance use disorder, no additional identifying data are required.
Comment: Many commenters questioned how non-FFS payments that often
include non-E/M services should be accommodated in the analysis and
recommended that CMS provide detailed guidance as to address capitated
providers, value-based payment (VBP) arrangements, bundled payments, or
alternative payment types. These commenters stated that excluding these
types of payments would undermine and devalue the shift to alternative
payment models and quality-based payment incentives and believe
specific guidance is needed so that managed care plans can consistently
and accurately reflect alternative payment models in their payment
analyses. A few commenters recommended that such payments be excluded
from the provider payment analysis to avoid results being skewed by
Medicaid managed care plans' assumption-driven allocations of non-
service specific payments to individual services and to ensure
comparability of analyses across multiple Medicaid managed care
programs. Some commenters stated concern that this data collection
effort will not factor in complex hospital, specialty hospital, and
multi-functional inter-disciplinary health care delivery system
arrangements which are negotiated in the context of the delivery of
multiple services instead of on a one-off basis. One commenter
recommended that the analysis allow managed care plans to incorporate a
proportional allocation of incentive, bonus, or other payments made to
a provider outside of the adjudication of claims to ensure that the
analysis accurately reflects all payments, including those based on
value or quality achievements.
Response: We agree that capitation (to providers), VBP
arrangements, bundled payments, and other unique payment arrangements
that reward and support quality over quantity are important, and it was
not our intention to appear to discourage them or minimize their value.
However, given the wide-ranging designs of such payments, we elected to
not propose a specific way to address them in this iteration of the
analyses. We believe that finding a consistent way to include these
arrangements in these analyses is critical and want to use the analyses
submitted to inform our determination of how best to do this. Further,
as we are finalizing that only E/M codes be included in the analysis,
we want to better understand the scope of services included in these
types of arrangements. We decline to adopt the commenter's suggestion
to permit a proportional allocation of incentive, bonus, or other
payments to be incorporated into the totals or percentages required in
Sec. 438.207(b)(3)(i) and (ii) for Medicaid, and for separate CHIP
through an existing cross-reference at Sec. 457.1230(b). However, to
collect information on these arrangements and their impact on provider
payment for primary care, OB/GYN, mental health, and SUD services, we
will permit managed care plans to include data in their submissions
required in Sec. 438.207(b)(3) for Medicaid, and for separate CHIP
through an existing cross-reference at Sec. 457.1230(b) that reflect
the value of these non-FFS payment arrangements and their impact on the
totals and percentages (to the degree possible given the inclusion of
other services) required in Sec. 438.207(b)(3)(i) and (ii) for
Medicaid, and for separate CHIP through an existing cross-reference at
Sec. 457.1230(b). As States are required to utilize the data submitted
by their plans as required at
[[Page 41030]]
Sec. 438.207(b) to produce the analysis and assurance required at
Sec. 438.207(d), we will include fields in the NAAAR that will enable
States to include this additional information. We encourage managed
care plans and States to provide specific and detailed information on
capitation (to providers), VBP arrangements, bundled payments, and
other unique payment arrangements to enable us to determine the most
appropriate way to collect this information in potential future
revisions to Sec. 438.207(b)(3).
Comment: One commenter contended that they believe the analysis
will produce an inaccurate picture of the impact of Medicaid payments
on access given the significant portion of Medicaid payments flowing
through FQHCs and rural health clinics, which are excluded per Sec.
438.207(b)(3)(iv).
Response: We intentionally excluded FQHCs and RHCs given their
statutorily required payment structure. We acknowledge that FQHCs and
RHCs provide a high volume of primary care, OB/GYN, mental health, and
SUD services, but they are paid a bundled rate. As addressed in the
prior response, bundled payments are challenging to disaggregate and we
believe it best to not include them in the payment analysis at this
time.
Comment: One commenter recommended that CMS require the data
required in Sec. 438.207(b)(3) to be submitted by plans to the State
within 90 days of the end of the rating period for annual NAAAR
submissions that must be submitted to CMS within 180 days of the end of
a rating period.
Response: We decline to specify that managed care plans must submit
the data required at Sec. 438.207(b) to the State within 90 days of
the end of the rating period. We defer to States to determine the
timeframe for plan submission given that States must submit annual
NAAARs within 180 days of the end of a rating period. We encourage
States to specify the submission timeframe in their managed care plan
contracts for clarity.
Comment: One commenter recommended that CMS require the payment
analysis required at Sec. 438.207(b)(3) to be certified by the managed
care plan's CEO.
Response: Section 438.606(a) specifies that managed care plans'
Chief Executive Officer; Chief Financial Officer; or an individual who
has delegated authority to sign for the Chief Executive Officer or
Chief Financial Officer must certify ``. . . data, documentation, or
information specified in Sec. 438.604. . . .'' As all information
provided by managed care plans consistent with Sec. 438.207(b) must be
posted on the State's website per Sec. 438.604(a)(5), existing Sec.
438.606(a) will apply the certification requirement to the data
provided by the managed care plans for Sec. 438.207(b)(3).
Comment: One commenter suggested that CMS publish a national report
of these payment analyses to provide a nationwide picture of Medicaid
payment.
Response: We appreciate the suggestion and may consider doing so in
the future.
Comment: A few commenters recommended that the States should be
required to make publicly available the results of the provider payment
analyses.
Response: We point out the requirement in Sec. 438.602(g)(2) that
through cross reference to Sec. 438.604(a)(5) requires documentation
described in Sec. 438.207(b), on which the State bases its
certification that the managed care plan has complied with its
requirements for availability and accessibility of services, be posted
on the State's website as required at Sec. 438.10(c)(3).
Comment: A few commenters contended that the payment analysis in
Sec. 438.207(b)(3) should not be required annually and suggested that
triennially would be less burdensome on the State agencies.
Response: We appreciate commenters' suggestion but believe the
payment analysis should be completed annually given that managed care
plan contracts and capitation rates are developed and approved on an
annual basis. We note a typographical error in Sec. 438.207(b)(3) that
we have corrected in this final rule. In the preamble (88 FR 28104), we
wrote ``At Sec. 438.207(b)(3) for Medicaid, and for separate CHIP
through an existing cross-reference at Sec. 457.1230(b), we propose to
require that MCOs, PIHPs, and PAHPs submit annual documentation to the
State that demonstrates a payment analysis showing their level of
payment for certain services, if covered by the managed care plan's
contract.'' Unfortunately, we failed to include ``annual'' in Sec.
438.207(b)(3). We did not receive comments questioning this discrepancy
and, as reflected in this and other comments, commenters understood our
intent that the anlyses be conducted and submitted annually. As such,
we are finalizing Sec. 438.207(b)(3) as ``Except as specified in
paragraphs (b)(3)(iii) and (iv) of this section and if covered by the
MCO's, PIHP's, or PAHP's contract, provides an annual payment analysis
using paid claims data from the immediate prior rating period. . . .''
Comment: A few commenters stated that the payment analysis at Sec.
438.207(b)(3) would create a significant new burden for Medicaid
agencies who would become responsible for conducting the complex
analysis of payments for each managed care plan and across managed care
plans for their market. One commenter stated that an actuarial services
contractor would be needed to evaluate past encounter data to define
which CPT or Healthcare Common Procedure Coding System (HCPCS) codes
need to be included for each managed care plan.
Response: We appreciate the opportunity to provide clarity on
managed care plan and State responsibilities as these comments are not
consistent with the proposed requirements. The payment analysis is
specified in Sec. 438.207(b)(3) for Medicaid managed care, and through
a cross-reference at Sec. 457.1230(b) for separate CHIP and is
required to be conducted by each managed care plan, not the State. The
States' only calculation is specified in Sec. 438.207(d)(2)(ii) for
Medicaid, and through a cross-reference at Sec. 457.1230(b) for
separate CHIP and requires States to produce a State-level payment
percentage for each service type by using the number of member months
for the applicable rating period to weight each managed care plan's
reported percentages. To the comment that an actuarial services
contractor would need to define which CPT/HCPCS codes need to be
included for each managed care plan, the analysis in Sec.
438.207(b)(3) for Medicaid, and through a cross-reference at Sec.
457.1230(b) for separate CHIP requires the use of paid claims data from
the immediate prior rating period. Managed care plans have all of their
claims data and can isolate the E/M codes and paid amounts. We are
unclear why an actuary would be needed for that or why a State would
assume this task for its managed care plans.
Comment: One commenter recommended that CMS reconsider the
timelines for conducting and reporting provider rates due to the
delayed approvals of State plans, waivers, and rate certifications of
actuarially sound capitation rates that can impact the actual or
planned managed care plan payments to providers. For example, if a
State plan is approved within 90 days but the capitation rates the
State will pay its managed care plans are not approved for several
months after, States who are risk averse may postpone all reprocessing
until all necessary CMS approvals have been received which
[[Page 41031]]
may extend beyond the deadline for reporting.
Response: We are unclear on the commenter's recommendation
regarding the impact of State plans, waivers, and rate certification
approvals on the payment analysis of provider payment. We are also
unclear on the reference to ``reprocessing.'' Regardless, we clarify
that the timing of authority documents or managed care plan contracts
and rates should not impact the provider payment analysis as it
utilizes actual paid claims data for a single rating period;
reprocessing of claims after the close of a rating period would be
captured in the following year's analysis.
Comment: One commenter noted that in developing the statutory
requirements for Medicaid managed care programs, Congress required
States contracting with Medicaid managed care entities to ``develop and
implement a quality assessment and improvement strategy'' that includes
``[s]tandards for access to care so that covered services are available
within reasonable timeframes and in a manner that ensures continuity of
care and adequate primary care and specialized services capacity.'' The
commenter contended that the payment analysis and disclosure
requirements being proposed by CMS are unsupported by this statutory
language, which concerns itself with beneficiary access to care, not
with comparative payment analyses.
Response: We disagree with the commenter as we believe there is a
strong link between access to care and provider payment and the payment
analysis finalized at Sec. 438.207(b)(3) for Medicaid managed care,
and through a cross-reference at Sec. 457.1230(b) for separate CHIP,
and the associated required review and analysis of the documentation
submitted by its managed care plans at Sec. 438.207(d) facilitates
States' inclusion of payment information in a consistent way to enable
States to develop effective ``[s]tandards for access to care so that
covered services are available within reasonable timeframes and in a
manner that ensures continuity of care and adequate primary care and
specialized services capacity.'' As we noted in the preamble (88 FR
28104), evidence suggests that low Medicaid physician fees limit
physicians' participation in the program, particularly for behavioral
health and primary care providers.48 49 Researchers also
found that increases in the Medicaid payment rates are directly
associated with increases in provider acceptance of new Medicaid
patients. In short, two key drivers of access--provider network size
and capacity--are inextricably linked with Medicaid provider payment
levels and acceptance of new Medicaid patients.50 51
---------------------------------------------------------------------------
\48\ Holgash K, Heberlein M. Physician acceptance of new
Medicaid patients. Washington (DC): Medicaid and CHIP Payment and
Access Commission; 2019 Jan 24. Available from https://www.macpac.gov/wp-content/uploads/2019/01/Physician-Acceptance-of-New-Medicaid-Patients.pdf.
\49\ Zuckerman S, Skopec L, and Aarons J. Medicaid Physician
Fees Remained Substantially Below Fees Paid by Medicare in 2019.
Health Aff (Millwood). 2021;40(2). doi:10.1377/hlthaff.2020.00611.
\50\ National Bureau of Economic Research, ``Increased Medicaid
Reimbursement Rates Expand Access to Care,'' October 2019, available
at https://www.nber.org/bh-20193/increased-medicaid-reimbursement-rates-expand-access-care.
\51\ Zuckerman S, Skopec L, and Aarons J. Medicaid Physician
Fees Remained Substantially Below Fees Paid by Medicare in 2019.
Health Aff (Millwood). 2021;40(2). doi:10.1377/hlthaff.2020.00611.
---------------------------------------------------------------------------
Comment: Some commenters stated that given the differences between
the Medicaid population and the Medicare population, any payment
analysis required to compare payment rates to providers in managed care
should use Medicaid FFS as a benchmark as it is more appropriate and
relevant than Medicare FFS. Some commenters question the validity of
comparing Medicaid payment rates to Medicare, especially for OB/GYN,
neonatal, and pediatric services given that Medicaid pays for far more
of these services than Medicare. A few commenters recommended that CMS
clarify that using Medicare is only a mechanism for evaluating payment
adequacy in a standardized way and that CMS is not suggesting that
Medicare payment rates are the appropriate benchmark to ensure Medicaid
beneficiaries have access to care. One commenter stated that Medicare
rates fall short of covering the cost to deliver care for most
providers. A few commenters suggested that the payment analysis should
use commercial plans' rates as the comparison.
Response: We appreciate the range of comments on our proposal to
use Medicare FFS rates the payment analysis at Sec. 438.207(b)(3) and
through a cross-reference at Sec. 457.1230(b) for separate CHIP. To
the suggestion to use Medicaid or CHIP FFS rates, we do not believe
that is appropriate given that each State sets their own rates and
therefore, would provide no level of consistency or comparability among
the analyses. We acknowledge that Medicare does not pay for a large
volume of OB/GYN, neonatal, and pediatric services, but it still
provides a consistent benchmark with rates developed in a standardized
and vetted manner. (88 FR 28104) However, we believe that limiting the
analysis to E/M codes and requiring all managed care plans to conduct
their analysis using published Medicare rates will mitigate the impact.
Further, we clarify that our intent is not to make a statement on the
appropriate benchmark to ensure Medicaid and CHIP beneficiaries have
access to care. We selected Medicare FFS rates for the payment analysis
for several reasons: they are consistently and rigorously developed and
vetted, most managed care plans routinely evaluate their payment rates
against Medicare FFS rates as a standard business practice, they are
the only complete and reliable set of rates published annually, and
they are easily accessible. We do not believe that using commercial
rates would be feasible given that none of the reasons listed above are
true for commercial rates.
Comment: We received several comments in support of including
habilitation services in the payment analysis. These commenters stated
that habilitation services are critical for enrollees, particularly
those in the I/DD population, who commonly receive personal care
services as part of their habilitation services. As such, since
personal care services are included in the payment analysis, so too
should habilitation services. These commenters also clarified that
while habilitation services are most frequently covered for enrollees
in the I/DD population and provided in their home, it could be covered
for other enrollees in other settings. The commenters assert that
limiting the payment analysis to habilitation services for just one
population and setting adds unnecessary complexity and that using
claims data for all habilitation services would reduce burden on
managed care plans and make the results more comprehensive.
Response: We appreciate the comments and agree that adding
habilitation services, irrespective of population or setting, to the
payment analysis would provide States with valuable information for
monitoring access to vital services for certain enrollees. This
revision also makes the payment analysis for habilitation services
consistent with the analysis for homemaker services, home health aide
services, and personal care services--which has no limitations based on
population or setting. We very much appreciate the information on
reducing burden by eliminating an unnecessary limitation on the data
based on population and setting and have revised Sec.
438.207(b)(3)(ii) accordingly. To
[[Page 41032]]
reflect this, we are finalizing Sec. 438.207(b)(3)(ii) by moving
``personal care'' before ``and'' and adding ``habilitation services''
after ``and.''
Comment: A few commenters stated that some States do not maintain
separate Medicaid FFS fee schedules for most I/DD services while others
noted that some States that use managed long-term services and supports
(MLTSS) exclusively do not maintain Medicaid FFS rates. These
commenters pointed out that not having Medicaid FFS rates in these
circumstances makes part of the payment analysis in Sec.
438.207(b)(3)(ii) impossible. A few commenters suggested that CMS
consider requiring States to report an average unit cost instead of a
Medicaid FFS comparison as this would enable States that do not have a
Medicaid FFS rate or have not made updates to Medicaid FFS rates to
still produce a valuable analysis. One commenter suggested using other
sources when a State's Medicaid FFS fee schedule is unavailable such as
comparison to regional payment data or other States' rates.
Response: States can utilize a managed care delivery system for
home health services, homemaker services, personal care services, and
habilitation services but they must still identify payment
methodologies in their State plans for all services authorized in their
State plan. Thus, while a State may not be actively paying Medicaid FFS
claims for the services identified in Sec. 438.207(b)(3)(ii), they
should be able to produce payment rates consistent with the methodology
approved in their State plan. We also clarify that rates approved in
1915(c) waivers are considered CMS-approved FFS payment rates and can
be used for the payment analysis in Sec. 438.207(b)(3)(ii). We
appreciate the suggestion of producing an average unit cost; however,
that would be inconsistent with the rest of the analysis and would be
overly impacted by outlier payment rates.
Comment: A few commenters stated that in the ``Medicaid Program;
Ensuring Access to Medicaid Services'' proposed rule,\52\ CMS proposed
to publish the E/M codes to be used for the payment rate analysis in
subregulatory guidance along with the final rule and questioned if CMS
would do that for the payment analysis in Sec. 438.207(b)(3).
---------------------------------------------------------------------------
\52\ Published in the May 3, 2023 Federal Register (88 FR 27960
through 28089); https://www.govinfo.gov/content/pkg/FR-2023-05-03/pdf/2023-08959.pdf.
---------------------------------------------------------------------------
Response: We did not intend to publish a specific list of E/M codes
for the managed care plan payment analysis in Sec. 438.207(b)(3). We
believe that using paid claims data to derive the E/M codes is more
appropriate as paid claims provide the codes used by managed care plan
providers and limits the codes in plans' analysis to those that are
relevant. Further, we believe the varied scope of covered services
among managed care plans makes using only E/M codes used by providers
on their claims most appropriate and simplifies extracting the relevant
data from a plan's paid claims data. For example, a PIHP that covers
only mental health and SUD will have far fewer E/M codes in their
claims data than an MCO that covers primary care and OB/GYN services.
In the interest of efficiency and relevance, we decline to publish a
list of E/M codes for the managed care plan payment analysis in Sec.
438.207(b)(3) in this rule.
Comment: A few commenters noted that final provider payments can
include a variety of adjustments and that CMS should work with State
Medicaid programs to develop an analysis method that accounts for these
differences to ensure that comparisons accurately reflect differences
in base provider payment rates. Another commenter stated concern that
the results of this type of analysis could be biased by differences in
the mix of services provided by different managed care plans and
suggested that instead of each plan using its own utilization mix,
States provide statewide utilization that would be used by all plans in
their provider payment analysis.
Response: We understand that there are adjustments made to
contractually negotiated provider rates when claims are adjudicated,
and we believe it is appropriate to include these in the analysis to
accurately reflect the amount paid to the provider types in the
analysis as compared to the published Medicare payment rate. Regardless
of the mix of services provided by different managed care plans, the
analysis required at Sec. 438.207(b)(3) only includes E/M codes for
primary care, OB/GYN, mental health, and SUD; as such, we are unclear
why the commenter believes that the results will be biased. Lastly, we
do not agree with the commenter's suggestion that each managed care
plan should use statewide utilization instead of its own data that
reflects the plan's unique utilization mix. We believe this would
render the analysis meaningless as the analysis is intended to produce
customized results that reflect each plan's expenditures.
Comment: One commenter requested clarification on whether States
that report managed care plan payment rate analyses will report in the
aggregate or by named managed care plan.
Response: The documentation provided by each managed care plan that
will include the payment analysis finalized in Sec. 438.207(b)(3) for
Medicaid and, included in separate CHIP regulations through an existing
cross-reference at Sec. [thinsp]457.1230(b), will be reviewed by
States and reported in the NAAAR, per Sec. 438.207(d). The fields in
the NAAAR for reporting of the payment analysis will be by managed care
plan consistent with Sec. 438.207(d)(2)(i). States will report the
data from its plans' reported payment analysis percentages in the NAAAR
as well as percentages weighted using the member months for the
applicable rating period.
Comment: A few commenters requested clarification on the exact
scope of LTSS included in the categories of homemaker, home health
aide, and personal care services, and whether they should be included
regardless of where they are provided or under what delivery model. One
commenter suggested that CMS provide guidance clarifying whether
payments for homemaker and home health aide services provided to dually
eligible enrollees for intermittent skilled care or for other purposes
would be excluded from the analysis.
Response: We thank commenters for raising these questions so that
we can provide additional clarity. The payment analysis required at
Sec. 438.207(b)(3)(ii) for Medicaid, and for separate CHIP through an
existing cross-reference at Sec. [thinsp]457.1230(b), includes all
codes for homemaker services, home health aide services, personal care
services, and habilitation services as these services do not generally
utilize E/M CPT codes. (88 FR 28105) We did not specify limitations on
where the services are provided and only services covered in a managed
care delivery system can be included as the analysis must utilize
managed care plan paid claims data. Regarding whether payments for
homemaker and home health aide services provided to dually eligible
enrollees are included in the analysis, Sec. 438.207(b)(3)(iii) was
proposed and finalized to specify that payments for which the managed
care plan is not the primary payer are excluded from the analysis.
Therefore, homemaker and home health aide services will be included in
the managed care plan's analysis if Medicaid was the primary payer for
the claim.
Comment: One commenter stated that section 1932 of the Social
Security Act does not address ``comparability'' of reimbursement rates
or with transparency, leaving the proposed
[[Page 41033]]
payment analysis without any clear statutory basis.
Response: We believe that 1932(c)(1)(A)(ii) and (iii) of the Act
provide CMS the authority for the payment analysis at Sec.
438.207(b)(3). As we stated in the proposed rule, 1932(c)(1)(A)(ii)
requires States' quality strategies to include an examination of other
aspects of care and service directly related to the improvement of
quality of care and procedures for monitoring and evaluating the
quality and appropriateness of care and services. The payment analysis
required at Sec. 438.207(b)(3) will generate data on each managed care
plan's payment levels for certain provider types which States should
use in their examination of other aspects related to the improvement of
quality of care, particularly access. Further, the data from the
payment analysis will provide consistent, comparable data that can
contribute an important perspective to States' activities to monitor
and evaluate quality and appropriateness of care given the well-
established link between payment levels and provider participation.
After reviewing the public comments, we are finalizing Sec. Sec.
438.207(b)(3) and (g), and 457.1230(b) as proposed, except for a minor
wording correction in Sec. 438.207(b)(3)(i) and to add habilitation in
Sec. 438.207(b)(3)(ii).
e. Assurances of Adequate Capacity and Services Reporting (Sec. Sec.
438.207(d) and 457.1230(b))
Section Sec. 438.207(d) requires States to review the
documentation submitted by their managed care plans, as required at
Sec. 438.207(b), and then submit to CMS an assurance of their managed
care plans' compliance with Sec. Sec. 438.68 and 438.206. To make
States' assurances and analyses more comprehensive, we proposed to
revise Sec. 438.207(d) to explicitly require States to include the
results from the secret shopper surveys proposed in Sec. 438.68(f)
(see section I.B.1.c. of this final rule) and included in separate CHIP
regulations through an existing cross-reference at Sec. 457.1230(b).
We also proposed to require States to include the payment analysis
proposed in Sec. 438.207(b)(3) (see section I.B.1.d. of this final
rule) to their assurance and analyses reporting. Additionally, on July
6, 2022, we published a CIB \53\ that provided a reporting template
Network Adequacy and Access Assurances Report \54\ for the reporting
required at Sec. 438.207(d). To be clear that States will have to use
the published template, we proposed to explicitly require that States
submit their assurance of compliance and analyses required in Sec.
438.207(d) in the ``format prescribed by CMS.'' The published template
will fulfill this requirement as will future versions including any
potential electronic formats. We believe the revision proposed in Sec.
438.207(d) is necessary to ensure consistent reporting to CMS and
enable effective analysis and oversight. Lastly, because we proposed
new requirements related to the inclusion of the payment analysis and
the timing of the submission of this reporting to CMS, we proposed to
redesignate the last sentence in paragraph (d) of Sec. 438.207 as
paragraph (d)(1) and create new paragraphs (d)(2) and (3).
---------------------------------------------------------------------------
\53\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib07062022.pdf.
\54\ https://www.medicaid.gov/medicaid/managed-care/downloads/network-assurances-template.xlsx.
---------------------------------------------------------------------------
In Sec. 438.207(d)(2) for Medicaid and included in separate CHIP
regulations through an existing cross-reference at Sec. 457.1230(b),
we proposed that the States' analysis required in Sec. 438.207(d)(1)
must include the payment analysis required of plans in Sec.
438.207(b)(3) and provide the elements specified in paragraphs
(d)(2)(i) and (ii). Specifically, Sec. 438.207(d)(2)(i) proposed to
require States to include the data submitted by each plan and Sec.
438.207(d)(2)(ii) proposed to require States to use the data from its
plans' reported payment analysis percentages and weight them using the
member months associated with the applicable rating period to produce a
Statewide payment percentage for each service type. We believe these
data elements will provide valuable new data to support States'
assurances of network adequacy and access and we will revise the NAAAR
template published in July 2022 to add fields for States to easily
report these data. We reminded States that Sec. 438.66(a) and (b)
require States to have a monitoring system for all of their managed
care programs and include all aspects, including the performance of
their managed care plans in the areas of availability and accessibility
of services, medical management, provider network management, and
appeals and grievances. Accordingly, States should have ample data from
their existing monitoring activities and which will be supplemented by
the proposed requirements in this rule, to improve the performance of
their managed care programs for all covered services, as required in
Sec. 438.66(c). Because concerns around access to primary care, mental
health, and SUD services have been raised nationally, we expect States
to review and analyze their plans' data holistically to provide a
robust, comprehensive analysis of the adequacy of each plan's network
and level of realistic access and take timely action to address
deficiencies.
Section 438.207(d) was codified in 2002 (67 FR 41010) as part of
the implementing regulations for section 1932(b)(5) of the Act
``Demonstration of Adequate Capacity and Services.'' In the 2016 final
rule, we made minor revisions to the language but did not address the
timing of States' submission of their assurance and analysis. Given the
July 2022 release of the NAAAR template for the assurance and analysis,
we believe it would be appropriate to clarify this important aspect of
the reporting requirement. To simplify the submission process and
enable States and CMS to allot resources most efficiently, we proposed
to establish submission times in Sec. 438.207(d)(3)(i) through (iii)
that correspond to the times for managed care plans to submit
documentation to the State in Sec. 438.207(c)(1) through (3).
Specifically for Medicaid, we proposed that States submit their
assurance and analysis at Sec. 438.207(d)(3): (1) at the time they
submit a completed readiness review, as specified at Sec.
438.66(d)(1)(iii); (2) on an annual basis and no later than 180
calendar days after the end of each contract year; and (3) any time
there has been a significant change as specified in Sec. 438.207(c)(3)
and with the submission of the associated contract. We also proposed in
Sec. 438.207(d)(3) that States must post the report required in Sec.
438.207(d) on their website within 30 calendar days of submission to
CMS. We believe the information in this report will be important
information for interested parties to have access to on a timely basis
and 30 calendar days seems adequate for States to post the report after
submitting.
Since we did not adopt the MCPAR requirements for separate CHIP
managed care in the 2016 final rule, we are also not adopting the
proposed submission timeframe at Sec. 438.207(d)(3)(i). However, we
proposed for separate CHIPs to align with Medicaid for the proposed
network adequacy analysis submission timeframes at Sec.
438.207(d)(3)(ii) and (iii) through the existing cross-reference at
Sec. 457.1230(b).
In Sec. 438.207(e), we proposed a conforming revision to add a
reference to the secret shopper evaluations proposed at Sec. 438.68(f)
as part of the documentation that States must make available to CMS,
upon request, and included in separate CHIP regulations through an
existing cross-reference at
[[Page 41034]]
Sec. 457.1230(b). We believe this was necessary as the text of Sec.
438.207(e) only addressed the documentation provided by the managed
care plans.
Sections 1932(b)(5) and 2103(f)(3) of the Act require Medicaid and
CHIP MCOs to demonstrate adequate capacity and services by providing
assurances to the State and CMS, as specified by the Secretary, that
they have the capacity to serve the expected enrollment in its service
area, including assurances that they offer an appropriate range of
services and access to preventive and primary care services for the
population expected to be enrolled in such service area, and maintains
a sufficient number, mix, and geographic distribution of providers of
services. The authority for our proposals is extended to PIHPs and
PAHPs through regulations based on our authority under section
1902(a)(4) of the Act. Our proposals to require States to include the
secret shopper surveys proposed in Sec. 438.68(f), as well as the
payment analysis proposed in Sec. 438.207(b)(3) in their assurance and
analyses reporting proposed at Sec. 438.207(d) are authorized by
section 1932(b)(5) of the Act for Medicaid and authorized for CHIP
through section 2103(f)(3) of the Act because the States' reports
reflect the documentation and assurances provided by their managed care
plans of adequate capacity, an appropriate range of services, and
access to a sufficient number, mix, and geographic distribution of
network providers. Sections 1932(b)(5) and 2103(f)(3) of the Act also
require that the required assurances be submitted to CMS in a time and
manner determined by the Secretary; that information is proposed in
Sec. 438.207(d)(3)(i) through (iii) and corresponds to the
requirements for submission of documenation from managed care plans in
Sec. 438.207(c)(3).
We also proposed to revise Sec. 438.207(g) to reflect that States
will have to comply with paragraph (d)(2) no later than the first
managed care plan rating period that begins on or after 2 years after
the effective date of the final rule and paragraph (d)(3) no later than
the first managed care plan rating period that begins on or after 1
year after the effective date of the final rule. We proposed that
States will not be held out of compliance with the requirements of
paragraphs (e) of this section prior to the first MCO, PIHP, or PAHP
rating period that begins on or after 4 years after the effective date
of the final rule, so long as they comply with the corresponding
standard(s) codified in paragraph (e) contained in the 42 CFR parts 430
to 481, most recently published before the final rule. We proposed that
States must comply with paragraph (f) no later than the first managed
care plan rating period that begins on or after 4 years after the
effective date of the final rule. We believe these are reasonable
timeframes for compliance given the level of new burden imposed by
each.
We summarize and respond to public comments received on Assurances
of adequate capacity and services reporting (Sec. Sec. 438.207(d) and
457.1230(b)) below.
Comment: Many commenters supported our proposal to have States
incorporate their review and analysis of their managed care plan
provider payment analysis required in Sec. 438.207(b)(3) into their
NAAARs. These commenters stated this will provide much needed
transparency in a consistent manner across all managed care programs.
Response: We thank commenters for their support for our proposal.
We believe incorporating the payment analyses into a State's NAAAR is
the least burdensome approach and will make the data easy to locate and
understand.
Comment: One commenter suggested that in addition to requiring that
the payment analysis in Sec. 438.207(b) be included in States' NAAARs,
which are posted on their website, that CMS also require States to
submit their reports to their interested parties' advisory groups.
Response: We appreciate the suggestion that States share their
NAAARs with their interested parties' advisory groups. We decline to
adopt an additional requirement in this final rule but encourage States
to consider incorporating distribution of their NAAARs into their
advisory group processes.
Comment: A few commenters supported the specificity on the timing
of submission of the NAAAR in Sec. 438.207(d)(3), as it would improve
consistency among States. One commenter pointed out that it seemed
duplicative to submit the NAAAR for new managed care plans at the same
time as the readiness review information (as proposed in Sec.
438.207(d)(3)(i)) and suggested giving States more time to submit the
NAAAR for newly contracted plans.
Response: We believe adding requirements for the submission times
of the NAAAR will not only improve consistency but help States
recognize some efficiencies as the submission times in Sec.
438.207(d)(3) align with other existing report submissions. We
appreciate commenters pointing out that our proposal in Sec.
438.207(d)(3)(i) for States to submit the readiness review results and
the NAAAR at the same time would not yield the most effective
information. To address this, we will finalize Sec. 438.207(d)(3)(i)
to require the submission of the NAAAR in advance of contract approval.
This will provide managed care plans time to continue working to
address any deficiencies identified in the readiness review and enable
States to report the most current network adequacy and access
information to inform our final determination regarding contract
approval. We believe this revision in the submission timeframe will
benefit the newly contracted managed care plan, the State, and CMS.
After reviewing the public comments, we are finalizing Sec. Sec.
438.207(d) and 457.1230(b) as proposed except for a revision to Sec.
438.207(d)(3)(i) to revise the submission time to enable contract
approval.
f. Remedy Plans To Improve Access (Sec. 438.207(f))
For FFS programs, we rely on Sec. 447.203(b)(8) to require States
to submit corrective action plans when access to care issues are
identified. Because of the numerous proposals in this rule that will
strengthen States' monitoring and enforcement of access requirements
and the importance of timely remediation of access issues, we believe
we should have a similar process set forth in part 438 for managed care
programs. In Sec. 438.68(e), we proposed a process that will require
States to carefully develop and enforce their managed care plans' use
of appointment wait time standards to ensure access to care for
Medicaid managed care enrollees. As proposed in a new Sec. 438.207(f),
when the State, MCO, PIHP, PAHP, or CMS identifies any access issues,
including any access issues with the standards specified in Sec. Sec.
438.68 and 438.206, the State will be required to submit a plan to
remedy the access issues consistent with this proposal. If we determine
that an access issue revealed under monitoring and enforcement rises to
the level of a violation of access requirements under section
1932(c)(1)(A)(i) of the Act, as incorporated in section
1903(m)(2)(A)(xii) of the Act, we have the authority to disallow FFP
for the payments made under the State's managed care contract for
failure to ensure adequate access to care. We intend to closely monitor
any State remedy plans that will be needed to ensure that both CMS and
States will adequately and appropriately address emerging access issues
in Medicaid managed care programs.
Using Sec. 447.203(b)(8) as a foundation, we proposed to
redesignate existing Sec. 438.207(f) as Sec. 438.207(g) and
[[Page 41035]]
proposed a new requirement for States to submit remedy plans in new
Sec. 438.207(f), titled Remedy plans to improve access. In Sec.
438.207(f)(1), we proposed that when the State, MCO, PIHP, PAHP, or CMS
identifies an issue with a managed care plan's performance regarding
any State standard for access to care under this part, including the
standards at Sec. Sec. 438.68 and 438.206, States will follow the
steps set forth in paragraphs (i) through (iv). First, in paragraph
(1)(i), States will have to submit to CMS for approval a remedy plan no
later than 90 calendar days following the date that the State becomes
aware of an MCO's, PIHP's, or PAHP's access issue. We believe 90
calendar days is sufficient time for States to effectively assess the
degree and impact of the issue and develop an effective set of steps
including timelines for implementation and completion, as well as
responsible parties. In Sec. 438.207(f)(1)(ii), we proposed that the
State must develop a remedy plan to address the identified issue that
if addressed could improve access within 12 months and that identifies
specific steps, timelines for implementation and completion, and
responsible parties. We believe 12 months to be a reasonable amount of
time for States and their managed care plans to implement actions to
address the access issue and improve access to services by enrollees of
the MCO, PIHP, or PAHP. We did not propose to specify that the remedy
plan will be implemented by the managed care plans or the State;
rather, we proposed that the remedy plan identify the responsible party
required to make the access improvements at issue, which will often
include actions by both States and their managed care plans.
Additionally, we believe this proposal acknowledged that certain steps
that may be needed to address provider shortages can only be
implemented by States. For example, changing scope of practice laws to
enable more providers to fill gaps in access or joining interstate
compacts to enable providers to practice geographically due to the
opportunity to hold one multistate license valid for practice in all
compact States, streamlined licensure requirements, reduced expenses
associated with obtaining multiple single-State licenses, and the
creation of systems that enable electronic license application
processes. Lastly, in Sec. 438.207(f)(1)(ii), we proposed some
approaches that States could consider using to address the access
issue, such as increasing payment rates to providers, improving
outreach and problem resolution to providers, reducing barriers to
provider credentialing and contracting, providing for improved or
expanded use of telehealth, and improving the timeliness and accuracy
of processes such as claim payment and prior authorization.
We proposed in Sec. 438.207(f)(1)(iii) to require States to ensure
that improvements in access are measurable and sustainable. We believe
it is critical that remedy plans produce measurable results to monitor
progress and ultimately, bring about the desired improvements in access
under the managed care plan. We also proposed that the improvements in
access achieved by the actions be sustainable so that enrollees can
continue receiving the improved access to care and managed care plans
continue to ensure its provision. In paragraph (f)(1)(iv) of this
section, we proposed that States submit quarterly progress updates to
CMS on implementation of the remedy plan so that we will be able to
determine if the State was making reasonable progress toward completion
and that the actions in the plan are effective. Not properly monitoring
progress of the remedy plan could significantly lessen the
effectiveness of it and allow missed opportunities to make timely
revisions and corrections.
Lastly, in paragraph (f)(2) of this section, we proposed that if
the remedy plan required in paragraph (f)(1) of this section does not
address the managed care plan's access issue within 12 months, we may
require the State to continue to take steps to address the issue for
another 12 months and may require revision to the remedy plan. We
believe proposing that we be able to extend the duration of actions to
improve access and/or require the State to make revision to the remedy
plan will be critical to ensuring that the State's and managed care
plans' efforts are effective at addressing the identified access issue.
These proposals are authorized by section 1902(a)(4)(A) of the Act,
which provides for methods of administration found necessary by the
Secretary for the proper and efficient operation of the plan as we
believe States taking timely action to address identified access issues
is fundamental and necessary to the operation of an effective and
efficient Medicaid program. The proposal for States to submit quarterly
progress reports is authorized by section 1902(a)(6) of the Act which
requires that States provide reports, in such form and containing such
information, as the Secretary may from time to time require. Lastly, we
believe these proposals are also authorized by section 1932(c)(1)(A)(i)
and (iii) of the Act which require States that contract with MCOs to
develop and implement a quality assessment and improvement strategy
that includes (and extended to PIHPs and PAHPs through regulations
based on our authority under section 1902(a)(4) of the Act): standards
for access to care so that covered services are available within
reasonable timeframes and in a manner that ensures continuity of care
and adequate primary care and specialized services capacity and
procedures for monitoring and evaluating the quality and
appropriateness of care and services to enrollees and requirements for
provision of quality assurance data to the State. Implementing timely
actions to address managed care plan access issues will be an integral
operational component of a State's quality assessment and improvement
strategy.
We summarize and respond to public comments received on Remedy
plans to improve access (Sec. 438.207(f)) below.
Comment: Many commenters stated support for requiring States to
submit remedy plans to address access areas in need of improvement in
Sec. 438.207(f). Commenters noted that when combined with CMS's
ability to disallow FFP for payments made under managed care contracts
when the State fails to ensure access to care, requiring remedy plans
would significantly advance the goal of ensuring that enrollees have
access to the services they need. Many commenters supported requiring
remedy plans to include specific steps and timelines and encouraged CMS
to go further to include payment adequacy information. These commenters
stated this requirement would impose much-needed transparency and
accountability.
Response: We believe that the use of remedy plans will improve how
States and managed care plans collaborate to develop robust, productive
solutions to address access areas in need of improvement. We expect
remedy plans to reflect how multiple factors were considered, including
information on provider payment rates, State workforce initiatives,
telehealth policies, and broad delivery system reforms. We decline to
specifically require the inclusion of payment adequacy information in
remedy plans in this final rule given the payment analysis requirement
in Sec. 438.207(b) and the associated reporting requirement in Sec.
438.207(d); however, we encourage States to consider incorporating
those analyses, as relevant, since they will be a readily available
resource.
Comment: Some commenters recommended that remedy plans include
input from a wide array of interested parties. These commenters stated
that allowing community-
[[Page 41036]]
interested parties to understand how the State and its managed care
plans intend to work together to correct the access issue(s) can not
only help enrollees make informed enrollment choices, but also help
ensure that all options for addressing the issues are considered and
that steps in remedy plans are feasible for the assigned parties. A few
commenters recommended requiring remedy plans to consider claim denial
rates, prior authorization requests, and other sources of
administrative burden which, in addition to payment rates, is another
top reason physicians cite for not participating in managed care plans.
Response: We agree that remedy plans should include input from
multiple sources to the extent feasible. We acknowledge that this may
be challenging within the 90-calendar day timeframe for developing and
submitting a plan. However, we believe States can gather input on ways
to address access issues at any time and utilize it when a remedy plan
is needed. We encourage States to consider how improvements in claim
denial rates, timely and accurate prior authorization requests, and
other sources of administrative burden can be used in remedy plans to
encourage increased provider participation.
Comment: Many commenters stated concerns about the administrative
burden of meeting the 90-day deadline for remedy plan submission and
the diversion of limited State resources to comply with this mandate.
Several commenters also stated that, depending on the number of
potential remedies plans due at one time, 90 days may not be sufficient
to collect data and complete the analysis needed to develop a useful
remedy plan. These commenters recommended a longer timeframe between
collecting reports from the plans and submission to CMS. Several
commenters recommended revising the 90-day submission time to 180 days,
given the anticipated volume of information reported.
Response: We understand commenters' concerns but do not believe
extending the 90-calendar day development and submission timeframe for
remedy plans is appropriate as States have experience using formal
plans to address program areas in need of improvement. Further, States
have been required to have a monitoring and oversight system that
addresses all aspects of their managed care program and use the data
collected from its monitoring activities to improve the performance of
its managed care program since Sec. 438.66(a) through (c) was issued
in the 2016 final rule. We see the remedy plans finalized at Sec.
438.207(f) to add structure (that is, specific steps, timelines, and
responsible parties) to the requirement in Sec. 438.66(c) to use data
collected from a State's monitoring activities to improve the
performance of its managed care program. As such, we do not believe
that 90 calendar days is an unreasonable timeframe for submission.
Comment: Many commenters stated that 12 months to remediate many of
the issues that will be included in remedy plans is not feasible
particularly for those that include initiatives like changing State
scope of practice laws. Some commenters noted that the most effective
workforce recruitment and retention efforts may take more than 12
months to yield full results and result in sustainable improvements.
Another commenter stated that it is unclear what meaningful change
could be enacted and what systemic barriers could be solved within 12
months. However, other commenters stated that with as many issues of
access to care as are already known, allowing for up to 2 years to
remedy a specifically identified problem with multiple progress report
opportunities would be too long for enrollees to wait to see the
benefits. One commenter recommended that unless an extreme scenario
occurs, CMS should employ a 12-month timeframe with no 12-month
extension.
Response: We appreciate the wide range of comments on the duration
of remedy plans.
We acknowledge that there are network adequacy and access issues
that will be identified during secret shopper surveys that will require
a range of effort, solutions, and time to produce improvement. Some
issues will be able to be resolved with short, quickly implemented
activities. While others, such as workforce expansion or changing scope
of practice laws to permit enrollment of new provider types, will take
more robust, multi-pronged, collaborative solutions over an extended
period. Regardless, we believe that remedy plans serve a critical
function in addressing identified deficiencies by focusing States',
managed care plans', and other interested parties' efforts on the
development and implementation of definitive steps to address areas for
improvement, including both short-term and long-term strategies to
address access to care issues. We also believe that including
timeframes and responsible parties for each planned action provide
structure and accountability, as well as facilitates effective
implementation and monitoring.
As we state in Sec. 438.207(f)(1)(ii), States' and managed care
plans' actions may include a variety of approaches, including
increasing payment rates to providers, improving outreach to and
problem resolution with providers, reducing barriers to provider
credentialing and contracting, providing for improved or expanded use
of telehealth, and improving the timeliness and accuracy of processes
such as claim payment and prior authorization. We encourage States to
collaborate with their managed care plans as soon as feasible to
evaluate plan performance for improvement opportunities and ensure that
process improvements related to credentialing, accurate claims
processing, and prior authorization processing are implemented
effectively and timely. Given that Sec. 438.207(f) will not be
applicable until the first rating period that begins on or after 4
years after the effective date of the final rule, we believe States
have ample time to use existing data from monitoring activities to
identify existing access issues and begin formulating and implementing
steps to remediate them in advance of a State's first remedy plan
submission. We encourage States to proactively take steps to address
identified access issues to minimize the number of issues that remain
four years after the effective date of the final rule. We decline the
suggestion to not finalize our ability to extend remedy plans for an
additional 12 months. We believe that the ability to extend the remedy
plans an additional 12 months is an important flexibility that will be
necessary for issues that require a longer timeframe to produce
measurable improvement. We also believe extending some remedy plans an
additional 12 months enables ongoing monitoring and progress reporting
to ensure adequate resolution and sustainability.
Comment: Many commenters requested that CMS provide additional
detail on what access issues would rise to the level of needing a
remedy plan. Commenters stated the text ``could be improved'' is vague
and does not give clear criteria for States to know when remedy plans
will be required. One commenter stated that the rule seems to give CMS
a lot of discretion as to how heavy-handed it wants to be, on a case-
by-case basis, without providing expectations that States can rely on.
Several commenters stated that States need some level of assurance from
CMS as to when they will need to produce remedy plans.
Response: We acknowledge that some commenters believe that the
regulation text at Sec. 438.207(f)(1) is vague. However,
[[Page 41037]]
we do not agree and believe that it is appropriate for us to have the
ability to require remedy plans when an area in which a managed care
plan's access to care under the access standards could be improved is
identified and we should not be restricted to a finite list of
criteria. Further, we clarify that Sec. 438.207(f)(1) includes ``under
the access standards in this part'' which provides many of the criteria
upon which we will base our requests for remedy plans, such as the
quantitative network adequacy and appointment wait time standards in
Sec. 438.68 and payment analysis reporting in Sec. 438.207(d).
Comment: Some commenters were opposed to CMS requiring remedy
plans. A few commenters stated that remedy plans were not needed as
States already employ a variety of strategies, including corrective
action plans, monetary damages, and other forms of intermediate
sanctions, to ensure plan compliance with contractual standards
regarding network adequacy and access to care. Some commenters stated
concerns that this provision may not successfully address underlying
challenges with access. A few commenters stated that it is
inappropriate for CMS to insert itself into the contractor management
process in the manner envisioned by the rule. A few commenters noted
that withholding FFP in this case is a highly disproportionate and
unreasonable consequence when States and managed care plans cannot make
more providers exist in the State and can only have a limited impact on
whether existing providers choose to enroll as Medicaid providers. A
few commenters suggested that CMS give States the autonomy to create
and enforce their own corrective action plans for access issues at
State discretion. Some commenters recommended that CMS should first
consider how it can play a role (perhaps by working closely with the
Health Resources and Services Administration and the U.S. Department of
Education), providing upside incentives to States to enact policies to
help grow and retain the healthcare workforce and that the creation of
remedy plans will be a distraction from what should be CMS's primary
focus of growing the healthcare workforce.
Response: We understand that some commenters believe that remedy
plans are not necessary. Prior to this final rule, the managed care
regulations in 42 CFR, part 438 have not contained a specific provision
for formal plans to address areas of program weakness. We have
typically relied on technical assistance and periodic meetings to
monitor States' progress to strengthen program performance.
Unfortunately, we find that these methods do not always yield
consistent, documented results and we believe that access concerns in
managed care programs warrant a more organized, traceable process.
Additionally, we do not intend to use remedy plans to usurp authority
from States or intervene inappropriately in their contractual
relationships. To the contrary, we believe remedy plans will help CMS,
States, and managed care plans work collaboratively and coalesce around
blueprints for improvement of specific access issues that can be shared
and enhanced over time. Lastly, as oversight bodies and interested
parties continue to audit, submit Freedom of Information Act requests,
and analyze performance of the Medicaid program, we believe
establishing a consistent process for addressing access issues in
managed care is necessary and CMS, States, and managed care plans will
all benefit from having documentation to substantiate improvement
efforts. To the comment that we also need to take steps to work with
our Federal partners, HHS and the entire Biden-Harris Administration
continues to undertake efforts to improve access. For example, funding
was recently awarded to improve health care facilities in rural towns
across the nation. See https://www.usda.gov/media/press-releases/2023/07/25/biden-harris-administration-helps-expand-access-rural-health-care. On August 10, 2023, the Health Resources and Services
Administration announced awards of more than $100 million to train more
nurses and grow the nursing workforce. See https://www.hhs.gov/about/news/2023/08/10/biden-harris-administration-announces-100-million-grow-nursing-workforce.html.
Comment: One commenter requested that CMS consider permitting
integrated plans for dually eligible individuals to substitute
compliance with Medicare network requirements for participation in the
proposed remedy plans.
Response: We appreciate that integrated plans must comply with
Medicare and Medicaid requirements for network adequacy and access.
However, we believe that when an access issue is identified that
warrants a remedy plan, all the State's impacted Medicaid managed care
plans need to contribute to the successful execution of it. This is
particularly relevant given the vulnerable populations covered by plans
that cover both Medicare and Medicaid services for dually eligible
enrollees.
Comment: A few commenters recommended that the remedy plans, once
approved, be posted on the State's website and that the State agency be
required to share them with interested parties' advisory groups.
Response: We appreciate the suggestion for States to post their
approved remedy plans on their website; however, we decline to include
that in this final rule. We encourage States to consider posting their
approved remedy plans on their websites and sharing them with their
interested parties' advisory groups so that interested parties can
support States and plans as they work to execute their remedy plans.
Comment: Some commenters recommended delaying the applicability
date until the first rating period for managed care plan contracts that
begins on or after 6 years after the effective date of the final rule.
Another commenter suggested an applicability date that is at least 1
year after the secret shopper survey is required.
Response: We believe it is important to align the use of remedy
plans with States receiving secret shopper survey results. As such, we
decline to extend the applicability date.
After reviewing the public comments, we are finalizing Sec.
438.207(f) as proposed.
g. Transparency (Sec. Sec. 438.10(c), 438.602(g), 457.1207, 457.1285)
In the 2016 final rule, we finalized Sec. 438.10(c)(3) for
Medicaid, which is included in separate CHIP regulations through cross-
reference at Sec. 457.1207, which required States to operate a website
that provides specific information, either directly or by linking to
individual MCO, PIHP, PAHP, or PCCM entity websites. A State's website
may be the single most important resource for information about its
Medicaid program and there are multiple requirements for information to
be posted on a State's website throughout 42 CFR part 438. Regulations
at Sec. 438.10(c)(6)(ii) required certain information to be
``prominent and readily accessible'' and Sec. 438.10(a) defined
``readily accessible'' as ``electronic information and services which
comply with modern accessibility standards such as section 508
guidelines, section 504 of the Rehabilitation Act, and W3C's Web
Content Accessibility Guidelines (WCAG) 2.0 AA and successor
versions.'' Despite these requirements, we have received input from
numerous and varied interested parties since the 2016 final rule about
how challenging it can be to locate regulatorily required information
on some States' websites.
[[Page 41038]]
There is variation in how ``user-friendly'' States' websites are,
with some States making navigation on their website fairly easy and
providing information and links that are readily available and
presenting required information on one page. However, we have not found
this to be the case for most States. Some States have the required
information scattered on multiple pages that requires users to click on
many links to locate the information they seek. While such websites may
meet the current minimum standards in part 438, they do not meet our
intent of providing one place for interested parties to look for all
required information. Therefore, we determined that revisions were
necessary to ensure that all States' websites required by Sec.
438.10(c)(3) provide a consistent and easy user experience. We
acknowledged that building websites is a complex and costly endeavor
that requires consideration of many factors, but we believe that States
and managed care plans share an obligation to build websites that
quickly and easily meet the needs of interested parties without undue
obstacles. We noted that State and managed care plan websites must be
compliant with all laws, including the Americans with Disabilities Act
(ADA), section 504 and 508 of the Rehabilitation Act, Title VI of the
Civil Rights Act of 1964, and section 1557 of the Affordable Care Act.
In implementing this proposed rule, we believe there are several
qualities that all websites should include, such as being able to:
Function quickly and as expected by the user;
Produce accurate results;
Use minimal, logical navigation steps;
Use words and labels that users are familiar with for
searches;
Allow access, when possible, without conditions such as
establishment of a user account or password;
Provide reasonably comparable performance on computers and
mobile devices;
Provide easy access to assistance via chat; and
Provide multilingual content for individuals with LEP.
We also believe that States and managed care plans should utilize
web analytics to track website utilization and inform design changes.
States should create a dashboard to regularly quantify website traffic,
reach, engagement, sticking points, and audience characteristics. Given
the critical role that websites fill in providing necessary and desired
program information, we believe proposing additional requirements on
States' websites was appropriate.
We acknowledge that States and managed care plans may have
information accessible through their websites that is not public
facing; for example, enrollee specific protected health information.
Proper security mechanisms should continue to be utilized to prevent
unauthorized access to non-public facing information, such as the
establishment of a user account and password or entry of other
credentials. Data security must always be a priority for States and
managed care plans and the proposals in Sec. 438.10(c)(3) in no way
diminish that obligation for States.
To increase the effectiveness of States' websites and add some
consistency to website users' experience, we proposed in Sec.
438.10(c)(3) to revise ``websites'' to ``web pages'' in the reference
to managed care plans. We proposed this change to clarify that if
States provide required content on their website by linking to
individual MCO, PIHP, PAHP, or PCCM entity websites, the link on the
State's site will have to be to the specific page that includes the
requested information. We believe this prevents States from showing
links to a landing page for the managed care plan that then leaves the
user to start searching for the specific information needed. Next, we
proposed to add ``States must:'' to paragraph (c)(3) before the items
specified in new paragraphs (c)(3)(i) through (iv). In Sec.
438.10(c)(3)(i), we proposed to require that all information, or links
to the information, required in this part to be posted on the State's
website, be available from one page. We believe that when website users
have to do repeated searches or click through multiple pages to find
information, they are more likely to give up trying to locate it. As
such, we carefully chose the information that is required in 42 CFR
part 438 to be posted on States' websites to ensure effective
communication of information and believe it represented an important
step toward eliminating common obstacles for States' website users.
At Sec. 438.10(c)(3)(ii), we proposed to require that States'
websites use clear and easy to understand labels on documents and links
so that users can easily identify the information contained in them. We
believe that using terminology and the reading grade level consistent
with that used in other enrollee materials, such as handbooks and
notices, will make the website more familiar and easy to read for
enrollees and potential enrollees. Similar to having all information on
one page, using clear labeling will reduce the likelihood of users
having to make unnecessary clicks as they search for specific
information.
In Sec. 438.10(c)(3)(iii), we proposed that States check their
websites at least quarterly to verify that they are functioning as
expected and that the information is the most currently available.
Malfunctioning websites or broken links can often render a website
completely ineffective, so monitoring a website's performance and
content is paramount. While we proposed that a State's website be
checked for functionality and information timeliness no less than
quarterly, we believe this to be a minimum standard and that States
should implement continual monitoring processes to ensure the accuracy
of their website's performance and content.
Lastly, in Sec. 438.10(c)(3)(iv), to enable maximum effectiveness
of States' websites, we proposed to require that States' websites
explain that assistance in accessing the information is available at no
cost to them, including information on the availability of oral
interpretation in all languages and written translation in each
prevalent non-English language, alternate formats, auxiliary aids and
services, and a toll-free TTY/TDY telephone number. This proposal was
consistent with existing information requirements in Sec. 438.10(d)
and section 1557 of the Affordable Care Act. Clear provision of this
information will help to ensure that all users have access to States'
websites and can obtain assistance when needed.
The Medicaid managed care website transparency revisions proposed
at Sec. 438.10(c)(3)(i) through (iv) will apply to separate CHIP
through the existing cross-reference at Sec. 457.1207.
To help States monitor their website for required content, we
proposed to revise Sec. 438.602(g) to contain a more complete list of
information. While we believe the list proposed in Sec. 438.602(g)
will help States verify their website's compliance, we clarify that a
requirement to post materials on a State's website in 42 CFR part 438
or any other Federal regulation but omitted from Sec. 438.602(g), is
still in full force and effect. Further, requirements on States to post
specific information on their websites intentionally remain throughout
42 CFR part 438 and are not replaced, modified, or superceded by the
items proposed in Sec. 438.602(g)(5) through (12). Section 438.602(g)
specified four types of information that States must post on their
websites; we proposed to add nine more as (g)(5) through (13): (5)
enrollee handbooks,
[[Page 41039]]
provider directories, and formularies required at Sec. 438.10(g), (h),
and (i); (6) information on rate ranges required at Sec.
438.4(c)(2)(v)(A)(3); (7) reports required at Sec. Sec. 438.66(e) and
438.207(d); (8) network adequacy standards required at Sec.
438.68(b)(1) and (2), and (e); (9) secret shopper survey results
required at Sec. 438.68(f); (10) State directed payment evaluation
reports required in Sec. 438.6(c)(2)(v)(C); (11) links to all required
Application Programming Interfaces including as specified in Sec.
431.60(d) and (f); (12) quality related information required in
Sec. Sec. 438.332(c)(1), 438.340(d), 438.362(c) and 438.364(c)(2)(i);
and (13) documentation of compliance with requirements in subpart K--
Parity in Mental Health and Substance Use Disorder Benefits. Although
we proposed to itemize these nine types of information in Sec.
438.602(g)(5) through (13), we note that all but the following three
are currently required to be posted on States' websites: the report at
Sec. 438.207(d), secret shopper survey results at Sec. 438.68(f), and
State directed payment evaluation reports at Sec. 438.6(c)(2)(v)(C).
Lastly, in Sec. 438.10(c)(3), we proposed to make the list of website
content more complete by removing references to paragraphs (g) through
(i) only and including a reference to Sec. 438.602(g) and ``elsewhere
in this part.''
We proposed to revise Sec. 438.10(j) to reflect that States will
have to comply with Sec. 438.10(c)(3) no later than the first managed
care plan rating period that begins on or after 2 years after the
effective date of the final rule and that States will have to comply
with Sec. 438.10(d)(2) no later than the first managed care plan
rating period that begins on or after 3 years after the effective date
of the final rule. Lastly, we proposed that States must comply with
Sec. 438.10(h)(3)(iii) no later than the first managed care plan
rating period that begins on or after 4 years after the effective date
of the final rule. We believe these dates provide reasonable time for
compliance given the varying levels of State and managed care plan
burden.
We proposed to add Sec. 438.602(j) to require States to comply
with Sec. 438.602(g)(5) through (13) no later than the first managed
care plan rating period that begins on or after 2 years after the
effective date of the final rule. We believe this is a reasonable
timeframe for compliance.
For separate CHIP managed care, we currently require States to
comply with the transparency requirements at Sec. 438.602(g) through
an existing cross-reference at Sec. 457.1285. We proposed to align
with Medicaid in adopting most of the consolidated requirements for
posting on a State's website proposed at Sec. 438.602(g)(5) through
(13) for separate CHIP:
We proposed to adopt the provision at Sec. 438.602(g)(5) (which
specifies that States must post enrollee handbooks, provider
directories, and formularies on the State's website) because
requirements at Sec. 438.10(g) through (i) are currently required for
separate CHIP through an existing cross-reference at Sec. 457.1207.
We did not propose to adopt the provision at Sec. 438.602(g)(6)
(which requires that States must post information on rate ranges on
their websites) because we do not regularly review rates for separate
CHIP.
We proposed to adopt the provision at Sec. 438.602(g)(7) (which
specifies that States must post their assurances of network adequacy on
the State's website) since the proposed network adequacy reporting at
Sec. 438.207(d) will apply to separate CHIP through an existing cross-
reference at Sec. 457.1230(b) (see section I.B.1.e. of this final
rule). Since we did not adopt the managed care program annual reporting
requirements at Sec. 438.66(e) for separate CHIP, we proposed to
exclude this reporting requirement at Sec. 457.1230(b).
We proposed to adopt the provision at Sec. 438.602(g)(8) (which
requires State network adequacy standards to be posted on the State's
website) for separate CHIP because we proposed to adopt the new
appointment wait time reporting requirements through an existing cross-
reference at Sec. 457.1230(b) (see section I.B.1.e. of this final
rule), though we proposed to exclude references to LTSS as not
applicable to separate CHIP.
We proposed to adopt the provision at Sec. 438.602(g)(9) (which
specifies that States must post secret shopper survey results on the
State's website) for separate CHIP network access reporting to align
with our proposed adoption of secret shopper reporting at Sec.
438.68(f) through an existing cross-reference at Sec. 457.1218 (see
section I.B.1.c. of this final rule).
We did not propose to adopt the provision at Sec. 438.602(g)(10)
(which directs States to post SDP evaluation reports on the State's
website) because State directed payments are not applicable to separate
CHIP.
We proposed to adopt the provision at Sec. 438.602(g)(11) (which
specifies that States must post required information for Application
Programming Interfaces on the State's website) given the existing
requirements at Sec. 457.1233(d).
We proposed to adopt the provision at Sec. 438.602(g)(12) (which
requires States to post quality-related information on the State's
website) for separate CHIP as required through cross-references at
Sec. 457.1240(c) and (e), as well as the applicable EQR report through
a cross-reference at Sec. 457.1250(a). However, we proposed to exclude
the reference to Sec. 438.362(c) since MCO EQR exclusion is not
applicable to separate CHIP.
We proposed to adopt the provision at Sec. 438.602(g)(13) (which
requires States to post documentation of compliance with parity in
mental health and substance use disorder benefits on the State's
website) for separate CHIP through the existing cross-reference at
Sec. 457.1285. However, we proposed to replace the reference to
subpart K of part 438 with CHIP parity requirements at Sec. 457.496 in
alignment with contract requirements at Sec. 457.1201(l).
We proposed to amend Sec. 457.1285 to state, 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. Sec. 438.66(e), 438.362(c), 438.602(g)(6) and (10), 438.604(a)(2)
and 438.608(d)(4) and references to LTSS of this chapter do not apply
and that references to subpart K under part 438 should be read to refer
to parity requirements at Sec. 457.496.
Our proposals for requirements for States' websites at Sec.
438.10(c)(3) and the list proposed in Sec. 438.602(g) are authorized
by sections 1932(a)(5)(A) and 2103(f)(3) of the Act for Medicaid and
which require each State, enrollment broker, or managed care entity to
provide all enrollment notices and informational and instructional
materials in a manner and form which may be easily understood by
enrollees and potential enrollees. The authority for our proposals is
extended to PIHPs and PAHPs through regulations based on our authority
under section 1902(a)(4) of the Act. We believe that our proposals will
make States' websites easier to use by incorporating easily understood
labels, having all information accessible from one page, verifying the
accurate functioning of the site, and clearly explaining the
availability of assistance- all of which will directly help States
fulfill their obligation to provide informational materials in a manner
and form which may be easily understood.
We summarize and respond to public comments received on
Transparency (Sec. Sec. 438.10(c), 438.602(g), 457.1207, 457.1285)
below.
Comment: Many commenters supported our proposal to require that
States' managed care websites contain
[[Page 41040]]
all required information on one page that is clear and easy to
understand, that is verified at least quarterly, and that helps users.
Commenters confirmed that interested parties often face difficulty
navigating State websites and the proposed requirements would greatly
improve the usability of States' websites.
Response: We appreciate the support for our proposals. We believe
State managed care websites are critical sources of information for
interested parties and efforts to improve their utility is a
fundamental responsibility for States.
Comment: We received a comment recommending that we require States
to post direct links to the appropriate document or information on the
managed care plan's site. Another commenter questioned whether the
requirements in Sec. 438.10(c)(3) will apply to the State website and/
or the managed care plans' websites.
Response: We appreciate the commenter raising this question and
welcome the opportunity to provide clarification. Existing regulation
text at Sec. 438.10(c)(3) requires ``The State must operate a website
that provides the content, either directly or by linking to individual
MCO, PIHP, PAHP, or PCCM entity websites, . . . .'' This means that the
link to an MCO's, PIHP's, PAHP's or PCCM entity's website must be to
the required content, not just to a random location on the MCO's,
PIHP's, PAHP's, or PCCM entity's website. Our proposal to revise
``websites'' to ``web pages'' was intended to make that clearer, not
alter this existing requirement. While the requirements of Sec.
438.10(c)(3) are applicable to State websites, States can certainly
apply them to their managed care plans through their managed care plan
contract. Given that States must provide assistance to website users at
Sec. 438.10(c)(3)(iv) and through existing cross-reference at Sec.
[thinsp]457.1207 for separate CHIP, we encourage States to ensure that
their plans' websites meet at least the same minimum standards.
Comment: A few commenters urged CMS to require States to post other
documents on the State website, such as the Annual Medical Loss Ratio
reports and mental health parity compliance analyses that managed care
plans must submit to the State. Conversely, other commenters stated
concern that some required reports are inherently technical and
difficult to understand and that it would be extremely hard or
impossible to render at a grade 6 reading level.
Response: We appreciate the suggestion that managed care plans' MLR
reports be posted on States' managed care web page. While we did not
propose that MLR reports be posted on States' managed care web page in
this rule, we may consider it in future rulemaking. The posting of
mental health parity analyses completed by MCOs is consistent with
existing Sec. 438.920 and we encourage States to ensure a clearly
identifiable label on such analyses or links to them. However, we want
to be cognizant of the amount of information that we require States to
present on their managed care web pages and balance that with
interested parties' use and need. The website requirement in Sec.
438.10(c)(3) was added in the 2016 final rule to acknowledge the
increasing use of electronic media by enrollees and potential enrollees
for critical program information. We believe these websites would be a
valuable and welcome way to address problems that Medicaid and CHIP
programs have struggled with for years; for example, missed mail,
incorrect mailing addresses, and excessively long or too frequent
mailings. While we understand that other interested parties also use
the States' web page, we want to be thoughtful about the required
content, particularly given that Sec. 438.10(c)(3)(i) and Sec.
457.1207 for separate CHIP will require that all information be
accessible from one page.
To the concern that some reports that are required to be posted on
States' managed care web page are complicated and technical, we
acknowledge that not all of the information is as easy to present as
others. We encourage States to include approaches that may assist
readers, such as providing executive summaries that contain less detail
and are easier to read but still capture the most important
information. This type of an aid would enable readers to determine if
they want to read the longer or more complicated document.
Comment: We received several comments regarding the administrative
burden and cost associated with developing a chat feature. One
commenter suggested that information should be able to be automatically
heard read aloud by clicking on the material for the most common
languages within each State.
Response: We clarify that including a chat feature on a website was
a recommended practice, but it was not proposed in Sec. 438.10(c)(3).
As we stated, we believe a chat feature to be one of the minimal
qualities that all websites should include but as we did not propose
it, we did not include it in our burden estimates for this provision.
We appreciate the suggestion that users should be able to click on the
material and it be automatically read aloud and encourage States and
managed care plans to consider building this feature into their web
pages.
Comment: A commenter supported our proposals at Sec. 457.1207 to
require States to operate a website that provides certain information,
either directly or by linking to individual MCO, PIHP, PAHP, or PCCM
entity websites. The commenter suggested aligning transparency
requirements for Medicaid MCOs proposed at Sec. 438.602(g) with
transparency requirements applicable to separate CHIP MCOs.
Response: We thank the commenter for their suggestion. We clarify
that we did propose to align separate CHIP with most of the Medicaid
transparency requirements at Sec. 457.1207 through an amended cross-
reference to Sec. [thinsp]438.602(g)(5) through (13), except in
situations where the Medicaid requirement is not relevant for separate
CHIP. We did not adopt the provision at Sec. [thinsp]438.602(g)(6),
which requires that States must post information on rate ranges on
their websites because we do not regularly review rates for separate
CHIP. We believe finalizing the amendments at Sec. 457.1285 will align
the transparency requirements of Medicaid MCOs and separate CHIP MCOs
when appropriate.
After reviewing the public comments, we are finalizing Sec. Sec.
438.10(c), 438.602(g), 457.1207, and 457.1285 as proposed.
h. Terminology (Sec. Sec. 438.2, 438.3(e), 438.10(h), 438.68(b) and
438.214(b))
Throughout 42 CFR part 438, we use ``behavioral health'' to mean
mental health and SUD. However, it is an imprecise term that does not
capture the full array of conditions that are intended to be included,
and some in the SUD treatment community have raised concerns with its
use. It is important to use clear, unambiguous terms in regulatory
text. Therefore, we proposed to change ``behavioral health'' throughout
42 CFR part 438 as described here. In the definition of PCCM entity at
Sec. 438.2 and for the provider types that must be included in
provider directories at Sec. 438.10(h)(2)(iv), we proposed to replace
``behavioral health'' with ``mental health and substance use
disorder;'' for the provider types for which network adequacy standards
must be developed in Sec. 438.68(b)(1)(iii), we proposed to remove
``behavioral health'' and the parentheses; and for the provider types
addressed in credentialing policies at Sec. 438.214(b), we proposed to
replace ``behavioral'' with ``mental health.'' We also proposed in the
definition of PCCM entity at Sec. 438.2 to replace the slash
[[Page 41041]]
between ``health systems'' and ``providers'' with ``and'' for
grammatical accuracy.
Similarly, we also proposed to change ``psychiatric'' to ``mental
health'' in Sec. 438.3(e)(2)(v) and Sec. 438.6(e). We believe that
``psychiatric'' does not capture the full array of services that can be
provided in an institution for mental disease (IMD).
These proposals are authorized by section 1902(a)(4)(A) of the Act,
which provides for methods of administration found necessary by the
Secretary for the proper and efficient operation of the plan, because
use of clear, unambiguous terms in regulatory text is imperative for
proper and efficient operation of the plan.
We summarize and respond to public comments received on Terminology
(Sec. Sec. 438.2, 438.3(e), 438.10(h), 438.68(b), 438.214(b)) below.
Comment: We received several comments supporting our proposal to
revise ``behavioral health'' throughout part 438 regulations to
``mental health'' and ``SUD'' as appropriate.
Response: We appreciate commenters' support and will finalize
``mental health'' and ``SUD'' in Sec. Sec. 438.2, 438.3(e), 438.10(h),
438.68(b), 438.214(b) to ensure that these provisions are clear and
unambiguous.
After reviewing the public comments, we are finalizing Sec. Sec.
438.2, 438.3(e), 438.10(h), 438.68(b), and 438.214(b) as proposed.
2. State Directed Payments (SDPs) (Sec. Sec. 438.6, 438.7 and 430.3)
a. Background
Section 1903(m)(2)(A) of the Act requires contracts between States
and MCOs to provide payment under a risk-based contract for services
and associated administrative costs that are actuarially sound. CMS has
historically used our authority under section 1902(a)(4) of the Act to
apply the same requirements to contracts between States and PIHPs or
PAHPs. Under risk-based managed care arrangements with the State,
Medicaid managed care plans have the responsibility to negotiate
payment rates with providers. Subject to certain exceptions, States are
generally not permitted to direct the expenditures of a Medicaid
managed care plan under the contract between the State and the plan or
to make payments to providers for services covered under the contract
between the State and the plan (Sec. Sec. 438.6 and 438.60,
respectively). However, there are circumstances under which requiring
managed care plans to make specified payments to health care providers
is an important tool in furthering the State's overall Medicaid program
goals and objectives; for example, funding to ensure certain minimum
payments are made to safety net providers to ensure access to care,
funding to enhance access to behavioral health care providers as
mandated by State legislative directives, or funding for quality
payments to ensure providers are appropriately rewarded for meeting
certain program goals. Balancing that this type of State direction
reduces the plan's ability to effectively manage costs but can be an
important tool for states. CMS, in the 2016 final rule, established
specific exceptions to the general rule prohibiting States from
directing the expenditures of MCOs, PIHPs and PAHPs at Sec.
438.6(c)(1)(i) through (iii). These exceptions came to be known as
State directed payments (SDPs).
The current regulations at Sec. 438.6(c) specify the parameters
for how and when States may direct the expenditures of their Medicaid
managed care plans and the associated requirements and prohibitions on
such arrangements. Permissible SDPs include directives that certain
providers of the managed care plan participate in value-based payment
(VBP) models, that certain providers participate in multi-payer or
Medicaid-specific delivery system reform or performance improvement
initiatives, or that the managed care plan use certain fee schedule
requirements (for example, minimum fee schedules, maximum fee
schedules, and uniform dollar or percentage increases). Among other
requirements, Sec. 438.6(c) requires SDPs to be based on the
utilization and delivery of services under the managed care contract
and are expected to advance at least one of the objectives in the
State's managed care quality strategy.
All SDPs must be included in all applicable managed care
contract(s) and described in all applicable rate certification(s) as
noted in Sec. 438.7(b)(6). Further, Sec. 438.6(c)(2)(ii) requires
that most SDPs be approved in writing prior to implementation.\55\ To
obtain written prior approval, States must submit a ``preprint'' form
to CMS to document how the SDP complies with the Federal requirements
outlined in Sec. 438.6(c).\56\ States must obtain written prior
approval of certain SDPs in order for CMS to approve the corresponding
Medicaid managed care contract(s) and rate certifications(s). States
were required to comply with this prior approval requirement for SDPs
no later than the rating period for Medicaid managed care contracts
starting on or after July 1, 2017.
---------------------------------------------------------------------------
\55\ State directed payments that are minimum fee schedules for
network providers that provide a particular service under the
contract using State plan approved rates as defined in Sec.
438.6(a) are not subject to the written prior approval requirement
at Sec. 438.6(c)(2)(ii); however, they must comply with the
requirements currently at Sec. 438.6(c)(2)(ii)(A) through (F)
(other than the requirement for prior written approval) and be
appropriately documented in the managed care contract(s) and rate
certification(s).
\56\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
---------------------------------------------------------------------------
Each SDP preprint submitted to CMS is reviewed by a Federal review
team to ensure that the payments comply with the regulatory
requirements in Sec. 438.6(c) and other applicable laws. The Federal
review team consists of subject matter experts from various components
and groups within CMS, which regularly include those representing
managed care policy and operations, quality, and actuarial science.
Over time, these reviews have expanded to include subject matter
experts on financing of the non-Federal share and demonstration
authorities when needed. The CMS Federal review team works diligently
to ensure a timely review and that standard operating procedures are
followed for a consistent and thorough review of each preprint. Most
preprints are reviewed on an annual basis; SDPs that are for VBP
arrangements, delivery system reform, or performance improvement
initiatives and that meet additional criteria in the Federal
regulations are eligible for multi-year approval.
CMS has issued guidance to States regarding SDPs on multiple
occasions. In November 2017, we published the initial preprint form
\57\ along with guidance for States on the use of SDPs.\58\ In May
2020, CMS published guidance on managed care flexibilities to respond
to the PHE, including how States could use SDPs in support of their
COVID-19 response efforts.\59\ In January 2021, we published additional
guidance for States to clarify existing policy, and also issued a
revised preprint form that States must use for rating periods beginning
on or after July 1, 2021.\60\ The revised preprint form is more
comprehensive compared to the initial preprint, and it is designed to
systematically collect the information that CMS identified as necessary
as part
[[Page 41042]]
of our review of SDPs to ensure compliance with the Federal regulatory
requirements.\61\ This includes identification of the estimated total
dollar amount for the SDP, an analysis of provider reimbursement rates
for the class(es) of providers that the SDP is targeting, and
information about the sources of the non-Federal share used to finance
the SDP.
---------------------------------------------------------------------------
\57\ https://www.medicaid.gov/sites/default/files/2020-02/438-preprint.pdf.
\58\ https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib11022017.pdf.
\59\ https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/cib051420.pdf.
\60\ https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf.
\61\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
---------------------------------------------------------------------------
Since Sec. 438.6(c) was codified in the 2016 final rule, States
have requested approval for an increasing number of SDPs. The scope,
size, and complexity of the SDP arrangements submitted by States for
approval has also grown steadily and quickly. In CY 2017, we received
36 preprints from 15 States for our review and approval. In contrast,
in CY 2021, we received 223 preprints from 39 States. For CY 2022, we
received 298 preprints from States. In total, as of October 2023, we
have reviewed nearly 1,400 SDP proposals and approved 1,244 proposals
since the 2016 final rule was issued.\62\
---------------------------------------------------------------------------
\62\ The number of proposals includes initial preprints,
renewals and amendments. An individual SDP program could represent
multiple SDP proposals as described here (that is, an initial
application, 1 renewal, and 3 amendments).
---------------------------------------------------------------------------
SDPs also represent a notable amount of spending. The Medicaid and
CHIP Payment and Access Commission (MACPAC) reported that, in 2020, CMS
approved SDP arrangements in 37 States, with spending exceeding more
than $25 billion.\63\ The U.S. Government Accountability Office (GAO)
also reported that at least $20 billion in SDP expenditures has been
approved by CMS for preprints with payments to be made on or after July
1, 2021, across 79 approved preprints \64\ and in another report they
estimated that SDPs totaled $38.5 billion in 2022 according to their
analysis of CMS approved SDP preprints approved through August 2022
while acknowledging the total estimated SDP spending was likely
higher.\65\ Our internal analysis of all SDPs approved from the time
that Sec. 438.6(c) was issued in the 2016 final rule through the end
of fiscal year 2022 estimates that the total spending for all SDPs
approved for the most recent rating period for States is nearly $52
billion annually \66\ (Federal and State) and at least half of that
amount is for provider payments States require plans to pay in addition
to the rates negotiated between the plans and providers.
---------------------------------------------------------------------------
\63\ Medicaid and CHIP Payment and Access Commission, ``Report
to Congress on Medicaid and CHIP,'' June 2022, available at https://www.macpac.gov/wp-content/uploads/2022/06/MACPAC_June2022-WEB-Full-Booklet_FINAL-508-1.pdf. Projected payment amounts are for the most
recent rating period, which may differ from calendar year or fiscal
year 2020.
\64\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
\65\ U.S. Government Accountability Office, ``Medicaid Managed
Care: Rapid Spending Growth in State Directed Payments Needs
Enhanced Oversight and Transparency.'' December 14, 2023, available
at https://www.gao.gov/assets/d24106202.pdf.
\66\ This data point is an estimate and reflective of the most
recent approval for all unique payment arrangements that have been
approved through the end of fiscal year 2022, under CMS's standard
review process. Rating periods differ by State; some States operate
their managed care programs on a calendar year basis while others
operate on a State fiscal year basis, which most commonly is July to
June. The most recent rating period for which the SDP was approved
as of the end of fiscal year 2022 also varies based on the review
process reflective of States submitting proposals later than
recommended (close to or at the end of the rating period), delays in
State responses to questions, and/or reviews taking longer due to
complicated policy concerns (for example, financing).
---------------------------------------------------------------------------
In its December 2023 report, the GAO acknowledged that CMS has
taken steps to enhance its process for approving SDPs and recommended
that CMS enhance fiscal guardrails for SDPs. Specifically, the GAO
recommended that CMS improve these guardrails by establishing a
definition of, and standards for, assessing whether SDPs result in
payment rates that are reasonable and appropriate, and communicating
those to States; determining whether additional fiscal limits are
needed; and requiring States to submit data on actual spending amounts
at the SDP preprint renewal.\67\ The GAO also recommended that CMS
consider interim evaluation results or other performance information
from States at the SDP preprint renewal, and recommended increased
transparency of SDP approvals. As the volume of SDP preprint
submissions and total dollars flowing through SDPs continues to
increase, we recognize the importance of ensuring that SDPs are
contributing to Medicaid quality goals and objectives as part of our
review process, as well as ensuring that SDPs are developed and
implemented with appropriate fiscal and program integrity guardrails.
The proposed changes in this rule are intended, individually and taken
together, to ensure the following policy goals:
---------------------------------------------------------------------------
\67\ U.S. Government Accountability Office, ``Medicaid Managed
Care: Rapid Spending Growth in State Directed Payments Needs
Enhanced Oversight and Transparency.'' December 14, 2023, available
at https://www.gao.gov/assets/d24106202.pdf.
---------------------------------------------------------------------------
(1) Medicaid managed care enrollees receive access to high-quality
care under SDP arrangements.
(2) SDPs are appropriately linked to Medicaid quality goals and
objectives for the providers participating in the SDP payment
arrangements; and
(3) CMS and States have the appropriate fiscal and program
integrity guardrails in place to strengthen the accountability and
transparency of SDP payment arrangements.
We are issuing the requirements in this final rule based on our
authority to interpret and implement section 1903(m)(2)(A)(iii) of the
Act, which requires contracts between States and MCOs to provide
payment under a risk-based contract for services and associated
administrative costs that are actuarially sound and our authority under
section 1902(a)(4) of the Act to establish methods of administration
for Medicaid that are necessary for the proper and efficient operation
of the State plan, and is extended to PIHPs and PAHPs through
regulations based on our authority under section 1902(a)(4) of the Act.
As noted in the 2016 final rule, regulation of SDPs is necessary to
ensure that Medicaid managed care plans have sufficient discretion to
manage the risk of covering the benefits outlined in their contracts,
which is integral to ensuring that capitation rates are actuarially
sound as defined in Sec. 438.4 (81 FR 27582). Where a proposal is also
based on interpreting and implementing other authority, we note that in
the applicable explanation of the proposed policy.
We did not adopt the Medicaid managed care SDP requirements
described at Sec. 438.6 in the 2016 final rule for separate CHIPs
because there was no statutory requirement to do so, and we wished to
limit the scope of new regulations and administrative burden on
separate CHIP managed care plans. For similar reasons, we did not
propose to adopt the new Medicaid managed care SDP requirements
proposed at Sec. Sec. 438.6 and 438.7 for separate CHIPs.
We proposed to define State directed payments as a contract
arrangement that directs an MCO's, PIHP's, or PAHP's expenditures under
paragraphs (c)(1)(i) through (iii) of this section. We proposed this
definition as it is currently used by States and CMS in standard
interactions, as well as in published guidance to describe these
contract requirements. Defining this term also improves the readability
of the related regulations. We have also proposed to rename the header
for paragraph (c) of Sec. 438.6 to ``State Directed Payments under
MCO, PIHP, or PAHP contracts'' to reflect this term.
In addition, we proposed several revisions to Sec. 438.6 to
further specify and add to the existing requirements
[[Page 41043]]
and standards for SDPs. First, we proposed revisions, including:
codifying administrative requirements included in recent guidance; \68\
exempting SDPs that establish payment rate minimums at 100 percent of
the total published Medicare payment rate from the written prior
approval requirement; incorporating SDPs for non-network providers in
certain circumstances; setting new procedures and timeframes for the
submission of SDPs and related documentation; codifying and further
specifying standards and documentation requirements on total payment
rates; further specifying and strengthening existing requirements
related to financing, as well as the connection to the utilization and
delivery of services; updating and providing flexibilities for States
to pursue VBP through managed care; strengthening evaluation
requirements and other areas; and addressing how SDPs are incorporated
into capitation rates or reflected in separate payment terms. The
proposed regulatory provisions include both new substantive standards
and new documentation and contract term requirements. In addition, we
proposed a new appeal process for States that are dissatisfied with
CMS's determination related to a specific SDP preprint and new
oversight and monitoring standards. In recognition of the scope of
changes we proposed, some of which will require significant time for
States to implement, we proposed a series of applicability dates over a
roughly 5-year period for compliance. These applicability dates are
discussed in section I.B.2.p. of this final rule.
---------------------------------------------------------------------------
\68\ https://www.medicaid.gov/sites/default/files/2021-12/smd21001.pdf.
---------------------------------------------------------------------------
We reiterate here our intent that if any provision of this final
rule is held to be invalid or unenforceable by its terms, or as applied
to any person or circumstance, or stayed pending further agency action,
it shall be severable from this final rule and not affect the remainder
thereof or the application of the provision to other persons not
similarly situated or to other, dissimilar circumstances. Although the
changes in this rule are intended to work harmoniously to achieve a set
of goals and further specific policies, they are not so interdependent
that they will not work as intended even if a provision is held
invalid. The SDP provisions may operate independently of each other.
For example, the financing provisions finalized as Sec.
438.6(c)(2)(ii)(G) and (H) are separate, distinct, and severable from
all the other standards enumerated in Sec. 438.6(c). Most of the SDP
parameters and conditions in the regulation govern the development of
the actual SDP arrangement, operational processes associated with
documentation and CMS review and approval, as well as the SDP
evaluation. If the financing provisions Sec. 438.6(c)(2)(ii)(G) and/or
(H) or even the payment limit established in Sec. 438.6(c)(2)(iii)
were to change, all the other standards around SDPs would continue to
remain enforceable because the other provisions do not impact either of
the financing provisions or the payment limit. Similarly, the
operational and evaluation standards adopted in this rule could be
implemented separately if necessary.
An outline of the remaining parts of this section of this final
rule is provided below:
b. Contract Requirements Considered to be SDPs (Grey Area Payments)
(Sec. 438.6(c)(1))
c. Medicare Exemption, SDP Standards and Prior Approval (Sec.
438.6(c)(1)(iii)(B), (c)(2) and (c)(5)(iii)(A)(5))
d. Non-Network Providers (Sec. 438.6(c)(1)(iii))
e. SDP Submission Timeframes (Sec. Sec. 438.6(c)(2)(viii) and
438.6(c)(2)(ix))
f. Standard for Total Payment Rates for each SDP, Establishment of
Payment Rate Limitations for Certain SDPs and Expenditure Limit for
All SDPs (Sec. 438.6(c)(2)(ii)(I) and (c)(2)(iii))
g. Financing (Sec. 438.6(c)(2)(ii)(G) and (c)(2)(ii)(H))
h. Tie to Utilization and Delivery of Services for Fee Schedule
Arrangements (Sec. 438.6(c)(2)(vii))
i. Value-Based Payments and Delivery System Reform Initiatives
(Sec. 438.6(c)(2)(vi))
j. Quality and Evaluation (Sec. 438.6(c)(2)(ii)(C), (c)(2)(ii)(D),
(c)(2)(ii)(F), (c)(2)(iv), (c)(2)(v) and (c)(7))
k. Contract Term Requirements (Sec. 438.6(c)(5) and and
438.7(c)(6))
l. Including SDPs in Rate Certifications and Separate Payment Terms
(Sec. Sec. 438.6(c)(2)(ii)(J) and (c)(6), and 438.7(f))
m. SDPs included through Adjustments to Base Capitation Rates
(Sec. Sec. 438.6(c)(6), and Sec. 438.7(c)(4) through (c)(6))
n. Appeals (Sec. 430.3(e))
o. Reporting Requirements to Support Oversight and Inclusion of SDPs
in MLR Reporting (Sec. Sec. 438.6(c)(4), and 438.8(e)(2)(iii)(C)
and (f)((2)(vii))
p. Applicability Dates (Sec. Sec. 438.6(c)(4) and 438.6(c)(8), and
438.7(f))
We summarize and respond to public comments received on State
Directed Payments (Sec. Sec. 438.6, 438.7, 430.3) below.
We received comments related to the definitions of ``academic
medical center,'' ``qualified practitioner services at an academic
medical center,'' ``inpatient hospital services,'' outpatient hospital
services,'' ``performance measure'' and ``total published Medicare
payment rate''; see sections I.B.2.f., I.B.2.j., and I.B.2.c.
respectively of this final rule for our responses.
We did not receive comments on the remaining proposed definitions.
We are finalizing the following definitions in Sec. 438.6(a) as
proposed: ``Academic medical center,'' ``Average commercial rate,''
``Final State directed payment cost percentage,'' ``Inpatient hospital
services,'' ``Maximum fee schedule,'' ``Minimum fee schedule,''
``Outpatient hospital services,'' ``Nursing facility services,''
``Performance measure,'' ``Population-based payment,'' ``Qualified
practitioner services at an academic medical center,'' ``Total payment
rate,'' ``Total published Medicare payment rate,'' and ``Uniform
increase.'' We are not finalizing a definition for the term ``separate
payment term'' or the provisions regarding separate payment terms (see
section I.B.2.l. of this final rule for discussion).
The definition for the term ``State directed payment'' is finalized
as proposed but has been moved from Sec. 438.6(a) to Sec. 438.2
because it is used in multiple provisions in part 438. We are also
finalizing revisions throughout Sec. Sec. 438.6 and 438.7 to use the
term ``State directed payment'' in place of ``contract arrangement'' or
similar terms that are used in the current regulations to refer to
State directed payments.
The definition for ``Condition-based payment'' is finalized with
the phrase ``covered under the contract'' at the end to specify that
such prospective payment must be for services delivered to Medicaid
managed care enrollees covered under the managed care contract.
b. Contract Requirements Considered to be SDPs (Grey Area Payments)
(Sec. 438.6(c)(1))
Under Sec. 438.6(c) (currently and as amended in this rule),
States are not permitted to direct the expenditures of a Medicaid
managed care plan under the contract between the State and the plan
unless it is an SDP that complies with Sec. 438.6(c), is permissible
in a specific provision under Title XIX, is permissible through an
implementing regulation of a Title XIX provision related to payments to
providers, or is a permissible pass-through payment that meets
requirements in Sec. 438.6(d). States are also not permitted to make
payments directly to providers for services covered under the contract
between the State and a managed care plan as specified in Sec. 438.60.
In our November 2017 CIB entitled ``Delivery System and Provider
Payment Initiatives under Medicaid Managed Care Contracts,'' we noted
instances
[[Page 41044]]
where States may include general contract requirements for provider
payments that will not be subject to approval under Sec. 438.6(c) if
the State was not mandating a specific payment methodology or amounts
under the contract.\69\ We also noted that these types of contract
requirements will not be pass-through payments subject to the
requirements under Sec. 438.6(d), as we believe they maintained a link
between payment and the delivery of services. One scenario in the CIB
described contract language generally requiring managed care plans to
make 20 percent of their provider payments as VBP or alternative
payment arrangements when the State does not mandate a specific payment
methodology and the managed care plan retains the discretion to
negotiate with network providers the specific terms for the amount,
timing, and mechanism of such VBP or alternative payment arrangements.
We continue to believe that this scenario does not meet the criteria
for an SDP nor a pass-through payment. However, we believe that the
aforementioned VBP scenario represents the State imposing a quality
metric on the managed care plans rather than the providers. We believe
that this specific type of contractual condition and measure of plan
accountability is permissible, so long as it meets the requirements for
an incentive arrangement under Sec. 438.6(b)(2), or a withhold
arrangement under Sec. 438.6(b)(3).
---------------------------------------------------------------------------
\69\ https://www.hhs.gov/guidance/document/delivery-system-and-provider-payment-initiatives-under-medicaid-managed-care-contracts.
---------------------------------------------------------------------------
The other scenario described in the November 2017 CIB relates to
instances where the State contractually implements a general
requirement for Medicaid managed care plans to increase provider
payment for covered services provided to Medicaid enrollees covered
under the contract, where the State did not mandate a specific payment
methodology or amount(s) and managed care plans retain the discretion
for the amount, timing, and mechanism for making such provider
payments. At the time, we believed that these areas of flexibility for
the plan would be sufficient to exclude the State's contract
requirement from the scope of Sec. 438.6(c). However, as we have
continued to review managed care contracts and rate certifications
since November 2017, we have grown increasingly concerned that
excluding this type of vague contractual requirement for increased
provider payment from the requirements of Sec. 438.6(c) created an
unintended loophole in regulatory oversight, presenting a significant
program integrity risk. For example, some States include general
contract requirements for significant increases to provider payments
that require the State to add money to the capitation rates paid to the
managed care plans as part of rate development for a specific service
(for example, hospital services) but without any further accountability
to ensure that the additional funding included in the capitation
payments is paid to providers for a specific service or benefit
provided to a specific enrollee covered under the contract. While this
is similar to the definition of pass-through payment in Sec. 438.6(a),
these contractual requirements do not meet all of the other
requirements in Sec. 438.6(d) to be permissible pass-through payments.
We commonly refer to these types of contractual arrangements as ``grey
area payments'' as they do not completely comply with Sec. 438.6(c)
nor Sec. 438.6(d).
Based on our experience since the 2017 CIB, we concluded that
general contractual requirements to increase provider payment rates
circumvent the intent of the 2016 final rule and the subsequent 2017
Pass-Through Payment Final Rule to improve the fiscal integrity of the
program and ensure the actuarial soundness of all capitation rates.\70\
As we stated in the preamble of the 2016 final rule ``[w]e believe that
the statutory requirement that capitation payments to managed care
plans be actuarially sound requires that payments under the managed
care contract align with the provision of services to beneficiaries
covered under the contract. . . . In our review of managed care
capitation rates, we have found pass-through payments being directed to
specific providers that are generally not directly linked to delivered
services or the outcomes of those services. These pass-through payments
are not consistent with actuarially sound rates and do not tie provider
payments with the provision of services.'' (81 FR 27587) Further,
``[a]s a whole, [42 CFR] Sec. 438.6(c) maintains the MCO's, PIHP's, or
PAHP's ability to fully utilize the payment under that contract for the
delivery and quality of services by limiting States' ability to require
payments that are not directly associated with services delivered to
enrollees covered under the contract.'' (81 FR 27589).
---------------------------------------------------------------------------
\70\ https://www.federalregister.gov/documents/2017/01/18/2017-00916/medicaid-program-the-use-of-new-or-increased-pass-through-payments-in-medicaid-managed-care-delivery.
---------------------------------------------------------------------------
In January 2021, we published State Medicaid Director Letter (SMDL)
#21-001,\71\ through which we sought to close the unintentional
loophole created in the November 2017 CIB and realign our
implementation of the regulation with the original intent of the 2016
final rule and the 2017 final rule. The 2021 SMDL provides that if a
State includes a general contract requirement for provider payment that
provides for or adds an amount to the provider payment rates, even
without directing the specific amount, timing or methodology for the
payments, and the provider payments are not clearly and directly linked
specifically to the utilization and delivery of a specific service or
benefit provided to a specific enrollee, then CMS will require the
contractual requirement to be modified to comply with Sec. 438.6(c) or
(d) beginning with rating periods that started on or after July 1,
2021. We maintain this interpretation. At this time, we further specify
our stance that any State direction of a managed care plan's payments
to providers, regardless of specificity or even if tied specifically to
utilization and delivery of services, is prohibited unless Sec.
438.6(c) or (d) permits the arrangement; our proposal reflected this
position. States wishing to impose quality requirements or thresholds
on managed care plans, such as the requirement that a certain
percentage of provider payments be provided through a VBP arrangement,
must do so within the parameters of Sec. 438.6(b). We did not believe
changes were needed to the regulation text in Sec. 438.6(c) or (d) to
reflect this reinterpretation and clarification because this preamble
provided an opportunity to again bring this important information to
States' attention. We noted in the proposed rule that CMS would
continue this narrower interpretation of Sec. 438.6(c) and (d) and we
solicited comments on whether additional clarification about these grey
area payments is necessary, or if revision to the regulation text would
be helpful.
---------------------------------------------------------------------------
\71\ https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf.
---------------------------------------------------------------------------
We summarize and respond to public comments received on Contract
Requirements Considered to be SDPs (Grey Area Payments) below.
Comment: Some commenters supported CMS's restatement of our
existing policy that any State direction of a managed care plan's
payments to providers, regardless of specificity or even if tied
specifically to utilization and delivery of services, is prohibited
unless Sec. 438.6(c) or (d) permits the arrangement, and that ``grey
area payments'' are prohibited. One
[[Page 41045]]
commenter noted that reiterating these existing requirements improves
transparency.
Response: We appreciate the commenters' support and agree that
restating our existing policy promotes greater transparency. We believe
it aids States' planning and operational efforts for associated managed
care activities. We note that guidance on this topic has been
previously published at SMD #21-001 and restatement in this final rule
provides consistent documentation of the policy and its scope. (see 88
FR 28113)
Comment: Some commenters opposed CMS's interpretation. These
commenters encouraged CMS to revise the Federal regulatory requirements
to instead indicate that broad contract requirements that direct
managed care plans to move a set percent of provider payments into
value-based arrangements do not trigger SDP provisions. One such
commenter indicated that the continuation of ``grey area payments''
allows States necessary flexibility to support State initiatives to
ensure access to medically necessary services, such as hospital
services, while still operating within the financial realities of State
budgets.
Response: We continue to believe that our current policy is
reasonable and appropriate, and we decline to revise the regulation to
allow flexibility for States to continue directing general increases to
payments without using an SDP to ensure that payments are tied to
utilization of service. We reject the recommendation to continue to
permit ``grey area payments'' that are about general direction to
increase payments. We believe the existing authorities available to
States, including SDPs and incentive arrangements, can be useful tools
in States' efforts to ensure access to care. After review of these
comments, we recognize that our intent as outlined in the proposed rule
preamble (88 FR 28113) would be clearer if we included a minor
modification to Sec. 438.6(c)(1). Therefore, we are amending Sec.
438.6(c)(1) to add the phrase ``in any way'' after ``. . . The State
may not . . .'' to make the regulation more explicit that any State
direction of an MCO's, PIHP's or PAHP's expenditures is impermissible
unless it meets the requirements set forth in Sec. 438.6(c).
We are also finalizing the definition for ``State directed
payment'' as proposed although we are moving it to Sec. 438.2 in
recognition of regulatory references to SDPs that are outside of Sec.
438.6. We are making minor changes in the text of this definition to be
consistent with how it is codified in Sec. 438.2 instead of Sec.
438.6. In addition, the final definition cites Sec. 438.6(c) instead
of paragraphs (c)(1)(i) through (iii) to reflect how paragraph (c)
includes additional requirements for SDPs.
Comment: Some commenters requested clarification on whether
payments to FQHCs, RHCs and Certified Community Behavioral Health
Clinics (CCBHCs) under a prospective payment system (PPS) are
considered SDPs since they mandate the amount of payment.
Response: We appreciate this request for clarification as an
opportunity to remind commenters of existing regulation that explicitly
addresses this topic. As outlined in Sec. 438.6(c)(1), the State may
not direct the MCO's, PIHP's or PAHP's expenditures under the contract,
except as specified in a provision of Title XIX or in another
regulation implementing a Title XIX provision related to payments to
providers. Therefore, the payment of statutorily-required PPS rates to
FQHCs and RHCs under Title XIX or CCBHC demonstrations under section
223 of the Protecting Access to Medicare Act of 2014 are not considered
SDPs and are not prohibited by Sec. 438.6. If States elect to adopt
payment methodologies similar to those under the CCBHC demonstration
but the State or facilities are not part of an approved section 223
demonstration, those payment arrangements would need to comply with SDP
requirements in Sec. 438.6(c) as the Federal statutory requirements
only extend to those States and facilities participating in an approved
demonstration.
After reviewing public comments, and for the reasons outlined in
the proposed rule and our responses to comments, we are amending Sec.
438.6(c)(1) to clarify that States may not in any way direct MCO, PIHP
or PAHP expenditures, unless such direction is permitted under Sec.
438.6(c)(1) and we are finalizing the definition for ``State directed
payment'' in Sec. 438.2 instead of Sec. 438.6(a) as originally
proposed.
c. Medicare Exemption, SDP Standards and Prior Approval (Sec. Sec.
438.6(c)(1)(iii)(B), (c)(2), and (c)(5)(iii)(A)(5))
In Sec. 438.6(c), States are permitted to direct managed care
plans' expenditures under the contract as specified in Sec.
438.6(c)(1)(i) through (iii), subject to written prior approval based
on complying with the requirements in Sec. 438.6(c)(2). In the
preamble to the 2020 final rule, we noted our observation that a
significant number of proposals submitted by States for review under
Sec. 438.6(c)(2) required managed care plans to adopt minimum fee
schedules specified under an approved methodology in the Medicaid State
plan. In response, we adopted several revisions to Sec. 438.6(c) in
the 2020 final rule.\72\ We defined ``State plan approved rates'' in
Sec. 438.6(a) as ``amounts calculated for specific services
identifiable as having been provided to an individual beneficiary
described under CMS approved rate methodologies in the Medicaid State
plan,'' and excluded supplemental payments that are paid in addition to
State plan approved rates. We also revised Sec. 438.6(c)(1)(iii)(A) to
explicitly address SDPs that are a minimum fee schedule for network
providers that provide a particular service under the contract using
State plan approved rates and revised Sec. 438.6(c)(2)(ii) to exempt
these specific SDP arrangements from the written prior approval
requirement. However, SDPs described in paragraph Sec.
438.6(c)(1)(iii)(A) must comply with the requirements currently at
Sec. 438.6(c)(2)(ii)(A) through (F) (other than the requirement for
written prior approval) and be appropriately documented in the managed
care contract(s) and rate certification(s).
---------------------------------------------------------------------------
\72\ https://www.federalregister.gov/documents/2020/11/13/2020-24758/medicaid-program-medicaid-and-childrens-health-insurance-program-chip-managed-care.
---------------------------------------------------------------------------
This piece of the 2020 final rule was, in part, intended to
eliminate unnecessary and duplicative review processes to promote
efficient and effective administration of the Medicaid program. This
rule improved States' efforts to timely implement certain SDP
arrangements that meet their local goals and objectives without drawing
upon State staff time unnecessarily. We continue to believe exempting
payment arrangements based on an approved State plan rate methodology
from written prior approval does not increase program integrity risk or
create a lack of Federal oversight. We continue to review the
corresponding managed care contracts and rate certifications which
include these SDPs, and TMSIS reporting requirements apply to SDPs that
do not require prior approval. The State plan review and approval
process ensures that Medicaid State plan approved rates are consistent
with efficiency, economy, and quality of care and are sufficient to
enlist enough providers so that care and services are available under
the plan, at least to the extent that such care and services are
available to the general population in the geographic area, as required
under section 1902(a)(30) of the Act.
As we have reviewed and approved SDPs since the 2020 final rule, we
[[Page 41046]]
continue to believe this same rationale applies to SDPs that adopt a
minimum fee schedule using Medicare established rates for providers
that provide a particular service under the contract. Medicare rates
are developed under Title XVIII of the Act and there are annual
rulemakings associated with Medicare payment for benefits available
under Parts A and B. Additionally, section 1852(a)(2) of the Act and 42
CFR 422.214 respectively provide, with some exceptions, that Medicare
Advantage plans pay out-of-network providers, and those providers
accept in full, at least the amount payable under FFS Medicare for
benefits available under Parts A and B, taking into account cost
sharing and permitted balance billing.\73\ These considerations mean
that Medicare Part A and B payment rates are appropriate and do not
require additional review by CMS in the context of a Medicaid managed
care SDP. Therefore, prior written approval by CMS is not necessary to
ensure that the standards for SDPs in current Sec. 438.6(c)(2) are met
when the total published Medicare payment rate is used in the same or a
close period as a minimum fee schedule.
---------------------------------------------------------------------------
\73\ See also 42 CFR 422.100(b) and 422.214 and guidance in the
``MA Payment Guide for Out of Network Payments'', April 15, 2015,
available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/oonpayments.pdf.
---------------------------------------------------------------------------
Consistent with how we have considered State plan rates to be
reasonable, appropriate, and attainable under Sec. Sec. 438.4 and
438.5, Medicare established rates also would meet this same threshold.
Therefore, we proposed to exempt SDPs that adopt a minimum fee schedule
based on total published FFS Medicare payment rates from the written
prior approval requirement as such processes will be unnecessary and
duplicative. We proposed to amend Sec. 438.6(c) to provide
specifically for SDPs that require use of a minimum fee schedule using
FFS Medicare payment rates and to exempt them from the written prior
approval requirement.
First, we proposed to add a new definition to Sec. 438.6(a) for
``total published Medicare payment rate'' as amounts calculated as
payment for specific services that have been developed under Title
XVIII Part A and Part B. We proposed to redesignate the existing Sec.
438.6(c)(1)(iii)(B) through (D) as Sec. 438.6(c)(1)(iii)(C) through
(E), respectively, and add a new Sec. 438.6(c)(1)(iii)(B) explicitly
recognizing SDP arrangements that are a minimum fee schedule using a
total published Medicare payment rate that is no older than from the 3
most recent and complete years prior to the rating period as a
permissible type of SDP.\74\ We also proposed to revise redesignated
paragraph (c)(1)(iii)(C) to take into account the proposed new category
of SDPs that use one or more total published Medicare payment rates. As
part of the proposals for paragraphs (c)(1)(iii)(A) through (E), we
also proposed to streamline the existing regulation text to eliminate
the phrase ``as defined in paragraph (a)'' as unnecessary; we expect
that interested parties and others who read these regulations will read
them completely and recognize when defined terms are used.
---------------------------------------------------------------------------
\74\ Section 438.5 requires that States and their actuaries must
use the most appropriate data, with the basis of the data being no
older than from the 3 most recent and complete years prior to the
rating period, for setting capitation rates.
---------------------------------------------------------------------------
We also proposed to restructure Sec. 438.6(c)(2) and amend its
paragraph heading to Standards for State directed payments as discussed
fully in later sections. As part of this restructuring, we proposed to
redesignate part of the provision in Sec. 438.6(c)(2)(ii) to Sec.
438.6(c)(2)(i) to describe which SDPs require written prior approval.
This revision included a conforming revision in Sec. 438.6(c)(2)(i) to
reflect the re-designation of Sec. 438.6(c)(1)(iii)(B) through (D) as
(c)(1)(iii)(C) through (E). This revision will ensure that that SDPs
described in paragraph (c)(1)(iii)(B) along with the SDPs described in
paragraph (c)(1)(iii)(A), are not included in the written prior
approval requirement. As described in our proposed rule, States that
adopt a minimum fee schedule using 100 percent of total published
Medicare payment rates will still need to document these SDPs in the
corresponding managed care contracts and rate certifications, and those
types of SDPs must still comply with requirements for all SDPs other
than prior written approval by CMS, just as minimum fee schedules tied
to State plan approved rates described in paragraph (c)(1)(iii)(A) must
comply. Under our proposal, SDPs described under paragraphs
(c)(1)(iii)(A) and (B) would still need to comply with the standards
listed in the proposed restructured Sec. 438.6(c)(2)(ii). (See
sections I.B.2.f. through I.B.2.l. of this final rule for proposed new
requirements and revisions to existing requirements for all SDPs to be
codified in paragraph (c)(2)(ii).)
Our proposal to exempt these Medicare payment rate SDPs from
written prior approval from CMS was specific to SDPs that require the
Medicaid managed care plan to use a minimum fee schedule that is equal
to 100 percent of the total published Medicare payment rate. SDP
arrangements that use a different percentage (whether higher or lower
than 100 percent) of a total published Medicare payment rate as the
minimum payment amount or that are simply based off of an incomplete
total published Medicare payment rate would be included in the SDPs
described in paragraph (c)(1)(iii)(C). Our review of SDPs includes
ensuring that they will result in provider payments that are
reasonable, appropriate, and attainable. Accordingly, we believe SDPs
that proposed provider payment rates that are incomplete or either
above or below 100 percent of total published Medicare payment rates
may not necessarily meet these criteria and thus, should remain subject
to written prior approval by CMS. Our proposal was consistent with this
belief.
We also did not propose to remove the written prior approval
requirement for SDPs for provider rates tied to a Medicare fee schedule
in effect more than 3 years prior to the start of the rating period.
This is reflected in our proposed revision to redesignated paragraph
(c)(1)(iii)(C) to describe fee schedules for providers that provide a
particular service under the contract using rates other than the State
plan approved rates or one or more total published Medicare payment
rates described in proposed new paragraph (c)(1)(iii)(B). We proposed
the limit of 3 years to be consistent with how Sec. 438.5(c)(2)
requires use of base data that is at least that recent for rate
development. Our review of SDPs includes ensuring that they will result
in provider payments that are reasonable, appropriate, and attainable.
Accordingly, we believe that SDPs that propose provider payment rates
tied to a total published Medicare payment rate in effect more than 3
years prior to the start of the rating period may not always meet these
criteria and thus, should remain subject to written prior approval by
CMS.
We solicited public comments on our proposal to specifically
address SDPs that are for minimum fee schedules using 100 percent of
the amounts in a total published Medicare payment rate for providers
that provide a particular service when the total published Medicare
payment rate was in effect no more than 3 years prior to the start of
the rating period and on our proposal to exempt these specific types of
SDP arrangements from the prior written approval requirement in Sec.
438.6(c)(2)(ii).
We also proposed to add new Sec. 438.6(c)(5) (with the paragraph
[[Page 41047]]
heading Requirements for Medicaid Managed Care Contract Terms for State
directed payments), for oversight and audit purposes. Proposed new
paragraph (c)(5)(iii)(A)(5) requires the managed care plan contract to
include certain information about the Medicare fee schedule used in the
SDP, regardless of whether the SDP was granted an exemption from
written prior approval under Sec. 438.6(c)(1)(iii)(B). That is, for
SDPs which use total published Medicare payment rates, the contract
would need to specify which Medicare fee schedule(s) the State directs
the managed care plan to use and any relevant and material adjustments
due to geography, such as rural designations, and provider type, such
as Critical Access Hospital or Sole Community Hospital designation.
Under our proposal, the managed care contract must also identify
the time period for which the Medicare fee schedule is in effect, as
well as the rating period for which it is used for the SDP. Consistent
with proposed Sec. 438.6(c)(1)(iii)(B), the Medicare fee schedule must
be in effect no more than 3 years prior to the start of the rating
period for the services provided in the arrangement. This 3-year
requirement is like requirements in Sec. 438.5 for rate setting, under
which data that the actuary relies on must be from the 3 most recent
years that have been completed, prior to the rating period for which
rates are being developed. For example, should a State seek to
implement a Sec. 438.6(c)(1)(iii)(B) fee schedule in CY 2025, the
Medicare fee schedule must have been in effect for purposes of Medicare
payment at least at the beginning of CY 2021.
Requiring sufficient language in the contract regarding the
Medicare fee schedule would provide clarity to CMS, managed care plans,
and providers regarding the explicit Medicare payment methodology being
used under the contract. For broader discussion of Sec. 438.6(c)(5),
see section I.B.2.k. of this final rule.
We requested comment on other material or significant information
about a Medicare fee schedule that will need to be included to ensure
the managed care contract sufficiently describes this type of SDP.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We summarize and respond to public comments received on our
proposals related to the SDPs that use total published Medicare payment
rates, including the proposed exemption from the written prior approval
and contract content requirements, Sec. 438.6(c)(1)(iii)(B), (2), and
(5)(iii)(A)(5) below.
Comment: Many commenters supported exempting minimum fee schedule
SDPs at 100 percent of the total published Medicare payment rates
specified in Sec. 438.6(c)(1)(iii)(B) from written prior approval as
Medicare payment rates have already been approved through the extensive
Medicare notice-and-comment rulemaking process. As such, this exemption
from written prior approval would reduce the administrative burden for
State Medicaid programs and for CMS. Commenters also supported CMS's
assertion that minimum fee schedules that are based on 100 percent of
published Medicare payment rates pose comparatively little risk and
satisfy the criteria of being reasonable, appropriate, and attainable.
Further, commenters supported the proposal that the Medicare fee
schedule should be in effect no more than 3 years prior to the start of
the applicable rating period for the SDP.
Response: We appreciate commenters' support and agree that the
exemption from written prior approval finalized in Sec. 438.6(c)(2)(i)
will eliminate an unnecessary and duplicative review process for SDPs
and will facilitate more efficient and effective administration of the
Medicaid program. We continue to believe that this exemption does not
increase program integrity risk as Medicare payment rates are
rigorously developed and vetted annually by CMS. Additionally, while
the SDPs described in Sec. 438.6(c)(1)(iii)(A) and (B) are not subject
to prior approval, they are not automatically renewed, must comply with
requirements and standards in part 438, and must be documented
appropriately in the managed care contract and rate certification
submission consistent with Sec. 438.7. We take this opportunity to
remind States that as specified in Sec. 438.7(b)(6), rate
certifications must include a description of any special contract
provisions related to payment in Sec. 438.6, including SDPs authorized
under Sec. 438.6(c)(1)(iii)(A) and (B). We also direct the commenter
to section I.B.2.l. of this final rule for further details on the
documentation of SDPs in rate certifications.
Comment: Several commenters supported the exemption from written
prior approval for minimum fee schedule SDPs at 100 percent of the
total published Medicare payment rate but suggested that we expand the
scope of this exemption for additional SDPs that use Medicare fee
schedules. Many of these commenters suggested a range, such as 95 to
105 percent of Medicare payment rates, or a threshold as high as 125
percent of Medicare payment rates. One commenter suggested that any
minimum fee schedule SDPs using payments in the range between the State
Plan rate and the Medicare payment rate should qualify for the
exemption from written prior approval.
Response: We continue to believe that minimum fee schedule SDPs
using 100 percent of total published Medicare payment rates are
reasonable and appropriate to remove from written prior approval
requirements as they are developed by CMS and finalized through
rulemaking. We have concerns about expanding this exemption to SDPs
that use other percentages of total published Medicare payment rates.
Only Medicare payment rates as published have undergone CMS development
and oversight. Deviations from these payment rates introduce variations
that have not been appropriately considered and vetted in a regulatory
capacity to ensure the rate is reasonable, appropriate, and attainable.
However, not using the published Medicare payment rate does not trigger
a presumption on CMS's part that the proposed rates are not reasonable,
appropriate, and attainable. Rather, we believe that minimum fee
schedule SDPs which use Medicare payment rates that are incomplete or
at a percentage other than 100 percent of the total published Medicare
payment rate must continue to be reviewed by CMS and receive written
prior approval via a preprint.
Comment: A few commenters recommended that CMS allow other SDPs to
be exempt from prior approval requirements. Some of these commenters
suggested CMS exempt from the prior written approval requirement any
SDP that adopts minimum fee schedules, particularly those for
behavioral health services and HCBS. Another commenter suggested
extending this exemption to SDPs that provide uniform increases.
Response: We disagree that additional types of SDPs should be
exempted from written prior approval of preprints. SDPs that use
minimum fee schedules other than State plan approved rates or 100
percent of the total published Medicare payment rate, as well as
uniform increases, must continue to be reviewed by CMS and receive
written approval via a preprint, to ensure the payment rates are
reasonable, appropriate, and attainable, in addition to ensuring
compliance with Sec. 438.6(c). The level of scrutiny and review that
applies to the total Medicare payment rate and State plan approved
rates does
[[Page 41048]]
not apply to other minimum or maximum fee schedules used in an SDP, so
there are not sufficient assurances that the payment rates are
reasonable, appropriate, and attainable to justify an exemption from
CMS review and approval. Our exemption from written prior approval of
certain SDPs is predicated on prior CMS involvement in the rates, such
as our development of the total published Medicare payment rate and our
approval of Medicaid State plan rates. As such, it would not be
appropriate to exempt all minimum fee schedules or uniform increases
regardless of service type and payment level.
Comment: One commenter suggested that any minimum fee schedule
using Medicare as a benchmark should be exempt from all SDP
requirements.
Response: We decline to expand the Medicare exemption from written
prior approval to an exemption from all SDP regulatory requirements
entirely. There are many critical components that every SDP must meet,
including requirements that it be based on utilization and delivery of
services, advance quality, not condition provider participation in the
SDP on a provider entering or adhering to intergovernmental transfers
(IGT) arrangements, and that it be documented in managed care plan
contracts and accounted for in rate development. As discussed
throughout this section of the final rule, there are important policy
and legal considerations furthered by these requirements for SDPs. As
always, CMS will continue to seek efficiencies in our operational
review processes to facilitate timely action.
Comment: Some commenters who supported the Medicare exemption also
requested that the exemption be expanded based on alternative
benchmarks. One commenter requested alternatives for provider types not
represented in Medicare. One commenter was concerned that States should
be able to look to other Medicare payment methodologies than the
Medicare Physician Fee Schedule, such as the Medicare partial
hospitalization program for psychiatric care.
Response: We acknowledge that the exemption from written prior
approval finalized in Sec. 438.6(c)(2)(i) will not accommodate all
service and provider types, such as those not addressed in the total
published Medicare payment rates. Our goal in finalizing Sec.
438.6(c)(2)(i) is to reduce State administrative burden by exempting
SDPs that are a minimum fee schedule using a total published Medicare
payment rate as this total payment rate is developed by CMS. States are
still able to pursue SDPs that are not tied to the State plan or
Medicare payment rates, but those proposals require written prior
approval. The term ``total published Medicare payment rate'' is defined
in Sec. 438.6(a) to include ``amounts calculated for payment for
specific services that have been developed under Title XVIII Part A and
Part B.'' Therefore, the exemption for SDPs specified in Sec.
438.6(c)(1)(iii)(B) is not limited to the Medicare Physician Fee
schedule and would encompass Medicare payment rates for other Medicare
covered services under Parts A and B.
Comment: One commenter requested that CMS revise its definition of
State plan approved rates to include payments that are estimated to be
equivalent to what Medicare would have paid using a payment-to-charge
ratio such as is permitted in the Medicaid FFS supplemental payment
Upper Payment Limit demonstrations required by Sec. 447.272.
Response: State plan approved rates are defined in Sec. 438.6(a)
as amounts calculated for services identifiable as having been provided
to an individual beneficiary described under CMS approved rate
methodologies in the State plan, and this definition specifically
indicates that ``Supplemental payments contained in a State plan are
not, and do not constitute, State plan approved rates.'' This is
because Medicaid FFS supplemental payments are not calculated or paid
based on the number of services rendered on behalf of an individual
beneficiary, and therefore, are separate and distinct from State plan
approved rates. We do not intend to revisit the definition for State
plan approved rates or the associated exemption from written prior
approval. Further detail on this policy is in the 2020 final rule (85
FR 72776 through 72779).
Comment: While commenters supported the administrative efficiency
associated with this exemption, some commenters stated that Medicare
rates are not sufficient compensation for certain services, for example
for highly specialized services, and can yield extremely low payment
rates for some services. One commenter urged CMS not to consider
adopting a framework that suggests Medicare payment rates are the
appropriate benchmark to ensure Medicaid beneficiaries have access to
care and recommended clarifying that this approach is solely a
mechanism for evaluating payment adequacy in a standardized way.
Another commenter opposed this provision saying that exactly 100
percent of the published Medicare payment rates was an arbitrary and
strict benchmark. One commenter, while supportive of CMS's goals,
cautioned that CMS should not discourage States from using common
service definitions, appropriate risk adjustment, and applicable
payment groupings that are designed for the Medicaid population, rather
than the Medicare population.
Response: The provision finalized as proposed at Sec.
438.6(c)(2)(i)--to exempt certain SDPs described in Sec.
438.6(c)(1)(iii)(B) from the prior written approval requirement--was
intended solely to reduce administrative burden on States and CMS. As
noted earlier, we are finalizing the exemption for minimum fee schedule
SDPs at the total published Medicare payment rate because these rates,
like Medicaid State plan rates, have already been approved by CMS. We
disagree that 100 percent of total published Medicare rates is an
arbitrary and overly rigid standard for the exemption from the prior
written approval requirement. We also did not assert that Medicare
rates were appropriate for all services, populations, and providers and
do not intend this provision for certain SDPs to communicate such a
position. States have the option to design SDPs based on the needs of
their Medicaid population and the structure of their Medicaid managed
care programs.
Comment: One commenter stated concerns that exempting these SDPs
from prior approval would mean CMS would no longer receive evaluations
for some minimum fee schedules that could substantially increase
provider payment rates from Medicaid managed care plans.
Response: The exemption is limited to written prior approval of a
preprint. As we discussed in the proposed rule, all SDPs, including
those described in Sec. 438.6(c)(1)(iii)(A) and (B), would still need
to comply with the standards listed in the finalized Sec.
438.6(c)(2)(ii) (see 88 FR 28114). As finalized, Sec. 438.6(c)(2)(ii)
reflects this policy. In addition, other requirements for SDPs adopted
in the rule, such as the reporting requirements in paragraph (c)(4) and
certain contract term requirements in paragraph (c)(5) will also apply
to the SDPs specified in paragraph (c)(1)(iii)(A) and (B). (To the
extent that certain SDP requirements are limited to specified SDPs,
those are discussed in the relevant parts of section I.B.2. of this
final rule.) For example, while it is true the SDP evaluation report
would not need to be submitted to CMS for review at a specified time,
the State is required to continue to evaluate the SDP and such
evaluation must be made available to
[[Page 41049]]
CMS upon request. See section I.B.2.j. of this final rule for further
details on SDP evaluations.
Comment: Some commenters were supportive of the proposed exemption
but stated concern, urging CMS to consider requiring States and their
actuaries to include detailed information describing the SDP within
their rate certification documentation. These commenters stated that
clear rate certification documentation that includes information about
SDPs that are not subject to the CMS written prior approval process
will help ensure the fiscal sustainability of the Medicaid program.
Response: We agree that SDPs being adequately described in rate
certifications is an important program integrity safeguard. SDPs that
are exempt from written prior approval must comply with requirements
and standards in part 438 and be appropriately documented in the
managed care contract and rate certification submission consistent with
Sec. 438.7. We take this opportunity to remind States that as
specified in Sec. 438.7(b)(6), rate certifications must include a
description of any special contract provisions related to payment in
Sec. 438.6, including SDPs authorized under Sec. 438.6(c)(1)(iii)(A)
and (B). We also direct the commenter to section I.B.2.k. of this final
rule for further details on the documentation of SDPs in rate
certifications.
Comment: Another commenter recommended that CMS define ``published
Medicare rates'' to be inclusive of additions and adjustments such as
GME, indirect medical education, and Area Wage Index specific to each
hospital to ensure the payment rates account for the acuity of the
patient, the population served, and services provided in a particular
geographic area of the country.
Response: The exemption from written prior approval in Sec.
438.6(c)(2)(i) for SDPs specified in Sec. 438.6(c)(1)(iii)(B) includes
the ``total published Medicare payment rate,'' which aligns with the
inpatient prospective payment system (IPPS) web pricer amount \75\ and
is fully inclusive of all components included in the rate developed by
CMS for Medicare payment. States retain the ability to propose SDPs
that use a fee schedule which is based on a Medicare payment rate but
in some way revises or deviates from the underlying approved
methodology or adds other types of variability. However, such SDPs are
not within the scope of Sec. 438.6(c)(1)(iii)(B) because they would
not use 100 percent of the total published Medicare payment rate. These
would be SDPs described in Sec. 438.6(c)(1)(iii)(C), which are not
eligible for the exemption in Sec. 438.6(c)(2)(i) and are subject to
written approval from CMS. Additionally, any SDPs that use a payment in
addition to the total published Medicare rate (as calculated by the
IPPS web pricer) are not within the scope of Sec. 438.6(c)(1)(iii)(B),
are not eligible for the exemption in Sec. 438.6(c)(2)(i) and are
subject to written prior approval from CMS. Any SDP that in any way
adjusts the total published Medicare payment rate must receive written
prior approval by CMS.
---------------------------------------------------------------------------
\75\ https://webpricer.cms.gov/#/.
---------------------------------------------------------------------------
Additionally, for clarity, we restate that for all SDPs that
specify a Medicare-referenced fee schedule regardless of whether it is
eligible for an exemption from written prior approval, the associated
managed care contract must comply with Sec. 438.6(c)(5)(iii)(A)(5) and
include information about the Medicare fee schedule(s) that is
necessary to implement the SDP, identify the specific Medicare fee
schedule, the time period for which the Medicare fee schedule is in
effect, and any material adjustments due to geography or provider type
that are applied. We also direct the commenter to section I.B.2.k. of
this final rule for further details on the documentation of SDPs in
managed care contracts.
After consideration of the public comments and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing revisions to Sec. 438.6(a), (c)(2)(i), and
(c)(5)(iii)(A)(5) as proposed for the reasons outlined here and in the
proposed rule. We are further finalizing the definition of ``Total
published Medicare payment rate'' at Sec. 438.6(a) as proposed and
finalizing Sec. Sec. 438.6(c)(1)(iii)(B), (c)(2), and
(c)(5)(iii)(A)(5) as proposed.
d. Non-Network Providers (Sec. 438.6(c)(1)(iii))
We proposed to remove the term ``network'' from the descriptions of
SDP arrangements in current (and revised as proposed) Sec.
438.6(c)(1)(iii). Existing regulations specify that for a State to
require an MCO, PIHP or PAHP to implement a fee schedule under Sec.
438.6(c)(1)(iii), the fee schedule must be limited to ``network
providers.'' This limitation is not included in Sec. 438.6(c)(1)(i) or
(ii) for SDP arrangements that are VBP and multi-payer or Medicaid-
specific delivery system reform or performance improvement initiatives.
In our experience working with States, limiting the descriptions of SDP
arrangements subject to Sec. 438.6(c)(iii) to those that involve only
network providers has proven to be too narrow and has created an
unintended barrier to States' and CMS's policy goals to ensure access
to quality care for beneficiaries.
In the 2016 final rule, we finalized current Sec. 438.6(c)(1)(iii)
to include ``network'' before ``providers'' in this provision.\76\ As
previously noted, the regulation at Sec. 438.6(c)(1) generally
prohibits States from directing the MCO's, PIHP's or PAHP's
expenditures under the contract unless it meets one of the exceptions
(as provided in a specific provision in Title XIX, in another
regulation implementing a Title XIX provision related to payment to
providers, a SDP that complies with Sec. 438.6(c), or a pass-through
payment that complies with Sec. 438.6(d)). Therefore, the inclusion of
the word ``network'' in the SDP arrangement descriptions in the 2016
final rule has prevented States from including contract requirements to
direct their Medicaid managed care plans on how to pay non-network
providers.
---------------------------------------------------------------------------
\76\ https://www.federalregister.gov/d/2016-09581/p-1269.
---------------------------------------------------------------------------
In our work with States over the years, some States have noted
concerns with the requirement that permissible SDPs only apply to (or
include) payments by Medicaid managed care plans to network providers.
States have noted that limiting SDPs to network providers is
impractical in large and diverse States. Several States had, prior to
the 2016 final rule, pre-existing contractual requirements with managed
care plans that required a specific level of payment (such as the
State's Medicaid FFS rates) for non-network providers. This aligns with
our experience working with States as well, and we note section
1932(b)(2)(D) of the Act requires that non-network providers furnishing
emergency services must accept as payment in full an amount equal to
the Medicaid State plan rate for those services. Some States have
historically required plans to pay non-network providers at least the
Medicaid State plan approved rate or another rate established in the
managed care contract. Many States with enrollees on their borders rely
on providers in neighboring States to deliver specialty services, such
as access to children's hospitals.
While we support States' and plans' efforts to develop strong
provider networks and to focus their efforts on providers who have
agreed to participate in plan networks, executing network agreements
with every provider may not always be feasible for plans.
[[Page 41050]]
For example, in large hospital systems, it may be impractical for every
plan to obtain individual network agreements with each rounding
physician delivering care to Medicaid managed care enrollees. In such
instances, States may have an interest in ensuring that their Medicaid
managed care plans pay non-network providers at a minimum level to
avoid access to care concerns. We have also encountered situations in
which States opt to transition certain benefits, which were previously
carved out from managed care, from FFS into managed care. In these
instances, States would like to require their managed care plans to pay
out-of-network providers a minimum fee schedule in order to maintain
access to care while allowing plans and providers adequate time to
negotiate provider agreements and provider payment rates for the newly
incorporated services. Consequently, we proposed these changes to
provide States a tool to direct payment to non-network providers, as
well as network providers.
Therefore, we proposed to remove the term ``network'' from the
descriptions of permissible SDP arrangements in Sec. 438.6(c)(1)(iii).
Under this proposal, the permissible SDPs are described as payment
arrangements or amounts ``for providers that provide a particular
service under the contract'' and this will permit States to direct
payments under their managed care contracts for both network and non-
network providers, subject to the requirements in Sec. 438.6(c) and
other regulations in part 438. We note that, as proposed, all standards
and requirements under Sec. 438.6(c) and related regulations (such as
Sec. 438.7(c)) will still be applicable to SDPs that direct payment
arrangements for non-network providers.
Finally, as pass-through payments are separate and distinct from
SDPs, we are maintaining the phrase ``network provider'' in Sec.
438.6(d)(1) and (6). Existing pass-through payments are subject to a
time-limited transition period and in accordance with Sec. 438.6(d)(3)
and (5), respectively, hospital pass-through payments must be fully
eliminated by no later than the rating period beginning on or after
July 1, 2027 and nursing facility and physician services pass-through
payments were required to have been eliminated by no later than the
rating period beginning on or after July 1, 2022 with the exception of
pass-through payments for States transitioning services and populations
in accordance with Sec. 438.6(d)(6). Therefore, we did not believe
that it is appropriate or necessary to eliminate the word ``network''
from Sec. 438.6(d).
We solicited public comments on our proposal. We sought comment on
whether this change will result in negative unintended consequences.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We summarize and respond to public comments received on our
proposal regarding SDPs for non-network providers (Sec.
438.6(c)(1)(iii)) below.
Comment: Many commenters supported our proposal to remove
``network'' from Sec. 438.6(c)(1)(iii) noting that the revision would
remove barriers to access to quality care for enrollees and provide
more flexibility for States to direct managed care plan payment to a
wider array of providers. Some commenters noted that this change would
ensure alignment across all types of providers.
Response: We appreciate the support for the proposed changes to
Sec. 438.6(c)(1)(iii). We agree that these revisions will provide
States with more flexibility, and could improve access to quality care,
and establish parity for provider eligibility for all types of SDPs.
Comment: One commenter sought clarification as to whether CMS is
proposing to require States to include non-network providers in SDPs or
if States will have flexibility to elect whether an SDP is limited to
network or non-network providers.
Response: We appreciate the request for clarification and clarify
that the revision to Sec. 438.6(c)(1)(iii) grants States the option to
direct payment under Sec. 438.6(c) to network and/or non-network
providers. As part of the provider class definition for each SDP
required in Sec. 438.6(c)(2)(ii)(B), States should identify in the SDP
preprint whether the provider class eligible for the SDP is inclusive
of network and/or non-network providers. We are also finalizing Sec.
438.6(c)(5)(ii) to require States to document both a description of the
provider class eligible for the SDP and all eligibility requirements in
the applicable managed care contract. We believe such description will
need to include whether an SDP is applicable to network and/or non-
network providers so that managed care plans can accurately implement
the SDP.
Comment: One commenter noted that States should provide clear and
timely guidance to managed care plans about SDP related adjustments to
the capitation rates and sufficient details about the SDP for the
managed care plan to be able to effectuate the SDP for non-network
providers. The commenter stated that States should be required to issue
a fee schedule for non-network providers to managed care plans with
sufficient time, preferably 90 days, to make programming and
operational changes necessary to operationalize the SDP.
Response: We agree with the commenter that States should account
for SDPs in applicable rate certifications and contracts in a clear and
timely manner. To ensure that managed care plans receive necessary
information on the State's intent and direction for the SDP, we are
finalizing provisions that establish minimum documentation requirements
for all SDPs and timeframes for submission of managed care contracts
and rate certifications that incorporate SDPs (see sections I.B.2.e.,
I.B.2.k., and I.B.2.l. of this final rule for further details). We
believe these requirements will help ensure that plans have sufficient
and timely information to effectuate SDPs with providers.
Comment: Several commenters stated support for removing ``network''
from Sec. 438.6(c)(1)(iii) and requested that CMS permit SDPs that
require network providers to be paid higher payment amounts than out-
of-network providers. One commenter requested that CMS grant States
flexibility to implement maximum fee schedules for non-network
providers that are lower than the fee schedules for network providers
to incentivize providers to join managed care plan networks while still
allowing for flexibility in contracting.
Response: States are permitted to direct payment in any of the ways
suggested by commenters, subject to all the requirements in Sec.
438.6(c) and applicable law. Unless limited or circumscribed by a
requirement for how a Medicaid managed care plan pays certain non-
contracted providers, States could choose to utilize network status as
the basis on which to define provider classes or subclasses for an SDP
under Sec. 438.6(c)(2)(i)(B). We encourage States to consider how best
to design SDPs for network and non-network providers to achieve the
goals and objectives of their managed care programs.
Comment: Several commenters opposed removing ``network'' from Sec.
438.6(c)(1)(iii) and recommended that we continue to limit certain
types of SDPs to network providers. Some of these commenters noted that
this proposed change might disincentivize providers from contracting
with managed care plans and undermine network adequacy or access to
network providers. One commenter noted that this change would run
counter to CMS's goals to improve access to managed care network
providers.
Response: We disagree that permitting States to direct fee schedule
or uniform
[[Page 41051]]
increase type SDPs specified in Sec. 438.6(c)(1)(iii) to non-network
providers will erode access to network providers or undermine network
adequacy. As discussed in the proposed rule, we believe that this
change may improve access to care in certain situations. For example,
States have stated interest in directing plans to pay at least the
Medicaid State plan rate to non-network providers in neighboring States
that furnish specialty services unavailable in the State or non-network
providers that render services to enrollees during inpatient stays. (88
FR 28115) We believe these examples demonstrate that permitting SDPs
for non-network providers could help States fulfill their obligation to
ensure timely access to all covered services. To the extent that a
State decides that concerns about disincentivizing network
participation should limit SDPs that direct payment to non-network
providers, our regulation similarly permits that policy choice.
Comment: One commenter urged CMS to delay the applicability date
from the effective date of the final rule to the first rating period
beginning on or after 2 years after the effective date of the rule to
allow managed care plans to prepare for network adequacy fluctuations.
Response: We decline to delay the applicability date of Sec.
438.6(c)(1)(iii). Since the inception of SDPs in the 2016 final rule,
States have been permitted to direct plan expenditures to network and
non-network providers consistent with Sec. 438.6(c)(1)(i) and (ii). To
our knowledge, these SDPs have not caused any network adequacy
fluctuations. The revision to Sec. 438.6(c)(1)(iii) simply extends the
option for States to include non-network providers in other types of
SDPs, including minimum fee schedules, maximum fee schedules and
uniform increases. Therefore, we do not believe it necessary to extend
the applicability date; this amendment to Sec. 438.6(c)(1)(iii) is
applicable upon the effective date of this final rule. States may seek
prospective amendments to existing SDPs or develop new SDPs consistent
with this amendment to Sec. 438.6(c)(1)(iii) without additional delay.
Comment: One commenter noted that implementing certain payment
arrangements with non-network providers could prove burdensome for
managed care plans to implement and track as the managed care plans do
not have a formal contractual relationship with non-network providers.
Response: Managed care plans have extensive experience paying
claims for non-network providers for many purposes including for
certain inpatient care, emergency services, and statutorily permitted
use of non-network family planning providers. Additionally, States have
been permitted to adopt and CMS has approved SDPs described in existing
Sec. 438.6(c)(1)(i) and (ii) to direct managed care plans to pay non-
network providers since the 2016 final rule. We encourage States and
plans to utilize lessons learned to implement other types of SDPs that
include non-network providers. Plans and States should work together to
reduce administrative burden, including for the impacted non-network
providers whenever possible, and develop SDP implementation processes
to ensure timely and accurate payment.
Comment: One commenter opposed removing ``network'' from Sec.
438.6(c)(1)(iii) stating that the provision cannot be adopted without
CMS performing a regulatory impact analysis.
Response: We included a robust discussion of the most impactful SDP
provisions for which we had sufficient data in the regulatory impact
analysis in the proposed rule and the public had the opportunity to
comment on it and provide additional information for our consideration.
We acknowledge that we do not have sufficient quantitative data
presently to assess the impact of all provisions, including removing
``network'' from Sec. 438.6(c)(1)(iii). Nor did commenters provide
such data.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing the
revision to remove ``network'' from the descriptions of the SDPs in
Sec. 438.6(c)(1)(iii) as proposed.
e. SDP Submission Timeframes (Sec. 438.6(c)(2)(viii) and (c)(2)(ix))
Since we established the ability for States to direct the
expenditures of their managed care plans in the 2016 final rule, we
have encouraged States to submit their requests for written prior
approval 90 days in advance of the start of the rating period whenever
possible. We also recommend that States seek technical assistance from
CMS in advance of formally submitting the preprint for review to CMS
for more complicated proposals to facilitate the review process.
Submitting 90 days in advance of the rating period provides CMS and
the State time to work through the written prior approval process
before the State includes the SDP in their managed care plan contracts
and the associated rate certifications. If States include SDPs in
managed care contracts and capitation rates before we issue written
prior approval, any changes to the SDP made as a result of the review
process will likely necessitate contract and rate amendments,\77\
creating additional work for States, actuaries, CMS, and managed care
plans. Submitting SDP preprints at least 90 days in advance of the
rating period can help reduce the need for subsequent contract and rate
amendments to address any inconsistencies between the contracts and
rate certifications and approved SDPs. State directed payments that are
not submitted 90 days in advance of the affected rating period also
cause delays in the approval of managed care contracts and rates
because those approvals are dependent on the written prior approval of
the SDP. Since we cannot approve only a portion of a State's Medicaid
managed care contract, late SDP approvals delay approval of the entire
contract and the associated capitation rates.
---------------------------------------------------------------------------
\77\ The term ``rate amendment'' is used to reference an
amendment to the initial rate certification.
---------------------------------------------------------------------------
Some States have not been successful in submitting their SDP
preprints in advance of the rating period for a variety of reasons.
Sometimes it is due to changes in program design, such as a new benefit
linked to the SDP being added to the Medicaid managed care contract
during the rating period. Other unforeseen changes, such as PHEs or
natural disasters, can also create circumstances in which States need
to respond to urgent concerns around access to care by implementing an
SDP during the rating period. While we recognize that from time to time
there may be a circumstance that necessitates a late preprint
submission, we have found that some States routinely submit SDP
preprints at the very end of the rating period with implementation
dates retroactive to the start of the rating period. We have provided
repeated technical assistance to these States, and we published
additional guidance in 2021 \78\ to reiterate our expectation that
States submit SDP preprints before the start of a rating period. This
guidance also made clear that CMS will not accept SDP preprints for
rating periods that are closed; however, we have not been able to
correct the situation with some States.
---------------------------------------------------------------------------
\78\ https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf.
---------------------------------------------------------------------------
To make our processes more responsive to States' needs while
ensuring that reviews linked to SDP approvals are not unnecessarily
delayed, we proposed a new Sec. 438.6(c)(2)(viii)(A) through (C) to
set the deadline for submission of SDP preprints that require written
prior
[[Page 41052]]
approval from CMS under paragraph (c)(2)(i) (redesignated from Sec.
438.6(c)(2)(ii)). In Sec. 438.6(c)(2)(viii)(A), we proposed to require
that all SDPs that require written prior approval from CMS must be
submitted to CMS no later than 90 days in advance of the end of the
rating period to which the SDP applies. This proposed requirement would
apply if the payment arrangement for which the State is seeking written
prior approval begins at least 90 days in advance of the end of the
rating period. We encourage all States to submit SDPs in advance of the
start of the rating period to ensure CMS has adequate time to process
the State's submissions and can support the State in incorporating
these payments into their Medicaid managed care contracts and rate
development. We proposed to use a deadline of no later than 90 days
prior to the end of the applicable rating period because we believed
this minimum timeframe would balance the need for State flexibility to
address unforeseen changes that occur after the managed care plan
contracts and rates have been developed with the need to ensure timely
processing of managed care contracts and capitation rates. When a State
fails to submit all required documentation for any SDP arrangement that
requires written prior approval 90 days prior to the end of the rating
period to which the SDP applies, the SDP will not be eligible for
written prior approval; therefore, the State will not be able to
include the SDP in its Medicaid managed care contracts and rate
certifications for that rating period.
In Sec. 438.6(c)(2)(viii)(B), we proposed to address the use of
shorter-term SDPs in response to infrequent events, such as PHEs and
natural disasters, by permitting States to submit all required
documentation before the end of the rating period for SDP proposals
that will start less than 90 days before the end of the rating period.
Although CMS is not finalizing this proposal, we note that it was
intended to provide flexibility to allow States effectively to use SDPs
during the final quarter of the rating period to address urgent
situations that affect access to and quality of care for Medicaid
managed care enrollees.
There are SDPs, such as VBP and delivery system reform, that can
currently be approved under Sec. 438.6(c)(3) for up to three rating
periods. For these, we proposed in Sec. 438.6(c)(2)(viii)(C) that the
same timeframes described in Sec. 438.6(c)(2)(viii)(A) and (B) apply
to the first rating period of the SDP.
To illustrate these timeframes in the proposed rule, we used the
example of an SDP eligible for annual approval that a State is seeking
to include in their CY 2025 rating period. In the example, under the
current regulations, CMS recommended that a State seeking approval of
an SDP for the calendar year (CY) 2025 rating period would ideally
submit the preprint by October 3, 2024. However, under this proposal to
revised Sec. 438.6(c)(2)(viii), if the start of the SDP was on or
before October 2, 2025, the State must submit the preprint no later
than October 2, 2025 in order for CMS to accept it for review; if the
State submitted the preprint for review after that date, CMS could not
grant written prior approval of the preprint for the CY 2025 rating
period under our proposal. The State could instead seek written prior
approval for the CY 2026 rating period instead if the preprint could
not be submitted for the CY 2025 rating period by the October 2, 2025
deadline.
We described in the proposed rule an alternative requiring all SDPs
to be submitted prior to the start of the rating period for which the
State was requesting written prior approval. This would be a notable
shift from current practice, which requires all preprints be submitted
prior to the end of the rating period. We noted in the proposed rule
that States submit all preprints prior to the start of the rating
period would reduce administrative burden and better align with the
prospective nature of risk-based managed care. However, instituting
such a deadline could potentially be too rigid for States that needed
to address an unanticipated or acute concern during the rating period.
Lastly, we described in the proposed rule an alternative of
requiring that States submit all SDPs in advance of the start of the
payment arrangement itself. For example, a State may seek to start a
payment arrangement halfway through the rating period (for example, an
SDP for payments starting July 1, 2025 for States operating on a CY
rating period). Under this alternative approach, the State would have
to submit the preprint for prior approval before July 1, 2025 in order
for it to be considered for written prior approval. This approach would
provide additional flexibility for States establishing new SDPs but
will limit the additional flexibility for that SDP to that initial
rating period. If the State wanted to renew the SDP for the subsequent
rating period (for example, CY 2026), it would have to resubmit the
preprint before the start of that rating period.
As discussed in section I.B.2.p. of this final rule on
Applicability Dates, we proposed that States must comply with these new
submission timeframes beginning with the first rating period beginning
on or after 2 years after the effective date of the final rule. In the
interim, we would continue our current policy of not accepting
submissions for SDPs after the rating period has ended. We solicited
public comment on our proposals and these alternatives, as well as
additional options that will also meet our goals for adopting time
limits on when an SDP can be submitted to CMS for written prior
approval.
For amendments to approved SDPs, we proposed at Sec.
438.6(c)(2)(ix) to require all amendments to SDPs approved under Sec.
438.6(c)(2)(i) (redesignated from Sec. 438.6(c)(2)(ii)) to be
submitted for written prior approval as well. We also proposed at Sec.
438.6(c)(2)(ix)(A) to require that all required documentation for
written prior approval of such amendments be submitted prior to the end
of the rating period to which the SDP applies in order for CMS to
consider the amendment. To illustrate this, we again provide the
following example for an SDP approved for one rating period (CY 2025).
If that SDP was approved by CMS prior to the start of the rating period
(December 31, 2024 or earlier) and it began January 1, 2025, then the
State would have to submit any amendment to the preprint for that
rating period before December 31, 2025. After December 31, 2025, CMS
would not accept any amendments to that SDP for that CY 2025 rating
period. The same would be true for an SDP that was approved for one
rating period after the start of the rating period (for example,
approval on October 1, 2025 for a CY 2025 rating period). In that
instance, the State would have until December 31, 2025 to submit any
amendment to the preprint for CMS review; after December 31, 2025, CMS
would not accept any amendments to that SDP for that rating period.
We further proposed in Sec. 438.6(c)(2)(ix)(B) to set timelines
for the submission of amendments to SDPs approved for multiple rating
periods as provided in paragraph (c)(3). Under this proposal, Sec.
438.6(c)(2)(ix)(A) and (B) would allow an amendment window for the
proposal within the first 120 days of each of the subsequent rating
periods for which the SDP is approved after the initial rating period.
The amendment process for the first year of the multiple rating periods
would work the same way as it would for any SDP approved for one rating
period and be addressed by proposed paragraph (xi)(A). However, in
recognition that the SDP is approved for multiple rating periods, we
proposed in Sec. 438.6(c)(2)(ix)(B) that the State would be able to
amend the approved preprint for the second (CY 2026 in our example) and
third (CY 2027 in our example) rating periods
[[Page 41053]]
within the first 120 days of the CY 2026 rating period (for example, by
May 1, 2026). The requested amendment could not make any retroactive
changes to the SDP for the CY 2025 rating period because the CY 2025
rating period would be closed in this example. The State would not be
permitted to amend the payment arrangement after May 1, 2026 for the CY
2026 rating period. The State will be able to do the same for the CY
2027 rating period as well--amend the SDP before the end of the first
120 days of the CY 2027 rating period, but only for the CY 2027 rating
period and not for the concluded CY 2025 or CY 2026 rating periods.
As proposed, these deadlines would be mandatory for written prior
approval of an SDP or any amendment of an SDP. When a State fails to
submit all required documentation for any amendments within these
specified timeframes, the SDP will not be eligible for written prior
approval. Therefore, the State would not be able to include the amended
SDP in its Medicaid managed care contracts and rate certifications for
that rating period. The State could continue to include the originally
approved SDP as documented in the preprint in its contracts for the
rating period for which the SDP was originally approved. We note that
written prior approval of an SDP does not obligate a State to implement
the SDP. If a State chose not to implement an SDP for which CMS has
granted prior approval, elimination of an SDP would not require any
prior approval, under our current regulations or this proposal. If a
State decides not to implement an approved SDP after it has been
documented in the rate certification and contract the State would have
to submit amendments for the rates and contract to remove the
contractual obligation for the SDP and the impact of the SDP on the
rates. We solicited comment on this aspect of our proposal.
We proposed regulatory changes in Sec. Sec. 438.6(c)(5)(vi) and
438.7(c)(6) to require the submission of related contract requirements
and rate certification documentation no later than 120 days after the
start of the SDP or the date we granted written prior approval of the
SDP, whichever is later. States should submit their rate certifications
prior to the start of the rating period, and Sec. 438.7(c)(2)
currently requires that any rate amendments \79\ comply with Federal
timely filing requirements. However, we believe given the nature of
SDPs, there should be additional timing restrictions on when revised
rate certifications that include SDPs can be provided for program
integrity purposes. We also reminded States that these proposals do not
supersede other requirements regarding submission of contract and rate
certification documentation when applicable, including but not limited
to those that require prior approval or approval prior to the start of
the rating period such as requirements outlined in Sec. Sec. 438.3(a),
438.4(c)(2), and 438.6(b)(1). These proposals are discussed in later
sections: section I.B.2.k. of this final rule on Contract Term
Requirements for SDPs; section I.B.2.l. of this final rule on Separate
Payment Terms; and section I.B.2.m. of this final rule on SDPs included
through Adjustments to Base Capitation Rates.
---------------------------------------------------------------------------
\79\ The term ``rate amendment'' is used to reference an
amendment to the initial rate certification.
---------------------------------------------------------------------------
We proposed these regulatory changes to institute submission
timeframes to ensure efficient and proper administration of the
Medicaid program. We had also described an alternative of requiring
that States submit all amendments to SDPs for written prior approval
within either 120 days of the start of the payment arrangement or 120
days of CMS issuing written prior approval, whichever was later. To
illustrate this, we again provide the following example for an SDP
approved for one rating period (CY 2025). If that SDP was approved by
CMS prior to the start of the rating period (December 31, 2024 or
earlier) and it began January 1, 2025, then the State would have 120
days after the start of the payment arrangement (May 1, 2025) to submit
any amendment to the preprint for that rating period. After May 1,
2025, CMS would not accept any amendments to that SDP for that CY 2025
rating period. If, however, that SDP were approved after the start of
the rating period (for example, October 1, 2025 for a CY 2025 rating
period); the State will have 120 days from that written prior approval
(January 29, 2026) to submit any amendment to the preprint for CMS
review; after January 29, 2026, CMS will not accept any amendments to
that SDP for that rating period. Requiring that States submit any
amendments to the SDP preprint within 120 days of either the start of
the payment arrangement or the initial approval could reduce some
administrative burden by limiting the time period for amendments to SDP
preprints. However, the timeframe would be specific to each preprint,
which could present some challenges in ensuring compliance.
Additionally, it would not preclude States from submitting amendments
after the end of the rating period; in fact, it may encourage States to
submit SDP preprints toward the end of the rating period to preserve
the ability to amend the preprint after the end of the rating period.
CMS does not believe such practices are in alignment with the
prospective nature of risk-based managed care.
We solicited public comment on our proposals and these
alternatives, as well as additional options that will also meet our
goals for adopting time limits on when SDP preprints are submitted to
CMS for approval and when amendments to SDPs can be submitted to CMS
for written prior approval.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comments on these proposals.
We summarize and respond to public comments received on SDP
Submission Timeframes (Sec. 438.6(c)(2)(viii) and (ix)) below.
Comment: We received a wide range of comments on the submission
timeframes that we proposed for SDP preprints and amendments in Sec.
438.6(c)(2)(viii) and (ix), as well as alternatives that we described
in the proposed rule. Some commenters supported requiring States to
submit preprints to CMS at least 90 days prior to end of the rating
period as this proposal would provide States the most flexibility. One
commenter contended that submission 90 days before the end of the
rating period makes it difficult to ensure that there is time for CMS
to review the SDP and for States to adequately and accurately update
the contract(s) and capitation rate(s) to reflect the approved SDP.
Commenters stated concern with States waiting so late into the rating
period to submit an SDP preprint for CMS approval, and noted this would
very often trigger retroactive contract and capitation rate
adjustments, which creates more burden and uncertainty for States,
managed care plans, providers, and CMS. One commenter noted that a
submission timeframe not linked to the start of a rating period would
help States implement SDPs when legislatures pass budgets after the
start of a rating period or when they are designed to run less than a
full rating period to address urgent access issues. Many of these
commenters also supported our proposal in Sec. 438.6(c)(2)(ix)(A) for
SDP preprint amendments to be submitted prior to the end of the rating
period, but some did not support our proposal in Sec.
438.6(c)(2)(ix)(B) as they noted the differing timeframes by SDP
approval duration disadvantaged States using
[[Page 41054]]
multi-year SDPs such as VBP arrangements. A few commenters also did not
support having submission dates that varied from the initial year to
subsequent years as those dates could be hard to track as SDPs changed
over time. In contrast, other commenters suggested that SDP preprints
be required to be submitted before the start of the rating period to
ensure prospective implementation of SDPs. However, some of these
commenters stated that 90 days before the rating period was too long
and would often conflict with annual rate setting processes. Some
commenters supported the alternative described in the proposed rule to
use the start date of the payment arrangement instead of the start of
the rating period because this enabled States to respond to events
during a rating period such as changes to State budgets, other
legislative actions, identified access issues, or natural disasters and
emergencies most efficiently and in the least burdensome way. Some
commenters had overall concerns with the complexity of our proposals on
submission timeframes for SDP preprints and preprint amendments and
stated that this could lead to States inadvertently missing submission
deadlines, particularly during certain situations such as natural
disasters.
Response: We appreciate the comments on our proposals in Sec.
438.6(c)(2)(viii) and (ix), as well as on the other SDP preprint
submission timeframes alternatives described in the proposed rule (88
FR 28116 and 28117). Since Sec. 438.6(c) was codified in the 2016
final rule, we have encouraged States to submit SDP preprints at least
90 days in advance of the start of the applicable rating period for
consistency with the prospective nature of managed care plan contracts
and capitation rates, and because it facilitates timely contract and
rate certification review and approval by CMS. However, some States
have consistently struggled to submit preprints 90 days in advance of
the rating period for a multitude of reasons, including State budget
processes and unexpected program issues that arose during the rating
period. To make our processes more responsive to States' needs while
ensuring that contract and rate certification reviews dependent on SDP
approvals are not unnecessarily delayed, we proposed a new Sec.
438.6(c)(2)(viii) and (ix) that specified multiple submission
timeframes based on the duration of an SDP. While we received comments
in support of and in opposition to our proposals in Sec.
438.6(c)(2)(viii) and (ix), the comments persuaded us that our proposal
could inadvertently make submission timeframes overly complicated which
could exacerbate rather than alleviate submission compliance and hinder
States' efforts to respond to unexpected issues. We recognize the need
for flexibility for States to propose or revise SDPs to address changes
that occur during the rating period that are unexpected or expected but
that will not be in effect until after the start of the rating period.
However, we also continue to believe that it is important for States to
be timely with submissions of SDPs as much as possible to align with
contract and rate certification reviews, as well as to facilitate
efficient implementation of SDPs by managed care plans. While we
appreciate the support provided by commenters for requiring States to
submit preprints 90 days before the end of the rating period, we share
commenters' concern about the number of retroactive contract and rate
adjustments that may be necessitated by approval of an SDP preprint
after the end of a rating period. This would create more burden and
uncertainty for States, plans, providers, and CMS.
After review of the comments, we reconsidered how to balance timely
and accurate SDP preprint submissions with enabling States to be nimble
enough to administer efficient and responsive programs. In the
discussion in the proposed rule about the alternative of requiring that
States submit all SDPs in advance of the start of the payment
arrangement, we stated ``This would provide additional flexibility for
States establishing new SDPs but would limit the additional flexibility
for that SDP to that initial rating period. If the State wanted to
renew the SDP the subsequent rating period . . ., it would have to
resubmit the preprint before the start of that rating period.'' After
reviewing the comments that emphasized the need for State flexibility,
we have determined that there is no substantial risk to requiring all
SDP preprints to be submitted before the start of payment arrangement
and that a single submission timeframe is the most efficient and, least
burdensome, and strikes the right balance between the extremes of the
start and end of the rating period. As such, we are finalizing the
submission timeframe for all SDPs as before the implementation of the
payment arrangement as indicated by the start date for the SDP
identified in the preprint. The start date specified in the preprint is
the date when the managed care plans must implement the payment
arrangement, and therefore, we believe a more relevant date upon which
to base preprint submission than the start or end of the rating period.
We encourage States to submit their preprints as far in advance of an
SDP's start date as possible to facilitate approval before the start
date. We also remind States that they remain at risk for a disallowance
of FFP until and unless we have approved the SDP preprint, when
required, as well as the managed care contracts and capitation rates
that include the payment arrangement, and all other conditions and
requirements for FFP have been satisfied (for example, the prior
approval requirement for managed care contracts and the claims timely
filing deadline).
To further simplify our regulation text and help States understand
their obligations relative to SDP preprint submissions, we are also
finalizing that all amendments to SDP preprints must be submitted
before the start date of the SDP amendment. We believe these changes
will reduce burden for States, managed care plans, and providers,
facilitate efficient implementation of SDPs by managed care plans, and
promote more timely and accurate processing of SDP amendments.
To reflect these changes, several revisions to the text that was
proposed in Sec. 438.6(c)(2)(viii) and (ix) are being finalized in
this rule. First, Sec. 438.6(c)(2)(viii) will be revised to specify
that States must complete and submit all required documentation for
each SDP for which written approval is required before the specified
start date of the SDP. Required documentation includes at least the
completed preprint and as applicable, the total payment rate analysis
and the ACR demonstration as described in Sec. 438.6(c)(2)(iii) and
the evaluation plan as required in Sec. 438.6(c)(2)(iv). The deadline
we are finalizing means before the first payment to a provider under
the SDP (not merely prior to the State's request for FFP for the
State's payments to its managed care plans that incorporate the SDPs).
Second, proposed Sec. 438.6(c)(2)(viii)(A) through (C) are not being
finalized. Third, proposed Sec. 438.6(c)(2)(ix) is not being
finalized.
Under Sec. 438.6(c)(2)(viii) as finalized, if the required
documentation--meaning a complete SDP preprint or complete amendment to
the preprint (inclusive of at least the completed preprint and, as
applicable, the total payment rate analysis, the ACR demonstration and
the evaluation plan)--is not submitted before the start date specified
in the preprint, the SDP or SDP amendment will not be eligible for
approval. States must be diligent and ensure that an SDP preprint or
[[Page 41055]]
amendment is accurate and complete, as further described in CMCS
Informational Bulletin ``Medicaid and CHIP Managed Care Monitoring and
Oversight Tools'' published on November 7, 2023.\80\ Please note that
the required documentation to satisfy Sec. 438.6(c)(2)(viii) does not
include the Medicaid managed care contract amendment or rate amendment
that accounts for the SDP; the timeframes for submission of contracts
and rates that account for SDPs are addressed in section I.B.2.k. and
section I.B.2.m. of this final rule.
---------------------------------------------------------------------------
\80\ https://www.medicaid.gov/sites/default/files/2023-11/cib11072023.pdf.
---------------------------------------------------------------------------
Comment: A few commenters either opposed instituting a ``hard''
deadline for submission or recommended a provision be added to provide
CMS and States additional flexibility to adjust timeframes if
determined necessary for the benefit of the Medicaid program and its
recipients at CMS's discretion.
Response: We respectfully disagree with commenters. As stated in
the preamble of the proposed rule and in our responses to other
comments, we believe it is critical to ensure timely processing of
contracts and rates, provide transparency for plans and interested
parties, align more with the prospective nature of managed care and
ensure more timely payment for providers. In addition, this new
requirement for when SDP preprints or amendments to preprints must be
submitted to CMS for approval before the SDP starts will provide an
opportunity to protect program integrity by assuring that the scope and
terms of SDPs are described and documented for evaluation against the
regulatory requirements before payments under the SDP begin. As noted
in the earlier response, if the required documentation--meaning a
complete SDP preprint or complete amendment to the preprint (inclusive
of at least the completed preprint, the total payment rate analysis,
the ACR demonstration and the evaluation plan as applicable) is not
submitted before the start date specified in the preprint, the SDP or
SDP amendment will not be eligible for approval. We also believe that
the submission deadline we are finalizing will provide flexibility to
allow States to respond to quickly changing conditions for the benefit
of their Medicaid enrollees and programs by tying the submission of the
required documentation to before the SDP begins, rather than the
beginning or end of the relevant rating period.
Comment: One commenter encouraged CMS to consider an equivalent 90-
day timeframe for CMS's review and approval of preprint submissions.
Response: We are committed to working with States to review SDP
preprints as expeditiously as possible and encourage States to request
technical assistance, particularly for new or complicated proposals, as
early as possible before formally submitting preprints. We reiterate
that we encourage States to submit preprints as far as possible in
advance of the SDP start date to facilitate timely processing of
preprints, contracts, and rate certifications.
Comment: One commenter suggested that CMS encourage States to work
with their managed care plan partners and share SDP preprints after
they are submitted to CMS to facilitate managed care plans' timely and
accurate implementation of the SDP.
Response: We agree that while CMS is not requiring States to share
SDP preprints with their managed care plans after submission, close
collaboration between States and their plans and actuaries facilitates
timely and accurate implementation of SDPs. In February 2023, we
started publicly posting SDP approvals on Medicaid.gov to facilitate
transparency. We encourage States to consider collaborating with both
their managed care plans and other partners early in the SDP process.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing Sec.
438.6(c)(2)(viii) to specify that States must complete and submit all
required documentation for all SDPs and associated amendments for which
written approval is required before the specified start date and are
not finalizing paragraphs Sec. 438.6(c)(2)(viii)(A) through (C) and
paragraph (ix).
f. Standard for Total Payment Rates for Each SDP, Establishment of
Payment Rate Limitations for Certain SDPs, and Expenditure Limit for
All SDPs (Sec. Sec. 438.6(c)(2)(ii)(I), 438.6(c)(2)(iii))
Standard for Total Payment Rates for Each SDP. Section
1903(m)(2)(A)(iii) of the Act requires contracts between States and
managed care plans that provide for payments under a risk-based
contract for services and associated administrative costs to be
actuarially sound. Under section 1902(a)(4) of the Act, CMS also has
authority to establish methods of administration for Medicaid that are
necessary for the proper and efficient operation of the State plan.
Under CMS regulations and interpretations of section 1903(m)(2)(A)(iii)
of the Act, actuarially sound capitation rates are projected to provide
for all reasonable, appropriate, and attainable costs that are required
under the terms of the contract and for the operation of the managed
care plan for the period and the population covered under the terms of
the contract. In risk-based managed care, managed care plans have the
responsibility to manage the financial risk of the contract, and one of
the primary tools plans use is negotiating payment rates with
providers. Absent Federal statutory or regulatory requirements or
specific State contractual restrictions, the specific payment rates and
conditions for payment between risk-bearing managed care plans and
their network providers are subject to negotiations between the plans
and providers, as well as overall private market conditions. As long as
plans are meeting the requirements for ensuring access to care and
network adequacy, States typically provide managed care plans latitude
to develop a network of providers to ensure appropriate access to
covered services under the contract for their enrollees and fulfill all
of their contractual obligations while managing the financial risk.
As noted earlier, both the volume of SDP preprints being submitted
by States for approval and the total dollars flowing through SDPs have
grown steadily and quickly since Sec. 438.6(c) was issued in the 2016
final rule. MACPAC reported that CMS approved SDP arrangements in 37
States, with spending exceeding more than $25 billion in 2020.\81\ Our
internal analysis of all SDPs approved from when Sec. 438.6(c) was
issued in the 2016 final rule through the end of fiscal year 2022,
provides that the total spending approved for each SDP for the most
recent rating period for States is nearly $52 billion annually \82\
with at least half of that spending representing payments that States
are requiring be paid in
[[Page 41056]]
addition to negotiated rates.\83\ This $52 billion figure is an
estimate of annual spending. As SDP spending continues to increase, we
believed it is appropriate to apply additional regulatory requirements
for the totality of provider payment rates under SDPs to ensure proper
fiscal and programmatic oversight in Medicaid managed care programs,
and we proposed several related regulatory changes as well as exploring
other potential payment rate and expenditure limits.
---------------------------------------------------------------------------
\81\ Medicaid and CHIP Payment and Access Commission, ``Report
to Congress on Medicaid and CHIP,'' June 2022, available at https://www.macpac.gov/wp-content/uploads/2022/06/MACPAC_June2022-WEB-Full-Booklet_FINAL-508-1.pdf.
\82\ This data point is an estimate and reflective of the most
recent approval for all unique payment arrangements that have been
approved through the end of fiscal year 2022, under CMS's standard
review process. Rating periods differ by State; some States operate
their managed care programs on a calendar year basis while others
operate on a State fiscal year basis, which most commonly is July to
June. The most recent rating period for which the SDP was approved
as of the end of fiscal year 2022 also varies based on the review
process reflective of States submitting proposals later than
recommended (close to or at the end of the rating period), delays in
State responses to questions, and/or reviews taking longer due to
complicated policy concerns (for example, financing).
\83\ As part of the revised preprint form, States are requested
to identify if the payment arrangement requires plans to pay an
amount in addition to negotiated rates versus limiting or replacing
negotiated rates. Approximately half of the total dollars identified
for the SDP actions included were identified by States for payment
arrangements that required plans to pay an amount in addition to the
rates negotiated between the plan and provider(s) rates.
---------------------------------------------------------------------------
As noted in the 2016 final rule, section 1903(m)(2)(A)(iii) of the
Act requires that contracts between States and Medicaid managed care
organizations for coverage of benefits use prepaid payments to the
entity that are actuarially sound. By regulation based on section
1902(a)(4) of the Act, CMS extended the requirement for actuarially
sound capitation rates to PIHPs and PAHPs. The regulations addressing
actuarially sound capitation rates are at Sec. Sec. 438.4 through
438.7.
Federal requirements at Sec. 438.6(c)(2) specify that SDPs must be
developed in accordance with Sec. 438.4, the standards specified in
Sec. 438.5 and generally accepted actuarial principles and practices.
Under the definition in Sec. 438.4, actuarially sound capitation rates
are ``projected to provide for all reasonable, appropriate, and
attainable costs that are required under the terms of the contract and
for the operation of the MCO, PIHP, or PAHP for the time period and the
population covered under the terms of the contract . . .'' Consistent
with this definition in Sec. 438.4, we noted in the State Medicaid
Director Letter #21-001 published on January 8, 2021 that CMS requires
States to demonstrate that SDPs result in provider payment rates that
are reasonable, appropriate, and attainable as part of the preprint
review process. We proposed to codify this standard regarding the
provider payment rates for each SDP more clearly in the regulation. As
part of the proposed revisions in Sec. 438.6(c)(2)(ii) to specify the
standards that each SDP must meet, we proposed a new standard at Sec.
438.6(c)(2)(ii)(I) to codify our current policy that each SDP ensure
that the total payment rate for each service, and each provider class
included in the SDP must be reasonable, appropriate, and attainable
and, upon request from CMS, the State must provide documentation
demonstrating the total payment rate for each service and provider
class. We proposed in Sec. 438.6(a) to define ``total payment rate''
as the aggregate for each managed care program of: (1) the average
payment rate paid by all MCOs, PIHPs, or PAHPs to all providers
included in the specified provider class for each service identified in
the SDP; (2) the effect of the SDP on the average rate paid to
providers included in the specified provider class for the same service
for which the State is seeking written prior approval; (3) the effect
of any and all other SDPs on the average rate paid to providers
included in the specified provider class for the same service for which
the State is seeking written prior approval; and (4) the effect of any
and all allowable pass-through payments, as defined in Sec. 438.6(a),
paid to any and all providers in the provider class specified in the
SDP for which the State is seeking written prior approval on the
average rate paid to providers in the specified provider class. We
noted that while the total payment rate described above is collected
for each SDP, the information provided for each SDP must account for
the effects of all payments from the managed care plan (for example,
other SDPs or pass-through payments) to any providers included in the
provider class specified by the State for the same rating period. We
assess if the total payment level across all SDPs in a managed care
program is reasonable, appropriate, and attainable.
We noted that Sec. 438.6(c)(1)(iii)(A) describes an SDP that sets
a minimum fee schedule using Medicaid State plan approved rates for a
particular service. As finalized in section I.B.2.c. of this final
rule, Sec. 438.6(c)(1)(iii)(B) describes an SDP that sets a minimum
fee schedule using 100 percent of the total published Medicare payment
rate that was in effect no more than 3 years prior to the start of the
applicable rating period for a particular service. An SDP that sets a
minimum fee schedule using Medicaid State plan approved rates for a
particular service does not currently require prior written approval by
CMS per Sec. 438.6(c)(2)(ii), and we proposed in Sec. 438.6(c)(2)(i)
to not require written prior approval for an SDP that sets a minimum
fee schedule using 100 percent of the total published Medicare payment
rate. We also believe that both of these specific payment rates will be
(and therefore meet the requirement that) reasonable, appropriate, and
attainable because CMS has reviewed and determined these payment rates
to be appropriate under the applicable statute and implementing
regulations for Medicaid and Medicare respectively. However, for other
SDP arrangements, additional analysis and consideration is necessary to
ensure that the payment rates directed by the State meet the standard
of reasonable, appropriate, and attainable.
The proposed standard at Sec. 438.6(c)(2)(ii)(I) also included a
requirement that upon request from CMS, the State must provide
documentation demonstrating the total payment rate for each service and
provider class. While we did not propose to require States to provide
documentation in a specified format to demonstrate that the total
payment rate is reasonable, appropriate, and attainable for all
services (see section I.B.2.f. for documentation requirements for some
SDPs), we intend to continue requesting information from all States for
all SDPs documenting the different components of the total payment rate
using a standardized measure (for example, Medicaid State plan approved
rates or Medicare) for each service and each class included in the SDP.
We formalized this process in the revised preprint form \84\ published
in January 2021, and described it in the accompanying SMDL. We noted in
the proposed rule that we will continue to review and monitor all
payment rate information submitted by States for all SDPs as part of
our oversight activities and to ensure managed care payments to
providers under SDPs are reasonable, appropriate, and attainable. Based
on our ongoing monitoring of payment rates, we may issue guidance
further detailing documentation requirements and a specified format to
demonstrate that the total payment rate is reasonable, appropriate, and
attainable for all services. We solicited comments on our proposed
changes.
---------------------------------------------------------------------------
\84\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
---------------------------------------------------------------------------
Establishment of Payment Rate Limitations for Certain SDPs. Some
entities, including MACPAC \85\ and GAO,\86\ have released reports
focused on SDPs. Both noted concerns about the growth of SDPs and lack
of a regulatory payment ceiling on the amounts paid to providers under
an SDP. Our proposed standard at Sec. 438.6(c)(2)(ii)(I) will codify
our current practice of determining whether the total payment rate is
[[Page 41057]]
reasonable, appropriate, and attainable for each SDP. However, neither
in our guidance nor in our proposed regulatory requirement at Sec.
438.6(c)(2)(ii)(I) have we defined the terms ``reasonable, appropriate,
and attainable'' as they are used for SDPs. To address this, we
proposed several regulatory standards to establish when the total
payment rates for certain SDPs are reasonable, appropriate, and
attainable. We proposed to adopt at Sec. 438.6(c)(2)(iii) both
specific standards and the documentation requirements necessary for
ensuring compliance with the specific standards for the types of SDPs
described in paragraphs (c)(1)(i), (ii), and (iii)(C) through (E) where
the SDP is for one or more of the following types of services:
inpatient hospital services, outpatient hospital services, nursing
facility services, and qualified practitioner services at an academic
medical center.
---------------------------------------------------------------------------
\85\ https://www.macpac.gov/publication/june-2022-report-to-congress-on-medicaid-and-chip/ June 2022 Report to Congress on
Medicaid and CHIP, Chapter 2.
\86\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
---------------------------------------------------------------------------
To explain and provide context for proposed new paragraph
(c)(2)(iii), we discussed the historical use of the average commercial
rate (ACR) benchmark for SDPs, the proposed payment limit for inpatient
hospital services, outpatient hospital services, qualified practitioner
services at academic medical centers and nursing facility services
(including proposed definitions for these types of services) and some
alternatives considered, the proposed requirement for States to
demonstrate the ACR, and the proposed requirements for States to
demonstrate compliance with the ACR and total payment rate comparison
requirement. We have included further sub-headers to help guide the
reader through this section.
1. Historical Use of the Average Commercial Rate Benchmark for SDPs
In late 2017, we received an SDP preprint to raise inpatient
hospital payment rates broadly that would result in a total payment
rate that exceeded 100 percent of Medicare rates in that State, but the
payments would remain below the ACR for that service and provider class
in that State. We had concerns about whether the payment rates were
still reasonable, appropriate, and attainable for purposes of CMS
approval of the SDP as being consistent with the existing regulatory
requirement that all SDPs must be developed in accordance with Sec.
438.4, the standards specified in Sec. 438.5, and generally accepted
actuarial principles and practices. We realized that approving an SDP
that exceeded 100 percent of Medicare rates would be precedent-setting
for CMS. We explored using an internal total payment rate benchmark
that could be applied uniformly across all SDPs to evaluate preprints
for approval and to ensure that payment is reasonable, appropriate, and
attainable.
Medicare is a significant payer in the health insurance market and
Medicare payment is a standardized benchmark used in the industry.
Medicare payment is also a benchmark used in Medicaid FFS, including
the Upper Payment Limits (UPLs) that apply to classes of institutional
providers, such as inpatient and outpatient hospitals, clinics, nursing
facilities, and intermediate care facilities for individuals with
intellectual disabilities (ICFs/IID), that are based on a reasonable
estimate of the amount that Medicare would pay for the Medicaid
services. The UPLs apply an aggregate payment ceiling based on an
estimate of how much Medicare would have paid in total for the Medicaid
services as a mechanism for determining economy and efficiency of
payment for State plan services while allowing for facility-specific
payments.\87\ Generally for inpatient and outpatient services, these
UPL requirements apply to three classes of facilities based on
ownership status: State-owned, non-State government-owned, and private.
Hospitals within a class can be paid different amounts and facility-
specific total payment rates can vary, sometimes widely, so long as in
the aggregate, the total amount that Medicaid paid across the class is
no more than what Medicare would have paid to those providers for those
services. When considering the Medicaid FFS UPL methodologies, we had
some concerns that applying the same standards for the total payment
rate under SDPs to three classes based on ownership status, would not
be appropriate for implementing the SDP requirements.
---------------------------------------------------------------------------
\87\ The Upper Payment Limit regulations for FFS Medicaid are
Sec. Sec. 447.272 (inpatient hospital services), 447.321
(outpatient hospital services) and 447.325 (other inpatient and
outpatient facility services).
---------------------------------------------------------------------------
Currently, Sec. 438.6(c)(2)(ii)(B) (which requires SDPs to direct
expenditures equally, and using the same terms of performance, for a
class of providers providing the service under the managed care
contract) provides States with broader flexibility than what is
required for FFS UPLs in defining the provider class for which States
can implement SDPs. This flexibility has proven important for States to
target their efforts to achieve their stated policy goals tied to their
managed care quality strategy. For example, CMS has approved SDPs where
States proposed and implemented SDPs that applied to provider classes
defined by criteria such as participation in State health information
systems. In other SDPs, the eligible provider class was established by
participation in learning collaboratives which were focused on health
equity or social determinants of health. In both cases, the provider
class under the SDP was developed irrespective of the facility's
ownership status. These provider classes can be significantly wider or
narrower than the provider class definitions used for Medicaid UPL
demonstrations in Medicaid FFS. Therefore, the provider classes in some
approved SDPs did not align with the classes used in Medicaid FFS UPL
demonstrations, which are only based on ownership or operation status
(that is, State government-owned or operated, non-State government-
owned or operated, and privately-owned and operated facilities) and
include all payments made to all facilities that fit in those
ownership-defined classes. Not all providers providing a particular
service in Medicaid managed care programs must be included in an SDP.
Under Sec. 438.6(c)(2)(ii)(B), States are required to direct
expenditures equally, using the same terms of performance, for a class
of providers furnishing services under the contract; however, they are
not required to direct expenditures equally using the same terms of
performance for all providers providing services under the contract.
Without alignment across provider classes, CMS could have faced
challenges in applying a similar standard of the Medicaid FFS UPL to
each provider class that the State specified in the SDP irrespective of
how each provider class that the State specified in the SDP compared to
the ownership-defined classes used in the Medicaid FFS UPL. Given the
diversity in provider classes States have proposed and implemented
under SDPs approved by CMS at the time (and subsequently), combined
with the fact that not all providers of a service under the contract
are necessarily subject to the SDP, CMS had concerns that applying the
Medicaid FFS UPL to each provider class under the SDP could have
resulted in situations in managed care where provider payments under
SDPs would not align with Medicaid FFS policy. In some instances,
payments to particular facilities could potentially be significantly
higher than allowed in Medicaid FFS, and in others, facility-specific
payments could potentially be significantly lower than allowed in
Medicaid FFS.
We note that States have been approved to make Medicaid FFS
supplemental payments up to the ACR
[[Page 41058]]
for qualified practitioners affiliated with and furnishing services
(for example, physicians under the physician services benefit) in
academic medical centers, physician practices, and safety net
hospitals.\88\ CMS had previously approved SDPs that resulted in total
payment rates up to the ACR for the same providers that States had
approved State plan authority to make supplemental payments up to the
ACR in Medicaid FFS. Additionally, while CMS does not review the
provider payment rate assumptions for all services underlying Medicaid
managed care rate development, we had recently approved Medicaid
managed care contracts in one State where plans are paid capitation
rates developed assuming the use of commercial rates paid to providers
for all services covered in the contract.
---------------------------------------------------------------------------
\88\ CMS has approved Medicaid State plan amendments authorizing
such targeted Medicaid supplemental payment methodologies for
qualified practitioner services up to the average commercial rate
under 1902(a)(30)(A) of the Act. Additional information on this and
other payment demonstrations is published on Medicaid.gov at https://www.medicaid.gov/medicaid/financial-management/payment-limit-demonstrations/index.html. Instructions specific to qualified
practitioner services ACR are further described in the following
instructions: https://www.medicaid.gov/medicaid/downloads/upl-
instructions-qualified-practitioner-services-replacement-
new.pdf#:~:text=CMS%20has%20approved%20SPAs%20that%20use%20the%20foll
owing,payments%20or%20an%20alternate%20fee%20schedule%20is%20used.
As practitioner payments are not subject to Medicaid UPL
requirements under 42 CFR part 447 subparts C and F, the ACR is a
mechanism by which CMS can review Medicaid practitioner supplemental
payments compared to average commercial market rates where private
insurance companies have an interest in setting reasonable,
competitive rates in a manner that may give assurance that such
rates are economic and efficient, consistent with section
1902(a)(30)(A) of the Act.
---------------------------------------------------------------------------
For these reasons, in 2018, CMS ultimately interpreted the current
Sec. 438.6(c)(2)(i) (which we proposed to re-designate as Sec.
438.6(c)(2)(ii)(I) and (J) along with revisions to better reflect our
interpretation) to allow total payment rates in an SDP up to the ACR.
The statutory and regulatory requirements for the UPL in Medicaid FFS
do not apply to risk-based managed care plans; therefore, permitting
States to direct MCOs, PIHPs, or PAHPs to make payments higher than the
UPL does not violate any current Medicaid managed care statutory or
regulatory requirements. We adopted ACR as the standard benchmark for
all SDPs. This standard benchmark for all SDPs applied ACR more broadly
(that is, across more services and provider types) than allowed under
Medicaid FFS, due to the Medicare payment-based UPLs applicable in FFS.
Our rationale in 2018 for doing so was that using the ACR allowed
States more discretion than the Medicaid FFS UPL because it allows
States to ensure that Medicaid managed care enrollees have access to
care that is comparable to access for the broader general public. Also,
we believe using the ACR presented the least disruption for States as
they were transitioning existing, and often long-standing, pass-through
payments \89\ into SDPs, while at the same time providing a ceiling for
SDPs to protect against the potential of SDPs threatening States'
ability to comply with our interpretation of current Sec.
438.6(c)(2)(i) that total provider payment rates resulting from SDPs be
reasonable, appropriate, and attainable. Finally, using the ACR
provided some parity with Medicaid FFS payment policy for payments for
qualified practitioners affiliated with and furnishing services at
academic medical centers, physician practices, and safety net hospitals
where CMS has approved rates up to the ACR.\90\
---------------------------------------------------------------------------
\89\ Pass-through payments are defined in Sec. 438.6(a) as,
``any amount required by the State to be added to the contracted
payment rates, and considered in calculating the actuarially sound
capitation rate between the MCO, PIHP, or PAHP and hospitals,
physicians, or nursing facilities that is not for a specific service
or benefit provided to a specific enrollee covered under the
contract, a provider payment methodology permitted under Sec.
438.6(c), a sub-capitated payment arrangement for a specific set of
services and enrollees covered under the contract; GME payments; or
FQHC or RHC wrap around payments.''
\90\ CMS has approved Medicaid State plan amendments authorizing
such targeted Medicaid supplemental payment methodologies for
qualified practitioner services up to the average commercial rate
under 1902(a)(30)(A) of the Act. Additional information on this and
other payment demonstrations is published on Medicaid.gov.
Instructions specific to qualified practitioner services ACR are
further described in the following instructions: https://
www.medicaid.gov/medicaid/downloads/upl-instructions-qualified-
practitioner-services-replacement-
new.pdf#:~:text=CMS%20has%20approved%20SPAs%20that%20use%20the%20foll
owing,payments%20or%20an%20alternate%20fee%20schedule%20is%20used.
As practitioner payments are not subject to Medicaid UPL
requirements under 42 CFR part 447 subparts C and F, the ACR is a
mechanism by which CMS can review Medicaid practitioner supplemental
payments compared to average commercial market rates where private
insurance companies have an interest in setting reasonable,
competitive rates in a manner that may give assurance that such
rates are economic and efficient, consistent with section
1902(a)(30)(A) of the Act.
---------------------------------------------------------------------------
Since 2018, we have used the ACR as a benchmark for total payment
rates for all SDP reviews. Under this policy, States have had to
document the total payment rate specific to each service type included
in the SDP and specific to each provider class identified. For example,
if an SDP provided a uniform increase for inpatient and outpatient
hospital services with two provider classes (rural hospitals and non-
rural hospitals), the State is required to provide an analysis of the
total payment rate (average base rate paid by plans, the effect of the
SDP, the effect of any other approved SDP(s), and the effect of any
permissible pass-through payments) using a standardized measure (for
example, Medicaid State plan approved rates or Medicare) for each
service and each class included in the SDP. In the example above, the
State is required to demonstrate the total payment rates for inpatient
services for rural hospitals, inpatient services for non-rural
hospitals, outpatient services for rural hospitals and outpatient
services for non-rural hospitals separately. We formalized this process
in the revised preprint form \91\ published in January 2021, and
described it in the accompanying SMDL. While CMS has collected this
information for each SDP submitted for written prior approval, we
historically requested the impact not only of the SDP under review, but
any other payments required by the State to be made by the managed care
plan (for example, other SDPs or pass-through payments) to any
providers included in the provider class specified by the State for the
same rating period.
---------------------------------------------------------------------------
\91\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
---------------------------------------------------------------------------
When a State has not demonstrated that the total payment rate for
each service and provider class included in each SDP arrangement is at
or below either the Medicare or Medicaid FFS rate (when Medicare does
not cover the service), CMS has requested documentation from the State
to demonstrate that the total payment rates that exceed the Medicare or
the Medicaid FFS rate do not exceed the ACR for the service and
provider class. CMS has worked with States to collect documentation on
the total payment rate, which has evolved over time. CMS has not
knowingly approved an SDP where the total payment rate, inclusive of
all payments made by the plan to all of the providers included in the
provider class for the same rating period, was projected to exceed the
ACR.
2. Proposed Payment Rate Limit for Inpatient Hospital Services,
Outpatient Hospital Services, Qualified Practitioner Services at
Academic Medical Centers, and Nursing Facility Services
While CMS has not knowingly approved an SDP that included payment
rates that are projected to exceed the ACR, States are increasingly
submitting preprints that will push total payment rates up to the ACR.
Therefore, we
[[Page 41059]]
proposed to move away from the use of an internal benchmark to a
regulatory limit on the total payment rate, using the ACR for inpatient
hospital services, outpatient hospital services, qualified practitioner
services at an academic medical center, and nursing facility services.
We also considered other potential options for this limit on total
payment rate for these four services.
CMS believes that using the ACR as a limit is appropriate as it is
generally consistent with the need for managed care plans to compete
with commercial plans for providers to participate in their networks to
furnish comparable access to care for inpatient hospital services,
outpatient hospital services, qualified practitioner services at an
academic medical center and nursing facility services.
While Medicaid is a substantial payer for these services, it is not
the most common payer for inpatient hospital, outpatient hospital and
qualified practitioner services at an academic medical center. Looking
at the National Health Expenditures data for 2020, private health
insurance paid for 32 percent of hospital expenditures, followed by
Medicare (25 percent) and Medicaid (17 percent). There is a similar
breakdown for physician and clinical expenditures--private health
insurance pays for 37 percent of physician and clinical expenditures,
followed by Medicare (24 percent) and Medicaid (11 percent).\92\ For
these three services, commercial payers typically pay the highest
rates, followed by Medicare, followed by
Medicaid.93 94 95 96
---------------------------------------------------------------------------
\92\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData.
\93\ Congressional Budget Office, ``The Prices That Commercial
Health Insurers and Medicare Pay for Hospitals' and Physicians'
Services,'' January 2022, available at https://www.cbo.gov/system/files/2022-01/57422-medical-prices.pdf.
\94\ E. Lopez, T. Neumann, ``How Much More Than Medicare Do
Private Insurers Pay? A Review of the Literature,'' Kaiser Family
Foundation, April 15, 2022, available at https://www.kff.org/medicare/issue-brief/how-much-more-than-medicare-do-private-insurers-pay-a-review-of-the-literature/.
\95\ Medicaid and CHIP Payment and Access Commission, ``Medicaid
Hospital Payment: A Comparison across States and to Medicare,''
April 2017, available at https://www.macpac.gov/wp-content/uploads/2017/04/Medicaid-Hospital-Payment-A-Comparison-across-States-and-to-Medicare.pdf.
\96\ C. Mann, A. Striar, ``How Differences in Medicaid,
Medicare, and Commercial Health Insurance Payment Rates Impact
Access, Health Equity, and Cost,'' The Commonwealth Fund, August 17,
2022, available at https://www.commonwealthfund.org/blog/2022/how-differences-medicaid-medicare-and-commercial-health-insurance-payment-rates-impact.
---------------------------------------------------------------------------
Based on both CMS's experience with SDPs for inpatient hospital
services, outpatient hospital services and qualified practitioner
services at an academic medical center as well as data from the
National Health Expenditure survey and other external studies examining
payment rates across Medicaid, Medicare and the commercial markets, we
believe that for these three services, the ACR payment rate limit will
likely be reasonable, appropriate, and attainable while allowing States
the flexibility to further State policy objectives through
implementation of SDPs.
We also believe that this proposed ACR payment rate limit aligns
with the SDP actions submitted to CMS. Based on our internal data
collected from our review of SDPs, the most common services for which
States seek to raise total payment rates up to the ACR are qualified
practitioner services at academic medical centers, inpatient hospital
services, and outpatient hospital services. Looking at approvals since
2017 through March 2022, we have approved 145 preprint actions that
were expected to yield SDPs equal to the ACR: 33 percent of these
payments are for professional services at academic medical centers; 18
percent of these payments are for inpatient hospital services; 17
percent of these payments are for outpatient hospital services; 2
percent are for nursing facilities. Altogether, this means that at
least two thirds of the SDP submissions intended to raise total payment
rates up to the ACR were for these four provider classes. While States
are pursuing SDPs for other types of services, very few States are
pursuing SDPs that increase total payment rates up to the ACR for those
other categories or types of covered services.
While there have not been as many SDP submissions to bring nursing
facilities up to a total payment rate near the ACR, there have been a
few that have resulted in notable payment increases to nursing
facilities. In the same internal analysis referenced above, 2 percent
of the preprints approved that were expected to yield SDPs equal to the
ACR were for nursing facilities. There have also been concerns raised
as part of published audit findings about a particular nursing facility
SDP.\97\ Therefore, we proposed to include these four services--
inpatient hospital services, outpatient hospital services, qualified
practitioner services at an academic medical center, and nursing
facility services--in Sec. 438.6(c)(2)(iii) and limit the total
payment rate for each of these four services to ACR for any SDP
arrangements described in paragraphs (c)(1)(i) through (iii), excluding
(c)(1)(iii)(A) and (B), that are for any of these four services. States
directing MCO, PIHP or PAHP expenditures in such a manner that results
in a total payment rate above the ACR for any of these four types of
services will not be approvable under our proposal. Such arrangements
will violate the standard proposed in Sec. 438.6(c)(2)(ii)(I) that
total payment rates be reasonable, appropriate, and attainable and the
standard proposed in Sec. 438.6(c)(2)(iii) codifying specific payment
level limits for certain types of SDPs. We noted that while the total
payment rate is collected for each SDP, the information provided for
each SDP must account for the effects of all payments from the managed
care plan (for example, other SDPs or pass-through payments) to any
providers included in the provider class specified by the State for the
same rating period. The proposed total payment limit will apply across
all SDPs in a managed care program; States will not be able to, for
example, create multiple SDPs that applied, in part or in whole, to the
same provider classes and be projected to exceed the ACR. These
proposals are based on our authority to interpret and implement section
1903(m)(2)(A)(iii) of the Act, which requires contracts between States
and MCOs to provide payment under a risk-based contract for services
and associated administrative costs that are actuarially sound and in
order to apply these requirements to PIHPs and PAHPs as well as MCOs,
we rely on our authority under section 1902(a)(4) of the Act to
establish methods of administration for Medicaid that are necessary for
the proper and efficient operation of the State plan.
---------------------------------------------------------------------------
\97\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
---------------------------------------------------------------------------
For some services where Medicaid is the most common or only payer
(such as HCBS,\98\ mental health services,\99\ substance use disorder
services,\100\ and
[[Page 41060]]
obstetrics and gynecology services 101 102), interested
parties have raised concerns about a number of issues surrounding these
services, including quality and access to care. For some of these
services States have found it difficult to determine the appropriate
payment rate to allow them to further their overall Medicaid program
goals and objectives. For example, one State shared data from its
internal analysis of the landscape of behavioral health reimbursement
in the State that showed Medicaid managed care reimbursement for
behavioral health services is higher than commercial reimbursement.
Further, a study \103\ authorized through Oregon's Legislature outlined
several disparities in behavioral health payment, including a concern
that within the commercial market, behavioral health providers often
receive higher payment rates when furnishing services to out-of-network
patients, potentially reducing incentives for these providers to join
Medicaid managed care or commercial health plan networks.
---------------------------------------------------------------------------
\98\ The National Health Expenditures data for 2020 who that
Medicaid is the primary payer for other health, residential and
personal care expenditures, paying for 58 percent of such
expenditures where private insurance only paid for 7 percent of such
services. For home health care expenditures, Medicare paid for 34
percent of such services, followed by Medicaid at 32 percent
followed by private insurance (13 percent.) https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData.
\99\ https://www.medicaid.gov/medicaid/benefits/behavioral-health-services/index.html.
\100\ https://www.kff.org/medicaid/issue-brief/medicaids-role-in-financing-behavioral-health-services-for-low-income-individuals/.
\101\ https://www.acog.org/advocacy/policy-priorities/medicaid.
\102\ https://www.kff.org/womens-health-policy/issue-brief/medicaid-coverage-for-women/.
\103\ J. Zhu, et al., ``Behavioral Health Workforce Report to
the Oregon Health Authority and State Legislature,'' February 1,
2022, available at https://www.oregon.gov/oha/ERD/SiteAssets/Pages/Government-Relations/Behavioral%20Health%20Workforce%20Wage%20Study%20Report-Final%20020122.pdf.
---------------------------------------------------------------------------
We acknowledged that some States have had difficulty with providing
payment rate analyses that compare a particular payment rate to the
ACR, including for services other than inpatient hospital services,
outpatient hospital services, nursing facility services, or qualified
practitioner services at academic medical centers. For example, based
on our experience, some States have found it difficult to obtain data
on commercial rates paid for HCBS. States have stated that commercial
markets do not generally offer HCBS, making the availability of
commercial rates for such services scarce or nonexistent. This same
concern has been raised for other services, such as behavioral health
and substance use disorder services, among others, where Medicaid is
the most common payer and commercial markets do not typically provide
similar levels of coverage.
Therefore, we did not propose at this time to establish in Sec.
438.6(c)(2)(iii) payment rate ceilings for each SDP for services other
than inpatient hospital services, outpatient hospital services, nursing
facility services, or qualified practitioner services at academic
medical centers that States include in SDPs. While SDPs for all other
services will still need to meet the proposed standard at Sec.
438.6(c)(2)(ii)(I) that the total payment rate for each SDP (meaning
the payment rate to providers) is reasonable, appropriate, and
attainable, we noted that we believe further research is needed before
codifying a specific payment rate limit for these services. We will
continue to review and monitor all payment rate information submitted
by States for all SDPs as part of our oversight activities and to
ensure managed care payments are reasonable, appropriate, and
attainable. Depending on our future experience, we may revisit this
issue as necessary.
For clarity and consistency in applying these proposed new payment
limits, we proposed to define several terms in Sec. 438.6(a),
including a definition for ``inpatient hospital services'' that will be
the same as specified at 42 CFR 440.10, ``outpatient hospital
services'' that will be the same as specified in Sec. 440.20(a) and
``nursing facility services'' that will be the same as specified at
Sec. 440.40(a). Relying on existing regulatory definitions will
prevent confusion and provide consistency across Medicaid delivery
systems.
We also proposed definitions in Sec. 438.6(a) for both ``academic
medical center'' and ``qualified practitioner services at an academic
medical center'' to clearly articulate which SDP arrangements will be
limited based on the proposed payment rate. We proposed to define
``academic medical center'' as a facility that includes a health
professional school with an affiliated teaching hospital. We proposed
to define ``qualified practitioner services at an academic medical
center'' as professional services provided by physicians and non-
physician practitioners affiliated with or employed by an academic
medical center.
We did not propose to establish a payment rate ceiling for
qualified practitioners that are not affiliated with or employed by an
academic medical center. We have not seen a comparable volume or size
of SDP preprints for provider types not affiliated with hospitals or
academic medical centers, and we believe establishing a payment ceiling
will likely be burdensome on States and could inhibit States from
pursuing SDPs for providers such as primary care physicians and mental
health providers; we sought comment on this issue. Depending on our
future experience, we may revisit this policy choice in the future but
until then, qualified practitioner services furnished at other
locations or settings will be subject to the general standard we
currently use that is proposed to be codified at Sec.
438.6(c)(2)(ii)(I) that total payment rates for each service and
provider class included in the SDP must be reasonable, appropriate, and
attainable.
In the proposed rule, we noted our position that establishing a
total payment rate limit of the ACR for these four services
appropriately balances the need for additional fiscal guardrails while
providing States flexibility in pursuing provider payment initiatives
and delivery system reform efforts that further advance access to care
and enhance quality of care in Medicaid managed care. In our view,
utilizing the ACR in a managed care delivery system is appropriate and
acknowledges the market dynamics at play to ensure that managed care
plans can build provider networks that are comparable to the provider
networks in commercial health insurance and ensure access to care for
managed care enrollees. However, as we monitor implementation of this
SDP policy, in future rulemaking we may consider establishing
additional criteria for approval of SDPs at the ACR, such as meeting
minimum thresholds for payment rates for primary care and behavioral
health, to ensure the State and its managed care plans are providing
quality care to Medicaid and CHIP enrollees and to support State
efforts to further their overall program goals and objectives, such as
improving access to care. These additional criteria could incorporate a
transition period to mitigate any disruption to provider payment
levels.
Codifying a payment rate limit of ACR for these four service types
may incent States and interested parties to implement additional
payment arrangements that raise total payment rates up to the ACR for
other reasons beyond advancing access to care and enhancing quality of
care in Medicaid managed care. Most SDPs that increase total payment
rates up to the average commercial rate are primarily funded by either
provider taxes, IGTs, or a combination of these two sources of the non-
Federal share. These SDPs represent some of the largest SDPs in terms
of total dollars that are required to be paid in addition to base
managed care rates. We are concerned about incentivizing States to
raise total payment rates up to the ACR based on the source of the non-
Federal share, rather than based on furthering goals and objectives
outlined in the State's managed care quality strategy. To mitigate this
concern, which is shared
[[Page 41061]]
not only by CMS but oversight bodies and interested parties such as
MACPAC,\104\ we proposed additional regulatory changes related to
financing the non-Federal share; see section I.B.2.g. of the proposed
rule and section I.B.2.g. of this final rule for further information.
---------------------------------------------------------------------------
\104\ MACPAC's report noted, ``The largest directed payment
arrangements are typically targeted to hospitals and financed by
them. Of the 35 directed payment arrangements projected to increase
payments to providers by more than $100 million a year, 30 were
targeted to hospital systems and at least 27 were financed by
provider taxes or IGTs. During our interviews, interested parties
noted that the amount of available IGTs or provider taxes often
determined the total amount of spending for these types of
arrangements. Once this available pool of funding was determined,
States then worked backward to calculate the percentage increase in
provider rates. Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
---------------------------------------------------------------------------
In light of these concerns, the proposed rule described several
alternatives to the ACR as a total payment rate limit for inpatient
hospital services, outpatient hospital services, nursing facility
services, and qualified practitioner services at an academic medical
center for each SDP. One alternative discussed was establishing the
total payment rate limit at the Medicare rate; this is a standardized
benchmark used in the industry and is often a standard utilized in
Medicaid FFS under UPL demonstrations in 42 CFR part 447. The Medicare
rate is also not based on proprietary commercial payment data, and the
payment data could be verified and audited more easily than the ACR. A
total payment rate limit at the Medicare rate may limit the growth in
payment rates more than limiting the total payment rate to the ACR. We
also considered, and solicited feedback on, establishing a total
payment rate limit for all services, not limited to just these four
services, for all SDP arrangements described in Sec. 438.6(c)(1)(i),
(ii), and (iii)(C) through (E) at the Medicare rate in the final rule.
We invited public comments on these alternatives.
We also noted our concerns about whether Medicare is an appropriate
payment rate limit for managed care payments given the concerns and
limitations we noted earlier in the ``Historical Use of the Average
Commercial Rate Benchmark for SDPs'' section in section I.B.2.f. of the
proposed rule, such as provider class limitations. Additionally,
Medicare payment rates are developed for a population that differs from
the Medicaid population. For example, Medicaid covers substantially
more pregnant women and children than Medicare. Although Medicaid FFS
UPLs are calculated as a reasonable estimate of what Medicare would pay
for Medicaid services and account for population differences across the
programs, it can be a challenging exercise to do so accurately.
Therefore, we sought public comment to further evaluate if Medicare
will be a reasonable limit for the total provider rate for the four
types of services delivered through managed care that we proposed, all
services, and/or additional types of services. Beneficiaries enrolled
in a Medicaid managed care plan are often more aligned with individuals
in commercial health insurance (such as, adults and kids), whereas the
Medicaid FFS population is generally more aligned with the Medicare
population (older adults and individuals with complex health care
needs). To acknowledge the challenges in calculating the differences
between the Medicaid and Medicare programs, we solicited feedback on
whether the total payment rate limit for each SDP for these four
services should be set at some level between Medicare and the ACR, or a
Medicare equivalent of the ACR in the final rule. We invited public
comments on these alternatives.
In considering these potential alternatives, we solicited comment
on whether robust quality goals and objectives should be a factor in
setting a total payment rate limit for each SDP for these four types of
services. Specifically, we described including a provision permitting a
total payment rate limit for any SDP arrangements described in
paragraphs (c)(1)(i) and (ii) that are for any of these four services
at the ACR, while limiting the total payment rate for any SDP
arrangements described in Sec. 438.6(c)(1)(iii)(C) through (E), at the
Medicare rate. As we noted earlier, one of the benefits of establishing
a total payment rate limit of the ACR for these four services is State
flexibility in pursuing provider payment initiatives and delivery
system reform efforts that further advance access to care and enhance
quality of care in Medicaid managed care. One alternative we considered
in the proposed rule was an additional fiscal guardrail compared to our
proposal by limiting the total payment rate for these four services to
ACR for value-based initiatives only and further limiting the total
payment rate for these four services to the Medicare rate for fee
schedule arrangements (for example, uniform increases, minimum or
maximum fee schedules). This alternative would account for the
importance of robust quality outcomes and innovative payment models and
could incentivize States to consider quality-based payment models that
can better improve health outcomes for Medicaid managed care enrollees
while limiting higher payment rates used when quality outcomes or
quality driven payment models are not being used. We invited public
comments on whether this potential alternative should be included in
the final rule.
We acknowledged that some States currently have SDPs that have
total payment rates up to the ACR and that these alternative proposals
could be more restrictive. Under the alternative proposals, States
could need to reduce funding from current levels, which could have a
negative impact on access to care and other health equity initiatives.
We also sought public comment on whether CMS should consider a
transition period in order to mitigate any disruption to provider
payment levels if we adopt one of the alternatives for a total payment
rate limit on SDP expenditures in the final rule.
We sought public comment on our proposal to establish a payment
rate limit for SDP arrangements at the ACR for inpatient hospital
services, outpatient hospital services, qualified practitioner services
at an academic medical center and nursing facility services.
Additionally, we solicited public comment on the alternatives we
considered for a payment rate limit at the Medicare rate, a level
between Medicare and the ACR, or a Medicare equivalent of the ACR for
these four service types. We also solicited public comment on whether
the final rule should include a provision establishing a total payment
rate limit for any SDP arrangements described in paragraphs (c)(1)(i)
and (ii) that are for any of these four services, at the ACR, while
limiting the total payment rate for any SDP arrangements described in
paragraph Sec. 438.6(c)(1)(iii)(C) through (E), at the Medicare rate.
3. Average Commercial Rate Demonstration Requirements
To ensure compliance with the proposed provision that the total
payment rate for SDPs that require written prior approval from CMS for
inpatient hospital services, outpatient hospital services, qualified
practitioner services at an academic medical centers and nursing
facility services do not exceed the ACR for the applicable services
subject to the SDP, CMS will need certain information and documentation
from the State. Therefore, we proposed in
[[Page 41062]]
Sec. 438.6(c)(2)(iii) that States provide two pieces of documentation:
(1) an ACR demonstration (which will document the average commercial
rate using data in alignment with the requirements we are finalizing at
Sec. 438.6(c)(2)(iii)(A)); and (2) a total payment rate comparison to
the ACR at Sec. 438.6(c)(2)(iii)(B). We proposed the timing for these
submissions in Sec. 438.6(c)(2)(iii)(C). Under our proposal, the ACR
demonstration would be submitted with the initial preprint submission
(new, renewal, or amendment) following the applicability date of this
section and then updated at least every 3 years, so long as the State
continues to include the SDP in one or more managed care contracts. The
total payment rate comparison to the ACR would be submitted with the
preprint as part of the request for approval of each SDP and updated
with each subsequent preprint submission (each amendment and renewal).
At Sec. 438.6(c)(2)(iii)(A), we proposed to specify the
requirements for demonstration of the ACR if a State seeks written
prior approval for an SDP that includes inpatient hospital services,
outpatient hospital services, qualified practitioner services at an
academic medical center or nursing facility services. This
demonstration must use payment data that: (1) is specific to the State;
(2) is no older than the 3 most recent and complete years prior to the
start of the rating period of the initial request following the
applicability date of this section; (3) is specific to the service(s)
addressed by the SDP; (4) includes the total reimbursement by the third
party payer and any patient liability, such as cost sharing and
deductibles; (5) excludes payments to FQHCs, RHCs and any non-
commercial payers such as Medicare; and (6) excludes any payment data
for services or codes that the applicable Medicaid managed care plans
do not cover under the contracts with the State that will include the
SDP. We considered QHPs operating in the Marketplaces to be commercial
payers for purposes of this proposed provision, and therefore, payment
data from QHPs should be included when available.
At Sec. 438.6(c)(2)(iii)(A)(1), States would be required to use
payment data specific to the State for the analysis, as opposed to
regional or national analyses, to provide more accurate information for
assessment. Given the wide variation in payment for the same service
from State to State, regional or national analyses could be misleading,
particularly when determining the impact on capitation rates that are
State-specific. Additionally, each State's Medicaid program offers
different benefits and has different availability of providers. We
currently request payment rate analyses for SDPs to be done at a State
level for this reason and believe it will be important and appropriate
to continue to do so.
At Sec. 438.6(c)(2)(iii)(A)(2), we proposed to require States to
use data that is no older than the 3 most recent and complete years
prior to the start of the rating period of the initial request
following the applicability date of this section. This will ensure that
the data are reflective of the current managed care payments and market
trends. It also aligns with rate development standards outlined in
Sec. 438.5. For example, for the ACR demonstration for an SDP seeking
written prior approval for inpatient hospital services, outpatient
hospital services, qualified practitioner services at an academic
medical center or nursing facility services for a CY 2025 rating
period, the data used must be from calendar year 2021 and later. We
used a calendar year for illustrative purpose only; States must use
their rating period timeframe for their analysis.
We proposed at Sec. 438.6(c)(2)(iii)(A)(3) to require States to
use data that is specific to the service type(s) included in the SDP,
which would be a change from current operational practice. In provider
payment rate analyses for SDPs currently, States are required to
compare the total payment rate for each service and provider class to
the corresponding service and provider class specific ACR. For example,
States requiring their managed care plans to implement SDPs for
inpatient hospital services for three classes of providers--rural
hospitals, urban hospitals, and other hospitals--will have to produce
payment rate analyses specific to inpatient hospital services in rural
hospitals, inpatient hospital services in urban hospitals, and
inpatient hospital services in other hospitals separately. Under our
current operational practice, if the total payment rate for any of
these three provider classes exceeds Medicare payment rates, CMS
requests the State provide documentation demonstrating that the total
payment rate does not exceed the ACR specific to both that service and
that provider class. As noted later in this same section, we proposed
in Sec. 438.6(c)(2)(iii)(B), to continue to require States to produce
the total payment rate comparison to the ACR at a service and provider
class level. However, our proposal to codify a requirement for an ACR
demonstration includes changes to our approach to determining the ACR
and would require States to submit the ACR demonstration, irrespective
of if the total payment rate were at or below the Medicare rate or
State plan rate for all preprints seeking written prior approval for
the four services.
During our reviews of SDP preprints since the 2016 final rule, it
has become clear that requiring an ACR analysis that is specific both
to the service and provider class can have deleterious effects when
States want to target Medicaid resources to those providers serving
higher volumes of Medicaid beneficiaries. For example, we have often
heard from States that rural hospitals commonly earn a larger share of
their revenue from the Medicaid program than they do from commercial
payers. There is also evidence that rural hospitals tend to be less
profitable than urban hospitals and at a greater risk of closure.\105\
These hospitals often serve a critical role in providing access to
services for Medicaid beneficiaries living in rural areas where
alternatives to care are very limited or non-existent. If States want
to target funding to increase reimbursement for hospital services to
rural hospitals, limiting the ceiling for such payments to the ACR for
rural hospitals only will result in a lower ceiling than if the State
were to broaden the category to include hospitals with a higher
commercial payer mix (for example, payment data for hospital services
provided at a specialty cardiac hospital, which typically can negotiate
a higher rate with commercial plans). However, in doing so, the
existing regulatory requirement for SDPs at Sec. 438.6(c)(2)(ii)(B)
required that the providers in a provider class be treated the same--
meaning they get the same uniform increase. In some cases, this has
resulted in States not being able to use Medicaid funds to target
hospitals that provide critical services to the Medicaid population,
but instead using some of those Medicaid funds to provide increases to
hospitals that serve a lower share of Medicaid beneficiaries.
---------------------------------------------------------------------------
\105\ MACPAC Issue Brief, ``Medicaid and Rural Health.''
Published April 2021 https://www.macpac.gov/wp-content/uploads/2021/04/Medicaid-and-Rural-Health.pdf.
---------------------------------------------------------------------------
In another example to demonstrate the potential effects of
requiring an ACR analysis that is specific to both the service and
provider class level, a State could seek to implement an SDP that will
provide different increases for different classes of hospitals (for
example, rural and urban public hospitals will receive a higher
percentage increase than teaching hospitals and short-term acute care
hospitals). The SDP preprint could
[[Page 41063]]
provide for separate additional increases for hospitals serving a
higher percentage of the Medicaid population and certain specialty
services and capabilities. However, if the average base rate that the
State's Medicaid managed care plans paid was already above the ACR paid
for services to one of the classes (for example, rural hospitals), the
State could not apply the same increases to this class as it will the
other classes, even if the average base rate paid for the one class was
below the ACR when calculated across all hospitals. In this example,
the State will be left with the option of either eliminating the one
class (for example, rural hospitals) from the payment arrangement or
withdrawing the entire SDP proposed preprint even if the State still
had significant concerns about access to care as it related to the one
class (for example, rural hospitals). The focus on the ACR for the
service at the provider class level has the potential to disadvantage
providers with less market power, such as rural hospitals or safety net
hospitals, which typically receive larger portions of their payments
from Medicaid than from commercial payers. These providers typically
are not able to negotiate rates with commercial payers on par with
providers with more market power.
To provide States the flexibility they need to design SDPs to
direct resources as they deem necessary to meet their programmatic
goals, we proposed to require an ACR demonstration using payment data
specific to the service type (that is, by the specific type of
service). This will allow States to provide an ACR analysis at just the
service level instead of at the service and provider class level. For
example, States could establish a tiered fee schedule or series of
uniform increases, directing a higher payment rate to facilities that
provide a higher share of services to Medicaid enrollees than to the
payment rate to facilities that serve a lower share of services to
Medicaid enrollees. States will still have a limit of the ACR, but
allowing this to be measured at the service level and not at the
service and provider class level will provide States flexibility to
target funds to those providers that serve more Medicaid beneficiaries.
Based on our experience, facilities that serve a higher share of
Medicaid enrollees, such as rural hospitals and safety net hospitals,
tend to have less market power to negotiate higher rates with
commercial plans. Allowing States to direct plans to pay providers
using a tiered payment rate structure based on different criteria, such
as the hospital's payer mix, without limiting the total payment rate to
the ACR specific to each tier (which will be considered a separate
provider class), but rather at the broader service level will provide
States with tools to further the goal of parity with commercial
payments, which may have a positive impact on access to care and the
quality of care delivered. Under this proposal, we would still permit
States to elect to provide a demonstration of the ACR at both the
service and provider class level or just at the service level if the
State chooses to provide the more detailed and extensive analysis, but
this level of analysis would no longer be required. We reminded States
that the statutory requirements in sections 1902(a)(2), 1903(a),
1903(w), and 1905(b) of the Act concerning the non-Federal share
contribution and financing requirements, including those implemented in
42 CFR part 433, subpart B concerning health care-related taxes, bona
fide provider related donations, and IGTs, apply to all Medicaid
expenditures regardless of delivery system (FFS or managed care).
At Sec. 438.6(c)(2)(iii)(B), we proposed to specify the
requirements for the comparison of the total payment rate for the
services included in the SDP to the ACR for those services if a State
seeks written prior approval for an SDP that includes inpatient
hospital services, outpatient hospital services, qualified practitioner
services at an academic medical center or nursing facility services.
Under this proposal, the comparison must: (1) be specific to each
managed care program that the SDP applies to; (2) be specific to each
provider class to which the SDP applies; (3) be projected for the
rating period for which written prior approval of the SDP is sought;
(4) use payment data that is specific to each service included in the
SDP; and (5) include a description of each of the components of the
total payment rate as defined in Sec. 438.6(a) as a percentage of the
average commercial rate, demonstrated pursuant to Sec.
438.6(c)(2)(iii)(A), for each of the four categories of services (that
is, inpatient hospital services, outpatient hospital services, nursing
facility services or qualified practitioner services at an academic
medical center) included in the SDP submitted to CMS for review and
approval.
The proposed comparison of the total payment rate to the ACR would
align with current practice with one exception. We proposed to codify
that the total payment rate comparison will be specific to each
Medicaid managed care program to which the SDP under review will apply.
Evaluating payment at the managed care program level will be consistent
with the payment analysis described in section I.B.1.d. of this final
rule. The total payment rate comparison proposed at Sec.
438.6(c)(iii)(B) will be a more detailed analysis than is currently
requested from States for SDP reviews. Under our proposal, these more
detailed total payment rate comparisons would also have to be updated
and submitted with each initial preprint, amendment and renewal per
proposed Sec. 438.6(c)(2)(iii)(C). In addition, we proposed that the
total payment rate comparison to ACR must be specific to both the
service and the provider class; this is current practice today but
differs from our proposal for the ACR demonstration, which is proposed
to be service specific only.
We have proposed a set of standards and practices States would be
required to follow in conducting their ACR analysis. However, we did
not propose to require that States use a specific source of data for
the ACR analysis. Further, at this time, we did not propose to require
States to use a specific template or format for the ACR analysis. In
our experience working with States on conducting the analysis of the
ACR, the availability of data differs by State and service. States are
familiar with the process used for conducting a code-level analysis of
the ACR for the qualified practitioner services at academic medical
centers for Medicaid FFS.\106\ Some States have continued to use this
same process for documenting the ACR for SDPs as well, particularly
when there is a limited number of providers from which to collect such
data (for example, academic medical centers). However, code-level data
analysis to determine the ACR has proven more challenging for other
services, particularly when that service is provided by large numbers
of providers. For example, the number of hospitals furnishing inpatient
services in a given State can be hundreds of providers.
---------------------------------------------------------------------------
\106\ https://www.medicaid.gov/medicaid/financial-management/payment-limit-demonstrations/index.html.
---------------------------------------------------------------------------
Data for inpatient and outpatient hospital service payment rates
tend to be more readily available in both Medicare and the commercial
markets. States with SDPs for hospital services have provided analyses
using hospital cost reports and all-payer claims databases. Others have
relied on actuaries and outside consultants, which may have access to
private commercial databases, to produce an ACR analysis. At times,
States have purchased access to private commercial databases to conduct
these analyses. We believe each of these approaches,
[[Page 41064]]
provided the data used for the analyses meet the proposed requirements
in Sec. 438.6(c)(2)(iii), will be acceptable to meet our proposed
requirements.
4. Average Commercial Rate Demonstration and Total Payment Rate
Comparison Compliance
We proposed at Sec. 438.6(c)(2)(iii)(C) to require States to
submit the ACR demonstration and the total payment rate comparison for
review as part of the documentation necessary for written prior
approval for payment arrangements, initial submissions or renewals,
starting with the first rating period beginning on or after the
effective date of this rule. The total payment rate comparison will
need to be updated with each subsequent preprint amendment and renewal.
In recognition of the additional State resources required to
conduct an ACR analysis, we proposed to require that States update the
ACR demonstration once every 3 years as long as the State continues to
seek to include the SDP in the MCO, PIHP, or PAHP contract. This time
period aligns with existing policy for ACR demonstrations for qualified
practitioners in Medicaid FFS programs; specifically, those that
demonstrate payment at the Medicare equivalent of the ACR.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
Expenditure Limit for SDPs. The increasing use of SDPs by States
has been cited as a key area of oversight risk for CMS. Several
oversight bodies and interested parties, including MACPAC, Office of
Inspector General (OIG), and GAO, have authored reports focused on CMS
oversight of SDPs.107 108 109 Both GAO and MACPAC have noted
concerns about the growth of SDPs in terms of spending as well as
fiscal oversight. Additionally, as States' use of SDPs in managed care
programs continues to grow, some interested parties have raised
concerns that the risk-based nature of capitation rates for managed
care plans has diminished. Medicaid managed care plans generally have
the responsibility under risk-based contracts to negotiate with their
providers to set payment rates, except when a State believes the use of
an SDP is a necessary tool to support the State's Medicaid program
goals and objectives. In a risk contract, as defined in Sec. 438.2, a
managed care plan assumes risk for the cost of the services covered
under the contract and incurs loss if the cost of furnishing the
services exceeds the payments under the contract. States' use of SDPs
and the portion of total costs for each managed care program varies
widely and, in some cases, are a substantial portion of total program
costs on an aggregate, rate cell, or category of service basis in a
given managed care program or by managed care plan. For example, in one
State, one SDP accounted for nine percent of the total projected
capitation rates in a given managed care program, and as much as 43
percent of the capitation rates by rate cell for SFY 2023. In another
State, SDPs accounted for over 50 percent of the projected Medicaid
managed care hospital benefit component of the capitation rates in CY
2022. In a third State, the amount of SDP payments as a percentage of
the capitation rates were between 12.5 percent and 40.3 percent by
managed care plan and rate cell for SFY 2022. Some interested parties
have raised concerns that such percentages are not reasonable in rate
setting, and that States are potentially using SDP arrangements to
circumvent Medicaid FFS UPLs by explicitly shifting costs from Medicaid
FFS to managed care contracts.
---------------------------------------------------------------------------
\107\ Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
\108\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
\109\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
---------------------------------------------------------------------------
In the proposed rule, CMS considered and invited comment on
potentially imposing a limit on the amount of SDP expenditures in the
final rule based on comments received. Specifically, we sought public
comment on whether we should adopt a limit on SDP expenditures in the
final rule.
We summarize and respond to public comments received on our
proposals regarding the standard for total payment rates for each SDP,
the establishment of payment rate limitations for certain SDPs, and the
expenditure limit for all SDPs (Sec. 438.6(c)(2)(ii)(I),
438.6(c)(2)(iii)) below.
Standard for Total Payment Rates for Each SDP (Sec. Sec. 438.6(a),
438.6(c)(2)(ii)(I))
Comment: Some commenters supported the proposal at Sec.
438.6(c)(2)(ii)(I) that each SDP must ensure that the total payment
rate for each service and provider class included in the SDP must be
reasonable, appropriate, and attainable but recommended that the
standards of ``reasonable, appropriate, and attainable'' be further
defined to avoid confusion between States, managed care plans and CMS.
One commenter noted that the use of ``reasonable, appropriate, and
attainable'' is understood as it relates to capitation rate
development, but not in assessing provider rates, providers' costs, or
the level of rates that will incentivize providers to accept a Medicaid
contract in a given region. We did not receive any comments on the
definition of ``total payment rate'' proposed in Sec. 438.6(a).
Response: We appreciate commenters support for our proposal at
Sec. 438.6(c)(2)(ii)(I) to require that all SDPs must ensure that the
total payment rate for each service and provider class included in the
SDP must be reasonable, appropriate, and attainable; and upon CMS
request, the State must provide documentation demonstrating the total
payment rate for each service and provider class (or, depending on the
timing, a projection of the total payment rate for the SDP). We believe
that monitoring the total payment rate for all SDPs is important for
proper monitoring and oversight, and finalizing this provision codifies
an existing standard in the SMDL published on January 8, 2021. We are
finalizing the proposed definition of the term ``total payment rate.''
When the total payment rate analysis and documentation are to be
submitted with the SDP preprint, it will largely be a projected amount,
based on projections of the payments and effects of those payments
under the SDP. Therefore, when we are referring specifically to
projected amounts, we occasionally use the term ``projected total
payment rate'' or something similar. We use the term consistent with
the definition throughout this discussion.
In reviewing all SDPs, CMS may request that States provide
additional information to assess whether payments to providers are
reasonable, appropriate, and attainable. Information specific to each
SDP and State Medicaid delivery system may be used and taken into
account to assess whether and when that standard is not met for SDPs
that are not subject to the more specific standards that we discuss in
the section below entitled ``Establishment of Total Payment Rate
Limitation for Certain SDPs'' in section I.B.2.f. of this final rule
(Sec. Sec. 438.6(a), 438.6(c)(2)(iii)). To demonstrate whether total
payment rates for such services are reasonable, appropriate, and
attainable, States could provide an actuarial analysis, use similar
Medicaid FFS State plan
[[Page 41065]]
services as a comparative benchmark for provider payment analysis or,
provide another methodologically sound analysis deemed acceptable by
CMS. As finalized in this rule, Sec. 438.6(c)(2)(ii)(I) requires
States to provide documentation demonstrating compliance with this
requirement upon CMS request for all SDPs. We will continue to review
and monitor all projected payment rate information submitted by States
for all SDPs as part of our oversight activities, including but not
limited to ensuring compliance with the requirement (finalized in this
rule at Sec. 438.6(c)(2)(ii)(I)) that SDP total payment rates are
reasonable, appropriate, and attainable. Further, we clarify here that
although we are only finalizing the total payment rate limit at ACR for
four provider types and services at Sec. 438.6(c)(2)(iii), in practice
we intend to use ACR as the fiscal benchmark by which we will evaluate
whether all SDP total payment rates are reasonable, appropriate, and
attainable.
We are finalizing the definition of ``Total payment rate'' at Sec.
438.6(a) as proposed. We are also finalizing Sec. 438.6(c)(2)(ii)(I)
with minor revisions. First, we are replacing ``must be'' with ``is''
so that subparagraph (I) is consistent with the introductory paragraph
in Sec. 438.6(c)(2)(ii) to require that each SDP must ensure the total
payment rate standard. Second, we are adding a comma after
``appropriate'' and before the ``and'' for consistency with the
requirement at Sec. 438.4(a), and to acknowledge that ``reasonable,
appropriate, and attainable'' are distinct components for the
assessment of the total payment rate. Finally, we are adding a
semicolon after ``attainable'' and removing ``and,'' to ensure a
consistent format throughout Sec. 438.6(c)(2)(ii).
Comment: One commenter suggested that CMS revise Sec.
438.6(c)(2)(ii)(I) to require that the total payment rate by provider
type rather than for each service and provider class (for example, all
hospitals together rather than by provider class) be reasonable,
appropriate, and attainable in recognition that some provider classes
may be disadvantaged in negotiating higher rates with commercial payers
(88 FR 28125-28124).
Response: We appreciate the commenter's suggestion to revise Sec.
438.6(c)(2)(ii)(I) in the final rule. However, given that States have
significant flexibility in designing the provider classes eligible for
SDPs and that providers can furnish more than one type of service (that
is, clinics can provide primary care services and mental health
services), we believe it is appropriate to finalize the provision as
proposed with minor grammatical and punctuation edits described in the
prior response. We reiterate here that we will continue to review and
monitor all total payment rates information submitted by States for all
SDPs as part of our oversight activities, including but not limited to
ensuring compliance with the requirement (finalized in this rule at
Sec. 438.6(c)(2)(ii)(I)) that total payment rates are reasonable,
appropriate, and attainable.
Comment: Some commenters requested clarification on the State
documentation requirement demonstrating the total payment rate by
service and provider class specified in Sec. 438.6(c)(2)(ii)(I). One
commenter requested that CMS allow a comparison by service category
rather than per specific CPT code to avoid administrative burden and
provide appropriate transparency and flexibility to balance the
interest of all provider classes. One commenter also suggested that
this documentation could be a comparison to contiguous or regional
State's Medicaid rates when services do not have a Medicaid State plan
rate or a Medicare rate, and this commenter noted that this was
frequently relied upon by States as they utilize providers that are
located on a State's borders or region. Another commentor requested
that CMS clarify if States could use an empirical analysis, such as a
provider rate study, as sufficient documentation demonstrating the
total payment rate for each service and provider class.
Response: In the proposed rule (88 FR 28126), we did not propose to
require States to provide documentation in a specified format to
demonstrate that the total payment rate is reasonable, appropriate, and
attainable for all services using a standardized measure. We do not
believe or anticipate that we would request a State to conduct and
provide a total payment rate analysis at the CPT code level when
exercising our authority under Sec. 438.6(c)(2)(ii)(I) to request
documentation demonstrating the total payment rate for each service and
provider class. Frequently, States complete total payment rate analyses
at the service category level as part of our current SDP review process
and it is not our intention for Sec. 438.6(c)(2)(ii)(I) to prohibit
this practice. States could choose to conduct this analysis at the CPT
code level. For example, some States conduct the total payment rate
analysis at the CPT code level if they design their SDPs to focus only
on specific CPT codes.
We appreciate the suggestion by commenters that we consider a
comparison to contiguous or regional State's Medicaid rates when
services do not have a Medicaid State plan rate or a Medicare rate.
This issue has not come up very often in SDP reviews, but when it has,
it is usually in reference to HCBS delivered in a MLTSS program. In
these cases, the States did not provide the services in an FFS delivery
system so there was not a comparison point available for the analysis
in Medicaid FFS. While we would encourage States to use data that is
State specific, Sec. 438.6(c)(2)(ii)(I) (unlike Sec.
428.6(c)(2)(iii)) does not require use of State-specific data. If a
State does not utilize State specific data, we recommend that the State
provide a rationale in its analysis to reduce questions from CMS during
our review.
While we provided examples of standardized measures that have
commonly been used in total payment rate analyses such as the Medicaid
State plan approved rates or the total published Medicare payment rate,
we did not specify that States must use a specific standardized
measure. We may issue additional guidance further detailing
documentation requirements and a specified format based on our ongoing
monitoring and oversight.
Comment: One commenter supported the standards proposed at Sec.
438.6(c)(2)(ii)(I) but recommended CMS go further and revise the
proposal to require all States provide documentation demonstrating the
total payment rate for each service and provider class under Sec.
438.6(c)(2)(ii)(I), not just at CMS's request, and require that this
documentation be available publicly to increase transparency.
Response: We appreciate the commenter's suggestion to expand the
documentation requirements included in Sec. 438.6(c)(2)(ii)(I), as
finalized. We support increased transparency in States' use of SDPs and
with this same aim in mind, we began publishing approved SDP packages
starting in February 2023. These approval packages include the final
SDP preprint form which includes the analysis of the total payment
rate. We additionally noted in the proposed rule (88 FR 28126) that we
intend to continue requesting information from all States for all SDPs
documenting the different components of the total payment rate as
described earlier in section I.B.2.f. of this final rule using a
standardized measure (for example, Medicaid State plan approved rates
or Medicare) for each service and each class included in the SDP. We
formalized this process in the revised
[[Page 41066]]
preprint form \110\ published in January 2021, and described it in the
accompanying SMDL. We reiterate here that we will continue to review
and monitor all projected payment rate information submitted by States
for all SDPs as part of our oversight activities, including but not
limited to ensuring compliance with the requirement (finalized in this
rule at Sec. 438.6(c)(2)(ii)(I)) that the total payment rate for each
service and provider class in an SDP be reasonable, appropriate, and
attainable.
---------------------------------------------------------------------------
\110\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
---------------------------------------------------------------------------
After reviewing public comments, we are finalizing the definition
of ``Total payment rate'' at Sec. 438.6(a) and the standard for the
provider payment rate applicable to all SDPs at Sec.
438.6(c)(2)(ii)(I) with revisions as described in the above section.
Establishment of Total Payment Rate Limitation for Certain SDPs
(Sec. Sec. 438.6(a), 438.6(c)(2)(iii))
Comment: Many commenters supported finalizing a total payment rate
limit that may not exceed the ACR as proposed at Sec. 438.6(c)(2)(iii)
for inpatient hospital services, outpatient hospital services, nursing
facility services, or qualified practitioner services at an academic
medical center. These commenters believe ACR is a reasonable threshold
that allows managed care plans to compete with commercial plans for
providers to participate in their networks to furnish comparable access
to services. Other commenters provided support for this proposal as
they believe it is consistent with the goal of equity in payment across
delivery systems. Some of the commenters that supported this proposal
stated that if accurately calculated, ACR would generally represent an
approximation of fair market value for the services provided and would
function as an appropriate fiscal guardrail to ensure that individual
program spending is reasonable, appropriate, and attainable.
Some commenters stated significant concerns with finalizing a total
payment rate limit lower than ACR on any SDP, not just the four
services proposed in Sec. 438.6(c)(2)(iii), as they believe a total
payment rate limit lower than ACR would be financially destabilizing,
would have damaging ramifications on healthcare providers that would
affect their ability to provide services to Medicaid patients,
potentially threatening the viability of some providers, and this in
turn would have devastating consequences on access to and quality of
healthcare services for Medicaid patients.
Some of these commenters opposed codifying a total payment rate
limit for certain SDPs (that is, SDPs for the four services proposed in
Sec. 438.6(c)(2)(iii)) at the Medicare rate as the commenters believe
that such a limit would not actually cover the cost of treatment due to
many unallowed charges under Medicare payment principles. Many of these
commenters noted that implementing Medicare rates as the total payment
rate limit for SDPs for these four service types would result in
significantly lower payment arrangements for providers that rely on the
SDP payments to fill Medicaid payment gaps. Many of these commenters
noted that finalizing a total payment rate limit below ACR or at the
Medicare rates for these SDPs would reduce the ability of managed care
plans to compete with commercial plans for providers to participate in
their networks and could result in a reduction of access, particularly
for States that already have SDPs at ACR.
Response: We acknowledge the concerns raised by commenters about
finalizing a total payment rate limit lower than ACR. One of the
primary goals of this rulemaking is to improve beneficiary access to
and quality of care. We believe payment policy is a critical component
in not only ensuring but improving access to and quality of care for
Medicaid beneficiaries. SDPs are an optional tool for States to use to
direct how managed care plans pay providers to further the State's
overall Medicaid program goals and objectives, including those related
to access and health equity. In establishing a total payment rate
limit, it was not our intent to restrict States' ability to effectively
use SDPs to further the State's overall Medicaid program goals and
objectives. Our goal was to balance the need for increased transparency
and fiscal integrity with the need for State flexibility to accomplish
State policy objectives, such as increasing access to care.
Our internal analysis indicates that establishing a total payment
rate limit less than the ACR could result in reductions in total
payment rates from existing total payment rate levels for some SDPs,
particularly given the number of States with approved SDPs that exceed
the Medicare rate. It is difficult to specify the impact such policies
would have for each State. States are not required to utilize SDPs and
there are separate regulatory requirements that require States that
contract with an MCO, PIHP or PAHP to deliver Medicaid services to
address network adequacy and access to care, regardless of the use of
SDPs. We reiterate that although we are only finalizing the total
payment rate limit at ACR for four service types at Sec.
438.6(c)(2)(iii), we will continue to use ACR as the fiscal benchmark,
to evaluate whether total payment rates for all SDPs are reasonable,
appropriate, and attainable.
As we monitor implementation of this SDP policy, in future
rulemaking we may consider establishing additional criteria for
approval of SDPs at the ACR, such as meeting minimum thresholds for
payment rates for primary care and behavioral health care, to ensure
the State and its managed care plans are providing quality care to
Medicaid and CHIP enrollees and to support State efforts to further
their overall program goals and objectives, such as improving access to
care. These additional criteria could incorporate a transition period
to mitigate any disruption to provider payment levels.
Comment: Some commenters recommended that CMS finalize a total
payment rate limit at the Medicare rate rather than ACR for the four
service types. These commenters noted that Medicare rates are published
yearly and available to the public, which would increase transparency
and predictability of costs and the commenters believe that using
Medicare as the threshold for a total payment rate limit is more in
alignment with the UPL for Medicaid FFS supplemental payments to
hospitals and other institutional providers. A few commenters also
supported utilizing the Medicare rate as the total payment rate limit
for SDPs for these four services for fiscal integrity reasons as they
noted concerns that SDPs increasing payments to the ACR will accelerate
hospital consolidation and create strong inflationary pressure on both
commercial hospital prices and Federal Medicaid spending.
Response: While we recognize that setting a total payment rate
limit at the Medicare rate would provide a strong fiscal guardrail for
SDPs, we also recognize that this limit could impact States' efforts to
further their overall Medicaid program goals and objectives. Under
risk-based managed care arrangements with the State, Medicaid managed
care plans have the responsibility to negotiate payment rates with
providers at levels that will ensure network adequacy. Subject to
certain exceptions, States are generally not permitted to direct the
expenditures of a Medicaid managed care plan under the contract between
the State and the plan, or to make payments to providers
[[Page 41067]]
for services covered under the contract between the State and the plan
(Sec. Sec. 438.6 and 438.60, respectively). SDPs allow States to
direct how managed care plans pay providers to further the State's
overall Medicaid program goals and objectives.
Our internal analysis indicates that instituting a total payment
rate limit at the Medicare rate may result in total payment rate
reductions compared to existing total payment rates for some SDPs,
particularly given the number of States with approved SDPs that exceed
Medicare. We reiterate that although we are only finalizing the total
payment rate limit at ACR for four service types at Sec.
438.6(c)(2)(iii), we will continue to use ACR as the fiscal benchmark
to evaluate whether total payment rates are reasonable, appropriate,
and attainable.
As finalized, Sec. 438.6(c)(2)(iii) establishes a total payment
rate limit when States choose to implement SDPs for one of the four
service types at the ACR (inpatient hospital services, outpatient
hospital services, nursing facility services, or qualified practitioner
services at an academic medical center); it does not require States to
implement SDPs that are projected to increase the total payment rate to
the ACR. We agree with the concerns raised by commenters about hospital
consolidation and inflationary pressures that SDPs can have on hospital
prices in other markets and on State and Federal spending. We encourage
States to take such factors into account when considering the
implementation and design of an SDP. States have significant
flexibility in designing the SDP, including the provider class(es) and
the type of payment arrangement. States are required to monitor the
impact of SDPs after implementation and adjust SDPs appropriately to
address any unintended consequences.
Comment: Some commenters stated concerns with our proposal at Sec.
438.6(c)(2)(iii) to require that the total payment rate projected for
each SDP for four specific services (inpatient hospital services,
outpatient hospital services, nursing facility services, or qualified
practitioner services at an academic medical center) not exceed the
ACR. They suggested that CMS consider using the ACR as a guideline for
measuring the reasonableness of SDP rates when considering whether the
managed care plans' capitation rates are reasonable, appropriate, and
attainable, which is the key standard for actuarial soundness described
at Sec. 438.4(a), rather than applying this standard as a limit on SDP
payment rates. These commenters believe this alternative would maximize
flexibility for States to address concerns with access to care. A
number of these commentors also noted that in other contexts, Medicaid
payment limits have led to retrospective audits and unanticipated
recoupments, often years after the fact; these commenters stated that
using a guideline instead of a limit would lessen the burden on
providers. Some commenters suggested that CMS not institute a total
payment rate limit for SDPs for these four service types as proposed,
but instead use the detailed data gathered as required in other
provisions in Sec. 438.6(c) of the final rule to inform policies and
address a total payment rate limit for SDPs in future rulemaking, if
warranted.
Response: As noted in the proposed rule, we have been using the ACR
as an internal benchmark in assessing SDPs since 2018. However, States
and interested parties over time as part of SDP reviews have often
stated confusion about what that internal ACR benchmark means and have
requested significant technical assistance on how to demonstrate that
the total payment rate for SDPs is reasonable, appropriate, and
attainable. Finalizing a total payment rate limit for these four
service types will provide clarity and transparency in what CMS
considers reasonable, appropriate, and attainable. We reiterate that
although we are only finalizing the total payment rate limit at ACR for
four service types at Sec. 438.6(c)(2)(iii), we will continue to use
ACR as the fiscal benchmark for all provider types and services by
which we'll evaluate whether total payment rates are reasonable,
appropriate, and attainable for all SDPs.
Further, SDPs are contractual obligations between the State and
managed care plan; as noted in proposed rule (88 FR 28144), all SDPs
must be included in all applicable managed care contract(s) and
described in all applicable rate certification(s) as noted in Sec.
438.7(b)(6). In accordance with Sec. 438.4(a), actuarially sound
capitation rates are projected to provide for all reasonable,
appropriate, and attainable costs that are required under the terms of
the contract and for the operation of the managed care plan for the
time period and the population covered under the terms of the contract,
and capitation rates are developed in accordance with the requirements
in Sec. 438.4(b). This includes the requirement in Sec. 438.4(b)(1)
that the capitation rates must be developed with generally accepted
actuarial principles and practices and the requirement in Sec.
438.4(b)(7) that the capitation rates account for any applicable
special contract provisions as specified in Sec. 438.6, including
SDPs, to ensure that all contractual arrangements are considered as the
actuary develops the actuarially sound capitation rates.
We continue to believe that it is appropriate to implement
additional regulatory requirements to ensure fiscal guardrails and
oversight of SDPs while also balancing the need to ensure States have
the flexibility to utilize SDPs as a mechanism to improve access to
care and advance health equity. As SDP spending continues to grow, we
believe there must be appropriate fiscal protections in place to ensure
that SDPs further the objectives of the Medicaid programs and that the
total payment rate under SDPs for each service and provider class do
not grow unfettered beyond what is reasonable, appropriate, and
attainable.
We reiterate that the total payment rate limit at Sec.
438.6(c)(2)(iii)--meaning the ACR limit--would apply to the total
payment rate(s) for these four service types only when a State chooses
to implement an SDP for one of these four service types. States are not
required to implement SDPs. The proposed total payment rate limit would
not apply to rates negotiated between plans and their providers in the
absence of an SDP and we note it may not be appropriate for States to
implement SDPs in instances when their plans negotiate provider payment
rates that support recruitment of robust provider networks. Further,
the regulatory text proposed by CMS at Sec. 438.6(c)(2)(iii) limits
the total payment rate for each SDP and provides an important fiscal
guardrail for these contractual obligations that would have to be
accounted for in development of capitation rates paid to managed care
plans. As part of CMS' monitoring and oversight of SDPs and review of
preprint submissions, CMS plans to use T-MSIS data (see section
I.B.2.o. of this final rule for further discussion) to assess
historical total payment rates for SDPs and could, for example, request
corrective modifications to future SDP submissions to address
discrepancies between projections of the total payment rate under the
SDP and the actual payments made to eligible providers. Future approval
of SDPs may be at risk if we identify these discrepancies.
We are finalizing Sec. 438.6(c)(2)(iii) as proposed.
Comment: A few commenters noted concerns with applying a total
payment rate limit for these four service types to VBP models, and
multi-payor or Medicaid-specific delivery system reform, or performance
improvement initiatives. These commenters noted a numeric limit was not
necessary and
[[Page 41068]]
inconsistent for these types of SDPs and that a total payment rate
limit would disincentivize the development of VBP SDPs. The commenters
noted that there does not appear to be a problem with payment levels in
these VBP SDPs identified by CMS.
Response: We appreciate commenters' concerns. We support States
increasing the use of VBP initiatives, including through SDPs in
Medicaid managed care risk-based contracts. We are finalizing in this
rule several regulatory changes to address challenges States have
identified in current regulations governing SDPs to provide easier
pathways to reasonably and appropriately adopt VBP SDPs (see section
I.B.2.i. of this final rule). However, we continue to believe that
implementing a total payment rate limit at the ACR for SDPs for these
four service types provides a necessary fiscal guardrail and a prudent
oversight mechanism to ensure program integrity of these SDPs as States
pursue new payment models. While many of the VBP SDPs that we have
reviewed to-date do not increase provider payment rates to ACR, we
believe that it is important to establish an ACR limit for the four
service types across all types of SDPs to ensure alignment and, so that
States have a clear standard for what is approvable by CMS in the
future as opposed to a changeable standard that would require repeated
rulemaking. Further, we clarify here that although we are only
finalizing the total payment rate limit at ACR for four provider types
and services at Sec. 438.6(c)(2)(iii), in practice we intend to use
ACR as the fiscal benchmark through by which we will evaluate whether
SDP total payment rates are reasonable, appropriate, and attainable.
Comment: Some commenters questioned applying the total payment rate
limit to only SDPs for the four service types outlined in the proposed
rule (for example, inpatient hospital services, outpatient hospital
services, nursing facility services and qualified practitioner services
at an academic medical center). These commenters suggested that
instituting a total payment rate limit at the ACR for just four service
types was inequitable treatment that does not have a basis in statute
nor in the best interest of Medicaid clients. The commenters noted that
hospitals, nursing facilities and academic medical centers often serve
a disproportionate number of Medicaid clients as part of their total
client care and subjecting such provider types or services to an
arbitrary payment limit is contrary to CMS's goal of ensuring access to
quality care because it indicates that CMS is willing to authorize
higher payment amounts for other service providers because they are
unaffiliated with training medical professionals for the future.
Response: We appreciate commenters' concerns. However, we disagree
with commenters' characterization. There is currently enough evidence
to support that the ACR is an appropriate total payment rate limit for
Medicaid managed care coverage of inpatient hospital services,
outpatient hospital services, qualified practitioner services at
academic medical centers and nursing facility services. As noted in the
proposed rule, private insurers are the primary payer for hospital
expenditures as well as physician and clinical expenditures. For these
three service types, commercial payers typically pay the highest rates
followed by Medicare, followed by Medicaid (88 FR 28122). This is
generally reflected in our internal review of total payment rate
analyses collected from States for inpatient hospital services,
outpatient hospital services, and professional services provided at
academic medical centers. As noted in the proposed rule (88 FR 28122),
we have also approved a few SDPs for nursing facility services that
were projected to increase total payment rates to the ACR. There have
also been some concerns raised as part of published audit findings
about a particular nursing facility SDP.\111\
---------------------------------------------------------------------------
\111\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
---------------------------------------------------------------------------
As noted in the proposed rule, further research is needed before
codifying a specific payment rate limit for other services beyond these
four service types, particularly where there is a lack of data due to
Medicaid being the primary payer in the market.
We will continue to review and monitor all payment rate information
submitted by States for all SDPs as part of our oversight activities,
including but not limited to ensuring compliance with the requirement
(finalized in this rule at Sec. 438.6(c)(2)(ii)(I)) that the total
payment rate for each service and provider class included in an SDP
must be reasonable, appropriate, and attainable. Based on our continued
review of SDPs and monitoring of payment rates, we may revisit
codifying a specific payment rate limit for other services depending on
future experience.
SDPs are a tool that States have the option to use to direct how
managed care plans pay providers to further the State's overall
Medicaid program goals and objectives. States are not required to use
SDPs; in fact, under risk-based managed care arrangements with the
State, Medicaid managed care plans have the responsibility to negotiate
payment rates with providers. Subject to certain exceptions, States are
generally not permitted to direct the expenditures of a Medicaid
managed care plan under the contract between the State and the plan or
to make payments to providers for services covered under the contract
between the State and the plan (Sec. Sec. 438.6 and 438.60,
respectively). The total payment rate limit we are finalizing at Sec.
438.6(c)(2)(iii) applies to SDPs; it is a limit on the State's ability
to direct the managed care plan's expenditures. However, as noted
earlier, although we are finalizing the total payment rate limit at ACR
for four provider types and services at Sec. 438.6(c)(2)(iii), in
practice we intend to use ACR as the fiscal benchmark by which we will
evaluate whether SDP total payment rates are reasonable, appropriate,
and attainable. The total payment rate limit does not apply outside of
the context of approved SDPs and therefore, does not apply to rates
independently negotiated between managed care plans and providers;
managed care plans will still be allowed to negotiate payment rates
with network providers to furnish covered services.
Comment: Some commenters supported applying the ACR limit to all
service types, not just those four service types proposed. Other
commenters noted that specifying an ACR limit beyond the four service
types (inpatient hospital services, outpatient hospital services,
nursing facility services and qualified practitioner services at an
academic medical center) was not necessary and that they supported
limiting the total payment rate limit to the four service types
proposed given the administrative work necessary to comply with the
documentation requirements.
Response: We appreciate commenters' feedback. As noted in an
earlier response, there is currently enough evidence to support that
the ACR is an appropriate limit for the total payment rate for SDPs for
inpatient hospital services, outpatient hospital services, qualified
practitioner services at academic medical centers and nursing facility
services.
Further research is needed before codifying a specific total
payment rate limit for other services beyond these four service types.
We will continue to review and monitor all payment rate information
submitted by States for all SDPs as part of our oversight activities,
including but not limited to ensuring
[[Page 41069]]
compliance with the requirement (finalized in this rule at Sec.
438.6(c)(2)(ii)(I)) that the total payment rate for each service and
provider class included in an SDP is reasonable, appropriate, and
attainable. Based on our continued review of SDPs and monitoring of
payment rates, we may revisit codifying a specific total payment rate
limit for other services.
Comment: Some commenters requested clarification on how CMS intends
to enforce the SDP total payment rate limit for the four service types
(inpatient hospital services, outpatient hospital services, qualified
practitioner services at academic medical centers and nursing facility
services) if actual payments made by the plans to eligible providers
exceeds the total payment rate limit.
Response: We appreciate the request for clarification. As discussed
in section I.B.2.o. of this final rule, we are requiring States to
submit to CMS no later than 1 year after each rating period, data to
the T-MSIS specifying the total dollars expended by each MCO, PIHP, and
PAHP for SDPs, including amounts paid to individual providers (Sec.
438.6(c)(4)). States are required to regularly monitor payments made by
plans to providers as part of standard monitoring and oversight,
including ensuring plans comply with the contractual requirements for
SDPs in alignment with the requirements in Sec. 438.6(c). CMS will use
the data collected from States on the actual final payment rate through
T-MSIS (discussed in section I.B.2.o. of this final rule) as part of
our monitoring and oversight; if the actual final payment rates differ
from what was projected, at minimum, we will use this information to
inform future reviews of SDPs.
Comment: Some commenters agreed with CMS's decision to not codify a
specific total payment rate limit for some services such as HCBS or
behavioral health. Commenters also supported not implementing a total
payment rate limit for physician services.
Response: We appreciate commenters' support for the proposal. As
noted in response to an earlier comment, we agree that limiting SDP
approval based on the total payment rate not exceeding the ACR is
appropriate. However, we will continue to review and monitor all
payment rate information submitted by States for all SDPs as part of
our oversight activities, including but not limited to ensuring
compliance with the requirement (finalized in this rule at Sec.
438.6(c)(2)(ii)(I)) that the total payment rate for each service and
provider class included in an SDP must be reasonable, appropriate, and
attainable.
We continue to believe that additional experience is needed before
codifying a specific limit for the total payment rate for SDPs
directing plan expenditures for services beyond the four service types
enumerated in Sec. 438.6(c)(2)(iii).
We did not propose to establish a specific, set limit for the total
payment rate for practitioners that are not affiliated with or employed
by an academic medical center; this would include physician services.
As noted in the proposed rule, we have not seen a comparable volume or
size of SDP preprints for provider types not affiliated with hospitals
or academic medical centers, and do not believe there is currently
enough evidence to support ACR as an appropriate limit on the total
payment rates for physician services. We will continue to review and
monitor all payment rate information submitted by States for all SDPs
as part of our oversight activities, including but not limited to
ensuring compliance with the requirement (finalized in this rule at
Sec. 438.6(c)(2)(ii)(I)) that the total payment rate for each service
and provider class included in an SDP must be reasonable, appropriate,
and attainable. Depending on our future experience, we may revisit this
issue as necessary.
Comment: We received a wide range of comments on establishing a
total payment rate limit at the ACR for nursing facilities. Many
commenters broadly supported establishing a total payment rate limit at
the ACR for all four service types. However, some commenters encouraged
CMS to not finalize a total payment rate limit for nursing facilities.
They noted that Medicaid, not commercial insurance, is the primary
payer for nursing facilities. These commenters also noted that Medicare
is not a reasonable benchmark for nursing facilities services since
Medicare adopted the Patient-Driven Payment Model reimbursement
methodology. Some commenters suggested that CMS consider a total
payment rate limit for nursing facilities that would be the greater of
the ACR or what Medicare would have paid to accommodate circumstances
in which a provider may serve a low volume of commercial clients and
therefore have insufficient negotiation ability. Other commenters
suggested CMS consider a benchmark, but not a total payment rate limit,
for nursing facilities based on cost as this would be State-specific
and market-based.
Response: We appreciate commenters' concerns. We acknowledge the
change in Medicare payment policy from the resource utilization groups
system to the Patient-Driven Payment Model and the implications it has
for States in determining Medicaid payment policies for SNFs.\112\ As
noted in the proposed rule, we have received SDP proposals that
increase total payment rates up to the ACR for nursing facilities. We
have also received a growing number of SDP proposals for nursing
facilities that are projected to increase the total payment rate above
the Medicare rate. There have also been concerns raised as part of
published audit findings about a particular nursing facility SDP unlike
other service category types.\113\ We believe it is important to have
oversight and monitor fiscal integrity risks for nursing facility
services and other services where Medicaid is a payer. We will continue
to review and monitor all payment rate information submitted by States
for all SDPs as part of our oversight activities, including but not
limited to ensuring compliance with the requirement (finalized in this
rule at Sec. 438.6(c)(2)(ii)(I)) that the total payment rate for each
service and provider class included in an SDP must be reasonable,
appropriate, and attainable. Depending on our future experience, we may
revisit this issue as necessary.
---------------------------------------------------------------------------
\112\ https://www.medicaid.gov/sites/default/files/2023-02/smd22005.pdf.
\113\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
---------------------------------------------------------------------------
Comment: We received many comments that supported establishing a
total payment rate limit at the ACR for qualified practitioner services
provided at an academic medical center. Some commenters stated that a
total payment rate limit at the ACR is critical because commercial
plans typically pay the highest rates for these services and academic
medical centers furnish a significant volume of services to Medicaid
beneficiaries ensuring access to care. These commenters noted that
academic medical centers are often the only source for certain
specialty and sub-specialty care.
Response: We appreciate the support for finalizing a total payment
rate limit at the ACR for qualified practitioner services provided at
an academic medical center. This will align with the long-standing
Medicaid FFS payment policy \114\ and we believe it is critical to
[[Page 41070]]
ensure continued access to services that are often not available
elsewhere.
---------------------------------------------------------------------------
\114\ CMS has approved Medicaid State plan amendments
authorizing such targeted Medicaid supplemental payment
methodologies for qualified practitioner services up to the average
commercial rate under 1902(a)(30)(A) of the Act. Additional
information on this and other payment demonstrations is published on
Medicaid.gov. Instructions specific to qualified practitioner
services ACR are further described in the following instructions:
https://www.medicaid.gov/medicaid/downloads/upl-instructions-
qualified-practitioner-services-replacement-
new.pdf#:~:text=CMS%20has%20approved%20SPAs%20that%20use%20the%20foll
owing,payments%20or%20an%20alternate%20fee%20schedule%20is%20used.
As practitioner payments are not subject to Medicaid UPL
requirements under 42 CFR part 447 subparts C and F, the ACR is a
mechanism by which CMS can review Medicaid practitioner supplemental
payments compared to average commercial market rates where private
insurance companies have an interest in setting reasonable,
competitive rates in a manner that may give assurance that such
rates are economic and efficient, consistent with section
1902(a)(30)(A) of the Act.
---------------------------------------------------------------------------
Comment: We received mixed comments on our proposed definition of
``qualified practitioner services at an academic medical center'' and
``academic medical center.'' Some commenters supported these
definitions as proposed. Other commenters raised concerns that the
proposed definitions were unclear on which types of services or
practitioners would be included and would exclude many academic medical
centers that are ``affiliated with'' but do not ``include'' a health
professional school. The commenters noted that many academic medical
centers include clinical facilities (for example, hospitals and
clinics) that have affiliations with health professionals schools, and
they are concerned that the proposed definition does not sufficiently
define ``facility.'' Another commenter suggested that CMS streamline
the definition of an academic medical center to include ``any facility
that both provides patient care and educates healthcare providers in
connection with at least one health professional school.''
Response: We appreciate commenters support on our proposed
definition of ``qualified practitioner services at an academic medical
center.'' To the comments that the definition of ``academic medical
center'' should be more inclusive and use ``affiliated with,'' we
acknowledge that the use of ``includes'' may result in some facilities
being excluded but we believe that the definition aligns with common
practices and understanding. Therefore, we are finalizing the
definition as proposed. We will continue to monitor and may revisit
this definition in future rulemaking.
Comment: One comment supported our proposed definitions of
inpatient hospital services and outpatient hospital services as
proposed in Sec. 438.6(a) and recommended that all definitions of Part
440 Subpart A be codified as applicable to Medicaid managed care more
generally to align with Medicare Advantage.
Response: We appreciate the commenter's support for our proposed
definitions of inpatient hospital services and outpatient hospital
services. As the commenter notes, the definitions proposed and
finalized in Sec. 438.6(a) for inpatient hospital services and
outpatient hospital services are specific to SDPs and are intended to
help determine which SDPs are subject to the requirements in Sec.
438.6(c)(2)(iii). We appreciate the suggestion to apply these
definitions and others more broadly than proposed; however, we did not
propose to expand the applicability of these terms in the proposed rule
and have not considered, or received public comment on, broader use of
part 440 definitions for all regulations in part 438; there may be
unintended consequences for such a wholesale approach to importing the
defined terms used in the FFS context to the managed care context given
how certain flexibilities in coverage are limited to the managed care
context (see for example, Sec. 438.3(e)). We also note that Sec.
438.206 already provides that ``all services covered under the State
plan [must be] available and accessible to enrollees of MCOs, PIHPs,
and PAHPs in a timely manner'' and that Sec. 438.210 provides that the
amount, duration and scope of coverage benefits through the managed
care plan must be no less than in the Medicaid state plan.
Comment: Some commenters suggested establishing national floors for
payment levels at the Medicare rate.
Response: States have the option to implement minimum fee schedule
requirements through SDPs provided they comply with the regulatory
requirements in Sec. 438.6(c). While we recognize the importance of
adequate payment rates to ensure access to care, we did not propose,
nor was it our intent to propose, a national minimum payment level at
the Medicare payment rate for Medicaid managed care plans.
Comment: A few commenters requested confirmation that the proposed
total payment rate limit for SDPs did not impact existing Federal
requirements related to payment for Indian Health Care Providers at the
IHS All-Inclusive Encounter Rate.
Response: In Sec. 438.6(c), it explicitly provides an exception to
the prohibition on State direction of a managed care plan's
expenditures for certain payments by stating: ``Except as specified in
this paragraph (c), in paragraph (d) of this section, in a specific
provision of Title XIX, or in another regulation implementing a Title
XIX provision related to payments to providers . . .'' Because payment
of Indian health care providers by MCOs is specified in Title XIX,
including section 1932(h) and section 1902(bb) for those that are
FQHCs, and associated implementing regulations also generally extend
those payment provisions to PIHPs and PAHPs in Sec. 438.14, the SDP
provisions in Sec. 438.6(c) do not apply to State direction of managed
care plan expenditures necessary to ensure compliance with the
applicable statutory and regulatory requirements. States are required
to ensure that Indian health care providers receive the minimum payment
rates set forth under the aforementioned statutes and implementing
regulations (such as Sec. 438.14).
Comment: Some commenters supported our proposals in Sec.
438.6(c)(2)(iii)(A) and (B) for data standards for the ACR
demonstration and the total payment rate comparison. These commenters
believe these proposals would improve fiscal integrity and ensure that
SDPs advance the objectives of the Medicaid program. Commenters also
supported the proposals outlined in Sec. 438.6(c)(2)(iii)(C) regarding
the submission process for the ACR demonstration and the total payment
rate comparison, including the requirement for these to be provided
with the initial SDP preprint and then updated at least once every 3
years thereafter. These commenters believe these proposals would allow
for State flexibility and lessen the administrative burden to implement
and report on ACR demonstrations since Sec. 438.6(c)(2)(iii) does not
require specific data sources or templates.
Response: We appreciate commenters' support for the proposed data
standards at Sec. 438.6(c)(2)(iii)(A) and (B), and the submission
process for the ACR demonstration and the total payment rate comparison
in Sec. 438.6(c)(2)(iii)(C). The total payment rate comparison
required at Sec. 438.6(c)(2)(iii)(B) must be updated and submitted
with each initial preprint, amendment, and renewal and that it must be
specific to both the service and the provider class, which differs from
the ACR demonstration requirements (specific to the service type only
and updated at least once every three years). We may publish additional
guidance on best practices for ACR demonstrations and total payment
rate demonstrations as well as a template to help facilitate CMS's
review.
Comment: Several commenters requested clarification on the data
sources that should be utilized for ACR demonstrations and total
payment rate
[[Page 41071]]
comparisons proposed in Sec. 438.6(c)(iii)(A) and (B). Some commenters
noted that commercial rate data are difficult for States to provide
absent an all-payer claims database. Other commenters noted it was
unclear if the data in the ACR demonstration and total payment rate
comparison will be collected in a way to clearly identify non-Medicaid
covered services in commercial payments or third-party liability
amounts. Commenters requested that CMS provide guidance and technical
assistance about the data sources that would be appropriate for States
to utilize for the ACR demonstrations and total payment rate
comparisons. A few commenters questioned if States should utilize
Medicare cost reports or whether CMS will make all-payer claims
databases publicly accessible to States. Other commenters requested
that CMS identify appropriate ACR sources (including any national data
sources) and methods for developing total payment rate comparisons.
Response: We appreciate the request for clarification and
additional guidance on data sources to utilize for ACR demonstrations
and total payment rate comparisons. We reiterate that we are not
requiring States to use specific data sources at this time (88 FR
28126) for the SDP submissions of the information required by Sec.
438.6(c)(2)(iii). We agree that all-payer claims databases are good
sources of data, though not all State Medicaid agencies have access to
such data. Additionally, commercial data are often proprietary and to
our knowledge, there are no publicly available data sources for
commercial data. Some States conduct a code-level analysis of the ACR
as is currently used for the qualified practitioner services at
academic medical centers supplemental payments for Medicaid FFS while
others have provided analyses using hospital cost reports. Actuaries
and consultants may have access to private commercial databases to aid
States to produce an ACR analysis or some States have purchased access
to private commercial databases to inform these analyses. Finally,
other States have required providers to provide commercial payment data
as a condition of eligibility for the SDP. We expect to publish
additional guidance in the future that highlights best practices from
States consistent with the regulatory requirements finalized in Sec.
438.6(c)(2)(iii)(A) and (B). Whatever data source the State uses will
need to comply with the standards set in Sec. 438.6(c)(2)(iii)(A) and
(B), including that data must exclude non-Medicaid covered services and
third-party liability amounts.
Comment: Many commenters supported our proposal at Sec.
438.6(c)(2)(iii)(A)(3) to allow ACR demonstrations that are specific to
the service included in the SDP and appreciated that the ACR
demonstrations are not required to be specific to both each service
type and each provider class. Commenters noted that this flexibility
would allow States to better target funding for financially vulnerable
providers, such as rural and safety net hospitals than current practice
allows for today. A few commenters disagreed with our proposal and
recommended that CMS revise the regulatory text in Sec.
438.6(c)(2)(iii)(A)(3) about what States must use to demonstrate the
ACR to ``is specific to the service(s) and provider class(es) addressed
by the State directed payment;'' to align with current practice. These
commenters noted that if a State chooses to create separate classes of
providers, then each class should be limited to the ACR for that
service and that provider class, and States should be prohibited from
relying on a cumulative ACR calculation to increase payment to some
provider classes at the expense of other provider classes. These
commenters stated that this practice undermines the equal access to
services that SDPs are intended to advance. Other commenters suggested
that CMS allow States maximum flexibility to calculate the ACR
demonstration by service, by provider class, or by geography or market
at the State's option.
Response: We appreciate the support for the proposal to allow ACR
demonstrations that are specific to the service addressed by the SDP at
Sec. 438.6(c)(iii)(A)(3). We agree that requiring the ACR
demonstration to be specific to the service addressed by the SDP but
not specific to both the service and provider class provides additional
flexibility to States to target resources to accomplish Medicaid
program goals and objectives. In the proposed rule (88 FR 28125), we
provided a lengthy discussion of our experience working with States and
how requiring an ACR analysis that is specific to both to the service
and provider class for SDPs can have deleterious effects when States
want to target Medicaid resources to those providers serving higher
volumes of Medicaid beneficiaries through SDPs. For example, we have
often heard from States that rural hospitals commonly earn a larger
share of their revenue from the Medicaid program than they do from
commercial payers, tend to be less profitable than urban hospitals
which often have a wider mix of payers, and are at a greater risk of
closure. These hospitals often serve a critical role in providing
access to services for Medicaid beneficiaries living in rural areas
where alternatives to care are very limited or non-existent. If States
want to target funding to increase managed care plan payments for
hospital services to rural hospitals through SDPs, limiting the total
payment rate limit for such payments to the ACR for rural hospitals
only would result in a lower total payment rate limit for such SDPs
than if the State were to broaden the provider class in the SDP to
include hospitals with a higher commercial payer mix (for example,
payment data for hospital services provided at a specialty cardiac
hospital, which typically can negotiate a higher rate with commercial
plans). However, in doing so, the regulatory requirement for SDPs at
Sec. 438.6(c)(2)(ii)(B) requires that SDPs direct expenditures equally
using the same terms of performance for a class of providers--meaning
the rural hospitals and the specialty cardiac hospitals in our examples
would get the same uniform increase, even though the State may not have
the same access to care concerns for Medicaid beneficiaries receiving
specialty care at cardiac hospitals.
The focus on the ACR for the service at the provider class level
has the potential to disadvantage providers with less market power to
negotiate rates with commercial payers on par with providers with more
market power. Therefore, we proposed and are finalizing the more
flexible approach.
While we understand commenters' concerns about our proposal at
Sec. 438.6(c)(2)(iii)(A)(3) to allow ACR demonstrations that are
specific to the service addressed by the SDP and not to the provider
classes, we believe that the commenter may have misunderstood the
proposal. The commenter asserts that allowing the ACR demonstrations to
be specific to the broad service type and not the individual provider
class will result in unequal treatment among provider classes. In fact,
the final rule would provide States the option to use the same ACR
analysis as the comparison point for the total payment rate comparison
(which is required to be conducted at the service and provider level)
for all classes providing the same service affected by the SDP.
Further, there is nothing in the final rule that permits SDP payments
above ACR or to favor one class of providers at the expense of another.
We remind commenters that there is no requirement that States implement
SDPs. In addition, States have broad discretion in defining
[[Page 41072]]
provider classes for SDPs. This provision (at Sec.
438.6(c)(2)(iii)(A)(3)) would also not change the existing regulatory
requirement Sec. 438.6(c)(2)(ii)(B) that SDPs direct expenditures
equally, and using the same terms of performance, for a class of
providers providing the service under the contract. We are finalizing
Sec. 438.6(c)(2)(iii)(A)(3) as proposed.
Finally, we appreciate the recommendations to allow States maximum
flexibility to use ACR and to calculate ACR by service, by provider
class, or by geography or market. States retain the discretion to use
payment data that is specific to the service(s) and provider classes in
the SDP and can also consider further specifics such as market and
geography so long as the payment data are still specific to the State.
We proposed at Sec. 438.6(c)(2)(iii)(A)(1) that States would be
required to use payment data specific to the State for the analysis as
opposed to regional or national data to provide more accurate
information for assessment. We noted that there is wide variation in
payment for the same service from State to State and that regional or
national analyses that cut across multiple States can be misleading,
particularly when determining the impact on capitation rates that are
State specific (88 FR 28125). For these reasons, we believe that
finalizing Sec. 438.6(c)(2)(iii)(A)(1) as proposed is appropriate.
We received no other comments on the remaining portions of Sec.
438.6(c)(2)(iii)(A) and are finalizing as proposed.
Comment: One commenter suggested that CMS allow Medicaid agencies
to increase the ACR level used to set the payment amounts in an SDP
between ACR demonstrations submitted to CMS, so that the State could
direct increased payments to account for inflation. While the commenter
supports only requiring States to submit an ACR demonstration every
three years in Sec. 438.6(c)(2)(iii)(C) to reduce State burden, they
noted that medical inflation trends are not static over three-year
periods (meaning, between ACR demonstration submissions). The commenter
recommended that CMS allow States to account for medical inflation
within their jurisdiction in their ACR during the three-year period
without requiring States to revise the ACR demonstration.
Response: We recognize that medical inflation may continue to
increase over the three-year period between ACR demonstrations. If
medical inflation has a notable impact during the three-year period
between demonstrations, States have the option to update the ACR
demonstration any time a preprint is submitted, and that updated ACR
demonstration is subject to CMS review as part of review of the SDP
preprint. We believe this is a reasonable approach that provides us the
ability to review such updates.
Comment: One commenter requested that CMS delay implementation of
Sec. 438.6(c)(2)(iii) for 1 year after the effective date of this
final rule. The commenter believes States will need more time than the
proposed applicability date, the first rating period after the
effective date of the final rule, provides.
Response: We appreciate the concern raised by commenters. This
requirement is largely in alignment with existing practices and should
not cause significant burden for States to implement. Therefore, we are
finalizing at Sec. 438.6(c)(8)(ii) the applicability date of the first
rating period for contracts with MCOs, PIHPs and PAHPs beginning on or
after the effective date of the final rule as proposed.
Expenditure Limit for All SDPs
Comment: Many commenters did not support the alternative options we
outlined in the proposed rule for an expenditure limit on SDPs. Some
commenters stated that any limit on SDP expenditures as a proportion of
managed care spending could be an arbitrary limit that could have
deleterious effects on enrollee access to care and impede State
flexibility to meet the goals and objectives of their managed care
program. A few commenters raised concerns that any SDP expenditure
limits could penalize States with lower base managed care expenditures
due to the relative size of the State or managed care program. Other
commenters believed that the proposed total payment rate limit at ACR
for inpatient and outpatient hospital services, nursing facilities and
professional services at academic medical centers provided a reasonable
limit on SDPs and that an additional limit on total expenditures for
SDPs was unnecessary. A few commenters recommended that CMS complete
additional studies including using future SDP evaluations to better
understand the impact of an SDP expenditure limit and assess whether an
SDP expenditure limit, either in totality or for specific provider
classes, was truly needed.
Response: We carefully considered alternative options for the SDP
expenditure limit outlined in the proposed rule. We recognize that the
alternative options for the SDP expenditure limit outlined in the
proposed rule could have unintended consequences to States' efforts to
further their overall Medicaid program goals and objectives, such as
improving access to care for Medicaid beneficiaries and reduce health
disparities through SDPs. We agree with commenters that the total
payment limit at the ACR that we are finalizing for the four specific
categories of services listed in Sec. 438.6(c)(2)(iii) is the
reasonable and appropriate policy to ensure the fiscal integrity of SDP
arrangements.
Comment: Several commenters recommended that if CMS finalizes an
expenditure limit for SDPs, existing SDPs be either exempted from the
expenditure limit or provided a transition period for States to develop
alternative frameworks.
Response: As we explain in the prior response, we are not
finalizing an overall SDP expenditure limit in this final rule.
We did not receive any comments on our proposed definitions of
``average commercial rate'' or ``nursing facility services'' in Sec.
438.6(a). After reviewing public comments and for the reasons outlined
in the proposed rule and our responses to comments, we are finalizing
the proposed definitions in Sec. 438.6(a). We are also finalizing
Sec. 438.6(c)(2)(ii)(I) with minor revisions also discussed earlier.
Finally, we are finalizing 438.6(c)(2)(iii) as proposed, with one
modification in paragraph (c)(2)(iii)(B)(3) to clarify that the prior
approval referenced is ``prior approval of the State directed payment .
. .''.
g. Financing (Sec. 438.6(c)(2)(ii)(G) and (c)(2)(ii)(H))
From our experience in working with States, it has become clear
that SDPs provide an important tool for States in furthering the goals
and objectives of their Medicaid programs within a managed care
environment. In finalizing the standards and limits for SDPs and pass-
through payments in the 2016 and 2017 final rules, we intended to
ensure that the funding that was included in Medicaid managed care rate
development was done so appropriately and in alignment with Federal
statutory requirements applicable to the Medicaid program. This
includes Federal requirements for the source(s) of the non-Federal
share of SDPs.
Background on Medicaid Non-Federal Share Financing. Medicaid
expenditures are jointly funded by the Federal and State governments.
Section 1903(a)(1) of the Act provides for Federal payments to States
of the Federal share of authorized Medicaid expenditures. The
foundation of Federal-State shared responsibility for
[[Page 41073]]
the Medicaid program is that the State must participate in the
financial burdens and risks of the program, which provides the State
with an interest in operating and monitoring its Medicaid program in
the best interest of beneficiaries (see section 1902(a)(19) of the Act)
and in a manner that results in receiving the best value for taxpayers
for the funds expended. Sections 1902(a)(2), 1903(a), and 1905(b) of
the Act require States to share in the cost of medical assistance and
in the cost of administering the Medicaid program. FFP is not available
for expenditures for services and activities that are not medical
assistance authorized under a Medicaid authority or allowable State
administrative activities. Additionally, FFP is not available to States
for expenditures that do not conform to approved State plans, waivers,
demonstration projects, or contracts, as applicable.
Section 1902(a)(2) of the Act and its implementing regulation in 42
CFR part 433, subpart B require States to share in the cost of medical
assistance expenditures and permit other units of State or local
government to contribute to the financing of the non-Federal share of
medical assistance expenditures. These provisions are intended to
safeguard the Federal-State partnership, irrespective of the Medicaid
delivery system or authority (for example, FFS or managed care delivery
system, and State plan, waiver, or demonstration authority), by
ensuring that States are meaningfully engaged in identifying,
assessing, mitigating, and sharing in the risks and responsibilities
inherent in operating a program as complex and economically significant
as Medicaid, and that States are accordingly motivated to administer
their programs economically and efficiently (see, for example, section
1902(a)(4) of the Act).
There are several types of permissible means for financing the non-
Federal share of Medicaid expenditures, including, but not limited to:
(1) State general funds, typically derived from tax revenue
appropriated directly to the Medicaid agency; (2) revenue derived from
health care-related taxes when consistent with Federal statutory
requirements at section 1903(w) of the Act and implementing regulations
at 42 CFR part 433, subpart B; (3) provider-related donations to the
State which must be ``bona fide'' in accordance with section 1903(w) of
the Act and implementing regulations at 42 CFR part 433, subpart B;
\115\ and (4) IGTs from units of State or local government that
contribute funding for the non-Federal share of Medicaid expenditures
by transferring their own funds to and for the unrestricted use of the
Medicaid agency.\116\ Regardless of the source or sources of financing
used, the State must meet the requirements at section 1902(a)(2) of the
Act and Sec. 433.53 that obligate the State to fund at least 40
percent of the non-Federal share of total Medicaid expenditures (both
medical assistance and administrative expenditures) with State funds.
---------------------------------------------------------------------------
\115\ ``Bona fide'' provider-related donations are truly
voluntary and not part of a hold harmless arrangement that
effectively repays the donation to the provider (or to providers
furnishing the same class of items and services). As specified in
Sec. 433.54, a bona fide provider-related donation is made to the
State or a unit of local government and has no direct or indirect
relationship to Medicaid payments made to the provider, any related
entity providing health care items or services, or other providers
furnishing the same class of items or services as the provider or
entity. This is satisfied where the donations are not returned to
the individual provider, provider class, or a related entity under a
hold harmless provision or practice. Circumstances in which a hold
harmless practice exists are specified in Sec. 433.54(c).
\116\ Certified public expenditures (CPEs) also can be a
permissible means of financing the non-Federal share of Medicaid
expenditures. CPEs are financing that comes from units of State or
local government where the units of State or local governmental
entity contributes funding of the non-Federal share for Medicaid by
certifying to the State Medicaid agency the amount of allowed
expenditures incurred for allowable Medicaid activities, including
the provision of allowable Medicaid services provided by enrolled
Medicaid providers. States infrequently use CPEs as a financing
source in a Medicaid managed care setting, as managed care plans
need to be paid prospective capitation payments and CPEs by nature
are a retrospective funding source, dependent on the amount of
expenditures the unit of State or local government certifies that it
already has made.
---------------------------------------------------------------------------
Health care-related taxes and IGTs are a critical source of funding
for many States' Medicaid programs, including for supporting the non-
Federal share of many payments to safety net providers. Health care-
related taxes made up approximately 17 percent ($37 billion) of all
States' non-Federal share in 2018, the latest year for which data are
available.\117\ IGTs accounted for approximately 10 percent of all
States' non-Federal share for that year. The Medicaid statute clearly
permits certain health care-related taxes and IGTs to be used to
support the non-Federal share of Medicaid expenditures, and CMS
supports States' adoption of these non-Federal financing strategies
where consistent with applicable Federal requirements. CMS approves
hundreds of State payment proposals annually that are funded by health
care-related taxes that appear to meet statutory requirements. The
statute and regulations afford States flexibility to tailor health
care-related taxes within certain parameters to suit their provider
community, broader State tax policies, and the needs of State programs.
However, all health care-related taxes must be imposed in a manner
consistent with applicable Federal statutes and regulations, which
prohibit direct or indirect ``hold harmless'' arrangements (see section
1903(w)(4) of the Act; Sec. 433.68(f)).
---------------------------------------------------------------------------
\117\ U.S. Government Accountability Office, ``Medicaid: CMS
Needs More Information on States' Financing and Payment Arrangements
to Improve Oversight,'' GAO-21-98, December 7, 2020, available at
https://www.gao.gov/products/gao-21-98.
---------------------------------------------------------------------------
States first began to use health care-related taxes and provider-
related donations in the mid-1980s as a way to finance the non-Federal
share of Medicaid payments (Congressional Research Service, ``Medicaid
Provider Taxes,'' August 5, 2016, page 2). Providers would agree to
make a donation or would support (or not oppose) a tax on their
activities or revenues, and these mechanisms (donations or taxes) would
generate funds that could then be used to raise Medicaid payment rates
to the providers. Frequently, these programs were designed to hold
Medicaid providers ``harmless'' for the cost of their donation or tax
payment. As a result, Federal expenditures rapidly increased without
any corresponding increase in State expenditures, since the funds used
to increase provider payments came from the providers themselves and
were matched with Federal funds. In 1991, Congress passed the Medicaid
Voluntary Contribution and Provider-Specific Tax Amendments (Pub. L.
102-234, December 12, 1991) to establish limits for the use of
provider-related donations and health care-related taxes to finance the
non-Federal share of Medicaid expenditures. Statutory provisions
relating to health care-related taxes and donations are in section
1903(w) of the Act.
Section 1903(w)(1)(A)(i)(II) of the Act requires that health care-
related taxes be broad-based as defined in section 1903(w)(3)(B) of the
Act, which specifies that the tax must be imposed for a permissible
class of health care items or services (as described in section
1903(w)(7)(A) of the Act) or for providers of such items or services
and generally imposed at least for all items or services in the class
furnished by all non-Federal, nonpublic providers or for all non-
Federal, nonpublic providers; additionally, the tax must be imposed
uniformly in accordance with section 1903(w)(3)(C) of the Act. However,
section 1903(w)(1)(A)(iii) of the Act disallows the use of revenues
from a broad-based health care-related tax if there is in effect a hold
harmless arrangement described in section
[[Page 41074]]
1903(w)(4) of the Act for the tax. Section 1903(w)(4) of the Act
specifies that, for purposes of section 1903(w)(1)(A)(iii) of the Act,
there is in effect a hold harmless provision for a broad-based health
care-related tax if the Secretary determines that any of the following
applies: (A) the State or other unit of government imposing the tax
provides (directly or indirectly) for a non-Medicaid payment to
taxpayers and the amount of such payment is positively correlated
either to the amount of the tax or to the difference between the amount
of the tax and the amount of the Medicaid payment; (B) all or any
portion of the Medicaid payment to the taxpayer varies based only upon
the amount of the total tax paid; or (C) the State or other unit of
government imposing the tax provides (directly or indirectly) for any
payment, offset, or waiver that guarantees to hold taxpayers harmless
for any portion of the costs of the tax. Section 1903(w)(1)(A) of the
Act specifies that, for purposes of determining the Federal matching
funds to be paid to a State, the total amount of the State's Medicaid
expenditures must be reduced by the amount of revenue received by the
State (or by a unit of local government in the State) from
impermissible health care-related taxes, including, as specified in
section 1903(w)(1)(A)(iii) of the Act, from a broad-based health care-
related tax for which there is in effect a hold harmless provision
described in section 1903(w)(4) of the Act.
In response to the Medicaid Voluntary Contribution and Provider-
Specific Tax Amendments of 1991, we published the ``Medicaid Program;
Limitations on Provider-Related Donations and Health Care-Related
Taxes; Limitations on Payments to Disproportionate Share Hospitals''
interim final rule with comment period in the November 24, 1992 Federal
Register (57 FR 55118) (``November 1992 interim final rule'') and the
subsequent final rule published in the August 13, 1993 Federal Register
(58 FR 43156) (August 1993 final rule) establishing when States may
receive funds from provider-related donations and health care-related
taxes without a reduction in medical assistance expenditures for the
purposes of calculating FFP.
After the publication of the August 1993 final rule, we revisited
the issue of health care-related taxes and provider-related donations
in the ``Medicaid Program; Health-Care Related Taxes'' final rule (73
FR 9685) which published in the February 22, 2008, Federal Register
(February 2008 final rule). The February 2008 final rule, in part, made
explicit that certain practices will constitute a hold harmless
arrangement, in response to certain State tax programs that we believed
contained hold harmless provisions. For example, five States had
imposed a tax on nursing homes and simultaneously created programs that
awarded grants or tax credits to private pay residents of nursing
facilities that enabled these residents to pay increased charges
imposed by the facilities, which thereby recouped their own tax costs.
We believed that these payments held the taxpayers (the nursing
facilities) harmless for the cost of the tax, as the tax program repaid
the facilities indirectly, through the intermediary of the nursing
facility residents. However, in 2005, the Department of Health and
Human (HHS) Departmental Appeals Board (the Board) (Decision No. 1981)
ruled that such an arrangement did not constitute a hold harmless
arrangement under the regulations then in place (73 FR 9686 and 9687).
Accordingly, in discussing revisions to the hold harmless guarantee
test in Sec. 433.68(f)(3), the February 2008 final rule preamble noted
that a State can provide a direct or indirect guarantee through a
direct or indirect payment. We stated that a direct guarantee will be
found when, ``a payment is made available to a taxpayer or party
related to the taxpayer with the reasonable expectation that the
payment will result in the taxpayer being held harmless for any part of
the tax'' as a result of the payment (73 FR 9694). We noted
parenthetically that such a direct guarantee can be made by the State
through direct or indirect payments. Id. As an example of a party
related to the taxpayer, the preamble cited the example of, ``as a
nursing home resident is related to a nursing home'' (73 FR 9694). As
discussed in the preamble to the February 2008 final rule, whenever
there exists a ``reasonable expectation'' that the taxpayer will be
held harmless for the cost of the tax by direct or indirect payments
from the State, a hold harmless situation exists, and the tax is
impermissible for use to support the non-Federal share of Medicaid
expenditures.
Non-Federal Share Financing and State Directed Payments. The
statutory requirements in sections 1902(a)(2), 1903(a), 1903(w), and
1905(b) of the Act concerning the non-Federal share contribution and
financing requirements, including those implemented in 42 CFR part 433,
subpart B concerning health care-related taxes, bona fide provider
related donations, and IGTs, apply to all Medicaid expenditures
regardless of delivery system (FFS or managed care). We employ various
mechanisms for reviewing State methods for financing the non-Federal
share of Medicaid expenditures. This includes, but is not limited to,
reviews of FFS SPAs, reviews of managed care SDPs, quarterly financial
reviews of State expenditures reported on the Form CMS-64, focused
financial management reviews, and reviews of State health care-related
tax and provider-related donation proposals and waiver requests.
We reiterated this principle in the 2020 Medicaid managed care
final rule, noting ``certain financing requirements in statute and
regulation are applicable across the Medicaid program irrespective of
the delivery system (for example, FFS, managed care, and demonstration
authorities), and are similarly applicable whether a State elects to
direct payments under Sec. 438.6(c)'' (85 FR 72765). Further, section
1903(m)(2)(A) of the Act limits FFP in prepaid capitation payments to
MCOs for coverage of a defined minimum set of benefits to cases in
which the prepaid payments are developed on an actuarially sound basis
for assuming the cost of providing the benefits at issue to Medicaid
managed care enrollees. CMS has extended this requirement, through
rulemaking under section 1902(a)(4) of the Act, to the capitation rates
paid to PIHPs and PAHPs under a risk contract as well.
As part of our review of SDP proposals, we are increasingly
encountering issues with State financing of the non-Federal share of
SDPs, including use of health care-related taxes and IGT arrangements
that may not be in compliance with the underlying Medicaid requirements
for non-Federal share financing. In January 2021, CMS released a
revised preprint form that systematically collects documentation
regarding the source(s) of the non-Federal share for each SDP and
requires States to provide additional assurances and details specific
to each financing mechanism, which has contributed to our increased
awareness of non-Federal share financing issues associated with
SDPs.\118\ Concerns around the funding of the non-Federal share for
SDPs have been raised by oversight bodies.119 120
---------------------------------------------------------------------------
\118\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
\119\ See U.S. Government Accountability Office, ``Medicaid: CMS
Needs More Information on States' Financing and Payment Arrangements
to Improve Oversight,'' GAO-21-98, December 7, 2020, available at
https://www.gao.gov/products/gao-21-98.
\120\ See Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
---------------------------------------------------------------------------
[[Page 41075]]
Through our review of SDP preprint proposals over the past few
years, we have identified various non-Federal share sources that
appeared unallowable. Primarily, the potentially unallowable non-
Federal share arrangements have involved health care-related taxes.
Specifically, we have identified multiple instances in which States
appear to be funding the non-Federal share of Medicaid SDP payments
through health care-related tax programs that appear to involve an
impermissible hold harmless arrangement. In one particular form of a
hold harmless arrangement, with varying degrees of State awareness and
involvement, providers appear to have pre-arranged agreements to
redistribute Medicaid payments (or other provider funds that are
replenished by Medicaid payments). These redistribution arrangements
are not described on the States' SDP applications; if an SDP preprint
stated that Medicaid payments ultimately will be directed to a
recipient without being based on the delivery of Medicaid-covered
services, we could not approve the SDP, because section 1903(a) of the
Act limits FFP to expenditures for medical assistance and qualifying
administrative activities (otherwise stated, FFP is not available in
expenditures for payments to third parties unrelated to the provision
of covered services or conduct of allowable administrative activities).
Similarly, under 1903(w), FFP is not permissible in payments that will
otherwise be matchable as medical assistance if the State share being
matched does not comply with the conditions in section 1903(w) of the
Act, such as in the case of the type of hold harmless arrangement
described above. The fact that these apparent hold harmless
arrangements are not made explicit on SDP preprints should not affect
our ability to disapprove SDPs when we cannot verify they do not employ
redistribution arrangements.
These arrangements appear designed to redirect Medicaid payments
away from the providers that furnish the greatest volume of Medicaid-
covered services toward providers that provide fewer, or even no,
Medicaid-covered services, with the effect of ensuring that taxpaying
providers are held harmless for all or a portion of their cost of the
health care-related tax. In the arrangements, a State or other unit of
government imposes a health-care related tax, then uses the tax revenue
to fund the non-Federal share of SDPs that require Medicaid managed
care plans to pay the provider taxpayers. The taxpayers appear to enter
a pre-arranged agreement to redistribute the Medicaid payments to
ensure that all taxpayers, when accounting for both their original
Medicaid payment (from the State through a managed care plan) and any
redistribution payment received from another taxpayer(s) or another
entity, receive back (and are thereby held harmless for) all or at
least a portion of their tax amount.
Providers that serve a relatively low percentage of Medicaid
patients or no Medicaid patients often do not receive enough Medicaid
payments funded by a health care-related tax to cover the provider's
cost in paying the tax. Providers in this position are unlikely to
support a State or locality establishing or continuing a health care-
related tax because the tax will have a negative financial impact on
them. Redistribution arrangements like those just described seek to
eliminate this negative financial impact or turn it into a positive
financial impact for taxpaying providers, likely leading to broader
support among the provider class of taxpayers for legislation
establishing or continuing the tax. Based on limited information we
have been able to obtain from providers participating in such
arrangements, we believed providers with relatively higher Medicaid
volume agree to redistribute some of their Medicaid payments to ensure
broad support for the tax program, which ultimately works to these
providers' advantage since the tax supports increased Medicaid payments
to them (even net of Medicaid payments that they redistribute to other
providers) compared to payment amounts for delivering Medicaid-covered
services they would receive in the absence of the tax program.
Therefore, these redistribution arrangements help ensure that State or
local governments are successful in enacting or continuing provider tax
programs.
The Medicaid statute at section 1903(w) of the Act does not permit
us to provide FFP in expenditures under any State payment proposal that
would distribute Medicaid payments to providers based on the cost of a
health care-related tax instead of based on Medicaid services, so
payment redistribution arrangements often occur without notice to CMS
(and possibly States) and are not described as part of a State payment
proposal submitted for CMS review and approval (see, section 1903(w)(4)
of the Act). Given that we cannot knowingly approve awarding FFP under
this scenario, we noted our belief that it would be inconsistent with
the proper and efficient operation of the Medicaid State plan to
approve an SDP when we know the payments would be funded under such an
arrangement. For example, we would not approve an SDP that would
require payment from a Medicaid managed care plan to a hospital that
did not participate in Medicaid, in any amount. Nor would we approve an
SDP that would require payment from a Medicaid managed care plan (that
is, a Medicaid payment) to a hospital with a low percentage of Medicaid
revenue based on the difference between the hospital's total cost of a
health care-related tax and other Medicaid payments received by the
hospital. As a result, the redistribution arrangements seek to achieve
what cannot be accomplished explicitly through a CMS-approved payment
methodology (that is, redirecting Medicaid funds to hold taxpayer
providers harmless for their tax cost, with a net effect of directing
Medicaid payments to providers based on criteria other than their
provision of Medicaid-covered services).
Redistribution arrangements undermine the fiscal integrity of the
Medicaid program and are inconsistent with existing statutory and
regulatory requirements prohibiting hold harmless arrangements.
Currently, Sec. 433.68(f)(3), implementing section 1903(w)(4)(C) of
the Act, provides that a hold harmless arrangement exists where a State
or other unit of government imposing a health care-related tax provides
for any direct or indirect payment, offset, or waiver such that the
provision of the payment, offset, or waiver directly or indirectly
guarantees to hold taxpayers harmless for all or any portion of the tax
amount. The February 2008 final rule on health care-related taxes
specified that hold harmless arrangements prohibited by Sec.
433.68(f)(3) exist ``[w]hen a State payment is made available to a
taxpayer or a party related to the taxpayer (for example, as a nursing
home resident is related to a nursing home), in the reasonable
expectation that the payment will result in the taxpayer being held
harmless for any part of the tax'' (73 FR 9694, quoting preamble
discussion from the proposed rule). Regardless of whether the taxpayers
participate voluntarily, whether the taxpayers receive the Medicaid
payments from a Medicaid managed care plan, or whether taxpayers
themselves or another entity make redistribution payments using the
very dollars received as Medicaid payments or with other provider funds
that are replenished by the Medicaid payments, the taxpayers
participating in these
[[Page 41076]]
redistribution arrangements have a reasonable expectation that they
will be held harmless for all or a portion of their tax amount.
We stated that the addition of the words ``or indirectly'' in the
regulation indicates that the State itself need not be involved in the
actual redistribution of Medicaid funds for the purpose of returning
tax amounts to taxpayers in order for the arrangement to qualify as a
hold harmless (73 FR 9694). We further noted in the same preamble that
we used the term ``reasonable expectation'' because ``State laws were
rarely overt in requiring that State payments be used to hold taxpayers
harmless'' (73 FR 9694). Hold harmless arrangements need not be overtly
established through State law or contracts but can be based upon a
reasonable expectation that certain actions will take place among
participating entities to return to taxpaying providers all or any
portion of their tax amounts. The redistribution arrangements detailed
earlier constitute a hold harmless arrangement described in section
1903(w)(4) of the Act and implementing regulations in part 433. Such
arrangements require a reduction of the State's medical assistance
expenditures as specified by section 1903(w)(1)(A)(iii) of the Act and
Sec. 433.70(b).
Approving an SDP under which the State share is funded through an
impermissible redistribution agreement would also be inconsistent with
``proper and efficient administration'' of the Medicaid program within
the meaning of section 1902(a)(4) of the Act, as it would result in
expenditures for which FFP will ultimately have to be disallowed, when
it would be more efficient to not allow such expenditures to be made in
the first place. Therefore, we also rely on our authority under section
1902(a)(4) of the Act to specify methods of administration that are
necessary for proper and efficient administration to support the
authority to make explicit in Sec. 438.6 that CMS may disapprove an
SDP when we are aware the State share of the SDP would be based on an
arrangement that violates section 1903(w) of the Act. We note that in
addition to the foregoing, SDPs that are required by Medicaid managed
care contracts must be limited to payments for services that are
covered under the Medicaid managed care contract and meet the
definition of medical assistance under section 1903(a) of the Act.
Thus, to the extent the funds are not used for medical assistance, but
diverted for another purpose, matching as medical assistance would not
be permissible.
In the past, we have identified instances of impermissible
redirection or redistribution of Medicaid payments and have taken
action to enforce compliance with the statute. For example, the Board
upheld our decision to disallow a payment redirection arrangement in a
State under a FFS State plan amendment, citing section 1903(a)(1) of
the Act, among other requirements (HHS, Board Decision No. 2103, July
31, 2007). Specifically, the Board found that written agreements among
certain hospitals redirected Medicaid payments. The payments were not
retained by the hospitals to offset their Medicaid costs, as required
under the State plan. Instead, pre-arranged agreements redirected
Medicaid payments to other entities to fund non-Medicaid costs. In its
decision, the Board stated, ``Hence, they were not authorized by the
State plan or Medicaid statute[.]'' When providers redistribute their
Medicaid payments for purposes of holding taxpayers harmless or
otherwise, in effect, the State's claim for FFP in these provider
payments is not limited to the portion of the payment that the provider
actually retains as payment for furnishing Medicaid-covered services,
but also includes the portion that the provider diverts for a non-
Medicaid activity ineligible for FFP (for example, holding other
taxpayers harmless for their tax costs). This payment of FFP for non-
qualifying activities also has the effect of impermissibly inflating
the Federal matching rate that the State receives for qualifying
Medicaid expenditures above the applicable, statutorily-specified
matching rate (see, for example, sections 1903(a), 1905(b), 1905(y),
and 1905(z) of the Act).
Ensuring permissible non-Federal share sources and ensuring that
FFP is only paid to States for allowable Medicaid expenditures is
critical to protecting Medicaid's sustainability through responsible
stewardship of public funds. State use of impermissible non-Federal
share sources often artificially inflates Federal Medicaid
expenditures. Further, these arrangements reward providers based on
their ability to fund the State share, and disconnect the Medicaid
payment from Medicaid services, quality of care, health outcomes, or
other Medicaid program goals. Of critical concern, it appears that the
redistribution arrangements are specifically designed to redirect
Medicaid payments away from Medicaid providers that serve a high
percentage of Medicaid beneficiaries to providers that do not
participate in Medicaid or that have relatively lower Medicaid
utilization.
States have cited challenges with identifying and providing details
on redistribution arrangements when we have requested such information
during the review of SDPs. The current lack of transparency prevents
both CMS and States from having information necessary for reviewing
both the proposed non-Federal share financing source and the proposed
payment methodology to ensure they meet Federal requirements. Some
States have also stated concerns with ongoing oversight activities in
which CMS is attempting to obtain information that may involve
arrangements to which only private entities are a party. We are only
interested in business arrangements among private entities that could
result in a violation of Federal statutory and regulatory requirements.
As noted above, we recognize that health care-related taxes can be
critical tools for financing payments that support the Medicaid safety
net, but they must be implemented in accordance with applicable
statutory and regulatory requirements. The policies in the rule will
help ensure that CMS and States have necessary information about any
arrangements in place that would redistribute Medicaid payments and
make clear that we have the authority to disapprove proposed SDPs if
States identify the existence of such an arrangement or do not provide
required information or ensure the attestations are made and available
as required under paragraph (c)(2)(ii)(H). The new attestation
requirement will help ensure appropriate transparency regarding the use
of Medicaid payments and any relationship to the non-Federal share
source(s), and aims to do so without interfering with providers' normal
business arrangements.
All Federal legal requirements for the financing of the non-Federal
share, including but not limited to, subpart B of part 433, apply
regardless of delivery system, although currently, Sec. 438.6(c) does
not explicitly state that compliance with statutory requirements and
regulations outside of part 438 related to the financing of the non-
Federal share is required for SDPs to be approvable or that CMS may
deny written prior approval for an SDP based on a State's failure to
demonstrate that the financing of the non-Federal share is fully
compliant with applicable Federal law. The requirements applicable to
health care-related taxes, bona fide provider related donations, and
IGTs also apply to the non-Federal share of expenditures for payments
under part 438. Currently,
[[Page 41077]]
Sec. 438.6(c)(1)(ii)(E) provides that a State must demonstrate to CMS,
in writing, that an SDP does not condition provider participation in
the SDP on the provider entering into or adhering to intergovernmental
transfer agreement. We believe additional measures are necessary to
ensure compliance with applicable Federal requirements for the
source(s) of non-Federal share. We believe updating the regulations to
explicitly condition written prior approval of an SDP on the State
demonstrating compliance with applicable Federal requirements for the
source(s) of non-Federal share will strengthen our ability to
disapprove an SDP where it appears the SDP arrangement is supported by
impermissible non-Federal share financing arrangements. Given the
growing number of SDPs that raise potential financing concerns, and the
growing number of SDPs generally, we believe it is important to be
explicit in the regulations governing SDPs that the same financing
requirements governing the sources of the non-Federal share apply
regardless of delivery system, and that CMS will scrutinize the source
of the non-Federal share of SDPs during the preprint review process. We
are finalizing Sec. 438.6(c)(2)(ii) to add a new paragraph
(c)(2)(ii)(G) that will explicitly require that an SDP comply with all
Federal legal requirements for the financing of the non-Federal share,
including but not limited to, subpart B of part 433, as part of the CMS
review process.
We are also finalizing our proposed revision to Sec.
438.6(c)(2)(ii) to ensure transparency regarding the use of SDPs and to
ensure that the non-Federal share of SDPs is funded with a permissible
source. Under our regulation, States will be required to ensure that
participating providers in an SDP arrangement attest that they do not
participate in any hold harmless arrangement for any health care-
related tax as specified in Sec. 433.68(f)(3) in which the State or
other unit of government imposing the tax provides for any direct or
indirect payment, offset, or waiver such that the provision of the
payment, offset, or waiver directly or indirectly guarantees to hold
the provider harmless for all or any portion of the tax amount. Such
hold harmless arrangements include those that produce a reasonable
expectation that taxpaying providers will be held harmless for all or a
portion of their cost of a health care-related tax. States will be
required to note in the preprint their compliance with this requirement
prior to our written prior approval of any contractual payment
arrangement directing how Medicaid managed care plans pay providers.
States will comply with this proposed requirement by obtaining each
provider's attestation or requiring the Medicaid managed care plan to
obtain each provider's attestation.
After reviewing comments, we have determined that we should make
explicit that the failure of one or a small number of providers to
submit an attestation would not necessarily lead to disapproval of the
State's proposed SDP preprint. CMS may disapprove the SDP preprint
proposal because some attestations are not obtained or are not made
available by the State. However, CMS will still perform our standard,
comprehensive review of whether a health care-related tax is allowable,
and through this review may approve the proposed SDP preprint if the
available information establishes that there is not likely to be a
prohibited hold harmless arrangement in place. This policy recognizes
that the presence or absence of provider attestations does not
conclusively establish whether a hold harmless arrangement exists or
not, but merely provides information that is relevant in determining
whether there is or may be a hold harmless arrangement. It further
recognizes that the actions of one or a small number of providers
should not automatically invalidate the efforts of the State (and other
providers in the State who would receive the SDP) to comply with
financing requirements.
For example, the fact that a few providers (who would be eligible
for an SDP) expect to pay more in taxes than they will receive in
payments might lead these providers not to complete an attestation,
even if no hold harmless arrangement is in place, because they find it
to be in their interest not to make the attestation in order to
interfere with implementation of the tax and/or the SDP. If that is the
reason the State is unable to obtain attestations from all providers
who would receive the SDP and there are no other indicia that a
prohibited hold harmless arrangement is in place, we intend to leave
flexibility to approve the SDP under this final rule. On the other
hand, even if all providers who are eligible for an SDP attest that
they do not participate in a hold harmless arrangement, we may
disapprove the SDP or initiate actions to defer or disallow FFP under a
previously approved SDP if we learn that a prohibited hold harmless
arrangement is or appears to be in place despite the attestations.
We proposed, at Sec. 438.6(c)(2)(ii)(H), to require that the State
ensure that such attestations are available upon CMS request. To better
reflect our standard review process for SDPs, we are finalizing the
proposal to require States to, upon request, submit to CMS the provider
attestations, with the modification that States may, as applicable,
provide an explanation that is satisfactory to CMS about why specific
providers are unable or unwilling to make such attestations. For an
explanation to be satisfactory, it must demonstrate to CMS why the
missing attestation(s) does not indicate that a hold harmless
arrangement is or is likely to be in place and why the absence of the
attestation(s) therefore should not impact our evaluation of the
permissibility of the health care-related tax. We discuss this
modification further in response to comments.
Under this rule, we note that CMS may deny written prior approval
of an SDP if it does not comply with any of the standards in Sec.
438.6(c)(2), including where the financing of the non-Federal share is
not fully compliant with all Federal legal requirements for the
financing of the non-Federal share and/or the State does not require an
attestation from providers receiving a payment based on the SDP that
they do not participate in any hold harmless arrangement. As part of
our restructuring of Sec. 438.6(c)(2), these provisions will apply to
all SDPs, regardless of whether written prior approval is required. We
relied on our authority in section 1902(a)(4) of the Act to require
methods of administration as are found by the Secretary to be necessary
for the proper and efficient operation of the Medicaid State Plan to
finalize these requirements for ensuring that the source of the non-
Federal share of the financing for SDPs is consistent with section
1903(w) of the Act. It is consistent with the economic and efficient
operation of the Medicaid State Plan to ensure that State expenditures
are consistent with the requirements to obtain FFP, and thereby avoid
the process of recouping FFP when provided inappropriately, which is
needlessly burdensome for States and CMS. Given that all Federal legal
requirements for the financing of the non-Federal share, including but
not limited to, subpart B of part 433, apply regardless of delivery
system, we also solicited public comment on whether the proposed
changes in Sec. 438.6(c)(2)(ii)(G) and (H) should be incorporated more
broadly into part 438.
For discussion on the proposed applicability dates for the
provisions outlined in this section, see section I.B.2.p. of this final
rule. Please note that we are updating the effective date for Sec.
438.6(c)(2)(ii)(H) to no later than
[[Page 41078]]
the first rating period for contracts with MCOs, PIHPs and PAHPs
beginning on or after January 1, 2028, as discussed in the responses to
comments on that provision.
We solicited public comments on these proposals.
We summarize and respond to public comments received on Financing
(Sec. 438.6(c)(2)(ii)(G) and (H)) below.
Comments on Sec. 438.6(c)(2)(ii)(G)
Please note that some commenters cited paragraph (G) in their
comments; however, upon review we determined the comments were
referencing the attestation policies contained in paragraph (H), and
those comments are discussed separately after the paragraph (G)
comments.
Comment: Some commenters stated that the proposed rule will
restrict States' ability to raise funds to finance the non-Federal
share of the Medicaid programs in the same manner as States have in the
past. The commenters indicated that such a change would reduce the
payment rates to providers, which may harm access to care for Medicaid
beneficiaries.
Response: We recognize that any changes to States' financing can be
challenging, given limited budgets. However, CMS disagrees that the
regulation would restrict non-Federal share financing sources. Rather,
this regulation emphasizes States' responsibilities to adhere to
existing Federal financing requirements. If a State believes this
regulation will require them to end a particular financing arrangement,
then such an arrangement is already impermissible even absent the rule.
When a State finds that it needs to transition to another financing
source or modify an existing one, CMS works with that State to ensure
such a transition can be executed as seamlessly as possible under
Federal law.
CMS has worked with many States to modify financing arrangements
over the years. To the extent that States find that they must change
the source of their financing to comply with Federal law, States have
several types of permissible means for financing the non-Federal share
of Medicaid expenditures. As discussed earlier in this section, those
include, but are not limited to: (1) State general funds, typically
derived from tax revenue appropriated directly to the Medicaid agency;
(2) revenue derived from health care-related taxes when consistent with
Federal statutory requirements at section 1903(w) of the Act and
implementing regulations at 42 CFR part 433, subpart B; (3) provider-
related donations to the State which must be ``bona fide'' in
accordance with section 1903(w) of the Act and implementing regulations
at 42 CFR part 433, subpart B; and (4) IGTs from units of State or
local government that contribute funding for the non-Federal share of
Medicaid expenditures by transferring their own funds to and for the
unrestricted use of the Medicaid agency.
The final rule is not designed to limit the amount of funds that
States spend on qualifying services by reducing provider payment rates
or otherwise. Rather, the rule is intended to ensure compliance with
existing Federal requirements for financing the non-Federal share of
program expenditures. CMS understands the critical role that health
care-related taxes have in financing the non-Federal share of Medicaid
expenditures in many States. According to MACPAC, for State fiscal year
2018, 17 percent of the non-Federal share of nationwide Medicaid
expenditures was derived from health care-related taxes, totaling $36.9
billion.\121\ The scale at which health care-related taxes have come to
be used as the non-Federal share of Medicaid expenditures throughout
the country underscores the importance of ensuring that these funds
meet Federal requirements when used to pay for Medicaid expenditures.
---------------------------------------------------------------------------
\121\ See https://www.macpac.gov/wp-content/uploads/2020/01/Health-Care-Related-Taxes-in-Medicaid.pdf.
---------------------------------------------------------------------------
Comment: One commenter stated that they understood that States are
already required to follow all rules related to financing the non-
Federal share of Medicaid payments, but did not provide any additional
information.
Response: The commenter is correct that all Federal legal
requirements for the financing of the non-Federal share, including
those stated in section 1903(w) of the Act and implementing regulations
in 42 CFR part 433, subpart B, apply to all non-Federal share financing
arrangements. We assume the commenter meant to indicate that the need
for this provision of the proposed rule was unclear, since the
commenter understood that the existing requirements apply regardless of
delivery system. However, before this final rule, Sec. 438.6(c) did
not explicitly state that compliance with statutory requirements and
regulations outside of part 438 related to the financing of the non-
Federal share is required for SDPs to be approvable or that CMS may
deny written prior approval for an SDP based on a State's failure to
demonstrate that the financing of the non-Federal share is fully
compliant with applicable Federal law. We are concerned that the
failure of the current regulations to explicitly condition written
prior approval of an SDP on compliance with the non-Federal share
financing requirements may create some ambiguity with regard to our
ability to disapprove an SDP where it appears the SDP arrangement is
supported by impermissible non-Federal share financing arrangements.
Although this commenter is correct about the funding requirements
already existing, the proposed rule and this final rule were written to
remove any possibility of confusion and codify that SDPs may be
disapproved on the basis of impermissible financing.
Comment: One commenter indicated that the broad language in
paragraph (G) requiring compliance ``with all Federal legal
requirements for the financing of the non-Federal share,'' coupled with
the use of ``including but not limited to,'' would cause uncertainty
regarding CMS' interpretation of Federal requirements, does not provide
enough information for providers to know what they are attesting to,
and that sub-regulatory guidance would be an inappropriate means to
provide clarifications because such guidance would in effect be
requirements.
Similarly, another commenter objected to the way that they
anticipated CMS would implement a final regulation through the issuance
of sub-regulatory guidance that goes beyond the regulatory
requirements. The commenter stated concerns that CMS would impose
further requirements on States using sub-regulatory guidance, rather
than through the rulemaking process.
Response: The provision at Sec. 438.6(c)(ii)(G) explicitly
requires that an SDP comply with all Federal statutory and regulatory
requirements for the financing of the non-Federal share, including but
not limited to, 42 CFR part 433, subpart B, as part of the CMS review
process. The regulatory citation following ``including but not limited
to'' is an illustrative example, and one we wanted to state explicitly,
but it does not change the requirement to comply with all financing
requirements. For example, the provision also requires compliance with
section 1903(w) of the Act. This requirement will help ensure that
States are compliant with all Federal requirements regarding non-
Federal share financing. Paragraph Sec. 438.6(c)(ii)(H) requires
States to ensure that providers receiving an SDP attest that they do
not participate in any hold harmless arrangement for any health care-
related tax. Providers will not be required to attest to a State's
compliance
[[Page 41079]]
with financing rules; rather, States will be required to ensure that
providers attest to their own conduct.
Any guidance CMS would release to clarify the requirement in Sec.
438.6(c)(ii)(G) would not change requirements, because the regulation
already encompasses all Federal statutory and regulatory requirements.
CMS uses sub-regulatory guidance to, among other things, explain how we
interpret a statute or regulation, or provide additional
clarifications. One of the main purposes of guidance is to explain and
help States comply with agency regulations, particularly for
circumstances that were not necessarily anticipated when issuing a
regulation and when additional clarifications are needed. CMS cannot
anticipate every scenario that States will encounter as they implement
requirements, but the inability to anticipate every possible future
scenario does not mean that such scenarios will not already be subject
to the requirements finalized in regulation, which underscores the
potential need for and role of sub-regulatory guidance. As such, CMS
will continue to issue interpretive subregulatory guidance, as
appropriate, to help ensure that requirements for States are clear and
transparent.
Comment: One commenter objected to CMS imposing new financing
requirements on SDPs and indicated that the proposed rule would create
inconsistency between requirements for FFS payments and payments under
managed care arrangements.
Response: As we noted in the preamble to the proposed rule \122\
and in this final rule, the statutory requirements in sections
1902(a)(2), 1903(a), 1903(w), and 1905(b) of the Act concerning the
non-Federal share contribution and financing requirements, including
those implemented in 42 CFR part 433, subpart B concerning health care-
related taxes, bona fide provider related donations, and IGTs, already
apply to all Medicaid expenditures regardless of delivery system (FFS
or managed care). We are not imposing new financing requirements on
SDPs. Rather, we reiterate that it is important to be explicit in the
regulations governing SDPs that the same financing requirements
governing the sources of the non-Federal share apply regardless of
delivery system. CMS views these finalized regulations as improving
financing consistency.
---------------------------------------------------------------------------
\122\ 88 FR 28092 at 28129.
---------------------------------------------------------------------------
Comment: One commenter supported CMS' proposals related to SDPs on
the basis that these requirements would help ensure that provider
payments are consistent with Federal requirements.
Response: We are finalizing the changes to the financing
regulations at Sec. 438.6(c)(2)(ii)(G) as proposed.
Comments on Sec. 438.6(c)(2)(ii)(H)
Comment: Some commenters were concerned that the proposed rule
requiring States to ensure that providers receiving an SDP attest to
their compliance with certain financing requirements would add burden
to States, providers, or managed care plans. Two commenters noted that,
under the proposed rule, States could delegate to managed care plans
the responsibility for gathering the attestations and suggested that
doing so would be burdensome to providers, which may be under contract
with a number of different managed care plans. Commenters suggested
limiting the number of attestations to one per provider, or requiring
States to collect the attestations, rather than allowing States to
delegate to managed care plans.
Response: We understand that some States may have to take on new
responsibilities to implement the requirements of Sec.
438.6(c)(2)(ii)(H). To assist in these efforts, we will work with
States to provide technical assistance, and we are also available to
assist States with questions about matching funds for qualifying State
Medicaid administrative activities to implement the regulation.
After consideration of the public comments, as further discussed in
this section, we are finalizing Sec. 438.6(c)(2)(ii)(H) with
modifications discussed in other responses in this section of the final
rule. To help ease the transition to the collection of required
provider attestations, we are establishing an applicability date at
Sec. 438.6(c)(8)(vii) of no later than the first rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after January 1,
2028, for the attestation provisions located at Sec. 438.6(c)(ii)(H),
to allow States sufficient time to establish the attestation collection
process that works best for their individual circumstances. This will
also provide time for States to restructure SDPs that may involve
arrangements that prevent providers from truthfully attesting that they
do not engage in hold harmless arrangements. We will utilize this time
to collect additional information about the prevalence of hold harmless
arrangements and work with States to come into compliance.
We acknowledge that, if States delegate to Medicaid managed care
plans the responsibility for collecting attestations, providers may
need to submit multiple attestations if they participate in multiple
managed care networks. Furthermore, providers may need to submit
multiple attestations if they are subject to multiple State taxes and/
or receive multiple SDPs, in particular if the provider participates in
multiple tax and payment programs that operate on different timelines.
To minimize burden on providers, Medicaid managed care plans, and
States, we recommend States that delegate the collection of provider
attestations to Medicaid managed care plans furnish standardized
attestation language or forms that reflect which tax or taxes it
concerns and what time period it covers, and that, in general, are as
comprehensive as reasonably possible under the circumstances in the
State. Ultimately, States will be responsible for implementing the
attestation requirement under this final rule, and CMS encourages
States to consider the complexities that may arise from delegating the
responsibility to plans. States may find it is ultimately more
efficient to gather the attestations, one per provider, to limit
complexity or variations in process with the multiple managed care
plans with which a provider may participate.
Our goal of ensuring compliance with the law warrants the
additional State and Federal resources required to implement these
provisions, as we are increasingly encountering issues with States
financing the non-Federal share of SDPs using potentially impermissible
hold harmless arrangements. CMS has a duty to ensure that Federal
financial participation is paid only in accordance with Federal law. In
addition, the applicability date of no later than the first rating
period for contracts with MCOs, PIHPs and PAHPs beginning on or after
January 1, 2028, will allow sufficient time for States to develop
systems to collect attestations in the most efficient, least burdensome
way for each.
Comment: Some commenters noted that the requirement for providers
to sign attestations was ``overly broad,'' which could lead to
confusion among States, managed care plans, and providers. One
commenter stated that CMS needs to clarify the scope of the attestation
requirement to specify exactly what parties are attesting to generally
and particularly for hold harmless relationships.
Response: We understand that States will be taking on increased
responsibility for ensuring that providers receiving SDPs attest that
they do not participate in hold harmless arrangements under Sec.
433.68(f)(3). We
[[Page 41080]]
also understand that providers may be confused by the requirement to
attest to matters concerning laws they may not have considered
previously. The regulation at paragraph Sec. 438.6(c)(2)(ii)(H) makes
clear that providers would need to attest to their compliance with
Sec. 433.68(f)(3), and we would expect States to guide providers on
this provision and the types of arrangements prohibited under that
regulation before they are expected to sign. We also note that States
have flexibility in how they frame their attestations and in the
specific instructions they make to providers, so long as the
requirements of the regulation are met. As always, CMS will work
diligently with States to provide technical assistance as necessary to
guide a State through any unique circumstances. We will also release
sub-regulatory guidance if needed to highlight use cases and best
practices.
Comment: One commenter recommended that CMS collect the
attestations from providers rather than requiring States to do so, to
avoid imposing additional burdens on State governments.
Response: We recognize that States have responsibility for managing
Medicaid programs, and the new attestation requirement may increase
some States' responsibilities further when States use SDPs. However, we
generally do not have the direct relationship that each State has with
its Medicaid providers and managed care plans, as providers enroll
through States and are paid by States or State-contracted plans and
generally do not interact with us. Conversely, we have an extensive
partnership with States. As such, we determined the most appropriate
mechanism to ensure compliance with financing requirements is for
States (or plans, at the direction of States) to collect these
attestations. The rule is clear that States are not required to submit
these attestations to us en masse, but rather to retain and make them
available to us upon request. As always, we will work diligently with
States to provide technical assistance and sub-regulatory guidance as
necessary, and when possible, to reduce burden on States. In addition,
the effective date of no later than the first rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after January 1,
2028, for Sec. 438.6(c)(ii)(H) will allow States sufficient time to
develop processes to minimize State administrative burden.
Comment: One commenter sought clarification on how the proposed
regulation would be applied if a provider declined to sign the
attestation or if a provider did sign the attestation and was later
found to be in violation of Sec. 433.68(f)(3). Another commenter
requested clarity about how CMS would treat States when a provider
fails to comply with the signed attestation.
Response: As noted in the preamble to the proposed rule \123\ and
in this final rule, States would be required to note in the preprint
their compliance with this requirement prior to our written approval of
SDPs. As a result, if a State sought approval of an SDP preprint for
which not every provider that would receive an SDP had submitted an
attestation under Sec. 438.6(c)(ii)(H), then the SDP preprint would be
at risk of disapproval.
---------------------------------------------------------------------------
\123\ 88 FR 28092 at 28132.
---------------------------------------------------------------------------
However, as discussed earlier in this section, CMS will still be
performing a comprehensive review of the permissibility of the SDP and
the source(s) of non-Federal share that support the SDP, including any
applicable health care-related taxes. In the case of a health care-
related tax, the presence or absence of one or more attestations will
be a component of our review. We do not believe that it would represent
sound Medicaid policy to allow one or a small number of providers, for
reasons unrelated to participation in impermissible arrangements, to
obstruct approval of an entire SDP that could apply to hundreds of
providers. Similarly, it would not represent sound Medicaid policy to
automatically approve SDPs when 100 percent of relevant attestations
are provided by the State, if CMS has specific information indicating
that a hold harmless arrangement is, or is likely to be, in place.
There are several possible scenarios where a State might be unable
to collect one or more attestations, yet CMS would determine that the
absence of those attestations does not indicate that an impermissible
hold harmless arrangement is likely to exist. For example, a provider
might expect to pay more under a health care-related tax than it will
receive in Medicaid payments supported by the tax, and therefore might
refuse to provide an attestation in an attempt to interfere with
implementation of the tax and the SDP even if no hold harmless
arrangement exists. In instances where not all providers sign the
required attestations, CMS will expect the State to provide sufficient
information to determine the reason(s) behind the failure to obtain
attestations from all providers eligible for an SDP, which is a
component of CMS's overall review of approvability. The requirement for
States to collect all attestations nevertheless remains a necessary
component of this process, as it will allow CMS to still consider
available attestations in our review of whether the non-Federal share
meets Federal requirements. Additionally, through the process of
collecting provider attestations, we expect the State will gain
information about why certain providers may fail to submit them, which
the State will need to share with us under the requirement in this
final rule that the State provide an explanation that is satisfactory
to CMS about why specific providers are unable or unwilling to make
required attestations. CMS will view the lack of an attestation or
attestations as evidence that there are impermissible hold harmless
arrangements, unless the State satisfactorily explains how the absence
of the attestation(s) does not suggest that a hold harmless arrangement
is in place or is otherwise unrelated to the permissibility of the
health care-related tax.
When a provider signs an attestation, they affirm the attested
information to be true. States should treat these attestations in the
same manner as they treat other attestations supplied by providers that
affirm that the provider complies with various requirements to receive
payment. As with all Federal requirements, States must oversee their
programs to ensure that the State can identify noncompliant providers.
As described earlier in the preamble to this section, if a provider
submits an inaccurate attestation or refuses to submit a signed
attestation, FFP could be at risk, because the State may be claiming
Medicaid expenditures with an impermissible source of non-Federal share
(due to the existence of a hold harmless arrangement). In such a
situation (for example, where a provider fails to provide a required
attestation), the State could make signing an attestation a condition
of eligibility for the SDP, according to the terms of the contract that
conditions receipt of SDP funds on compliance with provision of an
attestation, as a risk mitigation strategy, to avoid making a payment
that guarantees to hold the taxpayer harmless. Some States have already
undertaken this approach. If the State chooses this risk mitigation
strategy, the State should include the requirement that a provider sign
an attestation to qualify for the SDP in its contracts with the managed
care plans making the payments to providers.
After consideration of the public comments, we are modifying the
regulatory text at Sec. 438.6(c)(ii)(H) to include language saying
States must
[[Page 41081]]
``ensure either that, upon CMS request, such attestations are
available, or that the State provides an explanation that is
satisfactory to CMS about why specific providers are unable or
unwilling to make such attestations.'' This change will help protect
States, and other providers submitting attestations, in cases of
uncooperative and/or unresponsive providers. We emphasize that, while
providers refusing to sign the attestations may result in an SDP
disapproval, it does not mean that it necessarily will. Conversely, we
also want to emphasize that the ability to provide CMS an explanation
should not be regarded as a pathway to automatic approval in the
absence of one or more provider attestations, as CMS will not approve
an SDP where there is evidence that the payments would be funded by an
impermissible arrangement. CMS will still perform our standard,
comprehensive review to determine whether the SDP is approvable
considering a variety of factors, including the underlying source(s) of
non-Federal share and will consider all available information, which
includes attestations and State explanations about missing
attestations, as applicable.
As stated previously, for a State's explanation for a missing
attestation to be satisfactory to CMS, it must demonstrate why the
absence of the attestation(s) is not indicative of a hold harmless
arrangement. The State should demonstrate how it made a good faith
effort to obtain the attestation and why it does not believe that the
absence of the attestation(s) should be considered evidence of the
existence of a hold harmless arrangement. A State could do this in many
ways. For example, an explanation could include relevant information
about the business status of the provider(s) in question, such as
information about solvency, and demonstrate how these circumstances
reflect that a hold harmless arrangement is not in place. In this
example, a State might note if the providers in question lacked
sufficient resources to obtain a timely review of the attestation by
legal counsel. As another example, a State could include relevant
information about the providers' revenue. In this case, the State might
describe its efforts to obtain all attestations and indicate that of
150 participating providers, only two providers with an extremely small
amount of all-payer revenue (who may be less motivated to assist with
SDP approval) did not file an attestation. A State could note further
any information that may indicate a hold harmless arrangement does not
exist with respect to the SDP and related taxes, such as how the
absence of a single attestation with all remaining participating
providers attesting would tend to suggest that there is not an
impermissible arrangement in place among providers eligible for an SDP.
However, if the State's explanation is insufficient to establish that a
hold harmless arrangement is unlikely to exist, then CMS can and may
deny the SDP.
As described in the proposed rule, CMS's statutory obligation is to
ensure proper and efficient operation of the Medicaid program. We will
disapprove an SDP when we know the payments would be funded under an
impermissible arrangement, or if upon request, the State does not
provide sufficient information to establish that the non-Federal share
source is permissible. The attestation requirement is an assurance
measure that is in furtherance of that obligation, but at no point was
it intended as the sole indicator of whether an SDP would be supported
by a permissible source of non-Federal share or as the sole deciding
factor for whether the SDP can be approved. We believe it would be
unnecessarily punitive on States and unrealistic to not provide an
opportunity to explain why one or more provider attestations could not
be obtained, and for CMS to consider whether the circumstances for the
failure to obtain such attestations might not suggest the existence of
a hold harmless arrangement, before deciding whether to approve an SDP.
Comment: A few commenters stated that they did not agree with how
CMS interprets the statute's definition of hold harmless arrangements.
Specifically, several commenters stated that CMS' interpretation
overstepped or misinterpreted the ``plain language'' of the statute.
Some of those commenters asserted that the statute specifies that
States must be responsible for arranging the hold harmless agreement.
They stated that, if private actors create an arrangement without State
involvement, it should not be considered a violation of the statute.
They noted that the proposed rule would further codify what they
consider to be CMS' erroneous interpretation of the statute's hold
harmless definition, and illegally interferes with private providers
engaging in private arrangements to mitigate the impact of a provider
tax. Several commenters specifically referenced a lawsuit that was
brought by the State of Texas against CMS that has resulted in the
court preliminarily enjoining CMS from disapproving or acting against
certain financing arrangements within Texas.
Response: We do not agree with commenters' characterization that
the proposed regulation and the requirements of this final rule
overstep the plain language of the statute. The statute requires all
Medicaid payments be supported by financing that complies with section
1903(w) of the Act, which, as relevant to the provider attestation
requirement in Sec. 438.6(c)(ii)(H), defines a hold harmless
arrangement to exist if the State or other unit of government imposing
the tax provides (directly or indirectly) for any payment, offset, or
waiver that guarantees to hold taxpayers harmless for any portion of
the costs of the tax. Regulations at Sec. 433.68(f)(3) interpret this
provision to specify that a hold harmless arrangement exists where a
State or other unit of government imposing a health care-related tax
provides for any direct or indirect payment, offset, or waiver such
that the provision of the payment, offset, or waiver directly or
indirectly guarantees to hold taxpayers harmless for all or any portion
of the tax amount. By providing a payment that is then redistributed
through private arrangements that offset the amount paid by a taxpayer,
a State has indirectly provided for a payment that guarantees to hold
the taxpayer harmless.
As such, we do not agree with commenters' assertion that the
proposed rule would require providers to attest to anything beyond what
is currently required under statute and regulation, as arrangements
that redistribute Medicaid payments to hold providers harmless for the
tax amounts they pay are prohibited under current law. The February
2008 final rule on health care-related taxes specified that hold
harmless arrangements prohibited by Sec. 433.68(f)(3) exist ``[w]hen a
State payment is made available to a taxpayer or a party related to the
taxpayer (for example, as a nursing home resident is related to a
nursing home), in the reasonable expectation that the payment would
result in the taxpayer being held harmless for any part of the tax.''
\124\
---------------------------------------------------------------------------
\124\ 73 FR 9694.
---------------------------------------------------------------------------
Regardless of whether the taxpayers participate mandatorily or
voluntarily, or receive the State's Medicaid payment directly from the
State or managed care plan or indirectly from another provider or other
entity via redistribution payments (using the dollars received as
Medicaid payments or with other provider funds that are replenished by
Medicaid payments), the taxpayers participating in these redistribution
arrangements have a reasonable
[[Page 41082]]
expectation that they will be held harmless for all or a portion of
their tax amount. We have consistently noted that we use the term
``reasonable expectation'' because ``State laws were rarely overt in
requiring that State payments be used to hold taxpayers harmless.''
\125\
---------------------------------------------------------------------------
\125\ Id.
---------------------------------------------------------------------------
We acknowledge that on June 30, 2023, a Federal district court in
Texas issued a preliminary injunction enjoining the Secretary from
implementing or enforcing the Bulletin dated February 17, 2023,
entitled ``CMCS Informational Bulletin: Health Care-Related Taxes and
Hold Harmless Arrangements Involving the Redistribution of Medicaid
Payments,'' or from otherwise enforcing the interpretation of the scope
of 42 U.S.C. 1396b(w)(4)(C)(i) (section 1903(w)(4)(C)(i) of the Act)
found therein. That injunction remains in effect, and we will abide by
it as long as it remains in effect, in implementing the attestation
requirements contained in Sec. 438.6(c)(ii)(H) of this final rule.
Comment: One State commenter objected to the proposed rule because
they currently have a pooling arrangement that the State says is
compliant with Federal law and working well. Specifically, the
commenter noted that in their State, providers have had various private
agreements to redistribute funds among themselves for decades, with the
full knowledge and approval of CMS.
Response: We do not agree with the commenter that an arrangement
that pools and redistributes Medicaid payments to hold providers
harmless for tax payments would comply with Federal law and
regulations. The foundation of Federal-State shared responsibility for
the Medicaid program is that the State must participate in the
financial burdens and risks of the program. This requirement for a
State financial interest in operating and monitoring its Medicaid
program helps ensure that the State operates the program in the best
interest of beneficiaries (see section 1902(a)(19) of the Act) and in a
manner that results in receiving the best value for Federal and State
taxpayers for the funds expended.
Section 1902(a)(2) of the Act and its implementing regulation in 42
CFR part 433, subpart B require States to share in the cost of medical
assistance expenditures and permit other units of State or local
government to contribute to the financing of the non-Federal share of
medical assistance expenditures where applicable Federal requirements
are met. These provisions are intended to safeguard the Federal-State
partnership, irrespective of the Medicaid delivery system or payment
authority. The provisions do so by ensuring that States are
meaningfully engaged in identifying, assessing, mitigating, and sharing
in the risks and responsibilities inherent in operating a program as
complex and economically significant as Medicaid. States are
accordingly motivated to administer their programs economically and
efficiently. Medicaid payment redistribution arrangements undermine the
fiscal integrity of the Medicaid program by their apparent design to
redirect Medicaid payments away from Medicaid providers that serve a
high percentage of Medicaid beneficiaries to providers that do not
participate in Medicaid or that have relatively lower Medicaid
utilization. Further, they are inconsistent with existing statutory and
regulatory requirements prohibiting hold harmless arrangements and
artificially inflate Federal Medicaid expenditures.
Comment: One commenter noted that in its State, some institutional
providers have complex partnership and ownership relationships with
other institutions, both within and outside of the State. The commenter
anticipated needing more guidance as to what arrangements would be
permissible.
Response: We recognize that the requirement to obtain attestations
from providers that would receive an SDP places additional
responsibilities on States, and we recognize that many States impose
taxes on and pay providers that have multiple business and financial
relationships with one another. Large ownership groups operate in
multiple States and with different types of providers. CMS does not
intend to interfere with the normal business operations of any
providers, large or small. However, the final rule will help avoid
arrangements in which providers are explicitly connecting taxes to
payments in a manner that holds taxpayers harmless. CMS will work with
each State as needed to ensure that the law can be applied
appropriately in all circumstances, consistent with applicable
statutory and regulatory requirements.
Comment: One commenter lauded what they called the ``safe harbor
Hold Harmless provisions'' as an important tool for financing States'
share of Medicaid payments and recommended that, rather than finalizing
the proposed rule, CMS should more vigorously enforce ``safe harbor''
compliance.
Response: We agree that enforcing the existing requirements
concerning health care-related taxes would be beneficial. As such, CMS
believes that the attestation requirement is necessary to ensure that
SDPs are financed appropriately.
In addition, the ``safe harbor'' threshold located at 42 CFR
433.68(f)(3)(i)(A) states that taxes that are under 6 percent of net
patient revenue attributable to an assessed permissible class pass the
indirect hold harmless test. This test is an important financing
accountability requirement, but it is not addressed in this rulemaking.
We also remind the commenter that the 6 percent indirect hold harmless
limit does not mean that States are permitted to have direct hold
harmless arrangements if the amount of the tax is less than 6 percent
of net patient revenue. The 6 percent indirect hold harmless test is an
additional requirement on top of, not in place of, the prohibition
against having a direct hold harmless arrangement, including through
indirect payments.
Comment: One commenter stated that CMS should not adopt a new
substantive rule governing Medicaid financing that is limited to
managed care, but rather such requirements should apply broadly to all
delivery systems and payments by amending financing rules generally.
The commenter stated concerns that an inconsistent application of a new
policy would result in arbitrary and capricious distinctions between
Medicaid FFS and managed care expenditures, as well as between Medicaid
managed care directed and non-directed payments.
Response: We appreciate the commenter's perspective on ensuring
consistency across payment types and delivery systems. Partly in
response to this shared concern, in the proposed rule, we requested
public comment on whether the proposed changes in Sec.
438.6(c)(2)(ii)(G) and (H) should be incorporated more broadly into 42
CFR part 438 in future rulemaking. We appreciate the commenter's
feedback.
We also note that as part of our review of SDP proposals, we are
increasingly encountering issues with State financing of the non-
Federal share of SDPs that may not comply with the underlying Medicaid
statute and regulations. In addition, concerns around the funding of
the non-Federal share for SDPs have been raised by oversight bodies.
Further, CMS at times denies approval of proposed State plan amendments
affecting FFS payments due to unallowable sources of non-Federal share.
States that have SDPs disapproved because of impermissible financing
will also have the opportunity to engage in an administrative appeals
process if they choose, similar to how
[[Page 41083]]
States may administratively appeal the disapproval of a FFS payment
State plan amendment.
Comment: We received a few comments that addressed this provision
generally, and opposed implementation, but the commenters did not
provide further explanation.
Response: We do not agree with these comments, we appreciate the
concerns stated, and wherever possible we will seek to assist States
with meeting these new requirements.
After reviewing the public comments, we are finalizing the
following changes to the financing attestation provision in Sec.
438.6(c)(2)(ii)(H):
Updating the proposed language, ``ensure that providers
receiving payment under a State directed payment attest that providers
do not participate in any hold harmless arrangement'' to read, in
paragraph (H)(1), ``ensure that providers receiving payment under a
State directed payment attest that they do not participate in any hold
harmless arrangement.''
Updating the proposed language, ``directly or indirectly
guarantees to hold the provider harmless for all or any portion of the
tax amount'' to read, in paragraph (H)(1), ``directly or indirectly
guarantees to hold the taxpayer harmless for all or any portion of the
tax amount.''
Updating Sec. 438.6(c)(2)(ii)(H) with an organizational
change to divide the provision into paragraphs (H)(1) and (H)(2).
Updating the proposed language, ``ensure that such
attestations are available upon CMS request'' to read, in paragraph
(H)(2), ``ensure either that, upon CMS request, such attestations are
available, or that the State provides an explanation that is
satisfactory to CMS about why specific providers are unable or
unwilling to make such attestations.''
h. Tie to Utilization and Delivery of Services for Fee Schedule
Arrangements (Sec. 438.6(c)(2)(vii))
A fundamental requirement of SDPs is that they are payments related
to the delivery of services under the contract. In the 2016 final rule,
we stated how actuarially sound payments, which are required under
section 1903(m)(2)(A)(iii) for capitation payments to MCOs and under
part 438 regulations for capitation payments to risk-based PIHPs and
PAHPs, must be based on the provision of covered benefits and
associated administrative obligations under the managed care contract
(81 FR 27588). This requirement that SDPs be tied to the utilization
and delivery of covered benefits differentiates SDPs from pass-through
payments. We described the differences between pass-through payments
and SDPs in the 2016 final rule and in the 2017 Pass-Through Payment
Rule, where we noted 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 (81 FR 27587
through 27592, 82 FR 5415).
The current regulations at Sec. 438.6(c)(2)(ii)(A) require that
States demonstrate in writing that SDPs that require prior written
approval be based on the utilization and delivery of services to
Medicaid enrollees covered under the managed care plan contract. We
have interpreted and applied this requirement to mean that SDPs must be
conditioned upon the utilization or delivery of services during the
rating period identified in the preprint for which the State is seeking
written prior approval. Requiring SDPs to be based on the utilization
and delivery of services is a fundamental and necessary requirement for
ensuring the fiscal and program integrity of SDPs, but we believe
further clarification is appropriate due to the variety of payment
mechanisms that States use in their SDP arrangements. Ensuring that
payments are based on the delivery of services in SDPs that are fee
schedule requirements described in Sec. 438.6(c)(1)(iii) is relatively
straightforward since fee schedules explicitly link a rate to each code
(for example, CPT or HCPCS), compared to SDPs that are VBP initiatives
described in Sec. 438.6(c)(1)(i) and (ii). As discussed in further
detail in section I.B.2.i. of the proposed rule and in this final rule,
ensuring that payments in VBP initiatives are based on the delivery of
services in ways that do not hinder States' ability to pursue VBP
efforts is more difficult because, by their nature, VBP initiatives
seek to move away from paying for volume (or per services) in favor of
paying for value and performance. We proposed revising Sec. 438.6(c)
to address how different types of SDPs must be based on utilization and
delivery of covered services; this section discusses these requirements
for fee schedule arrangements and section I.B.2.i. of this final rule
discusses the requirements for VBP initiatives.
For SDPs that are fee schedule requirements described in Sec.
438.6(c)(1)(iii), the tie to utilization and delivery of services means
that States require managed care plans to make payments when a
particular service was delivered during the rating period for which the
SDP was approved. Thus, the State could not, under our interpretation
of the requirement, require managed care plans to make payments for
services that were delivered outside of the approved rating period.
However, in working with States, we found that this was not always
understood. Therefore, we clarified this in SMDL #21-001,\126\ and
noted that SDPs need to be conditioned on the delivery and utilization
of services covered under the managed care plan contract for the
applicable rating period and that payment cannot be based solely on
historical utilization.
---------------------------------------------------------------------------
\126\ https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf.
---------------------------------------------------------------------------
We proposed to codify this clarification in a new Sec.
438.6(c)(2)(vii)(A) for SDPs described in Sec. 438.6(c)(1)(iii)--that
is, minimum fee schedules, maximum fee schedules, and uniform
increases. The proposal would require that any payments made under the
SDP are conditioned on the utilization and delivery of services under
the managed care plan contract for the applicable rating period only.
This will preclude States from making any SDP payment based on
historical utilization or any other basis that is not tied to the
delivery of services in the rating period itself.
Our proposal also addressed SDPs that require reconciliation. In
SMDL #21-001,\127\ we noted that in capitation rate development, States
can use historical data to inform the capitation rates that will be
paid to managed care plans for services under the rating period, and
this is consistent with Sec. 438.5(b)(1) and (c). However, in
accordance with current requirements in Sec. 438.6(c)(2)(ii)(A),
payment to providers for an SDP must be made based on the delivery and
utilization of covered services rendered to Medicaid beneficiaries
during the rating period documented for the approved SDP. We have
reviewed and approved SDPs, typically SDPs that establish uniform
increases of a specific dollar amount, in which States require managed
care plans to make interim payments based on historical utilization and
then after the close of the rating period, reconcile the payments to
actual utilization that occurred during the rating period approved in
the SDP. For these SDPs, States include the SDP in the rate
certification and then once actual utilization for the current rating
year is known, we observe that in many cases States have their
actuaries submit an amendment to adjust the amount paid to plans
(whether through a separate payment term or an adjustment to base
[[Page 41084]]
rates) to account for this reconciliation. These amendments typically
come near to or after the close of the rating period and are most
common when the reconciliation will result in increased costs to the
plan absent the adjustment. As a result, risk is essentially removed
from the managed care plans participating in the SDP. We are concerned
with this practice as we believe tying payments in an SDP, even interim
payments, to utilization from a historical time period outside of the
rating period approved for the SDP, is inconsistent with prospective
risk-based capitation rates that are developed for the delivery of
services in the rating period. Further, rate amendments that are
submitted after the rating period concludes that adjust the capitation
rates retroactively to reflect actual utilization under the SDP goes
against the risk-based nature of managed care. To address this, we
proposed a new Sec. 438.6(c)(2)(vii)(B) which will prohibit States
from requiring managed care plans to make interim payments based on
historical utilization and then to reconcile those interim payments to
utilization and delivery of services covered under the contract after
the end of the rating period for which the SDP was originally approved.
---------------------------------------------------------------------------
\127\ https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf.
---------------------------------------------------------------------------
To illustrate our concern and need for the proposed regulatory
requirement, we share the following example for a State that has an SDP
approved to require a uniform increase to be paid for inpatient
hospital services for CY 2020. During CY 2020, the State's contracted
managed care plans pay the inpatient hospital claims at their
negotiated rates for actual utilization and report that utilization to
the State via encounter data. Concurrently, the State directs its
managed care plans, via the SDP, to make a separate uniform increase in
payment to the same inpatient hospital service providers, based on
historical CY 2019 utilization. Under this example, the increase in
January CY 2020 payment for the providers is made based on January CY
2019 data, the increase in February CY 2020 payment is based on
February CY 2019 data, and so forth. This pattern of monthly payments
continues throughout CY 2020. After the rating period ends in December
2020, and after a claims runout period that can be as long as 16
months, the State then in mid-CY 2021 or potentially early 2022,
reconciles the amount of CY 2019-based uniform increase payments to the
amount the payments should be based on CY 2020 claims. The State then
requires its managed care plans to make additional payments to, or
recoup payments from, the hospitals for under- or over-payment of the
CY 2019-based uniform increase.
In the inpatient hospital uniform increase example above, the State
may initially account for the SDP in the CY 2020 rate certification
and, after the rating period is over, the State submits an amendment to
their rate certification to revise the total dollar amount dedicated to
the SDP and the capitation rates to reflect the SDP provider payments
that were made based on actual utilization in the CY 2020 rating
period--thereby, making the managed care plans ``whole'' and removing
risk from the managed care plans participating in the SDP. We do not
find these practices consistent with the nature of risk-based managed
care.
Capitation rates must be actuarially sound as required by section
1903(m)(2)(A)(iii) of the Act \128\ and in Sec. 438.4. Specifically,
Sec. 438.4(a) requires that actuarially sound capitation rates are
projected to provide for all reasonable, appropriate, and attainable
costs that are required under the terms of the contract and for the
operation of the MCO, PIHP, or PAHP for the time period and the
population covered under the terms of the contract, and such capitation
rates are developed in accordance with the requirements outlined in
Sec. 438.4(b). ``Rating Period'' is defined at Sec. 438.2 as a period
of 12 months selected by the State for which the actuarially sound
capitation rates are developed and documented in the rate certification
submitted to CMS as required by Sec. 438.7(a). We described in the
proposed rule our belief that SDPs that make payments based on
retrospective utilization and include reconciliations to reflect actual
utilization, while eventually tying final payment to utilization and
delivery of services during the rating period approved in the SDP, are
contrary to the nature of risk-based managed care. SDPs must tie to the
utilization and delivery of services to Medicaid enrollees covered
under the contract for the rating period approved in the SDP.
---------------------------------------------------------------------------
\128\ The actuarial soundness requirements apply statutorily to
MCOs under section 1903(m)(2)(A)(ii) of the Act and were extended to
PIHPs and PAHPs under our authority in section 1902(a)(4) of the Act
in the 2002 final rule.
---------------------------------------------------------------------------
We have previously issued regulations and guidance in response to
payments we found to be inconsistent with the statute concerning
actuarial soundness. In the 2016 rule we noted our belief that the
statutory requirement that capitation payments to managed care plans be
actuarially sound requires that payments under the managed care
contract align with the provision of services under the contract. We
further noted that based on our review of capitation rates, we found
pass-through payments being directed to specific providers that
generally were not directly linked to the delivered services or the
outcomes of those services; thereby noting that pass-through payments
are not consistent with actuarially sound rates and do not tie provider
payments with the provision of services.\129\ These concerns led CMS to
phase out the ability of States to utilize pass-through payments as
outlined in Sec. 438.6(d). In the proposed rule, we noted that we
reached a similar conclusion in our review of SDP proposals which use
reconciliation of historical to actual utilization; if States are
seeking to remove risk from managed care plans in connection with these
types of SDPs, it is inconsistent with the nature of risk-based
Medicaid managed care. As further noted in the 2016 rule, ``[t]he
underlying concept of managed care and actuarial soundness is that the
[S]tate is transferring the risk of providing services to the MCO and
is paying the MCO an amount that is reasonable, appropriate, and
attainable compared to the costs associated with providing the services
in a free market. Inherent in the transfer of risk to the MCO is the
concept that the MCO has both the ability and the responsibility to
utilize the funding under that contract to manage the contractual
requirements for the delivery of services.'' \130\
---------------------------------------------------------------------------
\129\ 81 FR 27587 and 27588.
\130\ 81 FR 27588.
---------------------------------------------------------------------------
States use retrospective reconciliations even though there are less
administratively burdensome ways to ensure payment rates for specific
services are at or above a certain level. States could accomplish this
through the establishment of a minimum fee schedule, which we proposed
to define in Sec. 438.6(a) as any contract requirement where the State
requires a MCO, PIHP, or PAHP to pay no less than a certain amount for
a covered service(s). If a State's intent is to require that managed
care plans pay an additional amount per service delivered, States could
accomplish this through the establishment of a uniform increase, which
we proposed to define in Sec. 438.6(a) as any contract requirement
where the State requires a MCO, PIHP, or PAHP to pay the same amount
(the same dollar or the same percentage increase) per covered
service(s) in addition to the rates the managed care plan negotiated
with providers. In addition to being less administratively burdensome,
both options will provide more clarity to providers on payment rates
and likely result in more timely
[[Page 41085]]
payments than a retrospective reconciliation process. Both options
would also allow States' actuaries to include the SDPs into the
standard capitation rate development process using the same utilization
projections used to develop the underlying capitation rates. States can
require both minimum fee schedules and uniform increases under current
regulations and the amendments made in this final rule to Sec.
438.6(c).
Requiring managed care plans to make interim payments based on
historical utilization and then reconciling to actual utilization
instead suggests an intent by State to ensure payment of a specific
aggregate amount to certain providers or, in some cases, removal of all
risk related to these SDPs from managed care plans. Prohibiting this
practice and removing post-payment reconciliation processes as we
proposed in Sec. 438.6(c)(2)(vii)(B) will alleviate oversight
concerns, align with the risk-based nature of capitation rates, as well
as restore program and fiscal integrity to these kinds of payment
arrangements.
We proposed to prohibit the use of post-payment reconciliation
processes for SDPs; specifically, we proposed that States establishing
fee schedules under Sec. 438.6(c)(1)(iii) could not require that plans
pay providers using a post-payment reconciliation process. These post-
payment reconciliation processes that we proposed to prohibit here
directs how the plans pay providers. We have raised concerns about the
removal of risk from the plan and their use by some States in ways that
are contrary to the risk-based nature of Medicaid managed care.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comments on our proposals.
We summarize and respond to public comments received on our
proposal for tying utilization and delivery of services for fee
schedule arrangements (proposed Sec. 438.6(c)(2)(vii)) below.
Comment: Some commenters supported our proposal to prohibit States
from requiring plans to make interim payments based on historical
utilization and then reconciling these interim payments to utilization
and delivery of services at the end of the rating period (meaning the
proposal at Sec. 438.6(c)(2)(vii)(B) and agreed that this change would
ensure that payments made under an SDP be conditioned on the
utilization and delivery of services under the managed care plan
contract for the applicable rating period only, as specified at
proposed Sec. 438.6(c)(2)(vii)(A). Commenters stated these were
reasonable and appropriate guardrails to ensure that SDPs are
prospective and appropriately funded within capitation rates.
Response: We appreciate commenters' support for these proposals.
These provisions are fundamental and necessary protections to ensure
the fiscal and program integrity of SDPs and the risk-based nature of
Medicaid managed care.
Comment: Many commenters opposed the requirements specified at
Sec. 438.6(c)(2)(vii)(A) and (B). Some commenters stated concern that
these proposals would preclude States and managed care plans from
making SDP payments to providers based on historical data altogether.
Other commenters stated concerns that these policies could create cash
flow problems for providers and thus impact access to care. Other
commenters stated concern that payments from the managed care plans to
providers could not be completed within the rating period which would
mean that plans and States could not comply with this requirement. Some
commenters suggested including a grace period after the rating period
ends to allow for claims run out to occur. These commenters stated
concern that these provisions would create State challenges for
verifying that SDP rate increases are properly paid on each claim when
paying contemporaneously. Many commenters requested that CMS clarify
what practices would be allowable within these requirements.
Response: We acknowledge that many commenters stated either concern
that historical data, interim payments and reconciliation could not be
used at all under Sec. 438.6(c)(2)(vii)(A) and (B) or requested
additional clarification to ensure that reconciliation was still
available in addition to claims runout practices. Our goal is to ensure
the integrity of risk-based managed care. Payments to providers under
SDPs must be based on utilization and delivery of services during the
rating period in order to ensure that the payments are consistent with
the nature of risk-based care and do not unnecessarily undermine the
managed care plan's ability to manage its risk under the managed care
contract.
To be clear, this provision, as proposed and as finalized here,
does not prohibit all administrative reconciliation processes such as
those standard provider payment processes associated with claims
processing such as runout, adjudication, and appeal which may not be
completed within the rating period. These processes can continue. We
also note managed care plans should pay providers in a timely manner
pursuant to Sec. 447.46, and we believe this can be accomplished
within the parameters of these requirements finalized in Sec.
438.6(c).
For a broader example, we revisit our example from proposed rule
(88 FR 28133) and adapt it to illustrate permissible uses of historical
data, claims data, interim payments, reconciliation, and claims runout.
During CY 2020, the State's contracted managed care plans pay the
inpatient hospital claims at their negotiated rates for actual
utilization and report that utilization to the State via encounter
data. Concurrently, the State directs its managed care plans, via the
SDP, to make a uniform increase percentage payment of 3 percent per
service rendered to the same inpatient hospital service providers. The
total amount of the dollars to be paid during the rate period under the
SDP was determined during capitation rate development using historical
data from CY 2019, consistent with Sec. 438.5(b)(1) and (c) and
utilizing adjustments in rate development as appropriate in accordance
with Sec. 438.5(b)(4). During the rating period, the plans make
estimated interim payments (negotiated base provider payment rates plus
the 3 percent increase to those payment rates as directed by the SDP)
quarterly to the qualifying providers based on utilization within a
timeframe in the rating period (for example, an interim estimated
payment is made in April based on utilization in January through
March). When the claims runout is complete, which may take as long as
16 months, the plans make a final payment to the providers based on
total actual utilization for services rendered during the rating
period.
Under this example, historical data are used appropriately in
capitation rate development for the managed care plans, consistent with
Sec. 438.5(b)(1) and (c), and not as the basis for interim payments
from the plans to providers. Estimated interim payments are made by the
plans to providers based on actual experience for a timeframe within
the rating period to ensure there is no disruption in cash flow for
providers. Claims can be continued to be paid by the plans to the
providers after the end of the rating period, provided they are for
utilization that occurred within the rating period, either by date of
receipt of the claim or date of service, depending on the State's
consistent methodology. Payment adjustments from the plan to the
provider can still be used to ensure the plan's payments
[[Page 41086]]
to providers have been accurately tied to utilization within the rating
period. The regulation at Sec. 438.6(c)(2)(vii)(B), as proposed and
finalized, does not prohibit reconciliation of payments to actual
utilization during the rating period when interim payments were also
based on utilization during the rating period. there is no need for a
capitation rate amendment as the State has prospectively and
appropriately assigned the risk to the plans and developed actuarially
sound capitation rates.
However, in the example previously, the most straight forward way
for plans to pay providers consistent with the required uniform
increase is to increase the base payment to providers by 3 percent.
When the base payment is adjusted this way, there is no need for plans
to make adjustments to provider payments at a later date, and providers
will receive full payment initially, rather than waiting a potentially
significant amount of time for the plan to reconcile to actual
utilization.
Comment: Some commenters opposed the provisions specified at Sec.
438.6(c)(2)(vii)(A) and (B) given concerns that these provisions would
reduce or remove States' ability to mitigate risk using SDPs. Another
commenter did not agree that retroactively adjusting the payment amount
circumvents the prospective, risk-based nature of the managed care
arrangement; instead, the commenter stated that SDPs are intended to
allow States to direct payment amounts through managed care plans,
which by their nature removes some of the risk from the arrangement.
Response: As we have stated in the past, we believe that allowing
States to direct the expenditures of a managed care plan to make
payments to providers in a specified manner can reduce the plan's
ability to effectively manage costs, and as we described in the
proposed rule preamble, this is why we finalized specific parameters
for SDPs in the 2016 final rule (88 FR 28110). We disagree that it is
reasonable and appropriate for SDPs to be designed in a manner to fully
remove risk from the managed care plans participating in the SDP as
this is contrary to the nature of risk-based Medicaid managed care. For
these reasons, we are finalizing 438.6(c)(2)(vii)(A) and (B) as
proposed.
Comment: One commenter recommended that CMS create ``a threshold
(perhaps 5 percent) of change in payment per-enrollee beyond which an
additional [rate] certification would be required'' rather than
prohibiting the use of interim payments as specified in Sec.
438.6(c)(2)(vii)(B) if CMS's primary concern is that the SDP
reconciliation would result in final capitation rates that are
potentially different than the actuarially sound capitation rates. The
commenter did not provide further details on this recommendation.
Response: We are unclear on the recommended alternative that the
commenter suggested and there is not adequate detail to evaluate it
further. We believe that States have appropriate flexibility under
Sec. 438.6(c)(2)(vii)(A) and (B), as we have outlined in the
illustrative example above. All SDPs must be documented within rate
certifications (see section I.B.2.l. of this final rule for further
detail) and the types of changes in rates that do not require an
amended rate certification are not changing in this rulemaking. For
these reasons, we decline to revise Sec. 438.6(c)(2)(vii)(A) and (B).
Comment: Some commenters opposed the provisions specified in Sec.
438.6(c)(2)(vii)(A) and (B) as they noted that it would increase State
administrative burden, and one of these commenters indicated it is
administratively easier to reconcile payments from historical data.
Some commenters also requested that if CMS does implement these
provisions that they be delayed until ongoing challenges with the
process of SDP preprint submissions, and CMS review and approval of
these preprints are resolved.
Response: We do not agree that these provisions will create new
administrative burden. As discussed in the proposed rule (88 FR 28134),
retrospective reconciliation for SDP payments is administratively
burdensome and we believe States can meet their goals using appropriate
processes that eliminate the need to pay interim payments on experience
outside of the rating period or conduct associated reconciliation
processes. See a previous response to comment in this section in which
we provide an illustrative example. We do not believe revisions to
State and managed care plan processes to comply with Sec.
438.6(c)(2)(vii)(A) and (B) would create excessive new administrative
burden, as outlined in the illustrative example, and we are hopeful
these changes could create administrative efficiencies. However, we
acknowledge that States frequently pair separate payment terms with
post payment reconciliation processes to ensure that the full separate
payment term amount is paid out. Therefore, we are finalizing the
applicability date for Sec. 438.6(c)(2)(vii)(A) and (B) to align with
the applicability date for the prohibition we are finalizing against
separate payment terms in Sec. 438.6(c)(6). State will be required to
come into compliance with Sec. 438.6(c)(2)(vii)(A) and (B) no later
than the first rating period beginning on or after 3 years after the
effective date of the final rule instead of the proposed 2-year
compliance period. For discussion on the elimination of separate
payment terms and related changes to the proposed regulation text,
refer to sections I.B.2.k., I.B.2.l., I.B.2.m. and I.B.2.p. of this
final rule.
We agree that improvements in the SDP preprint submission process
are necessary. We believe our proposals related to SDP submission
timeframes will improve the fiscal oversight of these SDPs and CMS's
review and approval of SDP preprints (see section I.B.2.e. of this
final rule for further details); and as such, we decline to further
delay the implementation of these provisions. We also acknowledge that
if a minimum fee schedule SDP is not approved until after the start of
the rating period, plans are not prohibited from making retroactive
payments to providers so long as the payments are made consistent with
Sec. 438.6(c), including that the payments are conditioned on the
utilization and delivery of services under the managed care plan
contract for the applicable rating period only.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing Sec.
438.6(c)(2)(vii)(A) and (B) as proposed.
i. Value-Based Payments and Delivery System Reform Initiatives (Sec.
438.6(c)(2)(vi))
We also proposed several changes to Sec. 438.6(c) to address how
VBP initiatives, which include value-based purchasing, delivery system
reform, and performance improvement initiatives as described in Sec.
438.6(c)(1)(i) and (ii), can be tied to delivery of services under the
Medicaid managed care contract, as well as to remove barriers that
prevent States from using SDPs to implement these initiatives.
Currently Sec. 438.6(c)(2)(ii)(A) requires SDPs to be based on the
utilization and delivery of services, so SDPs that require use of VBP
initiatives must base payment to providers on utilization and delivery
of services. Further, current Sec. 438.6(c)(2)(iii)(A) requires States
to demonstrate in writing that the SDP will make participation in the
VBP initiative available, using the same terms of performance, to a
class of providers providing services under the contract related to the
initiative. (As finalized in this rule, the same requirement is
codified at
[[Page 41087]]
Sec. 438.6(c)(2)(vi)(A).) Existing regulations at Sec. 438.6(c)(1)(i)
and (ii) allow States to direct Medicaid managed care plans to
implement value-based purchasing models with providers or to
participate in delivery system reform or performance improvement
initiatives; these types of SDPs require written prior approval from
CMS. These provisions were adopted as exceptions to the overall
prohibition on States directing the payment arrangements used by
Medicaid managed care plans to pay for covered services. Since the 2016
rule, States have used SDPs to strengthen their ability to use their
managed care programs to promote innovative and cost-effective methods
of delivering care to Medicaid enrollees, to incent managed care plans
to engage in State activities that promote certain performance targets,
and to identify strategies for VBP initiatives to link quality outcomes
to provider reimbursement. As the number of SDPs for VBP initiatives
continues to grow, we have found that the existing requirements at
Sec. 438.6(c)(2)(iii) can pose unnecessary barriers to implementation
of these initiatives in some cases. We proposed revisions to Sec.
438.6(c) to address such barriers. First, we proposed to redesignate
current paragraph (c)(2)(iii) as paragraph (c)(2)(vi) with a revision
to remove the phrase ``demonstrate in writing'' to be consistent with
the effort to ensure that SDP standards apply to all SDPs, not only
those that require prior approval. We also proposed to redesignate
current paragraph (c)(2)(iii)(A) as paragraph (c)(2)(vi)(A).
To remove provisions that are barriers to implementation of VBP
initiatives, add specificity to the types of arrangements that can be
approved under Sec. 438.6(c), and strengthen the link between SDPs
that are VBP initiatives and quality of care, we proposed the following
changes to the requirements that are specific to SDPs that involve VBP
initiatives:
(1) Remove the existing requirements at Sec. 438.6(c)(2)(iii)(C)
that currently prohibit States from setting the amount or frequency of
the plan's expenditures.
(2) Remove the existing requirements at Sec. 438.6(c)(2)(iii)(D)
that currently prohibit States from recouping unspent funds allocated
for these SDPs.
(3) Redesignate Sec. 438.6(c)(2)(iii)(B) with revisions and
clarifications to Sec. 438.6(c)(2)(vi)(B). The provision addresses how
performance in these types of arrangements is measured for
participating providers.
(4) Adopt a new Sec. 438.6(c)(2)(vi)(C) to establish requirements
for use of population-based and condition-based payments in these types
of SDP arrangements.
Currently, Sec. 438.6(c)(2)(iii)(C) prohibits States from setting
the amount or frequency of expenditures in SDPs that are VBP
initiatives. In the 2015 proposed rule,\131\ we reasoned that while
capitation rates to the managed care plans will reflect an amount for
incentive payments to providers for meeting performance targets, the
plans should retain control over the amount and frequency of payments.
We believe that this approach balanced the need to have a health plan
participate in a multi-payer or community-wide initiative, while giving
the health plan a measure of control to participate as an equal
collaborator with other payers and participants. However, VBP
initiatives often include, by design, specific payment amounts at
specific times. As States began to design and implement VBP
initiatives, sometimes across delivery systems or focused on broad
population health goals, many found that allowing plans to retain such
discretion undermined the State's ability to implement meaningful
initiatives with clear, consistent operational parameters necessary to
drive provider performance improvement and achieve the goals of the
State's program. Also, because some VBP initiatives provide funding to
providers on bases other than ``per claim,'' these payment arrangements
need to be designed and administered in a way that encourages providers
to commit to meeting performance goals while trusting that they will
receive the promised funding if they meet the performance targets. This
is especially true for multi-delivery system arrangements or
arrangements that do not make payments for long periods of time, such
as annually. Inconsistencies in administration or payment can undermine
providers' confidence in the arrangement. For example, States often
direct their Medicaid managed care plans to distribute earned
performance improvement payments to providers on a quarterly basis.
Because these types of payment arrangements affect provider revenue
differently than the usual per claim payment methodology, establishing
strong parameters and operational details that define when and how
providers will receive payment is critical for robust provider
participation. While allowing States the flexibility to include the
amount and frequency of payments when designing VBP and delivery system
reform initiatives removes discretion from managed care plans, we
believe this flexibility is necessary to ensure that States can achieve
their quality goals and get value for the dollars and effort that they
invest in these arrangements. Creating obstacles for States trying to
implement VBP initiatives was not our intent in the 2016 final rule.
Our goal then and now is to incent States to implement innovative
initiatives that reward quality of care and improved health outcomes
over volume of services. To accomplish this, we need to refine our
regulations; we proposed to remove the existing text at Sec.
438.6(c)(2)(iii)(C) that prohibits States from setting the amount and
frequency of payment. We believe this will enable States to design more
effective VBP initiatives using more robust quality measures to help
ensure provider uptake, boost providers' confidence in the efficiency
and effectiveness of the arrangement, and enable States to use VBP
initiatives to achieve critical program goals.
---------------------------------------------------------------------------
\131\ https://www.federalregister.gov/documents/2015/06/01/2015-12965/medicaid-and-childrens-health-insurance-program-chip-programs-medicaid-managed-care-chip-delivered (pg 31124).
---------------------------------------------------------------------------
Currently, Sec. 438.6(c)(2)(iii)(D) prohibits States from
recouping any unspent funds allocated for SDP arrangements from managed
care plans when the SDP arrangement is for VBP, delivery system reform,
or performance improvement initiatives. In the 2015 proposed rule, we
noted that because funds associated with delivery system reform or
performance initiatives are part of the capitation payment, any unspent
funds will remain with the MCO, PIHP, or PAHP. We believe this was
important to ensure the SDPs made to providers were associated with a
value relative to innovation and Statewide reform goals and not simply
an avenue for States to provide funding increases to specific
providers. However, allowing managed care plans to retain unspent funds
when providers fail to achieve performance targets can create perverse
incentives for States and managed care plans. States have described to
us that they are often not incentivized to establish VBP arrangements
with ambitious performance or quality targets if those arrangements
result in managed care plans profiting from weak provider performance.
Although States attempt to balance setting performance targets high
enough to improve care quality and health outcomes but not so high that
providers are discouraged from participating or so low that they do not
result in improved quality or outcomes, many States struggle due to
lack of experience and robust data. And unfortunately, failed attempts
to implement VBP arrangements
[[Page 41088]]
discourage States, plans, and providers from trying to use the
arrangements again. It was never our intent to discourage States from
adopting innovative VBP initiatives, so we seek to address the
unintended consequence created in the 2016 final rule by proposing to
remove the regulation text at Sec. 438.6(c)(2)(iii)(D) that prohibits
States from recouping unspent funds from the plans. We noted in the
proposed rule that removing this prohibition could enable States to
reinvest these unspent funds to further promote VBP and delivery system
innovation. To the extent a state intends to recoup unspent funds from
plans for any State directed payment, this would need to be described
in the State's preprint.
To expand the types of VBP initiatives that will be allowed under
Sec. 438.6(c)(1)(i) and (ii) and ensure a focus on value over volume,
we also proposed additional revisions in Sec. 438.6(c)(2)(vi) to
distinguish between performance-based payments and the use of proposed
population-based or condition-based payments to providers. These
different types of VBP initiatives have different goals and conditions
for payment, and we believe that establishing different requirements
for them is necessary to establish the appropriate types of parameters
for payment.
The existing regulations at Sec. 438.6(c)(1)(i) and (ii) were
intended both to incent State activities that promote certain
performance targets, as well as to facilitate and support delivery
system reform initiatives within the managed care environment to
improve health care outcomes. We recognize that certain types of multi-
payer or Medicaid-specific initiatives, such as patient-centered
medical homes (PCMH), broad-based provider health information exchange
projects, and delivery system reform projects to improve access to
services, among others, may not lend themselves to being conditioned
upon provider performance during the rating period.\132\ Instead, these
arrangements are conditioned upon other factors, such as the volume and
characteristics of a provider's attributed population of patients or
upon meeting a total cost of care (TCOC) benchmark, for example,
through the provision of intense case management resulting in a
reduction of poor outcomes related to chronic disease. Due to the
diversity of VBP initiatives, we believe that the existing language at
Sec. 438.6(c)(2)(iii)(B), which requires that all SDPs that direct
plan expenditures under Sec. 438.6(c)(1)(i) and (ii) must use a common
set of performance measures across all of the payers and providers,
cannot be broadly applied to arrangements or initiatives under Sec.
438.6(c)(1)(i) and (ii) that do not measure specific provider
performance measures.
---------------------------------------------------------------------------
\132\ http://hcp-lan.org/workproducts/apm-framework-onepager.pdf.
---------------------------------------------------------------------------
We believe the best way to address the limitations in current
regulation text is to specify different requirements for VBP
initiatives that condition payment upon performance from ones that are
population or condition-based. Therefore, we proposed to use new Sec.
438.6(c)(2)(vi)(B) for requirements for SDPs that condition payment on
performance. We also proposed to adopt requirements in addition to
redesignating the provision currently at Sec. 438.6(c)(2)(iii)(B) to
newly proposed Sec. 438.6(c)(2)(vi)(B)(2). We proposed new
requirements at new (c)(2)(vi)(B)(1) and (3) through (5) that are
clarifications or extensions of the current requirement that SDPs use a
common set of performance metrics.
We further proposed to add new Sec. 438.6(c)(2)(vi)(C) to describe
the requirements for SDPs that are population-based payments and
condition-based payments.
Performance-Based Payments. Under current Sec. 438.6(c)(2)(ii)(A),
SDPs that direct the MCO's, PIHP's, or PAHP's expenditures under
paragraphs (c)(1)(i) and (ii) must be based on the utilization and
delivery of services. Therefore, we have required that SDPs that are
VBP initiatives be based on performance tied to the delivery of covered
services to Medicaid beneficiaries covered under the Medicaid managed
care contract for the rating period. This means that we have not
allowed these types of SDPs to be based on ``pay-for-reporting''
because the act of reporting, alone, is an administrative activity and
not a covered service. Instead, when States seek to design SDPs that
pay providers for administrative activities rather than provider
performance, we have encouraged States to use provider reporting or
participation in learning collaboratives as a condition of provider
eligibility for the SDPs and then tie payment under the SDP to
utilization under (as required by Sec. 438.6(c)(1)(iii)). At Sec.
438.6(c)(2)(vi)(B)(1), we proposed to codify our interpretation of this
policy by requiring payments to providers under SDPs that are based on
performance not be conditioned upon administrative activities, such as
the reporting of data, nor upon the participation in learning
collaboratives or similar administrative activities. The proposed
regulation explicitly stated our policy so that States have a clear
understanding of how to design their SDPs appropriately. We recognize
and understand the importance of establishing provider reporting
requirements, learning collaboratives, and similar activities to help
further States' goals for performance and quality improvement and want
to support these activities; however, while these activities can be
used as eligibility criteria for the provider class receiving payments,
they cannot be the basis for receiving payment from the Medicaid
managed care plan under an SDP described in Sec. 438.6(c)(1)(i) or
(ii) that is based on performance.
Currently, our policy is that the performance measurement period
for SDPs that condition payment based upon performance must overlap
with the rating period in which the payment for the SDP is made.
However, we have found that States frequently experience delays in
obtaining performance-based data due to claims run out time and the
time needed for data analyses and validation of the data and the
results. All of this can make it difficult, if not impossible, to
comply with this requirement. Therefore, we proposed to permit States
to use a performance measurement period that precedes the start of the
rating period in which payment is delivered by up to 12 months. Under
this aspect of our proposal, States would be able to condition payment
on performance measure data from time periods up to 12 months prior to
the start of the rating period in which the SDP is paid to providers.
We believe that this flexibility will allow States adequate time to
collect and analyze performance data for use in the payment arrangement
and may incentivize States to adopt more VBP initiatives. We solicited
comment on whether 12 months is an appropriate time period to allow for
claims runout and data analysis, or if the time period that the
performance period may precede the rating period should be limited to 6
months or extended to 18 or 24 months, or if the performance period
should remain consistent with the rating period. We also proposed that
the performance measurement period must not exceed the length of the
rating period. Although we proposed to extend the length of time
between provider performance and payment for administrative simplicity,
we did not propose to extend the performance measurement time. Finally,
we also proposed that all payments will need to be documented in the
rate certification for the rating period in which the payment is
delivered.
[[Page 41089]]
Identifying which rating period the payments should be reflected in is
important since up to 2 rating periods may be involved between
performance and payment, and we want States to document these payments
consistently. Specifically, we proposed, at Sec.
438.6(c)(2)(vi)(B)(3), that a payment arrangement that is based on
performance must define and use a performance period that must not
exceed the length of the rating period and must not precede the start
of the rating period in which the payment is delivered by more than 12
months, and all payments must be documented in the rate certification
for the rating period in which the payment is delivered.
In a December 2020 report,\133\ the OIG found that a quality
improvement incentive SDP implemented in one State resulted in
incentive payments paid to providers whose performance declined during
the measurement period. Other interested parties, such as MACPAC, have
noted concerns with performance improvement SDPs that continue even
when there has been a decline in quality or access. In alignment with
our proposed evaluation policies at Sec. 438.6(c)(2)(iv) (see section
I.B.2.j. of this final rule) that seek to better monitor the impact of
SDPs on quality and access to care, and in an effort to establish
guardrails against payment for declining performance in VBP initiative
SDPs, we proposed to add Sec. 438.6(c)(2)(vi)(B)(4) and (5).
Measurable performance targets that demonstrate performance relative to
a baseline allow States (and CMS) to assess whether or not a provider's
performance has improved. Therefore, at Sec. 438.6(c)(2)(vi)(B)(4), we
proposed to require that all SDPs that condition payment on performance
include a baseline statistic for all metrics that are used to measure
the performance that is the basis for payment from the plan to the
provider; these are the metrics (including, per proposed paragraph
(c)(2)(iv)(A)(2), at least one performance measure, as that term is
proposed to be defined in Sec. 438.6(a)) that are specified by the
States in order to comply with proposed Sec. 438.6(c)(2)(vi)(B)(2). At
Sec. 438.6(c)(2)(vi)(B)(5), we proposed to require that all SDPs that
condition payment on performance use measurable performance targets,
which are attributable to the performance by the providers in
delivering services to enrollees in each of the State's managed care
program(s) to which the payment arrangement applies, that demonstrate
improvement over baseline data on all metrics selected in Sec.
438.6(c)(2)(vi)(B)(2). We believe that our proposals are consistent
with how quality improvement is usually measured, as well as be
responsive to oversight bodies and will help promote economy and
efficiency in Medicaid managed care.
---------------------------------------------------------------------------
\133\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
---------------------------------------------------------------------------
Population-Based Payments and Condition-Based Payments. As
discussed previously in this section of this rule, States often adopt
VBP initiatives that are intended to further goals of improved
population health and better care at lower cost. We support these
efforts and encourage the use of methodologies or approaches to
provider reimbursement that prioritize achieving improved health
outcomes over volume of services. Therefore, we proposed to add new
Sec. 438.6(c)(2)(vi)(C) to establish regulatory pathways for approval
of VBP initiatives that are not conditioned upon specific measures of
performance.
We proposed to define a ``population-based payment'' at Sec.
438.6(a) as a prospective payment for a defined Medicaid service(s) for
a population of Medicaid managed care enrollees covered under the
contract attributed to a specific provider or provider group. We
proposed to define a ``condition-based payment'' as a prospective
payment for a defined set of Medicaid service(s), that are tied to a
specific condition and delivered to Medicaid managed care enrollees.
One example of a population-based payment would be an SDP that is a
primary care medical home (PCMH) that directs managed care plans to pay
prospective per member per month (PMPM) payments for care management to
primary care providers, where care management is the service being
delivered under the contract and covered by the PMPM. An attributed
population could also be condition-based. For example, States could
direct managed care plans to pay a provider or provider group a PMPM
amount for Medicaid enrollees with a specific condition when the
enrollee is attributed to the provider or provider group for treatment
for that condition.
At Sec. 438.6(c)(2)(vi)(C)(1), we proposed to require that
population-based and condition-based payments be based upon either the
delivery by the provider of one or more specified Medicaid covered
service(s) during the rating period or the attribution of a covered
enrollee to a provider during the rating period. This proposed
requirement aligns with the requirement, currently at Sec.
438.6(c)(2)(ii)(A), that SDP arrangements base payments to providers on
utilization and delivery of services under the Medicaid managed care
contract. States, consistent with section 1903(m)(2)(A)(xi) of the Act
and Sec. Sec. 438.242(d), and 438.818, must collect, maintain, and
submit to T-MSIS encounter data showing that covered service(s) have
been delivered to the enrollees attributed to a provider that receives
the population-based payment. Further, if the payment is based upon the
attribution of a covered enrollee to a provider, we proposed Sec.
438.6(c)(2)(vi)(C)(2) to require that the attribution methodology uses
data that are no older than the 3 most recent and complete years of
data; seeks to preserve existing provider-enrollee relationships;
account for enrollee preference in choice of provider; and describes
when patient panels are attributed, how frequently they are updated,
and how those updates are communicated to providers.
States have submitted proposals for VBP initiatives that include
prospective PMPM population-based payments with no direct tie to value
or quality of care and that would be paid in addition to the
contractually negotiated rate. Because population-based payments should
promote higher quality and coordination of care to result in improved
health outcomes, it is imperative that these type of PMPM payments are
used to ensure that enrollees are receiving higher quality and
coordinated services to increase the likelihood of enrollees
experiencing better outcomes. Therefore, we proposed to add Sec.
438.6(c)(2)(vi)(C)(3) to require that population-based payments and
condition-based payments replace the negotiated rate between a plan and
providers for the Medicaid covered service(s) being delivered as a part
of the SDP to prevent any duplicate payment(s) for the same service.
Also, at Sec. 438.6(c)(2)(vi)(C)(3), we proposed to add a requirement
that prevents payments from being made in addition to any other
payments made by plans to the same provider on behalf of the same
enrollee for the same services included in the population- or
condition-based payment. We believe that the requirements in paragraph
(c)(2)(vi)(C)(3) would prevent States from implementing SDPs under
Sec. 438.6(c)(2)(vi)(C) that are PMPM add-on payments made in addition
to negotiated rates with no further tie to quality or value.
We recognize the importance of providing a regulatory pathway for
States to implement SDPs that are VBP
[[Page 41090]]
initiatives designed to promote higher quality care in more effective
and efficient ways at a lower cost. Because quality of care and
provider performance are integral and inherent to all types of VBP
initiatives, we proposed that SDPs under Sec. 438.6(c)(2)(vi)(C)
designed to include population-based or condition-based payments must
also include in their design and evaluation at least one performance
measure and set the target for such a measure to demonstrate
improvement over baseline at the provider class level for the provider
class receiving the payment. As such, we proposed new Sec.
438.6(c)(2)(vi)(C)(4) to require that States include at least one
performance measure that measures performance at the provider class
level as a part of the evaluation plan outlined in proposed Sec.
438.6(c)(2)(iv). We also proposed that States be required to set the
target for such a performance measure to demonstrate improvement over
baseline. This balances the need to provide States the flexibility to
design VBP initiatives to meet their population health and other value-
based care goals, while providing accountability by monitoring the
effect of the initiatives on the performance of the provider class and
the subsequent health outcomes of the enrollees.
Approval Period. In the 2020 Medicaid managed care rule, we
finalized a revision to Sec. 438.6(c)(2)(i) providing SDPs that are
VBP initiatives as defined in Sec. 438.6(c)(1)(i) and (ii) and that
meet additional criteria described in Sec. 438.6(c)(3)(i)(A) through
(C) would be eligible for multi-year approval if requested. Because of
the tie to the managed care quality strategy, which in Sec. 438.340 is
required to be updated at least once every 3 years, CMS has never
granted written prior approval of an SDP for more than 3 years. We
proposed to modify Sec. 438.6(c)(3)(i) to add that a multi-year
written prior approval for SDPs that are for VBP initiatives described
in paragraphs (c)(1)(i) and (ii) may be for of up to three rating
periods to codify our existing policy. Requiring States to renew multi-
year SDPs at least every 3 years will allow us to monitor changes and
ensure that SDPs remains aligned with States' most current managed care
quality strategy. We proposed minor revisions in paragraphs
(c)(3)(i)(A) through (C) to use the term ``State directed payment'' as
appropriate and to revise paragraph (c)(3)(ii) to specify it is about
written prior approvals. Finally, we proposed to redesignate paragraph
(c)(2)(F) to new paragraph (c)(3)(iii) to explicitly provide that State
directed payments are not automatically renewed.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comments on these proposals.
We summarize and respond to public comments received on our
proposals regarding value-based payments and delivery system reform
initiatives (Sec. 438.6(c)(2)(vi)) below.
Comment: Many commenters were broadly supportive of our proposed
changes to the VBP initiative SDP provisions (currently at Sec.
438.6(c)(2)(iii)), including our proposals to remove existing
requirements (currently at Sec. 438.6(c)(2)(iii)(C) and (D)) that
prevent States from setting the amount and frequency of payments or
from recouping unspent funds from VBP initiative SDPs, respectively.
Commenters stated support for removing barriers to allow for flexible
collaboration and innovation. Some commenters encouraged CMS and States
to engage with interested parties to determine if there are additional
barriers to implementation of VBP initiative SDPs described in
paragraphs (c)(1)(i) and (ii).
Response: We appreciate the support for the proposed policies
regarding VBP initiative SDPs. Addressing barriers that prevent States
from designing VBP initiative SDPs based on prospective payments is key
to supporting States that wish to adopt innovative models intended to
promote quality and value over volume, such as hospital global budgets
and other delivery system reform initiatives. We will continue to
engage with interested parties to assess barriers and support States
wishing to implement VBP initiative SDPs.
Comment: Some commenters supported the removal of the prohibition
on States recouping unspent funds from VBP initiative SDPs but
requested that CMS provide further direction and requirements for how
recouped funds can be spent.
Response: As proposed, we are removing this existing prohibition on
recouping unspent funds because States have struggled to balance
setting performance targets that are ambitious enough that, if
achieved, they would meaningfully improve care quality and health
outcomes but not so ambitious that providers are discouraged from
participating or so unambitious that they do not result in improved
quality or outcomes. We believe States will be more likely to implement
VBP initiative SDPs if they are able to establish ambitious performance
or quality targets without being concerned that managed care plans will
profit from weak provider performance.
We did not propose and are not finalizing spending requirements for
recouped unspent State funds that were initially designated for payment
of VBP initiative SDPs. We remind States that any recoupments made from
plans as a part of VBP initiative SDPs are subject to the return of the
Federal share via the CMS-64.
Additionally, we refer readers to section I.B.2.k. of the proposed
rule for our discussion of proposed managed care contract requirements
for SDPs. Specifically, under this final rule, States are required by
Sec. 438.6(c)(5)(iii)(D)(6) to document how any unearned payments will
be handled, and any other significant relevant information. These
contract requirements will help ensure that States and plans have
explicit documentation of the goals of each VBP initiative SDP and the
disposition of unspent funds.
Comment: One commenter requested clarification about how the newly
proposed VBP initiative SDP criteria may impact existing VBP
arrangements that span both Medicare and Medicaid as a part of
integrated plans such as FIDE SNPs, and stated concern that the
potential for conflicting reporting requirements could deter States
from implementing VBP arrangements in a dual space.
Response: Because SDPs are not a venue for directing Medicare
dollars, the proposed VBP initiative SDP criteria will not impact
payment arrangements that exist under integrated Medicare Advantage
(MA) plans, such as FIDE SNPs, where the State contracts with MA
organizations offering the MA plan and directs how the MA plan pays its
providers for Medicare covered services or MA supplemental benefits.
However, if a State wishes to implement or direct payments by Medicaid
managed care plans for benefits under the Medicaid managed care
contract then the State would need to comply with 438.6(c). Written
approval of SDPs described in Sec. Sec. 438.6(c)(1)(iii)(A) and (B) is
not required, but it is required for other SDP arrangements under Sec.
438.6(c). For currently existing arrangements and the application of
changes adopted in this final rule, please see section I.B.2.p. of this
final rule regarding the applicability dates.
Comment: Many commenters supported the provisions for performance-
based VBP initiative SDPs at proposed Sec. 438.6(c)(2)(vi)(B).
Specifically, commenters showed support for requiring that performance-
[[Page 41091]]
based VBP initiative SDPs use measurable and understandable performance
targets as well the proposed expansion of the performance measurement
period to up to 12 months prior to the start of the contract rating
period.
Response: We appreciate the support of these provisions. In our
experience, these proposals are consistent with how quality improvement
is usually measured and will help promote economy and efficiency in
Medicaid managed care.
Comment: Several commenters either opposed the proposal that
performance-based VBP initiative SDPs must not condition payment on
administrative activities, such as the reporting of data, or they
suggested revisions to the provision so that ``pay-for-reporting''
would be allowed at least in the initial years of a performance-based
VBP initiative SDP. Commenters noted that often these initiatives are
multi-year and States need time to collect the data necessary to build
baselines to measure performance against. Some commenters stated
concern that it may not be possible to comply with the proposal to
require States to identify baseline statistics and performance targets
for all metrics tied to provider payment in the SDP because data for
the most appropriate measure for the payment strategy is not yet
collected.
Response: Because payment for performance-based VBP initiative SDPs
must be based on provider performance tied to the delivery of covered
services under the Medicaid managed care contract for the rating
period, we have never allowed these types of SDPs to be based on ``pay-
for-reporting.'' Our rationale has been and remains that the act of
reporting is an administrative activity and not a covered service. To
make this explicit, we proposed and are finalizing this requirement at
Sec. 438.6(c)(2)(vi)(B)(1). Although we recognize the challenges of
gathering the baseline data needed for establishing the performance
metrics and targets used in VBP initiative SDPs, we are finalizing
paragraph (c)(2)(vi)(B)(1) as proposed. For situations in which States
wish to support administrative activities that are necessary for
successful implementation of VBP initiatives, we encourage them to
explore alternative program designs. For example, a State could start
first by designing a fee-based payment arrangement that is tied to
utilization and delivery of services under the contract and to use
provider reporting or participation in learning collaboratives as a
condition of provider eligibility for the fee-based SDP. This allows
States, plans and providers time to develop their systems of reporting
and to collect the data necessary to establish baselines and
performance targets. Once established, the arrangement can be
transitioned to a performance-based VBP initiative SDP and payment to
providers can be tied to performance measured against the baseline.
Comment: Some commenters suggested revisions to the proposal that
the performance measurement period must not precede the start of the
rating period by more than 12 months; commenters suggested extending
the period of time for which the performance period could precede the
baseline to 18 or 24 months to allow for an adequate claims runout
period, provider reporting, and data analysis.
Response: We believe that the flexibility to use a performance
period that precedes the rating period by 12 months is sufficient to
allow adequate time for claims runout and for States time to collect
and analyze performance data for use in the payment arrangement. As an
illustration, if a State that uses a calendar year contract rating
period implements a performance-based VBP initiative SDP on January 1,
2025, the State could pay providers through December 31, 2025, based on
performance that occurred as far back as January 1, 2024, because the
performance measurement can proceed the start of the rating period in
which the payment is delivered by up to 12 months. In this example, we
believe that this would be enough time to allow for claims run out and
quality measure reporting. If the State needs extra time to analyze the
data and determine provider payments amounts, it should specify at the
start of the payment arrangement that payments to providers will not
occur prior to the 3rd or 4th quarter to establish clear expectations
for managed care plans and providers.
Comment: A few commenters were opposed to the proposal requiring
States to choose performance targets that show improvement over
baseline for all measures used in SDPs that condition payment on
performance. Commenters stated that it is impractical to require such
improvement year after year.
Response: We proposed that the performance targets used in VBP
initiative SDPs that condition payment on performance must show
improvement over a baseline for a performance-based payment to occur to
ensure that performance-based VBP initiative SDPs do not pay providers
for performance that is declining. We recognize that the proposed
provision was more restrictive than necessary to guard against that.
Therefore, we are finalizing proposed Sec. 438.6(c)(2)(vi)(B)(5) with
a revision, which aligns with Sec. 438.6(c)(2)(iv)(C), that
performance targets must demonstrate either maintenance or improvement
over baseline data on all metrics that will be used to measure the
performance that is the basis for payment. States have flexibility to
choose performance measures and targets that are meaningful to their
managed care quality goals, and we will not preclude States from
setting performance targets that represent maintenance of baseline
performance if the State believes those targets help further State
goals. We will work with States to ensure that these arrangements are
dynamic and drive continual performance improvement rather than reward
provider performance over several contract periods that should become
the minimum expectation over time. However, if a State wishes to
deliver payments to providers irrespective of their performance on
specified measures, then those payment arrangements should be
structured as fee-based SDPs under Sec. 438.6(c)(1)(iii) and therefore
must be tied to the delivery of a Medicaid-covered service(s) under the
managed care contract (however, we note such an SDP is required to
comply with all requirements, including that it advance at least one of
the goals and objectives in the State's quality strategy). If CMS finds
that a State is using a VBP SDP to deliver payment irrespective of
performance then, at minimum, CMS will not approve the subsequent SDP
preprint renewal submission and may provide technical guidance to the
State on how to transition the VBP SDP to a fee-based SDP.
Comment: Some commenters supported the proposed provisions at Sec.
438.6(c)(2)(vi)(C) that establishes a pathway for approval of
population-based and condition-based VBP initiative SDPs. Commenters
stated that these proposals increase States' flexibility in designing
and implementing VBP initiatives by removing barriers.
Response: We appreciate the support for these provisions.
Addressing regulatory barriers that limit payment for VBP SDPs to only
being tied to provider performance during the rating period is key to
allowing States to adopt and participate in innovative payment
arrangements designed to promote quality and value over volume. These
provisions, in tandem with removal of the restrictions preventing
States from setting the amount and frequency of VBP initiative SDPs or
recouping unspent funds from VBP initiative SDPs, will create a pathway
for approval
[[Page 41092]]
of such SDPs that are based on prospective PMPM payments. We believe
that these flexibilities will allow for the implementation of
innovative models that include payment arrangements, such as hospital
global budgets, which emphasize value and that rely on robust quality
improvement frameworks but that to date have not been allowable under
Sec. 438.6(c).
Comment: A few commenters requested clarification regarding the
provisions at proposed Sec. 438.6(c)(2)(vi)(C) for population-based or
condition-based payments used in SDPs. Commenters inquired about
whether the provisions pertain only to VBP initiative SDPs described at
Sec. 438.6(c)(1)(i) and (ii), or if these provisions would also be
applied to SDPs described at Sec. 438.6(c)(1)(iii). Some commenters
were also concerned about whether SDPs that include components of
attribution and care management and that are currently allowed under
the regulations at Sec. 438.6(c)(1)(iii) would continue to be
permitted under the new provisions.
Response: As proposed and finalized, Sec. 438.6(c)(2)(vi)(C)
applies solely to SDPs that are VBP, delivery system reform, and
performance improvement initiatives as described in Sec.
438.6(c)(1)(i) and (ii) that use population-based and condition-based
payments. These new provisions for population-based and condition-based
VBP initiative SDPs allow approval of certain types of innovative
payment arrangements that focus on value and that, to date, have not
been approvable under Sec. 438.6(c)(1)(i) and (ii) either because they
rely on prospective PMPM payments that are not tied to a specific
measure of provider performance during the rating period or because
they set the amount and frequency of payments or recoup unspent funds.
Because innovative models that include prospective PMPM payments (such
as hospital global budgets) alongside robust quality frameworks are
emerging in the current landscape of value-based care, it is crucial to
provide a regulatory framework for approving VBP initiative SDPs that
include these models.
Several States have successfully designed SDPs described in Sec.
438.6(c)(1)(iii) that include innovative payment models (such as PCMHs)
by tying the prospective payments to a Medicaid covered service (such
as case management) delivered under the managed care plan contract
during the rating period. We will not preclude States from seeking
approval of renewal preprints of previously approved SDPs using the
described existing pathway if States choose. Instead, we are seeking to
remove barriers and to provide a more flexible pathway for approval of
innovative payment models that focus on the delivery of quality care to
Medicaid beneficiaries.
Comment: Commenters requested additional information regarding how
population-based and condition-based payments must replace the
negotiated provider rate for a set of services, how to account for the
attribution of a patient population, and how these factors will affect
the development of Medicaid managed care capitation rates.
Response: We proposed and are finalizing a pathway for States to
implement population-based and condition-based payments, which are VBP
initiative SDPs that are prospective payments tied to specific groups
of Medicaid managed care enrollees covered under the contract; these
payments must be based on either the delivery by the provider of one or
more specified Medicaid covered service(s) during the rating period to
the covered group or upon the attribution of covered enrollees to the
provider during the rating period. If the payment is based on the
attribution of covered enrollees to the provider, the attribution
methodology must use data that are no older than the 3 most recent and
complete years of data; seek to preserve existing provider-enrollee
relationships; account for enrollee preference in choice of provider;
and describe when patient panels are attributed, how frequently they
are updated. Additionally, we are finalizing the requirement that
population-based and condition-based payments must replace the
negotiated rate between an MCO, PIHP, or PAHP and providers for the
Medicaid covered service(s) included in the payment and that no other
payment may be made by an MCO, PIHP, or PAHP to the same provider on
behalf of the same enrollee for the same services included in the
payment. We note that this final rule maintains the requirement that
SDPs must be developed in accordance with Sec. 438.4 and the standards
specified in Sec. Sec. 438.5, 438.7, and 438.8.
We believe that the regulation text and explanations in the
proposed rule and our summary of the proposed rule are sufficiently
clear to establish the requirements for use of these types of payments.
However, we appreciate that the implementation of these provisions will
introduce new operational and technical considerations for States and
interested parties, and we plan to publish guidance that includes
practical examples of implementation strategies to help guide States as
they design SDPs, particularly those that are VBP initiatives that
include population- and/or condition-based payments. Additionally, we
encourage States interested in establishing VBP initiative SDPs to
consult with their actuaries during rate development.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. 438.6(c)(2)(vi)(B)(5) as proposed but with revisions to allow
performance targets that demonstrate either maintenance of or
improvement over baseline. We are finalizing all other provisions at
paragraphs (c)(2)(vi)(B) and (C) as proposed but with minor grammatical
revisions in paragraphs (c)(2)(vi)(C)(1) and (2) and with a technical
correction in (c)(2)(vi)(C)(2). We are also finalizing the removal of
certain requirements currently codified at Sec. 438.6(c)(2)(iii)(C)
and (D) (related to directing the timing and amount of expenditures and
recouping unspent funds) and the redesignation of the current provision
at Sec. 438.6(c)(2)(iii)(A) to Sec. 438.6(c)(2)(vi)(A).
j. Quality and Evaluation (Sec. 438.6(c)(2)(ii)(C), (c)(2)(ii)(D),
(c)(2)(ii)(F), (c)(2)(iv), (c)(2)(v) and (c)(7))
We proposed several changes to the SDP regulations in Sec.
438.6(c) to support more robust quality improvement and evaluation.
Existing regulations at Sec. 438.6(c)(2)(ii)(C) and (D) specify that
to receive written prior approval, States must demonstrate in writing,
amongst other requirements, that the State expects the SDP to advance
at least one of the goals and objectives in the State's managed care
quality strategy and has an evaluation plan that measures the degree to
which the SDP advances the identified goals and objectives. We issued
guidance in November 2017 \134\ that provided further guidance on what
evaluation plans should generally include: the identification of
performance criteria which can be used to assess progress on the
specified goal(s) and objective(s); baseline data for performance
measure(s); and improvement targets for performance measure(s).
---------------------------------------------------------------------------
\134\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib11022017.pdf.
---------------------------------------------------------------------------
To monitor the extent to which an SDP advances the identified goals
and objectives in a State's managed care quality strategy, we request
that States submit their SDP evaluation results from prior rating
periods to aid our review of preprint submissions that are renewals of
an existing SDP. If an SDP proposal meets regulatory requirements but
the State is unable to provide the
[[Page 41093]]
requested evaluation results, we will usually approve a renewal of the
SDP with a ``condition of concurrence'' that the State submit
evaluation results with the following year's preprint submission for
renewal of the SDP for the following rating period. For example, one
common condition of concurrence for Year 2 preprints is the provision
of SDP evaluation results data for year one of the SDP with the Year 3
preprint submission.
In 2021, CMS conducted an internal analysis to assess the
effectiveness of SDP evaluation plans in measuring progress toward
States' managed care quality strategy goals and objectives and whether
SDP evaluation findings provided us with sufficient information to
analyze whether an SDP facilitated quality improvement. We analyzed
data from 228 renewal preprints submitted by 33 States between April
2018 and February 2021. Over half (63 percent) of the evaluation plans
submitted were incomplete, and only 43 percent of the renewal preprints
included any evaluation results. Our analysis also found only a 35
percent compliance rate with conditions of concurrence requesting
States submit SDP evaluation results with the preprint for the
following rating period. Our policy goals in this area are frustrated
by the lack of a regulation requiring submission of these evaluation
results. By adopting requirements for submission of evaluation plans
and reports, we intend to increase compliance and improve our oversight
in this area.
As the volume of SDP preprint submissions and total dollars flowing
through SDPs continues to increase, we recognize the importance of
ensuring that SDPs are contributing to Medicaid quality goals and
objectives and recognize that meaningful evaluation results are
critical for ensuring that these payments further improvements in
quality of care. Moreover, consistent submission of evaluation results
is important for transparency and for responsiveness to oversight
bodies. Consistent with our internal findings, other entities,
including MACPAC \135\ and GAO,\136\ have noted concerns about the
level of detail and quality of SDP evaluations. In MACPAC's June 2022
Report to Congress, the Commission noted concern about the lack of
availability of information on evaluation results for SDPs, even when
the arrangements had been renewed multiple times. The report also noted
examples of evaluation results showing a decline in quality or access,
but the SDPs were renewed without changes. MACPAC recommended in its
report that CMS require more rigorous evaluation requirements for SDPs,
particularly for arrangements that substantially increase provider
payments above Medicaid FFS reimbursement. The report also suggests
that CMS provide written guidance on the types of measures that States
should use to evaluate progress towards meeting quality and access
goals and recommended that we should clarify the extent to which
evaluation results are used to inform approval and renewal decisions.
---------------------------------------------------------------------------
\135\ Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
\136\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
---------------------------------------------------------------------------
We proposed several regulatory changes to enhance CMS's ability to
collect evaluations of SDPs and the level of detail described in the
evaluation reports. CMS's intent is to shine a spotlight on SDP
evaluations and use evaluation results in determining future approvals
of State directed payments. We also plan to issue additional technical
assistance on this subject, as well to assist States in the development
of evaluation plans in alignment with the proposed regulatory
requirements and preparing the subsequent evaluation reports.
To strengthen reporting and to better monitor the impact of SDPs on
quality and access to care, we proposed at Sec. 438.6(c)(2)(iv) that
the State must submit an evaluation plan for each SDP that requires
written prior approval and that the evaluation plan must include four
specific elements. Our proposal is to establish minimum content
requirements for SDP evaluation plans but is not intended to limit
States in evaluating their SDP arrangements. Currently, Sec.
438.6(c)(2)(ii)(D) requires that States develop an evaluation plan that
measures the degree to which the arrangement advances at least one of
the goals and objectives in the State's managed care quality strategy
(which is required by Sec. 438.340).
We proposed at Sec. 438.6(c)(2)(iv)(A) that the evaluation plan
must identify at least two metrics that will be used to measure the
effectiveness of the payment arrangement in advancing the identified
goal(s) and objective(s) from the State's managed care quality strategy
on an annual basis. In addition, proposed paragraph (c)(2)(vi)(C)(4)
further specifies that at least one of those metrics must measure
performance at the provider class level for SDPs that are population-
or condition-based payments. Under Sec. 438.6(c)(2)(iv)(A)(1), we
proposed that the metrics must be specific to the SDP and attributable
to the performance by the providers for enrollees in all of the State's
managed care program(s) to which the SDP applies, when practicable and
relevant. We proposed the standard ``when practicable and relevant'' to
allow flexibility to account for situations in which contract or
program level specificity may be either impossible to obtain or may be
ineffective in measuring the identified quality goal(s) and
objective(s). For example, States may implement a quality improvement
initiative in both the Medicaid FFS program and Medicaid managed care
program(s) but measuring the impact of that initiative on each program
separately will not produce valid results due to the small sample
sizes. The proposed flexibility would allow States to produce an
evaluation inclusive of both Medicaid managed care and FFS data and
comprised of measures relevant to the approved SDP to demonstrate the
effect the SDP arrangement is having on advancing the State's overall
quality goals.
We proposed at Sec. 438.6(c)(2)(iv)(A)(2) to require that at least
one of the selected metrics be a performance measure, for which we
proposed a definition in Sec. 438.6(a) as described in section
I.B.2.i. of this final rule. We currently allow, and will continue to
allow States to select a metric with a goal of measuring network
adequacy, or of maintaining access to care when that is the goal of the
SDP. While access metrics provide valuable information, they do not
measure service delivery (such as enrollee experience or HIE
interoperability goals), quality of care, or outcomes attribute to the
providers receiving the SDP, and they do not provide insight into the
impact that these payment arrangements have on the quality of care
delivered to Medicaid enrollees. Therefore, if a State elects to choose
a metric that measures maintenance of access to care or other network
adequacy measures, our proposal requires States to choose at least one
additional performance metric that measures provider performance.
Because we recognize that performance is a broad term and that the
approach to evaluating quality in health care is evolving, and because
we understand the importance of preserving States' flexibility to
identify performance measure(s) that are most appropriate for
evaluating the specific SDP, we did not
[[Page 41094]]
propose additional requirements for the other minimum metric so as not
to preclude innovation. However, we recommend that States use existing
measure sets which are in wide use across Medicaid and CHIP, including
the Medicaid and CHIP Child and Adult Core Sets,\137\ the Home and
Community-Based Services Quality Measure Set,\138\ or the MAC QRS
measures adopted in this final rule to facilitate alignment and reduce
administrative burden. We acknowledged in the proposed rule that in
some cases, these existing measures may not be the most appropriate
choice for States' Medicaid managed care goals; therefore, we stated
that we will issue subregulatory guidance to provide best practices and
recommendations for choosing appropriate performance measures when not
using existing measure sets.
---------------------------------------------------------------------------
\137\ Medicaid and CHIP Child Core Set (https://www.medicaid.gov/medicaid/quality-of-care/performance-measurement/child-core-set/index.html, the Medicaid Adult Core Set (https://www.medicaid.gov/medicaid/quality-of-care/performance-measurement/adult-core-set/index.htm).
\138\ https://www.medicaid.gov/federal-policy-guidance/downloads/smd22003.pdf.
---------------------------------------------------------------------------
Concerns around access to primary care, maternal health, and
behavioral health have been raised nationally. The current
administration considers increasing access to care for these services
to be a national priority.139 140 We encourage States to
implement SDPs for these services and providers to improve access. We
also encourage States to include measures that focus on primary care
and behavioral health in their evaluation plans when relevant. This
could include using existing measures from the Medicaid and CHIP Child
and Adult Core Sets \141\ or other standardized measure sets. CMS also
expects that States consider examining parity in payment rates for
primary care and behavioral health compared to other services, such as
inpatient and outpatient hospital services, as part of their evaluation
of SDPs.
---------------------------------------------------------------------------
\139\ Executive Order 14009, https://www.federalregister.gov/documents/2021/02/02/2021-02252/strengthening-medicaid-and-the-affordable-care-act.
\140\ Executive Order 14070, https://www.federalregister.gov/documents/2022/04/08/2022-07716/continuing-to-strengthen-americans-access-to-affordable-quality-health-coverage.
\141\ Medicaid and CHIP Child Core Set (https://www.medicaid.gov/medicaid/quality-of-care/performance-measurement/child-core-set/index.html, the Medicaid Adult Core Set (https://www.medicaid.gov/medicaid/quality-of-care/performance-measurement/adult-core-set/index.html.)
---------------------------------------------------------------------------
It is crucial to monitor and evaluate the impact of SDP
implementation, and as such we proposed at Sec. 438.6(c)(2)(iv)(B) to
require States to include baseline performance statistics for all
metrics that will be used in the evaluation since this data must be
established in order to monitor changes in performance during the SDP
performance period. This aspect of our proposal is particularly
necessary because we found in our internal study of SDP submissions
that, among the SDP evaluation plan elements, a baseline statistic(s)
was the most commonly missing element. We proposed the requirement at
Sec. 438.6(c)(2)(iv)(B) in an effort to ensure that States' evaluation
plans produce reliable results throughout the entirety of the SDP's
implementation.
Measurable SDP evaluation performance targets that demonstrate
performance relative to the baseline measurement allow States to
determine whether the payment arrangement is having the intended effect
and helping a State make progress toward its quality goals. Our
internal analysis showed that nearly 20 percent of performance measures
selected by States were not specific or measurable. Therefore, at Sec.
438.6(c)(2)(iv)(C), we also proposed to require that States include
measurable performance targets relative to the baseline statistic for
each of the selected measures in their evaluation plan.
Overall, we believe that the proposed regulations at Sec.
438.6(c)(2)(iv) would ensure that States collect and use stronger data
for developing and evaluating payment arrangements to meet the goals of
their Medicaid programs and that States would also be responsive to
recommendations for more clarity for SDP evaluation plans. We recognize
and share the concerns raised by oversight bodies and interested
parties regarding the limited availability of SDP evaluation results
for use in internal and external monitoring of the effect of SDPs on
quality of care. While we ask States for evaluation results as part of
the review process for SDP renewals, current regulations do not
explicitly require submission of completed evaluation reports and
results or use by CMS of prior evaluation reports and results in
reviewing current SDPs for renewal or new SDPs. As a result, because
most States do not comply with our request for evaluation data, we
proposed to revise Sec. 438.6(c)(2) to ensure CMS has access to
evaluation plans and reports for review to determine if SDPs further
the goals and objectives identified in the State's managed care quality
strategy. We proposed at Sec. 438.6(c)(2)(iv)(D) that States must
provide commitment to submit an evaluation report in accordance with
proposed Sec. 438.6(c)(2)(v), if the final State directed payment cost
percentage exceeds 1.5 percent.
Finally, we proposed to amend Sec. 438.6(c)(2)(ii)(D) to further
require the evaluation plan include all the elements outlined in
paragraph (c)(2)(iv). These proposed changes in Sec.
438.6(c)(2)(ii)(D) and the new proposed requirements in Sec.
438.6(c)(2)(iv) are intended to further identify the necessary
components of a State's SDP evaluation plan and make clear that we have
the authority to disapprove proposed SDPs if States fail to provide in
writing evaluation plans and reports (if required) for their SDPs that
comply with these regulatory requirements.
Section 1902(a)(6) of the Act requires that States provide reports,
in such form and containing such information, as the Secretary may from
time to time require. We proposed to add new Sec. 438.6(c)(2)(v) to
require that States submit to CMS, for specified types of SDPs that
have a final State directed payment cost percentage that exceeds 1.5
percent, an evaluation report using the evaluation plan the State
outlined under proposed Sec. 438.6(c)(2)(iv). As proposed in Sec.
438.6(c)(2)(v), the evaluation reporting requirement is limited to
States with SDPs that require prior approval and exceed a certain cost
threshold. However, we note that all SDPs, including those described in
Sec. 438.6(c)(1)(iii)(A) and (B), would still need to comply with the
standards listed in the finalized Sec. 438.6(c)(2)(ii). Therefore,
even in situations where the SDP evaluation report would not need to be
submitted to CMS for review at a specified time, the State is required
to continue to evaluate the SDP to comply with Sec. 438.6(c)(2)(ii)(D)
and (F), and such evaluation must be made available to CMS upon
request. We recognize that submitting an evaluation report will impose
some additional burden on States. We proposed a risk-based approach to
identify when an evaluation report must be submitted to CMS based on
the actual total amount that is paid as a separate payment term
described in Sec. 438.6(c)(6) or portion of the actual total
capitation payments attributable to the SDP, as a percentage of the
State's total Medicaid managed care program costs for each managed care
program. This approach will allow States and CMS to focus resources on
payment arrangements with the highest financial risk. We have selected
the 1.5 percent threshold as it aligns with existing Medicaid managed
care policy for when rate amendments are necessary (often referred to
as a de minimis threshold or de minimis changes) and with proposed
policies for in lieu of services (see section I.B.4. of this final
rule).
[[Page 41095]]
We proposed to define ``final State directed payment cost
percentage'' in Sec. 438.6(a) as the annual amount calculated, in
accordance with paragraph (c)(7)(iii) of Sec. 438.6, for each State
directed payment for which prior approval is required under Sec.
438.6(c)(2)(i) and for each managed care program. In Sec.
438.6(c)(7)(iii)(A), we proposed for SDPs requiring prior written
approval that the final SDP cost percentage numerator be calculated as
the portion of the total capitation payments that is attributable to
the SDP. In Sec. 438.6(c)(7)(iii)(B), we proposed the final SDP cost
percentage denominator be calculated as the actual total capitation
payments, defined at Sec. 438.2, for each managed care program,
including all State directed payments in effect under Sec. 438.6(c)
and pass-through payments in effect under Sec. 438.6(d), and the
actual total amount of State directed payments that are paid as a
separate payment term as described in paragraph (c)(6). We explained in
the proposed rule that to calculate the numerator for a minimum or
maximum fee schedule type of SDP that is incorporated into capitation
rates as an adjustment to base capitation rates, an actuary should
calculate the absolute change that the SDP has on base capitation
rates. Over time, as the SDP is reflected in the base data and
incorporated into base capitation rates, it is possible that the
absolute effect may decrease or no longer be apparent, and the
numerator may decrease to zero. We solicited comment on whether the
numerator for a minimum or maximum fee schedule SDP that is
incorporated into capitation rates as an adjustment to base capitation
rates should be calculated in a different manner (for example,
estimating a portion of the capitation rates resulting from the SDP).
We did not find it necessary to propose regulation text to codify this
approach as we intend to issue additional guidance in the Medicaid
Managed Care Rate Development Guide in accordance with Sec. 438.7(e).
The proposed numerator and denominator are intended to provide an
accurate measurement of the final expenditures associated with an SDP
and total program costs in each managed care program in a risk-based
contract.
We believe the final SDP cost percentage should be measured
distinctly for each managed care program and SDP, as reflected in the
definition proposed for this term. This is appropriate because
capitation rates are typically developed by program, SDPs may vary by
program, and each managed care program may include differing
populations, benefits, geographic areas, delivery models, or managed
care plan types. For example, one State may have a behavioral health
program that covers care to most Medicaid beneficiaries through PIHPs,
a physical health program that covers physical health care to children
and pregnant women through MCOs, and a program that covers physical
health and MLTSS to adults with a disability through MCOs. Another
State may have several different managed care programs that serve
similar populations and provide similar benefits through MCOs, but the
delivery model and geographic areas served by the managed care programs
vary. We believe it would be contrary to our intent if States were to
develop a final SDP cost percentage by aggregating data from more than
one managed care program since that would be inconsistent with rate
development, the unique elements of separate managed care programs, and
the SDPs that vary by managed care program. We noted in the proposed
rule how we intend to use this interpretation of managed care program
in other parts of this section of this final rule, including, but not
limited to, the discussion of calculating the total payment rate in
section I.B.2.f. of this final rule, measurement of performance for
certain VBP arrangements discussed in section I.B.2.i. of this final
rule and separate payment terms in section I.B.2.l. of this final rule.
With Sec. 438.6(c)(7)(i) and in the definition of the phrase
``final State directed payment cost percentage,'' we proposed that the
final State directed payment cost percentage be calculated on an annual
basis and recalculated annually to ensure consistent application across
all States and managed care programs. To ensure that final State
directed payment cost percentage will be developed in a consistent
manner with how the State directed payment costs will be included in
rate development, we proposed at Sec. 438.6(c)(7)(ii) to require that
the final SDP cost percentage would have to be certified by an actuary
and developed in a reasonable and appropriate manner consistent with
generally accepted actuarial principles and practices. An ``actuary''
is defined in Sec. 438.2 as an individual who meets the qualification
standards established by the American Academy of Actuaries for an
actuary and follows the practice standards established by the Actuarial
Standards Board, and who is acting on behalf of the State to develop
and certify capitation rates.
Although we proposed that all States would be required to develop
and document evaluation plans for SDPs that require CMS's written prior
approval in compliance with the provisions proposed in Sec.
438.6(c)(2)(iv), proposed Sec. 438.6(c)(2)(v) requires States to
submit an evaluation report for an SDP if the final SDP cost percentage
is greater than 1.5 percent. We acknowledged that States may choose to
submit evaluation reports for their SDPs regardless of the final SDP
cost percentage, and, under our proposal, submission of the evaluation
report could be done voluntarily even if not required. We proposed in
Sec. 438.6(c)(7) that, unless the State voluntarily submits the
evaluation report, the State must calculate the final State directed
payment cost percentage, and if the final State directed payment cost
percentage is below 1.5 percent, the State must provide a final State
directed payment cost percentage report to CMS. Under this proposal,
States would be required to provide the final SDP cost percentage to
demonstrate that an SDP is exempt from the proposed evaluation
reporting requirement. If, regardless of the final SDP cost percentage,
a State elects to prepare and submit an evaluation report, the final
SDP cost percentage report is not required. For SDP arrangements that
do not exceed the 1.5 percent cost threshold, as demonstrated in the
final SDP cost percentage report, and for SDPs for which there is no
written prior approval requirement, we proposed that the State would
not be required to submit an evaluation report (at proposed Sec.
438.6(c)(2)(v)). However, we encourage States to monitor the evaluation
results of all their SDPs. We recognize that in order to monitor the
1.5 percent threshold, we will need a reporting mechanism by which
States will be required to calculate and provide the final SDP cost
percentage to CMS. Therefore, we proposed (at new Sec.
438.6(c)(7)(iv)) that, for SDPs that require prior approval, the State
must submit the final State directed payment cost percentage annually
to CMS for review when the final State directed payment cost percentage
does not exceed 1.5 percent and when the State has not voluntarily
submitted the evaluation report. The submission of the final SDP cost
percentage data would be submitted concurrent with the rate
certification submission required in Sec. 438.7(a) no later than 2
years after the completion of each 12-month rating period that included
a State directed payment. It is appropriate for States' actuaries to
develop a separate report to document that the final State directed
payment cost percentage does not exceed 1.5 percent, rather than
[[Page 41096]]
including it in a rate certification, because the final State directed
payment cost percentage may require alternate data compared to the base
data that were used for prospective rate development, given the timing
of base data requirements as outlined in Sec. 438.5(c)(2). We note
that this proposal is similar to the concurrent submission for the
proposed MLR reporting at Sec. 438.74 and proposed ILOS projected and
final cost percentage reporting at Sec. 438.16(c). We described an
alternative approach in the proposed rule that would require States to
submit the final SDP cost percentage to CMS upon completion of the
calculation, separately and apart from the rate certification. However,
consistency across States for when the final SDP const percentage is
submitted to CMS for review is important and, we believed receiving the
final SDP cost percentage and the rate certification at the same time
will enable CMS to review them concurrently.
As proposed, the denominator for the final SDP cost percentage will
be based on the actual total capitation payments and the actual total
State directed payments paid as a separate payment term (see section
I.B.2.l. of this final rule for details on the proposals for separate
payment terms) paid by States to managed care plans. We noted in the
proposed rule that calculating the final SDP cost percentage will take
States and actuaries some time. For example, changes to the eligibility
file and revised rate certifications for rate amendments may impact the
final capitation payments that are a component of the calculation.
Given these factors, we concluded that 2 years is an adequate amount of
time to accurately perform the calculation and proposed that States
must submit the SDP cost percentage report no later than 2 years after
the rating period for which the SDP is included. Under this proposal,
for example, the final SDP cost percentage report for a managed care
program that uses a CY 2024 rating period will be submitted to CMS with
the CY 2027 rate certification.
For the evaluation reports, we proposed to adopt three requirements
in new Sec. 438.6(c)(2)(v)(A). First, in Sec. 438.6(c)(2)(v)(A)(1),
we proposed that evaluation reports must include all of the elements
approved in the evaluation plan required in Sec. 438.6(c)(2)(iv). In
Sec. 438.6(c)(2)(v)(A)(2), we proposed to require that States include
the 3 most recent and complete years of annual results for each metric
as required in Sec. 438.6(c)(2)(iv)(A). Lastly, at Sec.
438.6(c)(2)(v)(A)(3), in acknowledgement of MACPAC's recommendation to
enhance transparency of the use and effectiveness of SDP arrangements,
we proposed to require that States publish their evaluation reports on
their public facing website (the public facing website is required
under Sec. 438.10(c)(3).
States consistently have difficulty providing evaluation results in
the first few years after implementation of an SDP due to the time
required for complete data collection. Our internal analysis found that
States' ability to provide evaluation results improved over time.
Although only 21 percent of proposals included evaluation results in
Year 2, 55 percent of proposals included results data in Year 3, and 66
percent of Year 4 proposals included the results of the evaluation. For
this reason, we did not propose that States submit an annual evaluation
and proposed instead at Sec. 438.6(c)(2)(v)(B) to require States to
submit the first evaluation report no later than 2 years after the
conclusion of the 3-year evaluation period and that subsequent
evaluation reports must be submitted to CMS every 3 years after.
In Sec. 438.6(c)(2)(v)(A)(2), we proposed to require that
evaluation reports include the 3 most recent and complete years of
annual results for each metric as approved under the evaluation plan
approved as part of the preprint review. Under the proposal, the first
evaluation report would be due no later than with the submission of the
preprint for the sixth rating period after the applicability date for
the evaluation plan. The evaluation plan would contain results from the
first 3 years after the applicability date for the evaluation plan. The
approach to implementation was intended to allow adequate time for
States to obtain final and validated encounter data and performance
measurement data to compile and publish the first evaluation report. We
also considered a 5 and 10-year period evaluation period, but we
concluded that seemed to be an unreasonably long time to obtain
actionable evaluation results. We concluded that a 3-year period will
provide sufficient time to collect complete data and demonstrate
evaluation trends over time.
After submission of the initial evaluation report, States would be
required to submit subsequent evaluation reports every 3 years. This
means that States would submit the second evaluation report with the
SDP preprint submission for the first rating period beginning 9 years
after the applicability date for the evaluation plan; this evaluation
report will contain results from years four through six after the
applicability date for the evaluation plan. States will be required to
continue submitting evaluation reports with this frequency as long as
the SDP is implemented. We acknowledge that some SDPs will have been
operational for multiple years when these proposed regulations take
effect. We did not propose a different implementation timeline for SDP
arrangements that predate the compliance deadline for this proposal.
For these mature payment arrangements, States would be required to
submit an evaluation report in the fifth year after the compliance date
that includes the 3 most recent and complete years of annual results
for the SDP. However, because these types of long-standing payment
arrangements have been collecting evaluation data since implementation,
we will expect States to include the evaluation history in the report
to provide the most accurate picture.
We recognize and share the concerns that oversight bodies and other
interested parties have stated regarding the extent to which CMS uses
evaluation results to inform SDP written prior approval decisions. In
response to these concerns and as a part of the proposed revisions to
Sec. 438.6(c)(2)(ii), which include the standards that all SDPs must
meet, we proposed a new standard at Sec. 438.6(c)(2)(ii)(F) requiring
that all SDPs must result in achievement of the stated goals and
objectives in alignment with the State's evaluation plan. The proposed
changes are designed to help us to better monitor the impact of SDPs on
quality and access to care and will help standardize our review of SDP
proposal submissions under Sec. 438.6(c) while allowing us to
disapprove SDPs that do not meet their stated quality goals and
objectives.
We also proposed a concurrent proposal at Sec. 438.358(c)(7) to
include a new optional EQR activity to support evaluation requirements,
which will give States the option to leverage a CMS-developed protocol
or their EQRO to assist with evaluating SDPs. The proposed optional EQR
activity will reduce burden associated with these new SDP requirements
and is discussed in more detail in section I.B.5.c. of this final rule.
We described in the proposed rule, and invited public comment on, a
requirement that States procure an independent evaluator for SDP
evaluations in the final rule based on comments received. In
consideration of the myriad new proposed requirements within this final
rule, we weighed the value of independent evaluation with increased
State burden. We noted in the proposed rule a concern that it would be
overly burdensome for States to procure independent evaluators for SDPs
due, in part, to the timing of the final SDP cost
[[Page 41097]]
percentage submission. We proposed that the final SDP cost percentage
be submitted 2 years following completion of the applicable rating
period, and that if the final SDP cost percentage exceeds the 1.5
percent, States will be required to submit an evaluation report to CMS.
While we encourage all States to evaluate their SDPs, it could be
difficult and time consuming to procure an independent evaluator in a
timely manner solely for the purpose of the SDP evaluation since States
will not know whether an evaluation is required until 2 years following
the rating period. We solicited comment on whether we should instead
require that States use an independent evaluator for SDP evaluations.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comments on our proposals and the alternatives
under consideration.
We summarize and respond to public comments received on quality and
evaluation requirements for SDPs (Sec. 438.6(c)(2)(ii)(D) and (F),
(c)(2)(iv) and (v), and (c)(7)) below.
Comment: Several commenters were broadly supportive of our proposed
SDP evaluation plan policies at Sec. 438.6(c)(2)(iv). These commenters
stated appreciation for the framework we proposed and our goal to
incentivize quality improvement efforts through SDP evaluations. Some
commenters also offered specific support for our efforts to monitor and
quantify the extent to which SDPs advance the identified goals and
objectives in a State's managed care quality strategy.
Response: We appreciate the support for the proposed SDP evaluation
plan policies. As the volume of SDP preprint submissions and total
dollars flowing through SDPs continues to increase, we recognize the
importance of ensuring that SDPs contribute to Medicaid quality goals
and objectives. Meaningful evaluation results are critical for ensuring
that these payments further improvements in quality of care.
Comment: Some commenters opposed the proposed standard at Sec.
438.6(c)(2)(ii)(F) requiring all SDPs to result in the achievement of
the stated goals and objectives identified in the State's evaluation
plan(s) for the SDPs, noting concern that it will result in States
setting overly modest targets to avoid putting initiatives at risk if
performance does not meet the established targets.
Response: We believe that States should have the flexibility to
choose meaningful targets based on the goals of the payment arrangement
within their Medicaid managed care program and its quality strategy.
Even modest goals, such as maintaining a certain level of access to
care or provider performance, can be worthwhile and are allowable under
Sec. 438.6(c)(2)(iv)(C). We understand the commenters' concerns about
underachievement and unnecessarily low-quality targets putting SDP
initiatives at risk, and we encourage States to request technical
assistance from CMS for choosing targets that are commensurate to the
size and scope of their SDP and that are compliant with Sec.
438.6(c)(2)(iv). Ultimately, we believe that requiring SDPs to achieve
the identified goals and objectives in their evaluation plans is a
reasonable way to ensure that SDP spending supports the delivery of
quality care to Medicaid managed care enrollees. In alignment with our
original intent in the proposed rule to be able to request an
evaluation report from a State to assess compliance with the standard
at Sec. 438.6(c)(2)(ii)(F), we are revising paragraph (c)(2)(ii)(F) to
make abundantly clear that, at CMS's request, States must provide an
evaluation report for each SDP demonstrating the achievement of the
stated goals and objectives identified in the State's evaluation plan.
Comment: Some commenters stated concern that requiring SDPs to meet
the goals and objectives in the State's evaluation plan for that SDP
year after year is unreasonable because clinical outcome data can be
unpredictable and vulnerable to external factors. One commenter
requested further clarification on what flexibilities would be in place
for unforeseen circumstances that impact quality and performance (such
as a provider strike, a natural disaster, a new training protocol, or
an electronic medical record migration) that may take time to resolve.
Response: This standard gives CMS the authority to disapprove
renewal SDPs that repeatedly pay providers despite failure to meet the
identified quality strategy goals. For SDPs that require written prior
approval and have a final State-directed payment cost percentage
greater than 1.5 percent, States will be required (by Sec.
438.6(c)(2)(v)) to submit evaluation reports every 3 years that contain
the 3 most recent and complete years of available data. We believe that
this gives States adequate opportunity to show trends and explain
anomalies or other issues over time so long as States show attainment
of their goals. If an evaluation report fails to show attainment of any
of the identified quality strategy goals, we will work with the State
to help ensure that the subsequent evaluation report, which would be
required after another 3 years, demonstrates that the quality goals or
outcomes have been attained. However, if the subsequent evaluation
report does not show attainment of the identified quality strategy
goals, we would not approve a renewal of the SDP. Ultimately, spending
through SDPs should promote quality care to Medicaid managed care
enrollees and SDPs that consistently fall short of their targets likely
indicate misalignment with the State's quality strategy.
We appreciate that clinical outcomes can be unpredictable and
vulnerable to external factors as suggested by the commenters. In the
case of emergency and natural disasters that may impact clinical
outcome data, States could evaluate if flexibilities under section 1135
of the Act would be applicable and beneficial. For other unforeseen
circumstances, we are available to provide technical assistance to
States to understand the impact of these unforeseen circumstances on
the SDP's evaluation and determine how best to reflect the information
in the evaluation report.
Comment: Some commenters stated concern about the administrative
burden of the evaluation plans and suggested that CMS implement either
an optional requirement or a minimal level of monitoring for SDPs that
do not require CMS written prior approval of associated preprints.
Response: We acknowledge that SDP evaluations pose some
administrative burden. While having an evaluation plan that meets the
requirements in Sec. 438.6(c)(2)(ii)(D) is a requirement that all SDPs
must meet, States will not be required to submit their evaluation plans
for SDPs that are exempt from the written prior approval process, which
will significantly decrease administrative burden. However, States are
required to monitor and evaluate access and quality for all SDPs to
ensure and document compliance with Sec. 438.6(c)(2)(ii)(F) which will
require each SDP to result in achievement of the stated goals and
objectives in alignment with the State's evaluation plan. Further, we
note evaluation plans and reports must be made available to CMS upon
request for all SDPs, including for SDPs that are exempt from the
written prior approval process per Sec. 438.6(c)(2)(ii)(F). States may
consider leveraging existing monitoring and evaluation frameworks to
meet these requirements.
Comment: Some commenters were opposed to the expanded evaluation
[[Page 41098]]
plan requirements for SDPs that are designed solely to maintain access
to care. Other commenters recommended that Sec. 438.6(c)(2)(iv)(A) be
revised to allow States to select only access measures for these types
of SDPs. Commenters noted that maintaining access is a worthwhile goal,
and requiring performance measures may not be appropriate for the
community or payment arrangement. Some commenters encouraged CMS to
provide guidance on how to choose appropriate measures.
Response: While we recognize and agree that preserving access to
care is a worthwhile goal for some SDPs, monitoring access to care
should not be done in a vacuum that excludes monitoring provider
service delivery, quality of care, or outcomes. We believe that
requiring States to choose at least 2 metrics, one of which must be a
performance measure, will ensure adequate monitoring of both access and
quality. States have flexibility to determine which goal(s) from their
quality strategies best align with the goals of each SDP, and States
have flexibility to choose metrics in Sec. 438.6(c)(2)(iv)(A)(2) that
are appropriate for the payment arrangement, provider type, and
population served. As such, there is ample flexibility for States to
identify metrics that are most appropriate for evaluating each SDP in
Sec. 438.6(c)(2)(iv)(A)(1) which requires the metrics to be specific
to the SDP, and when practicable and relevant, attributable to the
performance by the providers for enrollees in all a State's managed
care program(s) to which the SDP applies. We encourage States to
request technical assistance to help determine appropriate measures
that comply with the requirements in Sec. 438.6(c)(2)(iv)(A).
We also remind States of the reporting requirements finalized in
Medicaid Program and CHIP; Mandatory Medicaid and Children's Health
Insurance Program (CHIP) Core Set Reporting in the August 31, 2023
Federal Register (88 FR 60278) \142\ which established requirements for
mandatory annual State reporting of the Core Set of Children's Health
Care Quality Measures for Medicaid and CHIP), the behavioral health
measures on the Core Set of Adult Health Care Quality Measures for
Medicaid, and the Core Sets of Health Home Quality Measures for
Medicaid. This rule requires States, the District of Columbia (DC) and
certain territories to mandatorily report on these Core Set measures at
the State level. Additionally, Subpart G of this final rule contains
requirements and the initial mandatory measure list (which will be
reported at the plan level) for the Medicaid and CHIP Managed Care
Quality Rating System. We encourage States to evaluate the
appropriateness of the measures required on these measure sets against
their measures for each SDP to leverage efficiencies and reduce
administrative burden. We also encourage States to stratify all
disparity sensitive measures by at least one dimension in their SDP
evaluation plan, whenever possible.
---------------------------------------------------------------------------
\142\ https://www.federalregister.gov/documents/2023/08/31/2023-18669/medicaid-program-and-chip-mandatory-medicaid-and-childrens-health-insurance-program-chip-core-set.
---------------------------------------------------------------------------
Comment: One commenter opposed proposed Sec. 438.6(c)(2)(iv)(A)(1)
and suggested removal of the requirement that evaluation metrics must
be attributable to the performance by the providers for enrollees in
each of the State's managed care program(s) noting that some programs
may be carve outs for specific service or set of services, making it
difficult to evaluate them relative to larger managed care programs.
Response: The proposed provision at Sec. 438.6(c)(2)(iv)(A)(1)
requires that the chosen metrics are attributable to the performance by
the providers for enrollees in all the State's managed care program(s)
to which the SDP applies, when practicable and relevant. We proposed
the standard ``when practicable and relevant'' to allow flexibility to
account for situations in which the type of data required for managed
care program-level specificity may be either impossible to obtain or
may be ineffective in measuring the performance of the providers for
the identified quality goal(s) and objective(s). We refer the commenter
to section I.B.2.j. of the proposed rule where we discussed examples of
situations where measuring performance at the specific program level
would not be considered practicable or relevant. Additionally, for SDP
evaluations, we believe it would be practicable and relevant to
attribute metrics to the providers participating in the SDPs when the
selected metrics can be calculated at the provider-level based on data
reporting practices. For example, if provider data are reported to the
State at the managed care program level and include providers
contracted with several payers, the evaluation could pool the data from
a group of providers participating in the SDP to conduct the
evaluation. We encourage States to leverage existing quality reporting
for this purpose, and we will continue to offer technical assistance to
States to help both select relevant metrics that can be specified at
the provider level and identify strategies to analyze and isolate data
to those participating SDP providers for their SDP evaluations.
Comment: Many commenters supported our proposed SDP evaluation
reporting requirements at Sec. 438.6(c)(2)(v), including the proposed
3-year submission timeframe and the submission threshold of 1.5 percent
of the final SDP cost percentage.
Response: We recognize that submitting an evaluation report that
complies with the requirements in Sec. 438.6(c)(2)(v) would impose
some additional burden on States but believe the 1.5 percent final SDP
cost percentage threshold allows States and CMS to focus resources on
payment arrangements with the highest financial risk.
Comment: Many commenters supported the proposed requirement that
evaluation reports be made publicly available on States' websites
noting that these proposals would help to bring more transparency to
Medicaid managed care spending. A few commenters encouraged CMS to also
consider making SDP evaluations publicly available on Medicaid.gov,
similar to the process currently used for section 1115 demonstration
evaluations.
Response: We appreciate the suggestion, and we intend to make
States' evaluation results available on Medicaid.gov.
Comment: One commenter requested more details on how CMS intends to
operationalize the new 3-year submission timeframe for evaluation
reporting. The commenter stated concern about how CMS will use SDP
evaluations to make renewal decisions for SDPs that are reviewed on an
annual basis when the evaluation reports are not required every year,
noting that this could introduce uncertainty and frustration for
States, managed care plans, and providers.
Response: In determining whether to approve an existing SDP once
the original approval period is over (that is, a renewal of an SDP),
CMS will take into account the achievement of the identified goals and
objectives from States' quality strategies based on a review of the
evaluation report (outlined in Sec. 438.6(c)(2)(v)) required for that
SDP. Because those evaluation reports, when required, are collected on
a 3-year running cycle, we can only make renewal determinations based
on the achievement of goals and objectives when States have submitted
the report. In the interim years, SDP approval determinations will be
made based on
[[Page 41099]]
the adequacy of the State's responses to the preprint showing that the
SDP has met all of the other applicable standards in Sec.
438.6(c)(2)(ii). With regards to the evaluation elements, States will
continue to submit their evaluation plans each year with the annual
preprint submission for SDPs that require written prior approval at
Sec. 438.6(c)(2)(iv). In years when States are not required to submit
evaluation reports, renewal determinations will also take into account
the adequacy of the evaluation plan, its required elements, and any
updates to those required elements.
To illustrate, after a State receives approval of its initial SDP
submission, a State would expect to submit its evaluation report with
its Year 5 renewal preprint submission as Sec. 438.6(c)(2)(iv)(B)
requires that the State submit the initial evaluation report no later
than 2 years after the conclusion of the 3-year evaluation period;
States are required to continually monitor the progress towards their
goals and objectives during the 3 years. We believe this gives States
adequate time to collect and monitor data and to anticipate trends. In
this example, Year 5 is the first year that CMS would make an approval
determination based on the achievement of the stated goal(s) and
objective(s) in alignment with the evaluation plan, as well as based on
the other requirements in Sec. 438.6(c). In Years 2, 3, and 4,
approval determinations will be made based on the adequacy of the plan
and its required elements, and any other information provided by the
State on this topic in the preprint, as well as based on the other
requirements in Sec. 438.6(c). If helpful, States can submit interim
reports for feedback from CMS to help alleviate the uncertainty of
interested parties.
If a State continues the SDP beyond Year 5, the next evaluation
report, which would be used in making renewal determinations that take
into account compliance with paragraph (c)(2)(ii)(F), will be required
in Year 8 as Sec. 438.6(c)(2)(iv)(B) requires subsequent evaluation
reports to be submitted to CMS every 3 years. In Years 6 and 7,
approval determinations will be made based on the adequacy of the plan
and its required elements and compliance with the other requirements in
paragraph (c) (including paragraphs (c)(2)(ii)(A) through (E) and (G)
through (J)).
In addition, we proposed and are finalizing Sec. 438.358(c)(7) to
include a new optional EQR activity to support evaluation requirements,
which would give States the option to leverage a CMS-developed protocol
or their EQRO to assist with evaluating SDPs as finalized at Sec.
438.6(c)(2)(v). We believe this optional activity could reduce burden
associated with this requirements and is discussed in more detail in
section I.B.5.c. of this final rule. We can provide technical guidance
on evaluations that are commensurate to the size and scope of SDPs for
which written prior approval is required under Sec. 438.6(c)(2)(i).
Comment: Some commenters were in favor of revising the 1.5 percent
threshold for evaluation report submission, suggesting that it should
be higher because the administrative burden of providing the report
could discourage States from using SDPs to advance quality and value-
based goals. One commenter opposed the 1.5 percent threshold altogether
in favor of requiring evaluation reports on all SDPs requiring written
prior approval.
Response: We appreciate the comments and continue to believe that
the 1.5 percent threshold strikes the right balance between the
reduction of State administrative burden and the availability of SDP
evaluation results for use in internal and external monitoring of the
effect of SDPs on quality of care.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. 438.6(c)(2)(ii)(D), (c)(2)(iv) and (v) as proposed. As described
in I.B.2.l, the final regulation at Sec. 438.6(c)(6) prohibits
separate payment terms; therefore, we are finalizing Sec. 438.6(c)(7)
with modifications to be consistent with that policy decision. We are
finalizing Sec. 438.6(c)(2)(ii)(F) with a revision to clarify that, at
CMS's request, States must provide an evaluation report to demonstrate
that an SDP resulted in achievement of the stated goals and objectives
in alignment with the State's evaluation plan.
k. Contract Term Requirements (Sec. 438.6(c)(5) and 438.7(c)(6))
SDPs are contractual obligations in which States direct Medicaid
managed care plans on how or how much to pay specified provider classes
for certain Medicaid-covered services. The current heading for Sec.
438.6(c) describes paragraph (c) as being about delivery system and
provider payment initiatives under MCO, PIHP, or PAHP contracts.
Further, the regulation refers to SDPs throughout as provisions in the
contract between the MCO, PIHP or PAHP and the State that direct
expenditures by the managed care plan (that is, payments made by the
managed care plan to providers). SDPs are to be included in a State's
managed care rate certification per Sec. 438.7(b)(6) and final
capitation rates for each MCO, PIHP, and PAHP must be identified in the
applicable contract submitted for CMS review and approval per Sec.
438.3(c)(1)(i). Thus, every SDP must be documented in the managed care
contract and actuarial rate certification.
Per previous guidance issued to States, including in the January
2022 State Guide to CMS Criteria for Medicaid Managed Care Contract
Review and Approval (State Guide), contractual requirements for SDPs
should be sufficiently detailed for managed care plans to
operationalize each payment arrangement in alignment with the approved
preprint(s).\143\ The State Guide includes examples of information that
States could consider including in their managed care contracts for
SDPs.\144\ However, despite this guidance, there is a wide variety of
ways States include these requirements in their contracts, many of
which lack critical details to ensure that plans implement the
contractual requirement consistent with the approved SDP. For example,
some States have sought to include a broad contractual requirement that
their plans must comply with all SDPs approved under Sec. 438.6(c)
with no further details in the contract to describe the specific
payment arrangements that the State is directing the managed care plan
to implement and follow. Other States have relied on broad contract
requirements stating that plans must comply with all applicable State
laws as a method of requiring compliance with State legislation
requiring plans to pay no less than a particular fee schedule for some
services. These types of vague contractual provisions represent
significant oversight risk for both States and CMS.
---------------------------------------------------------------------------
\143\ https://www.medicaid.gov/medicaid/downloads/mce-checklist-state-user-guide.pdf.
\144\ https://www.medicaid.gov/medicaid/downloads/mce-checklist-state-user-guide.pdf.
---------------------------------------------------------------------------
To reduce this risk and improve the clarity of SDPs for managed
care plans, we proposed to codify at Sec. 438.6(c)(5) minimum
requirements for the content of a Medicaid managed care contract that
includes one or more SDP contractual requirement(s). Minimum
requirements for SDP contract terms will assist States when developing
their contracts, ensure that managed care plans receive necessary
information on the State's intent and direction for the SDP, facilitate
CMS's review of managed care contracts, and ensure compliance with the
approved SDP preprint. At Sec. 438.6(c)(5)(i) through (v), we proposed
[[Page 41100]]
to specify the information that must be documented in the managed care
contract for each SDP. Proposed Sec. 438.6(c)(5)(i) would require the
State to identify the start date and, if applicable, the end date
within the applicable rating period. While most SDPs, particularly
long-standing contractual requirements, are in effect throughout the
entire rating period, some SDPs begin in the middle of the rating
period or are for a limited period of time within a rating period. This
requirement is designed to ensure that the time period for which the
SDP applies is clear to the managed care plans.
Proposed Sec. 438.6(c)(5)(ii) would require the managed care
contract to describe the provider class eligible for the payment
arrangement and all eligibility requirements. This proposal would
ensure compliance with the scope of the written prior approval issued
by CMS because we have implemented paragraph (c)(2)(ii)(B) by requiring
States to provide a description of the class of providers eligible to
participate and the eligibility criteria. In addition, a clear contract
term provides clear direction to plans regarding the provider class
that is eligible for the SDPs.
Proposed Sec. 438.6(c)(5)(iii) would require the State to include
a description of each payment arrangement in the managed care contract
and is a requirement to ensure compliance with the written prior
approval issued by CMS and provide clear direction to plans while also
assisting CMS in its review and approval of Medicaid managed care
contracts. For each type of payment arrangement, we proposed to require
that specific elements be included in the contract at a minimum. For
SDPs that are minimum fee schedule arrangements, we proposed that the
contract must include: in Sec. 438.6(c)(5)(iii)(A)(1), the fee
schedule the plan must ensure payments are at or above; in paragraph
(c)(5)(iii)(A)(2), the procedure and diagnosis codes to which the fee
schedule applies; and in paragraph (c)(5)(iii)(A)(3), the applicable
dates of service within the rating period for which the fee schedule
applies. We proposed the requirement at paragraph (c)(5)(iii)(A)(3) to
be clear that payment can only be triggered based on service delivery
within the applicable rating period.
For minimum fee schedules set at the State plan approved rate as
described in Sec. 438.6(c)(1)(iii)(A), we proposed to require at Sec.
438.6(c)(5)(iii)(A)(4) that the contract reference the applicable State
plan page, the date it was approved, and a link to where the currently
approved State plan page is posted online when possible. For minimum
fee schedules set at the Medicare rate as described in Sec.
438.6(c)(1)(iii)(B), we proposed to require at Sec.
438.6(c)(5)(iii)(A)(5), that the contract include the Medicare fee
schedule and any specific information necessary for implementing the
payment arrangement. For example, CMS updates many Medicare fee
schedules annually using a calendar year, but Medicaid managed care
contracts may not be based on a calendar year, such as those that use a
State fiscal year. Therefore, States will have to identify, for each
SDP using a Medicare fee schedule, the specific Medicare fee schedule
and the time period for which the Medicare fee schedule to be used
during the rating period is in effect for Medicare payment. As another
example, the Medicare physician fee schedule (PFS) includes factors for
different geographic areas of the State to reflect higher cost areas;
the Medicaid managed care contract will have to specify if the plans
are required to apply those factors or use an average of those factors
and pay the same rate irrespective of the provider's geographic region.
For uniform increases as described in paragraph (c)(1)(iii)(D), we
proposed at Sec. 438.6(c)(5)(iii)(B)(1) through (5) to require the
contract to include: (1) whether the uniform increase will be a
specific dollar amount or a specific percentage increase over
negotiated rates; (2) the procedure and diagnosis codes to which the
uniform increase will be applied; (3) the specific dollar amount of the
increase or percent of increase, or the methodology to establish the
specific dollar amount or percentage increase; (4) the applicable dates
of service within the rating period for which the uniform increase
applies; and (5) the roles and responsibilities of the State and the
plan, as well as the timing of payment(s), and any other significant
relevant information.
For maximum fee schedules as described in paragraph (c)(1)(iii)(E),
we proposed at Sec. 438.6(c)(5)(iii)(C)(1) through (4) to require the
contract to include: (1) the maximum fee schedule the plan must ensure
payments are below; (2) the procedure and diagnosis codes to which the
fee schedule applies; (3) the applicable dates of service within the
rating period for which the fee schedule applies; and (4) details of
the State's exemption process for plans and providers to follow if they
are under contract obligations that result in the need to pay more than
the maximum fee schedule. An exemption process is necessary for payment
arrangements that limit how much a managed care plan can pay a provider
to ensure that the MCO, PIHP, or PAHP retains the ability to reasonably
manage risk and has discretion in accomplishing the goals of the
contract. Therefore, this proposed requirement would ensure that the
exemption process exists and that the managed care contract describes
it, in addition to the preprint.
For contractual obligations described in paragraph (c)(1)(i) and
(ii) that condition payment based upon performance, we proposed at
Sec. 438.6(c)(5)(iii)(D)(1) through (6) to require that managed care
plan contracts must include a description of the following elements
approved in the SDP arrangement: (1) the performance measures that
payment will be conditioned upon; (2) the measurement period for those
metrics; (3) the baseline statistics against which performance will be
based; (4) the performance targets that must be achieved on each metric
for the provider to obtain the performance-based payment; (5) the
methodology to determine if the provider qualifies for the performance-
based payment, as well as the amount of the payment; and (6) the roles
and responsibilities of the State and the plan, the timing of
payment(s), what to do with any unearned payments if applicable, and
other significant relevant information. Some States perform the
calculations to determine if a provider has achieved the performance
targets necessary to earn performance-based payments, while others
delegate that function to their managed care plans. Adding this
specificity to the contract is intended to ensure clarity for both the
States and the managed care plans.
For contractual obligations described in paragraphs (c)(1)(i) and
(ii) that are population or condition-based payments as defined in
Sec. 438.6(a), we proposed at Sec. 438.6(c)(5)(iii)(E) to require the
contract to describe: (1) the Medicaid covered service(s) that the
population or condition-based payment is made for; (2) the time period
that the population-based or condition-based payment covers; (3) when
the population-based or condition-based payment is to be made and how
frequently; (4) a description of the attribution methodology, if one is
used, which must include at a minimum the data used, when the panels
will be established, how frequently those panels will be updated, and
how that attribution model will be communicated to providers; and (5)
the roles and responsibilities of the State and the plan in
operationalizing the attribution
[[Page 41101]]
methodology if an attribution methodology is used.
Proposed Sec. 438.6(c)(5)(iv) would require that the State include
in the managed care contract any encounter reporting and separate
reporting requirements that the State needs in order to audit the SDP
and report provider-level payment amounts to CMS as required in Sec.
438.6(c)(4).
Proposed Sec. 438.6(c)(5)(v) would require that the State indicate
in the contract whether the State will be using a separate payment term
as defined in Sec. 438.6(a) to implement the SDP. We noted in the
proposed rule that this information would provide additional clarity
for oversight purposes for both States and CMS.
We also proposed to require in Sec. 438.6(c)(5)(vi) that all SDPs
must be specifically described and documented in MCO, PIHP, and PAHP
contracts no later than 120 days after the start of the SDP or approval
of the SDP under Sec. 438.6(c)(2)(i), whichever is later. That
proposed timeframe was consistent with the timeframe proposed for
documenting separate payment terms in the managed care contract under
Sec. 438.6(c)(6)(v).
Finally, we proposed a new regulatory requirement at Sec.
438.7(c)(6) to require that States must submit the required rate
certification documentation for SDPs (either the initial rate
certification or a revised rate certification) no later than 120 days
after either the start date of the SDP approved under Sec.
438.6(c)(2)(i) (redesignated from current Sec. 438.6(c)(2)(ii)) or 120
days after the date CMS issued written prior approval of the SDP,
whichever is later. We proposed regulatory changes in Sec. Sec.
438.6(c)(5)(vi) and 438.7(c)(6) to require the submission of related
contract requirements and rate certification documentation no later
than 120 days after the start of the SDP or the date we granted written
prior approval of the SDP, whichever is later. States should submit
their rate certifications prior to the start of the rating period, and
Sec. 438.7(c)(2) currently requires that any rate amendments comply
with Federal timely filing requirements. However, we believe given the
nature of SDPs, there should be additional timing restrictions on when
revised rate certifications that include SDPs can be provided for
program integrity purposes. We also reminded States that these
proposals do not supersede other requirements regarding submission of
contract and rate certification documentation when applicable,
including but not limited to those that require prior approval or
approval prior to the start of the rating period such as requirements
outlined in Sec. Sec. 438.3(a), 438.4(c)(2), and 438.6(b)(1). (This
proposal was in section I.B.2.l. of the proposed rule and is also
discussed in section I.B.2.l. of this final rule.)
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comments on our proposals.
We summarize and respond to public comments received on our
proposals for contract term requirements for SDPs and submission of
associated rate certifications (Sec. Sec. 438.6(c)(5) and 438.7(c)(6))
below.
Comment: Some commenters stated support for accurate documentation
of SDPs in the applicable managed care plan contracts and noted that
timely incorporation of this SDP documentation, and associated
submission of the contracts to CMS, is essential to ensure efficient
and proper administration of the Medicaid program. A few commenters
suggested that CMS consider making Sec. 438.6(c)(5) applicable sooner
than proposed.
Response: We agree that timely and accurate documentation of SDPs
in applicable contracts and rate certifications is critical to
efficient and proper administration of the Medicaid program. Because
SDPs are contractual obligations between the State and its managed care
plans, it is imperative that they be documented in the contract with
sufficient granularity for plans to operationalize the SDP accurately
as approved. Therefore, we are finalizing the minimum contract
documentation requirements proposed in Sec. 438.6(c)(5)(i) through
(iv). Due to the separate payment term prohibition being finalized in
Sec. 438.6(c)(6) (see section I.B.2.l. of this final rule for further
details), we are not finalizing Sec. 438.6(c)(5)(v) as proposed and
Sec. 438.6(c)(5)(vi) is finalized, with modifications, as paragraph
(c)(5)(v). We also appreciate the suggestion to make Sec. 438.6(c)(5)
applicable sooner than proposed but believe that States will need to
sufficient time to implement this requirement, in concert with other
requirements finalized in this rule and therefore, decline to change
the applicability date of this provision. As proposed and finalized,
the requirements in Sec. 438.6(c)(5)(i) thorough (iv) are applicable
for any rating periods beginning on or after 2 years after the
effective date of this final rule and the requirement finalized at
Sec. 438.5(c)(5)(v) (proposed at (c)(5)(vi)) is applicable for any
rating periods beginning on or after 4 years after the effective date
of this final rule. See section I.B.2.p. of this final rule for more
discussion of the applicability dates for the regulatory amendments
regarding SDPs.
Comment: One commenter recommended that CMS require a general
statement in managed care contracts specifying that the managed care
plan is expected to incorporate a rate adjustment for certain providers
or services as a result of an SDP. The commenter stated that providers
may advocate for increased State general revenue appropriations for
provider reimbursement rates and States then increase the Medicaid FFS
reimbursement rates and make a corresponding capitation rate adjustment
to account for base provider payment rate assumptions aligned with the
Medicaid FFS reimbursement rates. However, without an SDP, the managed
care plans are not bound to incorporate these rate increases into their
provider rates. The commenter stated that it is important that a State
be able to memorialize legislative direction.
Response: SDPs are contractual requirements whereby States direct
their managed care plans' expenditures, and we are finalizing
requirements Sec. 438.6(c)(5) to ensure that SDPs are clearly
described and documented in managed care plan contracts. However, that
is different from when a State and its actuary use information as part
of rate development, such as provider payment rate assumptions aligned
with Medicaid FFS reimbursement rates, to make adjustments to base
capitation rates. Without a contractual obligation that directs the
managed care plans' expenditures (and such contractual obligations are
required to comply with our regulations), an adjustment included in
rate development and that meets the requirements for a rate adjustment
in Sec. 438.7, is not an SDP.
Comment: A few commenters supported our proposal to require States
to submit managed care plan contracts and rate certifications that
include SDPs no later than 120 days of the start date or approval date
while other commenters questioned the feasibility of the contract
submission timeframes proposed in Sec. 438.6(c)(5)(vi). One commenter
noted that 120 days may not be sufficient time for the State to process
contracts from language development, legal review, and State clearance
to managed care plan execution. Some commenters stated that using a
``later of'' submission date scheme was unnecessarily complicated,
prone to error, and would leave managed care plans and providers
unclear on final details about the SDP for too long. A few commenters
noted that contracts and rate certifications
[[Page 41102]]
should be submitted at the same time as the SDP preprint to ensure that
they are all consistent. A few commenters stated it is critical that
managed care plans receive timely information about SDPs as delays in
programming managed care plans claims processing and reporting systems
accurately have the potential to delay payments to providers.
Response: We noted in the proposed rule that contracts or
amendments can be submitted to CMS in draft form so long as it includes
all required elements in Sec. 438.6(c)(5)(i) through (iv), as
applicable, to meet the requirement proposed and finalized in this
rulemaking to document SDP terms in contract documents in a certain
timeframe (88 FR 28144). Between the publication of the proposed rule
and this final rule, CMS published the CMCS Informational Bulletin
``Medicaid and CHIP Managed Care Monitoring and Oversight Tools'' on
November 7, 2023.\145\ Within the CIB, CMS published guidance on the
components of a complete submission for managed care plan rate
certifications, contracts, and SDP, respectively. Like the submission
requirement finalized in Sec. 438.6(c)(2)(viii), the submission
requirement finalized at Sec. 438.6(c)(5)(v) must be met for approval
of the associated Medicaid managed care contract(s). To make this
requirement even clearer, we are finalizing 438.6(c)(5)(v) with a
revision to replace ``contracts that are submitted to CMS . . .'' to
``contract that must be submitted to CMS . . .'' If a State does not
submit the required contract and rate certification documenting the SDP
within 120 days of the SDP start date, CMS will require the State to
cease SDP implementation and submit a corrective SDP amendment
establishing a prospective SDP start date, as is required for all
amendments to approved SDPs.
---------------------------------------------------------------------------
\145\ https://www.medicaid.gov/sites/default/files/2023-11/cib11072023.pdf.
---------------------------------------------------------------------------
Similar to our reasoning for revising the SDP submission timeframe
in Sec. 438.6(c)(2)(viii) (see section I.B.2.e. of this final rule),
we are persuaded by comments that our proposal was overly complex with
the ``later of'' submission timelines. We also believe that we need to
ensure consistency between the final regulations at Sec.
438.6(c)(5)(vi) for contract submission and Sec. 438.7(c)(6) for rate
certification submission given their relationship to each other's
approval.
We stated in the proposed rule that we intended to make our
processes more responsive to States' needs while ensuring that reviews
linked to SDP approvals are not unnecessarily delayed (88 FR 28116).
Given the finalized version of Sec. 438.6(c)(2)(viii) for SDP preprint
submission (see section I.B.2.e. of this final rule), we believe
simplification of the timeframes for submission of the contract and
rate certifications inclusive of SDPs is also needed to prevent
unnecessary delays for States, managed care plans, and providers. In
section I.B.2.e. of this final rule, we acknowledged the importance of
contracts that include SDPs containing timely and accurate information
on each SDP to enable managed care plans to implement them as intended.
Proper implementation of an SDP also reduces uncertainty for providers
expecting to receive payments from it. After careful consideration, we
will finalize a single submission timeframe that is clear, facilitates
compliance, and does not cause unnecessary delays in review and
approval. Therefore, we are finalizing Sec. 438.6(c)(5)(v) (originally
proposed at Sec. 438.6(c)(5)(vi)) to require all SDPs to be
specifically described and documented in the managed care contracts
that must be submitted to CMS no later than 120 days after the start
date of the SDP and we are not finalizing ``or 120 days after the date
CMS issued written approval of the SDP under (c)(2) of this section,
whichever is later.'' As noted previously and in the proposed rule,
submission of the draft contract documents reflecting the SDP terms
will establish compliance with the deadline in Sec. 438.6(c)(5)(v) so
long as those draft contract documents include all of the required
elements in Sec. 438.6(c)(5)(i) through (v), as applicable. As
proposed and finalized, Sec. 438.6(c)(5) does not require a final
signed copy of the contract amendment within 120- days of the start of
the SDP However, States are required to submit a final signed contract
action that complies with all content requirements before CMS will
approve the managed care contract. Section 438.6(c)(5)(v) as finalized
requires States to submit contracts documenting SDPs no later than 120
days after the SDP start date. The submission requirement at Sec.
438.6(c)(5)(v) may be met using a draft complete contract or draft
excerpt of the contract that provides the information about the SDP
required by Sec. 438.6(c). This submission deadline applies to all
contracts (and, as required by Sec. 438.7(c)(6), discussed in detail
later in this response, all rate certifications) that include SDPs,
regardless--of whether the SDP requires written prior approval from
CMS.
As discussed in section I.B.2.e. of this final rule, we are
finalizing Sec. 438.6(c)(2)(viii) to require States to submit all
required complete documentation for each SDP requiring written approval
before the specified start date of the payment arrangement. Required
documentation for the SDP includes at least the completed preprint, the
total payment rate analysis and the ACR demonstration as described in
Sec. 438.6(c)(2)(iii) and the evaluation plan as required in
438.6(c)(2)(iv) as applicable. Therefore, States would be required to
submit the preprint to CMS prior to the start date of the SDP and then
the corresponding contract(s) and rate certification(s) inclusive of
the applicable SDP no later than 120 days following the start date of
the SDP. We believe this submission timeline is the clearest and least
burdensome for States, facilitates States submitting contracts that
contain accurate information about each SDP, enables managed care plans
to implement payment arrangements accurately, and facilitates timely
payments to providers.
Lastly, we are finalizing the proposed applicability deadlines for
Sec. 438.6(c)(5). Those deadlines provide States sufficient time to
come into compliance with the requirements finalized in Sec.
438.6(c)(5). We are finalizing Sec. 438.6(c)(8)(iii) and (v),
respectively, to require compliance with the minimum contract
documentation requirements in Sec. 438.6(c)(5)(i) through (iv) no
later than the first rating period for contracts with MCOs, PIHPs and
PAHPs beginning on or after 2 years after the effective date of the
final rule. We are finalizing Sec. 438.6(c)(5)(v) to require
compliance with the 120-day contract submission timeframe by the first
rating period for contracts with MCOs, PIHPs and PAHPs beginning on or
after 4 years after the effective date of the final rule. We believe
staggering these applicability dates by 2 years provides States ample
time to consider contracting best practices and design processes to
ensure timely submission of the required SDP contract documentation.
In response to part of the comments about the submission of ``rate
certifications,'' the discussion about the timing of submission to CMS
of contracts that contain SDPs are equally applicable to rate
certifications. To align rate certification submission timeframes with
that of contracts, we are also finalizing Sec. 438.7(c)(6) with
revisions compared to the proposed rule. We are finalizing Sec.
438.7(c)(6) to specify a single submission timeframe of no later than
120 days after the start date of the SDP. We are also not finalizing as
part of Sec. 438.7(c)(6) the phrase ``for which the State has obtained
written approval under Sec. 438.6(c)(2)(i)'' as that is not
[[Page 41103]]
consistent with long standing rate certification requirements (as
specified at Sec. 438.7(b)(6)) that a description of any special
contract provisions related to payment must be included in the rate
certification. For clarity, we remind States that Sec. 438.7(b)(6) is
applicable regardless of whether an SDP requires written prior approval
of a preprint and for all special contract terms specified in Sec.
438.6 (including incentive payments, withholds, and pass-through
payments). We believe finalizing Sec. 438.7(c)(6) as described here
provides States time to ensure that rate certifications accurately and
consistently reflect each SDP. We are finalizing as proposed (but
redesignated to Sec. 438.7(f)(2)) that Sec. 438.7(c)(6) as revised
here is applicable no later than the first rating period for managed
care plans beginning on or after 4 years of the effective date of this
final rule; this applicability date aligns with the applicability of
the 120-day contract submission timeframe finalized in Sec.
438.6(c)(5)(v). (This proposal was in section I.B.2.l. of the proposed
rule and is also discussed in section I.B.2.l. of this final rule.)
Comment: Some commenters stated concern about the administrative
burden of incorporating such detailed information about each SDP in
applicable managed care plan contracts. A few of these commenters
suggested CMS reduce burden by allowing States to incorporate SDPs in
contracts via formal reference to the approved preprints or through an
all-plan letter.
Response: Our goal with this provision was to ensure transparency
for SDPs, improve clarity for the managed care plans that are
responsible for implementing these payment arrangements, and to ensure
fidelity to SDP design and approval. As noted in the proposed rule,
despite guidance from CMS, States have used a wide variety of
approaches to include SDP requirements in their contracts, many of
which lack critical details to ensure that managed care plans implement
the contractual requirement consistent with the approved SDP. We
believe that the minimum requirements for SDP contract terms finalized
in Sec. 438.6(c)(5)(i) through (iv) will ensure that managed care
plans receive detailed direction on each SDP, facilitate CMS's review
of managed care contracts, and facilitate compliance with the approved
SDP preprint so that providers receive timely and accurate payments.
State directed payments must be included in a State's rate
certification per Sec. 438.7(b)(6) and final capitation rates for each
MCO, PIHP, and PAHP and must be identified in the applicable contract
submitted for CMS review and approval per Sec. 438.3(c)(1)(i) (88 FR
28142). References to an approved preprint is not sufficient to meet
this requirement. The preprint is the vehicle for CMS review and
approval of SDPs, when required, and they were never intended to serve
as a vehicle for managed care plan communication or direction. We do
not believe it is reasonable to expect managed care plans to interpret
an SDP preprint to operationalize an SDP, and States need to provide
clear and transparent contractual requirements for SDPs in the managed
care plan contracts to ensure successful implementation. For these same
reasons and because an SDP is ultimately a contractual obligation
between the State and managed care plans, we also do not believe that
it is appropriate for States to provide the information specified in
Sec. 438.6(c)(5)(i) through (iv) to their plans via all-plan letters
or other communications outside of the contract itself.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are:
finalizing Sec. 438.6(c)(5)(i), (ii) and (iv) as
proposed;
finalizing Sec. 438.6(c)(5)(iii) as proposed with
grammatical minor edits to (Sec. 438.6(c)(5)(iii)(B) and (C) to
remove, ``the contract must include the following'';
not finalizing the proposed provision (proposed at
paragraph (c)(5)(v)) related to contract terms for separate payment
terms;
finalizing, at new Sec. 438.6(c)(5)(v), a requirement for
submission of minimum contract documentation for an SDP to CMS no later
than 120 days after the SDP start date but not the proposal for
submission within 120 days of CMS's written prior approval if that is
later than the start date of the SDP; and
finalizing Sec. 438.7(c)(6) to require submission of rate
certifications that includes an SDP no later than 120 days after the
start date of the SDP but not the proposal for submission within 120
days of CMS's written prior approval if that is later than the start
date of the SDP. See sections I.B.2.l. and I.B.2.m. of this final rule
for further discussion of separate payment terms and rate
certifications related to SDPs.
The dates when these new requirements apply to SDPs are addressed
in section I.B.2.p. of this final rule.
l. Including SDPs in Rate Certifications and Separate Payment Terms
(Sec. Sec. 438.6(c)(2)(ii)(J) and (c)(6), and 438.7(f))
Including SDPs in rate certifications. Under current regulations,
all SDPs must be included in all applicable managed care contract(s)
and described in all applicable rate certification(s) as noted in Sec.
438.7(b)(6). As part of our proposed amendment and redesignation of
current Sec. 438.6(c)(2)(i), we proposed to redesignate the existing
regulatory requirement at Sec. 438.6(c)(2)(i) as (c)(2)(ii)(J) to
require that each SDP must be developed in accordance with Sec. 438.4
and the standards specified in Sec. Sec. 438.5, 438.7, and 438.8. We
also proposed to remove the current provision that SDPs must be
developed in accordance with generally accepted actuarial principles
and practices. We proposed this edit because inclusion of the language
``generally accepted actuarial principles and practices'' is
duplicative of the language included in Sec. 438.4.
We noted in the proposed rule a concern that inclusion of the
duplicative language that SDPs must be developed in accordance with
generally accepted actuarial principles and practices could be
interpreted as a requirement for an actuary to be involved in the
development of the SDP arrangement and adherence to actuarial standards
of practice (ASOPs) in connection with the SDP, potentially creating
unnecessary State administrative burden associated with the preprint
development process. However, we did not propose to change the existing
requirement that SDPs must be developed in accordance with Sec. 438.4
and the standards specified in Sec. Sec. 438.5, 438.7, and 438.8. As
noted in the proposed rule, although we believe that an actuary must
develop the capitation rates to ensure they are actuarially sound and
account for all SDPs when doing so, establishment of SDPs is a State
decision and States should have the flexibility to determine if they
wish to involve actuaries in the development of each specific SDP
arrangement. Practically, because actuaries must account for all SDPs
approved by CMS and included in the State's approved managed care
contract in the applicable rate certifications, providing all
documentation required by CMS, we do recommend that States consult with
and keep actuaries apprised of SDPs to facilitate their development of
actuarially sound capitation rates. We also believe that for certain
SDPs, specifically bundled payments, episode-based payments,
population-based payments and accountable care
[[Page 41104]]
organizations, it will be beneficial for actuaries to assist States in
the development of these arrangements.
In accordance with Sec. 438.4(a), actuarially sound capitation
rates are projected to provide for all reasonable, appropriate, and
attainable costs that are required under the terms of the contract and
for the operation of the managed care plan for the time period and the
population covered under the terms of the contract, and capitation
rates are developed in accordance with the requirements in Sec.
438.4(b) to be approved by CMS. This includes the requirement in Sec.
438.4(b)(1) that the capitation rates must be developed with generally
accepted actuarial principles and practices and in Sec. 438.4(b)(7)
that the capitation rates must meet any applicable special contract
provisions as specified in Sec. 438.6, to ensure that all SDPs, which
are contractual arrangements, are considered as the actuary develops
actuarially sound capitation rates. (Similarly, withhold and incentive
arrangements and pass-through payments must be taken into account when
capitation rates are developed.) We did not propose changes to the
requirements for actuarially sound capitation rates; therefore, we will
retain and reaffirm here applicability of the requirements that SDPs
must be developed in such a way as to ensure compliance with Sec.
438.4 and the standards specified in Sec. 438.5 and specify further
that SDPs must also be developed in such a way to ensure compliance
with Sec. Sec. 438.7 and 438.8.
We did not receive any comments on the proposed redesignation of
the existing regulatory requirement at Sec. 438.6(c)(2)(i) as
(c)(2)(ii)(J) and the proposed amendment to require that each SDP must
be developed in accordance with Sec. 438.4 and the standards specified
in Sec. Sec. 438.5, 438.7, and 438.8 and to remove the current
provision that SDPs must be developed in accordance with generally
accepted actuarial principles and practices. After reviewing public
comments and for the reasons outlined in the proposed rule and here, we
are finalizing Sec. 438.6(c)(2)(ii)(J) as proposed.
Separate Payment Terms. Under current regulations, all SDPs must be
included in all applicable managed care contract(s) and described in
all applicable rate certification(s) as noted in Sec. 438.7(b)(6). As
part of the Medicaid Managed Care Rate Development Guide, we have
historically provided guidance on two ways that States could make
payment to cover SDP obligations in Medicaid managed care contracts:
through adjustments to the base capitation rates \146\ in alignment
with the standards described in Sec. 438.5(f), or through a ``separate
payment term'' \147\ which was described in guidance applicable to
rating periods beginning between July 1, 2019 and June 30, 2021.
Separate payment terms are unique to Medicaid managed care SDPs. CMS
has not previously formally defined separate payment terms in
regulation.
---------------------------------------------------------------------------
\146\ As defined in Sec. 438.2, capitation payments are a
payment the State makes periodically to a contractor on behalf of
each beneficiary enrolled under a contract and based on the
actuarially sound capitation rate for the provision of services
under the State plan.
\147\ This guidance has appeared in the Medicaid Managed Care
Rate Development Guide for rating periods starting between July 1,
2019 and June 30, 2021. Medicaid Managed Care Rate Development
Guides for every rating period are located at https://www.medicaid.gov/medicaid/managed-care/guidance/rate-review-and-rate-guides/index.html.
---------------------------------------------------------------------------
The most common structure for separate payment terms is a State
first establishes a finite and predetermined pool of funding that is
paid by the State to the plan(s) separately and in addition to the
capitation payments for a specific SDP. The pool of funds is then
disbursed regularly throughout the rating period (for example,
quarterly) based on the services provided in that portion of the rating
period (for example, quarter) to increase total provider payments or
reach a specific payment rate target. Typically, States divide the
dedicated funding pool into equal allotments (for example, four
allotments if the State is making quarterly payments to their plans).
The State then reviews the encounter data for the service(s) and
provider class identified in the approved preprint for the quarter that
has just ended and divides the allotment by the total service
utilization across all providers in the defined class (for example,
inpatient discharges for all rural hospitals) to determine a uniform
dollar amount to be paid in addition to the negotiated provider payment
rate by the managed care plan for rendered services. The State then
pays the quarterly allotment to the managed care plans, separate from
the capitation rate payment, and directs the plans to use that
allotment for additional retroactive payments to providers for the
utilization that occurred in the quarter that just ended. The State
repeats this process each quarter, with the uniform increase changing
for each quarter depending on utilization but being paid uniformly to
providers in the defined class for the services within that quarter
(for example, inpatient discharges for rural hospitals). Other States
have chosen to make payments semi-annually, annually, or monthly.
States have also utilized separate payment terms for SDPs that are
performance-based payments rather than uniform increases (for example,
pay for performance under which payment is conditioned upon provider
performance).
As noted earlier, separate payment terms are paid separate and
apart from capitation rate payments; they are not included in
capitation rates. The development of the separate payment term is
frequently done by the State rather than the State's actuaries; we have
never required actuaries to certify the reasonableness of the amount of
the separate payment term, but only that the separate payment term is
consistent with what was approved in the SDP preprint. However, CMS has
always required that separate payment terms be documented in the
State's rate certification and that SDPs, including those that utilize
separate payment terms, must be developed in accordance with Sec.
438.4 and the standards in Sec. Sec. 438.5, 438.7 and 438.8. CMS has
requested actuaries to document the separate payment terms in the
State's rate certification because they are required payments for
services under the risk-based contract.
Depending on the size and scope of the SDP and the provider payment
rates assumed in the capitation rate development, separate payment
terms can have a significant impact on the assessment of the actuarial
soundness of the rates. In some cases, capitation rates may not be
sufficient without taking the existence of the separate payment term
amounts paid into account. When examined in conjunction with the
capitation rates, we have found that amounts included in separate
payment terms can, when combined with capitation payment amounts,
represent a significant portion of the total payment made under the
Medicaid managed care contract. For example, in one State, the separate
payment term for an SDP for inpatient hospital services represented 40
percent of the total amount paid in certain rate cells.
In some cases, the provider payment rates assumed in the
development of the capitation rates, absent the SDP paid through a
separate payment term to the plan(s), are so low that the capitation
rates would likely not be actuarially sound. In the example above,
considering how low the payment rates were absent the SDP paid to the
plans through a separate payment term in this State, it will be
difficult for an actuary to determine that the capitation rates are
actuarially sound. However, the additional payments made as part of the
SDP for these providers raise the effective provider payment rates, and
[[Page 41105]]
after considering all payments made to the plan (the base capitation
rates and the separate payment term payments for the SDP) the actuary
may be able to determine that the capitation rates are actuarially
sound. This is not the case for all States and for all SDPs; however,
this example highlights the need to account for the impact of separate
payment terms on the assessment of the actuarial soundness of the
capitation rates. Additionally, since the contract requires that the
managed care plans pay the SDP to providers, the separate payment term
must be included within the actuarial certification for the rates to be
considered actuarially sound as defined in Sec. 438.4(a). For this
reason, we consider separate payment terms part of the contract with
the managed care plans that is subject to the requirements of section
1903(m)(2)(A) of the Act, and a necessary part of certifying the
actuarial soundness of capitation rates under this provision. As such,
we proposed to regulate them under this authority.
Over time, the number of SDPs approved by CMS using separate
payment terms has increased substantially. According to our internal
analysis, 41.5 percent of all SDPs that CMS reviewed and approved from
May 2016 through March 2022 were included in the State's rate
certification submission as a separate payment term. While there has
been some fluctuation over time in this trend, the share of SDPs that
use separate payment terms has increased from 42 percent of all SDPs
that began in CY 2020 to 55 percent of all SDPs that began in CY
2021.\148\
---------------------------------------------------------------------------
\148\ Our internal analysis examines trends based upon when a
payment arrangement began. Since States have different rating
periods, this can refer to different timeframes for different
States. For example, payment arrangements that began in CY 2020 will
include payment arrangements that were in effect for CY 2020 rating
periods, which operated between January 1, 2020 through December 31,
2020, as well as SFY 2021 rating periods, which for most States were
operated between July 1, 2020 through June 30, 2021.
---------------------------------------------------------------------------
In our January 2021 SMDL, we published additional guidance on SDPs,
and stated our growing concern with the increased use of separate
payment terms.\149\ We noted, ``[a]s CMS has reviewed State directed
payments and the related rate certifications, CMS has identified a
number of concerns around the use of separate payment terms.
Frequently, while there is risk for the providers, there is often
little or no risk for the plans related to the directed payment, which
is contrary to the nature of risk-based managed care. This can also
result in perverse incentives for plans that can result in shifting
utilization to providers in ways that are not consistent with Medicaid
program goals.''
---------------------------------------------------------------------------
\149\ https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf.
---------------------------------------------------------------------------
To better understand why States choose to pay plans for their SDPs
through a separate payment term, we started collecting information from
States as part of the revised preprint form published in January 2021.
States were required to start using this revised preprint for SDP
requests for rating periods beginning on or after July 1, 2021. In the
revised preprint form, States must identify if any portion of the SDP
will be included in the rate certification as a separate payment term
and if so, to provide additional justification as to why this is
necessary and what precludes the State from covering the costs of SDPs
as an adjustment to the capitation rates paid to managed care plans.
Based on data we have collected, as well as discussions with
States, we understand there are several reasons why States use separate
payment terms. For example, States have noted challenges with including
VBP arrangements in capitation rates. They have stated that it is
difficult to project individual provider level performance in a way
that lends itself to inclusion in standard rate development practices.
Additionally, performance measurement often does not align with States'
rating periods, further complicating the standard rate development
process.
Several States also noted that even for fee schedule-based SDPs,
such as uniform payment increases, incorporation into standard rate
development practices presents challenges. States assert that using a
separate payment term offers administrative simplicity to the State
agency in administering the SDPs because distributing a pre-determined
amount of funding among its managed care plans is much easier than
relying on actuarial projections. Further, the use of a separate
payment term also promotes the ease of tracking and verification of
accurate payment to providers from the managed care plans required
under the SDP. States have noted that this is particularly important
when States are implementing legislative directives that require an
appropriation of funding be dedicated to a specific purpose. State
legislatures, in some instances, have identified a specific dollar
amount that they want to invest in increasing reimbursement for a
particular service, potentially to respond to an acute concern around
access. Incorporating this funding into the State's capitation rates
through standard rate development will not ensure plans do not use this
funding, or portions of this funding, for other purposes. Additionally,
even with the proper tracking, States will have to specify a particular
minimum fee schedule or uniform increase at the start of the rating
period to include in rate development and ensure it went to the
appropriate providers for the appropriate services. While such a
methodology is permissible and used effectively by several States
today, some States have noted challenges in utilizing such an approach,
particularly if the SDP is targeting a narrow set of providers because
it can be difficult to specifically target funding to a certain group
of providers through the standard process of capitation rate
development.
States have also noted that utilization often cannot be predicted
adequately; thus, including dedicated funding into base rates may not
always result in the funding being distributed as intended by the
legislature. Absent the ability to use separate payment terms, States
have resorted to requiring plans to make interim payments based on
historical utilization and then reconciling to current utilization,
often after the end of the rating period, to ensure that all of the
funding was used as directed by the legislature. As discussed in
section I.B.2.h. of this final rule, we have significant concerns with
this practice and we are prohibiting such payment methodologies in new
Sec. 438.6(c)(2)(vii).
States also have told us that separate payment terms reduce the
burden on managed care plans by limiting the need to update claims
systems. In fact, one State noted that they shifted from incorporating
a particular SDP as an adjustment to capitation rates to implementing
the SDP through a separate payment term because the State's managed
care plans did not have the ability to update or modify their claims
payment systems in a manner that will ensure accurate payment of the
increases required under the State's SDP if the funding was built into
the capitation payment. The State noted that the managed care plans had
dedicated significant technical resources and still could not implement
the changes needed accurately.
As noted earlier, CMS has a strong preference that SDPs be included
as adjustments to the capitation rates since that method is most
consistent with the nature of risk-based managed care. We noted in the
proposed rule that States believe there is utility in the use of
separate payment terms for specific programmatic or policy goals.
Although we acknowledged in the proposed rule that separate payment
terms are one tool
[[Page 41106]]
for States to be able to make targeted investments in response to acute
concerns around access to care, we continue to believe that, while
separate payment terms often retain risk for the providers as opposed
to guaranteeing them payment irrespective of the Medicaid services they
deliver to Medicaid managed care enrollees, there is often little or no
risk for the plans related to separate payment terms under an SDP,
which is contrary to the nature of risk-based managed care.
Therefore, we proposed establishing regulatory requirements
regarding the use of separate payment terms to fulfill our obligations
for fiscal and programmatic oversight. Currently, we consider separate
payment terms to be payment to the plan for services covered under the
contract with the managed care plan that is subject to 1903(m)(2)(A)
requirements because the use of separate payment terms is limited to
SDPs that must be tied to utilization and delivery of services to
Medicaid enrollees under the managed care contract and separate payment
terms have an impact on the assessment of actuarial soundness and
certification of capitation rates. Based on this, we proposed to
regulate them under 1903(m)(2)(A) authority. Section 1903(m)(2)(A) of
the Act is limited to MCOs so CMS is, consistent with well-established
practice and policy, extending the same requirements to PIHPs and PAHPs
using section 1902(a)(4) authority to adopt methods of administration
for the proper and efficient operation of the State Medicaid plan.
States are generally not permitted to direct the expenditures of a
Medicaid managed care plan under the contract between the State and the
plan or to make payments to providers for services covered under the
contract between the State and the plan (Sec. Sec. 438.6 and 438.60)
unless SDP requirements are satisfied.
Proposed Regulatory Changes--Contract Requirements
We proposed to amend Sec. 438.6(a) to define ``separate payment
term'' as a pre-determined and finite funding pool that the State
establishes and documents in the Medicaid managed care contract for a
specific SDP for which the State has received written prior approval.
Payments made from this funding pool are made by the State to the MCOs,
PIHPs or PAHPs exclusively for SDPs for which the State has received
written prior approval and are made separately and in addition to the
capitation rates identified in the contract as required under Sec.
438.3(c)(1)(i).
We recognize that some separate payment terms in the past may not
have fit this definition. For example, one State makes one payment
monthly that is inclusive of both the capitation payment and the
separate payment term. The State then contractually requires the
managed care plans to hold a portion of the monthly payment in a
reserve that the State later directs the plans how to pay to providers
under an approved SDP. In this example, the State initially indicated
to CMS that the SDP was accounted for through adjustments to base data
in capitation rates. However, the State later agreed with CMS that the
contractual requirement to hold a portion of the monthly payment in a
reserve that the State later directed was more in alignment with use of
a separate payment term. To be clear, CMS does not consider this
practice to be an adjustment to base rates or part of capitation rate
development; instead it meets the proposed definition of a separate
payment term and we stated in the proposed rule that arrangements like
this would have had to comply with all proposed requirements for using
separate payment terms for an SDP in the proposed revisions to Sec.
438.6(c)(6).
We proposed a new Sec. 438.6(c)(6) that would specify requirements
for the use of separate payment terms. We proposed a new Sec.
438.6(c)(6)(i) to require that all separate payment terms to be
reviewed and approved as part of the SDP review process in Sec.
438.6(c)(2). This is effectively current practice today; when a State
indicates that an SDP is included in the applicable rate
certification(s) through a separate payment term, the approved preprint
is checked to ensure that it also indicates that the SDP utilizes a
separate payment term. This proposed requirement would have codified
this operational practice. We believed when developing the proposed
rule that reviewing and approving the separate payment term as part of
the SDP review and approval process would be mutually beneficial for
CMS and States because they are inextricably linked given the proposed
definition of a separate payment term. We believed this would also
enable us to track of the use of separate payment terms more quickly
and accurately.
Because we proposed to require that separate payment terms would be
approved as part of the review and approval of the SDPs in Sec.
438.6(c)(2)(i) (redesignated from 438.6(c)(2)(ii)), we believed we
should explicitly address those SDPs that do not require written prior
approval to ensure clarity for States. Therefore, we proposed a new
requirement at Sec. 438.6(c)(6)(ii) that would expressly prohibit
States from using separate payment terms to fund SDPs that are exempted
from the written prior approval process--specifically, minimum fee
schedules using State plan approved rates in Sec. 438.6(c)(1)(iii)(A)
and minimum fee schedules using approved Medicare fee schedules, as
proposed in Sec. 438.6(c)(1)(iii)(B). Under this proposal, such
payment arrangements would have been required to be included as an
adjustment to the capitation rates identified in the contract, as
required under Sec. 438.3(c)(1)(i).
At Sec. 438.6(c)(6)(iii), we proposed to require that each
separate payment term be specific to both an individual SDP approved
under Sec. 438.6(c)(2)(i) (redesignated from Sec. 438.6(c)(2)(ii))
and to each Medicaid managed care program to provide clarity in the
contract for the plan and facilitate State and Federal oversight of
such terms. SDPs approved under Sec. 438.6(c)(2) can apply to more
than one Medicaid managed care program. We believed that requiring that
each separate payment term be specific to both the SDP approved under
Sec. 438.6(c)(2)(i) (redesignated from Sec. 438.6(c)(2)(ii)) and each
Medicaid managed care program would have facilitated monitoring and
oversight and helped to ensure clarity and consistency between the
approval of the separate payment term and the SDP, the managed care
plan contract, and the rate certification.
Additionally, we proposed a new requirement at Sec.
438.6(c)(6)(iv) that the separate payment term would not exceed the
total amount documented in the written prior approval for each SDP for
which we have granted written approval. Under current practice, the
total dollar amount for the separate payment term has acted as a
threshold to ensure alignment between the rate certification and the
SDP; States that documented more for the separate payment term in the
rate certification(s) than the total dollars documented in the preprint
under current practice have to either revise through a rate amendment
so that the total dollars for the separate payment term does not exceed
what was captured in the preprint or, submit an amendment to the
preprint. If States choose to amend the preprint under current
practice, the State is required to explain the cause of the increase
(for example, a change in payment methodology, or expansion of the
provider class); and then verify that the payment analysis has not
changed or if it has, then update the payment analysis to ensure that
the total payment rate is still reasonable, appropriate, and
[[Page 41107]]
attainable.\150\ This proposed requirement would have strengthened this
practice by requiring that the amount included in both the rate
certification(s) and contract(s) for each separate payment term could
not exceed the amount documented in the approved SDP preprint. The
total dollar amount documented in the written prior approval for the
State directed payment would instead act as a maximum that could not be
exceeded in the Medicaid managed care contract(s) and rate
certification(s) that include the SDP without first obtaining written
CMS approval of an amendment to the SDP as noted below. We emphasized
in the proposed rule that we currently review rate certifications to
verify that the total dollars across all applicable Medicaid managed
care programs do not exceed the total dollars identified in the State
directed payment documentation approved by CMS. If the total dollars
included in rate certifications exceed the total dollars identified in
the State directed payment documentation, the State then has to either
reduce the total dollars included in the rate certification for the
separate payment term or, most commonly, submit an amendment to the
preprint for review and approval by CMS. This process causes
significant delays and administrative burden for both the State and the
Federal government, and therefore, we believed that a regulation
prohibiting States from exceeding the total dollars for the separate
payment term identified in the State directed payment documentation
would be appropriate and important.
---------------------------------------------------------------------------
\150\ As noted in section I.B.2.f. of this final rule, CMS
requires States to demonstrate that SDPs result in provider payment
rates that are reasonable, appropriate, and attainable as part of
the preprint review process in alignment with the guidance published
in SMDL #21-001 published on January 8, 2021. We proposed to codify
this requirement in Sec. 438.6(c)(2(ii)(I).
---------------------------------------------------------------------------
We also described in the proposed rule an alternative that would
require that the separate payment term must equal exactly the total
amount documented for each SDP for which we have granted written prior
approval. Instead of acting as a maximum, the total dollar amount for
the separate payment term would have acted as both a minimum and a
maximum; the State's contract and rate certifications would have had to
include exactly the total dollar amount identified in the SDP approved
by CMS. We did not propose this alternative because of a concern that
requiring the total amount for the separate payment term to act as both
a minimum and maximum could be too administratively burdensome;
however, we solicited comments on both our proposal to require that the
total dollars documented in the SDP approved by CMS under (c)(2) would
have acted as a maximum, as well as this alternative option of the
total dollars documented in the SDP approved by CMS under (c)(2)(i) as
both a minimum and a maximum.
Historically, separate payment terms have only been documented in
the State's preprint review and in the State's rate certifications; the
details of when and how these payments were made by the State to the
plans was often not clear to CMS or the plans. This lack of clarity
presents significant oversight concerns for separate payment terms
because it makes tracking the payments made from the State to the plan
difficult to identify, particularly on the CMS-64 form on which States
claim FFP. It also presents challenges for ensuring timely payment to
plans and, ultimately, providers. We believed that just as the final
capitation rates must be specifically identified in the applicable
contract submitted for CMS review and approval, so too should separate
payment terms associated with SDPs.
As previously noted in this section, while there is risk for the
providers as opposed to guaranteeing them payment irrespective of the
Medicaid services they deliver to Medicaid managed care enrollees,
there is often little or no risk for the plans related to the SDP to
the extent it is included in contracts as a separate payment term. We
believe that this lack of risk for the plan is contrary to the nature
of risk-based managed care. This becomes even more concerning when
States retroactively amend the separate payment term, sometimes even
after the end of the rating period.
To illustrate this, we provided the following examples in the
proposed rule.
Example 1: States that include SDPs into their contracts and rate
certifications through separate payment terms must have the total
dollars for the separate payment term certified in the rate
certification(s). The State will then look at the utilization over a
defined period, for example, one quarter, and divide one-fourth of the
total dollars certified in the separate payment term by the utilization
during that quarter to determine a uniform dollar amount increase.
Example 1 illustrates a common practice for SDPs that use separate
payment terms: it allows the uniform dollar amount applied to
utilization to vary from one quarter to another, but it ensures that
the total dollars dedicated to the State directed payment are fully
expended.
Example 2: Some States have used this same methodology in Example
1, but instead of having their actuaries certify the total dollar
amount prospectively, they will have their actuaries certify an
estimate of the total dollars and then have their actuaries recertify a
higher amount later, often after all the payments under the separate
payment term have been made.
Example 2 not only removes all risk from the plans for the SDP, but
also removes all risk from the providers when the actuary recertifies a
total dollar amount later, often after all the payments under the
separate payment term have been made. Such practices are contradictory
to the prospective nature of risk-based managed care rate setting. In
our experience, such payment arrangements are not driven by furthering
particular goals and objectives identified in the State's managed care
quality strategy, but rather by the underlying financing of the non-
Federal share associated with the SDPs. We note financing requirements
in statute and regulation are applicable across the Medicaid program
irrespective of the delivery system (for example, FFS, managed care,
and demonstration authorities), and are similarly applicable whether a
State elects to direct payments under Sec. 438.6(c) or not.
To curtail these concerning practices described in Example 2 above,
we proposed to require as part of Sec. 438.6(c)(6)(v) that States
document the separate payment term in the State's managed care
contracts no later than 120 days after the start of the payment
arrangement or written prior approval of the SDP, whichever is later.
We believed requiring States to document the separate payment term
within these timeframes would be reasonable given that the contract
amendment would only have to document the separate payment term and the
related SDP; the contract action could be submitted to CMS in draft
form so long as it included all of the required elements. Under this
proposal, CMS would not require a final signed copy of the amendment
within this proposed 120-day timeframe; however, consistent with
current regulations and practice, States would still be required to
submit a final signed contract action prior to CMS's approval of the
managed care contract.
To further the fiscal and programmatic integrity of separate
payment terms, we proposed in Sec. 438.6(c)(6)(v)(A) to prohibit
States from amending the separate payment term after CMS approval
except to account for an amendment to the payment methodology that was
first
[[Page 41108]]
approved by CMS as an amendment to the approved State directed payment.
We recognized that a change in payment methodology could potentially
result in the need to amend the separate payment term as it could
impact the total dollar amount. However, to avoid the current practice
where States include a total dollar amount in the rate certification(s)
other than what is in the approved SDP preprint, we proposed to require
that CMS approve the amendment to the preprint before the separate
payment term could be amended. This proposal was also intended to
ensure that some level of risk is maintained, and that States do not
retroactively add additional funding to the managed care capitation
rates with the goal of removing all risk from the SDP arrangement. Such
actions do not align with the fundamental principles of risk-based
managed care or Medicaid managed care rate setting.
We also discussed an alternative to permit amendments to the
separate payment term to account for a change in the total aggregate
dollars to be paid by the State to the plan where there was no change
in the non-Federal portion of the total aggregate dollars. This
alternative would account for how the Federal portion of the total
aggregate dollars may fluctuate due to Federal statute changes that are
outside the State's control. We acknowledged that due to this, the
total dollars, which includes the Federal share, could not be perfectly
predicted by States at the start of a State's rating period. We did not
propose this alternative proposal out of concern that it could have
negative unintended consequences but solicited comment on both the
exception we proposed and the alternative exception that we considered.
To improve transparency of States' use of separate payment terms
and to ensure that managed care plans have clear information on the
contractual requirements associated to State directed payments linked
to a separate payment term, in Sec. 438.6(c)(6)(v)(B)(1) through (4),
we proposed four pieces of information that would be documented in the
State's Medicaid managed care plan contracts: (1) the total dollars
that the State would pay to the plans for the individual SDP that CMS
gave written prior approval; (2) the timing and frequency of payments
that would be made under the separate payment term from the State to
the plans; (3) a description or reference to the contract requirement
for the specific SDP for which the separate payment term would be used;
and (4) any reporting that the State required to ensure appropriate
reporting of the separate payment term for purposes of MLR reporting
under Sec. 438.8.
Proposed Regulatory Changes--Rate Certification for Separate Payment
Terms
To reflect the proposals discussed above that would require States
to document separate payment terms in their managed care rate
certifications, we also proposed changes to Sec. 438.7. Specifically,
we proposed to add a new Sec. 438.7(f) requiring the State, through
its actuary, to certify the total dollar amount for each separate
payment term as detailed in the State's Medicaid managed care contract,
consistent with the proposed requirements of Sec. 438.6(c)(6).
Requiring that all separate payment terms be included in the rate
certification to plans is also current practice today and would provide
a complete picture of all payments made by States to plans under risk
contracts.
We also proposed to codify many existing practices that we
currently employ when reviewing State directed payments that use
separate payment terms. In Sec. 438.7(f)(1), we proposed that the
State could pay each MCO, PIHP, or PAHP a different amount under the
separate payment term compared to other MCOs, PIHPs, or PAHPs so long
as the aggregate total dollars paid to all MCOs, PIHPs, and PAHPs did
not exceed the total dollars of the separate payment term for each
respective Medicaid managed care program included in the Medicaid
managed care contract. In Sec. 438.7(f)(2), we proposed that the
State, through its actuary, would have to provide an estimate of the
impact of the separate payment term on a rate cell basis, as paid out
per the SDP approved by CMS under Sec. 438.6(c)(2)(i). Both of these
proposed regulatory requirements are part of current operational
practice today as documented in the Medicaid Managed Care Rate
Development Guide.\151\ Understanding the estimated impact of the
separate payment term on a rate cell basis has been helpful for
assessing the actuarial soundness of the capitation rates. In Sec.
438.7(f)(3), we proposed that no later than 12 months following the end
of the rating period, the State would have to submit documentation to
CMS that included the total amount of the separate payment term in the
rate certification consistent with the distribution methodology
described in the State directed payment for which the State obtained
written prior approval to facilitate oversight and monitoring of the
separate payment term.
---------------------------------------------------------------------------
\151\ Medicaid Managed Care Rate Development Guides for every
rating period are located at https://www.medicaid.gov/medicaid/managed-care/guidance/rate-review-and-rate-guides/index.html.
---------------------------------------------------------------------------
Finally, we proposed at Sec. 438.7(f)(4) to require States to
submit a rate certification or rate certification amendment
incorporating the separate payment term within 120 days of either the
start of the payment arrangement or written prior approval of the SDP,
whichever is later. This proposal was aligned with the proposed
contract requirement in Sec. 438.6(c)(6)(v).
As previously noted, we stated that we preferred that SDPs be
included as adjustments to capitation rates since that method is most
consistent with the nature of risk-based managed care. Our proposals to
amend Sec. 438.6(a) to add a new definition for separate payment term
and the proposed addition of Sec. Sec. 438.6(c)(6) and 438.7(f) were
intended to maintain the State's ability to use separate payment terms
while implementing necessary guardrails for fiscal and programmatic
oversight. However, given our longstanding concern with separate
payment terms, we invited comment on requiring all SDPs to be included
only through risk-based adjustments to capitation rates and eliminating
the State's ability to use separate payment terms altogether in the
final rule based on comments received. We indicated in the proposed
rule that we were considering prohibiting the use of separate payment
terms to align with CMS's stated preference and greater consistency
with the nature of risk-based managed care.
Another alternative we outlined, and invited comment on, was
prohibiting the use of separate payment terms for SDPs described in
paragraph (c)(1)(iii). Under this alternative, States would only be
able to use separate payment terms for VBP initiatives described in
paragraphs (c)(1)(i) and (ii). This alternative would still have
allowed States to use separate payment terms for some payment
arrangements and could have incentivized States to consider quality-
based payment models that could better improve health outcomes for
Medicaid managed care enrollees. We believed this alternative could
address the difficulties States and their actuaries potentially face
when incorporating some VBP initiatives into capitation rate
development as compared to fee schedules as described in paragraph
(c)(1)(iii).
For each of these two alternatives, we acknowledged that many
States currently use separate payment terms and that finalizing either
alternative to prohibit the use of separate payment terms for SDPs
could cause some disruptions. CMS therefore sought
[[Page 41109]]
public comment on whether or not we should consider a transition period
in order to mitigate any disruptions.
We solicited public comment on our proposals.
We summarize and respond to public comments received on whether
either of these alternative approaches we are considering should be
adopted in the final rule, below.
Comment: We received a wide array of comments on our proposals in
Sec. Sec. 438.6(c)(6) and 438.7(f) on the use of separate payment
terms, as well as on our discussion in the proposed rule preamble
regarding whether to eliminate the use of them. We did not receive any
comments on Sec. 438.6(c)(2)(ii)(J). Many commenters supported our
proposal to codify States' ability to implement SDPs using separate
payment terms in regulation to formally recognize what has been an
operational flexibility to date. Most of these commenters did not
support our specific proposals in Sec. 438.6(c)(6) to require that the
total amount of each separate payment terms be documented in the SDP
preprint and managed care plan contract and to prohibit exceeding the
approved amount without obtaining approval of an SDP amendment. These
commenters stated that States should not be hampered from using
separate payment terms as they provide greater transparency, ensure
that payments flow to providers as intended, minimize administrative
burden for States, and make it easier for States to track SDPs. Some
commenters noted that separate payment terms are a useful tool for
targeting investments in response to acute concerns around access to
care. A few commenters supported finalizing some of the proposed
guardrails as they could mitigate risks associated with the use of
separate payment terms.
Conversely, other commenters agreed with CMS that SDPs are best
implemented through adjustments to base capitation rates. These
commenters noted that accounting for SDPs through adjustments to base
capitation rates is consistent with the transfer of risk to managed
care plans for all of their contractual obligations. These commenters
encouraged CMS to eliminate or at least limit the use of separate
payment terms to enable managed care plans to fulfill their contractual
obligations, including SDPs, using the actuarially sound capitation
payments provided by the State. These commenters noted that CMS would
need to consider giving States and their actuaries time to transition;
one commenter suggested that if CMS eliminated separate payment terms a
transition period of 3 years should be provided for States to
accommodate necessary changes.
Response: We stated our concern regarding the appropriateness of
separate payment terms in risk-based managed care programs and proposed
a list of seven new requirements in regulation that we believed when
developing the proposed rule could assert a measure of control on an
increasingly problematic practice (see 88 FR 28144 through 28146). The
comments in support of the continued use of separate payment terms with
none of the guardrails proposed in Sec. 438.6(c)(6) added to our
concern that some States are increasingly relying on this payment
mechanism to circumvent risk-based payment to managed care plans. More
specifically, it is a way to circumvent compliance with the requirement
that SDPs be developed in accordance with Sec. 438.4, and the
standards specified in Sec. Sec. 438.5, 438.7, 438.8, and generally
accepted actuarial principles and practices. Since being finalized in
2016, Sec. 438.6(c)(2)(i) has required that all contract arrangements
that direct the MCO's, PIHP's, or PAHP's expenditures under paragraphs
(c)(1)(i) through (iii) of that section must be developed in accordance
with Sec. 438.4, the standards specified in Sec. 438.5, and generally
accepted actuarial principles and practices; as explained earlier in
this section, we are finalizing a revision to this standard in new
paragraph (c)(2)(ii)(J). However, after reviewing public comments, we
are concerned that the proposed parameters do not adequately address
how the use of separate payment terms for SDPs erodes the risk-based
nature of payment to managed care plans and fiscal integrity in
Medicaid managed care.
We originally permitted the use of separate payment terms to
provide flexibility to States as they adjusted to using SDPs. We
expected States to transition over time to including all SDPs in
capitation rates in a risk-based manner and outlined our concerns with
the use of separate terms in guidance published in 2021.\152\ Public
comments on our proposals in Sec. 438.6(c)(6) reflect that some States
believe they need to use separate payment terms to have transparency,
accuracy, and administrative simplicity. However, we are concerned that
the use of separate payment terms for SDPs erodes the risk-based nature
of payment to managed care plans and fiscal integrity in Medicaid
managed care. These separate payment terms are separate funding streams
for services covered under the contract over which plans have no
control and for which they bear no risk. As we noted in the proposed
rule, we have found that amounts included in separate payment terms can
represent a significant portion of the total payment made under the
Medicaid managed care contract. In one State, the separate payment term
for an SDP for inpatient hospital services represented 40 percent of
the total amount paid in certain rate cells. These payments are
commonly made separate and apart from capitation rates. Commentors
reaffirmed that separate payment terms are developed by the State
rather than the State's actuaries, and the reasonableness of the amount
of the separate payment term is not generally certified by States'
actuaries (See 88 FR 28145 for further details). Separate payment terms
are commonly paid in allotments divorced from a per member per month
basis. The nature of separate payment terms makes assessing the total
payments made by the State to the plan on a prospective basis more
difficult and severely hampers CMS's ability to ensure the capitation
rates are actuarially sound.
---------------------------------------------------------------------------
\152\ https://www.medicaid.gov/sites/default/files/2021-12/smd21001.pdf.
---------------------------------------------------------------------------
As noted in the proposed rule and reaffirmed by commentors, the
total dollar amount of separate payment terms is not informed by an
analysis of what constitutes actuarially sound Medicaid managed care
capitation rates, or what constitutes reasonable, appropriate and
attainable costs in Medicaid managed care payment. . In our experience,
the amounts paid over the course of the year change from month to month
or quarter to quarter. These changes in the payments to providers are
again driven not by furthering particular goals and objectives
identified in the State's managed care quality strategy, but rather by
the specific dollar amount dedicated to the payment arrangement.
Robust encounter data reporting requirements in Sec. 438.242,
including paragraph (c)(3) requiring reporting of the allowed and paid
amounts, should provide sufficient transparency to validate accurate
payment to providers. We remind States that the encounter data
reporting requirements in Sec. 438.242(c)(2) specifically require
managed care plan contracts to provide for the submission of enrollee
encounter data to the State at a frequency and level of detail to be
specified by CMS and the State, based on program administration,
oversight, and program integrity needs. Should States determine that
standardized encounter data formats do not provide sufficient detail to
validate accurate payments as specified in an approved SDP, States
should identify additional levels of required detail and
[[Page 41110]]
reporting from plans in their managed care plan contracts.
After reviewing public comments on proposed Sec. 438.6(c)(6), our
concerns persist, and we are not persuaded that codifying separate
payment terms as a permissible option for SDPs, even with the
additional fiscal integrity guardrails proposed, aligns with the
regulatory objectives of SDPs or the overall structure of risk-based
managed care.
Therefore, we are not finalizing Sec. 438.6(c)(6) as proposed and
will instead, as we invited comments on, adopt a new provision at
paragraph (c)(6) requiring that all SDPs be incorporated into Medicaid
managed care capitation rates as adjustments to base capitation rates
and prohibiting the use of separate payment terms. In Sec.
438.6(c)(8)(iv), we establish that this new prohibition is applicable
beginning with the first rating period for contracts with MCOs, PIHPs
and PAHPs beginning on or after 3 years after July 9, 2024, which will
provide three rating periods for States to transition from use of
separate payment terms. The heading for new paragraph (c)(6) is
``Payment to MCOs, PIHPs, and PAHPs for State Directed Payments'' and
the finalized regulatory text requires that the final capitation rates
for each MCO, PIHP, or PAHP as described in Sec. 438.3(c) must account
for all SDPs and that each SDP must be accounted for in the base data,
as an adjustment to trend, or as an adjustment as specified in
Sec. Sec. 438.5 and 438.7(b). The final rule regulatory text also
prohibits the State from either withholding a portion of the capitation
rate to pay the MCO, PIHP, or PAHP separately for a State directed
payment, or requiring an MCO, PIHP, or PAHP to retain a portion of the
capitation rate separately to fulfill the contractual requirement of a
State directed payment. Consistent with this final policy, we will also
not finalize the proposed rate certification requirements for separate
payment terms in Sec. 438.7(f) nor the definition of ``separate
payment term'' at Sec. 438.6(a).
Comment: Some commenters noted that separate payment terms are
effective at removing financial incentives for managed care plans to
steer utilization away from specific services and deny coverage of
services by providers that receive SDPs.
Response: We do not believe that separate payment terms are
necessary or appropriate as a tool to address such concerns. States are
required to ensure adequate mechanisms are in place to monitor their
managed care programs, including actual spending and utilization
patterns, generally and after implementation of an SDP for accurate
execution, as well as to prevent unintended consequences. States have
identified multiple ways to address this without the use of a separate
payment term. For example, States can implement payment arrangements
that link payments to provider performance instead of utilization. This
approach has been effective at lessening any financial incentives for
inappropriate steering by managed care plans. Other examples include
States using tiered payment structures, requiring plans to include all
the providers in a particular provider class as network providers, or
using risk mitigation strategies consistent with the requirements in
Sec. 438.6(b)(1). Under this final rule, States are also now permitted
to recoup unspent SDP funds from plans as long as the recoupment
methodology, recoupment process and any other necessary details for
recoupment are detailed in the SDP preprint and the contract
documentation required in Sec. 438.6(c)(5); previously States were
only permitted to recoup funds for certain types of SDP arrangements.
We are available to provide States with technical assistance on ways to
address this issue, with or without the use of SDPs.
Comment: Some commenters noted concerns with incorporating SDPs
through adjustments to base rates. These comments noted that while
Medicaid program changes are included in the rate setting process at
the rate cell level, rates are not currently adjusted at the provider
level for SDPs.
Response: We noted in the proposed rule preamble that more than
half of current SDPs are incorporated into managed care rate
development as adjustments to base rates. This indicates that States
are able to make adjustments at the provider level as part of
capitation rate development as appropriate. Further, States are
required to use validated encounter data as base data for rate
development among other sources of data per Sec. 438.5(c) and
encounter data contains provider level information. At Sec.
438.242(c)(3), States must require via their managed care contracts
that MCOs, PIHPs and PAHPs submit all enrollee encounter data,
including allowed amount and paid amount. This information should allow
States to account for the impact of SDPs in actuarially sound
capitation rates. To evaluate the effectiveness of SDPs, States must be
able to ensure that the payment arrangement is being implemented as
intended by monitoring payments at the provider level. This aligns with
other provisions finalized in this rule--such as monitoring the payment
analysis required in Sec. 438.207(b)(3) and requiring provider level
reporting of actual SDP expenditures through T-MSIS. We also are
finalizing a requirement at Sec. 438.6(c)(5)(iv) that the MCO, PIHP or
PAHP contracts must include any encounter data reporting and separate
reporting requirements necessary for auditing the SDP in addition to
the reporting requirements in Sec. 438.6(c)(4).
Comment: Several commenters that supported the use of separate
payment terms for SDPs stated that CMS's concerns about separate
payment terms removing risk from managed care plans for SDP
expenditures are inconsistent with the original purpose for SDPs; that
is, to provide an exception and permit States to direct payment. These
commenters stated that the text of Sec. 438.6(c)(1) ``Except as
specified in this paragraph (c), . . .'' explicitly condones exceptions
to risk-based Medicaid managed care.
Response: We disagree with this interpretation of the regulatory
text and this misinterpretation further highlights the need to
eliminate the use of separate payment terms in SDPs. SDPs are an
exception to the prohibition on States paying for or specifying payment
rates for providers in a risk-based managed care system and were never
intended to be an exception to the risk-based payment requirements. The
exception to the prohibition on State payment or direction of payment
by the plan to providers is an effort to balance our belief about the
level of discretion managed care plans need to manage risk for their
populations with the unique policy goals and interests of States.
Currently, Sec. 438.6(c)(2) explicitly requires, ``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.'' This requirement is retained in this final rule in Sec.
438.6(c)(2)(ii)(J) for all SDPs specified in Sec. 438.6(c)(1)(i)
through (iii), with a revision to remove compliance with ``generally
accepted actuarial principles and practices'' and to add the standards
specified in Sec. Sec. 438.7 and 438.8; these changes are discussed
earlier in section I.B.2.l. of this final rule. As noted in earlier
responses and in the preamble to the proposed rule, we have
historically required States to account for separate payment terms in
rate certifications because they can have a significant impact on the
assessment of actuarial soundness of the capitation rates. As we noted,
in some cases, the provider payment rates assumed in development of the
capitation rates,
[[Page 41111]]
absent the SDP paid through a separate payment term to the plan(s), are
so low that the capitation rates would likely not be actuarially sound.
As specified at Sec. 438.4(a), actuarially sound capitation rates are
projected to provide for all reasonable, appropriate, and attainable
costs that are required under the terms of the contract and for the
operation of the MCO, PIHP, or PAHP for the time period and the
population covered under the terms of the contract. This requirement
includes all SDPs included in a risk-based contract.
Comment: Other commenters noted that safety-net providers would be
at particular risk if CMS prohibited States' from using separate
payment terms for SDPs. One commenter stated that safety-net providers
are often not in a position to negotiate rates and are forced to accept
whatever payment a managed care plan deems appropriate, which can
result in these providers being at risk more than the managed care
plan.
Response: We appreciate commenters raising this concern. As noted
in the proposed rule, we recognize that some providers that serve a
higher share of Medicaid enrollees, such as safety net hospitals and
rural hospitals, tend to have less market power to negotiate higher
rates with commercial plans (88 FR 28125). We recognize that SDPs can
be used effectively to further the State's overall Medicaid program
goals and objectives, which can include increased access to care.
However, we disagree with commenters that using separate payment terms
is necessary for States to accomplish such goals. States have
significant flexibility in designing SDPs under this final rule,
including determining the provider class. We have approved SDPs that
defined provider classes based on payer case mix or solely focused on
safety net providers, including VBP initiative arrangements that are
targeted to safety net providers and reward them based on performance
on quality metrics. All of these options can be implemented without the
use of a separate payment term.
Comment: Many commenters noted that eliminating separate payment
terms would be a notable departure from current practice as CMS has
been approving SDPs with separate payment terms for 6 years.
Eliminating separate payment terms, according to commenters, could
cause significant disruption for existing SDPs. Some commenters also
suggested that limiting States' ability to use separate payment terms
could threaten the viability of existing SDPs and jeopardize CMS's
compliance with the statutory mandate to safeguard equal access to
care.
Response: We recognize that nearly half of SDPs that we have
approved use separate payment terms. We are confident that States can
transition existing SDPs that use separate payment terms into
adjustments to base rates, and recognize this transition will take time
and that States are facing a number of competing priorities. As noted
earlier, we are revising the applicability date for Sec. 438.6(c)(6)
to the first rating period that begins on or after 3 years following
the effective date of the final rule. We believe that this transition
period will provide States time to work with interested parties and
actuaries to incorporate SDPs into capitation rates through standard
rate development practices.
Further, we disagree with commenters that limiting State's ability
to use separate payment terms could jeopardize compliance with the
statutory requirement to safeguard equal access to care. SDPs are an
optional tool that States can use to direct the expenditures of MCOs,
PIHPs or PAHPs; States are not required to utilize SDPs. There are
separate regulatory requirements that require States that contract with
an MCO, PIHP or PAHP to deliver Medicaid services to address network
adequacy and access to care regardless of the use of SDPs. For example,
States must develop and enforce network adequacy standard consistent
with Sec. 438.68, ensure that all services covered under the State
plan are available and accessible to enrollees of MCOs, PIHPs and PAHPs
in a timely manner in compliance with Sec. 438.206, ensure that each
MCO, PIHP and PAHP gives assurances to the State and provide supporting
documentation that demonstrates that it has the capacity to serve the
expected enrollment in its service area in accordance with Sec.
438.207. Further, the managed care capitation rates must be adequate to
meet these requirements as required under Sec. 438.4(b)(3).
Comment: Some commenters supported maintaining States' ability to
use separate payment terms but opposed defining separate payment terms
as a finite and predetermined amount documented in the managed care
plans' contract and instead suggested only requiring States to document
(1) a specific dollar amount or (2) a percentage unit price or increase
in the contracts. A few commenters stated concern that requiring that
SDPs incorporated into rates as separate payment terms not exceed the
total dollars documented in the written prior approval for each SDP was
a cap on total spending.
Response: As noted in prior responses, we are not finalizing the
regulatory framework we proposed at Sec. Sec. 438.6(c)(6), 438.7(f) or
the definition proposed in Sec. 438.6(a) for separate payment terms.
We take this opportunity to clarify that States could use an SDP to
require managed care plans to pay a specific dollar amount or a
percentage increase as a uniform increase or a fixed unit price as a
minimum and/or maximum fee schedule without using a separate payment
term. When the uniform increase is a fixed dollar amount or a fixed
percentage increase, States can use standard rate development processes
to include it as an adjustment to capitation rate development; the same
is true for a minimum and/or maximum fee schedule. Accounting for SDPs
in the standard rate development process removes the need to reduce the
payments as expenditures near the predetermined amount. Incorporating
SDPs into capitation rates in every situation accounts for changes in
enrollment and utilization without arbitrarily changing the amount per
service paid to providers.
Comment: Some commenters noted that requiring SDPs to be included
in capitation rates instead of separate payment terms puts States at
greater financial risk if program enrollment is greater than projected
and puts providers at risk if utilization is lower than projected.
These commenters noted that they believe including SDPs in separate
payment terms would help promote fiscal stability.
Response: We acknowledge that changes in utilization and program
enrollment are inevitable, and States must ensure that they provide the
most robust data available to their actuaries to facilitate the
development of accurate capitation rates that reflect all contractual
requirements for managed care plans, including any SDPs. State's
actuaries are experienced in addressing unforeseen changes through the
development of risk mitigation strategies, which is an appropriate
mechanism for addressing uncertainty in risk-based managed care
programs.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing Sec.
438.6(c)(2)(ii)(J) as proposed, finalizing a prohibition on separate
payment terms at Sec. 438.6(c)(6) as described in this section, and
are not finalizing Sec. 438.7(f).
[[Page 41112]]
m. SDPs Included Through Adjustments to Base Capitation Rates
(Sec. Sec. 438.7(c)(4) Through 438.7(c)(6))
We also proposed two additional changes to Sec. 438.7(c) to
address adjustments to managed care capitation rates that are used for
SDPs. (A third change to Sec. 438.7(c) to add a new paragraph (c)(6)
is addressed in section I.B.2.k. of this final rule) Specifically, we
proposed to add a new regulatory requirement at Sec. 438.7(c)(5)
specifying that retroactive adjustments to capitation rates resulting
from an SDP must be the result of an approved SDP being added to the
contract, an amendment to an already approved SDP, a State directed
payment described in Sec. 438.6(c)(1)(iii)(A) or (B), or a material
error in the data, assumptions, or methodologies used to develop the
initial rate adjustment such that modifications are necessary to
correct the error. We noted that proposed Sec. 438.7(c)(5) was
necessary, at minimum, to ensure fiscal integrity of SDPs and their
impact on rate development. While not as frequent, we have also
observed States, through their actuaries, submitting amendments to
rates for SDPs included through adjustments to base rates that do not
reflect changes in payment methodology, changes in benefit design, or
general actuarial practices, but instead appear to be related to
financing of the non-Federal share. We do not view such actions as
consistent with the prospective and risk-based nature of Medicaid
managed care. It also creates significant administrative burden for
both States and the Federal government by delaying review of associated
rate certifications.
Additionally, we proposed a new regulatory requirement at Sec.
438.7(c)(4) that States must submit a revised rate certification for
any changes in the capitation rate per rate cell, as required under
Sec. 438.7(a) for any special contract provisions related to payment
in Sec. 438.6 not already described in the rate certification,
regardless of the size of the change in the capitation rate per rate
cell. Currently, States are permitted the flexibility under Sec.
438.7(c)(3) to increase or decrease the capitation rate per rate cell
up to 1.5 percent during the rating period without submitting a revised
rate certification for rate changes that are unrelated to special
contract provisions, including SDPs, and ILOS provisions. Providing
this same flexibility for changes to capitation rates for special
contract provisions (including SDPs) is incongruent with the existing
requirement at Sec. 438.7(b)(6) that the rate certification include a
description of any of the special contract provisions related to
payment in Sec. 438.6 that are applied in the contract. In addition,
we believe it is also inconsistent with ensuring appropriate program
integrity, such as the 105 percent threshold in Sec. 438.6(b)(2) and
existing and proposed SDP standards. Therefore, we proposed to clarify
the requirements for submitting rate certifications and amendments to
rate certifications.
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comment on our proposals.
We summarize and respond to public comments received on our
proposals related to including SDPs through adjustments to base
capitation rates (Sec. 438.7(c)(4) and (5)) below.
Comment: Many commenters supported our proposals to add clarity to
how SDPs are documented in rate certifications and improve alignment
between Sec. Sec. 438.7(b)(6) and 438.7(c). Some commenters also
supported our proposal to keep the long-standing practice in Sec.
438.7(c) that does not permit States to utilize de minimis flexibility
to amend capitation rates for SDPs and expand it to include ILOSs. This
commenter supported the requirement that States must always submit
amendments to the rate certifications when changes are required for
SDPs or ILOSs. One commenter requested that CMS consider revising its
proposal at Sec. 438.7(c)(4) as they believed the proposal would
increase State administrative expenses and not result in improved
oversight.
Response: We appreciate the support and agree that these provisions
will support program integrity and our contract and rate certification
reviews by requiring additional specificity for any changes in the
capitation rate per rate cell, regardless of the size of the change. We
disagree with the commenter that the requirement for States to submit a
revised rate certification for any changes in the capitation rate per
rate cell for special contract terms (described in Sec. 438.6, which
includes SDPs) and ILOS provisions (described in Sec. 438.3(e)(2))
would not improve oversight. This new provision will ensure consistency
with the existing regulatory requirement at Sec. 438.7(b)(6) which
requires a description of any of the special contract provisions
related to payment in Sec. 438.6 that are applied to the contract, as
well as ensure that we are aware of changes being made to each SDP's
impact on capitation rates. Additionally, this level of detail
facilitates robust review of rate certifications by ensuring
specificity on any capitation rate changes. We acknowledge, as pointed
out by the commenter that this provision could increase State
administrative burden if a revised rate certification is solely done
for a change to an SDP or ILOS arrangement and not for other
programmatic purposes; as a result, we have revised the associated
Collection of Information for Sec. 438.7 Rate Certifications (see
section II.B.4. of this final rule for further details) to address this
burden. However, the increased burden is outweighed by the benefits
from additional program oversight afforded by submission of amended
rate certifications when an SDP or ILOS results in changes to the
capitation rate payable to the Medicaid managed care plan. Even
relatively small changes in SDPs and ILOS, both areas of growing
interest and State uptake, can have notable fiscal impacts and
depending on the nature of the change, may also trigger an associated
SDP and contract amendment that CMS would not know to request, absent a
required rate certification action.
Comment: Some commenters supported our proposal at Sec.
438.7(c)(5) to limit the retroactive adjustments that can be made to
capitation rates resulting from an SDP where these adjustments must be
the result of an approved SDP being added to the contract, an amendment
to an already approved SDP, a State directed payment described in Sec.
[thinsp]438.6(c)(1)(iii)(A) or (B), or a material error in the data,
assumptions or methodologies used to develop the initial rate
adjustment such that modifications are necessary to correct the error.
Other commenters opposed limitations on retroactive adjustments that
can be made to capitation rates resulting from an SDP, stating that
there are circumstances not related to a material error when
retroactive adjustments to capitation rates are appropriate. The
commenters offered the example of the COVID-19 PHE, when the actuarial
assumptions used to develop rates were uncertain and necessitated
continual monitoring and adjusting noting that this uncertainty is
likely to continue through the ``unwinding'' of the continuous coverage
requirement. Commenters further noted that it is possible for there to
be significant disparities between the amounts paid by States to
managed care plans for SDP arrangements and the amounts subsequently
paid by the managed care plans to providers. Without sufficient
oversight and the ability to adjust capitation rates as
[[Page 41113]]
needed, the commenters noted that managed care plans could be
incentivized to steer utilization away from the providers receiving
SDPs. The commenters noted that retroactive adjustments are an
effective tool to mitigate this risk by ensuring that managed care
plans cannot benefit financially from such behavior.
Response: We appreciate the range of comments on our proposal to
limit retroactive adjustments to capitation rates for an SDP. SDPs are
utilized in a risk-based contract; therefore, capitation rate
development must be developed in a risk-based manner. While we
recognize the challenges States face in developing capitation rates
impacted by the COVID-19 PHE, we believe that the uncertainty faced by
actuaries and States was not specific to SDPs but applied across all
aspects of rate development. For this reason, we recommended that
States implement risk-sharing arrangements such as 2-sided risk
corridors in response to the uncertainty. Risk corridors that comply
with the regulatory requirements in Sec. 438.6 are an effective tool
in mitigating risk from uncertainty and can be used by States during
this period of unwinding, as well as in other instances. We remind
States that, in accordance with Sec. 438.6(b)(1), risk sharing
mechanisms may not be added or modified after the start of the rating
period. Regardless of unique circumstances such as PHEs, we believe
that SDPs should be accounted for in rate certifications and that
retroactive adjustments must be a result of adding or amending any
State directed payment consistent with the requirements in Sec.
438.6(c), or a material error in the data, assumptions or methodologies
used to develop the initial capitation rate adjustment such that are
necessary to correct an error. We remind States that they are required
to return to CMS the Federal government's share of any remittance a
State collects, taking into account the applicable Federal matching
rate. See for example, Sec. 437.74(b). We also remind States that they
have an on-going responsibility to monitor all aspects of managed care
programs as required in Sec. 438.66, including contract requirements
such as SDPs (see Sec. 438.66(b)(14)). States must ensure that managed
care plans are operationalizing SDPs consistent with approved Medicaid
preprints, when written approval of a preprint is required, and
consistent with Federal requirements in 42 CFR part 438. This State
monitoring should also take into consideration as appropriate any
provider and enrollee complaints or concerns related to inappropriate
plan actions, including those that constitute efforts to steer
utilization away from the providers receiving SDPs. State oversight of
the implementation of SDP contractual obligations by plans is critical
to ensuring not only fiscal integrity, but that the SDP furthers the
State's goals and objectives of the SDP identified by the State.
Comment: One commenter appreciated the additional clarity that CMS
provides regarding actuarial certification standards but encouraged CMS
to maintain sufficient flexibility in the rules to allow each State to
work with CMS through the SDP approval process in meeting SDP
requirements and for managed care plans to retain flexibility to design
and enter incentive payments with providers in accordance with their
own private negotiations.
Response: We appreciate the commenters' support for the
clarification regarding actuarial certification standards in Sec. Sec.
438.7(c)(4) through (6). We take this opportunity to clarify that the
regulations at Sec. Sec. 438.6(c) and 438.7(c)(4) through (6) are for
SDPs; that is, contract requirements whereby the State directs a
managed care plan's expenditures. Provider incentive payments that a
plan and provider negotiate without State direction or involvement are
not SDPs. For further discussion on provider incentive payments, refer
to section I.B.3.a. of this final rule.
Comment: One commenter stated that requiring SDP funds to be built
into managed care plans' capitation rates would reduce transparency and
create opportunities for managed care plans to leverage funds meant for
providers to advance quality outcomes.
Response: Since SDPs were codified in the 2016 final rule, we have
consistently stated that they were to be built into the capitation
rates as actuarially sound capitation rates are projected to provide
for all reasonable, appropriate, and attainable costs that are required
under the terms of the contract and for the operation of the managed
care plan for the time period and the population(s) covered under the
terms of the contract. Although we have historically permitted
flexibility through the use of separate payment terms for SDPs, as
outlined in the proposed rule (88 FR 28144-28148), we have consistently
raised concerns about the use of separate payment terms given the
construct of a risk-based contract. As further noted in section
I.B.2.l. of this final rule, we are not finalizing Sec. 438.6(c)(6) as
proposed but will instead phase out the use of separate payment terms
and require that all SDPs be included in base capitation rates no later
than the first rating period beginning on or after three years
following the effective date of this rule. State directed payments are
part of risk-based managed care contract and as such, must be built
into capitation rates. The regulations adopted in this final rule are
clear on that. In addition, we are finalizing other provisions (such as
Sec. 438.6(c)(5) requiring specific documentation requirements in
managed care plan contracts for SDPs) that will improve the accuracy of
how SDPs are implemented. Lastly, we now publish approved SDP preprints
on Medicaid.gov to improve transparency. Together, these provisions
will ensure more accurate and timelier implementation of SDPs while
ensuring appropriate levels of oversight by CMS.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing Sec.
438.7(c)(4) and (5) as proposed. We are finalizing Sec. 438.7(c)(6)
with revisions as described further in section I.B.2.k. of this final
rule.
n. Appeals (Sec. 430.3(e))
As outlined under Sec. 438.6(c), SDPs are arrangements that allow
States to require managed care plans to make specified payments to
health care providers when the payments support overall Medicaid
program goals and objectives (for example, funding to ensure certain
minimum payments are made to safety net providers to ensure access or
that providers are appropriately rewarded for meeting certain program
goals). Section 438.6(c) was issued by CMS because this type of State
direction of managed care payment goes against the general premise of
managed care in which a contracted organization assumes risk from the
State for the delivery of care to its beneficiaries. As a result, we
established a process whereby States must submit a ``preprint'' form to
CMS to document how the SDP complies with the Federal requirements
outlined in Sec. 438.6(c). If the proposal complies, we issue written
prior approval. Subsequent to written prior approval, the SDP is
permitted to be included in the relevant managed care plan contract and
rate certification documents. This process is required by CMS for most
SDPs.
As discussed throughout this final rule, the volume of State
requests for written prior approval to implement State directed payment
arrangements has grown significantly in both number and total dollars
included in managed care plan capitation rates since
[[Page 41114]]
Sec. 438.6(c) was issued in the 2016 final rule.
Based on our review of SDP prior approval requests, we have
observed that States use SDPs not only as routine payment mechanisms,
such as to set minimum fee schedules or provide uniform increases, but
also for more complex payment arrangements, such as to implement Total
Cost of Care (TCOC) programs, and multi-metric and multi-year VBPs. CMS
provides technical assistance to States at all stages of SDP
development to help States develop SDP arrangements that meet their
programmatic goals and comply with Sec. 438.6(c). This technical
assistance can involve both verbal and written assistance, as well as
the exchange of CMS-generated question sets and State responses. The
State responses are shared internally with Federal review partners who
provide subject matter expertise, which may include those representing
managed care policy and operations, quality, financing, and actuarial
science, which is then shared with the State to inform SDP revisions
and ensure compliance with the regulations.
Providing this technical assistance has become increasingly
challenging as the number and complexity of States' SDP requests has
increased. To date, typically when CMS and States have found themselves
unable to reach agreement on SDP proposals and we have been unable to
issue prior written approval, States have agreed to withdraw the
submission. However, as SDPs have matured as a State tool, they have
outgrown this informal process. We believe it is appropriate to
establish a process for formally disapproving proposals that do not
comply with the Medicaid requirements and regulations. Accordingly,
this final rule will strengthen the SDP process, as well as further
specify the requirements for SDPs under our regulations.
A disapproval of an SDP could be issued for many reasons, including
impermissible financing of the non-Federal share, failure to show
improvement in the proposed quality evaluation report in the timeframe
required, or non-compliance with the controlling regulations in part
438. To be consistent with other CMS processes that issue formal
disapprovals, such as those for State plan amendment submissions and
disallowances of State Medicaid claims, there should be a formal
process for States to appeal CMS's disapproval of a State's SDP
proposal. The alternative is that a State may seek redress in the
courts, which can be costly and slow for both CMS and States. We
believe that States will benefit from an established, efficient
administrative process with which they are familiar. However, nothing
in this final rule precludes any State from seeking redress in the
courts.
Under our authority under section 1902(a)(4) of the Act to
establish methods for proper and effective operations in Medicaid, we
proposed to add a new Sec. 430.3(d) that would explicitly permit
disputes that pertain to written disapprovals of SDPs under Sec.
438.6(c) to be heard by the Health and Human Services (HHS)
Departmental Appeals Board (the Board) in accordance with procedures
set forth in 45 CFR part 16. As described in that section, the Board is
comprised of members appointed by the HHS Secretary and conducts de
novo (from the beginning) review of certain agency decisions under the
procedures at 45 CFR part 16 and its corresponding appendix A. The
Board has a robust administrative adjudication process as well as
experience resolving disputes between CMS and States involving the
Medicaid program, as it already reviews Medicaid disallowances under
Title XIX of the Act using the procedures set forth at 45 CFR part 16.
Applying those procedures to CMS's decision to deny a State's SDP
request, after a State receives a final written decision from CMS
communicating its disapproval of that State's SDP preprint, the State
would have 30 days to file a notice of appeal with the Board. (45 CFR
16.7(a)). The case would then be assigned a presiding Board member who
would conduct the conference or hearing if one is held. (45 CFR 16.5).
Within 10 days of receiving the notice of appeal, the Board would
acknowledge the notice and outline the next steps in the case. (45 CFR
16.7(b)). Under existing 45 CFR 16.16, the Board may allow additional
parties to participate if there is a ``clearly identifiable and
substantial interest in the outcome of the dispute'' in the discretion
of the Board. The State would then have 30 days to file its appeal
brief, which would contain its arguments for why CMS's final decision
was in error, and its appeal file, which would include the documents on
which its arguments are based. (45 CRF 16.8(a)). Then, CMS would have
30 days to submit its brief in response as well as any additional
supporting documentation not already contained in the record. (45 CRF
16.8(b)). The State would be given fifteen days to submit an optional
reply. (45 CFR 16.8(c)). The Board may extend any given deadline, but
only if the party provides ``a good reason'' for an extension. (45 CFR
16.15(a); Id) (noting that ``the Board has the flexibility to modify
procedures to ensure fairness, to avoid delay, and to accommodate the
peculiar needs of a given case'').
Under the Board's process, parties would be encouraged to work
cooperatively to develop a joint appeal file and stipulate to facts,
reducing the need to separately submit documentation. (45 CFR 16.8(d)).
At any time, the Board may request additional documentation or
information, request additional briefings, hold conferences, set
schedules, issue orders to show cause, and take other steps as
appropriate to ``develop a prompt, sound decision'' per existing 45 CFR
16.9. Although there is no general right to a hearing in cases heard
under 45 CFR 16 and 45 CFR 16.4 States appealing a CMS disapproval of a
proposed State directed payment under this proposed process could
request a hearing or oral argument, or the Board may call for one sua
sponte (of one's accord; voluntarily), should it determine that its
decision-making would be enhanced by such proceedings. (45 CFR
16.11(a)). Generally, Board's proceedings are conducted by
videoconference, or in person in Washington, DC, but may be held in an
HHS Regional Office or ``other convenient facility near the
appellant.'' 45 CFR 16.11(c)). The Board's decisions are issued by the
Board in three-member panels. (45 CFR 16.5(a)). Under 45 CFR 16.23, the
paramount concern of the Board is to take the time needed to review a
record fairly and adequately to produce a sound decision. Under 45 CFR
16.18, the Board, in consultation with the parties, may suggest use of
mediation or other alternative dispute resolution services to resolve
the dispute between the parties or clarify issues.
As an alternative to our proposal described above to use the Board
for such decisions, we also considered permitting appeals of SDP
written disapprovals to be heard by the CMS Offices of Hearings and
Inquiries (OHI) and the CMS Administrator for final agency action, as
governed by part 430, subpart D. The current jurisdiction of OHI stems
from section 1902 of the Act, under which it hears appeals arising from
decisions to disapprove Medicaid State Plan material under Sec. 430.18
or to withhold Federal funds under Sec. 430.35 for noncompliance of a
State Plan. The OHI process is overseen by a presiding officer who
makes a recommendation to the Administrator, who issues the final
decision. The process is initiated upon issuance of a written
disapproval.
If we were to use this process for disapproval of SDPs, the hearing
officer would mail the State a notice of hearing
[[Page 41115]]
or opportunity for hearing related to an SDP disapproval that is also
published in the Federal Register. (42 CFR 430.70). The hearing will be
scheduled either in the CMS Regional Office or another place designated
by the hearing officer for convenience and necessity of the parties
between 30 and 60 days after notice. (42 CFR 430.72). Before the
hearing, issues may be added, removed, or modified, to also be
published in the Federal Register and with 20 days' notice to the State
before the hearing, unless all issues have been resolved, in which case
the hearing is terminated. (42 CFR 430.74).
Under this process, the State and CMS will be given 15 days to
provide comment and information regarding the removal of an issue. (42
CFR 430.74(c)). Before the hearing, other individuals or groups will be
able to petition to join the matter as a party within 15 days after
notice is posted in the Federal Register. (42 CFR 430.76). The State
and CMS will be able to file comments on these petitions within five
days from receipt. Id. The presiding officer will determine whether to
recognize additional parties. Id. Alternatively, any person or
organization will be able to file an amicus curia (friend of the court)
as a non-party, should the presiding officer grant their petition. Id.
The parties will have the right to conduct discovery before the hearing
to the extent set forth under Sec. 430.86 and to participate in
prehearing conferences consistent with Sec. 430.83.
At the hearing, parties would make opening statements, submit
evidence, present, and cross-examine witnesses, and present oral
arguments.\153\ The transcript of the hearing along with stipulations,
briefs, and memoranda will be filed with CMS and may be inspected and
copied in the office of the CMS Docket Clerk. (42 CFR 430.94). After
the expiration of the period for post hearing brief, the presiding
officer will certify the record and recommendation to the
Administrator. (42 CFR 430.102(b)(1)). The Administrator will serve a
copy to the parties who have 20 days to file exceptions or support to
the recommendation. (42 CFR 430.102(b)(1)-(2)). The Administrator will
then issue its final decision within 60 days. (42 CFR 430.102(b)(3)).
The decision of the Administrator under this section is the final
decision of the Secretary and constitutes ``final agency action''
within the meaning of 5 U.S.C. 704 and a ``final determination'' within
the meaning of section 1116(a)(3) of the Act and Sec. 430.38. (42 CFR
430.102(c)). Should the Administrator preside directly, they will issue
a decision within 60 days after expiration of the period for submission
of post hearing briefs. (42 CFR 430.102(a)).
---------------------------------------------------------------------------
\153\ 42 CFR 430.83.
---------------------------------------------------------------------------
We believe the Board will be the most appropriate entity to hear
appeals of disapprovals of SDPs proposals for the following reasons.
Foremost, while both the Board's and OHI's processes can resolve
disputes, we believe the Board will better facilitate timely approval
of managed care plan contracts and the payment of capitation payments.
Medicaid managed care uses a prospective payment system of capitation
payments and anything that delays approval of the managed care plans'
contracts can have a significant adverse impact on a State's managed
care program. Additionally, the Board's processes have the added
procedural flexibilities of allowing for mediation under 45 CFR 16.18,
as well as not requiring, but allowing, a hearing, as described in 45
CFR 16.11. These differences in the Board regulations give additional
options and possible efficiencies to the parties. Therefore, while we
believe both processes will be adequate for appeals of any disapproval
of a State directed payment, for the reasons described above, we
believe the processes under the Board will be the most appropriate
proposal for inclusion in Sec. 430.3(d).
We solicited public comments on whether the Board or OHI appeals
processes will best serve the purposes of resolving disputes fairly and
efficiently. We summarize and respond to public comments received on
Appeals (Sec. 430.3(d)) below.
Comment: A few commenters supported our proposal at Sec. 430.3(d)
to use the HHS Departmental Appeals Board for the administrative
appeals process and agreed that having a formal process is appropriate
given that written prior approval is required for most SDPs.
Response: We agree that the Board is the most appropriate entity to
adjudicate an agency appeal process for denial of written prior
approval for SDPs. We believe that States will benefit from and
appreciate an established, consistent administrative process with which
they are familiar. We are finalizing Sec. 430.3(d) as proposed,
however, we are redesignating as Sec. 430.3(e) to reflect new Sec.
430.3(d) in the interim final rule Enforcement of State Compliance with
Reporting and Federal Medicaid Renewal Requirements under the Social
Security Act (88 FR 84733) published December 2023.\154\
---------------------------------------------------------------------------
\154\ 45 CFR part 16 (Notice of Proposed Rulemaking--CMS-2447-
IFC).
---------------------------------------------------------------------------
Comment: Many commenters stated concern that establishing an
administrative appeals process for denials of written prior approval of
an SDP would deny a potential appellant access to the courts. Some
commenters stated that the courts would be the preferred venue for
appeals of SDP denials based on statutes outside of the parameters of
Sec. 438.6(c) (for example, financing issues governed by the statute).
Response: The administrative process finalized at Sec. 430.3(e) is
at the option of the appellant, and States may seek redress in the
courts at any time (88 FR 28150). It was never our intent to imply that
use of an administrative appeals process was a barrier or deterrent for
States electing to utilize the courts. As we stated in the proposed
rule, we believe that an administrative appeals process is a timelier
and more cost-effective path to resolution than the court system.
Nothing in this final rule precludes any party from seeking redress in
the courts. To the comment on appeals of SDP denials based on statutes
outside of the parameters of Sec. 438.6(c), the Board has sufficient
legal authority and expertise to adjudicate appeals regardless of their
statutory basis. However, as we clarify above, States always have the
option to utilize the courts if they prefer.
Comment: Some commenters supported the use of an administrative
process but stated concern at the timeliness of decisions and the
effect on the SDP's use during a specific rating period. Some
commenters stated that the CMS OHI would be a more expeditious
decisionmaker in practice, despite the Board's faster timelines in
regulation. Some commenters stated that both bodies were frequently
backlogged rendering them ineffective for issues such as SDPs and
recommended that an expedited appeal process be codified. One commenter
noted OHI's ability to waive hearings as an efficiency that could be
useful for SDP appeals. Another commenter stated concern that the
amicus mechanism of the Board would slow their process.
Response: We share the commenters' goal of an expeditious process
for the benefit of all parties. We are confident that the Board has the
capacity to effectively adjudicate appeals of SDP disapproval by CMS.
We do not have concerns that the amicus mechanism of the Board will
prove a hindrance as it is an existing part of their processes, and the
option exists in the courts and OHI as well. Regardless, we do not
believe that utilization of the courts would produce a faster
resolution. To the suggestion that OHI would provide
[[Page 41116]]
faster resolution because of their ability to waive hearings as an
efficiency, we note that under 45 CFR part 16, the Board does not
automatically schedule a hearing, but rather ``only if the Board
determines that there are complex issues or material facts in dispute,
or that the Board's review would otherwise be significantly enhanced by
a hearing.''
Comment: Some commenters supported using OHI as opposed to the
Board for subject matter expertise. Some of these commenters stated
that OHI's expertise in SPAs was more akin to SDPs and thus, the more
appropriate venue.
Response: We acknowledge that OHI could also be an appropriate
venue for SDP appeals; however, we do not agree that their expertise in
SPAs makes them more competent than the Board to hear an appeal of
disapproval by CMS of an SDP. On balance, we believe the Board's
shorter goal resolution time would better facilitate timely approval of
managed care plan contracts and the payment of capitation payments.
Medicaid managed care uses a prospective payment system of capitation
payments and anything that delays approval of managed care plans'
contracts can have a significant adverse impact on a State's managed
care program. Additionally, the Board's processes have the added
flexibilities of allowing for mediation under 45 CFR 16.18, as well as
not requiring, but allowing, a hearing, as described in 45 CFR 16.11.
These differences in the Board regulations give additional options and
possible efficiencies to the parties (88 FR 28151).
Comment: One commenter objected to codification of any appeals
process for SDP program approvals because, unlike the State plan
amendment process or other administrative actions subject to appeals
processes, SDPs are merely providing direction to MCOs under an
existing, approved authority.
Response: We do not agree that SDPs are not appropriate for an
administrative appeals process. As stated in the proposed rule, there
is an administrative process for SDPs under Sec. 438.6(c), which
includes review and, when appropriate, issuance of written approval
prior to the SDP being included in the corresponding managed care plan
contract and rate certification (88 FR 28149). As such, we believe the
issuing of a disapproval by CMS of SDPs is an administrative action
suitably addressed through an administrative appeals process when
requested.
Comment: Some commenters stated concern with the remedy should an
appellant prevail in an appeal of an SDP disapproval. The commenter
stated that Medicaid managed care is a prospective payment system and
if the contract year ends and the appeal is not resolved, clarity is
needed on whether the SDP will only be approved going forward or if it
could be approved retroactively. Another commenter echoed the same
comment but emphasized that this concern is particularly acute in
performance-based payments. One commenter requested that the remedies
available be made explicit in regulation.
Response: The Board has broad discretion in the appropriate remedy
should an appellant prevail in its appeal, and we do not intend for
this regulation to either limit or broaden the Board's powers. For
example, the Board could opt to issue a remedy to permit the State to
implement the SDP retroactive to the arrangement start date proposed by
the State in the initial SDP preprint submission. Generally, we share
commenters' concerns that any issue should be resolved in a timely
fashion. We note that these concerns exist now under our existing
informal resolution process, but we believe that an administrative
process will provide cost and time efficiencies for all parties as an
alternative venue. Nothing in this final rule precludes any party from
seeking redress in the courts.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, at Sec. 430.3, we are
redesignating paragraph (d) as paragraph (e) and finalizing as
proposed.
o. Reporting Requirements To Support Oversight and Inclusion of SDPs in
MLR Reporting (Sec. Sec. 438.6(c)(4), and 438.8(e)(2)(iii)(C) and
(f)((2)(vii))
States' increasing use of SDPs has been cited as a key area of
oversight risk for CMS. Oversight bodies and other interested parties,
including GAO and MACPAC, have issued reports recommending that we
collect and make available provider-specific information about Medicaid
payments to providers, including SDPs.155 156 157 158
---------------------------------------------------------------------------
\155\ Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
\156\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
\157\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
\158\ U.S. Government Accountability Office, ``Medicaid Managed
Care: Rapid Spending Growth in State Directed Payments Needs
Enhanced Oversight and Transparency,'' December 14, 2023, available
at https://www.gao.gov/products/gao-24-106202.
---------------------------------------------------------------------------
As discussed in this final rule, CMS's current review and approval
process for SDPs is prospective; that is, we do not consistently nor
systematically review the actual amounts that States provide to managed
care plans for these SDPs \159\ nor do we review the actual amounts
that managed care plans pay providers. We are also aware that some
States are permitting managed care plans to retain a portion of SDPs
for administrative costs when plans make these payments to providers.
Because States are not required to provide the actual expenditures
associated with these arrangements in any separate or identifiable way,
we cannot determine exactly how much is being paid under these
arrangements, to what extent actual expenditures differ from the
estimated dollar amounts identified by States in the approved preprint
by CMS, and whether Federal funds are at risk for impermissible or
inappropriate payment.
---------------------------------------------------------------------------
\159\ Because CMS does not routinely perform retrospective
review of SDPs, the Medicaid Managed Care Rate Development Guide
requires States using separate payment terms to (1) submit
documentation to CMS that includes the total amount of the payment
into the rate certification's rate cells consistent with the
distribution methodology included in the approved State directed
payment preprint, as if the payment information had been known when
the rates were initially developed; and (2) submit a rate amendment
to CMS if the total amount of the payment or distribution
methodology is changed from the initial rate certification. As part
of this final rule, CMS is finalizing a prohibition on separate
payment terms, see Sec. 438.6(c)(6) and section I.B.2.l. of this
final rule for further details.
---------------------------------------------------------------------------
We proposed new reporting requirements for Medicaid SDPs in
Sec. Sec. 438.8 and 438.74 to align with the reporting that is
currently required for Medicaid FFS supplemental payments. CMS FFS
supplemental payment guidance notes that ``[i]nformation about all
supplemental payments under the State plan and under demonstration is
necessary to provide a full picture of Medicaid payments.'' \160\ While
States must provide CMS with the amounts for FFS supplemental payments,
there is no requirement for States or managed care plans to provide
actual payment data separately for SDPs. Implementing a new requirement
for both State and managed care plan reporting of actual SDP
expenditures will support CMS oversight activities to better understand
[[Page 41117]]
provider-based payments across delivery systems.
---------------------------------------------------------------------------
\160\ https://www.medicaid.gov/federal-policy-guidance/downloads/smd21006.pdf.
---------------------------------------------------------------------------
To address the need for additional information on the actual
amounts paid as SDPs, we proposed to require Medicaid managed care
plans to include SDPs and associated revenue as separate lines in the
reports required at Sec. 438.8(k). The managed care MLR reporting
requirements at Sec. 438.8(k) were codified in the 2016 final rule,
and States have substantial experience in obtaining and reviewing MLR
reports from their managed care plans. To date, our MLR guidance has
not addressed the inclusion of SDPs in the MLR; the proposed rule
specified these requirements by proposing to amend Sec. 438.8(k) to
ensure that Medicaid SDPs will be separately identified in annual MLR
reporting.
Specifically, at Sec. 438.8(e)(2)(iii)(C), we proposed to require
that managed care plan expenditures to providers that are directed by
the State under Sec. 438.6(c), including those that do and do not
require prior CMS approval, must be included in the MLR numerator. In
Sec. 438.8(f)(2)(vii), we proposed to require that State payments made
to Medicaid MCOs, PIHPs, or PAHPs for approved arrangements under Sec.
438.6(c) be included in the MLR denominator as premium revenue. We
proposed that States and managed care plans are required to comply with
these changes in Sec. 438.8(e)(2)(iii)(C) and (f)(2)(vii) 60 days
after the effective date of the final rule as we believe these
proposals are critical for fiscal integrity in Medicaid. We considered
an alternative compliance date of no later than the rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after 60 days
following the effective date of the final rule. We sought comment on
this proposal.
We also proposed to require that the managed care plans' MLR
reports to States as required in Sec. 438.8(k) include two additional
line items. The first item at Sec. 438.8(k)(1)(xiv) would require
reporting of Medicaid managed care plan expenditures to providers that
are directed by the State under Sec. 438.6(c). The second item at
Sec. 438.8(k)(1)(xv) would require reporting of Medicaid managed care
plan revenue from the State to make these payments. We proposed, in
Sec. 438.8(k)(xvi), that States and managed care plans would be
required to comply with Sec. 438.8(k)(1)(xiv) and (xv) no later than
the first rating period for contracts with MCOs, PIHPs, and PAHPs
beginning on or after the effective date of the final rule. We
considered an alternative effective date where States and plan would
comply with these requirements 60 days after the effective date of this
final rule. However, we were concerned this may not be a reasonable
timeframe for compliance as the new reporting requirements may require
State and managed care plans to make changes to financial reporting
systems and processes. We sought public comment on this proposal.
For separate CHIPs, we did not propose to adopt the new reporting
requirements at Sec. 438.8(k)(1)(xiv) and (xv) because SDPs are not
applicable to separate CHIP managed care plans. For this reason, we
proposed to amend Sec. 457.1203(f) to exclude any references to SDPs
for managed care plan MLR reporting. For clarity, we also proposed to
make a technical change at Sec. 457.1203(f) to include the word ``in''
before the cross-reference to Sec. 438.8.
To assist in CMS oversight of these arrangements, we proposed that
the plan-level SDP expenditure reporting should be reflected in States'
annual summary MLR reports to CMS. As part of States' annual summary
MLR reporting that is required under Sec. 438.74, we proposed to
require two additional line items. The first item at Sec.
438.74(a)(3)(i) would require State reporting of the amount of payments
made to providers that direct Medicaid MCO, PIHP, or PAHP expenditures
under Sec. 438.6(c). The second item at Sec. 438.74(a)(3)(ii) would
require State reporting of the amount of payments, including amounts in
the capitation payments, that the State makes to Medicaid MCOs, PIHPs,
or PAHPs for approved SDPs under Sec. 438.6(c). We proposed, in Sec.
438.74(a)(4), that States would be required to comply with Sec.
438.74(a)(3) no later than the rating period for contracts with MCOs,
PIHPs, and PAHPs beginning on or after 60 days following the effective
date of the final rule as we believed this was a reasonable timeframe
for compliance. We considered an alternative effective date where
States would comply with the new requirement 60 days after the
effective date of this final rule. However, we were concerned this may
not be a reasonable timeline for compliance as these changes may
require States to make changes to financial reporting systems and
processes. We sought public comment on this proposal.
We did not propose to adopt the new SDP reporting requirements at
Sec. 438.74 for separate CHIPs since expenditures under Sec. 438.6(c)
are not applicable to separate CHIP managed care plans. However, since
existing separate CHIP regulations at Sec. 457.1203(e) currently
cross-reference to the reporting requirements at Sec. 438.74, we
proposed to amend Sec. 457.1203(e) to exclude any references to SDPs
in State MLR reporting.
While we expected that some managed care plans and States may
oppose these proposals as increasing administrative burden, we believed
that the increased transparency associated with these enhanced
standards would benefit both State and Federal government oversight of
SDPs. Implementing these new requirements for both State and managed
care plan reporting of actual SDP expenditures will support CMS's
understanding of provider-based payment across delivery systems.
We also proposed to establish a new requirement at Sec.
438.6(c)(4) for States to annually submit data, no later than 180 days
after each rating period, to CMS's T-MSIS, and in any successor format
or system designated by CMS, specifying the total dollars expended by
each MCO, PIHP, and PAHP for SDPs that were in effect for the rating
period, including amounts paid to individual providers. The purpose of
this reporting would be to gain more information and insight into
actual SDP spending at the individual provider-level. As MACPAC noted
in their June 2022 Report to Congress, ``[State directed payments] are
a large and rapidly growing form of Medicaid payments to providers, but
we do not have provider-level data on how billions of dollars in
directed payments are being spent.'' \161\ The Commission noted that
SDPs are larger than disproportionate share hospital (DSH) and upper
payment limit (UPL) supplemental payments, but there is much less data
on who is receiving them.\162\ Currently, States must provide CMS with
specific information for FFS supplemental payments that are made to
individual providers; however, there is no such requirement for States
or managed care plans to provide this type of quantitative, provider-
specific data separately for SDPs. We believe implementing a provider-
level SDP reporting requirement will facilitate our understanding of
provider-level Medicaid reimbursement across delivery systems.
---------------------------------------------------------------------------
\161\ Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
\162\ Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
---------------------------------------------------------------------------
We proposed to develop and provide the form through which the
reporting
[[Page 41118]]
would occur so that there will be one uniform template for all States
to use. We proposed in Sec. 438.6(c)(4) the minimum data fields that
will need to be collected to provide the data needed for CMS to perform
proper oversight of SDPs. Proposed Sec. 438.6(c)(4)(i) through (v)
outlines the minimum data fields: provider identifiers, enrollee
identifiers, managed care plan identifiers, procedure, and diagnosis
codes, and allowed, billed, and paid amounts. Under the proposal, paid
amounts would include the amount that represents the managed care
plan's negotiated payment amount, the amount of the State directed
payments, the amount for any pass-through payments under Sec.
438.6(d), and any other amounts included in the total paid to the
provider. When contemplating the FFS supplemental payment reporting, we
considered how States should have the information being requested
readily available, ``[i]ncluding the provider-specific payment amounts
when approved supplemental payments are actually made and claimed for
FFP, as the aggregate expenditures reported on the CMS-64 comprise the
individual, provider-specific payment amounts.'' \163\ Similarly, we
believe States and their managed care plans already collect provider-
level SDP data, including the negotiated rate between the plan and
provider and any additional SDPs. We sought comment on whether these
are the appropriate minimum data fields to require and what provider-
level SDP data States currently collect as part of their monitoring and
oversight of SDPs.
---------------------------------------------------------------------------
\163\ https://www.medicaid.gov/federal-policy-guidance/downloads/smd21006.pdf.
---------------------------------------------------------------------------
We recognize that there are existing data collection processes and
systems established between CMS and States that could potentially
support this SDP reporting, and stated in the proposed rule that we
could use these systems to the extent they could help minimize
additional or duplicative reporting by States. For instance, we
considered the existing system and reporting structure that States are
using for FFS supplemental payment reporting. The Consolidated
Appropriations Act (CAA) of 2021 established new reporting requirements
in section 1903(bb) of the Act for Medicaid FFS supplemental payments
under both State plan and demonstration authorities consistent with
section 1902(a)(30)(A) of the Act.164 165 We issued guidance
in December 2021 outlining the information that States must report to
CMS as a condition of approval for a State plan or State plan amendment
that will provide for a supplemental payment, beginning with
supplemental payments data about payments made on or after October 1,
2021.\166\
---------------------------------------------------------------------------
\164\ The CAA included Division CC, Title II, Section 202
(section 202), which added section 1903(bb) of the Act to specify
new supplemental payment reporting requirements.
\165\ Demonstration authority includes uncompensated care (UC)
pool payments, delivery system reform incentive payments (DSRIP),
and possibly designated State health program (DSHP) payments to the
extent that such payments meet the definition of supplemental
payment as specified in section 1903(bb)(2) of the Act.
\166\ https://www.medicaid.gov/sites/default/files/2021-12/smd21006.pdf.
---------------------------------------------------------------------------
Under these FFS requirements, each quarter, each State must submit
reports on supplemental payment data through the Medicaid Budget and
Expenditure System (MBES), as a requirement for a State plan or State
plan amendment that will provide for a supplemental payment. The data
collection involves both narrative information, as well as
quantitative, provider-specific data on supplemental payments. The
narrative information includes descriptions of the supplemental payment
methodology, determination of eligible providers, description of the
timing of the payments, and justification for compliance with section
1902(a)(30)(A) of the Act. The quantitative, provider-specific data
collection includes detailed provider-specific accounting of
supplemental payments made within the quarter, including: provider
name, provider ID number, and other provider identifiers; Medicaid
authority (FFS or demonstration authority); Medicaid service category
for the supplemental payments; aggregate base payments made to the
provider; and aggregate supplemental payments made to the provider,
which will reflect the State's claim for FFP.
This supplemental payment reporting is included in the MBES to
capture the entire set of data reporting elements required in section
1903(bb)(1)(B) of the Act in one central location. MBES is familiar to
States, in part because of State's quarterly expenditure reporting on
the CMS-64 form. We stated in the proposed rule we could consider
taking a similar approach for SDPs by adding reporting in MBES to
capture provider-specific SDP payment data.
As another option, we described encounter data reported through T-
MSIS as the method for collecting SDP provider-specific payment
amounts. Specifically, T-MSIS could work well for SDPs that are
specifically tied to an encounter or claim, such as minimum fee
schedules or uniform dollar or percentage increases. Current
regulations at Sec. 438.242(c)(3) require States to submit all
enrollee encounter data, including the allowed amount and paid amounts,
and these paid amounts should be inclusive of State directed payments
that are tied to an encounter or claim. We could build additional data
fields in T-MSIS to capture more details about the paid amount,
including the amount that was the managed care plan's negotiated
payment amount, the amount of the State directed payments, the amount
for any pass-through payments under Sec. 438.6(d), and any other
amounts included in the total payment amount paid to the provider. As
noted in the proposed rule, this level of detail would provide the
information we need for analysis and oversight of SDP spending, and it
would be consistent with the managed care plan payment analysis
proposed in Sec. 438.207(b)(3) (see section I.B.1.d. of this final
rule). There are various fields currently captured in T-MSIS via
monthly encounter submissions (for example, national provider
identifier, enrollee identifiers, managed care plan identifiers,
procedure and diagnosis codes, billed, allowed, and paid amounts) that
could help us determine provider-specific SDP reimbursement. Utilizing
T-MSIS in this manner could substantially reduce unnecessary or
duplicative reporting from States, be an effective method to collect
the data with minimal additional burden on managed care plans and
States and enable comprehensive analyses since the data will be
included with all other T-MSIS data.
Lastly, we described using a separate reporting mechanism for this
new reporting of SDP provider-level data. For example, we could explore
building a new reporting portal, similar to the one developed for
submission of the Managed Care Program Annual Report. However, this
would take considerable time and resources to develop and would be
separate and distinct from all other SDP data, making it more difficult
to perform comprehensive analyses. We described the potential option of
permitting States to submit the proposed reporting using a Word or
Excel template sent to a CMS mailbox. While this option would be the
fastest way to collect the data, it too presents challenges for
integrating the data with other data collected by CMS for analyses.
Based on our evaluation and description of other options, using T-
MSIS appears to be the most efficient option and we proposed in Sec.
438.6(c)(4) to require States to submit data to T-MSIS as the method
for collecting provider-specific payment amounts under SDPs. As
specified in proposed
[[Page 41119]]
Sec. 438.6(c)(4)(v),\167\ provider-specific paid amounts would include
a plan's negotiated payment amount, the amount of the State directed
payments, the amount for any pass-through payments under Sec.
438.6(d), and any other amounts included in the total paid to the
provider. Under this proposal, States would submit this data to CMS no
later than 180 days after each rating period. We proposed a 180-day
deadline because we believed this timeframe would permit adequate time
for claims run out, submission of the necessary data to the State, and
for the State to format the data for submission to CMS. We also
proposed in Sec. 438.6(c)(4) that States comply with this new
reporting requirement after the rating period that begins upon our
release of the reporting instructions for submitting the information
required by this proposal. We sought public comment on our proposal to
use T-MSIS for this new reporting, or whether another reporting vehicle
such as MBES or other alternatives described in this final rulemaking
would be better suited for SDP reporting. We also sought comment on how
T-MSIS or another reporting vehicle could support capturing value-based
payment arrangements in which payment is not triggered by an encounter
or claim.
---------------------------------------------------------------------------
\167\ In the proposed rule (88 FR 28153), we mistakenly cited to
438.6(c)(4)(i)(E) instead of proposed 438.6(c)(4)(v).
---------------------------------------------------------------------------
We also proposed a conforming requirement at Sec. 438.6(c)(5)(iv)
to align with the proposal in Sec. 438.6(c)(4); proposed paragraph
(c)(5)(iv) would require States to document in their managed care
contracts any reporting requirements necessary for auditing SDPs in
addition to the reporting necessary to comply with Sec. 438.6(c)(4).
We described these data reporting proposals as a two-prong
approach, with the MLR proposed requirements serving as a short-term
step and the provider-specific data reporting proposed in Sec.
438.6(c) being a longer-term initiative. We noted that this approach
would ensure the appropriate content and reporting flows to CMS while
also giving States sufficient time to prepare for each proposal based
on the level of new burden. We acknowledged that States and managed
care plans may consider this an unnecessary increase in administrative
burden but noted that the increased transparency associated with these
enhanced standards would benefit both State and Federal government
oversight of SDPs. Implementing these proposals for State and managed
care plan reporting of actual SDP expenditures will provide CMS more
complete information when evaluating, developing, and implementing
possible changes to Medicaid payment policy and fiscal integrity
policy. As we noted in the proposed rule (88 FR 28160), our intent was
to improve monitoring and oversight of actual plan and State
expenditures with regards to payment arrangements in Sec. 438.6(c)
(that is SDPs).
For discussion on the proposed applicability dates for the
proposals outlined in this section, see section I.B.2.p. of this final
rule.
We solicited public comment on these proposals.
We summarize and respond to public comments received on our
proposals related to reporting of SDPs in the medical loss ratio (MLR)
(Sec. Sec. 438.8(e)(2)(iii) and (f)(2), 438.74, 457.1203(e) and (f)),
and SDP reporting requirements to support oversight (Sec. 438.6(c)(4))
below.
Comment: Some commenters supported including SDPs in MLR reporting
as a reasonable step to increase transparency and improve oversight of
SDPs.
Response: We agree that including SDPs in MLR reporting will
increase transparency and improve CMS and State oversight of SDPs. We
are finalizing Sec. 438.8(e)(2)(iii)(C) with technical clarifications
to require States and managed care plans to report State directed
payments made by managed care plans to providers under Sec. 438.6(c)
as incurred claims within the MLR numerator and to refer to the newly
defined term ``State directed payment-'' in Sec. 438.2. We are
finalizing Sec. 438.8(f)(2)(vii) to require States and managed care
plans to report all State payments made to Medicaid managed care plans
for arrangements under Sec. 438.6(c) be included in the MLR
denominator as premium revenue and to refer to the newly defined term
``State directed payment.'' We are finalizing the regulation text in
Sec. 438.8(f)(2)(vii) to remove the word ``approved'' as we require
the MLR denominator to include all State directed payments, including
those that are exempted from written prior approval as well as those
that require written prior approval from CMS under Sec.
438.6(c)(2)(i). All SDPs, including those that do not require CMS
written approval under Sec. 438.6(c)(2)(i), are within the scope of
these new regulatory provisions. State directed payments that are paid
to managed care plans as separate payment terms must also be included
as plan revenue within the MLR denominator until the rating period in
which separate payment terms are no longer permissible (see section
I.B.2.l. of this final rule for discussion of separate payment terms).
Comment: Many commenters questioned the feasibility of the SDP line
item MLR reporting proposals in Sec. Sec. 438.8(k)(1)(xiv) and (xv)
noting that the required SDP line item reporting would prove
administratively burdensome for managed care plans given the necessary
changes to financial reporting systems and processes. Commenters
indicated it would be significantly challenging to identify and report
managed care plan expenditures associated with minimum fee schedule
SDPs and managed care plan revenue associated with those SDPs
incorporated into capitation rates as these arrangements are not easily
identifiable especially when the SDP has been accounted for within base
capitation rates for several years. Commenters raised similar
challenges with distinguishing between multiple SDPs that impact the
same services or provider classes. Commenters stated additional
technical guidance would be necessary to clarify how plans should
calculate the portion of the capitation rates attributable to these
SDPs, and commenters noted there was minimal value to CMS or States of
this information given other available SDP data. Commenters cautioned
against overly rigid regulatory language that could result in distorted
MLR reporting that does not accurately reflect SDP arrangements. One
commenter requested additional time for States and plans to comply with
Sec. Sec. 438.8(k)(1)(xiv) and (xv) noting the extensive system and
MLR reporting template changes that would be required for
implementation.
Response: We appreciate the feasibility concerns raised by
commenters as to how managed care plans would separately report SDPs
within the plan-level MLR reports required under Sec. 438.8(k) and as
part of the State's annual summary MLR reporting required under Sec.
438.74. While we are finalizing provisions at Sec. 438.8(e)(2)(iii)(C)
and 438.8(f)(2)(vii) to require that all SDPs be included in plan-level
and State summary MLR reports, we agree that requiring plans and States
to report SDPs on a line item basis would require extensive State and
plan administrative work, as well as CMS technical assistance. In the
proposed rule (88 FR 28160), we noted that our intent was to improve
monitoring and oversight of actual plan and State expenditures with
regards to payment arrangements in Sec. 438.6(c). After careful
consideration, we believe that at this time, we can work towards these
goals using other provisions that
[[Page 41120]]
we are finalizing, including the requirement that all SDPs be
incorporated as adjustments to the risk-based capitation rates and the
SDP T-MSIS reporting requirements (see sections I.B.2.m. of this final
rule and earlier paragraphs of this section in this final rule for
further discussion). Therefore, we are not finalizing Sec. Sec.
438.8(k)(1)(xiv) and (xv) or 438.74(a)(3) through (4) to require State
and plan line-level reporting of SDPs. Because we are not finalizing
the line item-level reporting provisions in Sec. Sec. 438.8(k)(1)(xiv)
and (xv) or 438.74(a)(3) nor the respective compliance dates in
proposed Sec. Sec. 438.8(k)(xvi) or 438.74(a)(4), States will likely
not be required to make as many modifications to systems and MLR
reporting templates. We continue to believe that it is reasonable to
require States to comply with the requirement in Sec. Sec.
438.8(e)(2)(iii)(C) and 438.8(f)(2)(vii) that States and plans include
all SDPs within MLR reporting no later than 60 days following the
effective date of this final rule. We will monitor implementation of
this final rule and may consider additional future rulemaking if
necessary.
Comment: Many commenters supported the proposal for States to
report SDP expenditure data in the T-MSIS. Several commenters stated
that it would lead to greater transparency and accountability, as well
as facilitate and provide insights to provider reimbursement rates.
Some commenters appreciated that T-MSIS could enable better data
aggregation. One commenter stated that reporting aggregate spending on
SDPs as a separate line on CMS-64 reports could help validate whether
the data submitted to T-MSIS are complete. Another commenter supported
the specific requirement to have provider-level payment amounts. Some
State commenters questioned how certain data characteristics of SDPs
would be reported in T-MSIS; however, we did not receive comments from
State Medicaid agencies opposing the use of T-MSIS for SDP reporting.
Response: We agree that explicitly requiring States to report SDP
expenditure data to T-MSIS will lead to greater transparency,
oversight, and accountability. Even though States are already required
to report all enrollee encounter data per Sec. 438.818, including the
allowed and paid amounts, explicitly identifying SDPs as part of that
reporting will ensure clarity as T-MSIS evolves over time and includes
more granular levels of data to support CMS oversight and monitoring.
More robust and comprehensive data will improve data integrity, and T-
MSIS captures detailed beneficiary, service, and provider data that
provides important insights for administering and overseeing the
Medicaid program, including CMS's monitoring of State compliance with
SDP payment limits, contractual requirements, and alignment with CMS
approval of the SDP. We note that the allowed, billed, and paid amounts
do not need to be inclusive of pass-through payments under the final
version of Sec. 438.6(c)(4) as part of SDP T-MSIS reporting. This is a
technical correction as pass-through payments are not required to be
tied to utilization or the delivery of services and therefore would not
be included in the same financial transaction as SDPs.
Although we realize that requiring States to report SDPs through T-
MSIS will require encounter system changes for both States and managed
care plans, we believe that the additional detail provided by T-MSIS is
critical given the high levels of spending associated with SDPs. We
will evaluate actual SDP expenditures. SDP reporting through T-MSIS
will provide detailed information on the characteristics of enrollees
who receive services paid for using SDPs, the kinds of services that
are provided through these arrangements as well as the providers who
received the payments. In 88 FR 28160, we noted that our intent was to
improve monitoring and oversight of actual plan and State expenditures
with regards to payment arrangements in Sec. 438.6(c).
Having detailed information on enrollees, procedure and diagnosis
codes, and provider identifiers available from T-MSIS will allow CMS to
analyze potential reimbursement and health disparities in one or more
States. T-MSIS SDP encounter data will allow for comparisons of
reimbursement for specific services across a State for SDP and non-SDP
providers. For example, with the procedure codes available from T-MSIS,
we could analyze primary care reimbursement for a State with an SDP for
teaching hospitals compared to reimbursement for primary care providers
without SDPs and determine if primary care reimbursement disparities
exist in the state. The enrollee characteristic detail combined with
the service and diagnosis codes in T-MSIS will allow CMS to determine
if SDPs are providing improved access to high-risk enrollees or to
groups of enrollees who have historically lacked access to critical
services.
The detailed information from T-MSIS will also provide CMS with
information to assist in determining if an SDP should be renewed. The
SDP provider-level data from T-MSIS will allow CMS to verify if SDP
payments were made according to the provisions in the contract. For
example, we will be able to determine if the managed care plans made
payment in accordance with the SDP as included in the State's managed
care contract. Having the actual spending amounts from T-MSIS encounter
data will allow CMS to compare the projected amount(s) provided by the
State in the preprint to the actual payments made by the managed care
plan to ensure compliance with the SDP as included in the State's
managed care contract. This comparison will also provide important
insights into the accuracy of States' total payment rate analysis and
inform CMS' review of future total payment rate analyses provided for
the same payment arrangements to ensure compliance with Sec.
438.6(c)(2)(ii)(I) and (c)(2)(iii) as applicable. If a State's total
payment rate analyses are not appropriately adjusted to account for
errors later identified in comparing projected spending to actual
expenditures, CMS may not renew the SDP for future years.
SDP reporting through T-MSIS will also improve program integrity.
The detailed records will allow us for most encounter-based SDPs (for
example, uniform dollar increases, minimum or maximum fee schedules) to
identify and confirm compliance with the SDP as included in the State's
managed care contract by showing SDP payment amounts. The finalized
regulation at Sec. 438.6(c)(4)(v) requires that for each encounter,
the State must report the allowed, billed and paid amounts and that the
paid amounts include the amount that represents the MCO's, PIHP's or
PAHP's negotiated payment amount, the amount of the State directed
payment, and any other amounts included in the total amount paid to the
provider. This requires the State to report, on each encounter or
financial transaction, the total amount paid which includes the managed
care plan's negotiated payment amount, the amount of the State directed
payment, and any other amounts included in the total amount paid to the
provider. While some payment arrangements, like uniform dollar
increases, may lend themselves to more easily disaggregating a separate
SDP amount from the negotiated rate, CMS recognizes that other types of
SDPs (for example, minimum or maximum fee schedules), particularly
those that have been in effect for a significant period, may not due to
the nature of the SDP. Currently CMS has an established process that
reviews T-MSIS data needs, proposes revisions to the T-MSIS submission
file format(s), and provides opportunity for
[[Page 41121]]
States' review and comment. CMS intends to use this process for any
updates that may be needed to the T-MSIS file layout and technical
specifications to facilitate reporting of the total paid amount for
SDPs than the file currently supports. These detailed records will
provide CMS with a better understanding of how SDPs are implemented by
States and managed care plans. Currently, we review SDP payments and
calculations through MLR audits and financial management reviews (FMRs)
on a State-by-State basis. With the encounter-level data from T-MSIS,
we will be able to review the SDP data for more than one State at a
time and can identify potentially inappropriate payments as part of
more comprehensive and timely reviews of these payments once the
reporting requirement applies. In addition, we will be able to analyze
how well plans are administering the distribution of SDPs across
provider classes specified in the approved SDPs; that is, are managed
care plans making the payments to providers as required by the State
and are the payments made on a timely basis.
Comment: A few commenters stated that MBES would be the more
appropriate system for reporting SDP data since it is already used to
collect provider-level data on UPL payments. One commenter suggested
MBES would not take as much time to implement as submission to T-MSIS.
Another commenter suggested that the MBES forms that already collect
provider-level data on UPL FFS supplemental payments could be modified
to reduce State administrative burden.
Response: After further consideration, we disagree that MBES is a
more appropriate vehicle for this data collection as State reporting of
managed care expenditures within MBES is focused on capitation payments
paid from the State to the managed care plans, not amounts paid by the
managed care plan to a provider for a service delivered to a specific
Medicaid managed care enrollee. In addition to widespread support by
commenters, we conclude that T-MSIS is the more appropriate tool to
capture this information as T-MSIS will provide substantially more
detail on the affected enrollees, services, and providers and will
allow for more sophisticated analyses of access and payment. Current
regulations at Sec. 438.242(c)(3) require States to submit all
enrollee encounter data, and we have operationalized that using T-MSIS.
Using T-MSIS as well for the new SDP reporting will align well with
SDPs that are specifically tied to an encounter or claim, such as
minimum fee schedules or uniform dollar or percentage increases.
Further, current regulations at Sec. 438.242(c)(2) requires the
submission of enrollee encounter data to the State at a frequency and
level of detail to be specified by CMS and the State, based on program
administration, oversight and program integrity needs. Building
additional data fields in T-MSIS to capture more details about the paid
amount, including elements that would allow CMS to understand more
about the payment amount negotiated by the managed care plan, amount of
the SDPs, and any other amounts included in the total payment amount
paid to the provider, is appropriate and in alignment with the current
regulatory requirements at Sec. 438.242(c)(2).
Because of the numerous comments supporting the use of T-MSIS for
State SDP reporting as well as the level of detail available from T-
MSIS that will enable robust analysis of State SDP implementation, we
believe T-MSIS is the appropriate vehicle for State SDP reporting. In
addition, we note that the required file format for encounter data can
support the additional, more detailed reporting requirements for SDPs.
As previously noted, CMS currently has a standardized process that
reviews T-MSIS data needs, proposes revisions to the T-MSIS submission
file format(s), and provides opportunity for States' review and
comment. After consideration of States' comments, the review cycle
incorporates modifications that are in line with the standardized data
formats required in Sec. 438.242(c).
Comment: One commenter recommended that CMS ensure there was
adequate time to collect the appropriate data and noted that the
proposed effective date of this requirement would not give States
sufficient time to begin gathering this information. The commenter
indicated that States may need 2 to 3 years from the effective date of
the final rule to begin this reporting.
Response: We do not agree with the commenter that States will be
unable to report the data specified in Sec. 438.6(c)(4) by the
applicability date for several reasons. First, States have been
responsible for submitting data to T-MSIS or its predecessor system
since 1999 so they are very familiar with its requirements and
processes. Second, most of the data elements specified in Sec.
438.6(c)(4)(i) through (iv) are existing data fields in T-MSIS and
States currently report these data; these fields include provider
identifiers, enrollee identifiers, managed care plan identifiers,
procedure and diagnosis codes, as well as allowed, billed and paid
amounts. Under Sec. 438.242(c)(3) States and plans are already
required to report paid amounts as part of encounter data submissions;
the new SDP reporting requirement at Sec. 438.6(c)(4)(v) now requires
that the required paid amounts must include the amount that represents
the managed care plan's negotiated payment amount, the amount of the
State directed payments, and any other amounts included in the total
paid to the provider. Any revisions made to T-MSIS in the future to
include additional fields that capture different data will be
introduced using standard T-MSIS modification and instruction
procedures.
Lastly, after careful consideration of existing CMS processes for
the release of T-MSIS specifications and the compliance dates typically
established therein, we are modifying our applicability date for Sec.
438.6(c)(4) in proposed Sec. 438.6(c)(8)(vi) from the first rating
period beginning on or after the release of T-MSIS reporting
instructions by CMS to the applicability date set forth in the T-MSIS
reporting instructions released by CMS. Our method of releasing new
reporting instructions includes preparation time for States and managed
care plans as we are aware that any changes to data systems require
substantial programming and testing before implementation. For these
reasons, we believe Sec. 438.6(c)(4) as finalized in this rule
provides States with ample time to comply.
Comment: Some commenters supported the choice of T-MSIS as the
repository for SDP data, but shared concerns regarding some of the
details of the data itself. One commenter urged close Federal-State
partnership to finalize the elements and approach for the reporting.
One commenter wanted to ensure that there was a uniform template for
reporting. Another commenter requested that CMS explore ways that
additional explanatory information can be included to accompany the
dollar amounts being reported.
Response: We agree that T-MSIS is the appropriate data collection
tool for SDP reporting. The required minimum data fields to be
collected are specified in Sec. 438.6(c)(4), which we are finalizing
with the addition of ``, as applicable'' after ``Minimum data fields to
be collected include the following'' to be clear that for some SDPs,
such as value-based SDP arrangements in which there may not be an
identifiable tie to a specific procedure code because the SDP provider
payments are tied to
[[Page 41122]]
provider performance over the entire rating period, all of the minimum
data fields may not apply. As indicated by preliminary T-MSIS
specifications released in Fall 2023, we believe this data can be
successfully captured elsewhere in T-MSIS, via financial transaction
reporting, for example. To ensure consistent and accurate reporting, we
also plan to publish additional associated T-MSIS reporting
instructions through the established methods and mechanisms used for
disseminating T-MSIS information to States. To the suggestion for
additional explanatory information for the SDP data in T-MSIS, we
remind commenters that approved SDP preprints are now available on
Medicaid.gov. These preprints contain the information that was
submitted by the State for written prior approval and reflects the
purpose of each SDP.
Comment: One commenter was not sure that States and managed care
plans collect the necessary data, in particular the negotiated rate
between the plan and provider and any additional SDPs that are made to
the provider. The commenter was particularly concerned that for fee
schedule-related SDPs, managed care plans often are not provided enough
information to calculate the amount paid and in order to comply with
the proposals in this section, managed care plans will need to be
allowed greater insight into how these calculations are made at the
State level.
Response: We remind States and managed care plans that as specified
in Sec. 438.242(c)(3), all MCO, PIHP, and PAHP contracts must require
the 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. We expect States and managed care plans to ensure the
SDP data elements required under Sec. 438.6(c)(4) meet the
requirements for the encounter data submissions, including any
calculation methods for the SDP. We expect the SDP T-MSIS reporting to
follow the same process for data collection that is currently required
for encounter data. That is, the SDP information required in
438.6(c)(4) will be part of each encounter record that is submitted in
accordance with Sec. 438.242(c)(3). Encounters with SDP data will not
be submitted on a different schedule or timeline than other encounter
data and will not use different transaction types except for some SDPs
that are VBPs. We acknowledge that not all SDPs are paid on an FFS
basis that clearly identifies allowed and paid amounts, and certain
types of SDPs such as VBP provider incentive payments may not conform
to this encounter data format. We would expect that some VBP SDPs,
including provider incentive payments, would utilize a T-MSIS financial
transaction format which differs from the T-MSIS encounter data format.
The submission timing requirements for the T-MSIS VBP SDP financial
transactions would not differ from those for T-MSIS encounters; those
timing requirements for encounter data are delineated in Sec.
438.242(c). Regardless, the submission of complete and accurate data to
T-MSIS is critical to program oversight and managed care plans and
States should ensure that reporting requirements are clear and
consistently implemented. If States have questions about submission of
data to T-MSIS, they should contact their CMS T-MSIS contact for
technical assistance.
Comment: Some commenters cautioned CMS on any additional
administrative reporting burden. One commenter stated that CMS should
ensure that any reporting requirements, including around SDPs that
advance VBP, could be met through the broader reporting at Sec.
438.6(c)(4). Some commenters cautioned that any additional reporting
around SDPs that advance VBP would disincentivize Medicaid agencies
from using SDPs as a tool to transform payment and care delivery. Other
commenters stated CMS should limit the trend toward more and more
reporting, and suggested CMS combine the reporting requirements or
eliminate some to further streamline. Conversely, a few commenters
recommended that the reporting be more extensive than what was proposed
in Sec. 438.6(c)(4).
Response: We appreciate the range of comments on our reporting
proposals. We attempted to strike the right balance between oversight
and transparency, and additional administrative burden. As we noted in
the proposed rule, we believe utilizing T-MSIS for reporting would
substantially reduce unnecessary or duplicative reporting from States,
would be an effective method to collect the data with minimal
additional burden on managed care plans and States, and it would enable
comprehensive analyses since the data would be included with all other
T-MSIS data (88 FR 28153). As the commenters pointed out, VBP
arrangements are sometimes difficult to capture in a data repository
such as T-MSIS given the fixed file formatting and complex relationship
between the trigger for the SDP, such as achievement of specific
quality measures or global budgets, and the payment amount of the SDP.
We intend to further revise T-MSIS reporting in the future to better
enable States to report more complex SDP data easily and effectively.
Comment: Some commenters were concerned about the accessibility of
the data, and that the information should be publicly posted on the
State's Medicaid website or Medicaid.gov. Another commenter stated
concern that the data was too transparent, stating that the
requirements to report enrollee identifiers is troubling for data
protection issues. For behavioral and mental health, commenters stated
concerns that the reporting of identifying data and procedure
information could violate HIPAA protections. Another commenter was
concerned that requiring reporting on the allowed payment amounts by
managed care plans may inappropriately expose plan competitive
information, and that aggregate information by provider class and total
utilization is the appropriate level of detail.
Response: States and managed care plans are currently required to
report encounter data, including for mental health and SUD services,
under various authorities including section 1903(i)(25) and
(m)(2)(A)(xi) of the Act. While it is not feasible to publish raw T-
MSIS data or the underlying State data on a website given that it
contains protected health information, certain deidentified T-MSIS data
are available for research purposes. State T-MSIS submissions are used
to create a research-optimized version of the data known as the T-MSIS
Analytic File. Researchers who desire access to Research Identifiable
Files (RIF) must meet specific requirements before obtaining access to
these data. All summary data published from T-MSIS, including Data
Briefs, complies with applicable HIPAA and Privacy Act requirements.
Comment: Some commenters stated concern that requiring States to
report the total dollars expended by each MCO, PIHP, and PAHP for SDPs
within 180 days of the end of the rating period is not adequate time
for claims runout, receipt, and processing of encounter data by the
State, and submission to CMS.
Response: We appreciate the commenters' concern and acknowledge
that all paid claims data would likely not be complete within 180 days
of the end of a rating period, which was the deadline for submission of
the SDP reporting data proposed in Sec. 438.6(c)(4). In addition, it
will be difficult for States to process, validate, and submit the
encounter data to CMS within the proposed 180-day timeframe. Given
these considerations, we are finalizing
[[Page 41123]]
the regulation to require States to report the total dollars expended
by each managed care plan for SDPs no later than 1 year after the end
of the rating period.
Comment: Some commenters shared concerns that reporting T-MSIS data
would not go far enough to advance CMS's oversight goals and requested
clarification of what CMS would do if T-MSIS data identified regulatory
violations. The commenter also noted that CMS should use independently
obtained information about the performance of the State's program, and
not rely solely on attestations by States, to analyze and determine
compliance.
Response: We are committed to our oversight role of the Medicaid
program. CMS will review SDP data that is submitted via T-MSIS and will
follow up with States as appropriate, including enforcement of
regulatory requirements. CMS reserves its authority to enforce
requirements in the Act and implementing regulations, including by
initiating separate deferrals and/or disallowances of Federal financial
participation.
States have been submitting their program data to CMS via T-MSIS
and its predecessor since 1999, and we often rely on that data for
program monitoring and analysis. We do not rely on T-MSIS alone and
collect information from States in multiple ways, including MCPAR,
NAAAR, and MLR reports. In addition, other oversight bodies such as the
GAO and OIG, as well as MACPAC, provide information to CMS on the
performance of States' programs. We believe Sec. 438.6(c)(4) will
strengthen the information in T-MSIS specific to SDPs, but we will
continue to develop and utilize a comprehensive approach to monitoring
managed care program and plan performance.
Comment: A few commenters questioned whether SDPs that use minimum
fee schedules would be submitted to T-MSIS. These commenters stated
that parsing the total paid amount to report how much is attributable
to the SDP and how much is due to the plan's negotiations with the
provider would require an untenable level of effort.
Response: We understand the commenters' concerns but point out that
SDPs that use minimum fee schedules should already be reported to T-
MSIS and the requirements finalized in Sec. 438.6(c)(4) do nothing to
change that at this time. Currently, when managed care plans submit
their paid amounts in encounter data to States, those paid amounts
inherently reflect the minimum fee schedule by reporting the paid
amount. Currently CMS has standardized process that reviews T-MSIS data
needs, proposes revisions to the T-MSIS submission file format(s), and
provides opportunity for States' review and comment. CMS intends to use
this process for any updates that may be needed to the T-MSIS file
layout and technical specifications needed to obtain any additional,
more detailed reporting for the total paid amount for SDPs that the
file currently supports. After reviewing public comments and for the
reasons outlined in the proposed rule and our responses to comments, we
are finalizing, 457.1203(e), as proposed. We are finalizing Sec. Sec.
[thinsp]438.8(e)(2)(iii)(C) and (f)(2)(vii) with technical
clarifications and modifications to use the newly defined term ``State
directed payment'' and to clarify the scope of the provisions. We are
finalizing Sec. 438.6(c)(4) with revisions to modify the 180-day
timeframe to ``1 year'' and add ``, as applicable'' At the end of the
introductory text in Sec. 438.6(c)(4). We are finalizing
438.6(c)(4)(v) with a technical edit to remove ``the amount for any
pass-through payments under paragraph (d) of this section,'' in
acknowledgement that pass-through payments are separate financial
transactions not tied to the delivery of services to Medicaid managed
care enrollees and therefore, are not identifiable within encounter-
level data. We are not finalizing proposed Sec. Sec.
[thinsp]438.8(k)(1)(xiv) through (xvi) or Sec. 438.74(a)(3) through
(4) to require SDP line-level reporting in the State summary and
managed care plan specific MLR report.
p. Applicability and Compliance Dates (Sec. Sec. 438.6(c)(4) and
(c)(8), and 438.7(f)
We proposed that States and managed care plans would have to comply
with Sec. 438.6(a), (c)(1)(iii), (c)(2)(i), (c)(2)(ii)(A) through (C),
(c)(2)(ii)(E), (c)(2)(ii)(G), (c)(2)(ii)(I) through (J), (c)(2)(vi)(A),
(c)(3), (c)(6)(i) through (iv), and 438.7(c)(4), (c)(5), and (f)(1)
through (3) upon the effective date of the final rule, as these
proposals are either technical corrections or clarifications of
existing policies and standards. We proposed that States and managed
care plans would have to comply with Sec. 438.6(c)(2)(iii), (vi)(B),
(vi)(C)(1) and (2) no later than the first rating period for contracts
with MCOs, PIHPs and PAHPs beginning on or after the effective date of
the final rule as these newly proposed requirements will provide States
with increased flexibility and not require States to make changes to
existing arrangements. We proposed that States and managed care plans
would have to comply with Sec. 438.6(c)(2)(ii)(H), (c)(2)(vi)(C)(3)
and (4), (c)(2)(vii), (c)(2)(viii) and (ix), and (c)(5)(i) through (v)
no later than the first rating period for contracts with MCOs, PIHPs
and PAHPs beginning on or after 2 years after the effective date of the
final rule. We believe this is a reasonable timeframe for compliance
because it allows States sufficient time to operationalize the
timelines and requirements for preprint submissions that are newly
established in these proposals while balancing the need to strengthen
CMS oversight.
We further proposed that States and managed care plans would have
to comply with Sec. 438.6(c)(2)(ii)(D) and (F), (c)(2)(iv), (c)(2)(v),
and (c)(7) no later than the first rating period for contracts with
MCOs, PIHPs and PAHPs beginning on or after 3 years after the effective
date of the final rule as we believe States will need a sufficient
period of time to address the policy elements within these proposals
and operationalize them via various reporting, documentation and
submission processes. For Sec. 438.6(c)(2)(ii)(D) and (F), (c)(2)(iv)
and (v), and (c)(7), we also considered requiring compliance for the
first rating period beginning on or after 1 year, or 2 years after the
effective date of the final rule, but we proposed the first rating
period beginning on or after 3 years after the effective date of the
final rule because we believed it strikes a balance between the work
States will need to do to comply with these proposals and the urgency
with which we believed these proposals should be implemented in order
to strengthen and ensure appropriate and efficient operation of the
Medicaid program. We solicited comment on the proposal and
alternatives.
We proposed that States and managed care plans would have to comply
with Sec. Sec. 438.6(c)(5)(vi) and (c)(6)(v), and 438.7(c)(6) and
(f)(4) no later than the first rating period for contracts with MCOs,
PIHPs and PAHPs beginning on or after 4 years after the effective date
of the final rule. Because these proposals establish new submission
timelines and new requirements for contract and rate certification
documentation, and because States could view the new requirements as
substantial changes to the SDP process, we proposed a longer timeline
for compliance. We stated that we were also considering requiring
compliance no later than the first rating period beginning on or after
3 years after effective date of the final rule to align with the
compliance dates in the proposals described in the paragraph above;
however, to provide States adequate time to implement strong
[[Page 41124]]
policies and procedures to address the newly proposed requirements
before submitting the relevant contract and rate certification
documentation, we proposed the longer period for States to adjust and
come into compliance. We solicited comment on the proposal and
alternative.
Finally, as specified in proposed Sec. 438.6(c)(4), we proposed
that States would be required to submit the initial TMSIS report after
the first rating period following the release of CMS guidance on the
content and form of the report.
We proposed these applicability dates in Sec. Sec. 438.6(c)(4) and
(c)(8), and 438.7(g).
We solicited public comment on these proposals.
We summarize and respond to public comments received on our
proposals for the applicability and compliance dates (Sec. Sec.
438.6(c)(4) and (c)(8), and 438.7(g)(2)) for various proposals related
to SDPs below.
Comment: We received several comments encouraging us to consider
earlier applicability dates than those proposed in Sec. Sec.
438.6(c)(4) and (8), and 438.7(g)(2) and (3) in recognition that many
of the provisions would improve monitoring and oversight efforts
related to State directed payments. Other commenters noted the array of
new documentation requirements, including those proposed in Sec.
438.6(c)(5), and requested that applicability dates for all SDP
provisions be revised to be implemented at a later date than proposed
in recognition of State burden.
Response: As described in the proposed rule (88 FR 28153), we
carefully considered each proposed effective date for an applicable SDP
provision compared to the benefit incurred to the State or additional
administrative work that the State must undertake. We continue to
believe that the proposed applicability dates strike the right balance,
so we are finalizing most applicability dates as originally proposed in
Sec. Sec. 438.6(c)(8), and 438.7(g)(1) and (3), with technical
revisions to the regulation citations to reflect that the separate
payment term provisions proposed in Sec. Sec. 438.6(c)(6)(i) through
(iv) and 438.7(f) are not being finalized. We are modifying the
applicability date in Sec. 438.6(c)(8)(vi) to better align with
existing CMS processes for the release of T-MSIS data reporting
instructions and the compliance date established within such guidance.
Finally, we are modifying the T-MSIS reporting deadline in Sec.
438.6(c)(4) from 180 days to 1 year to acknowledge the time needed for
more accurate and complete encounter data reporting. We are also
modifying the applicability date for Sec. 438.6(c)(2)(vii) to no later
than 3 years after the effective date of the final rule to align with
the applicability date for the prohibition on separate payment terms in
Sec. 438.6(c)(6). As this provides States an additional year to come
into compliance with Sec. 438.6(c)(2)(vii), we believe this is a
reasonable modification. For discussion on the elimination of separate
payment terms and related changes to the proposed regulation text,
refer to sections I.B.2.k., I.B.2.l. and I.B.2.m. of this final rule.
After reviewing public comments, we are finalizing Sec.
438.6(c)(8)(i) without the reference to paragraph (c)(6)(i) through
(iv) given changes to regulatory text that remove this proposed text
(see section I.B.2.l. of this final rule for further details) and, we
are adding a reference to Sec. 438.6(c)(1), which was excluded in
error. We are also finalizing Sec. 438.6(c)(8)(iii) with revisions to
remove paragraph (c)(2)(ix) which is not being finalized (see section
I.B.2.e. of this final rule for further details), and to remove the
references to paragraphs (c)(5)(v) and (c)(2)(ii)(H), given the
proposed requirement at Sec. 438.6(c)(5)(v) is not being finalized
(see section I.B.2.k. of this final rule for further details), and the
updated applicability date for (c)(2)(ii)(H), respectively. To reflect
the later applicability date for Sec. 438.6(c)(2)(ii)(H), we are
adding paragraph (c)(8)(vii) to say ``[p]aragraph(c)(2)(ii)(H) no later
than the first rating period for contracts with MCOs, PIHPs, and PAHPs
beginning on or after January 1, 2028.'' To reflect the later
applicability date for Sec. 438.6(c)(2)(vii), we are finalizing the
reference to paragraph (c)(2)(vii) in paragraph (c)(8)(iv) instead of
paragraph (c)(8)(iii) (see section I.B.2.h. of this final rule for
further details). We are also finalizing Sec. 438.6(c)(8)(iv) with a
revision to add paragraph (c)(6) in recognition of the requirement that
all separate payment terms be eliminated no later than the first rating
period on or after 3 years after the effective date of the final rule
(see section I.B.2.k. of this final rule for further details). Finally,
we are revising Sec. 438.6(c)(8)(v) with revisions to remove the
reference to paragraph (c)(6)(v) which is not being finalized and to
refer to (c)(5)(v) (instead of proposed paragraph (c)(5)(vi)) to
account for changes in the regulation text compared to the proposed
rule (see sections I.B.2.l. and I.B.2.k. respectively of this final
rule for further details). Since we are also not finalizing Sec.
438.7(f) as proposed, Sec. 438.7(g) is redesignated as Sec. 438.7(f)
and we are not finalizing references therein to paragraphs (f)(1)
through (4) (see section I.B.2.l. of this final rule for further
details). We are also not finalizing the regulatory text proposed at
Sec. 438.7(g)(2) as we determined this was unnecessary as Sec.
438.7(c)(4) and (5) are effective with the publication of this final
rule; and therefore, Sec. 438.7(g)(3) is redesignated as Sec.
438.7(f)(2).
3. Medical Loss Ratio (MLR) Standards (Sec. Sec. 438.8, 438.3 and
457.1203)
In the 2016 final rule, we finalized Medicaid and CHIP managed care
regulations in Sec. Sec. 438.8(k) and 457.1203(f) respectively, that
require managed care plans to annually submit reports of their MLR to
States, and, at Sec. Sec. 438.74 and 457.1203(e) respectively, we
require States to submit annually a summary of those reports to CMS.
These sections were issued based on our authority under sections
1903(m)(2)(A)(iii), 1902(a)(4), and 2101(a) of the Act based on the
rationale that actuarially sound capitation rates must be utilized for
MCOs, PIHPs, and PAHPs. Additionally, actuarial soundness requires that
capitation payments cover reasonable, appropriate, and attainable costs
in providing covered services to enrollees in Medicaid managed care
programs. We proposed to amend our requirements under the same
authority and rationale that we describe below.
Medical loss ratios are one tool that CMS and States can use to
assess whether capitation rates are appropriately set by generally
illustrating how capitation funds are spent on claims and quality
improvement activities as compared to administrative expenses. More
specifically, MLR calculation and reporting can be used to demonstrate
that adequate amounts of the capitation payments are spent on services
for enrollees. With MLR reporting, States have more information to
understand how the capitation payments made for enrollees in managed
care programs are expended, resulting in responsible fiscal stewardship
of total Medicaid and CHIP expenditures.
Medicaid and CHIP managed care MLR reporting requirements align,
generally, with MLR standards for the private market and Medicare
Advantage standards for MA organizations. As we noted in the preamble
to the 2015 managed care proposed rule,\168\ alignment with private
market or Medicare Advantage standards supports administrative
simplicity for States and health plans to manage health care delivery
across different product lines and eases the administrative burden on
[[Page 41125]]
issuers and regulators that work in all of those contexts and markets
(80 FR 31101). We also noted that a consistent methodology across
multiple markets (private, Medicare, Medicaid, and CHIP) will allow for
administrative efficiency for the States in their roles regulating
insurance and Medicaid/CHIP, and for issuers and managed care plans to
collect and measure data necessary to calculate an MLR and provide
reports. In addition, a common standard will allow comparison of MLR
outcomes consistently from State to State and among private, Medicare,
and Medicaid/CHIP managed care plans (80 FR 31107).
---------------------------------------------------------------------------
\168\ https://www.govinfo.gov/content/pkg/FR-2015-06-01/pdf/2015-12965.pdf.
---------------------------------------------------------------------------
In general, Medicaid and CHIP managed care MLR reporting
requirements have remained aligned over time with the private market
MLR requirements; however, CMS finalized some regulatory changes to the
private market MLR requirements in 45 CFR 158.140, 158.150, and 158.170
effective July 1, 2022.\169\ To keep the Medicaid and CHIP managed care
regulations aligned with these revised private market provisions, we
proposed several revisions to our requirements in the following areas:
---------------------------------------------------------------------------
\169\ https://www.federalregister.gov/documents/2022/05/06/2022-09438/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2023.
---------------------------------------------------------------------------
Requirements for clinical or quality improvement standards
for provider incentive arrangements;
Prohibited administrative costs in quality improvement
activity (QIA) reporting; and
Additional requirements for expense allocation methodology
reporting.
In addition, we proposed changes to specify timing of updates to
credibility adjustment factors; when Medicaid and CHIP managed care
plans are required to resubmit MLR reports to the State; the level of
data aggregation required for State MLR summary reports to CMS;
contract requirements related to reporting of overpayments; and new
reporting requirements for SDPs.
a. Standards for Provider Incentives (Sec. Sec. 438.3(i), 438.8(e)(2),
457.1201 and 457.1203)
We proposed revisions to standards for provider incentives to
remain consistent with our goals of alignment with the private market
MLR regulations when appropriate, and to ensure that capitation rates
are actuarially sound and based on reasonable expenditures for covered
services under the contract. Under section 1903(m)(2)(A)(iii) of the
Act and implementing regulations, FFP is not available for State
expenditures incurred for payment (as determined under a prepaid
capitation basis or under any other risk basis) for services provided
by a managed care plan unless the prepaid payments are made on an
actuarially sound basis. While the same MLR requirements are made
applicable to PIHPs and PAHPs under authority in section 1902(a)(4) of
the Act, the requirements are enforced under section 1904 of the Act.
As specified in current regulations at Sec. 438.4(a), actuarially
sound Medicaid capitation rates are projected to provide for all
reasonable, appropriate, and attainable costs, as well as the operation
of the MCO, PIHP, or PAHP required under the terms of the contract.
While Medicaid managed care plans are required to calculate and
report an MLR to the State, States are not required to establish a
minimum MLR requirement; although under current regulations at Sec.
438.4(b)(9), capitation rates must be developed in a way that the
managed care plan will reasonably achieve an MLR of at least 85
percent. Under current regulations at Sec. 438.8(c), if a State elects
to require that their managed care plans meet a minimum MLR
requirement, the minimum must be set to at least 85 percent. Further,
under Sec. 438.8(j), States may establish a remittance arrangement
based on an MLR requirement of 85 percent or higher. As a general
matter, remittance arrangements based on minimum MLRs may provide value
to States by requiring managed care plans to remit a portion of their
capitation payments to States when spending on covered services and
QIAs is less than the minimum MLR requirements.
At existing Sec. Sec. 438.3(i)(1) and 457.1201(h), respectively,
Medicaid and CHIP managed care plan contracts must require compliance
with the provider plan incentive requirements in Sec. Sec. 422.208 and
422.210.\170\ In this section, we refer to the term ``incentive'' to
mean both incentive and bonus payments to providers. Under Sec.
422.208(c), managed care plans may enter into a physician incentive
plan with a health care provider, but plans must meet requirements
applicable to those arrangements in Sec. 422.208(c) through (g), and
under Sec. 422.208(c)(1) plans cannot make a payment, directly or
indirectly, as an inducement to reduce or limit medically necessary
services. A Medicaid and CHIP managed care plan may make incentive
payments to a provider if the provider agrees to participate in the
plan's provider network. These payment arrangements may be based solely
on an amount negotiated between the plan and the provider. Medicaid and
CHIP managed care plans can implement provider incentive arrangements
that are not based on quality improvement standards or metrics;
however, provider incentive payments must be included as incurred
claims when managed care plans calculate their MLR, per Sec. Sec.
438.8(e)(2)(iii)(A) and 457.1203(c) respectively. Further, provider
incentive payments may influence the development of future capitation
rates, and Medicaid managed care plans may have a financial incentive
to inappropriately pay provider incentives when the plans are unlikely
to meet minimum MLR requirements. Additionally, these payments may
inappropriately inflate the numerator of the MLR calculation and reduce
or eliminate remittances, if applicable. Additionally, including such
data in the base data used for rate development may inappropriately
inflate future capitation rates.
---------------------------------------------------------------------------
\170\ As specified in Sec. 438.3(i)(2), in applying the
provisions of Sec. Sec. 422.208 and 422.210 of this chapter,
references to ``MA organization,'' ``CMS,'' and ``Medicare
beneficiaries'' must be read as references to ``MCO, PIHP, or
PAHP,'' ``State,'' and ``Medicaid beneficiaries,'' respectively.
---------------------------------------------------------------------------
Vulnerabilities With Managed Care Plans' Provider Incentive Contracting
Practices
As part of our Medicaid managed care program integrity oversight
efforts, CMS recently conducted several in-depth reviews of States'
oversight of managed care plan MLR reporting. These reviews included
examinations of the contract language for provider incentive
arrangements between managed care plans and network providers. As part
of these reviews, CMS identified several examples of managed care plan
practices that could make an incentive payment inappropriate to include
in the numerator. For example, there were inconsistent documentation
and contracting practices for incentive payments in contracts between
some Medicaid managed care plans and their network providers, including
State acceptance of attestations of these arrangements from senior
managed care plan leadership when contract documentation was lacking.
These reviews also noted that many managed care plans' contracts with
network providers did not base the incentive payments on a requirement
for the providers to meet quantitative clinical or quality improvement
standards or metrics. In fact, examination of these contracts between
managed care plans and their network providers revealed that some
managed care plans did not require a provider to improve their
performance in any way to receive an
[[Page 41126]]
incentive payment. Additionally, many of the incentive arrangements
were not developed prospectively with clear expectations for provider
performance. Finally, we identified provider incentive performance
periods that did not align with the MLR reporting period and provider
incentive contracts that were signed after the performance period
ended.
Contract Requirements for Provider Incentive Payment Arrangements
Based on these reviews, we are concerned that if a provider
incentive arrangement is not based on basic core contracting practices
(including sufficient supporting documentation and clear, prospective
quantitative quality or performance metrics), it may create an
opportunity for a managed care plan to more easily pay network
providers solely to expend excess funds to increase their MLR numerator
under the guise of paying incentives. This potential loophole could
also be used to help managed care plans avoid paying remittances. Also,
this practice could allow for managed care plans that are integrated
with a medical or hospital system to move revenue out of the managed
care plan and into the affiliated medical or hospital system.
Additionally, this practice could artificially inflate future
capitation rates. To address these concerns, we proposed additional
requirements on provider incentive arrangements in Sec. 438.3(i).
In Sec. 438.3(i)(3) and (4) for Medicaid, and included in separate
CHIP regulations through an existing cross-reference at Sec.
457.1201(h), we proposed to require that the State, through its
contract(s) with a managed care plan, must include specific provisions
related to provider incentive contracts. Specifically, the proposed
changes required in Sec. 438.3(i)(3)(i) and (ii) that incentive
payment contracts between managed care plans and network providers have
a defined performance period that can be tied to the applicable MLR
reporting period(s), and such contracts must be signed and dated by all
appropriate parties before the commencement of the applicable
performance period. We also proposed, in Sec. 438.3(i)(3)(iii), that
all incentive payment contracts must include well-defined quality
improvement or performance metrics that the provider must meet to
receive the incentive payment. In addition, in Sec. 438.3(i)(3)(iv),
we proposed that incentive payment contracts must specify a dollar
amount that can be clearly linked to successful completion of these
metrics, as well as a date of payment. We noted that managed care plans
would continue to have flexibility to determine the appropriate quality
improvement or quantitative performance metrics to include in the
incentive payment contracts. In addition, the proposed changes also
required in Sec. 438.3(i)(4)(i) that the State's contracts must define
the documentation that the managed care plan must maintain to support
these arrangements. In Sec. 438.3(i)(4)(ii), we proposed that the
State must prohibit managed care plans from using attestations as
documentation to support the provider incentive payments. In Sec.
438.3(i)(4)(iii), we proposed that the State's contracts require that
managed care plans must make the incentive payment contracts and
supporting documentation available to the State both upon request and
at any routine frequency that the State establishes. Finally, we
proposed that States and managed care plans will have to comply with
Sec. 438.3(i)(3) and (4) no later than the rating period for contracts
with MCOs, PIHPs, and PAHPs beginning on or after 60 days following the
effective date of the final rule as we believe this is a reasonable
timeframe for compliance. We proposed this applicability date in Sec.
438.3(v) for Medicaid, and through a proposed cross-reference at Sec.
457.1200(d) for separate CHIPs, and we sought public comment on this
proposal. Other changes proposed to Sec. 438.3(v) are outlined in
section I.B.3. and section I.B.4 of this final rule.
We also proposed to amend Sec. 438.608 to cross-reference these
requirements in the program integrity contract requirements section.
Specifically, we proposed to add Sec. 438.608(e) that notes the
requirements for provider incentives in Sec. 438.3(i)(3) and (4). This
proposed requirement is equally applicable for separate CHIPs through
an existing cross-reference at Sec. 457.1285.
Alignment With Private Market Regulations for Provider Incentive
Arrangements \171\
---------------------------------------------------------------------------
\171\ https://www.federalregister.gov/documents/2022/05/06/2022-09438/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2023.
---------------------------------------------------------------------------
Effective July 1, 2022, the private market regulations at 45 CFR
158.140(b)(2)(iii), which are applicable to health insurance issuers
offering group or individual health insurance coverage, were updated to
clarify that only provider bonuses and incentives payments tied to
clearly defined, objectively measurable, and well-documented clinical
or quality improvement standards qualify as expenditures in the MLR
numerator. In contrast, current Medicaid and CHIP managed care
regulations for provider incentive arrangements do not require these
payments to be based on quality or performance metrics. This
inconsistency hinders the comparison of MLR data between the private
market issuers and Medicaid and CHIP managed care plans, which is
important given the high number of health plans that participate both
in the private market and Medicaid and CHIP, as well as the frequent
churn of individuals between private market, Medicaid, and CHIP
coverage. To address the potential for inappropriate inflation of the
MLR numerator, as well as facilitate data comparability, we proposed in
Sec. 438.8(e)(2)(iii)(A) for Medicaid, which is included in separate
CHIP regulations through an existing cross-reference at Sec.
457.1203(c), to require that for a provider bonus or incentive payment
to be included in the MLR numerator, the provider bonus or incentive
arrangement will have to require providers to meet clearly-defined,
objectively measurable, and well-documented clinical or quality
improvement standards to receive the bonus or incentive payment. This
change will prohibit Medicaid and CHIP managed care plans from
including provider bonus or incentive payments that are not based on
clinical or quality improvement standards in their MLR numerator, which
will improve the accuracy of their MLR, as well as other components of
managed care programs that rely on reported MLRs, such as capitation
rate development and remittances. Further, a consistent methodology
across multiple markets will allow for administrative efficiency for
the States as they monitor their Medicaid and CHIP programs, and for
issuers and managed care plans to collect and measure data necessary to
calculate an MLR and provide reports.
We believe that by requiring States' contracts with managed care
plans to specify how provider bonus or incentive payment arrangements
will be structured in managed care plans' provider contracts,
transparency around these arrangements will improve. In addition, by
requiring the contracts to include more specific documentation
requirements, CMS and States will be better able to ensure that
provider bonus or incentive payments are not being used either to
inappropriately increase the MLR to avoid paying potential remittances,
inflate future capitation rates, or to simply move funds from a
Medicaid managed care plan to an affiliated company or provider. The
[[Page 41127]]
proposals will increase transparency into provider bonuses and
incentives, improve the quality of care provided by ensuring that
bonuses and incentives are paid to providers that demonstrated
furnishing high-quality care, and protect Medicaid and CHIP programs
against fraud and other improper payments. We sought comment on these
proposed requirements, including whether any additional documentation
requirements should be specified in regulation. We proposed that States
and managed care plans would be required to comply with these
requirements 60 days after the effective date of this final rule as we
believe these proposals are critical for fiscal integrity in Medicaid
and CHIP. We considered an alternative compliance date of no later than
the rating period for contracts with MCOs, PIHPs and PAHPs beginning on
or after 60 days following the effective date of the final rule. We
sought comment on this proposal.
We summarize and respond to public comments received on Medical
Loss Ratio (MLR) Standards (Sec. Sec. 438.8, 438.3, and 457.1203)
below.
Comment: One commenter supported the proposal to require compliance
with the new contract requirements for provider incentive arrangements
on or after 60 days after the publication of the final rule. However,
several commenters opposed the proposal regarding the effective date of
these requirements for contracts with managed care plans. The
commenters suggested that managed care plans need more time to engage
with their contracted providers and conduct the legal reviews necessary
to modify and finalize the incentive contracts. Many of the commenters
suggested a one-year implementation timeframe, one commenter suggested
180 days, and one commenter suggested January 1, 2025.
Response: We appreciate these comments and considered them when
finalizing the effective date of the new contract requirements for
provider incentive arrangements in Sec. 438.3(i). We acknowledge that
60 days may not be long enough to engage with the contracted providers
and complete the legal review necessary to implement new provider
incentive arrangements, as raised by several commenters. After
considering the public comments, we believe 1 year after publication of
this final rule is sufficient time to complete the necessary contract
actions to come into compliance with these requirements. As such, we
are finalizing an effective date for these new contract requirements
for provider incentive arrangements as the first rating period
beginning on or after 1 year after the effective date of this final
rule for the provider incentive changes in Sec. Sec. 438.3(i),
438.608(e), and applicable to separate CHIP through the existing cross-
references at Sec. 457.1200(d).
Comment: One commenter supported the proposal that State contracts
with managed care plans require incentive payment contracts between
managed care plans and network providers to have a defined effective
period that can be tied to the applicable MLR reporting periods.
Several other commenters opposed this proposal, with some commenters
asking for more flexibility to align performance periods in Sec. 438.3
with a calendar year to create better alignment across products and
payors. In addition, one commenter stated that the proposal was
prescriptive and vague, as it was unclear whether CMS was requiring the
performance-related activity or the evaluation period to occur in the
MLR reporting period.
Response: We believe that by requiring an incentive payment
contract period of performance to be tied to a MLR reporting period,
program integrity and transparency around these arrangements would
vastly improve. Specifically, a defined performance period will allow
for States and CMS to have better oversight over provider incentive
payment arrangements and ensure that provider incentive payments are
made in accordance with the contract, are made for the appropriate
performance period, and can be tied to an MLR reporting period. The
proposed and finalized requirement at Sec. 438.3(i)(3)(i) would also
allow for flexibility in determining the effective period for incentive
payment contracts between managed care plans and network providers.
Managed care plans and network providers would continue to have the
option to implement effective periods on a calendar year, or other
appropriate temporal basis that they choose as long as the incentive
payment contract is clearly associated with a specific MLR reporting
period. Under this proposal, the contract would be required to include
a defined start and end date for the effective period so provider
incentive payments can be tied to a specific MLR reporting period. By
having a defined effective period, States and CMS would be able to
confirm and verify the appropriateness of provider incentive payments
included in the MLR for the relevant MLR reporting period.
Comment: A few commenters opposed the proposal to require that
provider incentive contracts be signed prior to the performance period.
Commenters contended that this requirement is overly restrictive and
could deter managed care plans and network providers from implementing
otherwise appropriate arrangements that support or improve access and
quality of care. Some commenters suggested removing this requirement,
and one commenter suggested that CMS should allow contracts to be
signed within the first 60 days of the measurement period as long as
there is no performance data available. One commenter requested CMS to
clarify whether it is permissible for managed care plans to include
prospective provider incentive arrangements that are not finalized
until after the MLR filings are submitted.
Response: We respectfully disagree that the requirement for
incentive payment contracts to be signed prior to the performance
period is overly restrictive and would deter managed care plans and
network providers from implementing otherwise appropriate arrangements.
Provider incentive payments should be included as incurred claims in
the MLR numerator and be tied to the MLR reporting period in which they
are to be reported. Because of the importance of such contract payments
in MLR calculations, we believe that allowing such contracts to be
signed after the beginning of the performance period creates an
opportunity for a managed care plan to more easily pay network
providers solely to expend excess funds to increase their MLR numerator
under the guise of paying incentives. Furthermore, it is a standard
contracting practice for all parties to sign a contract prior to the
period of performance to signal acceptance of the terms of the
contract. We believe that allowing for contracting deadlines to occur
after the beginning of the performance period would add further
complexity to the provider incentive contracting process. Requiring
such contracts to be signed before the period of performance increases
transparency into provider bonuses and incentives, improves care by
ensuring that bonuses and incentives are paid to providers that
demonstrated furnishing high-quality care, and protects Medicaid and
CHIP managed care plans against fraud and other improper payments.
Therefore, we believe it is in the best interest of the Federal
government, States and other interested parties to require that all
incentive payment contracts be signed prior to the performance period
for the payments in order to be appropriately included in the MLR
numerator.
Regarding the comment about whether it is permissible for managed
care plans to include prospective provider incentive arrangements that
are not finalized until after the MLR filings
[[Page 41128]]
are submitted, Federal regulations require that provider incentive
payments be included as incurred claims in the MLR numerator and be
tied to the MLR reporting period in which they are reported. Provider
incentive payments that do not meet those requirements of a specific
MLR reporting period may not be included.
Comment: Several commenters supported the proposal that State
contracts with managed care plans must require that incentive payment
contracts between managed care plans and network providers include
well-defined quality improvement performance metrics that the provider
must meet to receive the incentive payment. One commenter requested CMS
to clarify if there is a difference between ``well-defined quality
improvement performance metrics'' described in the Contract
Requirements for Provider Incentive Payment Arrangements section of the
2023 proposed rule at Sec. 438.3(i)(3)(iii) and ``clearly defined,
objectively measurable, and well-documented clinical or quality
improvement standards'' proposed in the MLR Standards section of the
2023 proposed rule at Sec. 438.8(e)(2)(iii)(A) and found in the
private market regulations at 45 CFR 158.140(b)(2)(iii).
Response: We believe that by requiring the contracts to include
well-defined quality improvement performance metrics which providers
must meet, CMS and States will be better able to ensure that providers
are in compliance with the terms of the incentive payment contract and
eligible to receive the payment. This in turn will help CMS and States
ensure that incentive payments are not being used to inappropriately
increase the MLR to avoid potential payment of remittances or inflate
future capitation rates.
We did not intend for there to be a difference between ``well-
defined quality improvement performance metrics'' proposed in the
Contract Requirements for Provider Incentive Payment Arrangements
section of the 2023 proposed rule at Sec. 438.3(i)(3)(iii) and
``clearly-defined, objectively measurable, and well-documented clinical
or quality improvement standards'' proposed in the MLR Standards
section of the 2023 proposed rule at Sec. 438.8(e)(2)(iii)(A). We
appreciate the commenter highlighting this inconsistency in language.
To further clarify our intent with this requirement and align this
provision with similar private market regulations, we revised the
proposed language at Sec. 438.3(i)(3)(iii) to include the following
language, ``clearly-defined, objectively measurable, and well-
documented clinical or quality improvement standards,'' which also
reflects the language used in the private market regulations at 45 CFR
158.140(b)(2)(iii). The finalized revision to Sec. 438.3(i)(3)(iii) is
equally applicable to separate CHIP through the existing cross-
reference at Sec. 457.1201(h). We note that even with this slight
revision to the proposed language at Sec. 438.3(i)(3)(iii), managed
care plans will continue to have the flexibility to determine any
appropriate non-clinical metrics, such as quality improvement or
quantitative performance metrics, to include in the incentive payment
contracts.
Comment: Several commenters supported the proposal that State
contracts with managed care plans require that incentive payment
contracts between managed care plans and network providers specify a
dollar amount that can be clearly linked to successful completion of
the metrics. A few commenters requested additional flexibility with
this requirement. Specifically, the commenters requested that beyond a
specified dollar amount, CMS should allow for a percentage of a
verifiable dollar amount. Commenters stated that this flexibility
reflects current incentive payment practices and would allow for
flexibility in how the provider incentive contracts are written, while
maintaining the link between quality improvement and/or performance
metrics and the receipt of incentive payments.
Response: Our intent with implementing this requirement is that by
requiring provider incentive contracts to include a specified dollar
amount or percentage of a verifiable dollar amount, CMS and States will
be able to have better oversight over provider incentive payments to
ensure that provider bonus or incentive payments are used
appropriately. In considering comments received, we believe that
providing additional flexibility regarding the financial terms of the
incentive arrangement continues to meet our intent while reflecting
current incentive arrangement practices identified by some commenters.
As such, we are revising our proposal in Sec. 438.3(i)(3)(iv) to also
allow for the incentive payment contracts between managed care plans
and network providers to specify either a dollar amount or a percentage
of a verifiable dollar amount that can be clearly linked to successful
completion of the metrics. We note that the specification of the
percentage of a dollar amount is an alternative to the specification of
a dollar amount in the contract. The finalized revision to Sec.
438.3(i)(3)(iv) is equally applicable to separate CHIP through the
existing cross-reference at Sec. 457.1201(h).
Comment: One commenter supported the proposal to prohibit the use
of attestations as supporting documentation for data that factors into
the MLR calculation.
Response: We believe that by requiring the contracts to include
specific documentation requirements, CMS and States will be better able
to ensure that provider incentive payments are not being used to
inappropriately increase the MLR to avoid paying potential remittances
or inflate future capitation rates.
Comment: A few commenters supported the proposal that State
contracts with managed care plans must require that managed care plans
make the provider incentive contracts and supporting documentation
available to the State both upon request and at the routine frequency
that the State established.
Response: We believe that by requiring State contracts with managed
care plans to include more specific documentation requirements, CMS and
States will be better able to ensure that provider incentive payments
are not being used to inappropriately increase the MLR to avoid paying
potential remittances or inflate future capitation rates.
Comment: One commenter noted that the proposed changes for provider
incentives should not be finalized until CMS determines that the
changes would not make VBP arrangements more difficult to implement in
Medicaid managed care.
Response: The commenter did not provide any reasons as to why the
proposed changes to the Medicaid MLR regulations would make VBP
implementation more difficult. We do not believe that the proposed and
finalized changes for provider incentives will make it more difficult
for States and managed care plans to implement VBP. As one goal of VBP
is to reduce excessive health spending and growth by limiting
administrative waste,\172\ we believe that the changes finalized in
this rule at Sec. Sec. 438.3, 438.8, and 457.1203 are very much
aligned with the goals of VBP.
---------------------------------------------------------------------------
\172\ Value-Based Payment As A Tool To Address Excess US Health
Spending. Health Affairs Research Brief, December 1, 2022. DOI:
10.1377/hpb20221014.526546.
---------------------------------------------------------------------------
Comment: Several commenters supported the requirement for
performance metrics in provider incentive arrangements and alignment
with private market MLR regulations. Commenters noted that this change
will
[[Page 41129]]
prevent managed care plans from inappropriately transferring
expenditures to providers to inflate their MLR and avoid paying
remittances to States. Other commenters noted the importance of
alignment with the private market regulations for consistency and
equity across Federal health programs.
Response: Having a consistent methodology across multiple markets
will allow for administrative efficiency for States as they monitor
their Medicaid and CHIP managed care plans and for issuers and managed
care plans to collect and measure data necessary to report and
calculate their MLRs. We believe the requirement for prospective
quantitative quality or performance metrics will increase transparency
around these arrangements and ensure that bonuses and incentives are
paid to providers that demonstrated furnishing high-quality care and
will protect Medicaid and CHIP against fraud and other improper
payments. In addition, CMS and States will be better able to ensure
that provider bonus or incentive payments are not being used either to
inappropriately increase the MLR to avoid paying potential remittances,
inflate future capitation rates, or to simply move funds from a
Medicaid managed care plan to an affiliated company or provider.
Comment: Several commenters urged CMS to exercise greater oversight
of Medicaid and separate CHIP managed care plans that own or are owned
by companies that also own networks of providers and other health care
services. The commenters described some potentially problematic
reporting or business practices used by some vertically integrated
health plans. The commenters noted that some large managed care plans
channel excessive health care dollars to their affiliated health care
providers and vendors and thereby increase health system costs while
increasing profit for the managed care plan's parent company.
Response: We understand these concerns regarding managed care plans
that are integrated with health care providers, and we will continue to
encourage State oversight of Medicaid and separate CHIP managed care
plan compliance with MLR reporting requirements for the different types
of provider arrangements or payment models employed by managed care
plans. As part of this effort, we encourage States to consider the
impact of vertical integration on the reporting and treatment of
provider payments under the MLR framework codified in Sec. 438.8.
Going forward, our Federal MLR reviews of the State Medicaid and CHIP
managed care programs will also review State oversight practices for
vertically integrated health plans' provider incentives.
Comment: Several commenters suggested that CMS require managed care
plans to use the measure sets developed by the Core Quality Measures
Collaborative (CQMC) for provider incentives. The commenters stated
that the work done by a multidisciplinary committee to review and
approve these measures makes them preferable to other measures a
managed care plan may select for provider incentives.
Response: We appreciate the commenters' noting the CQMC performance
measure review initiative and acknowledge the importance of alignment
and harmonization in quality measurement. While we are not requiring
the use of the CQMC measure sets, if a managed care plan's provider
bonus and incentive program is based on CQMC measure sets, then any
payments made based on the CQMC would qualify as a bonus or incentive
includable in the MLR calculation. We believe that each State's
Medicaid and CHIP managed care program is unique, and States are best
positioned, in collaboration with managed care plans and interested
parties, to design and determine the most appropriate metrics to use
for provider incentive arrangements. Additionally, the private market
MLR regulations did not specify a set of provider incentive metrics and
as noted in the preamble of the proposed rule, we aim to remain aligned
with the private market MLR regulations to the extent possible (88 FR
28154). Therefore, we decline to specify clinical or quality
improvement standards for provider incentives in this final rule.
Comment: Several commenters stated that requiring performance
metrics for provider incentives will lead to fewer providers
participating in managed care networks and may lessen the ability of
managed care plans to encourage creative solutions for access, such as
providing bonus payments for evening and weekend physician office
hours.
Response: We acknowledge that some providers may decline to
participate in a managed care network if a provider incentive or bonus
payment is tied to a clinical or quality improvement standard when
previously these payment arrangements had not been held to this kind of
standard. However, we believe that this would impact only a small
percentage of providers as most providers share in Medicaid's and
CHIP's goal of promoting the highest quality outcomes and safest care
for all beneficiaries. The requirement for provider incentive payments
to be based on clinical or quality improvement standards does not
prevent managed care plans from developing innovative responses to
improve access. In the commenter's example, the managed care plan could
develop a provider incentive or bonus payment that requires physician
offices to add evening and/or weekend hours but also requires improved
access outcomes for one or more populations, for example, an increase
in the proportion of adolescent enrollees who received a well-care
visit.
Comment: Several commenters noted that excluding provider incentive
payments that are based solely on total cost of care targets in the MLR
numerator could have unintended consequences and negatively affect VBP
arrangements in Medicaid managed care. One commenter noted that some
CMS VBP programs, such as the Accountable Care Organization Realizing
Equity, Access, and Community Health (ACO REACH) program,\173\ have
arrangements where a percentage of the shared savings payment is linked
directly to quality metrics and is separate from the total shared
savings or loss from the ACO. The commenter stated concern that the
portion of the shared savings arrangement that was not linked directly
to quality metrics could not be included as a provider incentive
payment in the MLR. The commenter recommended that incentive payments
based on total cost of care targets be included in MLR calculations.
---------------------------------------------------------------------------
\173\ https://innovation.cms.gov/innovation-models/aco-reach.
---------------------------------------------------------------------------
Response: We continue to support innovative alternative payment
models that deliver efficient and high-quality care. We further note
that the Medicaid managed care regulations in part 438 do not prohibit
States and managed care plans from adopting a wide range of value-based
payment models. The amendment to Sec. 438.8(e)(2), which we are
finalizing as proposed, is instead limited in applicability to the
treatment and reporting of these amounts for MLR purposes. We believe
that VBP models can reduce inappropriate utilization and lead to better
outcomes, or lower costs, without compromising the quality of care. We
confirm that the fact that a provider incentive or bonus program has a
shared savings or other cost efficiency element does not disqualify the
entire incentive or bonus from being classified as incurred claims, as
long as the incentive or bonus is tied to clearly defined, objectively
measurable, and well-documented clinical or quality improvement
standards that apply to providers. States and managed care
[[Page 41130]]
plans employing such models or arrangements should be able to
demonstrate this outcome through the use and documentation of
appropriate clinical or quality metrics and thus such incentive or
bonus payments would be eligible for inclusion in the MLR calculation
as incurred claims. Further we are not aware of any CMS VBP initiatives
(such as Medicare shared savings initiatives and alternative payment
models) that do not include clinical or quality standard requirements.
We clarify that when directed by a State to make provider incentive
payments based on a VBP methodology, Medicaid managed care plans must
include the full amount of these provider incentives in their MLR
reports. That is, Medicaid managed care plans should include the full
amount of provider incentives paid in their MLR reports if those
payments are SDPs. Under Sec. 438.6(c), States are required to tie
SDPs to clinical or quality standards; however, if an SDP provider
incentive or a portion of an SDP provider incentive is part of a VBP
program, is tied to the total cost of care, and is not based on
clinical or quality improvement standards, the managed care plan must
include the SDP provider incentive expenditures based on the total cost
of care in the MLR report. We encourage States to develop mechanisms
for managed care plans to report SDP provider incentive payments
separately from non-SDP provider incentive expenditures.
After consideration of public comments, we are finalizing Sec.
438.8(e)(2) as proposed. We are also finalizing our proposals related
to the Standards for Provider Incentives in Sec. 438.3(i)(3) and Sec.
438.3(i)(4). However, we are modifying a few proposals as described
below. We are revising our proposal at Sec. 438.3(v) to make these
provisions effective on or after 60 days following the effective date
of this final rule. We are instead finalizing that these provisions are
effective for the rating period beginning on or after 1 year following
the effective date of this final rule, based on public comments that 60
days may not be long enough to engage with the contracted providers and
complete the legal review necessary to implement new provider incentive
arrangements. Additionally, we are modifying our proposal at Sec.
438.3(i)(3)(iii) describing the performance metrics, based on public
comment that consistency is needed between the private market
regulations and Medicaid managed care regulations. Therefore, we are
finalizing revised text at Sec. 438.3(i)(3)(iii) to mirror the text in
the private market regulations at 45 CFR 158.140(b)(2)(iii). Finally,
based on public comments, we are modifying our proposal at Sec.
438.3(i)(3)(iv) that incentive payment contracts must specify a dollar
amount that can be clearly linked to successful completion of
performance metrics to provide additional flexibility that would better
align with current incentive payment practices. As such, we are
finalizing the proposal at Sec. 438.3(i)(3)(iv) to also allow a
percentage of a verifiable dollar amount in the contract, as an
alternative to a specific dollar amount, that can be clearly linked to
successful completion of the metrics. We are finalizing the effective
date for this provision as the first rating period beginning on or
after 1 year after the effective date for the provider incentive
changes in Sec. Sec. 438.3(i), 438.608(e), and the existing cross-
references at Sec. 457.1200(d) for separate CHIP. The finalized
revisions to Sec. 438.3(i)(3)(iii) and (iv) are equally applicable to
separate CHIP through the existing cross-reference at Sec.
457.1201(h).
b. Prohibited Costs in Quality Improvement Activities (Sec. Sec.
438.8(e)(3) and 457.1203(c))
The preamble to the HHS Notice of Benefit and Payment Parameters
for 2023 that adopted the updates to the private market regulations
that took effect on July 1, 2022, noted that examinations of MLR
reporting of issuers found ``wide discrepancies in the types of
expenses that issuers include in QIA expenses'' and that inconsistency
``creates an unequal playing field among issuers'' (87 FR 27350).
Therefore, to provide further clarity on the types of costs that may be
included in MLR calculations, CMS modified the private market MLR
regulations for QIA expenditures in 45 CFR 158.150(a) to specify that
only expenditures directly related to activities that improve health
care quality may be included in QIA expenses for MLR reporting and
rebate calculation purposes.
In Medicaid and separate CHIP regulations at Sec. Sec. 438.8(e)(3)
and 457.1203(c) respectively, we permit the inclusion of QIA expenses
for activities that meet the private market MLR requirements, but we
did not include language specifying that managed care plans may only
include expenditures directly related to activities that improve health
care quality when reporting QIA costs for MLR purposes in order to
align with the private market regulations. As a result, the current
Medicaid MLR regulations do not explicitly require managed care plans
to exclude indirect or overhead QIA expenditures. Because the Medicaid
regulation did not expressly disallow indirect or overhead QIA
expenditures, we did not challenge States or Medicaid or CHIP managed
care plans when these types of costs were included as QIA costs in the
MLR numerator, which could result in inappropriately inflated MLRs as
well as a different standard existing in the private market and
Medicaid and CHIP. This difference in standards could pose a potential
administrative burden for managed care plans that participate in
Medicaid, CHIP and the private market because managed care plans and
issuers may include different types of expenses in reporting QIA.
To align Medicaid and CHIP MLR QIA reporting requirements with the
private market requirements and to improve clarity on the types of QIA
expenditures that should be included in the MLR numerator, we proposed
to amend Sec. 438.8(e)(3)(i) for Medicaid, which is included in
separate CHIP regulations through an existing cross-reference at Sec.
457.1203(c), to add a reference to the private market regulation that
specifies that only those expenses that are directly related to health
care quality improvement activities may be included in the MLR
numerator. This change will provide States with more detailed QIA
information to improve MLR reporting consistency, allow for better MLR
data comparisons between the private market and Medicaid and CHIP
markets, and reduce administrative burden for managed care plans that
participate in Medicaid, CHIP and the private market. We proposed that
these requirements will be effective 60 days after the effective date
of this final rule as we believe these proposals are critical for
fiscal integrity in Medicaid and CHIP. We considered an alternative
effective date of no later than the rating period for contracts with
MCOs, PIHPs and PAHPs beginning on or after 60 days following the
effective date of the final rule. We sought comment on the
applicability date for these proposals.
We summarize and respond to public comments received on Prohibited
Costs in Quality Improvement Activities (Sec. Sec. 438.8(e)(3) and
457.1203(c)) below.
Comment: Many commenters supported the proposed exclusion of
administrative costs in QIAs and alignment with private market
regulations. Commenters noted that this alignment will promote
consistency and equity across Federal health programs and will ensure
an MLR calculation that more closely reflects the true value of
services delivered.
[[Page 41131]]
Response: We agree that this alignment will result in more accurate
MLR calculations and improve the value of managed care plans for
Medicaid and CHIP beneficiaries.
Comment: Several commenters urged CMS to review how managed care
plans are categorizing their utilization management expenses. These
commenters noted that utilization management activities are often
undertaken with the primary purpose to contain costs and encouraged CMS
to set clear guardrails around when, if ever, such activities can be
categorized as QIA.
Response: We agree with the commenters that certain utilization
management activities are designed to contain costs rather than improve
quality. To that end, under current regulations at Sec. Sec.
438.8(e)(3)(i) and 457.1203(c), Medicaid and CHIP managed care plans
cannot include in QIA any prospective or concurrent utilization
management costs or any retrospective utilization management costs that
do not meet the definition of QIA in 45 CFR 158.150. We remind States
that they are required to monitor all managed care programs per Sec.
438.66, including the QIA expenditures reported by managed care plans
to determine if any of the reported expenditures have the primary goal
of cost containment and should be excluded from the MLR numerator as
QIA. States should also ensure that where managed care plans report all
expenses from any given cost center as QIA, to the extent the cost
center also performs non-QIA functions, only those qualifying expenses
are included in the numerator. In such cases, the State should ensure
that the managed care plan provides the State with documentation, such
as time studies, showing how it determined the portion of time that
staff expended on QIA programs versus non-QIA programs. In the future,
our Federal MLR reviews of State Medicaid programs will also
specifically examine State oversight practices for the review of
utilization management expenses in QIA.
Comment: Several commenters requested that we allow health equity
accreditation costs in QIA.
Response: Medicaid and CHIP managed care plans are currently
permitted under Sec. Sec. 438.8(e)(3)(i) and 457.1203(c) respectively,
to include the costs associated with accreditation fees that are
directly related to the quality of care activities in 45 CFR
158.150(b). The private market MLR regulations in 45 CFR
158.150(b)(2)(i)(A)(5) specifically note ``accreditation fees directly
related to quality of care activities'' as permissible QIA
expenditures. Therefore, if a health equity activity that requires
accreditation meets the definition of QIA at 45 CFR 158.150, such
accreditation costs can be reported as QIA expenses under Sec. Sec.
438.8(e)(3)(i) and 457.1203(c).
Comment: Several comments requested alignment with Medicare QIA
regulations, rather than the private market MLR regulations governing
QIA, particularly for those plans serving beneficiaries that are
eligible for both Medicare and Medicaid. The commenters stated that
alignment with the Medicare Advantage regulations would better
streamline and align program requirements for dually eligible
beneficiaries. In addition, one commenter noted that CMS recently
published a request for information for an integrated MLR for
integrated dual eligible special needs plans (D-SNPs) \174\ and
recommended that CMS develop a prototype for a Medicaid-Medicare
aligned model MLR.
---------------------------------------------------------------------------
\174\ We summarized and responded to public comments at pages
27776 through 27778 at https://www.federalregister.gov/documents/2022/05/09/2022-09375/medicare-program-contract-year-2023-policy-and-technical-changes-to-the-medicare-advantage-and.
---------------------------------------------------------------------------
Response: The proposed alignment with the private market MLR
regulations governing QIA reflects the historical alignment of other
Medicaid MLR regulations with private market MLR regulations. This
proposed change does not affect Medicare MLR reporting for plans that
serve individuals who are eligible for both Medicare and Medicaid.
Those managed care plans should continue to report their Medicare MLR
consistent with the Medicare regulations. We continue to review MLR
reporting across CMS programs for potential opportunities to further
align policies where such alignment makes sense based on how Medicaid
and CHIP managed care plans operate compared to Medicare Advantage
organizations and private market issuers.
Comment: Many commenters requested more detail and definitions
about the types of overhead and indirect costs prohibited for QIA. A
commenter noted that some managed care plans may have implemented QIAs
that have associated administrative costs, such as a QIA that provides
vouchers for culturally acceptable nutritious food that supports
diabetes management and nutritional health. This commenter indicated
that administrative expenditures for these types of QIAs that are part
of quality improvement plan goals should be allowed in the MLR. One
commenter noted that CMS should provide guidance if a managed care plan
cannot report overhead expenses for QIA.
Response: In the proposed and finalized QIA changes, we did not
delineate between QIAs used as part of quality improvement plan goals
and other types of QIAs to ensure consistency in MLR reporting and to
align with the private market MLR regulations. We decline to specify
the types of administrative costs that would be prohibited for QIA in
the regulation as those types of costs are numerous, and providing a
list of prohibited costs in the regulation could lead to the
inappropriate inclusion of costs that were not specified in the
regulation. Many examples of inappropriate administrative costs were
provided in the HHS Notice of Benefit and Payment Parameters for 2023
final rule preamble and include office space (including rent or
depreciation, facility maintenance, janitorial, utilities, property
taxes, insurance, wall art), human resources, salaries of counsel and
executives, computer and telephone usage, travel and entertainment,
company parties and retreats, IT systems, and marketing of issuers'
products (87 FR 27351). In the example provided by the commenter, if
the administrative expenses referred to fall into any of these
categories, then the expenses cannot be included in QIA.
If a managed care plan indicates that it cannot separate indirect
or overhead expenses for QIA, the State should disallow the entirety of
QIA expenditures in the MLR. We remind States they are required to
monitor managed care programs per Sec. 438.66, which should include
developing oversight processes along with managed care plan reporting
tools to identify overhead and indirect expenses inappropriately
reported as QIA expenditures.
Comment: Several commenters noted that although salaries and non-
salary benefits are usually considered administrative costs, these
costs should be allowable in the MLR as QIA expenditures. One commenter
specified that salary and benefit costs for staff who are directly
responsible for QIA should be allowed as QIA expenditures.
Response: We agree with the commenters that salary and non-salary
benefits of employees performing QIA functions are directly tied to
QIA, and we consider the salary costs, as well as the costs of the
employee benefits to be direct QIA expenses. We take this opportunity
to clarify that since Sec. Sec. 438.8(e)(3) and 457.1203(c) were
finalized in the 2016 final rule, Medicaid and CHIP managed care plans
have been able to include the portion of
[[Page 41132]]
salaries and non-salary benefits that are part of a compensation
package for staff performing QIAs that is attributable to QIAs in the
MLR. The revision finalized at Sec. 438.8(e)(3) does not change that,
it only prohibits managed care plans from including as QIA fixed costs
and other administrative costs that provide no benefit to enrollee
health.
We understand that salary and benefit costs for staff who are
performing the QIAs make up a substantial portion of QIA expenditures
as these staff may spend all or part of their time working on QIA.
However, such costs may only be included up to the amount that reflects
the percentage of the employees' time actual spent on QIA. Managed care
plans that report these costs as QIA should take care to both document
and retain records supporting the amount(s) reported and the
determination of what portion of these costs are a direct QIA expense.
This question was also addressed for health insurance issuers subject
to the private market MLR requirements in the HHS Notice of Benefit and
Payment Parameters for 2023 (87 FR 27351).
Comment: One commenter noted that some administrative costs related
to QIA implementation should be allowed because disallowing these types
of costs could make plans less likely to implement QIAs.
Response: We disagree that prohibiting indirect or administrative
costs in QIA will make managed care plans less likely to implement
QIAs. We note that the proposed and finalized regulation prohibits
managed care plans from allocating fixed costs that would, for the most
part, exist even if the managed care plan did not engage in any QIA.
That is, many administrative costs such as office space, human
resources, and computer use would exist even if the managed care plan
did not undertake QIA.
Comment: One commenter noted that undertaking QIA unavoidably adds
administrative costs to the business or service line. The commenter
noted that disallowing costs that are reasonably related or incidental
to QIA could lead to understating the portion of the capitation rate
for QIA. The commenter noted they believe that the QIA portion of the
capitation rate may be set too low if most administrative costs were
excluded from QIA, and therefore, managed care plans may have less
incentive to perform QIA.
Response: We disagree with the commenter that implementing QIA
requires incurring unavoidable administrative costs as many indirect
costs such as office space and human resources would be incurred even
if the managed care plan did not implement QIA. We disagree that
prohibiting administrative costs such as office space or marketing,
which do not provide direct benefit to enrollee health, in QIA would
lead to incorrect QIA capitation rate setting. If costs that do not
provide direct benefit to enrollee health are included in QIA rate
setting, the portion of the capitation rate for QIA will be set too
high and the resulting managed care capitation rates will be
inappropriately inflated.
Comment: One commenter requested examples of computer software that
would be considered indirect expenses, and therefore, would not qualify
as QIA.
Response: Sections 438.8(e)(3)(iii) and 457.1203(c) provide that
MCO, PIHP, or PAHP expenditures that meet the requirements related to
Health Information Technology (HIT) in the private market MLR
regulations at 45 CFR 158.151 would qualify as QIA expenditures. The
proposed and finalized amendment to Sec. 438.8(e)(2) does not modify
the specification of HIT as outlined in 45 CFR 158.151. We affirm that
HIT expenses that meet the applicable requirements in 45 CFR 158.151
are permissible costs that can be included as QIA expenses under
Sec. Sec. 438.8(e)(3)(iii) and 457.1203(c). For example, the cost of
software designed and used primarily for QIA purposes such as
Healthcare Effectiveness Data and Information Set (HEDIS) reporting,
constitutes a direct expense related to activities that improve health
care quality and can be included in QIA expenses for MLR reporting. In
contrast, the costs of information technology infrastructure that
primarily support regular business functions such as billing,
enrollment, claims processing, financial analysis, and cost
containment, do not constitute a direct expense related to activities
that improve health care quality and cannot be included in QIA expenses
for MLR reporting purposes. A similar comment was also addressed in the
HHS Notice of Benefit and Payment Parameters for 2023 (87 FR 27351).
Comment: One commenter stated that the proposed QIA changes should
not be finalized until CMS determines that the changes would not make
VBP arrangements more difficult to implement in Medicaid managed care.
Response: The commenter did not provide any reasons as to why the
proposed changes to QIA in the Medicaid MLR regulations would make VBP
implementation more difficult. We do not believe that the proposed and
finalized QIA change will make it more difficult for States and managed
care plans to implement VBP. As one goal of VBP is to reduce excessive
health spending and growth by limiting administrative waste,\175\ we
believe that the changes finalized in this rule at Sec. Sec. 438.3,
and 457.1203 are very much aligned with the goals of VBP.
---------------------------------------------------------------------------
\175\ Value-Based Payment As A Tool To Address Excess US Health
Spending, '' Health Affairs Research Brief, December 1, 2022.DOI:
10.1377/hpb20221014.526546.
---------------------------------------------------------------------------
Comment: We received several comments related to including
expenditures for activities related to social determinants of health
(SDOH) and health-related social needs (HRSN) in the MLR. Commenters
noted that these specific types of expenditures should be included in
the numerator of the MLR, including community health worker quality
improvement activities, activities related to SDOH, and managed care
plan activities for the coordination of social services to address
SDOH, as well as ILOSs at Sec. 438.3(e)(2).
Response: We provided guidance related to the inclusion of expenses
for activities to address SDOH in the MLR in a State Health Official
Letter dated January 7, 2021,\176\ that is also relevant for HRSN
expenses. We provide a summary of the guidance here and encourage
States and managed care plans to review the original guidance as it
contains many examples of activities to address SDOH.
---------------------------------------------------------------------------
\176\ https://www.medicaid.gov/sites/default/files/2022-01/sho21001_0.pdf.
---------------------------------------------------------------------------
States may use incentive payments arrangements to reward managed
care plans that make investments and/or improvements in SDOH. These
payments must align with performance targets specified in the managed
care plan contract, including implementation of a mandatory performance
improvement project under Sec. 438.330(d) that focuses on factors
associated with SDOH, and comply with Federal requirements at Sec.
438.6(b)(2). These incentive arrangements represent additional funds
over and above the capitation rates. Managed care plan contract
payments that incorporate incentive arrangements may not exceed 105
percent of the approved capitation payments attributable to the
enrollees or services covered by the incentive arrangement. In the 2016
managed care rule (81 FR 27530), we specified that incentive
arrangements made to the managed care plan in accordance with Sec.
438.6(b)(2) should not be included in the denominator of the MLR as
such payments are in addition to the capitation payments received under
the contract.\177\
---------------------------------------------------------------------------
\177\ https://www.medicaid.gov/sites/default/files/2022-01/sho21001_0.pdf.
---------------------------------------------------------------------------
[[Page 41133]]
In the 2016 final rule (81 FR 27537), we clarified that services
approved under a waiver (for example, sections 1915(b)(3), 1915(c), or
1115 of the Act) are considered State plan services for purposes of MLR
requirements and are encompassed in the reference to State plan
services in Sec. 438.3(c). Therefore, if services to address SDOH are
approved under these waiver authorities for the State Medicaid program,
and the services are included in the managed care contract, then the
covered services must necessarily be incorporated in the numerator of a
plan's MLR. Additionally, States may develop and implement specific
managed care plan procurement and contracting strategies to incentivize
care coordination across medical and nonmedical contexts, including to
address SDOH. Per recently issued guidance, Medicaid-covered HRSN
services must be integrated with existing social services and housing
services.\178\ If managed care plans implement SDOH activities that
meet the requirements in 45 CFR 158.150(b) and are not excluded under
45 CFR 158.150(c), managed care plans may include the costs associated
with these activities in the numerator of the MLR as activities that
improve health care quality under Sec. 438.8(e)(3).\179\
---------------------------------------------------------------------------
\178\ https://www.medicaid.gov/sites/default/files/2022-01/sho21001_0.pdf.
\179\ https://www.medicaid.gov/sites/default/files/2022-01/sho21001_0.pdf.
---------------------------------------------------------------------------
Under the 2016 final rule (81 FR 27526), we also clarified that all
services under Sec. 438.3(e), including approved in lieu of services
and settings, at Sec. 438.3(e)(2), can be considered as incurred
claims in the MLR numerator. Under Sec. 438.3(e)(1), a managed care
plan may voluntarily cover, for enrollees, services that are in
addition to those covered under the State plan. These services are
often referred to as value-added services, and the cost of these
services may not be included in the capitation rate; however, as
outlined in the 2016 final rule (81 FR 27526), value-added services can
be considered as incurred claims in the numerator for the purposes of
the MLR calculation if the services are activities that improve health
care quality under 45 CFR 158.150 and are not excluded under 45 CFR
158.150(c).
After reviewing public comments, we are finalizing Sec. Sec.
438.8(e)(3) and 457.1203(c) as proposed.
c. Additional Requirements for Expense Allocation Methodology
(Sec. Sec. 438.8(k)(1)(vii) and 457.1203(f))
As specified in current regulations at Sec. Sec. 438.8(k)(1)(vii)
and 457.1203(f) respectively, Medicaid and CHIP managed care plans must
provide a report of the methodology or methodologies that they used to
allocate certain types of expenditures for calculating their MLR.
Examples of these types of expenditures include overhead expenses such
as facility costs or direct expenses such as employee salaries. If a
plan operates multiple lines of business, for example in both Medicaid
and the private market, it must indicate in the Medicaid MLR report how
the share of certain types of costs were attributed to the Medicaid
line of business. However, the Medicaid MLR regulations in Sec.
438.8(g) and (k)(1)(vii) do not require managed care plans to submit
information about the types of expenditures allocated to the Medicaid
line of business and do not require managed care plans to specify how
each type of expenditure was allocated to the Medicaid MLR.
Recent CMS State-level Medicaid MLR reviews noted a lack of expense
allocation information in managed care plans' MLR reports to
States.\180\ Specifically, CMS determined that several plans operated
in multiple markets, for example, Medicaid and Medicare Advantage, and
failed to adequately describe how certain costs that may apply across
multiple lines of business were allocated to the Medicaid MLR report.
Examples of these expenses include: quality improvement expenses,
taxes, licensing or regulatory fees, and non-claims costs. The impact
of this lack of transparency is that it may be impossible for a State
to determine if the managed care plan's allocation of the applicable
expenses to the Medicaid line of business was reasonable. For example,
if a managed care plan operating in multiple markets does not provide
information on how quality improvement activity expenses were allocated
to the Medicaid MLR, the State will be unable to determine if the MLR
numerator is accurately reported or inappropriately inflated.
---------------------------------------------------------------------------
\180\ See Completed MLR audit reports at: https://www.cms.gov/medicare/medicaid-coordination/center-program-integrity/reports-guidance.
---------------------------------------------------------------------------
The private market MLR regulations at 45 CFR 158.170(b) require
significantly more detail for expense allocation in issuer's MLR
reports. Specifically, Sec. 158.170(b) requires a description of the
types of expenditures that were allocated, how the expenses met the
criteria for inclusion in the MLR, and the method(s) used to allocate
these expenses. We proposed to require in Sec. 438.8(k)(1)(vii) for
Medicaid, which is included in CHIP regulations through an existing
cross-reference at Sec. 457.1203(f), that managed care plans must
include information in the MLR report that they submit to the State
that reflects the same information required under private market
requirements at Sec. 158.170(b). Specifically, in Sec.
438.8(k)(1)(vii), we proposed to add to the existing text that plans'
descriptions of their methodology must include a detailed description
of the methods used to allocate expenses, including incurred claims,
quality improvement expenses, Federal and State taxes and licensing or
regulatory fees, and other non-claims costs, as described Sec.
158.170(b). These proposed revisions would improve State MLR oversight
by providing States with more detailed information to ensure the
appropriateness of managed care plans' expense allocation. These
proposed requirements would also align with private market regulations
and reduce administrative burden for managed care plans operating
across multiple markets. We proposed that States and managed care plans
would be required to comply with these requirements 60 days after the
effective date of this final rule as we believe these proposals are
critical for fiscal integrity in Medicaid and CHIP. We considered an
alternative compliance date of no later than the rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after 60 days
following the effective date of the final rule. We sought comment on
this proposal.
We summarize and respond to public comments received on Additional
Requirements for Expense Allocation Methodology (Sec. Sec.
438.8(k)(1)(vii) and 457.1203(f)) below.
Comment: Several commenters supported the proposed changes to
expense allocation methodology reporting. Commenters noted that these
changes will clarify the underlying elements of MLR calculations to
address potentially inaccurate or inflationary MLR calculations and
produce more reliable reports.
Response: Given that a recent state-level Medicaid MLR review \181\
found that many MLR reports from managed care health plans did not
contain information about expense allocation methodologies, we believe
the proposed and finalized changes to the regulation will improve
expense allocation reporting from managed care plans.
---------------------------------------------------------------------------
\181\ https://www.cms.gov/files/document/oregon-medicaid-managed-care-medical-loss-ratio-report.pdf.
---------------------------------------------------------------------------
Comment: One commenter noted that the proposed new reporting
requirements imposed significant burdens on plans that serve dually
[[Page 41134]]
eligible beneficiaries in fully integrated dual eligible special needs
plans (FIDE SNPs).
Response: We do not believe that the proposed reporting
requirements will impose new or significant burdens on managed care
plans serving dually eligible beneficiaries as those types of managed
care plans are currently required to allocate certain types of costs
across lines of business as part of MLR reporting. The proposed change
requires managed care plans to provide additional detail about how the
plans allocate expenses across lines of business for MLR reporting; it
does not require plans to report new types of expenses, nor does it
change how costs should be allocated across lines of business.
Comment: One commenter noted that some managed care plans may have
a ``delegated model'' where subcontractors are paid using capitated
payment arrangements. The commenter noted they believe that managed
care plans that use these types of arrangements will have significant
difficulty with the proposed reporting requirements as medical and non-
medical expenditures cannot be easily reported separately.
Response: We disagree that the proposed changes will burden managed
care plans using a ``delegated model'' as Medicaid and CHIP
requirements for delegation to subcontractors were finalized in the
2016 Managed Care rule at Sec. Sec. 438.230(c)(1) and 457.1201(i)
respectively and have been known to States and managed care plans since
that time. We also published guidance in 2019 to assist States and
managed care plans in MLR reporting when subcontractor arrangements
were used by the managed care plan.\182\ In this guidance, we noted
that ``when a managed care plan subcontracts with a third-party vendor
to administer, and potentially provide, a portion of Medicaid covered
services to enrollees, the subcontractor must report to the managed
care plan all of the underlying data needed for the Medicaid managed
care plan to calculate and report the managed care plan's MLR.'' To
correctly calculate the MLR, the required underlying data would need to
separate medical and non-medical expenditures. Given that the
subcontractor regulations and related guidance in this area have been
available for several years, we would expect all managed care plans to
be complying with MLR reporting requirements for subcontractor
arrangements.
---------------------------------------------------------------------------
\182\ https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/cib051519.pdf.
---------------------------------------------------------------------------
Comment: Several commenters requested that we provide preferred
expense allocation methodologies for income taxes and other types of
expenditures to promote more consistency in MLR calculations. One
commenter noted that the Medicare Advantage MLR reporting instructions
provide detail on income tax expense allocation methods unlike those
for issuers offering group or individual health insurance coverage and
Medicaid managed care plans.
Response: We respectfully disagree with the commenter that the
Medicare Advantage MLR reporting instructions provide detail on income
tax expense allocation methods. Neither the private market nor the
Medicare MLR regulations provide methodologies for the allocation of
specific types of expenditures, including income taxes. The private
market MLR instructions reference to the National Association of
Insurance Commissioners (NAIC) Statements of Statutory Accounting
Principles (SSAP) and Supplemental Health Care Exhibit (SHCE) in effect
for the MLR reporting year.\183\ The instructions note that ``[t]hese
references are solely for the convenience of the filer in identifying
the information needed for this MLR form.'' \184\ Similarly, the
Medicare Advantage 2013 final rule references the use of Statutory
Accounting Principles to align with the commercial MLR expense
allocation requirements but does not specify methods for expense
allocation; the preamble notes that MA organizations should ``allocate
the expense to that particular activity'' or use ``a generally accepted
accounting method that yields the most accurate results.'' (78 FR
31293) We decline to provide recommendations for specific expense
allocation methodologies in regulation as neither the private market
nor the Medicare regulations specify this detail. As noted in the
preamble of the proposed rule, we aim to remain aligned with the
private market MLR regulations to the extent possible (88 FR 28154).
Specifying a method of allocating income taxes is also complicated by
the fact that many issuers and managed care plans are affiliated, and
taxes are filed at the holding company or parent level pursuant to an
inter-company tax allocation agreement. Thus, prescribing the most
accurate tax expense allocation methodology in the Medicaid regulation
would be nearly impossible. In addition, as State Medicaid programs are
unique, States are in the best position to develop oversight strategies
and guidance for managed care plan financial reporting, including
methods for income tax expense allocation.
---------------------------------------------------------------------------
\183\ See, for example, https://www.cms.gov/files/document/2022-mlr-form-instructions.pdf.
\184\ Ibid.
---------------------------------------------------------------------------
Comment: One commenter stated that the proposed changes for expense
allocation methodologies should not be finalized until CMS determines
that the changes would not make VBP arrangements more difficult to
implement in Medicaid managed care.
Response: The commenter did not provide any reasons as to why the
proposed changes to the Medicaid MLR expense allocation regulations
would make VBP implementation more difficult. We do not believe that
the proposed and finalized changes for expense allocation will make it
more difficult for States and managed care plans to implement VBP. As
one goal of VBP is to reduce excessive health spending and growth by
limiting administrative waste,\185\ we believe that the changes
finalized in this rule at Sec. Sec. 438.8, and 457.1203 are very much
aligned with the goals of VBP.
---------------------------------------------------------------------------
\185\ Value-Based Payment As A Tool To Address Excess US Health
Spending, '' Health Affairs Research Brief, December 1, 2022.DOI:
10.1377/hpb20221014.526546.
---------------------------------------------------------------------------
Comment: A few commenters requested additional time for
implementation and suggested that CMS not require managed care plans to
comply with Sec. Sec. 438.8(k)(1)(vii) and 457.1203(f) until the
rating period beginning on or after 60 days after the effective date of
the final rule.
Response: Although providing this level of detail related to
expense allocation methods may be new for some managed care plans, we
do not believe that it is particularly burdensome or that managed care
plans need additional time for implementation. We point out that the
effective date of the rule will be 60 days after publication in the
Federal Register.
After reviewing the public comments, we are finalizing Sec. Sec.
438.8(k)(1)(vii) and 457.1203(f) as proposed.
d. Credibility Factor Adjustment to Publication Frequency (Sec. Sec.
438.8(h)(4) and 457.1203(c))
Section 2718(c) of the Public Health Service Act charged the
National Association of Insurance Commissioners (NAIC) with developing
uniform methodologies for calculating measures of the expenditures that
make up the calculation for the MLR applicable to the private market,
and to address the special circumstances of smaller plans.
[[Page 41135]]
The NAIC model regulation allows smaller plans in the private market to
adjust their MLR calculations by applying a ``credibility adjustment.''
Under Sec. Sec. 438.8(h) and 457.1203(c) respectively, Medicaid and
CHIP managed care calculated MLRs may be adjusted using credibility
factors to account for potential variability in claims due to random
statistical variation. These factors are applied to plans with fewer
enrollees to adjust for the higher impact of claims variability on
smaller plans. As stated in Sec. 438.8(h)(4), CMS is responsible for
developing and publishing these factors annually for States and managed
care plans to use when reporting MLRs for plans with fewer enrollees.
In the 2015 Medicaid and CHIP managed care proposed rule (80 FR 31111),
we proposed adopting a credibility adjustment methodology along with
assurances to monitor and reevaluate credibility factors ``in light of
developing experience with the Affordable Care Act reforms.'' In the
2015 proposed rule (80 FR 31111), we also proposed to update the
credibility adjustment method within the parameters of the methodology
in that proposed rule. We finalized this proposal without revision in
the 2016 final rule (81 FR 27864). The Medicaid managed care
credibility adjustment factors were published on July 31, 2017, at
https://www.medicaid.gov/federal-policy-guidance/downloads/cib073117.pdf.
Since this publication of the credibility adjustment factors in
2017, the factors have not changed. The factors were originally
developed using a statistical model applying the Central Limit Theorem
(80 FR 31111). This model produced credibility factors that were not
expected to change annually. Therefore, we believe that annual updates
to these factors are not required, and we proposed to modify Sec.
438.8(h)(4) for Medicaid, which is included in separate CHIP
regulations through an existing cross-reference at Sec. 457.1203(c),
to remove ``On an annual basis.'' If we determine that the factors need
to be updated, we will use the methodology specified at Sec.
438.8(h)(4)(i) through (vi). We did not propose any revisions to Sec.
438.8(h)(4)(i) through (vi) in this rule. We proposed that these
changes will be effective 60 days after the effective date of this
final rule as we believe this timeframe is reasonable. We sought
comment on this proposal.
We summarize and respond to public comments received on Credibility
Factor Adjustment to Publication Frequency (Sec. Sec. 438.8(h)(4) and
457.1203(c)) below.
Comment: One commenter requested CMS to clarify if credibility
factors will be reviewed on a regular basis even if they are not
published annually.
Response: We understand the importance of credibility factors to
smaller managed care plans' MLR calculations and commit to review them
on a regular basis and publish updates if the factors change. If we
determine that the factors need to be updated, we will use the
methodology specified at Sec. 438.8(h)(4)(i) through (vi).
After reviewing the public comments, we are finalizing Sec.
438.8(h)(4) as proposed.
e. MCO, PIHP, or PAHP MLR Reporting Resubmission Requirements
(Sec. Sec. 438.8(m) and 457.1203(f))
Medicaid and CHIP managed care plans are required to resubmit MLR
reports to States under certain circumstances. In the 2015 managed care
proposed rule preamble, we noted that States may make retroactive
changes to capitation rates that could affect the MLR calculation for a
given MLR reporting year and that when that occurred, the MCO, PIHP, or
PAHP will need to recalculate the MLR and provide a new report with the
updated figures (80 FR 31113). We also indicated that ``In any instance
where a State makes a retroactive change to the capitation payments for
an MLR reporting year where the report has already been submitted to
the State, the MCO, PIHP, or PAHP must re-calculate the MLR for all MLR
reporting years affected by the change and submit a new report meeting
the requirements in paragraph (k) of this section.'' This regulation
was finalized in 2016 without changes (81 FR 27864). However, the
reference in the regulation to changes to capitation ``payments''
rather than ``rates'' has caused confusion about when managed care
plans should resubmit MLR reports to the State and has contributed to
additional administrative burden by requiring plans to resubmit MLR
reports to the State and by requiring States to review multiple MLR
report submissions from managed care plans.
As part of our Medicaid MLR report compliance reviews, we have
heard from several States that MLR reports from MCOs, PIHPs, or PAHPs
are often resubmitted to the State. These resubmissions usually
resulted from payments the State made to the managed care plan as part
of the retroactive eligibility review process. As part of this process
in these States, the State reviews beneficiary eligibility records to
determine if an individual qualifies for retroactive eligibility. If an
enrollee qualifies for retroactive eligibility, the State modifies the
number of capitation payments that were made to a plan; however, the
State does not retroactively modify the capitation rate for a group of
members.
We proposed to amend Sec. 438.8(m) for Medicaid, which is included
in separate CHIP regulations through an existing cross-reference at
Sec. 457.1203(f), to specify that an MCO, PIHP, or PAHP will only be
required to resubmit an MLR report to the State when the State makes a
retroactive change to capitation rates. Specifically, we proposed to
replace ``payments'' with ``rates'' and to insert ``retroactive rate''
before the word ``change.'' We proposed that these changes will be
effective 60 days after the effective date of this final rule as we
believe this timeframe was reasonable to alleviate State and plan
administrative burden. We considered an alternative effective date no
later than the rating period for contracts with MCOs, PIHPs, and PAHPs
beginning on or after 60 days following the effective date of the final
rule. We sought comment on this proposal.
We summarize and respond to public comments received on MCO, PIHP,
or PAHP MLR Reporting Resubmission Requirements (Sec. Sec. 438.8(m)
and 457.1203(f)) below.
Comment: Several commenters opposed our proposal to modify Sec.
438.8(m). These commenters opposed the proposed changes as they
believed that retroactive eligibility determinations could have a
significant impact on the MLR report calculation.
Response: After further consideration of these comments, as well as
States' restarting of the eligibility redetermination process, we
believe that the retroactive eligibility process that adjusts the
number of capitation payments to plans may involve many individuals and
could significantly affect the accuracy of the MLR calculations. After
consideration of public comments and reconsideration of the impact of
the restarting of the Medicaid and CHIP eligibility redetermination
process, we have determined that by restricting managed care plan MLR
resubmissions to when States make capitation rate changes, the MLRs may
not be accurate. Therefore, we will not finalize proposed Sec.
438.8(m).
f. Level of MLR Data Aggregation (Sec. Sec. 438.74 and 457.1203(e))
As specified in existing requirements at Sec. Sec. 438.8(k) and
457.1203(f) respectively, Medicaid and CHIP managed care plans are
required to submit detailed MLR reports to States,
[[Page 41136]]
and States, as required in Sec. 438.74 for Medicaid and Sec.
457.1203(e) for separate CHIP, must submit a summary description of
those reports to CMS. In the preamble to the 2015 managed care proposed
rule (80 FR 31113), we described the term ``summary'' as meaning an
abbreviated version of the more detailed reports required from managed
care plans in Sec. 438.8(k) but did not refer to a Statewide
aggregation of data across managed care plans. The proposed regulatory
text for Sec. 438.74 did not include the words ``for each'' and was
finalized as proposed. In our compliance reviews of State summary MLR
reports, several States provided MLR data aggregated over the entire
State and neglected to provide the abbreviated MLR report for each
plan. These submissions of MLR summary reports that omitted information
by plan indicate States' confusion with what is required for these
reports.
To correct this issue, we proposed to amend Sec. 438.74(a) for
Medicaid, which is included in separate CHIP regulations through an
existing cross-reference at Sec. 457.1203(e), to note explicitly that
State MLR summary reports must include the required elements for each
MCO, PIHP, or PAHP that is contracted with the State. To specify that
the MLR information will have to be reported for each managed care
plan, we proposed in Sec. 438.74(a)(1) to replace ``the'' with
``each'' before ``report(s).'' In addition, in Sec. 438.74(a)(2), we
proposed to add language to specify that the information listed as
required in the summary description must be provided for each MCO,
PIHP, or PAHP under contract with the State. These changes will specify
that States must provide MLR information for each managed care plan in
their annual summary reports to CMS. We proposed that States and
managed care plans will be required to comply with these changes 60
days after the effective date of this final rule as we believe these
proposals are critical for fiscal integrity in Medicaid and CHIP. We
considered an alternative compliance date of no later than the rating
period for MCO, PIHP and PAHP contracts beginning on or after 60 days
following the effective date of the final rule. We sought comment on
this proposal.
We summarize and respond to public comments received on Level of
MLR Data Aggregation (Sec. Sec. 438.74 and 457.1203(e)) below.
Comment: Numerous commenters supported the proposed requirement for
States to provide MLR reports at the managed care plan level, and CMS
received no comments opposing the proposal. One commenter supported the
proposed applicability date of 60 days after the effective date of the
final rule, and we received no comments opposing the proposed timeline.
Response: We thank the commenters for their support of the proposed
changes to specify the level of data aggregation required for State
summary MLR reporting to CMS and the applicability date.
After reviewing the public comments, we are finalizing Sec. Sec.
438.74 and 457.1203(e) as proposed.
g. Contract Requirements for Overpayments (Sec. Sec. 438.608(a)(2) and
(d)(3) and 457.1285)
In the 2016 final rule, we aimed to strengthen State and Medicaid
and CHIP managed care plan responsibilities to protect against fraud
and other overpayments in State Medicaid and CHIP programs, in part, by
enhancing reporting requirements to support actuarial soundness payment
provisions and program integrity efforts (81 FR 27606). Overpayments
are defined in Sec. 438.2 as any payment made to a network provider by
a MCO, PIHP, or PAHP to which the network provider is not entitled
under Title XIX of the Act or any payment to a MCO, PIHP, or PAHP by a
State to which the MCO, PIHP, or PAHP is not entitled under Title XIX
of the Act. These overpayments may be the result of fraud, waste,
abuse, or other billing errors. Regardless of cause, overpayments
should be excluded from the capitation rate because they do not
represent reasonable, appropriate, or attainable costs.
The 2016 final rule also enhanced the integrity of capitation
payments, in part, by requiring at Sec. 438.608(d)(3) for Medicaid,
and included in separate CHIP regulations through an existing cross-
reference at Sec. 457.1285, that State contracts with managed care
plans include provisions specifying that managed care plans must report
the recoveries of overpayments annually. This reporting to the State is
critical to the actuarial soundness of capitation rates because managed
care plans must exclude overpayments from their incurred claims, which
is also a key element in the numerator of the MLR calculation. As
required in Sec. 438.5(b)(5), States must consider a Medicaid managed
care plan's past reported MLR and the projected MLR in the development
of capitation rates. If a managed care plan's MLR numerator does not
exclude overpayments, the MLR may be inappropriately inflated. Section
438.608(d)(4) requires that the State use the results of the
information and documentation collected under Sec. 438.608(d)(3) for
setting actuarially sound Medicaid capitation rates consistent with the
requirements in Sec. 438.4.
We proposed to modify Sec. 438.608(a)(2), which requires managed
care plan contracts to include a provision for the prompt reporting of
all overpayments identified or recovered (specifying those due to
potential fraud) to the State; and Sec. 438.608(d)(3), which requires
managed care plan contracts to include annual reports on plan
recoveries of overpayments. Both proposed changes are included in
separate CHIP regulations through an existing cross-reference at Sec.
457.1285. The proposed changes aim to ensure that Medicaid and CHIP
managed care plans report comprehensive overpayment data to States in a
timely manner, which will better position States to execute program
integrity efforts and develop actuarially sound capitation rates.
Defining ``Prompt'' Reporting (Sec. Sec. 438.608(a)(2) and 457.1285))
Current regulations at Sec. 438.608(a)(2) require that States
include a provision in their contracts with managed care plans for the
prompt reporting to the State of all overpayments identified or
recovered, specifying the overpayments due to potential fraud. However,
the term ``prompt'' is not defined. Although a time period is not
defined, prompt reporting of identified or recovered overpayments is
important because it can enable a State to expeditiously take action
against a provider to prevent further inappropriate activity, including
potential fraud. With prompt reporting of managed care plan
overpayments, the State is better equipped to identify similar
overpayments and prevent future overpayments across its networks,
managed care programs, and FFS.
CMS's oversight efforts and other program integrity reviews have
revealed that States interpret the promptness requirement under Sec.
438.608(a)(2) inconsistently. For example, some States do not define
``prompt'' in managed care plan contracts, instead deferring to managed
care plans' interpretation of the timeframe to report overpayments;
this lack of definition can result in inconsistent overpayment
reporting among managed care plans and States. Our reviews also
revealed that some States do not use a consistent timeframe across
managed care plan contracts when requiring the reporting of
overpayments. As a result, managed care plans may not report identified
or recovered overpayments within a timeframe that enables States to
[[Page 41137]]
effectively and swiftly investigate and take appropriate administrative
action against providers that may be committing fraudulent activities
across networks and managed care programs.
We believe that establishing a uniform definition of the term
``prompt'' will provide clarity to States and managed care plans,
thereby enhancing ongoing communication between managed care plans and
States, particularly as it relates to program integrity practices.
Therefore, we proposed to amend Sec. 438.608(a)(2) for Medicaid, and
included in separate CHIP regulations through an existing cross-
reference at Sec. 457.1285, to define ``prompt'' as within 10 business
days of identifying or recovering an overpayment. We believed 10
business days would provide a managed care plan sufficient time to
investigate overpayments and determine whether they are due to
potential fraud or other causes, such as billing errors, and also
quickly provide the State with awareness to mitigate other potential
overpayments across its networks and managed care programs. With a
clear and consistent overpayment reporting requirement, States will be
better equipped to: direct managed care plans to look for specific
network provider issues, identify and recover managed care plan and FFS
claims that are known to be unallowable, take corrective actions to
correct erroneous billing practices, or consider a potential law
enforcement referral.
We solicited public comments on the proposed 10 business day
timeframe and whether reporting should be from date of identification
or recovery, or instead on a routine basis, such as monthly. We
proposed that States and managed care plans will be required to comply
with these requirements 60 days after the effective date of this final
rule as we believe these proposals are critical for fiscal integrity in
Medicaid and CHIP. We considered an alternative effective date of no
later than the rating period for contracts with MCOs, PIHPs and PAHPs
beginning on or after 60 days following the effective date of the final
rule. We sought comment on this proposal.
Identifying Overpayment Reporting Requirements (Sec. Sec.
438.608(d)(3) and 457.1285)
The overpayment reporting provisions in part 438, subpart H require
managed care plans to recover the overpayments they identify, and in
turn, report those identified overpayments to the State for purpose of
setting actuarially sound capitation rates. In the 2015 proposed rule,
we stated that ``MCOs, PIHPs, and PAHPs must report improper payments
and recover overpayments they identify from network providers. States
must take such recoveries into account when developing capitation
rates. Therefore, capitation rates that include the amount of improper
payments recovered by an MCO, PIHP, or PAHP as projected costs will not
be considered actuarially sound.'' (80 FR 31119). It was our
expectation that ``such recoveries'' include recoveries of all
identified overpayments. This intent is also reflected in Sec.
438.608(a)(2), which states that managed care plans must report both
``identified or recovered'' overpayments to the State. However, the
words ``identified or'' were omitted from the related regulatory text
at Sec. 438.608(d)(3). Program integrity reviews and investigations
conducted since the 2016 final rule have found that language in Sec.
438.608(d)(3) providing that managed care plans only report ``recovered
overpayments'' has created an unintentional effect of managed care
plans' reporting partial overpayment data for capitation rate
calculations. This omission may have also disincentivized managed care
plans from investing in the resources necessary to recover identified
overpayments in the interest of maintaining a higher MLR. For example,
we have identified instances in which managed care plans identified an
overpayment but did not recover the entire overpayment from the
provider due to negotiating or settling the overpayment to a lesser
amount. In other cases, managed care plans identified an overpayment
that was resolved by applying an offset to future payments to the
provider instead of recovering the full overpayment in the impacted
rating period. These situations resulted in the managed care plans only
reporting a relatively small or no overpayment recovery amount to the
State in the impacted rating period, instead of the full amount of the
identified overpayment. This inconsistent reporting does not reflect
our original intent in imposing the current requirements in Sec.
438.608(d)(3) and prevents the State from accounting for the full
amount of the identified overpayment in the impacted rating period when
developing capitation rates as required under Sec. 438.608(d)(4).
To address these issues, in our May 3, 2023, proposed rule, we
proposed to revise Sec. 438.608(d)(3) for Medicaid and separate CHIP
regulations through an existing cross-reference at Sec. 457.1285, to
specify our original intent that any overpayment (whether identified or
recovered) must be reported by Medicaid or CHIP managed care plans to
the State. Through this proposed change, we believe that managed care
plans and States will have more consistency in the overpayment
reporting requirements at Sec. 438.608(a)(2) and (d)(3) by requiring
reporting to the State all overpayments, whether identified or
recovered. By ensuring that both identified and recovered overpayments
are reported, States and CMS will be more assured that capitation rates
account for only reasonable, appropriate, and attainable costs covered
under the contract. We proposed that States and managed care plans will
be required to comply with these requirements 60 days after the
effective date of this final rule as we believe these proposals are
critical for fiscal integrity in Medicaid and CHIP. We considered an
alternative effective date no later than the rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after 60 days
following the effective date of the final rule. We solicited comments
on this proposal. We summarize and respond to public comments received
on Contract Requirements for Overpayments (Sec. Sec. 438.608(a)(2) and
(d)(3), and 457.1285) below.
Comment: Several commenters opposed the proposal regarding the
effective date of the proposed requirements at Sec. 438.608(a)(2) and
(d)(3). One commenter suggested delaying implementation of the rule to
align with the next rate certification or contract submission date,
instead of 60 days after the rule is finalized. Other commenters
requested a minimum of 1 year, rather than 60 days.
Response: We considered these comments when finalizing the
effective date of the new requirements for the prompt reporting of
overpayments in Sec. 438.608(a)(2) and (d)(3). We acknowledge that 60
days may not be long enough for CMS to provide any needed guidance to
States, or for States to engage with managed care plans and update
contract language. After considering the public comments, we are
finalizing a revised effective date of the first rating period
beginning on or after 1 year from the effective date of this final rule
to provide States sufficient time to complete the necessary actions to
come into compliance with these requirements.
Comment: One commenter supported our proposed 10 business days
timeframe for ``promptly'' reporting overpayments under Sec.
438.608(a)(2). However, many commenters recommended a longer timeframe
for ``promptly'' reporting overpayments, indicating that 10 business
days is not
[[Page 41138]]
enough time due to operational concerns. Several commenters suggested a
30-day or monthly cadence for ``prompt'' reporting to States, while
other commenters suggested lengthier reporting timeframes, such as a
60-day, quarterly, or semi-annual cadence.
Response: We continue to believe that rapid reporting by managed
care plans about identified or recovered overpayments is critical to
enable States to effectively and swiftly investigate and take
appropriate administrative action against providers that may be
committing fraudulent activities across networks and managed care
programs. However, after considering the public comments, we
acknowledge that a slightly longer timeframe to report can still
provide States with prompt awareness of overpayments while providing
managed care plans additional time to investigate overpayments and
determine whether they are due to potential fraud or other causes, such
as billing errors. Therefore, we are finalizing a revised proposal at
Sec. 438.608(a)(2) that States shall require managed care plans to
report identified or recovered overpayments within 30 calendar days
from the date of identification or recovery of an overpayment. We
believe that 30 calendar days achieves the appropriate balance of
addressing some commenters' concerns and maintaining the intent of
``prompt'' reporting of identified or recovered overpayments. While we
are finalizing ``prompt'' reporting as within 30 calendar days, States
still retain the flexibility to require managed care plans to report
overpayments within a shorter timeframe.
Comment: Several commenters suggested aggregated or batched
reporting instead of reporting each identified or recovered overpayment
to the State. One commenter recommended reporting this on a routine
basis, such as monthly or bimonthly, to avoid excessive notifications,
as well as establish a cadence in which State could expect to receive
reports. Another commenter recommended that the reporting be part of
the managed care plan's and/or Risk Bearing Organization (RBO)'s normal
quarterly financial reporting to the payer and/or regulator.
Response: We appreciate the comments on the allowable method of
reporting. However, defining the method through which reporting of
identified or recovered overpayment must be done, including the use of
batched or other reporting mechanisms, is outside the scope of our
proposal to define ``prompt'' reporting as within 10 business days.
States maintain flexibility to determine the manner with which managed
care plans report so long as it meets the finalized requirement that
identified or recovered overpayment(s) be reported within 30 calendar
days from the date it was identified or recovered.
Comment: One commenter suggested that while it might be reasonable
to require reporting of an overpayment identified during an
investigation to the State within 10 business days, it would not be
feasible to require that investigation be completed within 10 days of
identification.
Response: Our proposal does not include that an investigation must
be completed in any amount of time. We stated in the proposed rule that
our proposal of 10 business days would be sufficient time to begin an
investigation and determine whether overpayments are due to potential
fraud or other causes, such as billing errors. Also, as described
above, after consideration of public comments, we are finalizing that
States require managed care plans to report identified or recovered
overpayments within 30 calendar days from the date of identification or
recovery of an overpayment, specifying the overpayments due to
potential fraud. This does not also require that an investigation be
completed within that 30-calendar day timeframe.
Comment: Commenters sought clarification regarding the definition
or interpretation of several terms within Sec. 438.608(d)(3). Some
commenters requested guidance to clearly define ``identified
overpayment'' as compared to an allegation of fraud, waste, abuse, or
other provider misconduct. Another commenter requested clarification
about whether MCOs must separately report overpayments when they are
both identified and when/if they are eventually recovered. One
commenter supported the broad interpretation of ``overpayments,'' which
may be the result of fraud, waste, abuse, or other billing errors,
while other commenters suggested changes related to the reporting of
any overpayments. One commenter suggested that an ``overpayment''
should not be considered ``identified'' until there is an actual claim
paid and/or a final dollar value is determined. Another commenter
suggested limiting reporting requirements to overpayments that rise
above a de minimis percentage of the total claim amount to minimize
administrative burden. Another commenter suggested either removing the
word ``all'' from the language or allowing reporting of overpayments
related to claim adjustments, Coordination of Benefits/Third Party
Liability, error, and retroactive member disenrollment on a less
frequent basis. One commenter suggested that CMS should allow managed
care plans to apply direct costs for identifying, mitigating, and
recovering overpayments in the MLR numerator.
Response: With regard to the commenters' request for clearly
defined guidance on ``identified overpayment'' as compared to an
allegation of fraud, waste, abuse, or other provider misconduct under
revised Sec. 438.608(d)(3), this is out of the scope of the proposed
overpayment reporting requirements. States maintain flexibility to
determine the scope of ``identified overpayments,'' and we encourage
States to work with their managed care plans to ensure these terms are
clearly and consistently defined in the contracts.
For the commenters' request for clarification about whether a
managed care plan must separately report overpayments when the payments
are both identified and when/if they are eventually recovered, these
overpayments must be separately reported. As stated in the proposed
rule, the omission of the words ``identified or'' from Sec.
438.608(d)(3) created an unintentional effect of managed care plans
reporting partial overpayment data for capitation rate calculations.
This omission may have also disincentivized managed care plans from
investing in the resources necessary to recover identified overpayments
in the interest of maintaining a higher MLR. These situations resulted
in the managed care plans only reporting a relatively small or no
overpayment recovery amount to the State in the impacted rating period,
instead of the full amount of the identified overpayment. The
inconsistent reporting does not reflect our original intent in imposing
the current requirements in Sec. 438.608(d)(3) and prevents the State
from accounting for the full amount of the identified overpayment in
the impacted rating period when developing Medicaid capitation rates as
required under Sec. 438.608(d)(4). As such, our intent is that any
overpayment (whether identified or recovered) must be separately
reported by Medicaid or CHIP managed care plans to the State. Through
this final rule, we believe that managed care plans and States would
have more consistency in the overpayment reporting requirements at
Sec. 438.608(a)(2) and (d)(3) by requiring reporting to the State of
all overpayments, whether identified or recovered. By ensuring that
both
[[Page 41139]]
identified and recovered overpayments are reported, States and CMS
would be more assured that capitation rates account for only
reasonable, appropriate, and attainable costs covered under the managed
care plan contract.
With regard to the commenter's suggestion about limiting the
reporting of overpayments to overpayments that rise above a de minimis
percentage of the total claim amount to reduce administrative burden,
we believe this is outside the scope of our proposal, as we did not
propose a threshold for which overpayments must be reported under Sec.
438.608(d)(3). The previous regulation at Sec. 438.608(d)(3) required
managed care plans to report recovered overpayments to the State and
did not establish a certain threshold for such reporting. While our
proposal specifically added the term ``all'' when referring to reported
overpayments, our proposal sought to clarify what was previously
implied, that all overpayments should be reported. As stated in the
2016 final rule, a requirement to report all overpayments is important
to ensure actuarial soundness. For the commenter's comment about either
removing the word ``all'' from the language or allowing reporting of
overpayments related to claim adjustments, Coordination of Benefits/
Third Party Liability, error, and retroactive member disenrollment on a
less frequent basis, we also believe this is outside the scope of this
proposal, as described above. Similarly, with regard to the commenter's
suggestion that CMS should allow managed care plans to apply direct
costs for identifying, mitigating, and recovering overpayments in the
MLR numerator, this is outside the scope of this proposal.
Comment: Commenters requested that CMS confirm whether NEMT PAHPs
are excluded from reporting overpayments.
Response: We appreciate the commenters' request for clarification.
Requirements at Sec. Sec. 438.9 and 457.1206 outline the provisions of
42 CFR part 438 subpart H and part 457 subpart L, respectively, that
apply to NEMT PAHPs. Because the reporting of overpayments requirements
at Sec. 438.608 are not included in the provisions that apply to NEMT
PAHPs, these provisions do not apply to NEMT PAHPs, and we are removing
reference to NEMT PAHPs from these provisions in this final rule.
Comment: One commenter requested that CMS provide guidance
regarding situations where a third-party should review overpayments.
Response: We believe this proposed clarifying guidance is outside
the scope this final rule. We encourage managed care plans to work
closely with States to gain a clear understanding of expectations and
contractual requirements around identifying overpayments.
After consideration of public comments, we are finalizing our
proposals for overpayments in revised Sec. 438.608(a)(2) and (d)(3).
However, we are modifying our proposal that States require managed care
plans to define ``prompt'' as within 10 business days of identifying or
recovering an overpayment. We are instead finalizing in revised Sec.
438.608(a)(2) that States require managed care plans to define
``prompt'' as within 30 calendar days of identifying or recovery an
overpayment. This revision is also applicable to separate CHIP via an
existing cross-reference at Sec. 457.1285. We believe 30 calendar days
will provide a managed care plan sufficient time to investigate an
overpayment and determine whether the overpayment is due to potential
fraud or other causes, such as billing errors, and provide States with
awareness to mitigate other potential overpayments across its networks,
managed care programs, and FFS. With a clear and consistent overpayment
reporting requirement, States will be better equipped to direct managed
care plans to look for specific network provider issues, identify and
recover managed care plan and FFS claims that are known to be
unallowable, take corrective actions to correct erroneous billing
practices, or consider a potential law enforcement referral. We
reiterated that nothing in this final rule would prohibit a State from
setting a shorter timeframe than 30 calendar days for reporting of
overpayments.
We are also finalizing our proposal in Sec. 438.608(d)(3) for
Medicaid and separate CHIP managed care programs (through an existing
cross-reference at Sec. 457.1285), to clarify that all overpayments
(identified or recovered) must be reported by Medicaid or CHIP managed
care plans annually to the State. We believe this change will provide
managed care plans and States with more consistency in the overpayment
reporting requirements at Sec. 438.608(a)(2) and (d)(3) by requiring
reporting of all overpayments, whether identified or recovered, to the
States. By ensuring both identified and recovered overpayments are
reported, States and CMS will be more assured that capitation rates
account for only reasonable, appropriate, and attainable costs covered
under the contract.
To address an error in the proposed rule, we are removing reference
to the applicability of the overpayment reporting requirements at
Sec. Sec. 438.608(a)(2) and (d)(3) to NEMT PAHPs, as these plans are
excluded from these regulatory provisions under existing Sec. Sec.
438.9 and 457.1206.
Finally, we are modifying our proposals regarding the effective
date of beginning on or after 60 days following the effective date of
the final rule for both revisions to Sec. 438.608(a)(2) and (d)(3).
Instead, we are finalizing an effective date of the first rating period
beginning on or after 1 year from the effective date of this final
rule.
h. Reporting of SDPs in the Medical Loss Ratio (MLR) (Sec. Sec.
438.8(e)(2)(iii) and (f)(2), 438.74, 457.1203(e) and 457.1203(f))
Many States with managed care programs are using the authority in
Sec. 438.6(c) to direct managed care plans' payments to certain
providers. States' increasing use of these arrangements has been cited
as a key area of oversight risk for CMS. Several oversight bodies,
including OIG, and GAO, and other interested parties including MACPAC,
have authored reports focused on CMS oversight of
SDPs.186 187 188 189 Both GAO and MACPAC have recommended
that we collect and make available provider-specific information about
Medicaid payments to providers, including SDPs.
---------------------------------------------------------------------------
\186\ U.S. Department of Health and Human Services Office of the
Inspector General, ``Aspects of Texas' Quality Incentive Payment
Program Raise Questions About Its Ability To Promote Economy and
Efficiency in the Medicaid Program,'' A-06-18-07001, December 21,
2020, available at https://oig.hhs.gov/oas/reports/region6/61807001.asp.
\187\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
\188\ U.S. Government Accountability Office, Medicaid Managed
Care: Rapid Spending Growth in State Directed Payments Needs
Enhanced Oversight and Transparency,'' December 14, 2023, available
at https://www.gao.gov/products/gao-24-106202.
\189\ Medicaid and CHIP Payment and Access Commission,
``Oversight of Managed Care Directed Payments,'' June 2022,
available at https://www.macpac.gov/wp-content/uploads/2022/06/Chapter-2-Oversight-of-Managed-Care-Directed-Payments-1.pdf.
---------------------------------------------------------------------------
As discussed in section I.B.2. of this final rule, CMS's current
review and approval process for SDPs is prospective; that is, we do not
consistently nor systematically review the actual amounts that States
provide to managed care plans for these arrangements \190\ nor do we
review the
[[Page 41140]]
actual amounts that managed care plans pay to providers. CMS requires
States to provide an estimated total dollar amount that will be
included in the capitation rates for the SDP arrangement.\191\ However,
States are not required to report to CMS on the actual expenditures
associated with these arrangements in any separate or identifiable way
after the rating period has closed and claims are adjudicated. On a
limited basis, we perform in-depth State-level medical loss ratio (MLR)
reviews and financial management reviews (FMRs) that include the actual
amounts paid through SDPs. But without the systematic collection of
actual payment amounts, we cannot determine exactly how much is being
paid under these arrangements, to what extent actual expenditures
differ from the estimated dollar amounts approved by CMS under a
State's proposal, and whether Federal funds are at risk for
impermissible or inappropriate payments.
---------------------------------------------------------------------------
\190\ As CMS does not routinely perform this review, the current
requirements for separate payment terms outlined in the Medicaid
managed care rate guide requires States to (1) submit documentation
to CMS that includes the total amount of the payment into the rate
certification's rate cells consistent with the distribution
methodology included in the approved State directed payment
preprint, as if the payment information had been known when the
rates were initially developed; and (2) submit a rate amendment to
CMS if the total amount of the payment or distribution methodology
is changed from the initial rate certification.
\191\ https://www.medicaid.gov/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf.
---------------------------------------------------------------------------
We concur with the oversight bodies that it is important that we
gain more information and insight into actual SDP spending to help us
fulfill our oversight and monitoring obligations. We proposed two
approaches, one near term and one longer term, for collecting both
aggregate and provider-level information. The first proposal would use
existing MLR reporting as a vehicle to collect actual expenditure data
associated with SDPs. Specifically, in Sec. 438.8(k), we proposed to
require that managed care plans include SDPs and associated revenue as
separate lines in their MLR reports to States; specifically, the amount
of payments to providers made under SDPs that direct the managed care
plan's expenditures as specified in Sec. 438.6(c) and the payments
from the State to the managed care plans for expenditures related to
these SDPs. In turn, we proposed to require that managed care plan-
level SDP expenditure reporting be explicitly reflected in States'
annual summary MLR reporting to CMS, as required under Sec. 438.74.
We believe these proposals and our responses to comments should be
discussed in the context of the other proposed SDP reporting
requirements to support oversight (see section I.B.2.o. of this final
rule for comments and our proposed revisions to Sec. Sec.
438.8(e)(2)(iii)(C) and (f)(2)(vii), 457.1203(e), 438.8(k)(1)(xiv)
through (xvi), 438.74(a)(3) through (4)).
4. In Lieu of Services and Settings (ILOSs) (Sec. Sec. 438.2, 438.3,
438.7, 438.16, 438.66, 457.1201 and 457.1207)
a. Overview of ILOS Requirements (Sec. Sec. 438.2, 438.3(e), 438.16,
457.10, 457.1201(c) and 457.1201(e))
In the 2016 final rule, we finalized Sec. 438.3(e) for Medicaid,
which was included in separate CHIP regulations through cross-reference
at Sec. 457.1201(e), and specified in Sec. 438.3(e)(2) that managed
care plans have flexibility under risk contracts to provide a
substitute service or setting for a service or setting covered under
the State plan, when medically appropriate and cost effective, to
enrollees at the managed care plan and enrollee option (81 FR 27538 and
27539). A substitute service or setting provided in lieu of a covered
State plan service or setting under these parameters is known as an
``in lieu of service or setting'' (ILOS). In the 2015 proposed rule, we
stated that, under risk contracts, managed care plans have historically
had the flexibility to offer an ILOS that meets an enrollee's needs (80
FR 31116). Within the 2016 final rule, we clarified that this ILOS
authority continues to exist for States and managed care plans, subject
to Sec. 438.3(e)(2). We believe ILOS authority is inherent in a risk
contract in accordance with section 1903(m)(2)(A) of the Act which
addresses risk-based capitation payments, which are defined in Sec.
438.2. Additionally, we rely on the authority in section 1902(a)(4) of
the Act to establish methods for proper and effective operations in
Medicaid for PIHPs and PAHPs. ILOSs are incorporated into the
applicable States' contracts with its managed care plans and associated
capitation rates and are subject to CMS review and approval in
accordance with Sec. 438.3(a) and Sec. 438.7(a) respectively, and CMS
will not approve contracts in accordance with Sec. 438.3(a) that
include an ILOSs that does not meet standards in regulatory
requirements.
ILOSs are utilized by States and their managed care plans to
strengthen access to, and availability of, covered services and
settings, or reduce or prevent the need for covered services and
settings. As outlined in the guidance issued on January 7, 2021,\192\
January 4, 2023,\193\ and November 16, 2023 \194\ respectively, ILOSs
can be an innovative option States may consider employing in Medicaid
and CHIP managed care programs to address SDOH and HRSNs. The use of
ILOSs can also improve population health, reduce health inequities, and
lower overall health care costs in Medicaid and CHIP. We further
believe that ILOSs can be used, at the option of the managed care plan
and the enrollee, as immediate or longer-term substitutes for State
plan-covered services and settings, or when the ILOSs can be expected
to reduce or prevent the future need to utilize the State plan-covered
services and settings. The investments and interventions implemented
through ILOSs may also offset potential future acute and institutional
care, and improve quality, health outcomes, and enrollee experience.
For example, offering medically tailored meals (less than 3 meals per
day) as an ILOS may improve health outcomes and facilitate greater
access to HCBS, thereby preventing or delaying enrollees' need for
nursing facility care. We encouraged managed care plans to leverage
existing State and community level resources, including through
contracting with community-based organizations and other providers that
are already providing such services and settings and that have
expertise working with Medicaid and CHIP enrollees. We believe there is
a great deal of State and managed care plan interest in utilizing ILOSs
to help address many of the unmet physical, behavioral, developmental,
long-term care, and other needs of Medicaid and CHIP enrollees. We
expected that States' and managed care plans' use of ILOSs, as well as
associated Federal expenditures for these services and settings, will
continue to increase. We acknowledged that ILOSs can offer many
benefits for enrollees, but we also believe it is necessary to ensure
adequate assessment of these substitute services and settings prior to
approval, and ongoing monitoring for appropriate utilization of ILOSs
and beneficiary protections. Additionally, we believe there must be
appropriate fiscal protections and accountability of expenditures on
these ILOSs which are alternative services and settings not covered in
the State plan. Therefore, we proposed to revise the regulatory
[[Page 41141]]
requirements for ILOSs to specify the nature of the ILOSs that can be
offered and ensure appropriate and efficient use of Medicaid and CHIP
resources, and that these investments advance the objectives of the
Medicaid and CHIP programs.
---------------------------------------------------------------------------
\192\ https://www.medicaid.gov/federal-policy-guidance/downloads/sho21001.pdf.
\193\ https://www.medicaid.gov/federal-policy-guidance/downloads/smd23001.pdf.
\194\ https://www.medicaid.gov/sites/default/files/2023-11/cib11162023.pdf.
---------------------------------------------------------------------------
To ensure clarity on the use of the term ``in lieu of service or
setting'' and the associated acronym ``ILOS,'' we proposed to add a
definition in Sec. 438.2 for Medicaid to define an ``in lieu of
service or setting (ILOS)'' as a service or setting that is provided to
an enrollee as a substitute for a covered service or setting under the
State plan in accordance with Sec. 438.3(e)(2) and acknowledge that an
ILOS can be used as an immediate or longer-term substitute for a
covered service or setting under the State plan, or when the ILOS can
be expected to reduce or prevent the future need to utilize State plan-
covered service or setting. For separate CHIP, we proposed to align by
adding ``In lieu of service or setting (ILOS) is defined as provided in
Sec. 438.2 of this chapter'' to the definitions at Sec. 457.10. Given
this proposed definition and associated acronym, we also proposed
several conforming changes in Sec. 438.3(e)(2). We proposed to revise
Sec. 438.3(e)(2) to remove ``services or settings that are in lieu of
services or settings covered under the State plan'' and replace it with
``an ILOS.'' We proposed to revise Sec. 438.3(e)(2)(i) and (ii) to
remove ``alternative service or setting'' and replace it with ``ILOS.''
In Sec. 438.3(e)(2)(iii), we proposed to remove ``in lieu of
services'' and replace it with ``ILOS is,'' and remove the ``and'' at
the end of this requirement given new requirements that will be
proposed. We proposed to revise Sec. 438.3(e)(2)(iv) to remove ``in
lieu of services are'' and replace it with ``the ILOS is,'' and add the
term ``and settings'' after ``covered State plan covered services'' to
accurately reflect that ILOSs are substitute services and settings for
State plan services and settings. Additionally, we added an ``and'' at
the end of this requirement given a new proposed addition of Sec.
438.3(e)(2)(v) that is described later in this section of this final
rule. The proposed changes at Sec. 438.3(e) are equally applicable to
separate CHIP managed care plan contract requirements through the
existing cross-reference at Sec. 457.1201(e).
Because we made numerous proposals related to ILOSs, we believe
adding a cross reference in Sec. 438.3(e)(2)(v) to a new section will
make it easier for readers to locate all of the provisions in one place
and the designation flexibility of a new section will enable us to
better organize the provisions for readability. To do this, we proposed
to create a new Sec. 438.16 titled ILOS requirements for Medicaid, and
we proposed to amend Sec. 457.1201(c) and (e) to include cross-
references to Sec. 438.16 to adopt for separate CHIP. Our proposals in
Sec. 438.16 were based on several key principles, described in further
detail in sections I.B.4.b. through I.B.4.h. of this final rule. These
principles include that ILOSs would: (1) meet general parameters; (2)
be provided in a manner that preserves enrollee rights and protections;
(3) be medically appropriate and cost effective substitutes for State
plan services and settings, (4) be subject to monitoring and oversight;
and (5) undergo a retrospective evaluation, when applicable. We also
proposed parameters and limitations for ILOSs, including our proposed
requirements for ILOSs to be appropriately documented in managed care
plan contracts and considered in the development of capitation rates,
and our proposed risk-based approach for State documentation and
evaluation requirements of any managed care plan contracts that include
ILOSs. We proposed to continue our review of ILOSs as part of our
review of the States' managed care plan contracts in accordance with
Sec. 438.3(a), and associated capitation rates in accordance with
Sec. 438.7(a). CMS has the authority in Sec. 438.3(a) to deny
approval of any ILOS that does not meet standards in regulatory
requirements, and thereby does not advance the objectives of the
Medicaid program, as part of our review of the associated Medicaid
managed care plan contracts and capitation rates.
We acknowledged that one of the most commonly utilized ILOSs is
inpatient mental health or substance use disorder treatment provided
during a short term stay (no more than 15 days during the period of the
monthly capitation payment) in an IMD. Due to the statutory limitation
on coverage of services provided in an IMD in accordance with language
in section 1905(a) of the Act following section 1905(a)(30) of the Act,
our ability to permit States to make a monthly Medicaid capitation
payment for an enrollee who receives services in an IMD is limited as
outlined in Sec. 438.6(e), and uniquely based on the nature of risk-
based payment (see 80 FR 31116 for further details on this policy).
Other than as an ILOS, in accordance with Sec. Sec. 438.3(e)(2) and
438.6(e), FFP is not available for any medical assistance under Title
XIX for services provided to an individual, ages 21 to 64, who is a
patient in an IMD facility. We proposed no changes regarding the
coverage of short term stays in an IMD as an ILOS, or payments to MCOs
and PIHPs for enrollees who are a patient in an IMD in Sec. 438.6(e)
(see 81 FR 27555 through 27563 for further details on the existing
policy). In acknowledgement of the unique parameters necessary for
coverage of services provided in IMDs as an ILOS, given the statutory
limitations, we did not believe Sec. 438.16 should apply to a short
term IMD stay as an ILOS. For example, a short term stay in an IMD as
an ILOS was excluded from the calculation for an ILOS cost percentage,
described in further detail in section I.B.4.b. of this final rule, as
the costs of a short term IMD stay must not be used in rate development
given the statutory limitation, and instead States must use the unit
costs of providers delivering the same services included in the State
plan as required in Sec. 438.6(e). Additionally, as described in Sec.
438.6(e), States may only make a monthly capitation payment to an MCO
or PIHP for an enrollee aged 21 to 64 receiving inpatient treatment in
an IMD when the length of stay in an IMD is for a short term stay of no
more than 15 days during the period of the monthly capitation payment.
Therefore, we proposed to add Sec. 438.3(e)(2)(v) to explicitly
provide an exception from the applicability of Sec. 438.16 for short
term stays, as specified in Sec. 438.6(e), for inpatient mental health
or substance use disorder treatment in an IMD. This proposal did not
replace or alter existing Federal requirements and limitations
regarding the use of short term IMD stays as an ILOS, or the
availability of FFP for capitation payments to MCOs and PIHPs for
enrollees who utilize an IMD.
We did not propose to adopt the IMD exclusion for separate CHIP
since there are no similar payment restrictions for stays in an IMD in
separate CHIP. As long as a child is not applying for or renewing their
separate CHIP coverage while a resident of an IMD, the child remains
eligible for separate CHIP and any covered State plan services or ILOSs
while in an IMD consistent with the requirements of Sec.
457.310(c)(2)(ii). For this reason, we proposed to amend Sec.
457.1201(e) to exclude references to IMDs in the cross-reference to
Sec. 438.3(e).
States and managed care plans continue to be obligated to comply
with other applicable Federal requirements for all ILOS, including
short term IMD stays. This includes, but is not limited to, those
requirements outlined in Sec. Sec. 438.3(e)(2), 438.6(e), and 438.66.
As required in Sec. 438.66(a) through (c),
[[Page 41142]]
States must establish a system to monitor performance of their managed
care programs. When ILOSs are included in a managed care plan's
contract, they too must be part of the State's monitoring activities.
As part of such monitoring, States must ensure that all ILOSs,
including short term stays in an IMD, are medically appropriate, cost
effective, and at the option of the enrollee and managed care plan.
We summarize and respond to public comments received in this
section on ILOSs (Sec. Sec. 438.2, 438.3(e), 457.10, 457.1201(c) and
(e)) below.
Comment: Many commenters offered widespread support for our
proposed ILOS policies as they believe the proposed policy direction
and the flexibility to offer expanded ILOSs supported States and
managed care plans in their efforts to strengthen access to care,
improve enrollee's health care outcomes, and lower overall health care
costs in Medicaid and CHIP. Many commenters also supported the proposed
definition of an ILOS and stated that this definition appropriately
accounted for immediate or longer-term substitutes for a covered
service or setting under the State plan, noting that it supports
efforts to address enrollees' physical, behavioral, and health-related
social needs, improve population health, and advance health equity.
Response: We appreciate the support for the proposed ILOS policies,
including the proposed definition of an ILOS. Our goal is to strike the
right balance to place appropriate guardrails on the use of ILOSs, to
establish clarity and transparency on the use of ILOSs, ensure ILOSs
advance the objectives of the Medicaid program, are an appropriate and
efficient use of Medicaid and CHIP resources, and are in the best
interests of Medicaid and CHIP enrollees while also incentivizing
States and plans to use them to improve health outcomes and reduce
health care costs.
Comment: Some commenters raised concerns that the additional
guardrails and reporting requirements could increase State and plan
burden and disincentivize them from expanding ILOSs. A few of these
commenters recommended that CMS not finalize the proposed provisions,
but rather focus additional oversight only on more novel or non-
traditional ILOSs and allow approved ILOSs to continue without
additional guardrails.
A few commenters requested additional protections for FQHCs to
ensure that ILOSs could not be substituted for FQHC benefits, thereby
causing a reduction in an FQHC's prospective payment system (PPS) or
alternative payment methodology (APM) or otherwise reduce payment by
other means such as restricting the definition of a billable encounter.
Other commenters raised concerns that this definition could stifle
managed care plans' ability to innovate and provide timely, person-
centered, medically appropriate, and cost effective substitutes. One
commenter raised concerns that the definition may require that the ILOS
would need to be an immediate ``offset'' or substitute that reduces or
prevents the use of the State plan-covered service or setting and
recommended that CMS permit States and managed care plans additional
latitude to expand ILOS coverage without a corresponding immediate
offset in benefits elsewhere, such as if the plan demonstrates through
documented experience or credible academic or other studies, a
reasonable expectation that the ILOS will decrease cost and improve
outcomes over time.
Response: While we recognize that defining an ILOS will add
guardrails, we believe that finalizing a definition of ILOS is vital to
ensuring clarity and transparency on the use of ILOSs to ensure
appropriate and efficient use of Medicaid and CHIP resources, and that
these investments advance the objectives of the Medicaid and CHIP
programs. We also believe a definition will assist States in their
efforts to determine that each ILOS is a medically appropriate and cost
effective substitute for a covered service or setting under the State
plan. The ILOS definition finalized in this rule provides flexibility
to enable States to consider a longer-term substitute or when the ILOS
is expected to reduce or prevent the future need for the State plan
service or setting; therefore, an immediate offset or reduction in the
State plan-covered service or setting would not always be necessary for
a State to consider an ILOS to be medically appropriate and cost
effective. We believe that the documentation of previous experience or
credible academic studies could potentially be reasonable documentation
for a State to consider as it makes its determination. We also do not
believe specific protections are needed for FQHCs as the PPS rates are
established in accordance with section 1902(bb) of the Act and approved
in the State plan while ILOSs are substitutes for State plan-covered
services and settings that are offered at the option of managed care
plans and utilized by enrollees at their option. This inherent
flexibility and unpredictability in the use of ILOSs is not a factor in
the PPS rates approved in the State plan.
Comment: Some commenters requested clarification on what types of
services or settings would qualify under the definition of an ILOS.
Another commenter requested clarification on whether States would be
permitted to offer multiple ILOSs as substitutes for the same State-
plan covered service or setting.
Response: We provided several examples of possible ILOSs in the
proposed rule, including sobering centers, housing transition
navigation services, and medically tailored meals (less than 3 meals
per day) (88 FR 28167). Other potential examples could include respite
services, asthma remediation, environmental accessibility adaptations
(that is, home modifications), and day habilitation programs. Each ILOS
must be determined by the State to be a medically appropriate and cost
effective substitute for a covered service or setting under the State
plan and comply with all applicable Federal requirements. We also
direct commenters to section I.B.4.b. of this final rule which has
related comments regarding our proposal in Sec. 438.16(b) (cross-
referenced at Sec. 457.1201(e) for separate CHIP) that an ILOS be
approvable in the State plan or waiver under section 1915(c) of the
Act. We also acknowledge that it would be permissible for multiple
ILOSs to be substitutes for the same State-plan covered service or
setting so long as each ILOS is determined by the State to be a
medically appropriate and cost effective substitute for a covered
service or setting under the State plan for an appropriate target
population.
Comment: One commenter recommended that CMS revise Sec.
438.3(e)(2)(i) to define specific parameters around the scope,
duration, and intensity of quality for ILOSs.
Response: We agree with the commenter that as States determine
whether an ILOS is a medically appropriate and cost effective
substitute for the covered service or setting under the State plan, the
scope and duration of an ILOS is a factor States may consider. We also
direct commenters to section I.B.4.d. of this final rule where we
indicated that States could consider using additional criteria for
ILOSs, such as including a limit on the amount of an ILOS to ensure it
is medically appropriate and cost effective. We are unclear what the
commenter was referring to when they referred to ``intensity of
quality.'' Generally, we agree that as States determine the medically
appropriateness of an ILOS
[[Page 41143]]
that they consider whether an ILOS will improve quality of care and
health outcomes. We decline to revise Sec. 438.3(e)(2)(i) to define
these specific terms as we believe States should have flexibility to
make these determinations as they determine the ILOSs that are
medically appropriate and cost effective substitutes for State plan-
covered services and settings that best meet enrollees' needs and the
target populations for ILOSs. ILOSs will also vary by managed care
program given the differing populations and benefits offered, and the
fact they are provided at plans' options. As such, we do not believe it
is currently reasonable or appropriate for CMS to provide specific
definitions for these terms to apply to all ILOSs.
Comment: Several commenters supported the proposed exclusion of
inpatient mental health or substance use disorder treatment provided
during a short term stay (no more than 15 days during the period of the
monthly capitation payment) in an IMD from the proposed requirements in
Sec. 438.16. Commenters noted that this policy would lessen barriers
for States to provide IMD coverage for those in need of these services,
and in doing so, increase access to critical behavioral health care.
Response: We continue to believe, particularly with the support of
commenters, that the exception of a short term stay in an IMD for
inpatient mental health or substance use disorder treatment from the
proposed requirements in Sec. 438.16 is appropriate. As a reminder,
this exclusion does not replace or alter existing Federal requirements
and limitations regarding the use of short term IMD stays as an ILOS,
or the availability of FFP for capitation payments to MCOs and PIHPs
for enrollees who utilize an IMD as outlined in Sec. Sec. 438.3(e)(2)
and 438.6(e) respectively.
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.2, 438.3(e),
457.10 and 457.1201(c) and (e) as proposed with minor modifications to
Sec. Sec. 438.3(e)(2), (e)(2)(ii) and (e)(2)(iii) to add a comma
between ``PIHP'' and ``or PAHP'' for consistency with current
regulatory text.
b. ILOS General Parameters (Sec. Sec. 438.16(a) Through (d),
457.1201(c), and (e), and 457.1203(b))
We believe ILOSs can give States and managed care plans
opportunities to strengthen access to care, address unmet needs of
Medicaid and CHIP enrollees, and improve the health of Medicaid and
CHIP beneficiaries. However, we believe it is necessary to implement
appropriate Federal protections to ensure the effective and efficient
use of Medicaid and CHIP resources, particularly since these services
and settings are not State plan-covered services and settings furnished
under managed care plan contracts, and we rely on the authority in
sections 1902(a)(4) and 2101(a) of the Act to establish methods for
proper and effective operations in Medicaid and CHIP respectively.
Therefore, to ensure States and managed care plans utilize ILOSs
effectively and in a manner that best meets the needs of the enrollees,
as well as that related Federal expenditures are reasonable and
appropriate, we proposed several key requirements in Sec. 438.16.
We believe that a limitation on the types of substitute services or
settings that could be offered as an ILOS was a key protection to
ensure an ILOS is an appropriate and efficient use of Medicaid and CHIP
resources, and we believe this is a reasonable method to ensure proper
and effective operations in Medicaid and CHIP in accordance with
authority in sections 1902(a)(4) and 2101(a) of the Act, respectively.
We believe that the services and settings that could be provided as an
ILOS should be consistent with the services and settings that could be
authorized under the Medicaid or CHIP State plan or a program
authorized through a waiver under section 1915(c) of the Act. As
further described in section I.B.4.a. of this final rule, we believe
the only Medicaid exception should be a short term stay in an IMD for
the provision of inpatient mental health or substance use disorder
treatment, which already has appropriate safeguards per requirements
outlined in Sec. 438.6(e). Therefore, we proposed to require in Sec.
438.16(b) that an ILOS must be approvable as a service or setting
through a State plan amendment, including sections 1905(a), 1915(i), or
1915(k) of the Act, or a waiver under section 1915(c) of the Act. For
example, personal care homemaker services are approvable as a covered
service in a waiver under section 1915(c) of the Act, and would be an
approvable ILOS if the State determines it is a medically appropriate
and cost effective substitute for a service or setting covered under
the State plan.
For separate CHIP, we similarly proposed that ILOSs must be
consistent with services and settings approvable under sections 2103(a)
through (c), 2105(a)(1)(D)(ii), and 2110(a) of the Act, as well as the
services and settings identified in Sec. 438.16(b). For this reason,
we proposed to adopt the requirements proposed at Sec. 438.16(b) by
amending Sec. 457.1201(e) to include a new cross-reference to Sec.
438.16(b). We also reminded States that the use of an ILOS does not
absolve States and managed care plans of their responsibility to comply
with other Federal requirements. States must ensure that contracts with
managed care plans comply with all applicable Federal and State laws
and regulations in accordance with Sec. Sec. 438.3(f) and 457.1201(f).
For example, with the exception of short term IMD stays as described in
section I.B.4.a. of this final rule, ILOSs must adhere to general
prohibitions on payment for room and board under Title XIX of the Act.
Additionally, States and managed care plans must ensure access to
emergency services in accordance with the Emergency Medical Treatment
and Labor Act and compliance with the Americans with Disabilities Act
and Section 504 of the Rehabilitation Act. Moreover, consistent with
Sec. 438.208(c)(3), States must comply with person-centered planning
requirements as applicable.
Because ILOSs are provided as substitutes for State plan-covered
services and settings, we believe that we have an obligation to ensure
appropriate fiscal protections for Medicaid and CHIP investments in
ILOSs, and that there should be a limit on the amount of expenditures
for ILOSs to increase accountability, reduce inequities in the services
and settings available to beneficiaries across managed care and FFS
delivery systems, and ensure enrollees receive State plan-covered
services and settings. We rely on the authority in section 1902(a)(4)
of the Act to establish methods for proper and efficient operations in
Medicaid and section 2101(a) of the Act for establishing efficient and
effective health assistance in CHIP. To determine a reasonable limit on
expenditures for ILOSs, we proposed to limit allowable ILOS costs to a
portion of the total costs for each managed care program that includes
ILOS(s), hereinafter referred to as an ILOS cost percentage. States
claim FFP for the capitation payments they make to managed care plans.
Capitation payments are based on the actuarially sound capitation rates
as defined in Sec. 438.2, for Medicaid, and rates are developed with
``actuarially sound principles'' as required for separate CHIP at Sec.
457.1203(a). The utilization and cost associated with ILOSs are
accounted for in the development of Medicaid and separate CHIP
capitation rates in accordance with Sec. Sec. 438.3(e)(2)(iv) and
457.1201(e) respectively. Therefore, we proposed in Sec. 438.16(c),
that the ILOS cost
[[Page 41144]]
percentage must be calculated based on capitation rates and capitation
payments as outlined in further detail in this section. In section
I.B.2.l. of the proposed rule, we proposed requirements for State
directed payments as a separate payment term, and proposed these costs
should be accounted for in the denominator of the ILOS cost percentage
as these are payments made by the State to the managed care plans. The
reporting requirements in this proposal are authorized by sections
1902(a)(6) and 2107(b)(1) of the Act which require that States provide
reports, in such form and containing such information, as the Secretary
may from time to time require.
Given that actuarially sound capitation rates are developed
prospectively based on historical utilization and cost experience, as
further defined in Sec. 438.5, we believe that an ILOS cost percentage
and associated expenditure limit should be measured both on a projected
basis when capitation rates are developed and on a final basis after
capitation payments are made by States to the managed care plans.
Therefore, we proposed to define both a ``projected ILOS cost
percentage'' and ``final ILOS cost percentage'' in Sec. 438.16(a) as
the amounts for each managed care program that includes ILOS(s) using
the calculations proposed in Sec. 438.16(c)(2) and (3), respectively.
Additional details on these percentages are provided later in this
section. We also believe the projected ILOS cost percentage and final
ILOS cost percentage should be measured distinctly for each managed
care program as capitation rates are typically developed by program,
ILOSs available may vary by program, and each managed care program may
include differing populations, benefits, geographic areas, delivery
models, or managed care plan types. For example, one State may have a
behavioral health program that covers care to most Medicaid
beneficiaries through PIHPs, a physical health program that covers
physical health care to children and pregnant women through MCOs, and a
program that covers physical health and MLTSS to adults with a
disability through MCOs. Another State may have several different
managed care programs that serve similar populations and provide
similar benefits through MCOs, but the delivery model and geographic
areas served by the managed care programs vary. We addressed managed
care program variability within the 2016 final rule when we noted that
``This clarification in the regulatory text to reference ``managed care
program'' in the regulatory text is to recognize that States may have
more than one Medicaid managed care program--for example physical
health and behavioral health . . .'' (81 FR 27571). Therefore, we did
not believe it will be consistent with our intent to develop an ILOS
cost percentage by aggregating data from more than one managed care
program since that will be inconsistent with rate development, the
unique elements of separate managed care programs, and the ILOSs
elements (target populations, allowable provider types, etc.) that vary
by managed care program. Developing the ILOS cost percentage by managed
care program will further ensure appropriate fiscal safeguards for each
managed care program that includes ILOS(s). We believe 5 percent is a
reasonable limit on ILOS expenditures because it is high enough to
ensure that ILOSs will be used effectively to achieve their intended
purpose, but still low enough to ensure appropriate fiscal safeguards.
This proposed 5 percent limit would be similar to incentive
arrangements at Sec. 438.6(b), which limits total payment under
contracts with incentive arrangements to 105 percent of the approved
capitation payments attributable to the enrollees or services covered
by the incentive arrangement. In Sec. 438.6(b)(2), we note that total
payments in excess of 105 percent will not be actuarially sound. We
believe this existing limitation for incentive arrangements allows
States to design and motivate quality and outcome-based initiatives
while also maintaining fiscal integrity. We believe a similar threshold
was necessary and appropriate for ILOSs. Therefore, we proposed, at
Sec. 438.16(c)(1)(i), to require that the projected ILOS cost
percentage could not exceed 5 percent and the final ILOS cost
percentage could not exceed 5 percent.
For separate CHIP, we require States at Sec. 457.1203(a) to
develop capitation rates consistent with actuarially sound principles,
but at Sec. 457.1203(b) we allow for States to establish higher
capitation rates if necessary to ensure sufficient provider
participation or provider access or to enroll providers who demonstrate
exceptional efficiency or quality in the provision of services. While
we do not impose a similar limit for incentive arrangements in separate
CHIP capitation rates as we do for Medicaid capitation rates, we wish
to align with Medicaid in limiting projected and final ILOS cost
percentages to 5 percent of capitation payments for separate CHIPs. For
this reason, we proposed to amend Sec. 457.1203(b) to adopt 5 percent
ILOS cost percentage limits by amending Sec. 457.1201(c) to include a
new cross-reference to Sec. 438.16(c)(1).
We also proposed, in Sec. 438.16(c)(1)(ii), that the State's
actuary will have to calculate the projected ILOS cost percentage and
final ILOS cost percentage on an annual basis and recalculate these
projections annually to ensure consistent application across all States
and managed care programs. Furthermore, to ensure that the projected
ILOS cost percentage and final ILOS cost percentage would be developed
in a consistent manner with how the associated ILOS costs would be
included in rate development, we proposed at Sec. 438.16(c)(1)(iii) to
require that the projected ILOS cost percentage and the final ILOS cost
percentage would be certified by an actuary and developed in a
reasonable and appropriate manner consistent with generally accepted
actuarial principles and practices. An ``actuary'' is defined in Sec.
438.2 as an individual who meets the qualification standards
established by the American Academy of Actuaries for an actuary and
follows the practice standards established by the Actuarial Standards
Board, and who is acting on behalf of the State to develop and certify
capitation rates. Therefore, we believe that the actuary that will
certify the projected and final ILOS cost percentages should be the
same actuary that developed and certified the capitation rates that
included ILOS(s). For separate CHIP, we do not require actuarial
certification of capitation rates and are not adopting the requirement
at Sec. 438(c)(1)(iii). We proposed to amend Sec. 457.1201(c) to
exclude requirements for certification by an actuary. However, we
reminded States that separate CHIP rates must be developed using
``actuarially sound principles'' in accordance with Sec. 457.1203(a).
We proposed at Sec. 438.16(c)(2), that the projected ILOS cost
percentage would be calculated by dividing the portion of the total
capitation payments that are attributable to all ILOSs, excluding short
term stays in an IMD as specified in Sec. 438.6(e), for each managed
care program (numerator) by the projected total capitation payments for
each managed care program, including all State directed payments in
effect under Sec. 438.6(c) and pass-through payments in effect under
Sec. 438.6(d), and the projected total State directed payments that
are paid as a separate payment term as described in Sec. 438.6(c)(6)
(denominator). We also proposed, at Sec. 438.16(c)(3), that the final
ILOS cost percentage would be calculated by dividing the portion of the
total capitation payments that are attributable
[[Page 41145]]
to all ILOSs, excluding a short term stay in an IMD as specified in
Sec. 438.6(e), for each managed care program (numerator) by the actual
total capitation payments for each managed care program, including all
State directed payments in effect under Sec. 438.6(c) and pass-through
payments in effect under Sec. 438.6(d), and the actual total State
directed payments that are paid as a separate payment term as described
in Sec. 438.6(c)(6) (denominator). We believe these proposed
numerators and denominators for the projected and final ILOS cost
percentages would be an accurate measurement of the projected and final
expenditures associated with ILOSs and total program costs in each
managed care program in a risk-based contract. For separate CHIP, we
proposed to align with the projected and final ILOS cost percentage
calculations by amending Sec. 457.1201(c) to include cross-references
to Sec. 438.16(c)(2) through (3). However, since pass-through payments
and State directed payments are not applicable to separate CHIP, we
proposed to exclude all references to pass-through payments and State
directed payments at Sec. 457.1201(c).
We considered proposing that the actual expenditures of the managed
care plans for ILOSs and total managed care program costs, tied to
actual paid amounts in encounter data, be the numerator and denominator
for the final ILOS cost percentage. However, we determined this was
inconsistent with how States claim FFP for capitation payments in a
risk contract (based on the actuarially sound capitation rates as
defined in Sec. 438.2 for each managed care program, rather than on
the actual plan costs for delivering ILOSs based on claims and
encounter data submitted). Consistent with all services and settings
covered under the terms of the managed care plans' contracts, we
acknowledged that the actual plan experience would inform prospective
rate development in the future, but it was an inconsistent measure for
limiting ILOS expenditures associated with FFP retroactively. We
believe expenditures for short term stays in an IMD should be excluded
from the numerator of these calculations as they are excluded from the
proposed requirements outlined in Sec. 438.16. We also believe the
denominator of these calculations should include all State directed
payments and pass-through payments that are included into capitation
rates as outlined in Sec. 438.6(c) and (a) respectively. It is
necessary to include these State directed payments and pass-through
payments to ensure that the projected and final expenditures would
accurately reflect total capitation payments.
We believe the projected ILOS cost percentage should be included in
the rate certification for each managed care program that includes
ILOS(s) and any subsequent revised rate certification (for example,
rate amendment) as applicable, such as those that change the ILOSs
offered, capitation rates, pass-through payments and/or State directed
payments. As previously described in this section, we initially
proposed at Sec. 438.16(c)(1)(iii) that the actuary who certifies the
projected ILOS cost percentage should be the same actuary who develops
and certifies the associated Medicaid capitation rates and the State
directed payments paid as a separate payment term (see section I.B.2.l.
of the proposed rule for details on this proposal for separate payment
terms). We also believe that including this percentage within the rate
certification would reduce administrative burden for States and
actuaries while also ensuring consistency between how this percentage
would be calculated and how ILOS costs would be accounted for in rate
development. Therefore, we proposed to require, at Sec.
438.16(c)(5)(i), that States annually submit to CMS for review the
projected ILOS cost percentage for each managed care program as part of
the Medicaid rate certification required in Sec. 438.7(a). For
separate CHIP, we do not require actuarial certification of capitation
rates or review by CMS, and for this reason we do not adopt the new
requirement proposed at Sec. 438.16(c)(5)(i) for separate CHIP.
Under the proposed rule, the proposed denominator for the final
ILOS cost percentage, in Sec. 438.16(c)(3)(i), would have been based
on the actual total capitation payments and the State directed payments
paid as a separate payment term (see section I.B.2.l. of the proposed
rule for details on this proposal for separate payment terms) paid by
States to managed care plans. We recognized in the proposed rule that
calculating the final ILOS cost percentage under this scenario would
take States and actuaries some time. For example, changes to the
eligibility file and revised rate certifications for rate amendments
may impact the final capitation payments that are a component of the
calculation. We also believe documentation of the final ILOS cost
percentage is a vital component of our monitoring and oversight as it
will ensure that the expenditures for ILOSs comply with the proposed 5
percent limit; and therefore, must be submitted timely. Given these
factors, we believe that 2 years is an adequate amount of time to
accurately perform the calculation. Therefore, we proposed, at Sec.
438.16(c)(5)(ii), to require that States must submit the final ILOS
cost percentage report to CMS with the rate certification for the
rating period beginning 2 years after the completion of each 12-month
rating period that included an ILOS(s). Under this proposal, for
example, the final ILOS cost percentage report for a managed care
program that uses a CY 2024 rating period will be submitted to CMS with
the CY 2027 rate certification. For separate CHIP, we do not require
review of capitation rates by CMS and did not propose to adopt the
requirements at Sec. 438.16(c)(5)(ii) for separate CHIP.
We considered requiring the final ILOS cost percentage be submitted
to CMS within 1 year after the completion of the rating period that
included ILOS(s) to receive this data in a timelier fashion. However,
we were concerned this may not be adequate time for States and
actuaries given the multitude of factors described previously in this
section. We requested comment on whether our assumption that 1 year is
inadequate is correct.
We also believe that it was appropriate for States' actuaries to
develop a separate report to document the final ILOS cost percentage,
rather than including it in a rate certification, because the final
ILOS cost percentage may require alternate data compared to the base
data that were used for prospective rate development, given the timing
of base data requirements as outlined in Sec. 438.5(c)(2). However,
this final ILOS cost percentage could provide details that should
inform prospective rate development, such as through an adjustment
outlined in Sec. 438.5(b)(4), so we believe it should be submitted
along with the rate certification. We note that this proposal is
similar to the concurrent submission necessary for the MLR reporting at
Sec. 438.74. We considered proposing that States submit this report
separately to CMS upon completion. However, we believe there should be
consistency across States for when this report is submitted to CMS for
review, and we believe receiving this report and the rate certification
at the same time will enable CMS to review them concurrently. For these
reasons, we proposed, at Sec. 438.16(c)(5)(ii), to require that States
submit the final ILOS cost percentage annually to CMS for review as a
separate report concurrent with the rate certification submission
required in Sec. 438.7(a). We intend to issue additional guidance on
the standards and documentation requirements for this
[[Page 41146]]
report. For separate CHIP, we do not require review of capitation rates
by CMS and did not propose to adopt the requirements at Sec.
438.16(c)(5)(ii) for separate CHIP.
We believe there must be appropriate transparency on the managed
care plan costs associated with delivering ILOSs to aid State oversight
and monitoring of ILOSs, and to ensure proper and effective operations
in Medicaid in accordance with authority in section 1902(a)(4) of the
Act. Therefore, we proposed, in Sec. 438.16(c)(4), that States provide
to CMS a summary report of the actual managed care plan costs for
delivering ILOSs based on claims and encounter data provided by the
managed care plans to States. We also believe this summary report
should be developed concurrently and consistently with the final ILOS
cost percentage to ensure appropriate fiscal safeguards for each
managed care program that includes ILOS(s). We believe this summary
report should be developed for each managed care program consistent
with the rationale described in section I.B.4.b. of this final rule for
developing the ILOS cost percentage for each managed care program.
Therefore, in Sec. 438.16(a), we proposed to define a ``summary report
for actual MCO, PIHP, and PAHP ILOS costs'' and proposed that this
summary report be calculated for each managed care program that
includes ILOSs. We also proposed in Sec. 438.16(c)(1)(ii) that this
summary report be calculated on an annual basis and recalculated
annually. We proposed in Sec. 438.16(c)(1)(iii) that this summary
report be certified by an actuary and developed in a reasonable and
appropriate manner consistent with generally accepted actuarial
principles and practices. Finally, we proposed in Sec.
438.16(c)(5)(ii) that this summary report be submitted to CMS for
review within the actuarial report that includes the final ILOS cost
percentage. For separate CHIP, we do not require similar actuarial
reports and did not propose to adopt the annual ILOS cost report
requirements by excluding references to them at Sec. 457.1201(c).
To balance States' administrative burden with ensuring fiscal
safeguards and enrollee protections related to ILOSs, we believe it
will be appropriate to use a risk-based approach for States'
documentation and evaluation requirements. This proposed reporting
requirement is authorized by sections 1902(a)(6) and 2107(b)(1) of the
Act which requires that States provide reports, in such form and
containing such information, as the Secretary may from time to time
require. Therefore, we proposed that the ILOS documentation States
would submit to CMS, as well as an evaluation States would complete,
would vary based on a State's projected ILOS cost percentage for each
managed care program. We believe the projected ILOS cost percentage
would be a reasonable proxy for identifying States that offer a higher
amount of ILOSs, in comparison to overall managed care program costs,
and likely could have a corresponding higher impact to Federal
expenditures. As we considered the types of State activities and
documentation that could vary under this proposed risk-based approach,
we considered which ones would be critical for all States to undertake
for implementation and continual oversight of the use of ILOSs, but
would not require our review unless issues arose that warranted
additional scrutiny. We proposed that documentation requirements for
States with a projected ILOS cost percentage that is less than or equal
to 1.5 percent would undergo a streamlined review, while States with a
higher projected ILOS cost percentage would have more robust
documentation requirements. Additionally, we proposed States with a
higher final ILOS cost percentage would be required to submit an
evaluation of ILOSs to CMS. These parameters are noted further in
sections I.B.4.d. and I.B.4.g. of this final rule.
As we considered a reasonable percentage for this risk-based
approach, we evaluated flexibilities currently offered in part 438 to
assess if similar thresholds would be reasonable for this purpose.
These flexibilities included the opportunity available to States to
adjust rates without the requirement for a revised rate certification.
Specifically, we are referring to the 1 percent flexibility for States
that certify rate ranges in accordance with Sec. 438.4(c)(2)(iii) and
the 1.5 percent flexibility for States that certify capitation rates in
accordance with Sec. 438.7(c)(3). An additional flexibility currently
available to States relates to incentive arrangements. In accordance
with Sec. 438.6(b)(2), total payment under States' managed care plan
contracts with incentive arrangements are allowed to be no greater than
105 percent of the approved capitation payments attributable to the
enrollees or services covered by the incentive arrangement. As we
evaluated a reasonable and appropriate threshold to utilize for this
risk-based approach, we explored utilizing similar flexibilities of 1
percent, 1.5 percent and 5 percent, and also considered 2.5 percent as
a mid-point in this 5 percent range.
We did not believe 5 percent was a reasonable percentage for this
risk-based approach as this is the proposed limit for the projected and
final ILOS cost percentages described in this section. We believe a
greater degree of State documentation, and CMS oversight, was necessary
for States that offer ILOSs representing a higher share of overall
managed care program costs, and likely have a corresponding higher
impact on Federal expenditures. In the 2020 final rule, we finalized
Sec. 438.4(c)(2)(iii) to permit States that certify rate ranges to
make rate adjustments up to 1 percent without submitting a revised rate
certification. Our rationale was that States using rate ranges were
already afforded additional flexibility given the certification of rate
ranges, so it was not appropriate to utilize the same 1.5 percent
flexibility that is offered to States that certify capitation rates (85
FR 72763). We did not believe a similar rationale is appropriate or
relevant for this proposal, and thus, we did not believe 1 percent
would be the most appropriate threshold. We are also concerned that
utilizing 2.5 percent for a risk-based approach would result in
inadequate Federal oversight to ensure program integrity, such as
fiscal safeguards and enrollee protections related to ILOSs. We believe
1.5 percent, a de minimis amount, was appropriate to propose for
utilization of a risk-based approach for States' documentation and
evaluation requirements, and associated CMS review, as ILOS
expenditures less than or equal to 1.5 percent would likely be a
relatively minor portion of overall managed care program expenditures.
Therefore, we proposed 1.5 percent for this risk-based approach in
Sec. 438.16(d)(2); States with a projected ILOS cost percentage that
exceeds 1.5 percent would be required to adhere to additional
requirements described in sections I.B.4.d. and I.B.4.g. of this final
rule. For separate CHIP, we proposed to adopt the new documentation
requirements for States with a cost percentage that exceeds 1.5 percent
at Sec. 438.16(d)(2) by amending Sec. 457.1201(e) to include a cross-
reference to Sec. 438.16(d)(2).
We summarize and respond to public comments received in this
section on ILOSs (Sec. Sec. 438.16(a) through (d), 457.1201(c) and
(e), and 457.1203(b)) below.
Comment: Commenters generally supported the proposal that an ILOS
must be approvable as a service or setting through a waiver under
section 1915(c) of the Act or a State plan amendment, including section
1905(a), 1915(i) or 1915(k) of the Act, as they believe it would
implement ILOS guardrails and provide leeway under the proposed
definition to include services
[[Page 41147]]
and supports to support SDOH and HRSN efforts.
Response: We appreciate comments in support of our proposal as we
believe that ILOSs must be an appropriate and efficient use of Medicaid
and CHIP resources and advance the objectives of these programs. We
believe the proposal for an ILOS to be an approvable service or setting
under the State plan or waiver under section 1915(c) of the Act will
ensure an appropriate guardrail to meet these two aims.
Comment: Many commenters suggested revisions to the proposal that
an ILOS must be approvable through another Medicaid authority or
waiver. One commenter recommended revising Sec. 438.16(b) to include
services and settings approvable under Money Follows the Person while
another commenter recommended using a similar set of eligibility
criteria for Special Supplemental Benefits for the Chronically Ill
(SSBCI) offered by Medicare Advantage plans. Some commenters stated
that there should be no restriction on the types of services or
settings that could be approved as an ILOS while another recommended
creating an exception process for States that wanted to deviate from
Sec. 438.16(b). Another commenter recommended allowing room and board
that is generally not allowed in Title XIX of the Act. Other commenters
opposed this proposal and indicated it was too narrow, could limit
States' use of ILOSs and chill innovation with one of these commenters
indicating that any service or setting authorized in a demonstration
under section 1115 of the Act should be allowable as an ILOS.
Response: We do not believe it is appropriate to include services
and settings that are approvable in Money Follows the Person as it is a
demonstration program with unique funding and eligibility criteria.
SSBCI is a supplemental benefit option in Medicare Advantage
specifically for the certain chronically ill SSBCI-eligible plan
enrollees, so we do not believe it is relevant for ILOS policy as ILOSs
are not limited to a target population of the chronically ill nor a
supplemental benefit. We also do not believe authority under section
1115 of the Act is an adequate rationale to expand the scope of
allowable ILOSs as this authority is utilized to approve experimental,
pilot or demonstration projects that are found by the Secretary to be
likely to assist in promoting the objectives of the Medicaid program,
and this unique authority is separate and distinct from other
traditional Medicaid authorities such as the State plan. We further
believe that ensuring ILOSs comply with applicable Federal
requirements, such as the general prohibitions on payment for room and
board under Title XIX of the Act, is necessary and appropriate (see
section I.B.4.a. of this final rule for further details on short-term
IMD stays for inpatient mental health or substance use disorder
treatment). ILOSs are not to be used as a mechanism to evade compliance
with Federal statute and regulations. Therefore, we decline to adopt
any of these suggestions in the finalized definition.
We recognize that requiring an ILOS to be approvable as a service
or setting under the State plan or waiver under section 1915(c) of the
Act will place restrictions on allowable ILOSs, but we believe the
proposal strikes the right balance to encourage innovation while
ensuring appropriate use of Medicaid and CHIP resources. We do not
believe it is appropriate to consider an exception process for existing
ILOSs that do not meet the proposed definition in Sec. 438.3(b) as
this would create inequity in the use of ILOSs and fail to ensure
compliance with proposed Federal requirements, and we decline to revise
the proposal to adopt such a process. We also remind managed care plans
that if a service or setting they wish to provide does not meet ILOS
requirements, the plans may always choose to voluntarily provide
additional services in accordance with Sec. 438.3(e)(1) although the
cost of these services cannot be included when determining payment
rates under Sec. 438.3(c).
Comment: One commenter requested clarification on whether a service
or setting must be approved in a State's Medicaid or CHIP State plan or
waiver under section 1915(c) of the Act to be allowed as an ILOS.
Response: As specified in Sec. 438.16(b), an ILOS must be
approvable as a service or setting under the State plan or waiver under
section 1915(c) of the Act to be eligible as an ILOS; however, it does
not need to be approved in the State plan or waiver. For example, yoga
is not a service that is approvable in the Medicaid or CHIP State plan,
and therefore, it would not be eligible to be an ILOS. Additionally,
any limitations in the coverage of a service or setting in the State
plan or waiver under section 1915(c) of the Act must also be adhered to
if the service or setting is covered as an ILOS, such as the
limitations on room and board including that meals must be less than 3
meals per day and other limitations on allowable housing supports.\195\
---------------------------------------------------------------------------
\195\ On November 16, 2023, CMS published a CMCS Informational
Bulletin on coverage of services and supports to address HRSN needs
in Medicaid and CHIP that included a table on allowable HRSN
coverage and associated limitations: https://www.medicaid.gov/sites/default/files/2023-11/cib11162023.pdf.
---------------------------------------------------------------------------
Comment: One commenter recommended that CMS require more uniformity
on allowable ILOSs by providing States with a menu of approved ILOSs
that they can choose to implement within their Medicaid programs, with
the option for States to include other ILOSs at their discretion. The
commenter noted they believe that this uniformity could make it easier
to evaluate the effectiveness of each ILOS. Other commenters opposed
the proposal in Sec. 438.16(b) as they noted it required unnecessary
uniformity and decreased innovation.
Response: As required in Sec. 438.3(e)(2)(1), States are required
to determine that an ILOS is a medically appropriate and cost effective
substitute for the covered service or setting under the State plan, and
States have flexibility in Sec. Sec. 438.3(e) and 438.16 to identify
the ILOSs that they believe best meet enrollees' needs and the target
population for an ILOS. Appropriate ILOSs will also vary by managed
care program given the differing populations and benefits offered. As
such, we do not believe it is currently reasonable or appropriate for
CMS to provide a menu of approved ILOSs.
Comment: Some commenters requested clarification on whether
nutritional supports, services provided by community health workers, or
services provided through telehealth are allowable ILOSs while another
commenter recommended that chronic pain management not traditionally
covered by Medicaid or CHIP be considered approvable as an ILOS.
Another commenter requested clarification on whether transportation to
underlying services being provided as an ILOS would also be considered
as a component of the ILOS.
Response: We continue to believe it is not appropriate to cover
services or settings as an ILOS that are not approvable through the
State plan or waiver under section 1915(c) of the Act to ensure an ILOS
is an appropriate and efficient use of Medicaid and CHIP resources. As
such, States must assess whether an ILOS being considered for inclusion
in a managed care plan's contract is approvable in Medicaid and CHIP to
evaluate if it is eligible as an ILOS. Similarly, transportation in
conjunction with another service that is an ILOS could potentially be
allowable as a component of that ILOS only if this is an allowable
component of a service or setting that is approvable under the
[[Page 41148]]
State plan or waiver under section 1915(c) of the Act.
Comment: Generally, there was support for the proposed calculation
and documentation of projected and final ILOS cost percentages,
including the exclusion of short-term IMD stays that are ILOSs, and the
summary report of managed care plans' ILOS costs. Many commenters also
indicated that the definitions for the ILOS cost percentages were
reasonable and appropriate. There were no specific comments on our
proposals that these cost percentages be certified by State actuaries
and reviewed by CMS. Another commenter supported our proposal to allow
2 years for submission of the final ILOS cost percentage as reasonable
and indicated that the alternative of 1 year would be insufficient time
for States to finalize this calculation. Some commenters supported the
proposed 5 percent limit for the projected ILOS cost percentage and
final ILOS cost percentage at Sec. 438.16(c)(1), and indicated it was
an appropriate upper threshold for ILOS expenditures as a component of
total capitation payments.
Response: We believe these proposals are appropriate fiscal
protections for Medicaid and CHIP investments in ILOSs. We also
appreciate the feedback we received on the proposal in Sec.
438.16(c)(5)(ii) regarding the timing to submit the final ILOS cost
percentage. As the comments confirmed our concern that 1 year would be
insufficient time for States and actuaries to develop this final
calculation, we are finalizing this provision without revision.
Comment: Some commenters suggested revisions to the proposed
calculations and documentation for ILOS cost percentages. One commenter
recommended that CMS allow States with smaller programs to calculate
the ILOS cost percentage across programs or require integrated programs
to calculate ILOS cost percentages by major service types such as
physical health, behavioral health, or LTSS within the single program
(with a higher threshold limit for the ILOS cost percentage to offset
the narrower denominator). Another commenter stated concern that the
proposed definitions for the projected ILOS cost percentage and the
final ILOS cost percentage were complex although no detail was provided
by the commenter and indicated that the ILOS cost percentage
calculations would create a new State administrative burden. Another
commenter questioned the need for the calculation of both a projected
ILOS cost percentage and a final ILOS cost percentage as the numerator
for these calculations is consistent and only the denominator varies.
This commenter requested clarification on why the final ILOS cost
percentage was necessary given the proposal in Sec. 438.16(c)(4) for
States to submit to CMS a summary report of the managed care plans'
actual ILOS costs for delivering ILOSs based on the claims and
encounter data.
Response: We acknowledge that the calculation of projected ILOS
cost percentages and final ILOS cost percentages will be a new State
administrative burden; however, we believe it is a necessary tool to
ensure appropriate Federal oversight. We accounted for this burden in
the associated Collection of Information for Sec. 438.7 Rate
Certifications (see section II.B.4. of this final rule for further
details).
We continue to believe that an ILOS cost percentage should be
calculated for each managed care program. We do not believe it is
appropriate for this to be an aggregate calculation across multiple
programs or broken down by major service category. This calculation
should occur distinctly for each managed care program as ILOSs
available may vary by program, each managed care program may include
differing populations, benefits, geographic areas, delivery models, or
managed care plan types, and capitation rates are typically developed
by program.
We agree that the numerator for the projected ILOS cost percentage
and final ILOS cost percentage are identical, and it is the denominator
that varies. As capitation rates are developed prospectively based on
historical utilization and cost experience, the denominator for the
projected ILOS cost percentage can only capture the projected total
capitation payments. Conversely, the denominator of the final ILOS cost
percentage captures the actual total capitation payments paid by the
State to the managed care plans. As States claim FFP on these
capitation payments and not managed care plans' actual expenditures, we
believe it is necessary and appropriate to ensure compliance with the 5
percent limit proposed in Sec. 438.16(c)(1) for both percentages. We
also note that the final ILOS cost percentage is developed based on
capitation payments while the summary report captures managed care
plans' actual costs for delivering ILOSs based on claims and encounter
data; these two are distinct reporting requirements to acknowledge the
nature of risk-based rate development and how FFP is claimed for
managed care expenditures.
Comment: One commenter recommended that CMS provide guidance on how
costs associated with third party administrative management of ILOSs
would be factored into the ILOS cost percentage. Another commenter
recommended that CMS help States invest in infrastructure to support
ILOS administration.
Response: We do not believe it is appropriate to include costs
associated with third party management, operational costs, or
infrastructure of ILOSs within any portion of ILOS costs. That is,
these expenditures should not be included in any part of the ILOS cost
percentage, ILOS benefit or non-benefit component, or any portion of
Medicaid managed care capitation rates. For example, an ILOS cost
percentage is focused on the portion of the total capitation payments
that is attributable to the provision of ILOSs. In accordance with
Sec. 438.5(e), the non-benefit component of capitation rates includes
reasonable, appropriate, and attainable expenses including those
related to the managed care plan's operational costs associated with
the provision of services identified in the Sec. 438.3(c)(1)(ii) to
the populations covered under the contract. While we are revising Sec.
438.3(c)(1)(ii) to ensure that final capitation rates may be based on
State plan, ILOSs and additional services deemed by the State to be
necessary to comply with mental health parity, Sec. 438.3(c)(1)(ii)
also requires that this payment amount must be adequate to allow the
managed care plan to efficiently deliver covered services to Medicaid-
eligible individuals in a manner compliant with contractual
requirements. As ILOSs are substitutes for State plan-covered services
and settings that are provided at the option of the managed care plan,
and not a contractual requirement, we do not believe it is appropriate
to include associated costs for managed care plan operational costs,
the third party administrative management of ILOSs or associated plan
or provider infrastructure needs in the benefit or non-benefit
component of capitation rates, or the associated ILOS cost percentage
that is calculated based on capitation payments.
Comment: One commenter stated concern regarding the additional ILOS
reporting proposed at Sec. 438.16(c)(5)(ii) and suggested that CMS
leverage existing reporting structures like the MCPAR.
Response: We agree with the commenter that we should leverage
existing reporting, including the MCPAR for ILOSs; accordingly, we
revised the requirement to include ILOSs in reporting related to
availability
[[Page 41149]]
and accessibility of covered services in the MCPAR at Sec.
438.66(e)(2)(vi). However, we do not believe capturing information on
ILOSs in the MCPAR alone is sufficient to appropriately monitor and
oversee the fiscal impact of ILOSs on managed care expenditures. ILOSs
are included in capitation rates and, as outlined in this section of
the preamble as well as section I.B.4.e. of this final rule, we believe
it is appropriate for us to review the ILOS cost percentage and the
summary report of managed care plans' actual ILOS costs as a component
of our review of rate certifications. This helps us to review the
calculation for the projected ILOS cost percentage and determine if it
was developed in a manner consistent with how associated ILOS costs
would be included in rate development and that the historical
experience garnered from the final ILOS cost percentage and summary
report of managed care plans' actual ILOS costs informs prospective
rate development as appropriate.
Comment: Many commenters recommended revisions to the proposed 5
percent limit for the ILOS cost percentage or were in opposition to the
limit. One commenter supported this limit, but raised concerns that the
cost of a service should not be the principal or determinative
criterion in findings of medical necessity for Medicaid coverage. Other
commenters supported a 5 percent limit on ILOS expenditures but
recommended other exceptions to this limit which varied by commenter or
to focus the limit on novel ILOSs. Recommended exceptions included all
approved ILOSs, ILOSs focused on HCBS, or ILOSs needed to ensure access
to quality care such as HCBS and behavioral health. One commenter
recommended that the proposed 5 percent limit be a general guideline
while allowing States the flexibility to propose a modification to this
limit by means of a waiver or exception process while another commenter
recommended a process by which the 5 percent limit would be removed if
a State met a pre-defined set of quality or cost outcomes. One
commenter recommended that States should have the flexibility to set
their own limit. Another commenter recommended this limit be increased
to 10 to 15 percent for some programs, such as smaller behavioral
health programs.
Other commenters opposed any limit of the projected ILOS cost
percentage or final ILOS cost percentage. These commenters raised
concerns that a fiscal limit could discourage utilization of ILOSs,
reduce the use of existing ILOSs, remove State flexibility and create
inequities in the ILOSs offered across States. One commenter stated
concern that any fiscal limit could create hardships for smaller,
limited benefit managed care programs while another stated similar
concerns for nonintegrated programs. One commenter noted that the
proposed CMS review of ILOSs and evaluation, as applicable, as well as
the documentation of a projected ILOS cost percentage should be
sufficient for demonstrating the reasonableness and appropriateness of
ILOSs instead of requiring an overall fiscal limit. Another commenter
noted that the cost effectiveness test for section 1915(b)(3) of the
Act services should be sufficient and did not believe an additional
limit was necessary for ILOSs. A few commenters requested clarification
for CMS's rationale for selecting 5 percent and some of those
commenters raised concerns that 5 percent was arbitrary. One commenter
who opposed any fiscal limit did acknowledge that they were unaware of
any States that actually spent more than 5 percent of total capitation
payments on ILOSs.
Response: We believe that there must be appropriate and consistent
fiscal guardrails on the use of ILOSs in every managed care program to
ensure proper and efficient operations in Medicaid, and efficient and
effective health assistance in CHIP. While we recognize that any limit
imposed on ILOS expenditures in comparison to overall program
expenditures will limit State and managed care plan use of ILOSs to
some degree, we believe that we have an obligation to implement
appropriate fiscal constraints for Medicaid and CHIP investments in
ILOSs, and it is appropriate to set a limit for each managed care
program so that ILOS expenditures do not grow unfettered. We continue
to believe a fiscal limit would increase accountability, reduce
inequities in the services and settings available to beneficiaries
across managed care and FFS delivery systems, and ensure that enrollees
receive State plan-covered services and settings. We believe a 5
percent limit on ILOS expenditures in comparison to total program
expenditures is a reasonable limit for every managed care program,
including smaller, limited benefit programs, because it is high enough
to encourage the use of ILOSs, at the plan and enrollee option, but
still low enough to maintain appropriate fiscal safeguards.
We do not believe it is reasonable or appropriate to include
additional exceptions to the proposed fiscal limit as we believe this
would exacerbate inequities in the coverage of ILOSs in State programs
as well as create operational and oversight challenges. ILOSs are
substitute services and settings provided in lieu of services or
settings covered under the State plan. States have an obligation to
ensure that all services covered under the State plan are available and
accessible to managed care enrollees in a timely manner as required at
Sec. Sec. 438.206 and 457.1230(a) for Medicaid and separate CHIP,
respectively, and that there is adequate capacity to serve the expected
enrollment as required at Sec. Sec. 438.207 and 457.1230(b),
respectively. Therefore, we do not believe an exception process is
reasonable based on access concerns. If States have concerns about
compliance with this fiscal limit, States should explore transitioning
to cover the services as Medicaid benefits through other pathways for
coverage such as the State plan authority in section 1905(a), 1915(i)
and 1915(k) or a waiver under section 1915(c) of the Act. For example,
we are aware of one State that recently undertook an assessment of its
historical ILOSs and determined that some historical ILOSs, or a
component of an ILOS, were duplicative of services authorized in the
Medicaid State plan. Once this State terminated these historical ILOSs
prospectively, this eliminated the State's concern of exceeding the
projected ILOS cost percentage for its applicable managed care program
as the numerator of the ILOS cost percentage is the portion of the
total capitation payments that is attributable to the provision of
ILOSs and not services authorized in the Medicaid State plan as
benefits.
The final rule does not stipulate that ILOS cost is the principal
or determinative criterion in findings of medical necessity for
Medicaid or CHIP coverage. In accordance with existing Federal
requirements at Sec. 438.3(e)(2)(i), States must determine each ILOS
to be a medically appropriate and cost effective substitute for the
covered service or setting under the State plan. Cost effectiveness of
an ILOS is one factor in a State's determination, and medical
appropriateness is an additional factor. CMS proposes to ensure clarity
in the managed care plan contracts on the target population(s) for
which each ILOS is determined to be medically appropriate and cost
effective substitute for a State plan-covered service or setting (see
section I.B.4.d. of this final rule for further details). We continue
to believe that there should be an overall fiscal limit on ILOS
expenditures to ensure appropriate use of ILOSs and to avoid creating a
perverse incentive for States and plans
[[Page 41150]]
not to provide State plan-covered services and settings. For the
reasons outlined above, we decline to revise the proposed 5 percent
limit at Sec. 438.16(c)(1).
We also remind commenters that section 1915(b)(3) of the Act
services are separate and distinct services from ILOSs and have a
separate and distinct cost effectiveness requirement. Under section
1915(b)(3) of the Act, States share cost savings resulting from the use
of more cost effective medical care with enrollees by providing them
with additional services, known as section 1915(b)(3) services. There
is a specific cost effectiveness test that States must prospectively
meet to request approval from CMS for section 1915(b)(3) services as a
component of a section 1915(b) waiver application as well as
retrospective cost effectiveness reporting.
Comment: One commenter stated concern about the administrative
burden that the proposed ILOS rules will pose for smaller, more
specialized CHIP managed care programs. In particular, the 5 percent
limitation on ILOS as a proportion of overall capitated payments has a
disproportionate impact on CHIP programs with a smaller enrollment
population. The commenter stated the increased limitations on managed
care programs do not align with the overall intent of managed care and
restrict the flexibilities that make managed care a desirable model for
children's services.
Response: We appreciate the commenter's concerns for the potential
impact of new ILOS requirements on managed care programs that serve
smaller separate CHIP populations. In our determinations throughout
this final rule for which provisions would align separate CHIP with
Medicaid, we sought to balance the burden on CHIP State agencies and
separate CHIP managed care programs with the need for responsible
Federal oversight and protections to CHIP beneficiaries. We believe
requiring a 5 percent limit on ILOS expenditures in comparison to total
program expenditures remains a reasonable limit even for managed care
programs serving smaller populations. The 5 percent limit on ILOS
expenditures ensures fiscal responsibility and additional transparency
for State and Federal oversight of managed care programs. If separate
CHIP managed care programs have concerns about exceeding this 5 percent
limit for the ILOS cost percentage, we encourage States to evaluate
services currently being provided as ILOSs that might alternately be
coverable under the CHIP State plan through the service definitions at
Sec. 457.402--specifically ``home and community-based health care
services and related supportive services.'' States also have the
flexibility to cover SDOH and HRSN services through CHIP Health
Services Initiatives.
Comment: One commenter requested that if CMS finalizes the 5
percent limit, that CMS should identify the affected States so
interested parties can meaningfully understand the impacts of the
proposed limits.
Response: We agree that States should engage with interested
parties to ensure clarity on how the ILOS fiscal limit may impact
particular managed care programs and we encourage the engagement of
interested parties more broadly such as on ILOS development, evaluation
and any necessary transition planning. We are unable to currently
identify potentially affected States as ILOS offerings and enrollee
utilization may vary year to year, and this will impact State
calculations for the ILOS cost percentage. We encourage interested
parties to engage directly with States.
Comment: One commenter recommended that CMS closely monitor this 5
percent limit after implementation to assess if the limit should be
revisited in future rulemaking.
Response: We agree that it is imperative that CMS and States
closely monitor implementation of this required limit to ensure
compliance.
Comment: Several commenters supported the annual reporting of
managed care plans' ILOS costs. One commenter indicated that ILOSs and
the amounts paid by managed care plans should continue to be monitored
at the State and national levels to drive Federal policy changes to the
Medicaid program. Another commenter recommended that this spending data
be made publicly available.
Response: We appreciate the support for this proposal to require
annual reporting on managed care plans' actual ILOS costs and we
believe this data should inform rate development and could be utilized
to inform other policy changes. Managed care plans are required to
provide all encounter data, including allowed and paid amounts, to the
State per Sec. Sec. 438.242(c)(3) and 457.1233(d) for Medicaid and
separate CHIP respectively, and the State is required to submit this
data to T-MSIS per Sec. Sec. 438.818 and 457.1233(d), respectively. As
encounter data will be generated when an ILOS is rendered, the data
will be captured in T-MSIS and treated as other encounter data in the
production of T-MSIS analytic files.\196\ At this time, CMS does not
plan to publicly release the annual reporting by managed care plans on
actual ILOS costs, but we will take this into consideration in the
future.
---------------------------------------------------------------------------
\196\ https://www.medicaid.gov/medicaid/data-systems/macbis/transformed-medicaid-statistical-information-system-t-msis/t-msis-analytic-files/index.html.
---------------------------------------------------------------------------
Comment: Some commenters supported the use of a risk-based approach
for States' ILOS documentation and evaluation requirements as they
believe the proposals struck the right balance between Federal
oversight and State administrative burden.
Response: We appreciate the support for these proposals, and for
the feedback that our proposals appropriately balanced States'
administrative burden with ensuring fiscal safeguards and enrollee
protections related to ILOSs.
Comment: One commenter requested clarification on whether the
proposed 1.5 percent threshold applied to each managed care plan
contract or each individual ILOS.
Response: The threshold for the risk-based approach is by managed
care program. The definitions for a projected ILOS cost percentage and
final ILOS cost percentage proposed in Sec. 438.16(a) indicate that
these percentages are calculated for each managed care program that
includes ILOSs, and these percentages are based on calculations
proposed in Sec. Sec. 438.16(c)(2) and (c)(3) which include all ILOSs,
excluding a short term stay in an IMD as specified in Sec. 438.6(e).
See this section of the preamble, as well as sections I.B.4.d. and
I.B.4.g. of this final rule for further details.
Comment: Other commenters were concerned with the State
administrative burden associated with the proposed documentation and
evaluation requirements, and either opposed any new requirements or
recommended alternatives.
Response: As required in existing Federal requirements at Sec.
438.3(e)(2)(1), States must determine each ILOS to be a medically
appropriate and cost effective substitute for a State plan-covered
service or setting. We expect that whenever a State is making such a
determination that it has a clear process and protocol, and that it
adequately maintains documentation of its decisions. Therefore, we do
not believe the documentation requirements proposed in Sec.
438.16(d)(2) should create substantially new burden for States as
States should be readily able to provide a description of their
evaluative
[[Page 41151]]
processes as these should already be maintained in States' records. The
goal of this proposal was to reduce State administrative burden by only
requiring that this documentation be submitted to CMS when the
projected ILOS cost percentage exceeded a 1.5 percent as opposed to
always providing it.
We recognize that the proposed evaluation requirement outlined in
Sec. 438.16(e)(1) is a new State requirement and will increase
administrative burden. We believe this is a necessary requirement to
ensure that States appropriately evaluate whether ILOSs meet their
intended purposes and truly are medically appropriate and cost
effective, and for CMS to receive these evaluations to inform our
determination of continued approval of these ILOSs in managed care plan
contracts or to consider termination as appropriate. We did account for
this burden in the associated Collection of Information for Sec.
438.16 (see section II.B.7. of this final rule for further details).
Comment: A few commenters recommended alternatives to the 1.5
percent threshold. The recommended alternative varied by commenter and
included utilizing a 2.5 or 3 percent threshold, allowing the State's
actuary to determine a threshold, and only requiring these requirements
when the ILOS cost percentage had shifted noticeably. Some commenters
also recommended exempting currently approved ILOSs from any additional
documentation and evaluation requirements. Other commenters recommended
CMS consider setting a minimum threshold for each ILOS so that the
documentation and/or evaluation requirements only apply to individual
ILOSs of material size. A few commenters recommended using the 1.5
percent threshold for each ILOS while several of the commenters
indicated they thought a threshold of 0.1 percent of the capitation
rates for each ILOS was a reasonable threshold.
Response: Commenters provided several alternatives to the proposed
1.5 percent threshold which we have reviewed and considered. We do not
believe the alternative to consider an ILOS cost percentage threshold
that exceeds 3 percent for additional documentation and evaluation
requirements is appropriate to consider for this risk-based approach.
We believe that this alternative, which is twice as high as the 1.5
percent threshold proposed, is not sufficent to appropriately ensure
appropriate Federal oversight that ILOSs are medically appropriate and
cost effective substitutes for State-plan covered services and settings
and in the best interests of the Medicaid and CHIP programs.
We continue to believe that there should be a consistent Federal
standard utilized across all managed care programs that include ILOSs
to appropriately monitor and oversee the use of ILOSs, and therefore,
we do not believe it is reasonable and appropriate to consider allowing
a State's actuary to have the discretion to determine a varying
threshold for each program or to allow currently approved ILOSs to be
excluded from this risk-based approach. We also note that the
commenters who recommended the alternative to allow a State's actuary
to have the discretion to determine a threshold for this risk-based
approach did not provide a rationale for this alternative for us to
reconsider our position. Therefore, at this time, we do not believe
allowing States and their actuaries to identify a reasonable threshold
for submitting to CMS additional documentation and evaluation
requirements is a reasonable alternative to consider further.
We are also concerned that applying a risk-based approach threshold
for documentation and evaluation requirements by each ILOS, rather than
for all non-IMD ILOSs across a given managed care program, could
actually increase State administrative burden based on the potential
volume of ILOSs that could exceed the proposed 1.5 percent ILOS cost
percentage threshold. We also have concerns that the proposed
alternative to consider a threshold of 0.1 percent would be far too low
to meaningfully ensure appropriate Federal oversight of ILOSs. We are
also concerned that any threshold that is required for each ILOS,
rather than at the aggregate across a managed care program, could
increase administrative burden and the complexity for States and CMS to
operationally implement and oversee this proposed requirement as some
States have a significant volume of ILOSs.
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.16(a) through
(d), 457.1201(c) and (e) and 457.1203(b) as proposed with the following
modifications. As outlined in section I.B.2. of this final rule, we are
prohibiting the use of separate payment terms for State directed
payments. We will modify Sec. 438.16(c)(2)(ii) to remove the word
``including'' before ``all State directed payments,'' and the following
language: ``and the projected total State directed payments in effect
under Sec. 438.6(c) that are paid as a separate payment term as
described in Sec. 438.6(c)(6)'' and the comma that preceded this
statement as well as add a comma before ``and pass-through payments.''
We will also modify Sec. 438.16(c)(3)(ii) to remove the word
``including'' before ``all State directed payments,'' and the following
language: ``and the actual total State directed payments in effect
under Sec. 438.6(c) that are paid as a separate payment term as
described in Sec. 438.6(c)(6)'' and the comma that preceded this
statement as well as add a comma before ``and pass-through payments.''
We will also modify Sec. Sec. 438.16(c)(4) and (c)(5) to add a comma
before ``and PAHP'' for consistency.
c. Enrollee Rights and Protections (Sec. Sec. 438.3(e), 438.10(g),
457.1201(e) and 457.1207)
Consistent with the ILOS definition proposed in Sec. 438.2, ILOSs
are immediate or longer-term substitutes for State plan-covered
services and settings, or when the ILOSs can be expected to reduce or
prevent the future need to utilize the covered services and settings
under the State plan. They can be utilized to improve enrollees' health
care outcomes, experience, and overall care; however, ILOSs are an
option and not a requirement for managed care plans. While ILOSs are
offered to Medicaid and CHIP enrollees at the option of the managed
care plan, the provision of an ILOS is also dependent on the enrollees'
willingness to use the ILOS instead of the State plan-covered service
or setting. Medicaid managed care enrollees are entitled to receive
covered services and settings under the State plan consistent with
section 1902(a)(10) of the Act. As ILOSs can be offered as substitutes
for covered State plan services and settings that Medicaid enrollees
are otherwise entitled to, we believe that it is of the utmost
importance that we identify the enrollee rights and managed care
protections for individuals who are offered or opt to use an ILOS
instead of receiving State plan-covered service or setting. To ensure
clarity for States, managed care plans, and enrollees on the rights and
protections afforded to enrollees who are eligible for, offered, or
receive an ILOS, we proposed to add new Sec. 438.3(e)(2)(ii)(A) and
(B) under Sec. 438.3(e)(2)(ii) to specify our meaning of enrollee
rights and protections that are not explicitly stated elsewhere in part
438. We believe it will be appropriate to add this clarity to Sec.
438.3(e)(2)(ii) as these are not new rights or protections, but rather,
existing rights and protections that we believe should be more
explicitly stated for all ILOSs, including short-term IMD stays.
[[Page 41152]]
We proposed to specify, in Sec. 438.3(e)(2)(ii)(A), that an
enrollee who is offered or utilizes an ILOS will retain all rights and
protections afforded under part 438, and if an enrollee chooses not to
receive an ILOS, they will retain their right to receive the service or
setting covered under the State plan on the same terms as will apply if
an ILOS was not an option. We believe this proposed addition would
ensure clarity that the rights and protections guaranteed to Medicaid
managed care enrollees under Federal regulations remain in full effect
when an enrollee is eligible to be offered or elects to receive an
ILOS. For example, enrollees retain the right to make informed
decisions about their health care and to receive information on
available treatment options and alternatives as required in Sec.
438.100(b)(2)(iii). To ensure that enrollee rights and protections
would be clearly and consistently provided to enrollees, we proposed to
revise Sec. 438.10(g)(2)(ix) to explicitly require that the rights and
protections in Sec. 438.3(e)(2)(ii) be included in enrollee handbooks
if ILOSs are added to a managed care plan's contract. For separate
CHIP, enrollee rights and protections are unique from those offered to
Medicaid enrollees and are instead located under subparts K and L of
part 457. To acknowledge these differences, we proposed to amend Sec.
457.1207, (which includes an existing cross-reference to Sec. 438.10)
to reference instead to the separate CHIP enrollee rights and
protections under subparts K and L of part 457. Protections to ensure
that managed care enrollees have the ability to participate in
decisions regarding their health care and have avenues to raise
concerns including their right to appeals related to adverse benefit
determinations and grievances are critical to ensure that ILOSs are
utilized in a reasonable, appropriate, and effective manner.
We believe safeguards and protections for enrollees that elect to
use an ILOS should be specified, particularly since ILOS costs can vary
compared to costs for the State plan service or setting for which it is
a substitute. Specifically, we wanted to make clear that the provision
or offer of an ILOS may not be used coercively or with the intent to
interfere with the provision or availability of State plan-covered
service and setting that an enrollee would otherwise be eligible to
receive. Therefore, we proposed to add Sec. 438.3(e)(2)(ii)(B) to
ensure that an ILOS would not be used to reduce, discourage, or
jeopardize an enrollee's access to services and settings covered under
the State plan, and a managed care plan could not deny an enrollee
access to a service or setting covered under the State plan on the
basis that an enrollee has been offered an ILOS as a substitute for a
service or setting covered under the State plan, is currently receiving
an ILOS as a substitute for a service or setting covered under the
State plan, or has utilized an ILOS in the past. While ILOSs can be
effective substitutes for services and settings covered under the State
plan, we wanted to ensure consistent and clear understanding for
enrollees, States, and managed care plans on how ILOSs can be
appropriately utilized to meet an enrollee's needs.
For separate CHIP, we proposed to adopt the enrollee rights and
protections at Sec. 438.3(e)(2)(ii)(A) and (B) through an existing
cross-reference at Sec. 457.1201(e). However, separate CHIP enrollee
rights and protections are unique from those offered to Medicaid
enrollees and are instead located under subparts K and L of part 457.
To acknowledge these differences, we proposed to amend Sec.
457.1201(e), which already includes a cross-reference to Sec. 438.3(e)
to state, ``An MCO, PIHP, or PAHP may cover, for enrollees, services
that are not covered under the State plan in accordance with Sec.
438.3(e) . . . of this chapter . . . except . . . that references to
enrollee rights and protections under part 438 should be read to refer
to the rights and protections under subparts K and L of this part.''
We believe that a strong foundation built on these enrollee rights
and protections would also ensure that ILOSs could have a positive
impact on enrollees' access to care, health outcomes, experience, and
overall care. As such, we believe these enrollee rights and protections
must be clearly documented in States' managed care plan contracts.
Therefore, we proposed this documentation requirement in Sec.
438.16(d)(1)(v). For separate CHIP, we proposed to adopt the
requirement for enrollee rights and protections for ILOSs to be
documented in managed care plan contracts by amending Sec. 457.1201(e)
to include a cross-reference to Sec. 438.16(d)(1)(v).
We summarize and respond to public comments received in this
section related to ILOSs (Sec. Sec. 438.3(e), 438.10(g), 457.1201(e),
457.1207) below.
Comment: Many commenters supported the proposed enrollee rights and
protections and the inclusion of these in managed care plan contracts
and enrollee handbooks if ILOSs are authorized and identified in
managed care plan contracts as commenters noted they believe these were
reasonable and appropriate guardrails.
Response: We appreciate the support for these proposals, and we
continue to believe that outlining the existing enrollee rights and
protections in regulation is a critical safeguard to ensure that the
delivery of ILOSs is in the best interest of beneficiaries and advances
the objectives of the Medicaid and CHIP programs.
Comment: A few commenters recommended that CMS require States to
develop a public list of available ILOSs, related targeting criteria
and the managed care plans who offer them, and to conduct outreach to
providers and enrollees, so that providers and enrollees understand
what ILOS options may be available.
Response: Information on ILOSs authorized by the State that their
managed care plans may elect to offer and that enrollee may choose at
their option to utilize will be in the managed care plan contracts
which, as required in Sec. Sec. 438.602(g)(1) and 457.1285 for
Medicaid and separate CHIP respectively, must be posted on their
websites. We are aware that many States conduct education and outreach
efforts to raise awareness of authorized ILOSs, including web postings,
provider outreach, enrollee handbooks, and other interested parties
engagement. We do not believe it is necessary for CMS to further
mandate the use of specific education and outreach mechanisms as States
are in the best position to determine what efforts are appropriate for
the target population for each ILOS.
Comment: One commenter recommended that CMS implement an appeals
process, using existing State and managed care plan infrastructure, for
ILOSs.
Response: We appreciate these comments as they allow CMS to clarify
existing policy guidance. On January 4, 2023, we published ILOS
guidance \197\ which clarified that ``The rights and protections
guaranteed to Medicaid managed care enrollees under Federal regulations
remain in full effect when an enrollee is eligible to be offered or
elects to receive any ILOS.'' Enrollees retain all rights afforded to
them in part 438. As we further noted in this ILOS guidance published
on January 4, 2023, managed care plans' contracts must, pursuant to
Sec. 438.228, require each managed care plan to have a grievance and
appeal system in place that meets the requirements of subpart F of part
438. States are required to provide State fair hearings, as described
in subpart E
[[Page 41153]]
of part 431, to enrollees who request one after an adverse benefit
determination is upheld on appeal (see Sec. 438.402(c)(1)(i)). The
grievance, appeal, and State fair hearing provisions in part 438,
subpart F, apply to enrollees and ILOSs to the same extent and in the
same manner as all other services covered by the managed care plans'
contracts. As with all services in managed care, enrollees can request
a State fair hearing before the Medicaid agency in accordance with
Sec. 431.220(a)(4). As further noted in the January 4, 2023, guidance,
``The offer or coverage of ILOS(s) by a managed care plan in no way
alters or diminishes an enrollee's rights under subpart F of part 438.
For example, at Sec. 438.404, managed care plans are expected to
provide notice of an adverse determination to enrollees if ILOS(s)
offered by their Medicaid managed care plan are not authorized for an
enrollee because of a determination that it was not medically
appropriate. Additionally, consistent with Sec. 438.402, Medicaid
enrollees also retain the right to file appeals and/or grievances with
regard to the denial or receipt of an ILOS.'' For separate CHIP, we
amended Sec. 457.1201(e) to apply separate CHIP enrollee rights and
protections at subparts K and L of part 457 for ILOSs. Subpart L of
part 457 applies separate CHIP managed care grievance system
requirements to ILOSs and subpart K of part 457 applies all separate
CHIP external review requirements to ILOSs. We are finalizing the
proposal to clarify this existing guidance in Sec. Sec.
438.3(e)(2)(ii)(A) and 457.1201(e) for Medicaid and separate CHIP,
respectively.
---------------------------------------------------------------------------
\197\ https://www.medicaid.gov/sites/default/files/2023-12/smd23001.pdf.
---------------------------------------------------------------------------
Comment: One commenter requested clarification on whether ILOSs
could be offered retroactively, and if so, how the managed care plan
would ensure enrollee rights and protections.
Response: ILOSs must be provided at the option of the enrollee and
the managed care plan, as well as authorized and identified in the
managed care contract as required in Sec. 438.3(e)(2). As such, it is
not appropriate to retroactively implement an ILOS. For example, it is
not possible to retroactively offer an enrollee the option to receive
an ILOS rather than the State plan service.
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.3(e), 438.10(g),
457.1201(e) and 457.1207 as proposed with a minor modification to Sec.
438.3(e)(2)(B) to add a comma between ``PIHP'' and ``or PAHP'' for
consistency.
d. Medically Appropriate and Cost Effective (Sec. Sec. 438.16(d) and
457.1201(e))
In Sec. 438.3(e)(2)(i), managed care plans may cover an ILOS if
the State determines the ILOS is medically appropriate and cost
effective substitute for a covered State plan service or setting. This
policy is consistent with authority in section 1902(a)(4) of the Act to
establish methods for proper and efficient operations in Medicaid, as
well as the nature of capitation payments based on risk-based
capitation rates recognized in section 1903(m)(2)(A) of the Act. We
interpreted medically appropriate and cost effective substitute to mean
that an ILOS may serve as an immediate or longer-term substitute for a
covered service or setting under the State plan, or when the ILOS can
be expected to reduce or prevent the future need to utilize a covered
service or setting under the State plan. We believe this was a
reasonable interpretation in acknowledgement that health outcomes from
any health care services and settings may also not be immediate. We
offered the following examples to illustrate the difference between an
ILOS that is an immediate versus longer-term substitute for a State
plan service or setting, or when the ILOS could be expected to reduce
or prevent the future need to utilize a covered service or setting
under the State plan.
For example, transportation to and services provided at a sobering
center could be offered as a medically appropriate and cost effective
immediate substitute for target populations for specific State plan
services or settings, such as an emergency room visit or hospital
inpatient stay. Alternatively, we could envision target populations for
which an ILOS, such as housing transition navigation services, might
serve as a longer-term substitute for a covered State plan service or
setting, or when the ILOS could be expected to reduce or prevent the
need to utilize the covered service or setting under the State plan,
such as populations with chronic health conditions and who were
determined to be at risk of experiencing homelessness. The managed care
plan might choose to offer medically tailored meals to individuals with
a diabetes diagnosis and poorly managed A1C levels within the allowable
limit of less than 3 meals per day. While not an immediate substitute
for a State plan-covered service such as emergency room visits or
inpatient hospital stays, medically tailored meals consistently
provided to the individual over a period of time could contribute to
improved management of the diabetes. In the long term, improved
management might lead to fewer complications related to diabetes and
consequentially, fewer emergency room visits and inpatient stays
thereby demonstrating the ILOS was both medically appropriate and cost
effective for the individual.
We believe it was important to ensure appropriate documentation to
support a State's determination that an ILOS is a medically appropriate
and cost effective substitute, either long or short term, for a State
plan-covered service or setting. ILOS documentation requirements for
States would permit CMS and the State to better monitor the use of
ILOSs, safeguard enrollee rights, facilitate fiscal accountability, and
promote transparency to ensure the efficient and appropriate use of
Medicaid and CHIP resources. Therefore, we proposed to expand the
documentation requirements for ILOSs through the addition of
requirements in Sec. 438.16. Specifically, we proposed at Sec.
438.16(d)(1), elements that must be included in any managed care plan
contract that includes ILOS(s) in order to obtain CMS approval
consistent with Sec. 438.3(a). In accordance with Sec.
438.3(e)(2)(iii), States are already required to authorize and identify
ILOSs in each managed care plan contract and such ILOSs are offered at
the option of the managed care plan. Therefore, we believe it was
consistent with a risk contract to require States to provide sufficient
detail regarding any ILOSs covered under the contract and accounted for
in the capitation rates per Sec. 438.3(e)(2)(iv).
In our experience reviewing managed care plan contracts, States
have not always provided sufficient detail in their managed care plan
contracts for Federal review. For example, some contracts have included
only general language that ILOSs are provided at the option of the
managed care plan and have not clearly identified each ILOS that the
State has authorized in sufficient detail. We believe clarity was
needed to ensure accountability and transparency in managed care plan
contracts. Therefore, we proposed Sec. 438.16(d)(1)(i) and (ii) to
require that States would include within each managed care plan
contract that includes ILOS(s), the name and definition for each ILOS
and clearly identify the State plan-covered service or setting for
which each ILOS was determined to be a medically appropriate and cost
effective substitute by the State. For separate CHIP, we proposed to
adopt the new documentation requirements at Sec. 438.16(d)(1)(i) and
(ii) by amending Sec. 457.1201(e) to include the cross-reference. By
requiring that this
[[Page 41154]]
information be clearly identified in the contract, we believe that
managed care plans would have sufficient detail on the ILOSs to be able
to utilize ILOSs appropriately while enabling States and CMS to more
effectively monitor each ILOS over time. We also believe including this
level of detail in the contract would be an appropriate fiscal
protection to ensure that capitation rates are developed in an
actuarially sound manner in accordance with Sec. 438.4 for Medicaid,
and developed with actuarially sound principles in accordance with
Sec. 457.1203(a) for separate CHIP. Actuarially sound capitation
rates, as defined in Sec. 438.4(a) for Medicaid, and actuarially sound
principles as defined at Sec. 457.10 for CHIP, are projected to
provide for all reasonable, appropriate, and attainable costs that are
required under the terms of the contract and for the operation of the
managed care plan for the time period and the population covered under
the terms of the contract. Additionally, for Medicaid, such capitation
rates must be developed in accordance with the requirements in Sec.
438.4(b), including the requirements that the actuarially sound
capitation rates must be appropriate for the populations to be covered
and the services to be furnished under the contract as required in
Sec. 438.4(b)(2).
The existing regulation Sec. 438.3(e)(2)(i) indicates that a
managed care plan may offer an ILOS if the State determines that the
ILOS is a medically appropriate and cost effective substitute for a
covered service or setting under the State plan. As noted in section
I.B.4.a. of this final rule, we proposed a definition of ILOS in Sec.
438.2 to specify that ILOSs may be determined to be cost effective and
medically appropriate as immediate or longer-term substitutes for State
plan-covered services and settings, or when the ILOSs can be expected
to reduce or prevent the future need to utilize State plan-covered
services and settings. Current regulations do not require States or
managed care plans to document any details related to the determination
of medical appropriateness and cost effectiveness, either broadly or
for a specific enrollee who is offered an ILOS. For managed care plans
to appropriately offer ILOSs to enrollees consistent with the State's
determination of medical appropriateness and cost effectiveness, States
will have to identify the target populations for each ILOS using clear
clinical criteria. Prospective identification of the target population
for an ILOS is necessary to ensure capitation rates are developed in an
actuarially sound manner in accordance with Sec. 438.4, including the
requirements that the actuarially sound capitation rates must be
appropriate for the populations to be covered and the services to be
furnished under the contract as required in Sec. 438.4(b)(2) and meet
the applicable requirements of part 438, including ILOS requirements as
required in Sec. 438.4(b)(6). For these reasons, we proposed a new
requirement at Sec. 438.16(d)(1)(iii) to require States to document
within each managed care plan contract the clinically defined target
population(s) for which each ILOS has been determined to be a medically
appropriate and cost effective substitute. For separate CHIP, we
proposed to adopt the new documentation requirements at Sec.
438.16(d)(1)(iii) by amending Sec. 457.1201(e) to include the cross-
reference. We proposed the phrase ``clinically defined target
populations'' as we believe that States would have to identify a target
population for each ILOS that would be based on clinical criteria. This
would not preclude States from using additional criteria to further
target certain clinically defined populations for ILOSs.
While States may establish target population(s) for which an ILOS
is medically appropriate, we believe that the actual determination of
medical appropriateness should be completed by a provider, for each
enrollee, using their professional judgement, and assessing the
enrollee's presenting medical condition, preferred course of treatment,
and current or past medical treatment to determine if an ILOS is
medically appropriate for that specific enrollee. Therefore, we
proposed, at Sec. 438.16(d)(1)(iv), to require that the managed care
plan contract document a process by which a licensed network or managed
care plan staff provider would determine that an ILOS is medically
appropriate for a specific enrollee before it was provided. Under this
proposal, this determination and documentation could be done by either
a licensed network provider or a managed care plan staff provider to
ensure States and managed care plans have capacity to implement this
requirement, consistent with State standards. For separate CHIP, we
proposed to adopt the new documentation requirements at Sec.
438.16(d)(1)(iv) by amending Sec. 457.1201(e) to include the cross-
reference. The provider would document the determination of medical
appropriateness within the enrollee's records, which could include the
enrollee's plan of care, medical record (paper or electronic), or
another record that details the enrollee's care needs. This
documentation would include how each ILOS is expected to address those
needs.
As discussed in section I.B.4.b. of this final rule, we proposed a
risk-based approach based on a State's projected ILOS cost percentage,
for State documentation and evaluation requirements of ILOSs that would
require standard streamlined documentation to CMS for States with a
projected ILOS cost percentage less than or equal to 1.5 percent while
States with a projected ILOS cost percentage that exceeds 1.5 percent
will be required to submit additional documentation. To specify the
proposed additional documentation requirements for a State with a
projected ILOS cost percentage that exceeds 1.5 percent, we proposed,
at Sec. 438.16(d)(2), the documentation requirements in paragraphs
Sec. 438.16(d)(2)(i) and (ii), and that this documentation would be
submitted to CMS concurrent with the managed care plan contract that
includes the ILOS(s), for review and approval by CMS under Sec.
438.3(a). We believe concurrent submission is the most efficient, since
each ILOS must be authorized and identified in States' contracts with a
managed care plan as required in Sec. 438.3(e)(2)(ii). In Sec.
438.16(d)(2)(i), we proposed that the State submit a description of the
process and supporting evidence the State used to determine that each
ILOS is a medically appropriate service or setting for the clinically
defined target population(s), consistent with proposed Sec.
438.16(d)(1)(iii). As ILOSs are often substitutes for State plan-
covered services and settings that have already been determined
medically appropriate, we expected States to use evidence-based
guidelines, peer reviewed research, randomized control trials,
preliminary evaluation results from pilots or demonstrations, or other
forms of sound evidence to support the State's determination of an
ILOS' medical appropriateness. Lastly, in Sec. 438.16(d)(2)(ii), we
proposed that the State provide a description of the process and
supporting data that the State used to determine that each ILOS is a
cost effective substitute for a State plan-covered service or setting
for the clinically defined target population(s), consistent with the
proposed Sec. 438.16(d)(1)(iii). CMS has the authority in Sec.
438.3(a) to deny approval of any ILOS that does not meet standards in
regulatory requirements, and thereby does not advance the objectives of
the Medicaid program, as part of our review of the associated
[[Page 41155]]
Medicaid managed care plan contracts and capitation rates. For separate
CHIP, we proposed to adopt the new documentation requirements at Sec.
438.16(d)(2) by amending Sec. 457.1201(e) to include the cross-
reference.
While we believe that a risk-based approach for States' ILOS
documentation and evaluation requirements is a reasonable and
appropriate balance of administrative burden and fiscal safeguards, we
always reserve the right to ask for additional documentation from a
State as part of our review and approval of the managed care plan
contracts and rate certifications as required respectively in
Sec. Sec. 438.3(a) and 438.7(a), and we are not precluded from doing
so by our proposal to add Sec. 438.16(d)(2)(i) through (ii).
Therefore, we proposed to require at Sec. 438.16(d)(3) that any State
must provide additional documentation, whether part of the managed care
plan contract, rate certification, or supplemental materials, if we
determined that the requested information was pertinent to the review
and approval of a contract that includes ILOS(s). For separate CHIP, we
proposed to adopt the new documentation requirements at Sec.
438.16(d)(3) by amending Sec. 457.1201(e) to include the cross-
reference, except that references to rate certifications do not apply.
We summarize and respond to public comments received in this
section related to ILOSs (Sec. Sec. 438.16(d), 457.1201(e)) below.
Comment: Many commenters supported our documentation requirements
proposed in this section of the preamble and indicated the proposals
were reasonable to ensure that ILOSs are an appropriate Medicaid
investment and serve to meet beneficiaries' health care needs and
ensure enrollees' health and safety.
Response: We appreciate the support we received for these
documentation proposals to ensure proper and efficient operations for
the use of ILOSs in Medicaid and CHIP managed care.
Comment: Some commenters recommended allowing States flexibility to
only update managed care plan contracts every 3 to 5 years rather than
when the level of detail on ILOSs changes as the commenters indicated
that the level of detail rarely changes. Other commenters recommended
to grandfather in existing ILOSs and not require additional contract
documentation for these existing ILOSs. A few of these commenters
raised concerns that the proposed documentation requirements could
create administrative burden, inhibit use of these ILOSs in the future
or not allow flexibility including individualized planning to meet
enrollees' needs. A few of these commenters requested flexibility to
revise the ILOSs outside the managed care contracts when such care
otherwise meets the criteria for ILOSs, and one such commenter
recommended all the necessary detail be included in the rate
certification rather than the contract.
Response: As managed care plan contracts are the critical vehicle
by which States outline their expectations to the managed care plans
and are used to enforce plans' contractual obligations, we have
historically believed and continue to believe that the contracts are
the appropriate mechanism to document the ILOSs that the State had
determined to be medically appropriate and cost effective substitutes
for State plan-covered services and settings, as well as the
administrative and operational processes necessary to monitor these
ILOSs. The proposals in Sec. 438.16(d) also build upon existing
Federal requirements in Sec. 438.3(e)(2)(iii) that the ILOSs approved
by the State are identified in the managed care plan contracts. In
alignment with this existing requirement, as well as the new proposed
requirements, we expect States to revise managed care plan contracts
anytime the ILOSs that the State has determined to be medically
appropriate and cost effective substitutes change, as well as any time
the associated administrative and operational processes for these ILOS
change. We do not believe it would be appropriate to outline the
proposed documentation outlined in Sec. 438.16(d) within a rate
certification in lieu of a managed care plan contract as a rate
certification is the documentation a State's actuary develops as it
certifies actuarially sound Medicaid capitation rates. States may find
it administratively less burdensome to revise an appendix to the
managed care contract, though we remind States that any appendix to the
contract or other document included as reference in the contract is a
component of the contract that requires CMS review and approval. We
also remind commenters that ILOSs are required to be medically
appropriate and cost effective substitute services for clinically
defined target populations. We remind managed care plans that if a
service or setting they wish to provide does not meet ILOS
requirements, the plans may always choose to voluntarily provide
additional services in accordance with Sec. 438.3(e)(1) although the
cost of these services cannot be included when determining payment
rates under Sec. 438.3(c).
Comment: Some commenters sought revisions or clarifications on the
processes in Sec. 438.16(d)(iii) and (iv). One commenter recommended
revising the term ``clinically defined target population'' to include
functional and HRSNs of enrollees in addition to medically
appropriateness of an ILOS. Another commenter requested confirmation
that the State should identify the clinically defined target
populations for ILOSs and not managed care plans. Other commenters
recommended that CMS require States and managed care plans to document
the safety and efficacy of each ILOS in the enrollee's records or
require that only the enrollee's primary care provider be allowed to
make the determination that an ILOS is medically appropriate.
Response: We agree that States should consider the safety and
efficacy of an ILOS when they are determining a potential ILOS is
medically appropriate, as well as when a network provider or staff
provider for the managed care plan determines and documents in the
enrollee's records that an ILOS is medically appropriate for a specific
enrollee.
We are not entirely clear what the commenter meant by functional
need, but we believe the commenter may be referring to functional
assessment tools that collect information on an individual's health
conditions and functional needs. We agree that evaluating the
functional needs and HRSNs of enrollees can be critical components for
care coordination and determining medically appropriate services;
however, these factors cannot be the sole rationale for the
determination that an ILOS is medically appropriate, as an ILOS is a
substitute for a State plan-covered service or setting.
We appreciate the commenter who requested confirmation that the
State should identify the clinically defined target populations for
ILOSs and not managed care plans. As States are required to determine,
subject to CMS review, each ILOS is a medically appropriate and cost
effective substitute for a State plan-covered service or setting as
required in Sec. 438.3(e)(2)(i), the State is also responsible for
determining the clinically defined target population for which each
ILOS is determined to be a medically appropriate and cost effective
substitute. We are finalizing Sec. 438.16(d)(1)(iii) with a
modification to add language after ``medically appropriate and cost
effective'' to add
[[Page 41156]]
``substitute by the State'' to ensure clarity on this issue.
As a reminder, when authorizing an ILOS, a State is required to
determine the clinically defined target population(s) for which each
ILOS is determined to be a medically appropriate and cost effective
substitute for a State plan covered service or setting, and the State
must document this clinically defined target population(s) in the
managed care plan contract in accordance with Sec. 438.16(d)(iii). For
example, it would not be sufficient to indicate that the target
population is any individual at risk for any chronic condition as
clinical criteria must be utilized to document a specific clinical
condition that is predictive of adverse health outcomes, and that is
not itself a social determinant of health. For example, a State may
determine that asthma remediation (e.g., air filters) is a medically
appropriate and cost effective substitute in lieu of the covered State
plan services of emergency department services, inpatient services, and
outpatient services for a target population of individuals with poorly
controlled asthma (as determined by a score of 25 or lower on the
Asthma Control Test).
Additionally, in accordance with Sec. 438.16(d)(iv), the State
must ensure that there is the process by which a licensed network or
plan staff provider determines and documents in the enrollee's records
that an identified ILOS is medically appropriate for a specific
enrollee, and this process must be documented in the State's contracts
with its managed care plans. We agree than an enrollee's primary care
provider may be an appropriate provider to determine and document that
an ILOS is medically appropriate for a specific enrollee; however, we
believe States should have flexibility to allow other licensed network
or staff providers to make this determination, as they deem
appropriate.
Comment: One commenter recommended that managed care plans be able
to provide ILOSs without State and provider determination that the ILOS
is medically appropriate. One additional commenter requested that CMS
remove managed care plans' control over access to ILOSs and require
standardized availability of ILOSs across managed care plans.
Response: ILOSs must be determined by States to be medically
appropriate and cost effective substitutes for State plan-covered
services and settings in accordance with Sec. 438.3(e)(2)(i). We
continue to believe that there must be appropriate documentation in
managed care plan contracts to ensure managed care plans appropriately
offer ILOSs consistent with the State's determination. We also remind
commenters that in accordance with existing Federal requirements at
Sec. 438.3(e)(2)(iii), an ILOS is always provided at the option of a
managed care plan as an ILOS is a substitute for a State plan-covered
service or setting. An ILOS is not a Medicaid benefit, but rather a
medically appropriate and cost effective substitute for one. CMS or
States cannot remove managed care plans' option to provide ILOSs;
however, States must ensure standardization in the name, definition,
clinically defined target population, and other critical components
necessary to properly oversee that ILOSs are medically appropriate and
cost effective substitutes for specific State plan-covered services and
settings that also comply with all applicable Federal requirements.
Comment: One commenter requested clarification on whether a
licensed social worker could be an allowable provider under the
proposed requirement at Sec. 438.16(d)(1)(iv).
Response: We agree that a licensed social worker could potentially
be a provider that States and managed care plans consider as they
develop the process outlined in Sec. 438.16(d)(1)(iv).
Comment: A few commenters recommended that the ILOS documentation
requirements be posted on the State's website or otherwise made
publicly available in addition to documented in the managed care plan
contracts.
Response: We remind commenters that information on ILOSs authorized
by the State that their managed care plans may elect to provide, and
that enrollee may choose at their option to utilize will be in the
managed care plan contracts, and these contracts are required in Sec.
438.602(g)(1) to be posted on States' websites.
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.16(d) and
457.1201(e) as proposed with four minor corrections to replace ``cost-
effective'' with ``cost effective'' in Sec. Sec. 438.16(d)(1)(ii) and
438.16(d)(2)(ii) to utilize consistent language with existing
regulatory terminology in Sec. 438.3(e)(2)(i), modify Sec.
438.16(d)(1)(iii) to add ``substitute by the State'' after ``medically
appropriate and cost effective,'' and add a comma before ``or PAHP''
for consistency.
e. Payment and Rate Development (Sec. Sec. 438.3(c), 438.7 and
457.1201(c))
In accordance with existing regulations at Sec. 438.3(e)(2)(iv),
States are required to ensure the utilization and actual cost of ILOSs
are taken into account in developing the benefit component of the
capitation rates that represents covered State plan services, unless a
statute or regulation explicitly requires otherwise. Additionally,
through existing regulations at Sec. 438.4(b)(6), States' actuaries
are required to certify that Medicaid capitation rates have been
developed in accordance with the ILOS requirements outlined in Sec.
438.3(e). We relied on authority in section 1903(m)(2)(A)(iii) of the
Act and regulations based on our authority under section 1902(a)(4) of
the Act, to establish actuarially sound capitation rates. While ILOS
utilization and actual costs, when allowed, are included in rate
development, the existing regulations at Sec. 438.3(c)(1)(ii) do not
clearly acknowledge the inclusion of ILOSs in the final capitation
rates and related capitation payments. Existing regulations at Sec.
438.3(c)(1)(ii) require that the final capitation rates must be based
only upon services covered under the State plan and additional services
deemed by the State to be necessary to comply with the requirements of
subpart K of part 438 (Parity in Mental Health and Substance Use
Disorder Benefits), and represent a payment amount that is adequate to
allow the managed care plan to efficiently deliver covered services to
Medicaid-eligible individuals in a manner compliant with contractual
requirements. As an ILOS is not a managed care plan requirement, but
rather offered at the option of the managed care plan, it will not be
included within the requirement in Sec. 438.3(c)(2)(ii) related to
contractual requirements. We proposed to revise Sec. 438.3(c)(1)(ii)
to include ``ILOS'' to ensure clarity on this matter. This technical
change would be included in separate CHIP regulations through an
existing cross-reference at Sec. 457.1201(c).
Additionally, we proposed to revise Sec. 438.7(b)(6) and the
proposed Sec. 438.7(c)(4) (see section I.B.2.l. of this final rule) to
add ``ILOS in Sec. 438.3(e)(2)'' to ensure any contract provision
related to ILOSs must be documented in all rate certifications
submitted to CMS for review and approval. We believe this is necessary
to ensure compliance with proposed new regulatory requirements in Sec.
438.16(c)(1)(i) and (5)(i), described in section I.B.4.b. of this final
rule, to ensure that the projected ILOS cost percentage documented in
the rate
[[Page 41157]]
certification would not exceed the proposed 5 percent limit. This is a
similar approach to the current requirements in Sec. 438.7(b)(6) which
require a revised rate certification for any change to contract
provisions related to payment in Sec. 438.6, including incentive
arrangements that have a similar 5 percent limit in accordance with
Sec. 438.6(b)(2). We signaled our intent to issue additional guidance
in the Medicaid Managed Care Rate Development Guide, in accordance with
Sec. 438.7(e), on the Federal standards and documentation requirements
for adequately addressing ILOSs in all rate certifications. For
separate CHIP, we did not plan to adopt the proposed change at Sec.
438.7(b)(6) since rate certifications are not applicable to separate
CHIP.
As risk-based capitation rates are developed prospectively, States'
actuaries would make initial assumptions regarding managed care plan
and enrollee utilization of ILOSs and associated costs. Since ILOS are
offered at the option of the managed care plan and Medicaid enrollee,
States and their actuaries should closely monitor whether managed care
plans elect to offer these ILOSs and enrollees utilize these ILOSs.
States' actuaries should assess if adjustments to the actuarially sound
capitation rates are necessary in accordance with Sec. Sec. 438.4 and,
438.7(a) and (c)(2). For example, a rate adjustment may be necessary if
a managed care plan's actual uptake of ILOSs varies from what is
initially assumed for rate development and results in an impact to
actuarial soundness.
We summarize and respond to public comments received in this
section related to ILOSs (Sec. Sec. 438.3(c), 438.7 and 457.1201(c))
below.
Comment: Many commenters supported the proposed changes to
Sec. Sec. 438.3(c) and 438.7 to clarify that ILOSs, when authorized by
a State and offered by a managed care plan(s), should be appropriately
included in the final capitation rates and rate certifications.
Response: We appreciate the confirmation that these proposals
provide clarity to States and their actuaries on how ILOS costs can be
incorporated into managed care capitation rates and should be
appropriately documented in rate certifications.
Comment: Some commenters requested that CMS clarify that capitation
rates must be sufficient to account for ILOSs and State plan services,
and one commenter raised concerns that this is not occurring today in a
particular State.
Response: As required at Sec. 438.5(b), when setting actuarially
sound capitation rates, States and their actuaries must identify and
develop base utilization and price data and make appropriate and
reasonable adjustments to account for programmatic changes. The base
data should include historical utilization and costs for State plan-
covered services and settings, as well as associated ILOSs as
applicable, and actuaries should make adjustments for programmatic
changes to ILOSs and State plan services. Additionally, as required at
Sec. 438.4(b)(6), States' actuaries must certify that Medicaid
capitation rates were developed in accordance with the ILOS
requirements outlined in Sec. 438.3(e). We believe these existing
Federal requirements ensure that State plan services and settings and
associated ILOSs are accounted for in the development of actuarially
sound capitation rates; and we believe the proposed change at Sec.
438.3(c) will clarify that ILOSs should be included in the final
capitation rates and related capitation payments when ILOSs are offered
by managed care plans. We also direct commenters to section I.B.4.b. of
this final rule for our response to a commenter's inquiry on the
inclusion of costs associated for managed care plan operational costs,
the third party management of ILOSs, or associated plan or provider
infrastructure needs for ILOSs within the ILOS cost percentage and the
benefit or non-benefit components of Medicaid managed care capitation
rates.
Comment: One commenter requested that CMS outline specific Federal
guidelines for actuarial rate setting for ILOSs that are longer-term
substitutes for State plan-covered services and settings under the
State plan.
Response: We believe that States and their actuaries have
responsibility under Sec. 438.5(b)(4) to include appropriate and
reasonable adjustments to account for ILOSs that are longer-term
substitutes for State plan-covered services and settings in rate
development. We encourage States to work with their actuaries on how
best to incorporate ILOSs into capitation rates which may vary based on
States' determinations on the medically appropriateness and cost
effectiveness of the ILOS and the clinically defined target
population(s). At this time, we do not believe additional Federal
guidelines are necessary on this matter. CMS will continue to monitor
this issue and may consider guidance within the annual Medicaid Managed
Care Rate Development Guide in accordance with Sec. 438.7(e) if deemed
necessary.
Comment: One commenter requested that CMS consider revising its
proposal at Sec. 438.7(c)(4). The commenter opposed this proposal as
they believe the proposal would increase State administrative expenses
and not result in any improved oversight.
Response: We disagree with the commenter that the proposal at Sec.
438.7(c)(4) would not improve oversight. As described in section
I.B.4.b. of this final rule, we proposed in Sec. 438.16(c)(2) and
(c)(3) to require the calculation of a projected and final ILOS cost
percentage based on capitation payments, and we proposed in Sec.
438.16(c)(1) that this percentage, on both a projected and final basis,
may not exceed 5 percent. We also proposed in Sec. 438.16(c)(5)(i) to
require that documentation for the projected ILOS cost percentage
should be included in the rate certification. When States amend
capitation rates, we believe this should require the calculation of a
revised projected ILOS cost percentage, and this revised calculation
should be accurately accounted for in the revised rate certification to
ensure continued compliance with the proposed regulatory requirements
in Sec. 438.16, including the 5 percent limit for the projected ILOS
cost percentage. We agree with the commenter that this proposal could
increase State administrative burden, and we accordingly have revised
the associated Collection of Information for Sec. 438.7 Rate
Certifications (see section II.B.4. of this final rule for further
details).
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.3(c), 438.7 and
457.1201(c) as proposed.
f. State Monitoring (Sec. Sec. 438.16(d) and (e), 438.66(e) and
457.1201(e))
In the 2016 final rule, we clarified the term ``monitoring'' to
include oversight responsibilities, and we required standard data
elements that a State's monitoring system must collect to inform
performance improvement efforts for its managed care program(s). We
wish to continue to strengthen State and CMS oversight of each Medicaid
managed care program with the addition of proposed text to explicitly
address States' monitoring of ILOSs. We rely on the authority in
section 1902(a)(4) of the Act to establish methods for proper and
effective operations in Medicaid.
Currently, Sec. 438.66 requires that States establish a system to
monitor performance of managed care programs broadly, Sec. 438.66(b)
outlines the data elements that a State's system must collect, Sec.
438.66(c) establishes expectations for State use of such data
[[Page 41158]]
for performance improvement, and Sec. 438.66(e) requires States to
provide a report on and assessment of each managed care program. When
ILOSs are included in a managed care plan's contract, they too must be
included in the State's monitoring activities required in Sec.
438.66(b) and (c). We believe States must ensure appropriate
monitoring, evaluation, and oversight of ILOSs. We believe additional
protections are necessary to ensure the delivery of ILOSs. In the 2015
proposed rule, we proposed expanded State monitoring requirements in
Sec. 438.66 and noted that our experience since the 2002 final rule
has shown that strong State management and oversight of managed care is
important throughout a program's evolution, but is particularly
critical when States transition large numbers of beneficiaries from FFS
to managed care or when new managed care plans are contracted (see 80
FR 31158). We subsequently finalized these requirements in the 2016
final rule. We believe that this logic is also applicable when a State
expands the use of ILOSs as we have seen in recent years. Therefore,
our proposals in this section further strengthened these existing
Federal requirements related to States' monitoring activities for each
managed care program.
As with all covered services and settings, States and their managed
care plans must comply with all enrollee encounter data requirements in
Sec. Sec. 438.242 and 438.818. We rely on authority in section
1903(m)(2) of the Act to require sufficient encounter data and a level
of detail specified by the Secretary. Complete, accurate, and validated
encounter data will also support the evaluation and oversight of ILOS
proposals described in sections I.B.4.g. and section I.B.4.h. of this
final rule, and ensure appropriate rate development, as described in
section I.B.4.e. of this final rule. In Sec. 438.242(c)(2), we require
that contracts between a State and its managed care plans provide for
the submission of enrollee encounter data to the State at a frequency
and level of detail to be specified by CMS and the State, based on
program administration, oversight, and program integrity needs.
Further, at Sec. 438.242(d), States must review and validate that
encounter data collected, maintained, and submitted to the State by the
managed care plan is a complete and accurate representation of the
services and settings provided to enrollees. Because ILOSs may not be
easily identifiable in CPT[supreg] and HCPCS, we believe it is
imperative that States identify specific codes and modifiers, if
needed, for each ILOS and provide that information to its managed care
plans to ensure consistent use. For example, the use of a modifier is
useful when a State needs to separately identify an ILOS from a State
plan-covered service or setting that may utilize the same HCPCS code.
We proposed in Sec. 438.16(d)(1)(vi), to require that States include a
contractual requirement that managed care plans utilize the specific
codes established by the State to identify each ILOS in enrollee
encounter data. States could require the use of specific HCPCS or CPT
codes and modifiers, if needed, that identify each ILOS. To the extent
possible, we encouraged States to work towards the development of
standard CPT[supreg] and HCPCS codes for ILOSs, and we noted that
States may wish to collaborate with appropriate interested groups. For
separate CHIP, while the provisions at Sec. 438.66 are not applicable,
we proposed to adopt the new coding requirements at Sec.
438.16(d)(1)(vi) by amending Sec. 457.1201(e) to include the cross-
reference.
We considered allowing States to include this level of data outside
of the managed care plan contract, such as in a provider manual or
similar documents; however, those documents are frequently not readily
available to interested parties and some are not made publicly
available. We believe requiring specific codes to be in the managed
care plan contracts would ensure that we can easily identify ILOSs in
T-MSIS data, support program integrity activities, and ensure that the
information is publicly available as required at Sec. 438.602(g)(1).
For these reasons, we believe requiring the codes for ILOSs in the
managed care plan contract would be the most appropriate and efficient
option. We also believe this proposal would ensure that ILOSs are
easily identifiable in the base data utilized for development of
capitation rates in accordance with rate development standards
described in Sec. 438.5(c), and the associated development of the
projected and final ILOS cost percentage which are built off of
capitation rates and capitation payments as proposed in section
I.B.4.b. of this final rule.
States are required to submit an annual performance report to CMS
for each Medicaid managed care program administered by the State in
accordance with Sec. 438.66(e)(1), known as the MCPAR. In Sec.
438.66(e)(2), we specify the content of the MCPAR, including Sec.
438.66(b)(11) that specifies accessibility and availability of covered
services in the managed care plan contract. As ILOSs are substitutes
for State plan-covered services and settings, we believe States should
already be reporting on ILOSs in MCPAR, but to improve clarity for
States, we proposed to add an explicit reference. Therefore, we
proposed a minor revision to Sec. 438.66(e)(2)(vi) to add the phrase
``including any ILOS.'' To facilitate States' reporting of their
monitoring activities and findings for ILOSs in MCPAR, we intend to
update the MCPAR report template to enable States to easily and clearly
include ILOS data throughout the report. We believe that it is
important for States to monitor trends related to the availability and
accessibility of ILOSs given the unique and innovative nature of some
ILOSs, and we believe using MCPAR will be an efficient way for States
to report their activities.
We summarize and respond to public comments received in this
section related to ILOSs (Sec. Sec. 438.16(d), 438.66(e), 457.1201(e))
below.
Comment: Commenters generally supported the proposal to require
States to identify and document in managed care plan contracts the
specific codes and modifiers for ILOSs to utilize for encounter data.
Commenters indicated that this proposal would make ILOS data more
easily available in T-MSIS, support program integrity and provide
transparency. One commenter also indicated that this proposal would
provide plans, States and researchers more opportunities to assess and
build the evidence base about which specific interventions work best as
ILOSs and are medically appropriate and cost effective for specific
clinically defined target populations.
Response: We agree that including ILOSs in encounter data is a
critical component for appropriate program operations, oversight, and
evaluation.
Comment: A few commenters suggested that CMS define and require
specific ILOS codes for States to use for ILOS services to ensure
uniformity and comparability of services across States, and one of
those commenters also recommended that CMS provide States, managed care
plans and providers with resources and technical assistance to educate
providers on ILOS coding practices. Similarly, another commenter stated
concerns that some ILOS providers, such as community-based
organizations, have limited billing and coding experience and will need
to build expertise and could benefit from necessary training and
support. One commenter encouraged the use of Z codes to help identify
SDOH factors.
Response: We encourage States to collaboratively work towards the
development of standard CPT[supreg] and
[[Page 41159]]
HCPCS codes and modifiers for ILOSs, and we noted that States may wish
to collaborate with appropriate interested groups in this section of
the preamble. As the ILOSs utilized in States may vary and we do not
want to stifle State innovation, at this time, we believe that States
should continue to lead efforts to identify ILOS codes and modifiers
that work best in their programs and provide necessary resources,
training, and technical assistance to providers (although we remind
States costs associated with these activities cannot be included within
the capitation rates or ILOS cost percentage). CMS will continue to
monitor States ILOS encounter data requirements to identify best
practices and evaluate if CMS should consider further standardization
in the future.
Comment: Commenters supported the proposal at Sec.
438.66(e)(2)(vi) to include ILOSs in the MCPAR when States report on
the availability and accessibility of covered services. One commenter
noted it is unclear how ILOSs should be reported in the MCPAR.
Response: We appreciate the comments supporting our proposal to
clarify that ILOSs are reported in the MCPAR in Sec. 438.66(e)(2)(vi).
As ILOSs are substitutes for State-plan covered services and settings,
we believe States should already be reporting ILOSs in the MCPAR and we
appreciate the support to clarify this issue. We intend to update the
MCPAR template to enable States to easily, clearly, and separately
include ILOS data in the report from State plan-covered services and
settings. We also clarify that for separate CHIP, the provisions at
Sec. 438.66 are not applicable so we did not propose to adopt the
additional reporting requirements through MCPAR.
Comment: One commenter requested clarification on how network
adequacy standards will be applied to ILOSs given that MCOs provide
ILOSs on an optional basis.
Response: We encourage States and managed care plans ensure
appropriate access to ILOSs that States authorize, and managed care
plans choose to offer so that enrollees have appropriate access to
those ILOSs if they choose. As ILOSs are substitutes for State plan-
covered services and settings, the access standards, such as the
network adequacy standards outlined in Sec. 438.68, are not required
for ILOSs.
Comment: One commenter requested CMS provide additional guidance
and discussion related to monitoring and reporting for ILOSs versus the
Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefit.
Response: We are unsure what specific guidance the commenter
requires as they did not provide additional detail in their comment.
Medicaid's EPSDT benefit for children and youth under age 21 provides a
comprehensive array of preventive, diagnostic, and treatment services,
as specified in section 1905(r) of the Act. Through EPSDT, States are
required to provide comprehensive services and furnish all medically
necessary services listed in section 1905(a) of the Act that are needed
to correct or ameliorate health conditions, based on certain Federal
guidelines. We direct the commenter to Medicaid.gov which provides more
details on EPSDT requirements and related monitoring and reporting,
including the annual EPSDT performance information required annually on
Form CMS-416.\198\ On the other hand, ILOSs are substitutes for State-
plan covered services and settings that a managed care plan may provide
at their option, and the related monitoring and reporting is outlined
in the preamble of this final rule. We encourage States to request
technical assistance from CMS if they have further questions on the
monitoring and reporting for the EPSDT benefit and ILOSs.
---------------------------------------------------------------------------
\198\ https://www.medicaid.gov/medicaid/benefits/early-and-periodic-screening-diagnostic-and-treatment/index.html.
---------------------------------------------------------------------------
After reviewing the public comments, we are finalizing the
provisions outlined in this section at (Sec. Sec. 438.16(d),
438.66(e), 457.1201(e) as proposed.
g. Retrospective Evaluation (Sec. Sec. 438.16(e) and 457.1201(e))
As part of Federal monitoring and oversight of Medicaid and CHIP
programs, we regularly require States to submit evaluations to CMS that
analyze cost or cost savings, enrollee health outcomes, or enrollee
experiences for a specific Medicaid or CHIP benefit, demonstration, or
managed care program. For example, as set forth in an SMDL \199\
published on December 22, 1998, States with a program authorized by a
waiver of section 1915(b) of the Act must conduct two independent
assessments of the quality of care, access to care, cost effectiveness,
and impact on the State's Medicaid program to ensure compliance with
Sec. 431.55(b)(2)(i) through (iii). There are also quality
requirements at Sec. Sec. 438.340 and 457.1240(e) for States
contracting with a managed care plan to develop and implement a written
quality strategy for assessing and improving the quality of health care
and services furnished by the plan. We also believe that States should
evaluate and demonstrate that ILOSs are cost effective, medically
appropriate, and an appropriate and efficient use of Medicaid and CHIP
resources, and that such a requirement will be consistent with those
existing requirements and the proposals outlined in sections I.B.4. of
this final rule. We rely on the authority in sections 1902(a)(4) and
2101(a) of the Act to establish methods for proper and effective
operations in Medicaid and CHIP respectively, and sections 1902(a)(6)
and 2107(b)(1) of the Act which require that States provide reports, in
such form and containing such information, as the Secretary may from
time to time require. To reduce State and Federal administrative
burden, where possible, we again proposed a risk-based approach to the
State documentation requirement that will be proportional to a State's
ILOS cost percentage. We proposed, in Sec. 438.16(e)(1) for Medicaid,
and through a proposed cross-reference at Sec. 457.1201(e) for
separate CHIP, to require States to submit a retrospective evaluation
to CMS of ILOSs, if the final ILOS cost percentage exceeds 1.5 percent,
though we do encourage all States that include ILOSs in their managed
care plan contracts to conduct a retrospective evaluation of all ILOSs.
As a State could authorize multiple ILOSs in one managed care program,
we believe that this evaluation should evaluate each ILOS in order to
clearly assess the impact and effectiveness of each ILOS.
---------------------------------------------------------------------------
\199\ https://www.medicaid.gov/federal-policy-guidance/downloads/smd122298.pdf.
---------------------------------------------------------------------------
With Sec. 438.16(e)(1)(i) for Medicaid, and through a proposed
cross-reference at Sec. 457.1201(e) for separate CHIP, we proposed
that an evaluation be completed separately for each managed care
program that includes an ILOS. We considered allowing States to
evaluate ILOSs across multiple managed care programs to reduce State
administrative burden and alleviate potential concerns regarding sample
size for the evaluation. We further considered permitting States to
self-select the appropriate level at which to evaluate ILOSs including
for each managed care program, across managed care programs, or by
managed care plan contract. However, in our experience, a State with
multiple managed care programs (for example, behavioral health,
physical health, etc.) could have differing enrollee eligibility
criteria, populations, covered benefits, managed care plan types,
delivery models, geographic regions, or rating periods among the
separate managed care programs. Including more than one managed care
program in an evaluation
[[Page 41160]]
will likely impact evaluation rigor and could dilute or even alter
evaluation results due to the variability among managed care programs.
As States will be required to provide the ILOS cost percentage for each
managed care program, we believe that it is necessary for the
evaluation to also be conducted at the individual program level as it
is one measure to aid in evaluating the overall impact of the ILOSs.
For these reasons, we believe it would be critical for States to
provide separate evaluations for each managed care program that
includes ILOSs. We sought public comment on whether the evaluation
should be completed for each managed care program, across multiple
managed care programs, each managed care plan contract, or at a level
selected by the State.
Since these proposed retrospective evaluations will utilize
complete encounter data, we considered several options for the length
of the evaluation period. Often, evaluation reports are required on an
annual basis, such as MCPAR in Sec. 438.66(e) or the NAAAR in
Sec. Sec. 438.207(d) and 457.1230(b) for Medicaid and separate CHIP,
respectively. We considered requiring an annual submission for the
report required in Sec. 438.16(e)(1) but believe that encounter data
would be insufficient to result in meaningful analysis. We also
considered a 3-year evaluation period, which may be sufficient for
ILOSs that are immediate substitutes, but enrollees may need to receive
longer-term substitutes for a period of several years in order for a
State to have robust data. We also considered a 10-year period, but we
concluded that seemed to be an unreasonably long time to obtain
information on the efficient and effective use of these unique services
and settings. We concluded that a 5-year period will provide sufficient
time to collect complete data. Therefore, we proposed in Sec.
438.16(e)(1)(ii) for Medicaid, and through a proposed cross-reference
at Sec. 457.1201(e) for separate CHIP, that a State's retrospective
evaluation would use the 5 most recent years of accurate and validated
data for the ILOSs. We believe the 5-year period will allow managed
care plans and enrollees to become comfortable with the available ILOSs
and opt to provide or receive them, thus generating the necessary data
for the evaluation. Even for ILOSs that are longer-term substitutes, we
believe a 5-year period will be sufficient to permit robust data
collection for cost effectiveness and medical appropriateness. We
requested comment on the appropriate length of the evaluation period.
As described in section I.B.4.h. of this final rule, we also proposed
in Sec. 438.16(e)(2)(ii) that CMS may require the State to terminate
the use of an ILOS if it determines the State is out of compliance with
any ILOS requirement which includes if the evaluation does not show
favorable results such as those consistent with those proposed in Sec.
438.16(e)(1).
By proposing that retrospective evaluations be completed using the
five most recent years of accurate and validated data for the ILOS(s),
we recognized we needed to also propose the scope of the evaluation. We
considered permitting States to identify an appropriate 5-year
evaluation period, but ultimately decided against this as it could
create a perverse incentive to identify a favorable evaluation period
for each ILOS in order to circumvent the termination process proposed
in Sec. 438.16(e)(2)(iii) and described in section I.B.4.h. of this
final rule. We also considered if the evaluation period should begin
with the first year that a State exceeds the 1.5 percent final ILOS
cost percentage threshold, but decided against this option as we
believe it is necessary for evaluation rigor to establish an early or
ideally, pre-intervention, baseline from which to evaluate the impact
of a new ILOS over time. We concluded that States' evaluations should
be retroactive to the first complete rating period following the
effective date of this provision in which the ILOS was included in the
managed care plan contracts and capitation rates; we proposed this in
Sec. 438.16(e)(1)(iv) for Medicaid, and through a proposed cross-
reference at Sec. 457.1201(e) for separate CHIP. We believe that our
proposed approach is aligned with identified best practices for
evaluation. We encouraged States to consider developing a preliminary
evaluation plan for each ILOS as part of the implementation process for
a new ILOS, and any time States significantly modify an existing ILOS.
We requested comment on the appropriate timing of an ILOS evaluation
period.
To ensure some consistency and completeness in the retrospective
evaluations, we believe there should be a minimum set of required
topics to be included. First, in Sec. 438.16(e)(1)(ii) for Medicaid,
and through a proposed cross-reference at Sec. 457.1201(e) for
separate CHIP, we proposed to require that States must utilize data to
at least evaluate cost, utilization, access, grievances and appeals,
and quality of care for each ILOS. Similar elements are required in
evaluations for programs authorized by waivers approved under sections
1915(b) and 1915(c) of the Act and demonstrations under section 1115(a)
of the Act. We believe these five proposed elements would permit CMS
and States to accurately measure the impact and programmatic integrity
of the use of ILOSs. We expanded upon these elements in Sec.
438.16(e)(1)(iii) wherein we proposed the minimum elements that a
State, if required to conduct an evaluation, would evaluate and include
in an ILOS retrospective evaluation. We proposed, in Sec.
438.16(e)(1)(iii)(A) for Medicaid, and through a proposed cross-
reference at Sec. 457.1201(e) for separate CHIP, to require States to
evaluate the impact each ILOS had on utilization of State plan-covered
services and settings, including any associated savings. As an intended
substitute for a State plan-covered service or setting, that is cost
effective and medically appropriate as required in Sec.
438.3(e)(2)(i), we believe that it is important to understand the
impact of each ILOS on these State plan-covered services and settings
and any cost savings that result from reduced utilization of such
specific services and settings. We believe that this evaluation element
would also require the State to evaluate potentially adverse trends in
State plan services and settings utilization, such as underutilization
of adult preventive health care. Per Sec. 438.3(e)(2)(i), the State
must determine that an ILOS is a cost effective substitute; therefore,
we believe that it will be appropriate for a State to evaluate any cost
savings related to utilization of ILOSs in place of State plan-covered
services and settings. CMS will monitor the results of the evaluations
to ensure the results are reasonable and CMS may request additional
evaluations per Sec. 438.16(e)(1)(v) as necessary. As described in
section I.B.4.h. of this final rule, we also proposed in Sec.
438.16(e)(2)(ii) that CMS may require the State to terminate the use of
an ILOS if it determines the State is out of compliance with any ILOS
requirement which includes if the evaluation does not show favorable
results such as those consistent with those proposed in Sec.
438.16(e)(1).
Similarly, we proposed in Sec. 438.16(e)(1)(iii)(B) for Medicaid,
and through a proposed cross-reference at Sec. 457.1201(e) for
separate CHIP, to require that States evaluate trends in managed care
plan and enrollee use of each ILOS. We believe that it is necessary to
understand actual utilization of each ILOS in order to evaluate
enrollee access to ILOSs and related trends that occur over time.
[[Page 41161]]
Trends in enrollee utilization of ILOSs could also be compared to data
related to State plan services and settings utilization to determine if
there is a correlation between utilization of certain ILOSs, and
decreased or increased utilization of certain State plan services and
settings. Trends in utilization of ILOSs may also help identify when
enrollees choose not to utilize an ILOS to help States and managed care
plans assess future changes in authorized ILOSs. We believe this is a
key evaluation element necessary to determine if the ILOS was cost
effective.
Critical to the authority for the allowable provision of ILOSs, is
a State determination that an ILOS is a cost effective and medically
appropriate substitute for a covered service or setting under the State
plan as required in Sec. 438.3(e)(2)(i). Therefore, we believe States
should evaluate whether, after 5 years, its determinations are still
accurate given actual enrollee utilization and experience for the
clinically defined target population. To achieve this, we proposed
Sec. 438.16(e)(1)(iii)(C) for Medicaid, and through a proposed cross-
reference at Sec. 457.1201(e) for separate CHIP, which will require
that States use encounter data to evaluate if each ILOS is a medically
appropriate and cost effective substitute for the identified covered
service or setting under the State plan or a medically appropriate and
cost effective measure to reduce or prevent the future need to utilize
the identified covered service or setting under the State plan. We have
included the following example to identify how a State could use
encounter data to evaluate the medical appropriateness and cost
effectiveness of an ILOS. A State may initially determine that the
provision of air filters as an ILOS is a medically appropriate and cost
effective substitute service for a target population of individuals
with poorly controlled asthma (as determined by a score of 25 or lower
on the Asthma Control Test) in lieu of the covered State plan services
of emergency department services, inpatient services and outpatient
services. After analyzing the actual encounter data, the State may
discover that the provision of air filters to this clinically defined
target population did not result in decreased utilization of a State
plan service such as emergency department services, inpatient services
and outpatient services. In this instance, the evaluation results would
demonstrate that the ILOS as currently defined was not a medically
appropriate and cost effective substitute for the target population of
individuals as currently defined.
As ILOSs are services and settings provided to Medicaid and CHIP
managed care enrollees in lieu of State plan-covered services and
settings, we believe that it is important for States to evaluate the
quality of care provided to enrollees who utilized ILOSs to ensure that
the ILOS(s) are held to the same quality standards as the State plan
services and settings enrollees would otherwise receive. Quality of
care is also a standard domain within evaluations of Medicaid and CHIP
services, Medicaid and CHIP managed care plans, and Medicaid and CHIP
programs as demonstrated by the ubiquitous use of the National
Committee for Quality Assurance (NCQA) CAHPS survey, and HEDIS measure
set which includes standardized and validated quality of care measures
for use by States and managed care plans operating within Medicaid and
CHIP managed care environments. Accordingly, in Sec.
438.16(e)(1)(iii)(D) for Medicaid, and through a proposed cross-
reference at Sec. 457.1201(e) for separate CHIP, we proposed that
States evaluate the impact of each ILOS on quality of care. We believe
that States should use validated measure sets, when possible, to
evaluate the quality of care of ILOSs, though we do not want to stifle
State innovation in this area, so we did not propose to require it. We
considered proposing to require that States procure an independent
evaluator for ILOS evaluations. In consideration of the myriad of new
proposed requirements within this final rule, we weighed the value of
independent evaluation with increased State burden. We were concerned
that it would be overly burdensome for States to procure independent
evaluators for ILOS(s) due, in part, to the timing of the final ILOS
cost percentage submission. In section I.B.4.b. of this final rule, we
proposed that the final ILOS cost percentage be submitted 2 years
following completion of the applicable rating period, and we proposed
here that if the final ILOS cost percentage exceeds the 1.5 percent,
States would be required to submit an evaluation. While States should
conduct some evaluation planning efforts, it could be difficult and
time consuming to procure an independent evaluator in a timely manner
solely for the purpose of the ILOS evaluation since States would not
know definitely whether an evaluation is required until 2 years
following the rating period. We solicited comment on whether we should
consider a requirement that States use an independent evaluator for
ILOS evaluations.
We believe that States should, to the extent possible, leverage
existing quality improvement and evaluation processes for the
retrospective ILOS evaluation. Through Sec. Sec. 438.364(a) and
457.1250(a), we require States to partner with an EQRO to produce an
annual technical report that summarizes findings related to each MCO's,
PIHP's, PAHP's, or PCCM entity's performance relative to quality,
timeliness, and access to health care services furnished to Medicaid
and CHIP enrollees. Through these existing EQR activities at Sec.
438.364(b), and, if finalized, the newly proposed optional activity at
Sec. 438.64(c)(7), discussed in more detail in section I.B.5.c. of
this final rule, we believe States could leverage the CMS-developed
protocol or their EQRO to assist with evaluating the impact of ILOSs on
quality of care. We believe this new optional activity could reduce
burden associated with these new evaluation requirements for ILOSs.
The elements we proposed in the evaluation should communicate a
complete narrative about the State, managed care plans, and enrollees'
experience with ILOSs. As key thresholds and limits on ILOSs, the final
ILOS cost percentages would be another element that CMS would consider
as part of the overall mosaic to understand the impact that an ILOS
might have on each managed care program. Although the final ILOS cost
percentage is proposed to be submitted with the rate certification
submission required in Sec. 438.7(a) for the rating period beginning 2
years after each rating period that includes ILOS(s), we believe it was
important to the completeness of the retrospective evaluation, that all
final ILOS cost percentages available be included. Therefore, we
proposed in Sec. 438.16(e)(1)(iii)(E) for Medicaid, and through a
proposed cross-reference at Sec. 457.1201(e) for separate CHIP, that
States provide the final ILOS cost percentage for each year in their
retrospective evaluation, consistent with the report proposed in Sec.
438.16(c)(5)(ii), (described in section I.B.4.b. of this final rule)
with a declaration of compliance with the allowable 5 percent threshold
proposed in Sec. 438.16(c)(1)(i). We believe this necessary
documentation of State compliance would be appropriate to document in
the evaluation alongside the other data we proposed to ensure a fulsome
evaluation that accurately demonstrates whether the ILOS(s) are an
appropriate and efficient use of Medicaid and CHIP resources.
In section I.B.4.c. of this final rule, we proposed to identify
enrollee rights and protections for individuals who are
[[Page 41162]]
offered or who receive an ILOS, and in section I.B.4.f. of this final
rule we outlined requirements for States' monitoring of enrollee rights
and protections. To determine if States have appropriately safeguarded
and adequately monitored enrollee rights and protections, we proposed
in Sec. 438.16(e)(1)(iii)(F) for Medicaid, and through a proposed
cross-reference at Sec. 457.1201(e) for separate CHIP, to require
States to evaluate appeals, grievances, and State fair hearings data,
reported separately for each ILOS, including volume, reason, resolution
status, and trends. As ILOSs are substitutes for covered State plan
services and settings and are offered at the option of the managed care
plan, we believe it will be important to evaluate appeals, grievances,
and State fair hearing trends to ensure that enrollees' experience with
ILOSs was not inconsistent or inequitable compared to the provision of
State plan services and settings. We acknowledged that we already
require for Medicaid, through Sec. 438.66(e)(2)(v), that States
include an assessment of the grievances, appeals, and State fair
hearings annually in MCPAR. But the information we proposed that States
submit with the ILOS retrospective evaluation was different as it would
be specific to each ILOS compared to the summary level information
required by MCPAR. We believe collecting these data by ILOS will help
evaluate the quality of care and enrollee experience related to the
provision of each ILOS.
Finally, we believe an evaluation of the impact ILOSs have on
health equity efforts is a critical component to measure enrollee
experience, health outcomes, and whether ILOSs are an appropriate and
efficient use of Medicaid and CHIP resources. As ILOSs can be an
innovative option States may consider employing in Medicaid and CHIP
managed care programs to address SDOHs and HRSNs, we also believe it
was critical to measure their impact on improving population health and
reducing health disparities. We proposed in Sec. 438.16(e)(1)(iii)(G)
for Medicaid, and through a proposed cross-reference at Sec.
457.1201(e) for separate CHIP, to require States to evaluate the impact
of each ILOS on health equity efforts undertaken by the State to
mitigate health disparities. To do this, managed care plans should
submit enrollee encounter data, to the extent possible, that includes
comprehensive data on sex (including sexual orientation and gender
identity), race, ethnicity, disability status, rurality, and language
spoken. We reminded managed care plans of their obligations in
Sec. Sec. 438.242(c)(3) and 457.1233(d) to submit all enrollee
encounter data that States are required to report to CMS under Sec.
438.818; currently, T-MSIS provides fields for sex, race, ethnicity,
disability status, and language spoken.
To allow adequate time for claims run-out and the evaluation to be
conducted, we proposed in Sec. 438.16(e)(1)(iv) for Medicaid, and
through a proposed cross-reference at Sec. 457.1201(e) for separate
CHIP, to require that States submit a retrospective evaluation to CMS
no later than 2 years after the completion of the first 5 rating
periods that included the ILOS following the effective date of this
provision, if finalized. This 2-year timeframe is similar to the
timeframe utilized for independent assessments to evaluate programs
authorized by waivers approved under section 1915(b) of the Act.
While we believe many ILOSs can be sufficiently validated as
medically appropriate and cost effective substitutes within 5 years, we
know that some may not. To fulfill our program monitoring obligations,
we believe we must be able to require additional evaluations if the
initial evaluation demonstrates deficiencies. We proposed in Sec.
438.16(e)(1)(v) for Medicaid, and through a proposed cross-reference at
Sec. 457.1201(e) for separate CHIP, to explicitly assert our right to
require States to provide additional 5-year retrospective evaluations.
We believe that this could be a necessary flexibility when additional
evaluation time might be needed, such as to demonstrate that an ILOS
acting as a longer-term substitute for a covered State plan service or
setting is cost effective and medically appropriate. We also believe we
may need to utilize this flexibility when a State substantially revises
the ILOSs that are options within a managed care program.
For CHIP, our typical mechanism for retrospective managed care cost
evaluation is through the CHIP Annual Report Template System (CARTS).
We recognized that CARTS is completed annually by States and that our
proposed timeframe for the retrospective evaluation is for a period of
5 years, but we considered whether it would be less burdensome to
States to incorporate the separate CHIP ILOS retrospective evaluation
into CARTS rather than as a stand-alone report. We sought public
comment on whether or not the proposed retrospective evaluation should
be incorporated into CARTS for separate CHIP ILOSs.
We summarize and respond to public comments received in this
section related to ILOSs (Sec. Sec. 438.16(e) and 457.1201(e)) below.
Comment: Many commenters supported the proposed ILOS evaluations in
Sec. Sec. 438.16(e) and 457.1201(e) as they stated it was an
appropriate guardrail to ensure ILOSs are in the best interests of the
Medicaid and CHIP programs and would ensure appropriate assessment of
whether ILOS are medically appropriate, cost effective, as well as
improve access to care, ensure enrollee rights and protections, and
advance health equity efforts. Commenters stated support for requiring
these evaluations be conducted for each applicable managed care
program, and all ILOSs in that program as they believe it would ensure
robust evaluations. Commenters also supported the evaluation elements,
as they believe this would ensure a fulsome, broad-based evaluation.
Response: We believe an evaluation of ILOSs is a reasonable
component of a State's monitoring and oversight activities. States
should be actively monitoring their ILOSs on a continual basis to
ensure that each ILOS is an appropriate substitute for a State-plan
covered service or setting that an enrollee is entitled to, including
monitoring trends in the utilization of ILOSs, data related to appeals,
grievances, and State fair hearings for each ILOS to ensure there are
no concerns with beneficiary rights and protections, and that each ILOS
continues to be medically appropriate and cost effective.
As we reviewed these comments, we recognized a revision to the
technical text in Sec. 438.16(e)(1)(i) was needed. In the proposed
rule, we outlined our intent to require that a retrospective
evaluation, when required, must include all ILOSs in that managed care
program (see 88 FR 28171). Therefore, we are revising Sec.
438.16(e)(1)(i) to include ``and include all ILOSs in that managed care
program'' after ``be completed separately for each managed care program
that includes an ILOS.'' The finalized revision to Sec.
438.16(e)(1)(i) is also applicable to separate CHIP through a cross-
reference at Sec. 457.1201(e).
Comment: Some commenters supported revisions to the ILOS evaluation
proposals. One commenter recommended that rather than requiring States
conduct ILOS evaluations that CMS should assume this responsibility to
reduce State administrative burden. Other commenters indicated the CMS
should require States to conduct ILOS evaluations from all managed care
programs to ensure that clinical learning and improvement can be
derived from
[[Page 41163]]
those programs going forward. One commenter recommended that an
evaluation be done for each managed care plan contract rather than by
program though the commenter did not provide a substantive rationale
for this alternative. Some commenters opposed this proposed evaluation
requirement and raised concerns regarding the associated State
administrative burden, possibility that it may inhibit State and
managed care plan use of ILOSs, and/or did not find the evaluation
necessary.
Response: We continue to believe that ILOSs evaluations are a
reasonable and appropriate oversight mechanism to ensure ILOSs are an
appropriate and efficient use of Medicaid and CHIP resources. We also
believe it is appropriate for States rather than CMS to conduct ILOS
evaluations at this time. We also believe that evaluations should be
done for each managed care program rather than across managed care
programs or by managed care plan contract, as in our experience, the
ILOSs in managed care programs may have differing enrollee eligibility
criteria, populations, covered benefits, managed care plan types,
delivery models, and geographic regions. While we encourage States to
evaluate all ILOSs, we will maintain our proposed risk-based approach
for providing evaluations to CMS to balance State administrative
burden.
Comment: One commenter requested clarification on whether CMS's
intent is for States to continuously submit a rolling 5-year
evaluation. This commenter also suggested CMS consider requiring that
States update ILOS evaluations within a certain number of years,
similar to CMS's proposal for evaluations of State directed payments
described in section I.B.2.j. of the proposed rule. Another commenter
noted their belief that clarity was needed on the timing for when ILOS
evaluations would first be expected.
Response: We appreciate these comments. Upon further review, we
acknowledge that the preamble was inconsistent for this proposal as to
when an evaluation would be required and for what 5-year period. We
utilized both ``5 most recent years of accurate and validated data for
ILOS'' in preamble (85 FR 28171) and proposed regulatory text at Sec.
438.16(e)(1)(ii) (85 FR 28242), as well as ``the first 5 rating periods
that included the ILOS'' in preamble (85 FR 28173) and proposed
regulatory text at Sec. 438.16(e)(1)(iv) (see 85 FR 28242).
We believe an evaluation is a helpful tool to ensure that ILOSs
that have been in place for some time, as well as new ILOSs, such as
those to address HRSNs, are reasonable and appropriate for Medicaid and
CHIP enrollees. However, we also strive to balance State administrative
burden; therefore, we are utilizing a risk-based approach to only
require States submit an evaluation when the final ILOS cost percentage
exceeds 1.5 percent as outlined in section I.B.2.b. of this final rule.
Additionally, we do not believe it is necessary to have a ``rolling''
evaluation requirement as there are other monitoring and oversight
tools that will continue to evaluate ILOSs, including the MCPAR
required in Sec. 438.66(e)(2), ILOS cost percentage and required State
notification for identified issues at Sec. 438.16(e)(2)(i) (see
sections I.B.4.f., I.B.4.b. and I.B.4.h. of this final rule
respectively). CMS also has the option to request an additional
evaluation in Sec. 438.16(e)(2)(v), such as if the ILOS is a longer
term substitute and additional evaluation time is needed to determine
whether an ILOS is a cost effective and medically appropriate
substitute for a covered State plan service or setting (see 85 FR
28173).
As such, our intent was to require a retrospective evaluation of
existing ILOSs typically only for a specified period of time (that is,
5 years) following the publication of the final rule unless new ILOSs
are authorized by the State and offered by the plans. We also intend to
utilize a risk-based approach to require States submit this evaluation
to CMS if the final ILOS cost percentage for one of these 5 years
exceeds 1.5 percent, unless CMS determines another evaluation is
warranted. This intent is also consistent with the SMDL published on
January 4, 2023,\200\ which indicated that the evaluation would be
completed for ``the first five contract years that include ILOS(s)''
following the effective date of the guidance.
---------------------------------------------------------------------------
\200\ https://www.medicaid.gov/sites/default/files/2023-12/smd23001.pdf.
---------------------------------------------------------------------------
We also recognize that some ILOSs have been used for many years and
other ILOSs will begin to be new, and we acknowledge both circumstances
as we determine an appropriate timeframe for States to submit the
evaluation to CMS. Therefore, we intend to require this evaluation be
submitted to CMS no later than 2 years after the later of either the
completion of the first 5 rating periods that include ILOSs or the
rating period that has a final ILOS cost percentage that exceeds 1.5
percent. We believe 2 years is a sufficient period of time as all
States are encouraged to develop a preliminary evaluation plan for each
ILOS as part of the implementation process for a new ILOS, and any time
States significantly modify an existing ILOS (88 FR 28171), and States
should actively be monitoring their ILOSs to ensure they are medically
appropriate, cost effective and in compliance with other Federal
requirements. States will also project an ILOS cost percentage each
year, should be closely monitoring this percentage throughout the
rating period and will reasonably know if the final ILOS cost
percentage will exceed 1.5 percent during the rating period and 6
months following the rating period when most claims data are finalized.
Therefore, we believe it is unnecessary to require the evaluation to be
submitted 2 years after the State submits this final ILOS cost
percentage to CMS as we believe this would create unnecessary delays.
Therefore, we replace the proposed language in the first sentence
at Sec. 438.16(e)(1) after the section title of ``Retrospective
evaluation'' of ``A State with a final ILOS cost percentage that
exceeds 1.5 percent, is required to submit at least one retrospective
evaluation of ILOS to CMS'' with ``A State is required to submit at
least one retrospective evaluation of all ILOSs to CMS when the final
ILOS cost percentage exceeds 1.5 percent in any of the first 5 rating
periods that each ILOS is authorized and identified in the MCO, PIHP,
or PAHP contract as required under Sec. 438.3(e)(2)(iii) following the
applicability date in paragraph (f), or as required in paragraph (v).''
And finalize the second sentence in this subsection as proposed.
Additionally, we replace language at Sec. 438.16(e)(1)(iv) of ``The
State must submit the retrospective evaluation to CMS no later than 2
years after the first 5 rating periods that included ILOS'' with ``The
State must submit the retrospective evaluation to CMS no later than 2
years after the later of either the completion of the first 5 rating
periods that the ILOS is authorized and identified in the MCO, PIHP, or
PAHP contract as required under Sec. 438.3(e)(2)(iii) or the rating
period that has a final ILOS cost percentage that exceeds 1.5
percent.'' The revisions to Sec. Sec. 438.16(e)(1) and (1)(iv) are
equally applicable to separate CHIP through the cross-reference at
Sec. 457.1201(e).
We believe it would be helpful to provide a few illustrative
examples of when an evaluation would be required, as well as the
timeframe to be evaluated and the required timeline for submission of
the ILOS evaluation to CMS. As one illustrative example, a State's
managed care program that has 3 ILOSs that were first authorized by the
State and documented in the managed care plan contracts for the CY 2027
[[Page 41164]]
rating period would be required to submit an evaluation of all 3 ILOSs
to CMS if the final ILOS cost percentage for CYs 2027, 2028, 2029,
2030, or 2031 exceeds 1.5 percent. CMS also reserves the right to
require the State to submit additional retrospective evaluations to CMS
at Sec. 438.16(e)(1)(v). If the final ILOS cost percentage for any of
these 5 rating periods exceeds 1.5 percent, the State must submit an
evaluation to CMS no later than 2 years after the completion of this 5-
year period which in this example would be December 31, 2033, as this
is 2 years following the completion of the first five rating periods
that include the ILOSs. As a second illustrative example, a State's
managed care program has 5 ILOSs that were first authorized by the
State and documented in the managed care plan contracts in CY 2022. In
CY 2027, the final ILOS cost percentage is 2 percent. The State is
required to conduct an evaluation as the final ILOS cost percentage
exceeds 1.5 percent. And this evaluation would be due to CMS by
December 31, 2029, as this is 2 years following the completion of the
CY 2027 rating period that had a final ILOS cost percentage that
exceeded 1.5 percent. As a third illustrative example, a State's
managed care program has 2 ILOSs that were first authorized by the
State and documented in the managed care plan contracts in CY 2026. In
CY 2040, the final ILOS cost percentage is 1.7 percent. Since CY 2040
is not the first 5 years following the applicability date in Sec.
438.16(f), CMS would make a determination as to whether the State would
be required to submit a retrospective evaluation per Sec.
438.16(e)(1)(v).
Comment: Some commenters stated the 5-year evaluation period was
appropriate while others recommended that CMS reconsider the 5-year
look back period for evaluations and these commenters varied in their
recommended timeframe, including 3 years or a longer evaluation period
than 5 years. One commenter recommended 7 years while another commenter
just indicated a timeframe greater than 5 years without specifying a
specific timeframe. A few commenters indicated that many ILOSs are cost
effective in the first year they are offered and indicated that in
those circumstances reporting 5 years of data would be an unnecessary
burden to apply unilaterally. One of these commenters recommended that
CMS revise Sec. 438.16(e)(1)(ii) to acknowledge that the evaluation
would ``be completed using either the most recent year or 5 most recent
years'' of accurate and validated data for the ILOS, and the commenter
noted they believe this flexibility would allow States to evaluate the
ILOS using data for either one or 5 years of data and that this
constraint, as opposed to a revision of ``5 or fewer years'' would
preclude States from cherry-picking the most favorable set of years.
Response: We continue to believe that 5 years of ILOS data is an
appropriate time period as it would allow managed care plans and
enrollees to become comfortable with the available ILOSs and opt to
provide or receive them, thus generating the necessary data to
evaluate. The commenters who recommended 3 years did not provide a
substantive rationale for us to evaluate this recommendation further.
We also agree with commenters that a longer evaluation period than 5
years may be needed in some circumstances which is why CMS will
finalize Sec. 438.16(e)(v) which allows CMS to require the State to
submit additional retrospective evaluations to CMS when warranted.
In line with the revisions at Sec. 438.16(e)(1) and (e)(1)(iv)
that we are finalizing, we are also replacing the first sentence
proposed at Sec. 438.16(e)(1)(ii) of ``Be completed using the 5 most
recent years of accurate and validated data for the ILOS'' with ``Be
completed using 5 years of accurate and validated data for the ILOS
with the basis of the data being the first 5 rating periods that the
ILOS is authorized and identified in the MCO, PIHP, or PAHP contract as
required under Sec. 438.3(e)(2)(iii).'' In addition, we are finalizing
the second sentence in this subsection as proposed. The revision to
Sec. 438.16(e)(1)(ii) is equally applicable to separate CHIP through
the cross-reference at Sec. 457.1201(e). Given inconsistency in the
proposed rule discussed in the previous comment and response, this
revision clarifies our intent, which is that the ILOS evaluation be
completed using ILOS data from the first 5 rating periods that the ILOS
is authorized by the State and offered by the managed care plan. Using
the first illustrative example described in the previous comment, the
ILOS evaluation would be required to utilize ILOS data from CYs 2027,
2028, 2029, 2030, and 2031. Additionally, using the second illustrative
example described above, the evaluation would be required to utilize
ILOS data from CYs 2022, 2023, 2024, 2025, and 2026.
Comment: We received some comments on ILOS data and its use in
evaluations. A few commenters requested flexibility on data used for
ILOS evaluations and raised concerns with requiring ILOS encounter data
to be utilized for evaluations. Another commenter stated concern that
States and plans would not utilize standard codes for ILOSs and there
would then be little insight into the exact service provided. Other
commenters recommended that CMS require specific data frameworks be
utilized by States and plans for the ILOS evaluation, such as
standardized social care data frameworks to report ILOS impact on
health equity. A few commenters recommended that States work with
managed care plans to encourage that ILOS data be stratified by various
factors, including pregnancy status, as this provides useful insights
in addressing health disparities and advancing health equity. One
commenter also recommended the evaluation elements outlined in
438.16(e)(1)(ii) be expanded to include how many ILOSs were utilized
with demographic data on age, disability, race, and ethnicity.
Response: As we further outline in section I.B.4.f. of this final
rule, we believe that requiring managed care plans and their providers
to utilize specific codes established by the State to identify each
ILOS in encounter data is critical for appropriate monitoring,
oversight, and evaluation; as such, we will not grant flexibility on
this matter. The ILOS evaluation will include data on ILOS utilization
as specified in Sec. 438.16(e)(1)(iii)(A). Additionally, we continue
to believe encounter data, when possible, must include data necessary
for the State to stratify ILOS utilization by sex (including sexual
orientation and gender identity), race, ethnicity, disability status,
and language spoken to inform health equity initiatives and efforts to
mitigate health disparities; and this type of data stratification can
be utilized by States in many contexts beyond ILOSs. While we encourage
States to stratify encounter data, when possible, we are not requiring
it at this time given the data limitations that we recognize some
States have, such as the data that enrollees choose to share. We are
unclear what specific data the commenter is referring to when they
indicated that data stratification by pregnancy status may also be
useful. We agree that, when possible, States, plans and evaluators
should stratify applicable data by pregnancy status to inform program
development, oversight, and evaluation efforts. To aid these efforts,
we remind commenters that we released a previous resource that may be
helpful. As pregnant women are a critical subgroup of Medicaid
beneficiaries and their identification in many administrative data
files, such as the T-MSIS Analytic Files (TAF), is not
[[Page 41165]]
straightforward, CMS previously developed a set of specifications and
programming code to help researchers who wish to use administrative
data to analyze this population.\201\ At this time, we are not
requiring States to use a standardized social care data framework to
evaluate the impact of the ILOS. As we monitor the use of ILOSs and
State evaluations of ILOSs, we will continue to assess how various
frameworks and standardization may be useful to States, managed care
plans and CMS.
---------------------------------------------------------------------------
\201\ https://www.medicaid.gov/medicaid/data-systems/macbis/medicaid-chip-research-files/transformed-medicaid-statistical-information-system-t-msis-analytic-files-taf/index.html.
---------------------------------------------------------------------------
Comment: One commenter requested clarification on whether for
purposes of the evaluation, the ILOS cost percentage will be calculated
annually or as an average of the 5-year period of the evaluation.
Response: An ILOS evaluation will document the final ILOS cost
percentage for each year of the respective evaluation as this
percentage is an annual calculation. See section I.B.4.b. of this final
rule for further details on the final ILOS cost percentage.
Comment: One commenter urged CMS to clarify how the proposed
evaluation requirements would apply to MCOs serving dually eligible
enrollees and account for data limitations on Medicare cost data.
Response: The evaluation proposed in Sec. 438.16(e)(1) is critical
to ensuring that ILOSs are used in an effective and efficient manner
and achieve their intended purpose. CMS makes available a variety of
Medicare claims data to States for dually eligible beneficiaries. As
such, we believe States have sufficient relevant data on dually
eligible enrollees to produce a robust evaluation.
Comment: A few commenters recommended that CMS create additional
guidance or standardized templates for data collection and reporting
associated with evaluations to make it easier for States to evaluate
the effectiveness of ILOSs, and another recommended that CMS have final
approval of the quality measures a State utilizes in an evaluation if
it is not a validated measure set.
Response: We appreciate the recommendation regarding associated
templates for data collection and reporting, and we will take this
under advisement as we consider developing subregulatory guidance on
ILOS evaluations. We recommend that States use validated measure sets,
when possible, to evaluate the quality of care of ILOSs. At this time,
we will not require CMS to approve States' measure sets as we do not
want to stifle States' evaluation efforts including those of novel
ILOSs. We will take this into consideration for future rulemaking as
needed.
Comment: One commenter recommended that CMS consider tracking
mechanisms to ensure States are on track to submit necessary
evaluations while another recommended that ILOSs and associated costs
be monitored at the State and national levels to inform future
policymaking. One additional commenter also encouraged CMS to require
that ILOS evaluations be publicly available.
Response: We agree with commenters that CMS and States should
closely monitor the evaluation efforts for ILOSs, and that these
efforts may inform future policy efforts. States should consider
developing a preliminary evaluation plan for each ILOS as part of the
implementation process for a new ILOS and any time States significantly
modify an existing ILOS to ensure they are adequately prepared to
conduct an ILOS evaluation when required. We also encourage States to
post publicly on their websites all ILOS evaluations that they conduct,
including those not required by CMS; however, we are not requiring this
in Federal regulation at this time as this would cause additional State
administrative burden than initially proposed in the proposed rule.
Comment: One commenter requested clarification on whether the
proposed ILOS evaluation requirements would supersede any prior written
requirements for an ILOS evaluation included in approved Standard Terms
and Conditions for existing waivers and demonstrations under section
1915(b) and section 1115 respectively.
Response: Any approved Special Terms and Conditions in an approved
waiver or demonstration, such as those under section 1915(b) or section
1115 of the Act, are additional requirements that are conditions of
CMS's approval of the associated Medicaid authority.
Comment: We received some comments regarding our proposal to
encourage, but not require States to utilize an independent evaluator
for ILOS evaluations. Most commenters supported not requiring the use
of an independent evaluator. One of these commenters indicated than an
independent evaluator would be costly and administrative burdensome. A
few commenters recommended that CMS require States use an independent
evaluator.
Response: We appreciate this feedback from commenters. Given the
majority of commenters supported our proposal, we plan to move forward
with our proposal to encourage, but not require an independent
evaluator for ILOSs.
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.16(e) and
457.1201(e) as proposed with a few changes. First, as discussed in this
section, we will modify the text of Sec. 438.16(e)(1), (1)(i),
(1)(ii), and (1)(iv). Additionally, we will replace ``cost-effective''
with ``cost effective'' in Sec. 438.16(e)(1)(iii)(C) to utilize
consistent language with existing regulatory terminology in Sec.
438.3(e)(2)(i).
h. State and CMS Oversight (Sec. Sec. 438.16(e) and 457.1201(e))
If a State determines that an ILOS is no longer a medically
appropriate or cost effective substitute or the State identifies
another area of noncompliance in the provision of ILOSs, we believe CMS
must be promptly notified. We rely on the authority in sections
1902(a)(4) and 2101(a) of the Act to establish methods for proper and
effective operations in Medicaid and CHIP, and sections 1902(a)(6) and
2107(b)(1) of the Act which require that States provide reports, in
such form and containing such information, as the Secretary may from
time to time require. We proposed, in Sec. 438.16(e)(2) for Medicaid,
and through a proposed cross-reference at Sec. 457.1201(e) for
separate CHIP, to establish processes and timelines for State and CMS
oversight of ILOSs. In Sec. 438.16(e)(2)(i)(A) and (B) for Medicaid,
and through a proposed cross-reference at Sec. 457.1201(e) for
separate CHIP, we proposed to require that States notify CMS within 30
calendar days if the State determines that an ILOS is no longer a
medically appropriate or cost effective substitute for a State plan-
covered service or setting, or the State identifies another area of
noncompliance in this proposed section. Issues of noncompliance that
would require State notification to CMS included, but was not limited
to, contravening statutory requirements (for example, the provision of
room and board), failure to safeguard the enrollee rights and
protections enumerated under part 438, or the absence of the proposed
provider documentation necessary to establish that an ILOS is medically
appropriate for a specific enrollee. We believe that 30 days was a
reasonable period of time for a State to identify and confirm an area
of noncompliance. We considered a 60-day notification period, but
believe that States should notify CMS in a more
[[Page 41166]]
expeditious manner so that CMS may assess and swiftly remediate issues
of noncompliance that might cause harm to enrollees. We sought comment
on the time period for State notification to CMS to ensure it is
reasonable and appropriate.
We believe a termination process for ILOSs was critical to properly
safeguard the health and safety of Medicaid and CHIP enrollees.
Therefore, we proposed a Federal oversight process at Sec.
438.16(e)(2)(ii) for Medicaid, and through a proposed cross-reference
at Sec. 457.1201(e) for separate CHIP, which would permit CMS to
terminate the use of an ILOS, if we determined noncompliance or receive
State notification of noncompliance as proposed in Sec.
438.16(e)(2)(i). In Sec. 438.16(e)(2)(iii) for Medicaid, and through a
proposed cross-reference at Sec. 457.1201(e) for separate CHIP, we
proposed a process for termination of an ILOS that will apply when a
State terminates an ILOS, a managed care plan elects to no longer offer
an ILOS to its enrollees, or CMS notifies the State that it must
terminate an ILOS. In any of these events, we proposed that the State
will be required to submit an ILOS transition plan to CMS for review
and approval within 15 calendar days of the decision by the State to
terminate an ILOS, a managed care plan notifying the State it will no
longer offer an ILOS, or receipt of notice from CMS to terminate. In
addition to 15 calendar days, we also considered 30, 60, and 90
calendar days, but ultimately decided on the former option. We
recognize that 15 calendar days is a rapid submission timeline, but we
firmly believe that such a transition plan would need to be implemented
immediately following an ILOS termination to safeguard enrollee health
and safety, and to maintain the integrity and efficient operation of
the Medicaid program in accordance with sections 1902(a)(4) and 2101(a)
of the Act. Given the submission timeline and that ILOSs are provided
at the option of the managed care plan, we believe States should
prepare an ILOS transition plan as part of the implementation process
for any new ILOSs. The process for termination proposed at Sec.
438.16(e)(2)(iii) is the same, regardless of whether the State, managed
care plan, or CMS terminates the ILOS as the potential risks to
enrollees are the same irrespective of which entity directs termination
of the ILOS.
In Sec. 438.16(e)(2)(iii)(A) through (D) for Medicaid, and through
a proposed cross-reference at Sec. 457.1201(e) for separate CHIP, we
proposed the elements States should include in the transition plan for
the ILOS. We believe that a transition plan is necessary to protect the
health and well-being of Medicaid and CHIP enrollees for whom the
sudden termination of an ILOS, without an adequate transition plan,
could have a significant negative impact. We rely on the authority in
sections 1902(a)(4) and 2101(a) of the Act to establish methods for
proper and effective operations in Medicaid and CHIP, and sections
1902(a)(6) and 2107(b)(1) of the Act which require that States provide
reports, in such form and containing such information, as the Secretary
may from time to time require. In Sec. 438.16(e)(2)(iii)(A) for
Medicaid, and through a proposed cross-reference at Sec. 457.1201(e)
for separate CHIP, we proposed to require that States establish a
process to notify enrollees that the ILOS they are currently receiving
will be terminated as expeditously as the enrollee's health condition
requires. We also proposed, in Sec. 438.16(e)(2)(iii)(B) for Medicaid,
and through a proposed cross-reference at Sec. 457.1201(e) for
separate CHIP, to require that States create and make publicly
available a transition of care policy, not to exceed 12 months, to
arrange for State plan services and settings to be provided timely and
with minimal disruption to the care for any enrollees receiving an ILOS
at the time of termination. From the period of notification onward, we
would expect that a State and its managed care plans cease provision of
the ILOS to any new enrollees. Together, we believe that these two
actions will ensure adequate beneficiary protections, including
adequate beneficiary notice and access to medically appropriate State
plan-covered services and settings in a timely fashion.
In addition to enrollee focused activities, we proposed that the
transition plan also include administrative actions that States would
take to remove a terminated ILOS from the applicable managed care plan
contract(s) and capitation rates. ILOSs must be authorized and
identified in the managed care plan contract consistent with Sec.
438.3(e)(2)(iii) and Sec. 457.1201(e), and we believe it was equally
important to ensure any terminated ILOS is removed from the managed
care plan contract (and rate certification if necessary) to ensure
clarity on contractual obligations and appropriate program integrity.
We proposed, in Sec. 438.16(e)(2)(iii)(C) for Medicaid, and through a
proposed cross-reference at Sec. 457.1201(e) for separate CHIP, to
direct States to remove the ILOS from the applicable managed care plan
contracts and submit a modified contract to CMS for review and approval
as required for Medicaid in Sec. 438.3(a). Similarly, we permitted
States, through Sec. Sec. 438.3(e)(2)(iv) and Sec. 457.1201(e), to
account for the utilization and actual cost of ILOSs in developing the
component of the capitation rates that represents the covered State
plan services, unless a statute or regulation explicitly required
otherwise. As part of the transition plan, States would be required to
provide an assurance that it will submit the necessary contract
amendment and outline a reasonable timeline for submitting the contract
amendment to CMS for review and approval. In the event that an ILOS is
terminated from the managed care plan contract, the State and its
actuary, would evaluate if an adjustment(s) to the capitation rates is
necessary to ensure Medicaid capitation rates continue to be
actuarially sound, such as if the programmatic change will have a
material impact to the rate development. As outlined in Sec. 438.4 for
Medicaid, actuarially sound capitation rates must be appropriate for
the populations to be covered and the services to be furnished under
the managed care plan contract, and the State's actuary must ensure
that the capitation rates continue to be actuarially sound given any
change to the contract. Therefore, we proposed in Sec.
438.16(e)(2)(iii)(D) to direct States to adjust the actuarially sound
capitation rate(s), as needed, to remove utilization and cost of the
ILOS from Medicaid capitation rates as required in Sec. Sec. 438.4,
438.7(a) and 438.7(c)(2). As part of the transition plan, States would
be required to provide an assurance that it will submit an adjustment
to the capitation rates, as needed, and outline a reasonable timeline
for submitting the revised rate certification to CMS for review and
approval.
For separate CHIPs, States must develop capitation rates consistent
with actuarially sound principles as required at Sec. 457.1203(a). We
also believe that in the event a separate CHIP ILOS is terminated, a
State should evaluate if an adjustment to the capitation rate is needed
to account for the removal of ILOS utilization and cost from the
managed care plan contract. For this reason, we proposed to adopt Sec.
438.16(e)(2)(iii)(D) for separate CHIP through a new cross-reference at
Sec. 457.1201(e). However, we note that the requirements at Sec.
438.7 are not applicable for part 457.
We summarize and respond to public comments received in this
section related to ILOSs (Sec. Sec. 438.16(e) and 457.1201(e)) below.
[[Page 41167]]
Comment: Some commenters supported the proposed State notification
requirements when a State determines that an ILOS is no longer a
medically appropriate or cost effective substitute for a State plan-
covered service or setting, or the State identifies another area of
noncompliance. The commenters stated the proposal ensured adequate
notice and transparency. Many commenters also supported a required
transition plan for terminated ILOS and prompt enrollee notification
when an ILOS is terminated, and indicated it was appropriate oversight
and transparency.
Response: We appreciate the support for these provisions which we
believe are critical to ensure appropriate Federal oversight of ILOSs
to ensure they advance the objectives of the Medicaid and CHIP
programs, and properly safeguard the health and safety of Medicaid and
CHIP enrollees. We take this opportunity to note that both States and
CMS can determine that an ILOS is no longer a medically appropriate or
cost effective substitute for a State plan-covered service or setting.
Further, both States and CMS can identify other areas of noncompliance.
Comment: One commenter supported a 60-day time period for this
notification rather than our proposed 30-day timeframe as the commenter
indicated that additional time was necessary to provide this
notification to CMS. This commenter also requested clarification on the
format and process for this proposed notification. Another commenter
opposed the State notification requirement.
Response: We continue to believe that requiring States to notify
CMS within 30 calendar days is necessary to ensure appropriate
oversight. We believe this is critically important in circumstances
where enrollee's health or well-being may be impacted. We are concerned
that 60 calendar days is not an adequate timeframe to ensure CMS can
assess and swiftly remediate issues of noncompliance that might cause
harm to enrollees. We also believe that States have existing experience
on required notifications to CMS such as those required in Sec.
438.610(d)(1) for prohibited affiliations and in Sec. 438.742 for
sanctions, as well as notifications related to the termination of
waivers under section 1915(b) of the Act. Therefore, we do not believe
additional guidance on the notification process is necesary, but we
will provide technical assistance to States as necessary, and continue
to evaluate if further guidance is necessary on this process for State
notification.
As we reviewed these comments, we recognized a technical correction
to the regulatory text in Sec. 438.16. As outlined in this section of
the preamble for the proposed rule (88 FR 28174), our intent was to
require State notification of noncompliance with part 438 as evident by
the examples to contravening statutory requirements (such as the
provision of room and board), failure to safeguard the enrollee rights
and protections enumerated under part 438, etc. The proposed regulatory
text utilized the term ``in this section'' which could be construed to
reference only Sec. 438.16. Therefore, we believe a technical
correction is needed. While we are finalizing the notification
timeframe as proposed, we are revising Sec. 438.16(e)(2)(i)(B) to
acknowledge that identified noncompliance relates to part 438, and not
just Sec. 438.16. The revision to Sec. 438.16(e)(2)(i)(B) is equally
applicable to separate CHIP through the cross-reference at Sec.
457.1201(e).
Comment: Some commenters raised concerns with our proposal that
States must submit a transition plan to CMS within 15 calendar days.
Several commenters indicated that 15 calendar days is not a reasonable
timeframe to develop and submit a transition plan because States would
struggle to collect necessary data from their managed plans, and
analyze it quickly enough to develop a meaningful transition plan for
the specific ILOS. Commenters stated that transition plans should
ensure that enrollees experience minimal disruption to services when an
ILOS is no longer available to them and developing a robust plan
specific to each ILOS takes time and should include input from
interested parties. These commenters noted they believe this is likely
not feasible within 15 calendar days and recommended alternative
timeframes of 45 days, 60 days, and 12 months. Further, commenters
pointed out that this 15-day timeframe does not align with the 30-day
timeframe for a State to notify CMS as proposed in Sec.
438.16(e)(2)(i)(A) and (B). These commenters stated that this
misalignment makes the requirements on States unclear which could lead
to confusion and disruption for enrollees. One commenter also noted
that in some instances, States may choose to terminate ILOSs at a
future date, but the requirement to submit a transition plan is based
on the decision to terminate and not the termination date; the
commenter requested clarification on the which action the timeframe is
tied to.
Response: We concur with commenters that smooth transitions with
minimal disruption for enrollees is our goal. We proposed that an ILOS
transition plan be submitted within 15 calendar days of the decision by
a State, managed care plan or CMS to terminate an ILOS believing that
to be the most appropriate timeframe to address potential health and
safety concerns. However, we realize that monitoring for and addressing
health and saftey concerns is a routine part of managed care plan
operations and is done through multiple methods such as grievance
monitoring, encounter data analysis, and utilization management. While
identifying these issues must inform the development of a transition
plan, we know that managed care plans will continue to prioritize
addressing health and safety issues as expeditiously as necessary. We
acknowledge that we may have focused on those issues too narrowly
leading us to propose 15 calendar days, but we agree with commenters
that transition plans have to be meaningful and address many aspects in
order to be effective. After consideration of the comments, we are
finalizing Sec. 438.16(e)(2)(iii) to allow States up to 30 calendar
days to submit an ILOS transition plan to CMS for review and approval
to align with the State notification process so both of these
activiites, when pertinent, could occur concurrently within the same
30-day timeframe. The revision to Sec. 438.16(e)(2)(iii) is equally
applicable to separte CHIP through the cross-reference at Sec.
457.1201(e). We remind States that this 30-day timeframe to submit an
ILOS transition plan is a maximum time period and States must always
ensure that any health and safety issues for enrollees are mitigated as
expeditiously as possible. We also continue to believe that the
submission of a transition plan should be tied to the decision date and
not the termination date to ensure adequate timing for enrollee
notification and operational planning, as well as allow CMS time to
review and approve the transition plan.
Additionally, as we reviewed these comments, we recognized that our
intent in Sec. 438.16(e)(2)(iii) would be clearer if we restructured
the proposed language. In response to commenters' requests, we believe
it would be helpful to clarify the specific actions that require an
ILOS transiton plan to be submitted to CMS as the term ``decision''
appears to have caused confusion. Consistent with the intent outlined
in this section of the proposed rule preamble, upon receipt of a notice
the State provides to an MCO, PIHP, or PAHP of its decision to
terminate an ILOS, an MCO, PIHP, or PAHP provides to the State of its
decision to cease
[[Page 41168]]
offering an ILOS to its enrollees, or CMS provides to the State of its
decison to require the State to terminate an ILOS, the State must
submit an ILOS transition plan to CMS for review and approval.
Therefore, we are finalizing Sec. 438.16(e)(2)(iii) by replacing
``When a State decides to terminate an ILOS, an MCO, PIHP or PAHP
decides to cease offering an ILOS to its enrollees, or CMS makes the
decision to require the State to terminate an ILOS, the State must
submit an ILOS transition plan to CMS for review and approval within 15
calendar days of the decision'' with ``Within 30 calendar days of
receipt of a notice described in paragraph(e)(2)(iii)(A), (B) or (C) of
this section, the State must submit an ILOS transition plan to CMS for
review and approval: (A) The notice the State provides to an MCO, PIHP,
or PAHP of its decision to terminate an ILOS; (B) The notice an MCO,
PIHP, or PAHP provides to the State of its decision to cease offering
an ILOS to its enrollees; or (C) The notice CMS provides to the State
of its decision to require the State to terminate an ILOS.''
Additionally, we are redesignating requirements for an ILOS transition
plan originally proposed in Sec. 438.16(e)(2)(iii) to Sec.
438.16(e)(2)(iv). The revisions to Sec. 438.16(e)(2)(iii) and (iv) are
equally applicable to separate CHIP through the cross-reference at
Sec. 457.1201(e).
Comment: Some commenters recommended revisions to Sec.
438.16(e)(iii) to require a termination process for ILOSs. One
commenter requested that CMS outline a specific process, including
timelines and parameters for notifying enrollees about the termination
of an ILOS while another commenter requested that CMS outline the
requirements for the termination process, but leave the management of
the process to individual States. Another commenter recommended that in
addition to a notification process for impacted enrollees, States
should also notify providers and family caregivers. One commenter
opposed the proposed requirement for States to notify enrollees of a
terminated ILOS.
Response: We appreciate commenters' requests for further details on
the activities related to ILOS terminations, including notifications to
enrollees, providers, and family caregivers. We believe States should
follow their standard practices for termination of services. For
example, some States provide enrollees (and their authorized
representatives, if applicable) a notice, such as a postcard and web
posting, announcing an update to the enrollee handbook as required in
Sec. 438.10(g) and Sec. 457.1207 for Medicaid and CHIP, respectively.
We believe using a consistent process for ILOSs is reasonable and makes
it easier for enrollees. Managed care plans should also provide notice
to providers in accordance with their usual protocols.
Comment: One commenter stated that managed care plans should not
have the ability to reverse their decision to cover ILOSs and suggested
that a different termination process should apply in this situation.
Specifically, the commenter recommended that CMS prohibit managed care
plans from terminating coverage of an ILOS within a contract year, and
that if a plan chooses to terminate an ILOS at the end of a rating
period, the plan should be required to provide a 6-month transition
period after enrollee and provider notice. This same commenter raised
concerns with the proposed transition of care policy only pertaining to
enrollees currently receiving the ILOS that will be terminated, and the
commenter recommended that new enrollees be able to receive the ILOS
during the transition period.
Response: We do not agree with the commenter than CMS should place
requirements on managed care plans regarding how long a managed care
plan must provide an ILOS before it can choose to no longer offer it.
We believe ILOS authority is inherent in a risk contract in accordance
with section 1903(m)(2)(A) of the Act which addresses risk-based
capitation payments (88 FR 28161), and this is reflected in Sec.
438.3(e)(2)(iii) which specifies that an ILOS is a substitute for a
State-plan covered service or setting that will be offered to enrollees
at the option of the managed care plan. As such, it is not appropriate
for CMS to place limits on when a managed care plan can decide to no
longer offer an ILOS to its enrollees. However, plans are obligated to
ensure that enrollees have timely access to State-plan covered services
and settings and should provide enrollees notice if they intend to
change their coverage of an ILOS.
As we acknowledged in the proposed rule (85 FR 28174), we have
concerns with enrollees being able to begin receiving an ILOS after the
decision has been made that it is being terminated. We recognize that
enrollees currently receiving an ILOS that will be terminated require
time to transition to State plan services and settings and managed care
plans must ensure that they are provided such services timely and with
minimal disruption to care. However, we are concerned that allowing
additional enrollees to receive an ILOS that is being terminated is
inappropriate particularly when an ILOS is being terminated because it
is no longer medically appropriate or has triggered health and safety
concerns. Therefore, we decline to adopt the commenter's suggestion and
will only require transition plans to be implemented for enrollees who
are currently receiving an ILOS that will be terminated, and not allow
terminating ILOSs to be provided to new enrollees during the transition
period.
Comment: A few commenters submitted comments related to the
administrative steps associated with terminating an ILOS, namely the
proposed requirements to amend the managed care plan contracts and any
necessay revised rate certification to amend capitation rates. One
commenter recommended that States be required to notify CMS through a
different reporting mechanism, such as the MCPAR, instead of amending a
managed care plan's contract. Another commenter opposed a requirement
to amend managed care plan contracts and amend capitation rates, as
necessary.
Response: While we recognize that there is additional State burden
to revise managed care plan contracts and revise rate certifications,
as applicable, we continue to believe that these actions are necessary
in circumstances when a State or CMS requires, or a managed care plan
chooses to terminate an ILOS. As currently required in Sec.
438.3(e)(2)(iii), ILOSs must be identified in the managed care plan
contracts, which necessitates amending them to reflect the termination
of an ILOS. Additionally, ILOSs are considered in the developement of
actuarially sound capitation rates; therefore, if an ILOS is terminated
from the managed care plan contract, the State and its actuary must
evaluate if an adjustment(s) to the capitation rates is necessary to
ensure Medicaid capitation rates continue to be actuarially sound. This
is consistent with any programmatic change that may have a material
impact to rate development.
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.16(e) and
457.1201(e) as proposed with the following modifications:
At Sec. 438.16(e)(2)(i)(B), remove ``this section'' and
replace it with ``this part.''
At Sec. 438.16(e)(2)(iii), modify text as discussed in
this section.
At Sec. 438.16(e)(2)(iv), renumber text proposed at Sec.
438.16(e)(2)(iii) within this new section entitled ``Requirements for
an ILOS Transition Plan'' as discussed in this section.
[[Page 41169]]
i. Applicability Dates (Sec. Sec. 438.3(e), 438.7(g),
438.10(g)(2)(ix), 438.16(f) and 457.1200(d))
We proposed that States and managed care plans would be required to
comply with the provisions outlined in Sec. Sec. 438.2,
438.3(c)(1)(ii) and (e)(2)(i) through (iv), 438.10(g)(2)(ix),
438.66(e)(2)(vi), and applicable cross-references for separate CHIP at
Sec. Sec. 457.10, 457.1201(c) and (e), and 457.1207 no later than the
effective date of the final rule. We believe this is appropriate as
these proposals are technical corrections or clarifications of existing
requirements. Additionally, we proposed that States and managed care
plans would comply with Sec. Sec. 438.3(e)(2)(v), 438.16, and
438.7(b)(6) no later than the rating period for contracts with MCOs,
PIHPs, and PAHPs beginning on or after 60 days following the effective
date of the final rule as we believe this is a reasonable timeframe for
compliance. We proposed to revise Sec. 438.3(v) to add this proposed
date, remove ``July 1, 2017,'' and update ``2015'' and referenced
citations; and add Sec. Sec. 438.7(g)(1) and 438.16(f). We proposed to
adopt the applicability date at Sec. 438.16(f) for separate CHIP by
adding Sec. 457.1200(d).
We summarize and respond to public comments received in this
section related to ILOS applicability dates (Sec. Sec. 438.3(e),
438.7(g), 438.16(f), 438.10(g), 457.1200(d)) below.
Comment: Some commenters requested that CMS delay the proposed
applicability dates for ILOS provisions as they noted additional time
was needed to make necessary contractual and operational changes. A few
of these commenters requested delay of all ILOS provisions, one
commenter requested delay of Sec. Sec. 438.16(d) and 438.16(e),
another recommended delay of Sec. 438.66(c)(1), and one commenter
recommended delay of Sec. 438.66(e)(2)(vi). Other commenters were
unclear which ILOS provisions they recommended be delayed.
Additionally, we received commenters who requested CMS delay
enforcement of the associated guidance published on January 4, 2023
until the effective date of the final rule.
There was also variability in the recommended revisions to
applicability dates. One commenter recommended delaying all ILOS
requirements to take effective with the next rate certification or
contract submission. Another commenter recommended delaying ILOS
provisions until the contract rating period beginning on or after 1
year following the effective date of the final rule. Other commenters
did not provide specific recommendations on applicability dates. The
commenter who specifically requested to delay the documentation,
monitoring, evaluation, and oversight in Sec. 438.16(d) and (e)
recommended allowing States until September 1, 2024. This commenter
noted additional time was needed to finalize necessary contract
amendments with managed care plans. This commenter indicated these
contract amendments typically take at least 90 days, and managed care
plans typically need 60 to 90 days after these contractual changes to
update their member handbooks and related processes. The commenter who
requested a delay for MCPAR changes in Sec. 438.66(e)(2)(vi)
recommended a 2-year delay to allow time for States to make necessary
changes to contracting, reporting templates, and systems. The commenter
who requested a delay for the ILOS cost percentage limit in Sec.
438.66(c)(1) recommended a 5-year delay to allow States sufficient time
for necessary ILOS implementation changes.
Response: We continue to believe that the proposed applicability
dates give States ample time to comply with the proposed regulatory
changes for ILOSs. On January 4, 2023, we published guidance \202\ to
clarify the existing option for States to pursue efforts to address
enrollees' unmet HRSNs, strengthen access to care, improve population
health, reduce health inequities, and lower overall health care costs
in Medicaid through the use of ILOSs. This guidance outlined our
expectations for such ILOSs and provided a policy framework for States
and managed care plans to ensure appropriate and efficient use of
Medicaid resources. This guidance was effective with the date of
publication; however, we acknowledged that States with existing ILOSs
would need a glidepath to conform to the guidance given necessary
procedural and contractual changes. Therefore, we allowed States with
existing ILOSs to have until the contract rating period, beginning on
or after January 1, 2024, to conform with the guidance for existing
ILOSs. If States elected to add any new ILOSs, they were required to
conform to this guidance for new ILOSs as of the publication of the
SMDL. As the regulatory changes are generally consistent with the ILOS
guidance, we believe States have had ample notice and should actively
be making the necessary contractual and procedural changes. As such, we
are finalizing the applicability dates as proposed.
---------------------------------------------------------------------------
\202\ https://www.medicaid.gov/sites/default/files/2023-12/smd23001.pdf.
---------------------------------------------------------------------------
After reviewing the public comments, we are finalizing the
provisions outlined in this section at Sec. Sec. 438.3(e), 438.7(g),
438.10(g)(2)(ix), 438.16(f), 457.1200(d) as proposed.
5. Quality Assessment and Performance Improvement Program, State
Quality Strategies and External Quality Review (Sec. Sec. 438.330,
438.340, 438.350, 438.354, 438.358, 438.360, 438.364, 457.1201,
457.1240 and 457.1250)
a. Quality Assessment and Performance Improvement Program (Sec.
438.330)
Regulations at Sec. 438.330 establish the Quality Assessment and
Performance Improvement (QAPI) programs that States must require of
Medicaid managed care plans (that is, MCOs, PIHPs, and PAHPs). Section
438.330(d) describes the performance improvement projects (PIPs) that
States must require of Medicaid managed care plans as part of the QAPI
program. MA plans are subject to similar (but not identical)
requirements at Sec. 422.152. In the proposed rule, we noted that
Sec. 422.152 outlines the quality improvement program requirements for
MA organizations, including the development and implementation of a
Chronic Care Improvement Program (CCIP) (88 FR 28175). We noted that
CMS had previously required MA organizations to develop and implement
Quality Improvement Project (QIPs), which were an organization's
initiatives focusing on specified clinical and nonclinical areas and
were expected to have a favorable effect on health outcomes and
enrollee satisfaction. However, CMS found the implementation of the QIP
and CCIP requirements had become burdensome and complex, and removed
the requirements for the QIP. We removed the QIP requirement in the
2019 Final Rule (83 FR 16440). Accordingly, we proposed to update our
regulations at Sec. 438.330(d)(4) which still referenced a QIP as a
substitute for a PIP in managed care plans exclusively serving dually
eligible individuals.
In the 2016 final rule (81 FR 27682), we implemented a policy, at
Sec. 438.330(d)(4), to allow States to permit Medicaid managed care
plans exclusively serving dually eligible individuals to substitute an
MA plan's QIP conducted under Sec. 422.152(d) in the place of a
Medicaid PIP, to prevent unnecessary duplication and increase
flexibility for plans and States. Subsequently, in the final rule
``Medicare Programs; Contract Year 2019 Policy and Technical Changes to
[[Page 41170]]
the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service,
the Medicare Prescription Drug Benefit Programs and the PACE Program,''
we removed the QIP from the requirements for MA organizations at Sec.
422.152, because we determined that they did not add significant value
and many were duplicative of existing activities, such as the CCIP (83
FR 16669). As we noted in the proposed rule, we neglected to remove a
reference to the QIP from Sec. 438.330(d)(4) to conform with the
changes at Sec. 422.152. We proposed to replace the outdated reference
at Sec. 438.330(d)(4) to Sec. 422.152(d) (which previously described
the now-removed QIP), with a reference to the CCIP requirements for MA
organizations in Sec. 422.152(c). Under our proposal, States could
permit a Medicaid managed care plan exclusively serving dually eligible
individuals to substitute an MA organization CCIP, conducted in
accordance with the requirements at Sec. 422.152(c), for one or more
of the PIPs required under Sec. 438.330(d). We noted our belief that
the CCIP meets the same intent of the current regulation as an
appropriate substitute for a PIP, based on the quality improvement
standards in a CCIP, including the identification of intervention goals
and objectives, the collection and analysis of valid and reliable data,
the assessment of performance and outcomes using quality indicators and
measures, systematic and ongoing follow-up for increasing or sustaining
improvement, and the reporting of results to CMS. We noted our belief
that permitting such a substitution would also maintain the intent of
the current regulation to prevent unnecessary duplication and increase
flexibility for plans and States, while allowing Medicaid managed care
plans to maintain robust health improvement initiatives for dually
enrolled individuals. Since the change to remove QIPs has been in place
since 2019, we stated that we expected some States to already have
CCIPs in place of QIPs, and therefore, we proposed that States must
comply with this update in Sec. 438.330(d)(4) no later than the rating
period for contracts beginning after the effective date of the final
rule in the applicability date provision at Sec. 438.310(d)(1). We
noted that this proposed change does not apply to separate CHIP because
we did not apply Sec. 438.330(d)(4) to separate CHIP in the 2016 final
rule, and because Sec. 457.310(b)(2) does not allow for concurrent
health coverage in separate CHIP.
We summarize and respond to public comments received on our
proposal to allow States to permit plans exclusively serving dually
eligible individuals to substitute an MA organization CCIP, conducted
in accordance with the requirements at Sec. 422.152(c), for one or
more of the PIPs required under Sec. 438.330(d), below.
Comment: Several commenters supported our proposal to replace the
outdated reference at Sec. 438.330(d)(4) to Sec. 422.152(d) (which
previously described the now-removed QIP), with a reference to the CCIP
requirements for MA organizations in Sec. 422.152(c). A few commenters
requested CMS provide clarification on the definition of the term
``exclusively'' and how CMS intends to define MCOs ``exclusively''
serving dually eligible individuals.
Response: For the comments regarding the definition of the term
``exclusively,'' our proposal would not change the intent of the
previous policy that allowed States to permit Medicaid managed care
plans that exclusively serve dually eligible individuals to substitute
a quality plan required for their MA organization for a PIP required
for the Medicaid managed care plan. It only replaces the reference to a
QIP (which are no longer in use) with a CCIP. Under this final rule,
like the previous policy, ``exclusively serving dually eligible
individuals'' means the policy would only apply to Medicaid managed
care plans whose enrollees are all dually eligible for Medicare and
Medicaid.
After reviewing the public comments, and for the reasons described
in the proposed rule, we are finalizing the change to Sec.
438.330(d)(4) as proposed. We note that we are modifying the effective
date of this provision to allow States with Medicaid managed care plans
that exclusively serve dually eligible individuals to substitute an MA
plan's CCIP conducted under Sec. 422.152(c) in the place of a Medicaid
PIP effective with the effective date of this final rule. The proposed
applicability date would have required States to comply with this
update in Sec. 438.330(d)(4) no later than the rating period for
contracts beginning after the effective date of the final rule in the
applicability date provision at Sec. 438.310(d)(1) (88 FR 28175);
however, this was an error. Since the change is optional for plans, we
are not finalizing the applicability date proposed at Sec.
438.310(d)(1), since separate applicability dates are only required if
the effective date is different from that of the final rule.
b. Managed Care State Quality Strategies (Sec. Sec. 438.340 and
457.1240)
Current regulations at Sec. 438.340, which are included in
separate CHIP regulations through an existing cross-reference at Sec.
457.1240(e), set forth requirements for States to draft and implement a
written quality strategy for assessing and improving the quality of
health care and services furnished by the MCO, PIHP, or PAHP. The
requirement also applies to a PCCM entity whose contract with the State
provides financial incentives for improved quality outcomes, as
described in Sec. 438.310(c)(2). The quality strategy is intended to
serve as a foundational tool for States to set goals and objectives
related to quality of care and access for their managed care programs.
Regulations at Sec. 438.340(c) require States to make their quality
strategy available for public comment when drafting or revising it and
require States to submit their initial quality strategy to CMS for
feedback prior to adopting in final. These regulations also stipulate
that States must review and update their quality strategy as needed,
but no less than once every 3 years and submit the strategy to CMS
whenever significant changes are made to the document or whenever
significant changes occur within the State's Medicaid program. Building
upon these requirements, we proposed several changes to increase
transparency and opportunity for meaningful ongoing public engagement
around States' managed care quality strategies. We proposed that States
must comply with these updates in Sec. 438.340 no later than 1 year
from the effective date of the final rule and proposed to codify this
applicability date at Sec. 438.310(d)(2) for Medicaid, and through a
proposed amendment at Sec. 457.1200(d) to include a cross-reference to
Sec. 438.310(d) for separate CHIP.
First, we proposed to increase the opportunity that interested
parties have to provide input into States' managed care quality
strategy. Regulations at Sec. 438.340(c)(1) require that States make
their quality strategy available for public comment when it is first
adopted and when revisions are made. However, the regulations did not
require that the quality strategy be posted for public comment at the
three-year renewal mark if significant changes had not been made. We
proposed to revise Sec. 438.340(c)(1) to require that States make
their quality strategy available for public comment at the 3-year
renewal, regardless of whether or not the State intends to make
significant changes, as well as whenever significant changes
[[Page 41171]]
are made. The proposed change would promote transparency and give
interested parties an opportunity to provide input on changes they
believe should be made to the quality strategy, even if the State
itself is not proposing significant changes. We noted that States would
retain discretion under the proposed rule to define the public comment
process. We proposed this change would apply equally to separate CHIP
through the existing cross-reference at Sec. 457.1240(e).
Second, we proposed to revise Sec. 438.340(c)(2)(ii) to clarify
that the State Medicaid agency must post on its website the results of
its 3-year review. The regulations clarify at Sec. 438.340(c)(2) that
the review must include an evaluation, conducted within the previous 3
years, of the effectiveness of the quality strategy and that the
results of the review must be made available on the State's website,
but do not specifically state that the full evaluation must be posted
on the website. We proposed revisions at Sec. 438.340(c)(2)(ii) to
make clear that the evaluation, as part of the review, must be posted.
We noted that Sec. 438.340(c) allows for States to post the evaluation
on the website as a standalone document or to include the evaluation in
the State's updated and finalized quality strategy, which is required
to be posted under Sec. 438.340(d). We proposed this change at Sec.
438.340(c)(2)(ii) would apply equally to separate CHIP through the
existing cross-reference at Sec. 457.1240(e). For additional
information on the components and purpose of the managed care quality
strategy, see the Quality Strategy Toolkit, available at https://www.medicaid.gov/medicaid/downloads/managed-care-quality-strategy-toolkit.pdf.
Third, we proposed to clarify when States must submit a copy of
their quality strategy to CMS. Regulations at Sec. 438.340(c)(3)
require that States submit to CMS a copy of their initial quality
strategy for feedback and a copy of the revised quality strategy
whenever significant changes are made. The regulations did not require
States to submit to CMS subsequent versions of their quality strategy
unless the State has made significant changes to the document or to
their Medicaid program. We proposed to modify Sec. 438.340(c)(3)(ii)
to require that States, prior to finalizing a revised or renewed
quality strategy as final, submit a copy of the revised strategy to CMS
at minimum every 3 years, following the review and evaluation of the
strategy described at Sec. 438.340(c)(2), in addition to when
significant changes are made. These changes would allow CMS the
opportunity to provide feedback periodically to help States strengthen
their managed care quality strategies before they are finalized,
whether or not significant changes are made to a State's strategy or to
their Medicaid program. We proposed to include this requirement into
the provision at Sec. 438.340(c)(3)(ii) for Medicaid by adding
paragraphs (c)(3)(ii)(A) through (C), which applies to separate CHIP
through an existing cross-reference at Sec. 457.1240(e). We proposed
at Sec. 438.310(d)(2) for Medicaid, and through a proposed amendment
at Sec. 457.1200(d) to include a cross-reference to Sec. 438.310(d)
for separate CHIP, that States must comply with updates to Sec.
438.340 no later than 1 year from the effective date of the final rule,
which we believed would give States time to update internal processes
accordingly.
Finally, we proposed a technical correction to Sec.
438.340(c)(3)(ii) to correct an internal citation related to State-
defined significant changes. Currently, Sec. 438.340(c)(3)(ii)
references significant changes ``as defined in the State's quality
strategy per paragraph (b)(11) of this section[.]'' However, Sec.
438.340(b)(10) contains the information on a State's definition of a
significant change. Therefore, we proposed to replace ``paragraph
(b)(11)'' with ``paragraph (b)(10)'' in Sec. 438.340(c)(3)(ii). This
proposed change will apply equally to separate CHIP through the
existing cross-reference at Sec. 457.1240(e).
We summarize and respond to public comments received on Managed
Care State Quality Strategies (Sec. Sec. 438.340, 457.1240) below.
Comment: Several commenters supported our proposals to increase the
opportunity for public comment, clarify the requirements for posting
the quality strategy evaluation on the State Medicaid website, and
submit the quality strategy to CMS every 3 years regardless of whether
significant changes were made. One commenter opposed the publication of
the State's quality strategy for public comment every 3 years
regardless of whether a significant change was made, and one commenter
opposed the proposal to submit the quality strategy to CMS regardless
of whether a significant change was made. The commenter opposing the
provision requiring public comment noted that the requirement would be
burdensome for States and that the current requirements are sufficient.
Some commenters requested CMS impose more requirements on the State
public comment process, such as requiring a certain amount of lead time
for the public to make comments, and requiring States to publicly
document the actions they took in response to the public feedback, or
the rationale for not taking actions requested by the public. One
commenter requested clarification on what is considered a significant
change.
Response: We disagree with commenters who thought the current
requirements were sufficient. Under Sec. 438.340(b)(10), it is up to
the State to define what is considered a significant change, and to
include that definition in their quality strategy. Without finalizing
these changes, States may make revisions that do not rise to the level
of ``significant change,'' as defined by the State, and would not be
required to post the quality strategy for public comment or submit the
strategy to CMS for feedback. We believe these new requirements bring
the regulations closer to the original intent--for the quality strategy
to evolve over time with the shifting needs of the managed care
population, and for the public and CMS to weigh in on the strategy
every 3 years.
We also appreciate the comments recommending additional
requirements on how States administer the public comment process. In
the proposed rule, we stated that States would retain discretion to
define the public comment process. We clarify that States are currently
required under Sec. 438.340(c)(1) to obtain input from the Medical
Care Advisory Committee, beneficiaries and interested parties, as well
as consult with Tribes, if appliable, during the public comment
process. We did not propose additional requirements on the public
comment process for the quality strategy, and are therefore, not
finalizing any additional requirements at this time.
Comment: One commenter noted that the timeframe we proposed to
implement these changes to the quality strategy requirements (1 year
from the effective date of the final rule) was reasonable, and one
commenter requested we consider a longer timeframe, such as 2 years,
for compliance with these new requirements to help States manage the
process.
Response: We continue to believe the timeframe we proposed is
reasonable given that many States are already implementing the policies
we proposed based on our review and feedback provided on quality
strategies to date. Therefore, we are finalizing the implementation
date as proposed.
We did not receive any comments on the proposed technical
correction to replace ``paragraph (b)(11)'' with
[[Page 41172]]
``paragraph (b)(10)'' in Sec. 438.340(c)(3)(ii), and are therefore
finalizing this provision as proposed.
After reviewing the public comments, we are finalizing the rules
for the quality strategy as proposed. We note that the applicability
date, though unchanged, will be finalized at Sec. 438.310(d)(1), not
Sec. 438.310(d)(2) as proposed.
c. External Quality Review (Sec. Sec. 438.350, 438.354, 438.358,
438.360, 438.364, 457.1201, 457.1240 and 457.1250)
Current regulations at Sec. Sec. 438.350, 438.354, 438.358,
438.360, 438.364, and 457.1250 provide requirements for the annual
External Quality Review (EQR) on quality, timeliness, and access to the
health care services furnished to Medicaid and CHIP beneficiaries
enrolled in managed care. The regulations set forth the EQR-related
activities that States or a qualified EQR organization (EQRO) must
perform, and the information that must be produced from an EQR and
included in an annual detailed EQR technical report. States must submit
to CMS an annual EQR technical report, which must include, among other
things, a description of data, including validated performance
measurement data for certain mandatory EQR-related activities. The
regulations also delineate the circumstances in which States may use
the results from a Medicare or private accreditation review in lieu of
conducting an EQR for a given managed care entity. The EQR requirements
in subpart E of part 438 apply to each MCO, PIHP, and PAHP that has a
contract with a State Medicaid or CHIP agency, as well as certain PCCM
entities whose contract with the State provides financial incentives
for improved quality outcomes, as described in Sec. 438.310(c)(2). We
proposed several changes to the EQR regulations that seek to accomplish
two overarching goals: (1) eliminate unnecessary burdensome
requirements; and (2) make EQR more meaningful for driving quality
improvement.
(1) Removal of PCCM Entities From Scope of Mandatory External Quality
Review
In the final 2016 final rule, we added a definition of ``primary
care case management entity'' in Sec. Sec. 438.2 and 457.10 to
recognize a new type of primary care case management system in Medicaid
and CHIP. Previously, the regulations recognized, and continue to
recognize, a primary care case manager (PCCM) as a physician or a
physician group practice or, at State option, a physician assistant,
nurse practitioner, or certified nurse-midwife that contracts with the
State to furnish case management services to Medicaid beneficiaries.
The 2016 final rule added the term ``PCCM entity,'' which is defined in
Sec. Sec. 438.2 and 457.10 as an organization that provides one or
more additional specified functions in addition to primary care case
management services, for example, intensive case management,
development of care plans, execution of contracts with and/or oversight
responsibilities for other FFS providers, and review of provider
claims, utilization and practice patterns, among others. We further
recognized in the 2016 final rule that some PCCM entities have
contracts with the State that provide financial incentives for improved
quality outcomes. Per current Sec. 438.310(c)(2), such PCCM entities
are subject to a number of the requirements in part 438, subpart E
(relating to Quality Measurement and Improvement and External Quality
Review) to which PCCMs are not similarly subject.
Of particular relevance to this final rule, the regulations have
long provided that States are not required to perform an annual EQR of
the State's PCCMs. However, in the 2016 final rule, we provided at
Sec. Sec. 438.350 and 457.1250(a) that States are required to conduct
an annual EQR of PCCM entities operating under a risk-bearing contract
described in Sec. 438.310(c)(2). We reasoned at the time that, while
PCCMs traditionally are paid a per capita fee to provide case
management services for Medicaid beneficiaries and otherwise are
reimbursed for services rendered on a FFS basis, such PCCM entities
function more like a managed care entity because their contracts
include shared financial risk, and thus should be subject to the EQR
requirements.
The 2016 final rule also provided for CMS review of States'
contracts with their PCCM entities under Sec. 438.3(r). Our reviews of
these contracts have led us to reevaluate the policy to require an
annual EQR of PCCM entities described in Sec. 438.310(c)(2), as these
contracts exhibit wide variability in the size, structure, and scope of
case management and other services provided by risk-bearing PCCM
entities. This variation called into question the appropriateness of
EQR as an oversight tool for many of the PCCM entities. For example,
the scope of services for some of these PCCM entities may yield little
to no data for EQR. In addition, some PCCM entities are a single
provider or a small provider group, and we believe the cost and burden
imposed by the EQR process may disincentivize them from entering into
risk-bearing contracts with States aimed at improving quality and
outcomes in the FFS delivery system. We do not believe the EQR
requirement should be a barrier for these types of PCCM entities to
establish arrangements aimed at quality improvement when States have
additional quality monitoring and oversight tools that may be
sufficient (for example, QAPI program reviews described at Sec.
438.330(e)).
Therefore, we proposed to remove PCCM entities described in Sec.
438.310(c)(2) from the managed care entities subject to EQR under Sec.
438.350. Other requirements in part 438, subpart E that currently apply
to risk-bearing PCCM entities described at Sec. 438.310(c)(2) are not
impacted by this final rule.\203\ We noted that States may perform
additional oversight and monitoring activities that are similar to
mandatory external quality reviews for PCCM providers (and other
providers not subject to EQR such as non-emergency medical
transportation providers) at their discretion, and may choose to use an
entity that is also an EQRO for these activities, however these
activities will not be subject to EQR regulations at part 438. Further,
we believe that the removal of all PCCM entities from the mandatory
scope of EQR would alleviate burden on States and PCCM entities while
retaining appropriate tools for quality monitoring and oversight.
---------------------------------------------------------------------------
\203\ States are currently required to include their PCCM
entities in CMS contract review under Sec. 438.3(r), and for PCCM
entities described at Sec. 438.310(c)(2), States must include them
in aspects of their quality assessment and performance improvement
programs (QAPI) including an annual utilization and program reviews
(Sec. 438.330(b)(2), (b)(3), (c), and (e)), and their quality
strategy (Sec. 438.340), which includes a quality strategy
effectiveness evaluation. States have the discretion under Sec.
438.358(d) to use their EQRO to provide technical assistance to PCCM
entities described at Sec. 438.310(c)(2).
---------------------------------------------------------------------------
We proposed conforming amendments to remove reference to PCCM
entities described in Sec. 438.310(c)(2) at Sec. Sec. 438.310(b)(5),
438.358(a)(1), 438.364(a)(3) through (6), and 438.364(c)(2)(ii), and to
remove the reference to Sec. 438.350 from Sec. 438.310(c)(2). We also
proposed removing the current provision at Sec. 438.358(b)(2) that
applies risk-bearing PCCM entities to the mandatory EQR activities, to
conform with the proposed changes at Sec. 438.350, and reserve this
provision for future use. We maintain that EQROs must be independent
from any PCCM entities they review at the State's discretion, as
currently required under Sec. 438.354(c), and proposed a modification
at Sec. 438.354(c)(2)(iii) to clarify this. We note that these
changes,
[[Page 41173]]
if finalized, would be effective as of the effective date of the final
rule. For separate CHIP, we likewise proposed to exclude all PCCM
entities from EQR requirements by removing the cross-reference to Sec.
438.350 at Sec. 457.1201(n)(2), by removing the reference to PCCM
entities entirely from Sec. 457.1250(a), and removing the cross-
reference to Sec. 457.1250(a) for quality requirements applicable to
PCCM entities at Sec. 457.1240(f).
We summarize and respond to public comments received on Removal of
PCCM entities from scope of mandatory External Quality Review below.
Comment: Several commenters supported our proposal to remove the
EQR requirements for PCCM entities described at Sec. 438.310(c)(2).
Some commenters noted that States will continue to exercise optional
participation for PCCM entities in the performance measure validation
activity, especially where performance measures are not otherwise
evaluated by an independent auditor.
Response: As we noted in the proposed rule, we intended to allow
flexibility for States to continue to monitor PCCM entities at their
discretion, including through EQR. Therefore, we are finalizing these
changes largely as proposed, with one revision to more explicitly allow
validation of performance measures and performance improvement projects
conducted by PCCM entities described at Sec. 438.310(c)(2) at the
discretion of States, which was supported by public comments.
Specifically, we proposed to remove Sec. 438.358(b)(2) to implement
our proposal to exclude PCCM-entities described at Sec. 438.310(c)(2)
from EQR. Instead, we are finalizing a modification to this provision
to remove the word ``must'' and replace it with ``may.'' It now reads
``For each PCCM entity (described in Sec. 438.310(c)(2)), the EQR-
related activities in paragraphs (b)(1)(ii) and (iii) of this section
may be performed'' (emphasis added). This change will allow States that
choose to conduct these activities to continue to access FFP at the 50
percent rate in accordance with Sec. 438.370(b). We are also
finalizing a technical change to remove the references to PCCM entities
described at Sec. 438.310(c)(2) within the optional activities at
Sec. 438.358(c)(3) and (4) since they are no longer included in the
required activities referenced at Sec. 438.358(b)(1)(i) and (ii) but
are included in the list of plans for which States can exercise
optional activities at Sec. 438.358(c).
After reviewing the public comments, we are finalizing the rules
for the removing EQR requirements for PCCM entity (described in Sec.
438.310(c)(2)) with modifications at Sec. 438.358(b)(2), and at Sec.
438.358(c)(3) and (4).
(2) EQR Review Period
In the proposed rule, we noted that the regulations provided that
most EQR activities are performed using information derived from the
preceding 12 months, but did not clearly indicate to which 12-month
period the activity should pertain. Specifically, the regulations at
Sec. 438.358(b)(1) (which apply to separate CHIP through an existing
cross-reference at Sec. 457.1250(a)) required validation of
information collected or calculated during ``the preceding 12 months''
for three of the mandatory EQR activities (validation of performance
improvement projects, validation of performance measurement data, and
validation of network adequacy activities). The optional EQR activities
described in Sec. 438.358(c) were also required to use information
derived ``during the preceding 12 months.'' In addition, we did not
previously specify in the regulations when the EQR activity must take
place relative to the finalization and posting of the annual report.
The result was a lack of uniformity in the review periods included in
States' annual EQR technical reports each year. In some cases, for
example, States reported on the results of EQR activities conducted 3
or more years ago, while other States reported on the results of EQR
activities conducted relatively close to the completion of the report.
To support States' and CMS's ability to use the reports for quality
improvement and oversight, we proposed modifications to ensure
consistency and align the data in the annual reports with the most
recently available information used to conduct the EQR activities.
We proposed to add paragraph (a)(3) in Sec. 438.358 to define the
12-month review period for all but one of the EQR-related activities
described in Sec. 438.358(b)(1) and the optional activities described
in Sec. 438.358(c). The one exception is the activity described in
Sec. 438.350(b)(1)(iii), which requires a review within the previous 3
years. We proposed at Sec. 438.358(a)(3) that the 12-month review
period for the applicable EQR activities begins on the first day of the
most recently concluded contract year or calendar year, whichever is
nearest to the date of the EQR-related activity.
We understand that most performance measures run on a calendar
year, while performance improvement projects and network adequacy
assessments typically align with the contract year. We proposed that
the 12-month review period for EQR activities does not have to be the
same. For example, if an EQRO begins the performance measurement
validation activity in July of 2022, and the State calculates
performance measures on the calendar year, the review period for the
performance measurement validation activity will be January 1 through
December 31, 2021. Similarly, if the EQRO validates PIPs in November
2021 and the most recent contract year ended in March 2021, the review
period for the EQRO will be March 2020-March 2021.
We also proposed to require at Sec. 438.358(b)(1) and (c) that the
EQR-related activities must be performed in the 12 months preceding the
finalization and publication of the annual report. We believe these two
proposed changes would result in more recent data being publicly posted
in the annual EQR technical reports and would create more consistency
among States regarding the time period represented by the data.
Consistency in what data are reported could help make the EQR technical
reports a more meaningful tool for monitoring quality between plans
within and among States.
We proposed the 12-month review period for the applicable EQR-
related activities described in Sec. 438.350(b)(1) and (c) would be
effectuated at proposed Sec. 438.358(a)(3). We proposed conforming
changes to Sec. 438.358(b)(1)(i), (ii) and (iv), and (c) to reference
the EQR review period proposed at Sec. 438.358(a)(3). We proposed to
modify the language at Sec. 438.350(b)(1) and (c) to indicate that the
EQR-related activities must be performed in the 12 months preceding the
finalization of the annual reports. We proposed changes would apply
equally to separate CHIP EQR requirements for MCOs, PIHPs, and PAHPS
through an existing cross-reference to Medicaid's EQR-related
activities in Sec. 438.358 at Sec. 457.1250(a). We proposed that
States must comply with these updates to Sec. 438.358 no later than
December 31, 2025, and proposed to codify this applicability date at
Sec. 438.310(d)(3) for Medicaid, and through a proposed amendment at
Sec. 457.1200(d) to include a cross-reference to Sec. 438.310(d) for
separate CHIP. We believed this timeline would allow States the time to
make any contractual or operational updates following the final rule.
We summarize and respond to public comments received on EQR review
period below.
Comment: Several commenters supported the proposed changes to the
EQR review period, noting the importance of using the most recent
[[Page 41174]]
available data and creating more uniformity across State EQR reports.
One commenter encouraged us to consider further standardizing the
reporting periods along the calendar year. Another commenter supported
the alignment of review periods but noted that some EQR activities may
not be completed in the 12-month timeframe proposed.
Response: After reviewing the public comments, we are finalizing
these provisions as proposed for EQR mandatory activities and, based on
comments received about how some EQR activities are not completed in a
12-month timeframe, revising how the review period is applied to EQR
optional activities. We considered the commenter's suggestion to align
all review periods on the calendar year, but decided against this since
many States use the contract year as a review period which may be more
appropriate in some circumstances. In response to the commenter's
concern about the EQR activities taking more than 12 months, we
continue to believe applying these timeframes will result in the most
recent available data for the three applicable mandatory activities at
Sec. 438.358(b)(1) (which apply to separate CHIP through an existing
cross-reference at Sec. 457.1250(a)). We encourage States to request
technical assistance if they experience challenges with these new
timeframes and anticipate that with our decision (discussed in section
I.B.5.c.5. of this final rule) not to move up the EQR report deadline
to December 31 will help States implement these changes. However, the
commenter's concern about EQR activities taking more than 12 months did
make us reconsider how the review periods apply to EQR optional
activities, particularly with the finalization of the new optional
activity at Sec. 438.358(c)(7) for evaluations (discussed in section
I.B.5.c.3. of the final rule). Based on comments received, we no longer
believe the review period proposed applies equally between mandatory
and optional EQR activities. If we finalized our proposed review period
timeline for optional activities, the data and information used for
optional activities would be limited to a 12-month period, which
conflicts with the 3-5 year time periods required to be evaluated for
quality strategies, SDPs and ILOSs. Therefore, we are finalizing the
regulations at Sec. 438.358(c) to remove the reference to a review
period from the optional activities, and to remove the reference to the
optional activities in the new review period regulation at Sec.
438.358(a)(3). We believe this modification will provide flexibility
for States to determine the appropriate time periods for the optional
activities they implement based on the intended use of the data
obtained from these activities.
Based on our review of public comments, we are finalizing this
provision with modifications at Sec. 438.358(c) and finalizing the
applicability at Sec. 438.310(d)(2) for Medicaid (not Sec.
438.310(d)(3) as proposed), and at Sec. 457.1200(d) to include a
cross-reference to Sec. 438.310(d) for separate CHIP.
(3) Using an Optional EQR Activity To Support Current and Proposed
Managed Care Evaluation Requirements
We proposed to add a new optional EQR activity to support States in
their evaluations to learn more about quality outcomes and timeliness
of and access to care in managed care plans and programs. Specifically,
we believe the existing or proposed evaluation requirements included in
this final rule for quality strategies at Sec. 438.340(c)(2)(i), State
Directed Payments (SDPs) at Sec. 438.6(c)(2)(iv) and (v), and In Lieu
of Services or Settings (ILOSs) at Sec. 438.16(e)(1) may be
implemented using this new EQR activity. We currently require at Sec.
438.340(c)(2)(i) that States review their quality strategy at a minimum
every 3 years, and that this review include an evaluation of the
effectiveness of the quality strategy conducted within the previous 3
years. In this final rule, we finalize new requirements related to the
evaluation of SDPs at Sec. 438.6(c)(2)(iv) and (v) and ILOSs at Sec.
438.16(e)(1), described in more detail in sections I.B.2.j. and
I.B.4.g. of this final rule. We discussed at length the challenges
States have demonstrated regarding the SDP evaluation plans and results
in the proposed rule, which indicated to us that States will likely
benefit from additional technical assistance and support in conducting
evaluations under the new SDP and ILOS requirements. Additionally, we
described how CMS's reviews of State quality strategy evaluations
revealed many challenges for States and a similar need for greater
technical assistance. For this reason, we proposed to add a new
optional EQR activity at Sec. 438.358(c)(7) to assist in evaluations
of quality strategies, SDPs, and ILOSs, that pertain to outcomes,
quality, or access to health care services. We focused the scope of the
EQR optional activity to activities permissible under the statutory
authority at section 1932(c)(2) of the Act, which requires external
review of the quality outcomes and timeliness of, and access to, the
items and services for which the organization is responsible under the
contract. We believe by adding this optional activity, States, their
agent, or an EQRO could use the accompanying protocol that CMS will
develop (in coordination with the National Governors Association in
accordance with Sec. 438.352) to assist with evaluation activities
related to quality strategies, SDPs, and ILOS, that are within the
scope of EQR. We also believe EQROs may be well positioned to help with
evaluations since their qualifications, as required under Sec.
438.354(b), include research design and methodology, statistical
analysis, and quality assessment and improvement methods. We believe
this optional activity will provide States critical technical
assistance via a CMS-developed protocol that will enable more robust
evaluations, which could lead to greater transparency and quality
improvement in States' implementation of their quality strategy, SDPs
and ILOSs. It could also reduce burden by allowing States to receive an
enhanced match for activities carried out by an EQRO under this
optional activity in accordance with section 1903(a)(3)(C)(ii) of the
Act.
For separate CHIP, we did not adopt the proposed evaluation of SDPs
at Sec. 438.6(c)(2)(iv) and (v) (see sections I.B.2.a. and I.B.2.j. of
this final rule). For this reason, we proposed to amend separate CHIP
EQR requirements at Sec. 457.1250(a) to exclude references to Sec.
438.6. However, we proposed to adopt the new ILOS retrospective
evaluation requirements at Sec. 438.16(e)(1) through our proposed
cross-reference at Sec. 457.1201(e) (see section I.B.4.g. of this
final rule). Since section 2103(f)(3) of the Act requires external
review of CHIP managed care plans, we also believe that CHIP EQROs are
well positioned to assist with the proposed ILOSs evaluations and
believe it would be beneficial to States to have this optional EQR
activity. We proposed to adopt the new EQR optional activity for
separate CHIP through an existing cross-reference to Sec. 438.358 at
Sec. 457.1250(a). We intended this optional activity to be available
to States as of the effective date of the final rule.
We summarize and respond to public comments received on using an
optional EQR activity to support current and proposed managed care
evaluation requirements below.
Comment: Several commenters supported our proposal to allow States
to use an optional EQR activity to support the new evaluation
requirements in the proposed rule. Some commenters noted that States
would appreciate the flexibility to
[[Page 41175]]
conduct the evaluations themselves. One commenter noted concerns about
whether the current EQRO vendors have the capabilities, staffing and
expertise to support these activities. Commenters also noted that if a
State Medicaid agency does use an EQRO, CMS should not require a new
competitive procurement to amend the scope of an EQRO contract or other
contract vehicle.
Response: In response to the comment about State flexibility, we
clarify that States are allowed to conduct the evaluation themselves
for their quality strategy, SDPs and ILOSs under these final rules. As
we described in the proposed rule, we continue to believe the
competencies of an EQRO required under Sec. 438.354(b), including
research design and methodology, statistical analysis, and quality
assessment and improvement methods, could be leveraged for these
activities. However, States have the discretion under Sec.
438.358(a)(1) to conduct EQR activities themselves or use an agent that
does not qualify as an EQRO, so long as it is not a managed care plan
(the EQRO is, however, required to compile and write the final EQR
reports). Regarding the comment about procuring a new EQRO contract, we
note that Sec. 438.356(e) currently requires States to follow an open,
competitive procurement process for each contract with an EQRO that is
in accordance with State law and regulation and requires State to
comply with 45 CFR part 75 as it applies to State procurement of
Medicaid services. We acknowledge, however, that state procurement laws
may vary relative to what actions prompt a new competitive procurement
process. We also note that under Sec. 438.370(c) States, would need to
obtain CMS approval of the EQRO contract or contract amendment
including this optional activity prior to claiming a 75 percent FFP
match for the activity. We intend to update the EQR protocols to
provide guidance on this new activity in accordance with Sec. 438.352,
and once published, States can begin claiming FFP match for this
activity.
After reviewing the public comments, we are finalizing the changes
EQR optional activities at Sec. 438.358(c) as proposed.
(4) Non-Duplication of Mandatory EQR Activities With Medicare or
Accreditation Review
Current Sec. 438.360 provides an option for States to exempt MCOs,
PIHPs, or PAHPs from EQR-related activities that will duplicate
activities conducted as a part of either a Medicare review of a MA plan
or a private accreditation review. Section 438.360(a)(1) required that,
in order for a State to exercise this option for private accreditation,
the plan accreditation must be from a private accrediting organization
recognized by CMS ``as applying standards at least as stringent as
Medicare under the procedures in Sec. 422.158 of this chapter[.]''
Section 422.158 describes the procedures for private, national
accreditation organizations (PAOs) to apply for approval of
accreditation as a basis for deeming compliance with Medicare
requirements, also referred to as ``deeming authority.'' Sections
422.156 and 422.157 discuss conditions and applications of the deeming
authority, under which a PAO may accredit MA plans for the purposes of
deeming compliance with one or more specific areas of the MA program.
The implementation of this requirement at Sec. 438.360(a)(1) meant
that PAOs had to obtain deeming authority from CMS as a prerequisite
for the States to use the PAO's plan accreditation review for the
purposes of nonduplication of mandatory EQR activities. This meant the
PAO had to obtain and periodically renew their MA deeming authority
from CMS even if it is solely for the purpose of providing States the
opportunity to use their reviews of a Medicaid managed care plans in
lieu of conducting a similar EQR-related activity.
We believe this regulation created an unnecessary administrative
burden on both CMS and PAOs and restricted the availability of the EQR
nonduplication option for States. We also do not believe that the
requirement is compelled under the statute. The statutory basis for the
nonduplication provision, found at section 1932(c)(2)(B) of the Act,
states: a State may provide that, in the case of a Medicaid managed
care organization that is accredited by a private independent entity
(such as those described in section 1852(e)(4) of the Act) or that has
an external review conducted under section 1852(e)(3) of the Act, the
external review activities conducted under subparagraph (A) for the
organization shall not be duplicative of review activities conducted as
part of the accreditation process or the external review conducted
under such section (emphasis added). Section 1852(e)(4) of the Act is
the statutory basis for PAOs to obtain MA deeming authority from CMS.
We do not interpret this provision as requiring every private
independent entity to be described under section 1852(e)(4) of the Act
in order for a State to exercise the nonduplication provision. Rather,
we read section 1932(c)(2)(B) of the Act as describing in general terms
the types of organizations that will be eligible to participate in
nonduplication, and providing organizations described in section
1852(e)(4) of the Act as an example.
Therefore, we proposed at Sec. 438.360(a)(1) to remove the
requirement that PAOs must apply for MA deeming authority from CMS in
order for States to rely on PAO accreditation reviews in lieu of EQR
activities. We proposed conforming changes to the title of Sec.
438.362(b)(2) to remove language specific to Medicare Advantage
deeming. Additionally, we proposed to remove the requirements for PAOs
related to MA deeming authority at Sec. 438.362(b)(2)(i). This
proposal removed paragraph (b)(2)(i)(B) and modified paragraph
(b)(2)(i) to include current Sec. 438.362(b)(2)(i)(A). We believe this
proposed change would reduce administrative burden among the private
accreditation industry, as well as create more flexibility for States
to leverage PAO reviews for nonduplication. We noted that under Sec.
438.360(a)(2) States are required to ensure the review standards used
by any PAO are comparable to standards established through the EQR
protocols under Sec. 438.352, and pursuant to Sec. 438.360(c), and
need to explain the rationale for the State's determination that the
activity is comparable in their quality strategy at Sec. 438.340. We
proposed these changes would be effective as of the effective date of
the final rule.
We summarize and respond to public comments received on non-
duplication of mandatory EQR activities with Medicare or accreditation
review below.
Comment: We received several comments on this proposal to remove
the requirements on PAOs to obtain MA deeming authority. The two
commenters that supported the proposal noted how the revisions would
reduce burden, make data more accessible, and streamline EQRs by
facilitating the use of accreditation data. Two commenters opposed the
proposal. One commenter did not specify their objection; the second
commenter stated concerns about States having to ensure that private
accreditation standards are comparable to standards established through
EQR protocols and consistent with a State's quality strategy. This
commenter stated that private accreditation should not substitute for
Federal or State monitoring and noted that it is more efficient for CMS
to make one determination regarding an accreditation organization
rather than each State making its own determination.
Response: After reviewing the public comments, we are finalizing
this rule as
[[Page 41176]]
proposed. We agree with commenters that this change will reduce burden
and streamline the EQR process for States by removing barriers to using
accreditation data. States may leverage the non-duplication option for
EQR-related activities that would otherwise be performed by the State,
the State's entity or an EQRO. In response to the concerns about the
use of accreditation data for monitoring and State responsibilities for
ensuring accreditation standards are comparable to those in EQR
protocols, we note that the current regulations at Sec. 438.360(a)
already allow States to use information from a private accreditation
review of an MCO, PIHP, or PAHP for the annual EQR, and at Sec.
438.360(a)(2) already require each State to determine that the
accreditation review standards are comparable to the standards
established in the EQR protocols and include the rationale for this
determination in its quality strategy. Furthermore, under Sec.
438.360(c) the State must identify in its quality strategy under Sec.
438.340 the EQR activities for which it has exercised the option
described in this section, and explain the rationale for the State's
determination that the Medicare review or private accreditation
activity is comparable to such EQR activities. The removal of the
requirement for PAOs to obtain Medicare deeming authority does not
affect those existing requirements. Regarding the comment about
efficiencies, the current regulations at Sec. 438.360(b), already
require the State to furnish all the data obtained from an
accreditation review to the EQRO for analysis and inclusion in the
annual EQR technical reports. Removing the requirement for PAOs to
obtain Medicare deeming authority does not impact this requirement but
would create efficiencies for the State by reducing barriers to
obtaining data for the annual EQR. In addition, as noted in the
proposed rule, we do not believe the requirement for PAOs to obtain
Medicare deeming authority is compelled under the statute, and we do
not believe the process has added value to a PAO's ability to conduct
accreditation reviews that could be used for EQRs.
After reviewing the public comments, we are finalizing the changes
to non-duplication at Sec. 438.360(a)(1) as proposed.
(5) External Quality Review Results (Sec. 438.364)
(a) Data Included in EQR Technical Reports
The current regulations at Sec. 438.364, included in separate
CHIPs through an existing cross-reference at Sec. 457.1250(a),
describe what information must be included in the annual EQR technical
reports, as well as the public availability of the reports. While the
information currently provided in the EQR technical reports is useful
to CMS in our work with States to improve beneficiary access to and
quality of care provided through a managed care delivery system, we
believe these reports could and should provide additional information
useful to both CMS and the public.
Regulations at Sec. 438.364(a)(2) describe the information the
State must include in the annual EQR technical report for each EQR-
related activity. Under Sec. 438.364(a)(2)(iii), the EQR technical
reports must include a description of data obtained, including
validated performance measurement data for each PIP validation and
performance measurement validation activity at Sec. 438.358(b)(1)(i)
and (ii), respectively. The regulations, however, limited the data
included in the reports to performance measurement data; the
regulations did not require other types of data used to measure the
outcomes associated with a PIP, such as percentages of enrollees that
participated in the PIP or data on patient satisfaction based on
services received from the plan, be included in the annual reports. The
result was that reports often focused on whether the methods used to
implement or evaluate the PIP were validated, but did not include the
measurable data reflecting the outcomes of the PIP. Additionally, the
regulations did not require the reports to include any data obtained
from the mandatory network adequacy validation activity.
We believe validation alone was insufficient to provide CMS and
interested parties with insight into plan performance on PIPs or
States' effectiveness in driving quality improvement through PIPs. We
also believe data on network adequacy validation was critical to
understanding plan performance regarding timeliness and access to care.
Therefore, we proposed to revise Sec. 438.364(a)(2)(iii) in two ways:
(1) to require that the EQR technical reports include ``any outcomes
data and results from quantitative assessments'' for the applicable EQR
activities in addition to whether the data has been validated, and (2)
to require this type of data from the mandatory network adequacy
validation activity to also be included the EQR technical report. We
believe this change would result in more meaningful EQR technical
reports because they would include, in addition to validation
information, the data demonstrating the outcome of PIPs and the results
of quantitative assessments that determined plan compliance with
network adequacy standards. This, in turn, would make the EQR technical
reports a more effective tool to support quality improvement and
oversight in managed care. We proposed that the revisions to Sec.
438.364(a)(2)(iii) for Medicaid would apply to separate CHIP through an
existing cross-reference at Sec. 457.1250(a). We proposed at Sec.
438.310(d)(4) for Medicaid, and through a proposed amendment at Sec.
457.1200(d) to include a cross-reference to Sec. 438.310(d) for
separate CHIP, that States must comply with these updates to the type
of data in the EQR technical report no later 1 year from the issuance
of the associated protocol, which we believe will provide the guidance
and time for States and EQROs need to update their processes.
In addition to the proposed regulations in this section, we sought
comment on adding guidance in the EQR protocols, described under Sec.
483.352, for States to stratify performance measures collected and
reported in the EQR technical reports under the performance measure
validation activity. We noted that stratification of performance
measure data in EQR technical reports could support States' efforts to
monitor disparities and address equity gaps. Stratifying performance
measure data also aligns with requirements for the mandatory reporting
of Medicaid and CHIP Core Sets and requirements in the MAC QRS proposed
under new 42 CFR part 438 subpart G. We sought comment on how CMS could
best support States in these efforts using future guidance we develop
in the EQR protocols.
We summarize and respond to public comments received on Data
included in EQR technical reports below.
Comment: Several commenters supported our proposal to expand the
scope of data included in the EQR technical reports. Commenters in
general supported these changes, noting that they would make the data
more accessible and result in more meaningful reports that can be used
to support quality improvement, oversight in managed care, and stronger
managed care plan performance for beneficiaries. Commenters agreed that
some States have limited their technical reports to include only
information about the validation of quality data, while not including
the results of performance measures or performance improvement
projects. One commenter questioned whether we plan to require the
secret shopper survey results be included in
[[Page 41177]]
the EQR Protocol 4 Technical Report. MACPAC noted that this proposal
may help to address the concern that the reports do not focus on
changes in performance and outcomes over time, and interested parties
would like EQR process and findings to place more emphasis on outcomes
and comparability.
Response: We agree with commenters about how this change will make
reports more meaningful to support quality improvement. In response to
the question about secret shopper survey results, we will include
guidance in the updated EQR protocols on what the EQR technical reports
must include, including guidance on results from quantitative
assessments related to the network adequacy validation activity.
Comment: Several commenters supported the future addition of
guidance in the EQR protocols for States to stratify performance
measures collected and reported in the EQR technical reports under the
performance measure validation activity. Commenters noted that
additional guidance would facilitate monitoring health disparities and
would promote alignment of the EQR technical report with the mandatory
reporting of Medicaid and CHIP Core Sets and requirements we proposed
for the MAC QRS. Some commenters noted concerns about data reliability
and indicated that State Medicaid agencies would need significant time
to develop their data infrastructure. Another commenter recommended
that CMS use a phased approach with pre-validated subsets of the
measures.
Response: We agree with commenters that adding guidance for the
stratification of performance measure data in the EQR technical reports
would support States in monitoring health disparities and addressing
equity gaps. We appreciate the comments to align the guidance with the
Core Sets and MAC QRS stratification requirements, as well as the
concerns noted about State implementation time and data infrastructure
and using a phased approach. We will consider these concerns and
recommendations from commenters as we develop future EQR protocol
guidance.
After reviewing the public comments, we are finalizing the changes
to the data included in EQR reports at Sec. 438.364(2)(iii) as
proposed. As noted in the proposed rule, we intend to release an
updated EQR protocol in accordance with Sec. 438.352 to implement the
changes finalized at Sec. 438.364(a)(2)(iii). This applicability date,
though unchanged, will be finalized at Sec. 438.310(d)(3).
(b) Revising the Date Annual EQR Technical Reports Must Be Finalized
and Posted
We currently require at Sec. 438.364(c) that EQR technical reports
be completed and available on the State's website required under Sec.
438.10(c)(3) no later than April 30th of each year. However, we
understand that most States with managed care programs use HEDIS
measures. HEDIS measures represent the majority of measures included in
the performance measure validation EQR activity. Data on these measures
from the previous calendar year are audited and finalized in June
annually. Therefore, we proposed to revise Sec. 438.364(c)(1) and
(c)(2)(i) to change the April 30th date to December 31st. We believe
this proposed change would align better with the HEDIS timeframes
because the EQR performance measurement activity could then follow the
HEDIS audit. We considered aligning the EQR technical report posting
date with the end of the Federal fiscal year on September 30th.
However, we believe States and EQROs needed more time to complete the
EQR activities after receiving audited HEDIS data. We also believe
December 31st is most appropriate because performance measurement data
are most often calculated on a calendar year, so the December 31st date
would result in data being at most one-year old at the time the reports
are posted on the State's website. We believe this change, coupled with
those discussed in section I.B.5.c.2. of this final rule regarding
changes to the EQR review period, would have improved the utility of
the technical reports for States, CMS and interested parties by making
the data reported in them more current. We proposed changes at Sec.
438.364(c)(1) and (c)(2)(i) for Medicaid that would apply to separate
CHIP through an existing cross-reference at Sec. 457.1250(a).
We solicited comments on changing the posting date to December 31st
annually. We also solicited comments on whether additional time beyond
December 31st is needed by States, and if so, how much time and why, or
whether the posting date should remain at April 30th of each year, or a
date between April 30th and December 31st and why. We proposed at Sec.
438.310(d)(3) for Medicaid, and through a proposed amendment at Sec.
457.1200(d) to include a cross-reference to Sec. 438.310(d) for
separate CHIP, that States come into compliance with this new due date
by December 31, 2025, which we believe will provide enough time for
contractual and operational updates.
We summarize and respond to public comments received on revising
the annual due date for EQR technical reports below.
Comment: Commenters both opposed and supported the proposal the
change the annual due date from April 30 to December 31 each year. Some
commenters requested to clarify whether the change represents more or
less time to complete the reports. Commenters who supported the
proposal noted that the change would better align with the availability
of finalized HEDIS performance measures in the EQR technical reports,
leading to more recent data and better comparability across States.
Other commenters supported the change to make the reports more
actionable but noted that the change would result in States incurring
additional costs, and could result in data reporting lags as some
measures would not make the ``cut-off'' date to be included in that
year's report if it was due December 31. Commenters who opposed the
change noted that it would be extremely challenging to complete the
mandatory EQR activities under the new proposed due date, citing the
burden and time constraints associated with this change. Some
commenters detailed the timelines of their internal processes to
conduct the EQR activities, for the EQRO to analyze and compile the
report, and for State officials to review and approve the report before
it is posted online. One commenter noted that the EQR activities
typically occur in the second half of the calendar year, and the
December 31 date would not allow enough time to complete all the
individual activities to be incorporated into the annual report.
Another commenter noted that the last step of the State officials
reviewing and approving the report usually starts in February, and the
December 31 date would be very difficult to meet.
Response: After reviewing the public comments, we are not
finalizing this proposed change to the annual due date for EQR
technical reports and are maintaining the current requirement for
posting annually by April 30. We clarify for commenters that we did
intend to reduce the time allowed to finalize the reports by 4 months
in our proposal by moving the due date from April 30 to December 31.
Based on comments received, we no longer believe the benefit of the EQR
technical reports being posted 4 months earlier outweighs the current
burden of changing State and EQRO processes for conducting annual EQR
activities and compiling the EQR technical reports. Though the April 30
due date does create a considerable
[[Page 41178]]
lag time between the data and information included in the reports and
when that data becomes available to the public, we believe our new
provisions regarding the EQR review period is a sufficient step to
making reports more current. We will consider where there may be
efficiencies to be gained through standardization or electronic
reporting that could help States post their EQR reports earlier to
reduce this lag time and make the reports more timely and actionable.
With this change we are also not finalizing the corresponding change at
Sec. 438.364(c)(2)(i), as well as the proposed applicability date of
December 31, 2025, and the reference to Sec. 438.364(c)(2)(iii) was
removed from Sec. 438.310(2).
After reviewing the public comments, we are not finalizing the
changes proposed to the EQR report due date at Sec. 438.364(c)(1).
(c) Notifying CMS When Annual EQR Technical Reports Are Posted
Current regulations do not require States to notify CMS that their
EQR technical report has been completed and posted on the State's
website. We proposed to revise Sec. 438.364(c)(2)(i) to require that
States notify CMS within 14 calendar days of posting their EQR
technical reports on their website, for example, by providing CMS with
a link to the report. Section 401 of the Children's Health Insurance
Reauthorization Act (CHIPRA) of 2009 (Pub. L. 111-3, February 4, 2009)
and section 2701 of the ACA require that CMS review and aggregate data
from these reports in an annual report to the Secretary by September
30th. We described that this change would facilitate our review and
aggregation of the required data and ensure that all States' data are
included in the annual report. We proposed that the notice to CMS be
provided ``in a form and manner determined by CMS.'' However, we sought
comment on whether we should require that this notice be provided via
email or some other mode of communication. The proposed revisions at
Sec. 438.364(c)(2)(i) will apply to separate CHIP through an existing
cross-reference at Sec. 457.1250(a). We note that this requirement be
effective as of the effective date of the final rule, which we did not
believe will impose a great burden on States since most States already
notify CMS when their EQR technical reports are posted by email.
We summarize and respond to public comments received on Notifying
CMS when annual EQR technical reports are posted below.
Comment: One commenter supported our proposal to require that
States notify CMS within 14 calendar days of posting their EQR
technical reports on their website, noting that the State already
notifies CMS once the State's EQR technical report is posted.
Response: After reviewing the public comments, we are finalizing
the change to require States to notify CMS when their EQR reports are
posted as proposed, but we are not finalizing the proposed change to
the due date, which we are keeping as April 30 (per our discussion in
section 5.c.5.b. of this final rule).
(d) Revising Website Requirements for Historical EQR Technical Reports
Currently, States are encouraged, but not required, to retain EQR
technical reports from previous years on their websites. We proposed to
require States maintain at least the previous 5 years of EQR technical
reports on their website. Retaining at least 5 years of past EQR
technical reports will provide administrative efficiencies and
additional transparency by allowing CMS to use historical data and
information within the annual EQR technical reports for the purposes of
reviewing States' managed care program and plan performance during
contract renewals and waiver renewals. In addition, having archived
reports will provide other interested parties insight into historical
plan performance. We noted that section 1915(b) waivers can be approved
for up to 5 years, and section 1115 demonstrations are often approved
for 5 years, providing additional support for 5 years being an
appropriate timeframe for this requirement.
We understand that almost half of States already retain at least 2
years' worth of EQR technical reports based on a review of State
websites in 2022, and we sought comment on whether archiving 5 years of
reports will pose a significant burden on States. We proposed to add
this provision to the requirements at Sec. 438.364(c)(2) for Medicaid,
which will apply to separate CHIP through an existing cross-reference
at Sec. 457.1250(a).
We proposed that States must comply with this update to Sec.
438.364(c)(2)(iii) no later than December 31, 2025, and proposed to
codify this applicability date at Sec. 438.310(d)(3) for Medicaid, and
through a proposed amendment at Sec. 457.1200(d) to include a cross-
reference to Sec. 438.310(d) for separate CHIP. We believe this
applicability date would provide the time needed to update websites
accordingly.
We summarize and respond to public comments received on revising
website requirements for historical EQR technical reports below.
Comment: Several commenters supported our proposal to require
States to maintain at least the previous 5 years of EQR technical
reports on their website. Commenters in general supported this
revision, noting there is little additional burden to keep technical
reports available to the public over an extended period, and that
having an archive of EQR technical reports would make it easier to
track responses to recommendations, evaluate progress on performance
improvement projects, and monitor changes in quality performance. Three
commenters requested that we consider extending this requirement for
States to maintain at least 10 years of EQR technical reports on their
website and two comments requesting CMS provide clarification on how
State agencies are expected to display this data.
Response: In response to commenters requesting the requirement be
extended to at least 10 years, we encourage States to maintain a
publicly available archive of EQR technical reports dating back as long
as feasible, however we are not requiring more than 5 years of reports
to be posted at this time. We understand that EQR technical reports can
be lengthy and vary greatly from State to State, so at this time we are
not specifying how the data must be displayed. We will consider
developing technical assistance resources to help States make the EQR
data more accessible and usable for interested parties.
After reviewing the public comments, we are finalizing this change
to the website posting requirements for EQR at Sec. 438.364(c)(2)(iii)
as proposed.
(6) Technical Changes
We proposed a technical change at Sec. 438.352 to eliminate the
apostrophe from National Governors Association to align with the
correct name of the organization.
We did not receive any comments in response to our proposed
technical change. Therefore, we are finalizing this provision as
proposed.
6. Medicaid Managed Care Quality Rating System (Sec. Sec. 438.334 and
457.1240)
We proposed significant revisions to the requirements for the
Medicaid and CHIP managed care quality rating system, including
revisions to existing regulations and the adoption of a new subpart in
part 438 for regulations governing the rating system. In response to
supportive comments we received and for the reasons outlined in this
[[Page 41179]]
rulemaking, we are finalizing most provisions related to the mandatory
measure list, the flexibility for States to request to implement an
alternative MAC QRS, the proposed subregulatory process to make updates
to the mandatory measure list in the future, and the ability for States
to include additional measures in their MAC QRS. We are finalizing
several modifications from our proposal to clarify the scope of the
alternative QRS and to reduce the implementation resources States need
for their MAC QRS, including when, or if, a State chooses to adopt an
alternative QRS.
Specifically, many comments we received on our alternative quality
rating system proposal suggested that commenters did not understand
what changes to the MAC QRS developed by CMS would require CMS approval
as a State alternative MAC QRS. The current regulations at Sec.
438.334(b)(1) identify two components of the MAC QRS framework: (1) The
quality measures used to assess plan performance and (2) the
methodology for calculating quality ratings based on the measure data
reported for each plan rated by the QRS. Current Sec. 438.334(c)
establishes a process by which States may request CMS approval to
display different performance measures or apply a different methodology
to generate quality ratings in their MAC QRS after requesting and
receiving CMS approval. As described in more detail in section I.B.6.h.
of the proposed rule, we proposed to narrow the scope of actions that
require CMS approval under the alternative quality rating system
flexibility to only modifications to the MAC QRS methodology. We also
proposed that States could display additional measures in their MAC QRS
without requiring CMS approval if they requested input from a broad
range of interested parties and documented the input received and the
state's response. Therefore, we proposed to change the existing QRS
rule (reflected in the regulation at Sec. 438.334(c)), to allow States
to include additional measures, meaning that States would include these
measures in addition to the CMS-identified mandatory measures for the
QRS. Upon review of the comments, we realized that this was
misinterpreted, and that commenters thought that our proposal was
intended to allow States to implement alternative mandatory measures to
replace CMS-identified selected measures as opposed to being in
addition to those measures.
A number of commenters also misunderstood our proposal and thought
that we proposed to allow States to request alternatives to the website
display features proposed in Sec. 438.520 as a third MAC QRS framework
component. Although the proposed rule anticipated that States could add
additional website display features, we did not propose to allow States
to eliminate or use alternatives to the QRS website design features
included in the proposed MAC QRS rules. To summarize, the proposed rule
included that States would no longer need CMS approval to add measures
that are in addition to those identified as mandatory measures by CMS;
would be able to implement website display features in addition to
those newly proposed in Sec. 438.520 (also without CMS approval); and
would continue to have the option to use an alternative methodology
(meaning an alternative to the rating methodology described in Sec.
438.515(b)), for calculating quality ratings for mandatory measures
identified by CMS, subject to CMS review and approval).
To address these issues, we are finalizing the provision enabling
States to request an alternative QRS as part of the section of the
regulation governing the QRS methodology with changes to more clearly
and accurately reflect the State flexibility option to apply an
alternative QRS rating methodology. We believe this makes clear that
States must request CMS approval to apply an alternative methodology
but need not seek CMS approval to include additional measures or
website display features in their MAC QRS. We stress that these changes
in the final rule compared to the proposed rule are merely
organizational. Under this final rule, States will have the flexibility
to display additional measures not included in the mandatory measure
set, as well as to develop additional QRS website display features, as
proposed. States also retain flexibility currently available under
Sec. 438.334, and finalized in this final rule at Sec. 438.515(c) to
use an alternative QRS methodology, if they request and receive CMS
approval to do so, subject to fewer procedural requirements.
We also are finalizing changes compared to the proposed rule to
reduce State burden in implementing a QRS. As discussed throughout the
proposed rule, our proposals were meant to minimize burden on States,
managed care plans, and other interested parties, such as providers,
and to maximize access to the information that beneficiaries identified
as useful and desirable in selecting a plan. However, while commenters
were overwhelmingly supportive of the MAC QRS, many commenters stated
concern that the overall administrative complexity of implementing the
MAC QRS, including the time and resources needed to do so, would be
substantial. Based on feedback received from commenters, we are
finalizing five modifications to our proposal that we believe will
further reduce QRS implementation burden with minimal impact on
beneficiaries' access to the information it is important for them to
have.
First, as discussed in additional detail in section I.B.6.d of this
final rule, we are finalizing an option for States to request a one-
time, one-year extension to fully comply with one or more of the
requirements of the MAC QRS rating methodology under Sec. 438.515(b)
and certain website display requirements under Sec. 438.520(a), if the
State, despite a good faith effort, would be unable to fully implement
the requirements in Sec. 438.515(b) or Sec. 438.520(a)(2)(v) and
(a)(6) by the implementation deadline specified for CMS in subpart G.
As discussed in section I.B.6.g. of the proposed rule, we proposed that
States will implement a MAC QRS in two phases and we are finalizing
that approach. In the first phase of implementation, States must fully
comply with all MAC QRS requirements, except for requirements under
Sec. 438.520(a)(6), by the implementation date specified in Sec.
438.505(a)(2) (by the end of the fourth calendar year following July 9,
2024. This rule is being finalized July 9, 2024, which means States
must implement a MAC QRS by December 31, 2028. States granted an
extension for eligible first phase requirements--those under Sec.
438.515(b) or Sec. 438.520(a)(2)(v)--will have until December 31, 2029
to fully comply with these requirement(s). Requirements under Sec.
438.520(a)(6) will be implemented in a second phase. CMS will specify
the implementation date of the second phase in the future, but this
date must be no earlier than 2 years after implementation of the first
phase as per Sec. 438.520(a)(6). Therefore, States will be required to
implement the requirements under Sec. 438.520(a)(6) no earlier than
calendar year 2030, and States granted an extension for requirements
under Sec. 438.520(a)(6) will have until at least until calendar year
2031 to fully comply with the requirement.
Second, under the proposed rule, States would have been required to
display a quality rating for all MAC QRS mandatory measures. As
discussed in section I.B.6.e. of this rule, this final rule narrows the
scope of mandatory measures for which a quality rating must be
displayed in a State's MAC QRS to only those that are applicable to the
managed care program(s) established by the State (meaning those MAC QRS
[[Page 41180]]
mandatory measures that assess a service or action covered by one or
more of the State's managed care contracts). As a result of this
change, the scope of data that States must collect and validate to
calculate quality ratings for mandatory measures will be narrowed--to
only data for measures that are applicable to a State's managed care
program(s). Third, as described in section I.B.6.h. of this final rule,
we are removing the requirement (proposed to be redesignated from
current Sec. 438.334(c)(2) to proposed Sec. 438.525(b)(1) and (2))
that requires States to obtain input from the State's Medical Care
Advisory Committee and provide an opportunity for public comment of at
least 30 days on a request for, or modification of a previously
approved, alternative Medicaid managed care quality rating system.
Fourth, we proposed at Sec. 438.520(a)(6)(i) and (ii) that States
would be required to display a search tool that enables users to
identify available managed care plans that provide coverage for a drug
identified by the user and a search tool that enables users to identify
available managed care plans that include a specific provider in the
plan's network. In this final rule we are narrowing the scope of these
proposed MAC QRS requirements to apply only to managed care plans that
participate in managed care programs with two or more participating
plans; this change is discussed in section I.B.6.g.2 of this final
rule.
Finally, under the proposed rule States would be required to
collect the data necessary to calculate quality ratings for each MAC
QRS mandatory measure from Medicaid FFS, Medicare, or both if all data
necessary to calculate a measure could not be provided by Medicaid
managed care plans. Furthermore, States would be required to ensure
that the collected data are validated and then used to calculate
performance rates for MAC QRS measures. In the proposed rule, we
acknowledged that challenges currently exist to the collection and use
of Medicare data and, to some extent, Medicaid FFS data that may be
necessary to calculate quality ratings for Medicaid plans. We therefore
proposed an undue burden standard under which States would be required
to collect necessary Medicare and Medicaid FFS data when such data are
available for collection by the State without undue burden. We are
largely finalizing these requirements as proposed, but with
modifications throughout Sec. 438.515(a) and (b) to clarify that the
scope of the undue burden standard extends beyond the collection of
Medicaid FFS and Medicare data and may be applied also to the
validation of collected data and the use of validated data to calculate
quality ratings for MAC QRS mandatory measures for Medicaid managed
care plans. As finalized, States will be required to collect Medicaid
FFS and Medicare data, validate the collected data, and use the
validated data to calculate quality ratings for managed care plans for
MAC QRS mandatory measures the extent feasible without undue burden.
This change is discussed in section I.B.6.f of this final rule.
a. Background
In the 2016 final rule we established the authority to require
States to operate a Medicaid managed care quality rating system (QRS)
at Sec. 438.334 and adopted the requirement for this provision,
excluding provisions regarding consultation with the Medical Care
Advisory Committee, to apply to separate CHIP at Sec. 457.1240(d). We
use the term ``Medicaid and CHIP Managed Care Quality Rating System''
(``MAC QRS'') for this final rule in line with the terminology used in
the 2020 final managed care rule (85 FR 72754). The MAC QRS
requirements currently include public posting of quality ratings on the
State's website, which is intended to provide beneficiaries and their
caregivers with a web-based interface to compare Medicaid and CHIP
managed care plans based on assigned performance indicators and
ratings. As described in previous rulemaking, the policy objectives of
the MAC QRS are threefold: (1) to hold States and plans accountable for
the care provided to Medicaid and CHIP beneficiaries; (2) to empower
beneficiaries with useful information about the plans available to
them; and (3) to provide a tool for States to drive improvements in
plan performance and the quality of care provided by their programs.
Managed care is the dominant delivery system in the Medicaid program;
of the 80.8 million individuals covered by Medicaid as of July 1, 2020,
67.8 million (84 percent) were enrolled in a type of managed care, with
most beneficiaries offered a choice of plans.\204\
---------------------------------------------------------------------------
\204\ https://www.medicaid.gov/medicaid/managed-care/downloads/2020-medicaid-managed-care-enrollment-report.pdf.
---------------------------------------------------------------------------
Numerous States have implemented rating systems for Medicaid and
CHIP managed care plans, but the MAC QRS represents the first time that
States will be held to a minimum Federal standard for their rating
systems and that Medicaid and CHIP beneficiaries in every State
contracting with a managed care plan could access quality and other
performance data at the plan level, supporting the ability of Medicaid
and CHIP beneficiaries to select plans that meet their needs. The MAC
QRS is intended to be a one-stop-shop where beneficiaries can access
information about Medicaid and CHIP eligibility and managed care;
compare plans based on quality and other factors key to beneficiary
decision making, such as the plan's drug formulary and provider
network; and select a plan that meets their needs.
Current requirements at Sec. 438.334(b)(1) for Medicaid, which are
adopted by cross-reference at Sec. 457.1240(d) for separate CHIP,
provide that CMS, in consultation with States and other interested
parties, including beneficiaries, managed care plans, external quality
review organizations (EQROs), tribal organizations, and beneficiary
advocates (hereafter referred to as ``interested parties''), will
develop a MAC QRS framework that includes quality measures and a
methodology for calculating quality ratings. The current regulations
also provide States the option to either use the CMS-developed
framework or establish an alternative QRS that produces substantially
comparable information about plan performance, subject to our approval.
Furthermore, the current regulations require that we develop a minimum
set of mandatory quality measures that must be used, regardless of
whether a State chooses to implement the CMS-developed QRS or an
alternative QRS; this supports the goal of State-to-State comparisons
of plan performance while reducing plan burden through standardization.
The current regulations also require the MAC QRS framework to align,
where appropriate, with other CMS managed care rating approaches (such
as the Medicaid Scorecard initiative, the Medicare Advantage (MA) and
Part D 5-star, and the Qualified Health Plan (QHP) quality rating
systems) as a way to reduce State and plan burden across quality
reporting systems.
Since the previous regulations were issued, we have used a variety
of forums to engage in robust consultation with interested parties to
develop the framework of the MAC QRS to fulfill our obligation under
Sec. 438.334(b)(1) for Medicaid and under Sec. 457.1240(d) for
separate CHIP. These forums included beneficiary interviews, workgroup
meetings, listening sessions, user testing of a MAC QRS prototype, and
in-depth interviews with participants from State Medicaid programs,
managed care plans, and EQROs. Through these extensive consultations,
which took
[[Page 41181]]
place between 2018 and 2022 and are summarized in section I.B.6.a of
the proposed rule, we learned about current State quality measure
collection and reporting efforts and beneficiary needs and preferences
related to the selection of a health plan. What we learned informed the
MAC QRS framework set forth in the proposed rule.
Based on this consultation, we proposed a MAC QRS framework that
includes mandatory measures, a rating methodology (either the CMS-
developed methodology or an alternate methodology approved by CMS), and
a mandatory website display format; the website display will be an
additional third component of the MAC QRS framework. We proposed that
States must include the mandatory measures under the MAC QRS framework,
but that States may also include additional measures without
implementing an alternative QRS methodology. This would represent a
change from the current regulations that include both mandatory and
non-mandatory measures in the CMS-developed framework. We proposed the
initial mandatory measure set that States must use regardless of
whether they use the MAC QRS CMS methodology or a CMS-approved
alternative QRS methodology, as well as a subregulatory process under
which CMS will engage regularly with interested parties to update the
mandatory measure set over time.
Additionally, after consulting with prospective MAC QRS users, we
came to understand that displaying quality ratings alone would not be
useful in selecting a health plan without additional context about
Medicaid and CHIP, as well as other information about health plans.
Therefore, we proposed website display requirements as a new component
of the overall framework, and that the MAC QRS website include
information that draws from existing State data and information to
ensure a State's MAC QRS is a meaningful and usable tool for
beneficiaries. Finally, considering the diverse starting points from
which States will begin to implement their MAC QRS, we proposed to
delay the deadline by which States must come into compliance with
several of the requirements of the proposed MAC QRS framework to
provide States with more time to implement the more complex
requirements, including certain interactive website display features.
Importantly, States can use the optional EQR activity at Sec.
438.358(c)(6) to assist with the quality rating of MCOs, PIHPs, and
PAHPs, though enhanced FFP would only be available in the case of MCOs.
This could reduce burden by allowing States to receive an enhanced
match for certain, limited activities carried out by an EQRO under this
optional activity in accordance with section 1903(a)(3)(C)(ii) of the
Act.
The MAC QRS proposals in the proposed rule were made under our
authority to implement and interpret sections 1932(c)(1), 1932(a)(5)(C)
and 2103(f)(3) of the Act, which provide that States that contract with
MCOs for Medicaid managed care and CHIP, respectively, must develop and
implement a quality assessment and improvement strategy that examines
standards for access to care, as well as other aspects of care and
services directly related to the improvement of quality of care
(including grievance procedures and information standards) and must
provide comparative information on available plans related to health
plan benefits and cost-sharing, service area, and available quality and
performance indicators. As with most other requirements for managed
care plans, we relied on section 1902(a)(4) of the Act to extend the
same requirements to PIHPs and PAHPs that apply to MCOs in a Medicaid
managed care program and on section 2103(f)(3) of the Act to extend the
same requirements that apply to MCOs in CHIP to PIHPs and PAHPs.
Throughout the proposed rule, we noted how the proposed Medicaid
managed care regulations in part 438, subpart G (related to the MAC
QRS) would apply equally to separate CHIP by a proposed cross-
referenced added to Sec. 457.1240(d).
The proposed set of minimum quality measures were intended to
evaluate performance on quality of care, access to services, and
outcomes. By measuring performance annually on specific quality
measures (that is, mandatory measures adopted by us and any additional
measures elected by the State), States would have information and data
to monitor and evaluate performance of their managed care plans.
In exercising our authority under sections 1932(c)(1) and
2103(f)(3) of the Act, CMS may not implement standards for the
implementation of a quality assessment or improvement strategies unless
the Secretary implements such standards in consultation with the
States. To fulfill this requirement, we have engaged in robust
consultation with States, as described in section I.B.6.a. of the
proposed rule and of this final rule, on the design of the MAC QRS,
including the mandatory measure set, methodology, and display
requirements. Under this final rule, we will continue to engage in
consultation prior to making updates to the three components of the MAC
QRS framework. In section I.B.6.e.3. of this final rule (regarding
Sec. 438.510(b)(1)), we are finalizing a subregulatory process through
which we will continue to consult with States and interested parties to
update the mandatory measure set; in section I.B.6.f. of this final
rule (regarding Sec. 438.515(e)), we are finalizing our proposal to
propose new rules to implement domain-level quality ratings after
consulting with States and interested parties to update the MAC QRS
methodology; and in section I.B.6.g. of this final rule (regarding
Sec. 438.520(d)), we are finalizing our proposal to periodically
consult with States and interested parties (including Medicaid managed
care quality rating system users) to evaluate the website display
requirements for continued alignment with beneficiary preferences and
values.
b. Provisions of the Proposed Rule (Sec. Sec. 438.334, 438 Subpart G
and 457.1240(d))
We proposed to create a new subpart G in 42 CFR part 438 to
implement the MAC QRS framework required under Sec. 438.334 of the
current regulations and establish the standards which States must meet
for CMS to approve adoption of an alternative QRS and related
requirements. We proposed to redesignate and revise existing
regulations at Sec. 438.334 to newly created proposed sections in
Subpart G with proposed revisions, discussed in detail in section I.B.6
in this final rule. For separate CHIP, we proposed to adopt the new
provisions of subpart G in part 438 by cross-reference through an
amendment at Sec. 457.1240(d). We did not receive any comments on this
general approach and are moving the QRS provisions to subpart G, as
proposed.
c. Definitions (Sec. Sec. 438.334, 438.500 and 457.1240(d))
We proposed definitions for several technical and other terms at
Sec. 438.500 for Medicaid, and for separate CHIP by cross-reference
through a proposed amendment at Sec. 457.1240(d). Additional
definitions are discussed in more detail later in this final rule in
connection with specific proposals for which the definitions are
relevant.
Measurement period means the period for which data are
collected for a measure or the performance period that a measure
covers.
Measurement year means the first calendar year and each
calendar year thereafter for which a full calendar year of claims and
encounter data necessary to calculate a measure are available.
[[Page 41182]]
Medicaid managed care quality rating system framework (QRS
framework) means the mandatory measure set identified by CMS in the
Medicaid and CHIP managed care quality rating system technical resource
manual described in Sec. 438.530, the methodology for calculating
quality ratings described in Sec. 438.515, and the website display
described in Sec. 438.520 of this subpart.
Medicare Advantage and Part D 5-Star Rating System (MA and
Part D quality rating system) means the rating system described in
subpart D of parts 422 and 423 of this chapter.
Qualified health plan quality rating system (QHP quality
rating system) means the health plan quality rating system developed in
accordance with 45 CFR 156.1120. We inadvertently used the term
``Qualified health plan rating system (QHP quality rating system)'' in
the proposed rule and are updating the terminology here by adding the
word quality after ``Qualified health plan'' and before ``rating
system.''
Quality rating means the numeric or other value of a
quality measure or an assigned indicator that data for the measure is
not available.
Technical resource manual means the guidance described in
Sec. 438.530.
Validation means the review of information, data, and
procedures to determine the extent to which they are accurate,
reliable, free from bias, and in accord with standards for data
collection and analysis.
We did not receive any public comments on these proposed
definitions (Sec. Sec. 438.334, 438.500, and 457.1240(d)). We are
finalizing these definitions as proposed, with the minor correction
outlined above regarding the term ``Qualified health plan rating system
(QHP quality rating system),'' and use the terms consistent with the
definitions throughout part 438, subpart G. We are also finalizing our
approach that CHIP managed care programs be subject to the same quality
rating system rules, except where otherwise explicitly noted, by using
a cross-reference in Sec. 457.1240(d) to the Medicaid rules.
d. General Rule and Applicability (Sec. Sec. 438.334(a), 438.505(a)
and 457.1240(d))
Currently, Sec. 438.334(a) lays out the general rule for the MAC
QRS, including general requirements for States contracting with MCOs,
PIHPs and/or PAHPs to furnish services to Medicaid beneficiaries. These
requirements also apply to separate CHIP through a cross-reference to
Sec. 438.334 at Sec. 457.1240(d). Specifically, Sec. 438.334(a)
requires States to adopt a quality rating system using the CMS
framework or an alternative quality rating system and to implement such
quality rating system within 3 years of the date of the final rule
published in the Federal Register. We proposed at Sec. 438.505(a)(2)
for Medicaid, and for separate CHIP by cross-reference to part 438,
subpart G at Sec. 457.1240(d), to require States to implement their
MAC QRS (or alternative QRS) by the end of the fourth calendar year
following the effective date of the final rule (meaning the fourth
calendar year following issuance of the final rule). This proposed
change from the current 3-year implementation date currently in Sec.
438.334(a)(3) would provide States more time to make the operational
and contractual changes needed to meet the requirements in this final
rule and give States flexibility to determine what time of year to
publish their quality ratings.
To illustrate the proposed timeline change, we provided the
following example: if the final rule were effective on April 1, 2024,
States would be required to implement their MAC QRS no later than
December 31, 2028, and the data displayed in 2028 would be from the
measurement year between January 1, 2026, and December 31, 2026. The
timeline for future measurement and display years is discussed in
detail in section I.B.6.e.7. of this final rule. The proposal at Sec.
438.520(a)(6) for Medicaid, and for separate CHIP by cross-reference
through a proposed amendment at Sec. 457.1240(d), would require
implementation of some website display requirements, discussed in
section I.B.6.g. of this final rule, after the proposed implementation
date. We also discuss, in section I.B.6.g. of this final rule, how
several of the proposed display requirements build upon existing
information and data States either already have or are currently
required to report publicly or to CMS. We sought comment on whether
these proposed policies, all together, would give States sufficient
time to implement their MAC QRS on a timeline that meets their
operational needs.
We also proposed for Medicaid, as a general rule, that States
provide a support system for beneficiaries or users of a State's MAC
QRS, leveraging existing State resources. In our user testing,
described in greater detail in section I.B.6.g. of the proposed rule,
users responded positively to the availability of live consumer
assistance through telephone or online chat, which 83 percent of
participants found useful as it helped them navigate the MAC QRS
website and get the information they were looking for right away. Per
Sec. 438.71, States are currently required to develop and implement a
beneficiary support system. The elements of the beneficiary support
system are identified at Sec. 438.71(b)(1) as including choice
counseling for all beneficiaries in Sec. 438.71(b)(1)(i), assistance
for enrollees in understanding managed care in Sec. 438.71(b)(1)(ii),
and assistance related to the receipt of long-term services and
supports at Sec. 438.71(b)(1)(iii).
Currently, Sec. 438.2 provides that choice counseling means the
provision of information and services designed to assist beneficiaries
in making enrollment decisions and includes answering questions and
identifying factors to consider when choosing among managed care plans
and primary care providers. Choice counseling does not include making
recommendations for or against enrollment into a specific MCO, PIHP, or
PAHP. We noted in the proposed rule that we believe that this existing
support is an appropriate system for States to build upon to assist
beneficiaries in using and understanding the information in the MAC QRS
to select a managed care plan. Therefore, we proposed at Sec.
438.505(a)(3), for Medicaid, that States would be required to use the
beneficiary support system implemented under current Sec. 438.71 to
provide choice counseling to all beneficiaries, and assistance for
enrollees on understanding how to use the managed care quality rating
system to select a managed care plan, including the receipt of long-
term services and supports. With the support system already in place,
we believe States could leverage existing resources by developing new
scripts and training existing staff. We discussed the importance of
providing this assistance in section I.B.6.g. of the proposed rule
where we provide an overview of the input we received from
beneficiaries. However, since a beneficiary support system is not
required for separate CHIP, we did not propose to adopt this provision
for subpart L of part 457.
The current regulations at Sec. 438.334(b)(1) for Medicaid and
applied by cross-reference at Sec. 457.1240(d) for separate CHIP,
require the MAC QRS framework to align, where appropriate, with the QHP
quality rating system, the MA and Part D quality rating system and
other related CMS quality rating approaches to reduce State burden
across Federal quality reporting systems. We believe this requirement
should continue to apply broadly to the MAC QRS framework, and
therefore, proposed to require this alignment, to the extent
appropriate, as part of CMS's updates to the MAC QRS mandatory measures
and
[[Page 41183]]
methodology. We proposed to redesignate this requirement for alignment
in Sec. 438.334(b)(1) to its own provision at Sec. 438.505(c) for
Medicaid, and for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d). The importance of alignment of the MAC
QRS with the MA and Part D and QHP quality rating systems was shared by
States, managed care plans, and other interested parties during our
pre-rulemaking consultations, which informed the policy reflected in
our current regulations that, to the extent possible, the MAC QRS
should be aligned with the MA and Part D and QHP quality ratings
systems, the Medicaid and CHIP Child Core Set, the Medicaid Adult Core
Set, and other similar CMS initiatives such as the Medicaid and CHIP
Scorecard and the CMS Universal Foundation.\205\ We also proposed, at
Sec. 438.505(c), that in maintaining the MAC QRS mandatory measure set
and rating methodology, CMS would align with these other similar CMS
programs and approaches when appropriate.
---------------------------------------------------------------------------
\205\ https://www.nejm.org/doi/full/10.1056/NEJMp2215539.
---------------------------------------------------------------------------
Finally, current regulations at Sec. 438.334(a) for Medicaid
managed care programs (applied to separate CHIP through a cross-
reference in Sec. 457.1240(d)) apply the requirements for the MAC QRS
to each State contracting with an MCO, PIHP or PAHP to furnish services
to Medicaid or CHIP beneficiaries. We proposed to revise this to refer
to ``an applicable managed care plan as described in paragraph (b) of
this section'' in proposed Sec. 438.505(a), and add an applicability
provision at new Sec. 438.505(b) stating that the provisions of newly
proposed subpart G apply to States contracting with MCOs, PIHPs, and
PAHPs for the delivery of services covered under Medicaid. The proposed
provisions at Sec. 438.505(a) and (b) were also proposed to apply to
separate CHIP through a cross-reference at Sec. 457.1240(d) but
excluded all references to beneficiary support systems. We noted that
the current and proposed regulations in Subpart G do not apply to PCCM
entities, consistent with current regulations at Sec. Sec.
438.10(c)(2) and 457.1207; non-emergency medical transport PAHPs are
also not included in the MAC QRS, in accordance with Sec. Sec. 438.9
and 457.1206(b). In addition, our proposal for the MAC QRS framework
excluded contracts between States and MA dual eligible special needs
plans (D-SNP) where the contract is only for the D-SNP to provide
Medicaid coverage of Medicare cost sharing for the D-SNP enrollees;
this is reflected in proposed Sec. 438.505(b).
We summarize and respond below to public comments received on the
general rule and applicability provisions (Sec. Sec. 438.334(a),
438.505(a) and 457.1240(d)).
Comment: Most commenters supported our proposal to extend the
implementation date for the MAC QRS another year, from 3 years to the
end of the fourth calendar year following the publication of the final
rule. Commenters who supported the timeline stated that the proposal
balances the burden on States, health plans, and providers with the
needs of beneficiaries. Some commenters urged CMS to accelerate the
initial implementation so users could access the information sooner.
Several commenters requested that CMS consider further extending the
implementation timeline beyond the proposed additional year, with many
suggesting that CMS provide another additional year to implement,
giving States 5 calendar years to implement a MAC QRS following the
publication of the final rule. A couple of commenters encouraged CMS to
consider implementing a voluntary performance year prior to mandating
full implementation of the proposed MAC QRS, effectively requesting an
additional year to implement a MAC QRS. Several commenters suggested
that CMS consider an extension process for MAC QRS requirements
(especially for States with a small number of managed care plans) to
allow States additional time to implement MAC QRS requirements. States
noted several challenges to meeting the implementation dates, including
collecting the data necessary to calculate measures for certain
beneficiaries, such as those who are dually eligible, and collecting
data needed to stratify quality ratings. A couple of commenters
requested that CMS phase in the proposed mandatory measures, starting
with a subset of mandatory measures, such as ten, required for the
first year, and moving toward display of the full measure set over
time.
Response: We agree that States may be challenged to implement all
MAC QRS requirements by the proposed implementation date despite a good
faith effort. We considered but are declining the suggestion to further
extend the implementation dates as a whole by an additional year or to
phase in use of the full mandatory measure set over time. We believe
that the additional year that was proposed (extending the current 3-
year timeframe under the current regulation to 4 years), as well as our
proposal to implement the MAC QRS website requirements in two phases,
giving additional time to implement the search tools and display of
measures stratified by beneficiary characteristics required under Sec.
438.520(a)(6) that may require more advanced technological capabilities
or more challenging data collection, is sufficient to implement the MAC
QRS, particularly since many of our requirements build upon existing
information and data States either already have or are currently
required to report publicly or to CMS. We note that the deadline
specified in Sec. 438.505(a)(2) as finalized is the end of the fourth
calendar year after the effective date of this final rule (meaning the
fourth calendar year after July 9, 2024 2024), unless otherwise
specified in the part 438, subpart G regulations.
Nonetheless, we recognize that some States may need additional time
to fully comply with all MAC QRS requirements and we are adding new
provisions at Sec. Sec. 438.515(d) and 438.520(b) to this final rule
to allow States to request a one-time, one-year extension for certain
MAC QRS requirements for which commenters identified specific concerns
and barriers to implementation. These include the methodology
requirements established at Sec. 438.515(b)(1) and (2), as well as the
website display requirements established at Sec. 438.520(a)(2)(v) and
(6). We discuss additional details related to extensions for
methodology requirements in section I.B.6.f. and related to extensions
for website display requirements in section I.B.6.g but address here
the overall elements common to both types of extensions.
States may submit a request for an extension under either
Sec. Sec. 438.515(d) or 438.520(b) of the final rule by submitting an
extension request to CMS that includes the information and by the
deadline(s) identified in these respective sections. We are finalizing
identical content requirements for requests for both types of
extensions. First, the State must identify the specific requirement for
which the extension is requested. Second, the State must describe the
steps the State has taken to meet the requirement as well as the
anticipated steps that remain to implement the requirement. Third, the
State must explain why it will be unable to comply with the requirement
by the implementation date, which must include a detailed description
of the specific barriers the State has faced or faces in complying with
the requirement by its implementation date. Finally, the
[[Page 41184]]
State must include a detailed plan to implement the requirement by the
end of the one-year extension including, but not limited to, the
operational steps the State will take to address identified
implementation barriers by the end of the extension year as the
extension is for only one-year, and it is a one-time extension. If a
State wishes to request an extension for multiple requirements, the
State need not submit multiple extension requests, but must provide the
required information for each individual requirement identified in its
single extension request. We discuss the types of information a State
could provide to meet these requirements for each type of extension in
more detail in sections I.B.6.f. and I.B.6.g of this final rule.
We are also finalizing the same standard for approving extension
requests for implementation of the methodology (Sec. 438.515(d)(3))
and the website display requirements (Sec. 438.520(b)(3)). CMS will
approve a State's request for an extension if CMS determines that the
request: (1) includes the information required for the extension
request; (2) demonstrates that the State has made a good-faith effort
to identify and begin executing an implementation strategy for the
requirement but is unable to comply with the specified requirement by
the implementation date specified in the regulations in part 438
subpart G; and (3) demonstrates the State has an actionable plan to
implement the requirements by the end of the one-year extension. If a
State requests an extension for multiple requirements, CMS will review
each request separately against these standards and will the provide
the State with an individual determination for each requirement for
which the State has requested an extension.
We believe that providing States with an opportunity to request an
extension for these individual MAC QRS requirements, if needed, best
balances the important policy goals and burdens associated with
implementation of the MAC QRS requirements adopted in this final rule
and addresses the various policy discussions in the comments to
accelerate or postpone MAC QRS implementation. We discuss the
implementation extension for rating methodology requirements in
additional detail in section I.B.6.f of this final rule and the
implementation extension for website display requirements in additional
detail in section I.B.6.g. of this final rule.
Comment: Many commenters supported our proposal to require States
to provide support to beneficiaries, enrollees, or both, seeking
assistance as to how to use the MAC QRS through the State's existing
beneficiary support system. Most of these commenters agreed that this
would require additional training and financial resources and requested
that CMS ensure that States have access to an enhanced Federal match
(FFP funding) to provide these services. A couple of commenters noted
the importance of ensuring that any choice counseling provided include
information and resources related to Medicare coverage for people who
are dually eligible. One commenter recommended that CMS issue guidance
or best practices for communicating with dually eligible beneficiaries
about the differences between the MAC QRS ratings and Medicare and Part
D quality rating system ratings.
Response: We appreciate commenters' support for our proposal to
require States to use their beneficiary support system to assist
beneficiaries, enrollees, or both, using the MAC QRS implemented by the
State. We agree that this requirement will necessitate additional
training and resources for call center staff, and we acknowledge that
the MAC QRS requirements may be more complex than information currently
provided through the beneficiary support system. To address this
concern, we will consider developing technical assistance resources to
support States in training call center staff, including how to best
address the unique needs of dually eligible individuals, and
differences between the MAC QRS ratings and the MA and Part D quality
rating system ratings.
In response to the commenters that requested increased FFP funding
to support States in the design and development of their MAC QRS, we
clarify that there are existing pathways States can use to receive
enhanced FFP related to the implementation of the MAC QRS. As was
discussed in the proposed rule and reiterated in section I.B.6.f. of
this final rule, under the EQR optional activity at Sec.
438.358(c)(6), States may use their EQRO to assist with quality
ratings, which could include the collection of data, validation of
data, and calculation of performance rates. States may be eligible for
a 75 percent FFP for such EQRO services in the case of an MCO, as
provided in Sec. 438.370. We appreciate commenters requesting clarity
on FFP regarding the other aspects of the MAC QRS implementation. If
the requirements for the enhanced match are met, a State may be
eligible for enhanced FFP as part of the State's Medicaid Enterprise
System (MES) for the design, development, and implementation of a new
public facing website--and the data infrastructure that supports it--
when necessary to comply with the new MAC QRS website requirements we
are finalizing in Sec. 438.520. We refer States to SMDL #22-001 \206\
for more information and encourage States to meet with their MES State
Officer for technical assistance on which operational elements of their
MAC QRS implementation may be eligible for enhanced FFP. We will also
consider developing more specific guidance on FFP availability for MAC
QRS to help States plan their implementation.
---------------------------------------------------------------------------
\206\ See State Medicaid Director Letter #22-001, https://www.medicaid.gov/sites/default/files/2023-06/smd22001.pdf.
---------------------------------------------------------------------------
We also agree with commenters that information developed by the
State that is related to the MAC QRS, including choice counseling,
should also address the unique needs of dually eligible individuals. We
will consider using the information and perspectives gathered during
our pre-rulemaking engagement with beneficiaries, described in section
I.B.6.a. of the proposed rule, to inform future guidance on best
practices for how to assist MAC QRS users, including dually eligible
beneficiaries, and how to explain the differences between the MAC QRS
ratings and the MA and Part D rating system ratings.
Comment: Commenters overwhelmingly supported alignment of the MAC
QRS with existing CMS quality measurement and rating initiatives, when
appropriate, and encouraged continued focus on alignment to reduce
burden on both States and plans. Many cited the QHP quality rating
system and MA and Part D quality ratings system, specifically, as well
as the Adult and Child Core Sets and the Universal Foundation as
particularly important initiatives with which to align.
Response: We agree with commenters that alignment of the MAC QRS
with existing CMS quality measurement and rating initiatives is an
important way to reduce burden on States and plans and we appreciate
the support for our proposal at Sec. 438.505(c) to continue alignment
between the MAC QRS and existing CMS quality measurement and rating
initiatives for other markets and programs to the extent appropriate.
After consideration of the public comments and for the reasons
outlined in the proposed rule and this final rule, we are finalizing
Sec. 438.505 largely as proposed, with some modifications. As
finalized, Sec. 438.505(a)(1) reflects changes to clarify the scope of
flexibility for States regarding the methodology
[[Page 41185]]
used in the QRS and to clarify that States may display additional
quality measures and website features in addition to the mandatory
minimum measures specified by CMS and the mandatory minimum content of
the MAC QRS website identified in Sec. 438.520(a). In addition, we are
finalizing minor changes throughout paragraph (a) to improve the
readability of the provision. We are also finalizing the cross-
reference in Sec. 457.1240(d) to part 438, subpart G to require CHIP
managed care programs to comply with implementing their MAC QRS (or
alternative QRS) by the end of the fourth calendar year following the
effective date of this final rule as proposed. We note that although
the MAC QRS changes in this rule are intended to work harmoniously to
achieve a set of goals and further specific policies, they are not so
interdependent that they will not work as intended even if a provision
is held invalid. Many of the MAC QRS provisions may operate
independently of each other. For example, quality ratings for mandatory
measures can be displayed in accordance with the requirements of phase
one of the website display implementation even if website display
requirements in phase two are successfully challenged. Where a
provision is necessarily dependent on another, the context generally
makes that clear (such as by a cross-reference to apply the same
standards or requirements). We intend that if any amendment or new
provision regarding the MAC QRS adopted in this rule is held to be
invalid or unenforceable by its terms, or as applied to any person or
circumstance, or stayed pending further agency action, it shall be
severable from the remaining provisions.
e. Establishing and Modifying a Mandatory Measure Set for MAC QRS
(Sec. Sec. 438.334(b), 438.510 and 457.1240(d))
The current regulations at Sec. 438.334(b)(1) direct CMS, after
consulting with States and other interested parties, to identify a
mandatory set of QRS quality measures that align, where appropriate,
with the MA and Part D and QHP quality rating systems and other related
CMS quality rating approaches, and to provide an opportunity for public
notice and comment on such mandatory measures. In section I.B.6.e.1. of
the proposed rule, we discussed the standards that guided CMS in
identifying the initial mandatory measures and proposed an initial
mandatory measure set. We sought comment on our proposed initial
mandatory measure set, which we are finalizing in this final rule. We
noted that we would not duplicate the list of the mandatory measures
and specifications in regulation text considering the regular updates
and revisions that would occur under the subregulatory process at least
every other year to include the addition, removal, or update of the
mandatory measure set proposed in Sec. 438.510(b). We also proposed to
codify both the standards that guided development of the initial
mandatory measure set and the standards for a subregulatory process to
modify the mandatory measure set over time.
(1) Standards for Including Measures in Mandatory Measure Set
(Sec. Sec. 438.510(c) and 457.1240(d))
Three distinct considerations guided the process of selecting
individual measures to establish a concise proposed initial mandatory
measure set. We proposed at Sec. 438.510(c)(1) through (3) to codify
these three considerations as standards that we would apply in
subsequent years in adding measures to the mandatory measure set,
making substantive updates to an existing mandatory measure, and in
some circumstances when removing measures from the mandatory measure
set. Specifically, a measure was only included in our proposed initial
mandatory measure set if: (1) it met five of six measure inclusion
criteria proposed in Sec. 438.510(c)(1); (2) it will contribute to
balanced representation of beneficiary subpopulations, age groups,
health conditions, services, and performance areas in the mandatory
measure set; and (3) the burdens associated with including the measure
will not outweigh the benefits to the overall quality rating system
framework of including the new measure based on the measure inclusion
criteria we proposed. Performance areas are domains of care, such as
preventive health and long-term services and supports. We discussed in
section I.B.6.e.4. of the proposed rule that these same standards will
be applied in determining whether a measure may be added to or removed
from the mandatory set.
As discussed in section I.B.6.e.1. of the proposed rule (and
reflected in proposed Sec. 438.510(c)(1)), during our pre-rulemaking
discussions with States and other interested parties, we identified six
measure criteria for determining whether a given measure is a good
candidate for including in the mandatory MAC QRS measure set: (1)
Usefulness: is the measure meaningful and useful for beneficiaries and
their caregivers when choosing a managed care plan; (2) Alignment: is
the measure currently used by States and other Federal programs and
does it align with other CMS rating programs described in Sec.
438.505(c) of this chapter; (3) Relevance: does the measure assess
health plan performance in at least one of the following areas:
customer experience, access to services, health outcomes, quality of
care, health plan administration, and health equity; (4) Actionability:
does the measure provide an opportunity for managed care plans to
influence their performance on the measure; (5) Feasibility: is the
measure based on data that are readily available, or available without
undue burden on States and plans, such that it is feasible to report by
most States and managed care plans; and (6) Scientific Acceptability:
does the measure demonstrate scientific acceptability, meaning that the
measure, as specified, produces consistent and credible results.
We provided the following explanation in the proposed rule of each
of these criteria and how we assessed (and, if finalized, how we will
assess) whether a given measure met it for inclusion in the initial
mandatory measure set.
Usefulness: For the initial mandatory set, we assessed
whether a measure meets this criterion by seeking beneficiaries'
feedback on which measures of health plan performance are most relevant
to them and determined that measures that assess the quality of care or
services most identified by beneficiaries as relevant to selection of a
health plan. We noted that when adding, updating, or removing measures
through the proposed process, we would rely on the continued engagement
with beneficiaries proposed in Sec. 438.520(c) and discussed in
section I.B.6.g.4. of the proposed rule to determine whether a measure
meets this criterion of being meaningful and useful for beneficiaries
and their caregivers when choosing a managed care plan. We noted that
input from beneficiaries or beneficiary advocates with experience
assisting beneficiaries was particularly important in evaluating this
criterion, but input from other interested parties was also considered.
Alignment: For measures in the initial mandatory measure
set, we assessed whether a measure met this criterion by identifying
the extent to which States and other Federal programs (such as the
Medicaid and CHIP Scorecard, the MA and Part D quality rating system,
and the QHP quality rating system) currently collect or report the
measure. We considered feedback on measures commonly used to assess
health plan performance, as well as the challenges and concerns
[[Page 41186]]
with these measures. If the measure is not currently in use, we
assessed whether it overlaps with an existing, widely used measure.
This approach reflects the continuing evolution of quality measurement
and allowed for consideration of new, better measures.
Relevance: For each measure under consideration, we
determined, using measure information and technical specifications,
whether the measure evaluated or measured at least one of these areas:
customer experience, access to services, health outcomes, quality of
care, health plan administration, and health equity. If it was
determined that the measure evaluated or measured at least one of these
areas, it was considered to meet the criteria.
Actionability: For the proposed measure set, we assessed
whether a measure met this criterion by considering input from States,
plans, and other interested parties on what actions managed care plans
may take to improve or maintain measure performance and the extent to
which the plans control, or are capable of influencing, what is being
measured. We also considered whether the measure is currently specified
at the plan level, meaning that measure specifications are available to
calculate the measure at the plan (as opposed to provider or State)
level because individual plans cannot effectively impact performance of
all plans aggregated across the state.
Feasibility: For the proposed measure set, we assessed
whether a measure meets this criterion by considering the accessibility
of the data required to calculate the measures and the proportion of
plans or States that currently collect data for the measure.
Scientific Acceptability: For the proposed measure set, we
assessed whether the intervention included in the measure directly
correlates to the quality of care provided and provides consistent and
credible results by reviewing evidence that the measure can be used to
draw reasonable conclusions about care in a given domain.\207\
---------------------------------------------------------------------------
\207\ CMS Measures Blueprint: https://mmshub.cms.gov/measure-lifecycle/measure-testing/evaluation-criteria/overview.
---------------------------------------------------------------------------
Using feedback throughout our consultations related to the
mandatory measure list, we assessed our list of suggested measures to
identify the extent to which each measure met these inclusion criteria.
During the consultations, we received feedback confirming our
assessment that, while each of the six criteria were important to
consider, it would be difficult for a measure to meet all six criteria.
For instance, we found that requiring all six criteria could prevent
the inclusion of either measures that are extremely meaningful to
beneficiaries but not commonly used by States, or measures aligned with
State priorities for managed care quality and plan performance, but
less useful to beneficiaries. Therefore, we proposed in Sec.
438.510(c)(1) that a measure must meet at least five of the six measure
inclusion criteria to be considered against our other standards and
included in the mandatory measure set in the future. We sought comment
on the six criteria we proposed to evaluate prospective measures for
the mandatory measure set, and whether there are additional objective
measure inclusion criteria that we should use to evaluate quality
measures for inclusion as mandatory measures. Additionally, we sought
comment on our proposal to require measures to meet five out of the six
proposed criteria, and whether that threshold produces enough measures
to consider for the MAC QRS. Finally, we sought comment on the extent
to which the measures in our proposed measure set met the proposed
measure inclusion criteria, including the reasons and/or supporting
data for why the measure meets or does not meet the criteria.
Through our work to develop the proposed mandatory measure set, we
found that many measures met at least five of the six measure inclusion
criteria and came to understand that additional standards would be
needed to narrow the initial mandatory measure set to a manageable size
and to prevent future measure sets from becoming too large. States and
managed care plans recommended limiting the mandatory set to between 10
and 30 measures to ensure that plans can improve on selected measures,
that States will be able to report all measures, and that implementing
a QRS would not overwhelm State and plan resources. Furthermore, our
website prototype user testing showed that beneficiaries were evenly
split between those with high informational needs who preferred
detailed information from a lot of measures, and those who valued clear
and concise information on the big picture using fewer measures.
The first standard which a measure must meet for inclusion in the
mandatory measure set, under the proposed rule, reflected at Sec.
438.510(c)(1), is to satisfy at least five of the six criteria
discussed above. The two additional standards that we proposed to
codify in Sec. 438.510(c)(2) and (3) reflect the feedback we received
for a concise mandatory measure list and allow us to consider how a
measure would contribute to the measure set as a whole. First, in Sec.
438.510(c)(2), we proposed that a measure must contribute to balanced
representation of beneficiary subpopulations, age groups, health
conditions, services, and performance areas that are assessed within a
concise mandatory measure set since we included as part of our standard
proposed in Sec. 438.510(c)(2) that the overall measure set should be
``concise.'' We stated our intent to maintain a goal of no more than 20
measures for the initial mandatory measure set, but proposed to allow
flexibility for the number of measures to increase as the mandatory set
is updated over time. We stated that we would consider each suggested
measure in relation to other suggested measures, as well as the
measures already in the mandatory measure set to identify those that
are very similar or duplicative, keeping in mind the need for a
mandatory measure set that is both representative and concise.
The second standard, proposed in Sec. 438.510(c)(3), is that a
measure would be added to the mandatory measure set when the burdens of
adding the measure do not outweigh the benefits. To make this
assessment, the extent to which the measure meets the six criteria
proposed at Sec. 438.510(c)(1)(i) through (vi) would be considered. If
several similar measures are suggested for inclusion (that is, those
that measure performance within similar subpopulations of
beneficiaries, health conditions, services, and performance areas), we
would assess the extent to which each suggested measure meets the
criteria listed in proposed paragraph (c)(1), to assess the benefits
and burdens of including each measure in the mandatory measure set and
identify a measure that best balances burdens and benefits. We proposed
to include a measure when all three of the standards proposed in Sec.
438.510(c) are met. We also proposed that CMS would use the
subregulatory process proposed in Sec. 438.510(b) and discussed in
section 1.B.6.e.3. of the proposed rule, to determine which measures
meet the proposed standards.
We sought comment on the standards proposed at Sec. 438.510(c)(2)
and (3) and how measures should be assessed using these standards. We
sought comment on the appropriate balance of representation (of
populations and performance areas) in the mandatory measure set and any
additional considerations that may be missing from our proposed
paragraph (c)(2). Further, we sought comment on whether there are
additional considerations that CMS
[[Page 41187]]
should consider in the weighing of burdens and benefits of a measure
under proposed Sec. 438.510(c)(3).
We summarize and respond to public comments received on standards
for including and adding mandatory measures for the MAC QRS (Sec. Sec.
438.334(b), 438.510(c) and 457.1240(d)) below.
Comment: We received many comments supporting our standards for
measure selection, including our proposed measure selection criteria.
One commenter supported our proposed measure selection criteria but
recommended that we revise the feasibility criterion to consider burden
on providers. Another commenter recommended that we consider the burden
of chart review abstraction in data collection and reporting when
weighing the benefits and burdens of a measure.
Response: We agree with the commenter that recommended that we
revise the feasibility criterion to consider provider burden and we are
modifying the proposed feasibility measure selection criterion at Sec.
438.510(c)(1)(v) to add ``providers'' to ensure that provider burden,
as well as State and plan burden, is considered when assessing whether
data collection associated with the measure is feasible. This means
that feasibility of a measure will be determined by whether data are
available without undue burden on States, plans, or providers such that
it is feasible to report by many States, managed care plans, and
providers. We believe that this change also addresses the commenter
that requested that we specifically consider the burden of chart review
abstraction on providers in data collection and reporting when
assessing the burdens and benefits of a measure. In Sec.
438.510(c)(3), we proposed that the benefit and burden assessment would
be made based on the six criteria listed at Sec. 438.510(c)(1). By
finalizing our feasibility criteria at Sec. 438.510(c)(1)(v) with
modifications to include the feasibility and potential burden of data
reporting for providers, CMS may consider the extent to which chart
review abstraction may burden providers when assessing a measure for
inclusion in the mandatory measure set.
Comment: One commenter requested additional clarification on how
CMS intends to assess the administrative burden associated with a
potential measure and evaluate the reasonableness of that burden, as
well as the relative benefit to the larger quality rating system,
noting that CMS's determination of burdens associated with data
collection and reporting and whether they are reasonable is not always
consistent with States' views or experiences.
Response: In section I.B.6.e.1 of the proposed rule, we provided an
overview of the process by which we identified the three standards for
adding mandatory measures, finalized in this final rule at Sec.
438.510(c)(1)-(3). We emphasize here that we did not develop the
standards for including a measure without input and do not intend to
apply them without an opportunity for input from interested parties.
Rather, the standards proposed and finalized in this rule reflect the
thought process and concerns discussed by and among interested parties,
including States, over several years of engagement.
Furthermore, as discussed in section I.B.6.e.3 of the proposed rule
and finalized in Sec. 438.510(b), before adding a measure to the
mandatory set, we must engage in a subregulatory process through which
States and other interested parties evaluate the current mandatory
measure set, make recommendations to add mandatory measures, and
provide comment on modifications to the mandatory measure set. When a
measure meets all three of the standards finalized at Sec.
438.510(c)(1)-(3), per Sec. 438.510(c), we will add the measure to the
mandatory set--an assessment that must be based on available relevant
information, including the input received during the subregulatory
process. Following the engagement required under Sec. 438.515(b)(1),
as proposed and finalized at Sec. 438.510(b)(2), we must provide
public notice and opportunity to comment through a call letter or
similar subregulatory process using written guidance on any planned
modifications to the mandatory measure set. During this second phase of
engagement, we will gather additional input from the public on any
mandatory measures identified by us as meeting the three standards for
adding a measure, which will be reviewed and considered prior to
finalizing the measure in the technical resource manual.
In combination, the subregulatory process, finalized at Sec.
438.510(b), and the requirement, finalized at Sec. 438.515(c), that we
base the decision to add a measure on available relevant information
(which would include the input received during the subregulatory
process) ensures that assessment of whether a measure meets the
standards, including that the benefits of a given measure outweigh the
burdens, will take into account the input that we receive through the
subregulatory process. This process will allow us to assess each
proposed measure based on--among other things--the identified benefits
and burdens of a given measure and how those benefits and burdens are
perceived and weighed across the health care system, the existence of
alternative measures that may better balance burdens with benefits, and
the extent to which CMS can provide support that addresses the
challenges that create burdens for a given quality measure, such as
through technical assistance or reasonable implementation timelines.
After considering the commenter's concerns, we do, however, believe
that additional clarity on how CMS will assess a measure under the
balancing standards in Sec. Sec. 438.510(c)(2) and (3) is warranted to
ensure that, when providing their own perspective on how they would
assess the measure under these two balancing standards, those who
provide measure input through the subregulatory process finalized in
Sec. 438.510(b) have a clear understanding of the types of CMS's
considerations. As noted, in section I.B.6.e, the proposed rule
detailed many of the factors and considerations considered by
participants in our pre-rulemaking engagement. We are finalizing a new
(c)(4) at Sec. 438.510 to reflect these considerations by establishing
that, when making the determination required under Sec. 438.510(c)(1)
through (3), to add, remove, or update a measure, CMS may consider the
measure set as a whole, each specific measure individually, or a
comparison of measures that assess similar aspects of care or
performance areas when assessing the measure under the balancing
standards in Sec. 438.510(c)(2) and (3). This modification reflects
what we observed during pre-rulemaking discussions among interested
parties about potential MAC QRS measures. Participants in these
discussions did not just assess each measure in a vacuum, but assessed
measures on their own merits and also engaged in robust discussion on
both how a measure would work together with other measures considered
for inclusion in the MAC QRS mandatory set and whether other, similar
measures exist that may be more appropriate for inclusion. As
finalized, our intent in adding new Sec. 438.510(c)(4) is to encourage
participants in the subregulatory process to include these
considerations when providing their perspective on how they would
assess a measure under Sec. 438.510(c)(2) and (c)(3) through the
subregulatory process so that CMS can may use input from across the
healthcare system to assess the measure against the measure standards,
including the balancing standards in Sec. 438.510(c)(2) and (3). We
note that we
[[Page 41188]]
are not including a reference to Sec. 438.510(c)(1) in new (c)(4) as
whether a measure meets a given measure selection criterion is not
impacted by whether any other measure does so as well.
Comment: Several commenters suggested additional criteria including
those that would require the measure to advance health equity; be an
outcomes-based measure (as opposed to a process measure); be endorsed
by the National Quality Foundation (NQF); and be validated, audited,
and publicly reported.
Response: We considered commenters' requests to finalize additional
measure selection criteria, but we are declining to add to our existing
list of criteria. We agree with commenters that a measure's potential
impact on improving health equity is an important consideration in
assessing a measure for inclusion in the mandatory measure set. We
considered adding a selection criterion related exclusively to health
equity but concluded that advancing health equity is already considered
during measure selection as it is a consideration under the relevance
criteria in Sec. 438.510(c)(1)(iii), which assesses whether a proposed
measure evaluates health plan performance in at least one area
specified by CMS including customer experience, access to services,
health outcomes, quality of care, and health equity. We recognize that
the relevance criteria does not require that a measure evaluate
performance in health equity to be considered for addition to the
mandatory set. However, when providing perspective on whether a measure
meets the standards in Sec. 438.510(c)(2) and (c)(3), participants in
the subregulatory process could provide input on whether a measure that
evaluates health equity alone, or in addition to other priority topics,
would result in a better balance of representation, provide more
benefits to the overall quality rating system framework, or both, as
compared to those measures that do not evaluate health equity, which
CMS may then consider when assessing the measure under the standards in
Sec. 438.510(c).
After consideration, we have decided not to add a criterion that
would require measures to be outcomes-based measures (instead of
process measures). While outcomes-based measures are considered by many
to be the ``gold standard'' of quality measures, the outcomes addressed
by these measures are often influenced by multiple factors, including
those outside the control of a health plan. In many cases, a process
measure may be a better way to determine the degree of access a health
plan's enrollees have to important services, such as preventive care.
Furthermore, beneficiaries often find certain process measures
informative and desirable. Therefore, we do not want to exclude process
measures from inclusion in the MAC QRS measure set.
We considered the suggestion to require NQF endorsement, however we
are declining to add endorsement as a measure selection criterion
because the criteria used for NQF endorsement overlap with the MAC QRS
measure selection criteria in Sec. 438.510(c) as finalized in this
rule and would therefore be redundant.\208\ Likewise, while we agree
that whether a measure rating is validated and audited, and whether the
measure is publicly reported, are also important considerations, we
decline to add these suggestions as additional selection criteria.
Validation and auditing are sufficiently addressed through our
requirement in Sec. 438.515(a)(3) that States validate data used to
calculate quality ratings for mandatory measures.
---------------------------------------------------------------------------
\208\ https://www.qualityforum.org/Measuring_Performance/ABCs/What_NQF_Endorsement_Means.aspx (includes criteria: important to
measure, scientifically acceptable, useable, relevant, and feasible
to collect.)
---------------------------------------------------------------------------
Finally, our alignment measure criterion considers the extent to
which a measure is publicly reported as it assesses the extent to which
a measure aligns with other CMS rating programs, that is, the measure
is already reported to CMS. To the extent that managed care plans or
States already report a measure, that would also have bearing on the
criterion at Sec. 438.510(c)(1)(v), which addresses the level of
burden of reporting a measure such that it is feasible to report.
Comment: A few commenters suggested that we make certain measure
selection criteria, or combinations of measure criteria, mandatory
including usefulness to beneficiaries, feasibility, actionability, and
scientific acceptability. One commenter recommended that CMS make the
actionability and feasibility criteria mandatory, noting that these
criteria are essential to ensuring that all measures included in the
MAC QRS meet the goals described by CMS in section I.B.6.a. of the
proposed rule. The commenter noted that if CMS only requires measures
to meet five of six inclusion criteria, the mandatory measure set could
include measures that managed care plans cannot reasonably be expected
to impact, or that are not feasible to report. Another commenter
recommended that a measure should only be included in the MAC QRS
mandatory measure set if it meets the usefulness to beneficiary's
standard given the stated role of the MAC QRS. Another commenter
suggested that CMS make the usefulness, feasibility, and scientific
acceptability criteria mandatory to better align with the measure
evaluation criteria that is widely accepted by the quality measurement
ecosystem and used by the CMS consensus-based entity.
Response: We considered but are declining commenters' suggestions
to make certain measure selection criteria, or certain combinations of
selection criteria, mandatory. In section I.B.6.e.1 of the proposed
rule, we discussed how we considered each of the six measure selection
criteria to be important, but that our own process of identifying the
initial mandatory measure set showed that requiring a measure to meet
all six criteria severely limited the measures that could be included
in the MAC QRS. Similarly, we believe that requiring certain measure
selection criteria to be mandatory could prevent flexibility to include
important measures in the future. Additionally, there was no consensus
among those who commented on this aspect of the proposed rule about
which criteria should be made mandatory, highlighting the difficulty of
establishing this additional designation. Instead of identifying a
subset of mandatory criteria, we believe that the subregulatory process
for adding measures finalized at Sec. 438.510(b) and described in the
proposed rule in section I.B.6.e.4 will allow CMS to gather for
consideration varying viewpoints on whether a measure does or does not
meet certain measure selection criteria and on the relative importance
of a criterion and other considerations specified in Sec. 438.510(c),
which CMS may use when assessing the overall benefits and burdens of
adding the measure in applying Sec. 438.510(c)(2) through (4).
Furthermore, we are finalizing in new Sec. 438.510(c)(4) that when
assessing whether a measure meets the measure standards in Sec.
438.520(c)(2) and (3), CMS may consider the measure set as a whole,
each specific measure individually, or a comparison of measures that
assess similar aspects of care or performance areas. This provision
will allow CMS to consider input gathered through the subregulatory
process on how interested parties balance and weigh the importance of
the measure standards, including the measure selection criteria when
assessing measures for inclusion in the mandatory set.
Comment: One commenter suggested that new measures undergo a 2-year
[[Page 41189]]
pilot period to allow States and CMS to collect benchmark data before
implementing in the QRS. The commenter did not identify the perceived
benefits of adopting this approach. Furthermore, the commenter did not
specify what they would consider to be ``new'' measures--whether these
would include any measure newly added to the mandatory measure set or
only measures added to the mandatory set that are ``new'' in that they
were recently developed or adopted by a measure steward.
Response: After consideration, we are declining the commenter's
suggestion to implement a pilot period prior to implementing new
measures in the MAC QRS, both when a measure is newly added to the
mandatory measure set or when a measure is added that is recently
developed. Benchmarks for a given quality measure help health plans to
assess how well they are currently performing on a given quality
measures, identify any need for improvement, and make educated
decisions on how to assign finite resources towards quality
improvement. We believe that our established selection criteria, which
include scientific acceptability and alignment with other CMS programs
such as the QHP quality rating system and MA and Part D quality rating
system, the Adult and Child Core Sets, and other programs identified at
Sec. 438.505(c), will make it likely that measures added to the
measure set are well-established and already in use. As such, we
believe that States and health plans will have a sense of both State
and plan performance on the measures added to the mandatory measure set
as well as the feasibility of reporting the measure. However, we noted
in the proposed rule at I.B.6.e.1 that when considering whether a
measure that is not currently in use (such as a newly developed
measure) meets the alignment criterion we would assess whether it
overlaps with an existing, widely used measure. As such, we recognize
that our current policy accepts the possibility that a newly developed
measure (including one that may not have data from which benchmarks
could be developed) could be added to the mandatory measure set. We
continue to believe that this approach is appropriate as it reflects
the continuing evolution of quality measurement, allows for
consideration of new, better measures, and the measure would still need
to meet at least 5 of the 6 measure selection criteria.
If a newly developed measure is added to the mandatory measure set
(following the subregulatory process requiring extensive public
engagement and application of the measure selection standard finalized
in Sec. 438.510), this final rule provides CMS with flexibility to
determine the implementation date for such a measure, which could allow
something like the pilot period recommended by the commenter prior to
mandatory implementation. As finalized in Sec. 438.510(f), States will
have at least 2 calendar years after a measure is added to the
mandatory measure set to display the measure in its MAC QRS. The
flexibility to give States more than 2 years to implement a mandatory
measure newly added to the measure set would allow CMS to implement a
voluntary implementation period or pilot program. Furthermore, the
extensive subregulatory engagement process would provide CMS with many
opportunities to gather input on an appropriate implementation timeline
and any additional steps that may be desirable prior to mandatory
implementation. We recognize that other programs may use pilot periods
similar to what the commenter generally described but believe that the
specific policy goals and implementation structure for the MAC QRS
means that setting mandatory pilot periods as part of adopting or
changing the mandatory minimum measure set is not necessary.
Comment: One commenter expressed concern that the alignment measure
selection criteria in Sec. 438.510(c)(1)(ii) could make it harder for
new HCBS measures to be included as HCBS measures will never align with
the QHP quality rating system or the MA and Part D quality rating
system since neither Medicare nor QHPs provide coverage for HCBS.
Response: We agree with the commenter that HCBS measures will
likely not align perfectly with MA and Part D quality rating system or
QHP quality rating system measures because those quality rating systems
do not include measures specifically developed to assess HCBS plans.
While we do not believe that our current alignment requirement would
hinder the inclusion of HCBS measures in the MAC QRS mandatory measure
set, we are finalizing modifications to paragraph (c)(1)(ii) to require
alignment, to the extent appropriate, with other CMS programs described
in Sec. 438.505(c), which include the MA and Part D quality rating
system and QHP quality rating system and other similar CMS quality
measurement and rating initiatives. Under finalized Sec.
438.510(c)(1)(ii), it would not be appropriate to require measures
developed specifically for HCBS to align with either the MA and Part D
or QHP quality rating system, but it would be appropriate to look to
whether the measure is aligned with other similar CMS quality
measurement and rating initiatives, such as the HCBS Quality Measure
Set. If a measure is proposed for which there is no existing CMS
program with which it would be considered appropriate for the measure
to align, CMS would consider the proposed measure to meet the alignment
criterion.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. 438.510(c) as proposed except for revisions to Sec.
438.510(c)(1)(ii) and (v). We are finalizing paragraph (c)(1)(ii) with
the additional phrase ``to the extent appropriate'' to clarify that if
alignment is appropriate, it should be considered when determining
whether a measure meets this criterion. We are finalizing Sec.
438.510(c)(1)(v), with a modification to include provider burden when
considering whether a measure meets the feasibility criterion
established in Sec. 438.510(c)(1) of the final rule.
(2) Mandatory Measure Set (Sec. Sec. 438.510(a) and 457.1240(d))
We proposed in Sec. 438.510(a) for Medicaid, and for separate CHIP
by cross-reference through a proposed amendment at Sec. 457.1240(d),
that the quality rating system for managed care plans implemented by
the State for Medicaid and CHIP managed care programs must include the
measures in a mandatory measure set, which would be identified by CMS
in the technical resource manual as proposed in Sec. 438.530(a)(1). We
note that proposed Sec. 438.520(b), discussed in section I.B.6.g.5. of
the proposed rule and this final rule, would allow States to include
other, additional measures outside the mandatory measure set. We
received input through our pre-rulemaking consultations with interested
parties, detailed in section I.B.6.a. of the proposed rule, on the
mandatory measure set for the MAC QRS, including the number of
measures, measure inclusion criteria, and performance areas and
populations represented by the measures. After considering the
priorities and other information gleaned through the several years of
pre-rulemaking consultations described in section I.B.6.a. of the
proposed rule, and applying the standards discussed in section
I.B.6.e.1. of the proposed rule, we proposed for public comment an
initial set of 18 mandatory measures. The proposed mandatory measures
reflected a wide range of preventive and
[[Page 41190]]
chronic care measures representative of Medicaid and CHIP
beneficiaries. The proposed list of measures included:
1. Use of First-Line Psychosocial Care for Children and Adolescents
on Antipsychotics;
2. Initiation and Engagement of Substance Use Disorder (SUD)
Treatment;
3. Preventive Care and Screening: Screening for Depression and
Follow-Up Plan;
4. Follow-Up After Hospitalization for Mental Illness;
5. Well-Child Visits in the First 30 Months of Life;
6. Child and Adolescent Well-Care Visits;
7. Breast Cancer Screening;
8. Cervical Cancer Screening;
9. Colorectal Cancer Screening;
10. Oral Evaluation, Dental Services;
11. Contraceptive Care--Postpartum Women;
12. Prenatal and Postpartum Care;
13. Hemoglobin A1c Control for Patients with Diabetes;
14. Asthma Medication Ratio;
15. Controlling High Blood Pressure;
16. CAHPS survey measures: how people rated their health plan,
getting care quickly, getting needed care, how well doctors
communicate, and health plan customer service;
17. MLTSS-1: LTSS Comprehensive Assessment and Update; and
18. MLTSS-7: LTSS Minimizing Institutional Length of Stay.
See also 88 FR 28187 through 21891 for additional details on the
proposed measures.
At the time the proposed rule was published, 15 of the 18 measures
were commonly reported by States,\209\ 16 of the 18 measures overlapped
with the 2023 and 2024 Core Set measures, 11 with the QHP quality
ratings system, 13 with the 2021 Medicaid and CHIP Scorecard, 5 with
the MA and Part D quality rating system, and 2 with the HCBS Quality
Measure Set.
---------------------------------------------------------------------------
\209\ As reported by States for the 2020-2021 EQR reporting
cycle.
---------------------------------------------------------------------------
In the proposed rule, we also provided an overview of several
measures that we considered but decided not to include in the proposed
initial mandatory set. We noted that these other measures were not
included because they did not meet one or more of the standards
proposed at Sec. 438.510(c). We also identified these other measures
and the reasons we did not include them in the measure set in the
proposed rule as follows:
Contraceptive Care--All Women Ages 15 to 44 (CCW) and
Person-Centered Contraceptive Counseling (PCCC): During our pre-
rulemaking engagement, States and other interested parties stated a
desire for the MAC QRS to include a quality measure involving
contraceptive services that will be relevant for all women, but many
noted that there is not yet a measure they would recommend that meets
this description. Beneficiaries did not specifically speak to the
importance of a contraceptive measure, but consistently noted the
desire to be involved in their care decisions and for providers to
respect their health goals and needs when providing counseling on
health care options. We considered various contraceptive measures in
addition to CCP, the measure we proposed. The additional measures that
we considered on this topic included Contraceptive Care--All Women Ages
15 to 44 (CCW) and a new survey-based measure, Person-Centered
Contraceptive Counseling (PCCC), that uses patient provided responses
to assess the person-centeredness of contraceptive counseling.
While we believe the PCCC measure aligns well with beneficiary
preferences stated during beneficiary consultations, it is an emerging
measure that fails to meet two of the six measure inclusion criteria
and is not currently used in any other CMS quality measurement and
rating initiatives. First, PCCC does not currently meet our measure
inclusion requirement of feasibility as we did not find evidence that
plans are currently collecting the data necessary to produce this
measure and some interested parties stated concern about the perceived
burden of reporting PCCC. Second, we believe the measure does not meet
the scientific acceptability criterion as it is currently specified
only at the provider level, so it is unknown whether it produces
consistent and credible results at the plan level. We note, however,
that emerging measures would still be assessed based on the criteria
and standards proposed at Sec. 438.510(c), and it could take time for
emerging measures to meet the proposed regulatory standards.
Both CCW and CCP meet at least five of the six inclusion criteria
and both measure access to contraception that reduces unintended
pregnancy in a defined population. Therefore, each would contribute to
balanced representation of beneficiaries by providing insight into the
accessibility of contraceptive care among beneficiaries who may become
pregnant. However, we believe the benefits of including CCP are greater
than those of including CCW because CCP is more actionable than CCW due
to the larger proportion of individuals who are enrolled in a health
plan during the postpartum period (the focus of CCP) as opposed to the
preconception period (the focus of CCW). CCP focuses on measuring
access to effective contraceptive care during the postpartum period,
which can improve birth spacing and timing and improve the health
outcomes of women and children.
Follow-up after Emergency Department Visit for Mental
Illness (FUM) versus Follow-up After Hospitalization for Mental Illness
(FUH): States and other interested parties supported including FUM, as
well as Follow-up After Hospitalization for Mental Illness (FUH) in the
initial mandatory measure list. Both measures met the measure inclusion
criteria and had similar benefits and burdens, and including both would
give a fuller picture of the percentage of emergency department and
inpatient hospital discharges for which beneficiaries received follow-
up services. The two measures assessed important, but very similar
services. We concluded that including both would not add sufficiently
to the goal of achieving balanced representation given the need also to
select a concise overall mandatory set. Upon balancing benefits and
burdens associated with each measure, we proposed to include FUH
because it was more commonly collected and reported by States and other
Federal programs and more frequently used by States to assess plan
performance. We provide a detailed analysis of our review of the FUH
and FUM measures in section I.B.6.e.4. of the proposed rule in the
Table 2-Example Inclusion Criteria Assessment.
Childhood Immunization Status (CIS): We considered
including the CIS measure; however, we included the well-child visit
measures (Well-Child Visits in the First 30 Months of Life (W30) and
Child and Adolescent Well-Care Visits (WCV)) instead. All three
measures met at least five of the six inclusion criteria, and each
could contribute to balanced representation within the overall
mandatory set. However, when reviewing the burdens and benefits to the
overall MAC QRS, we concluded the well-child visit measures will have
greater benefit to beneficiaries based on our beneficiary testing,
which showed that parents cared a lot about whether their children can
get appointments (reflected in the well-child visit measure), but no
beneficiary commented specifically on childhood immunizations.
Postpartum Depression Screening: We considered this
measure based on recommendations from the 2019
[[Page 41191]]
Measure Workgroup. However, we did not include this measure because it
did not meet two of our six inclusion criteria, including the
feasibility and alignment criteria, at the time of our evaluation.
We also note that we are retaining flexibility in the final rule
for States to display quality ratings for additional measures not
included in the mandatory measure set after following the process
described in Sec. 438.520(c). We encourage States to work with plans
and providers regarding the selection of additional measures.
We summarize and respond to public comments received on the MAC QRS
mandatory measure set (Sec. Sec. 438.510(a), (b), and 457.1240(d))
below.
Comment: Many commenters supported the use of a mandatory measure
set for the MAC QRS, stating that a unified reporting structure of
mandatory measures would bring a level of discipline and consistency
that would foster more reliable data across the Medicaid program.
Commenters also agreed that the uniformity in tracking plan quality
will enable CMS to determine if certain States or managed care plans
across States are underperforming.
Response: We appreciate the support and agree that using a minimum
mandatory measure set will facilitate comparisons of managed care plan
and program performance nationwide. To ensure that our use of a
mandatory measure set for the MAC QRS maximizes the uniformity and
consistency supported by commenters, we are finalizing Sec. 438.510(a)
with modifications to clarify that the mandatory minimum measure set
includes only measures calculated using the technical specifications
identified and specified by CMS in the technical resource manual. As
discussed in section I.B.6.h of the proposed rule, when quality ratings
calculated for a mandatory measure do not use the technical
specifications approved by the measure steward, we consider those to be
ratings for a different measure (that is, an additional measure that
may be displayed only once the requirements in finalized Sec.
438.520(c)(2) are met); therefore, display of a measure calculated or
used with different specifications than those identified in the
technical resource manual would not meet the requirement in Sec.
438.510(a)(1)(i). To the extent that the technical resource manual
identifies flexibilities for calculating ratings for MA (either
explicitly or through reference to flexibilities approved by the
measure steward), calculating the mandatory measure using those
flexibilities complies with Sec. 422.510(a)(1). We intend to provide
additional guidance on what modifications or flexibilities we would
consider to be approved by the measure steward in the technical
resource manual. For example, as discussed in the proposed rule,
steward-approved modifications could include allowable adjustments to a
measure's specifications published by the measure steward or measure
specification adjustments requested from and approved by the measure's
steward. This approach supports consistency in the use of the measures
and ensures comparability by clearly establishing that quality ratings
for such measures must be produced using specifications approved by the
measure steward, which have been reviewed and subjected to the measure
steward's own process to ensure that modified specifications allow for
comparisons across health plans.
Comment: Many commenters supported the proposed MAC QRS mandatory
measure set, with several suggesting prioritization of certain types of
measures such as those that assess health outcomes, promote health
equity, or present opportunities for quality improvement in the
Medicaid and CHIP populations and incorporation of stronger assessments
of the services provided under the Early and Periodic Screening,
Diagnostic, and Treatment (EPSDT) benefit.
Response: We agree with the measure topics identified by commenters
as priorities and believe our measure selection criteria addresses them
sufficiently. Specifically, whether a measure addresses health plan
performance for health equity and health outcomes is considered under
the relevance measure selection criteria in Sec. 438.510(c)(1)(iii),
and whether a measure presents an opportunity for plans to influence
performance on the measure is considered under the actionability
criteria in Sec. 438.510(c)(1)(iv). We agree with commenters on the
importance of measuring quality of care and services delivered to
children, including those eligible children under the ESPDT benefit,
and believe that the MAC QRS will supplement ongoing efforts we are
making to strengthen quality reporting in this area. For example,
current ongoing efforts to monitor services provided under the EPSDT
benefit include the CMS collection of information on the delivery of
EPSDT services at the State level annually through the Annual EPSDT
Participation Report (Form CMS-416) and the Child Core Set, which will
be mandatory for States to report in 2024. We believe the measures
included in our initial mandatory measure set for the MAC QRS will
supplement the State level data received from the CMS-416 and Child
Core Set by enabling interested parties to view the MAC QRS measures
for children at the health plan level within a State. The MAC QRS
mandatory measures that are focused on children include measures that
help to assess whether eligible children are receiving EPSDT services,
such as the Well-Child Visits in the First 30 Months of Life. The
rating for this measure will indicate the percentage of children who
received this preventive health service for each plan that is
responsible for delivering those services. The MAC QRS measures for
children will also help parents select a health plan that meets their
child's needs, which is one of the objectives of the MAC QRS.
Comment: Many commenters suggested either specific measures or
types of measures to add to the initial mandatory measure set. Specific
measure recommendations included HIV Viral Load Suppression, Adherence
to Antipsychotic Medications for Individuals with Schizophrenia, Kidney
Health Evaluation for Patients with Diabetes, and Proportion of Days
Covered: Adherence to Direct-Acting Oral Anticoagulants measure.
Measure topics recommended for inclusion included Cesarean deliveries,
child lead screening, adult immunization status, and measures that
support patient-primary care team relationships such as child and
adolescent well-care visits, prenatal and postpartum care visits, and
adults' access to preventive/ambulatory health services. We also
received several comments that advocated for the inclusion of a measure
of social determinants of health (SDOH) and measures that reflect
quality of care for people with rare disorders. One commenter
recommended that we include measures that cover a wide array of
potentially avoidable events, and another commenter suggested that we
include a metric related to newborn screening that benchmarks health
plan performance to the Recommended Uniform Screening Panel (RUSP), but
the commenters did not suggest a specific measure.
We received comments in response to our request for feedback on our
decision to exclude the following measures: Childhood Immunization
Status, Contraceptive Care--All Women Ages 15-14 (CCW), Person-Centered
Contraceptive Counseling (PCCC), and Postpartum Depression Screening.
Some commenters provided feedback in support of including the CCW
measure
[[Page 41192]]
because measuring contraceptive access for all individuals, regardless
of pregnancy status, is important to improve health outcomes and
effectively compare access to contraception from State to State. One
commenter encouraged CMS to consider mandating the use of various
measures that exist for contraceptive need screening such as Pregnancy
Intention Screening Question (PISQ) and Self Identified Need for
Contraception (SINC). Some commenters recommended inclusion of the
Childhood Immunization Status measure to ensure that the MAC QRS
assesses not only access to care, but also quality of care, and
commitment to the health of members and the community. Other commenters
provided feedback indicating that while they understood the rationale
for not including the Postpartum Depression Screening measure at this
time, they requested this metric to be included in the future due to
the short-term and long-term consequences if left untreated.
Response: We thank those who suggested additional measures for
inclusion in the initial mandatory measure set. We reviewed the
comments for each additional measure suggestion and, based on our
assessment of the measures according to our measure selection criteria
in Sec. 438.510(c), we are declining to add additional measures at
this time. Regarding the suggestions to add HIV Viral Load Suppression,
Adherence to Antipsychotic Medications for Individuals with
Schizophrenia, Kidney Health Evaluation for Patients with Diabetes and
Proportion of Days Covered: Adherence to Direct-Acting Oral
Anticoagulants measure, we appreciate these suggestions and believe
they meet many (but not all) of the measure criteria. However, to keep
the initial mandatory measure list concise, we are not adding them at
this time. Furthermore, while we agree with the importance of these
measures and that they show promise in meeting our measure standards,
we believe that it is important to gather additional input through the
public and notice comment process finalized in Sec. 438.510(b), and we
do not believe it is appropriate to bypass that process by adopting an
additional measure without providing a clear opportunity for comment on
the specific measure. Additional rationale for not including these
measures in the initial mandatory measure set is indicated below.
We are declining to include the HIV Viral Load Suppression measure
because the measure does not meet two of the measure selection criteria
described in Sec. 438.510(c)(1). It does not meet the feasibility
criterion in paragraph (c)(1)(v) because the data required to calculate
the measure is not consistently available to health plans and it does
not meet the actionability criterion in paragraph (c)(1)(iv) for plan-
level reporting because it has only been used at the provider and State
level and the data are not consistently available at the plan level. We
are declining to add the Adherence to Antipsychotic Medications measure
for Individuals with Schizophrenia as we have concluded after analysis
that the benefits of the measure would be outweighed by the burdens
given that many health plans are likely to be unable to display this
measure due to small denominator sizes.
While the Kidney Health Evaluation for Patients with Diabetes
measure and the Proportion of Days Covered: Adherence to Direct-Acting
Oral Anticoagulants measure meets at least five of six measure
selection criteria in Sec. 438.510(c)(1), we are excluding them, and
measures of Cesarean birth, child lead screening, and adult
immunization status, from the initial mandatory measure set for two
reasons. First, the proposed mandatory measure set already includes
preventive health measures for both adults and children and
reproductive health measures and, to maintain a balanced and concise
set of measures as required under Sec. 438.510(c)(2), we believe that
we would need to remove an existing measure in these performance areas
to add the suggested measures. Second, using the standard at Sec.
438.510(c)(3), we carefully considered the burdens and benefits of the
suggested measures against those from our current list and believe that
the benefits of our current measures outweigh those of the suggested
measures. Specifically, our current measure for Prenatal and Postpartum
Care represents a larger proportion of pregnant individuals than the
Cesarean birth measures.
Regarding the comment to include measures that support patient-
primary care team relationships such as child and adolescent well-care
visits, prenatal and postpartum care visits, and adults' access to
preventive/ambulatory health services, we agree with the importance of
these measures and several of these types of measures are included in
the initial mandatory measure set, including, for example, the Child
and Adolescent Well-Care Visits measure which is described as the
percentage of members who had at least one comprehensive well-care
visit with a primary care practitioner or an obstetrician/gynecologist
during the measurement year.
We agree with the importance of measures that address social
determinants of health (SDOH) and support measure development in this
area. In our consultations, beneficiaries stated preferences for
measures that reflect critical upstream services that impact health,
which could include the National Committee for Quality Assurance (NCQA)
Healthcare Effectiveness Data and Information Set (HEDIS) Social Needs
Screening and Intervention (SNS-E) measure. However, no existing SDOH
measure has yet been widely publicly reported at a plan-level so we are
not convinced that they are appropriate for inclusion in the initial
mandatory measure set. We will consider adopting SDOH measures in the
future through the subregulatory process set forth in Sec. 438.510(b).
Regarding the suggestion to add measures for rare diseases, due to the
limited number of beneficiaries with rare diseases, we have concerns
that these measures would ultimately not be included in a State's QRS
website due to low denominator sizes despite State efforts to collect,
validate, and use these data to calculate such measures. We understand
the importance of capturing information about quality and experience of
care among individuals with rare diseases and will look for ways to
address this within our other quality focused Medicaid and CHIP
efforts. Regarding the recommendation to add measures that cover a wide
array of potentially avoidable events and metrics related to newborn
screenings under RUSP, we will obtain input from interested parties
through the subregulatory process to determine whether these types of
measures would be a good fit for inclusion in the mandatory measure
set.
Regarding the measures not included in the initial list and for
which we requested feedback, we reviewed the public comments and have
concluded that our original rationale for not including these measures
on the initial mandatory measure set, set forth in section I.B.6.e.2.
of the proposed rule, still holds. We agree with commenters that
Childhood Immunization Status is an important measure. However, as
discussed in I.B.6.e.2 of the proposed rule, when reviewing the burdens
and benefits to the overall MAC QRS, we concluded the well-child visit
measures will have greater benefit to beneficiaries based on our
beneficiary testing, which showed that parents cared a lot about
whether their children can get appointments (reflected in the well-
child visit measure), but no beneficiary
[[Page 41193]]
commented specifically on childhood immunizations. We also agree with
commenters about the importance of CCW but our original rationale for
not including CCW as set forth in section I.B.6.e.2 of the proposed
rule still holds, and we note that both the Adult and Child Core Sets
include the CCW measure to enable comparisons among States.
Regarding the request to include a contraceptive need screening
measure, we appreciate the commenter's suggestion to include a measure
that assesses contraceptive need. While the commenter suggested a
couple screening tools (Pregnancy Intention Screening Question (PISQ)
and Self-Identified Need for Contraception (SINC)), they did not
recommend, and we are unaware of, quality measures related to
contraceptive needs assessment that meet the measure inclusion
criteria. We will monitor measure development in this area and consider
additional contraceptive measures through our subregulatory process. We
agree with commenters that PCCC, as well as other contraceptive needs
screening measures are promising given their focus on measuring person-
centered care, which was frequently identified as highly desirable in
our conversations with beneficiaries. Furthermore, we also agree with
commenters on the importance of including a postpartum depression
screening measure in a future mandatory measure set. However, as we
previously noted, we believe that measure additions should occur
through the subregulatory process to update the mandatory measure set
finalized in this rule to allow for public notice and comment prior to
any decision to add or not add a measure to the mandatory set. We will
continue to monitor the evolution of these suggested measures, their
ability to meet our measure selection criteria, and input on these
measures from those who participate in our subregulatory process.
Comment: Several commenters requested that specific measures be
removed from the initial mandatory measure set and replaced with
alternative measures. A few commenters suggested the removal of the
Asthma Medication Ratio (AMR) because they do not believe it includes
an accurate depiction of asthma control for the pediatric population.
These commenters recommended replacement with an alternative measure
that would better capture asthma outcomes for children, but they did
not suggest a specific alternative measure. Two commenters suggested
removal of the Initiation and Engagement of Substance Use Disorder
Treatment (IET) because it captures a minimum number of encounters but
does not assess the effectiveness of the treatment or clinical outcome.
One of these commenters suggested replacing IET with other NCQA
measures related to alcohol use screening, such as Unhealthy Alcohol
Use Screening and Follow-up. We received two comments regarding the
Prenatal and Postpartum Care (PPC) measure. One commenter supported the
inclusion of PPC in the initial mandatory measure set, while the other
commenter suggested removal of PPC and replacement with another
maternity measure such as Cesarean birth. Another commenter suggested
that we remove the Preventive Care and Screening: Screening for
Depression and Follow-Up Plan (CDF) measure and replace it with the
NCQA HEDIS Depression Screening and Follow-Up for Adolescents and
Adults (DSF) measure because CDF is no longer endorsed by NQF and has
measure specifications that differ from a similar measure included in
HEDIS. We received a couple of comments regarding our proposal to
include the Dental Quality Alliance's (DQA) Oral Evaluation, Dental
Services (OEV) measure into the initial mandatory measure set. One
comment was in support of including OEV, and the other suggested the
removal of OEV and replacement with the NCQA HEDIS measure Oral
Evaluation, Dental Services (OED). The commenter who suggested
replacement of DQA's OEV with NCQA's HEDIS OED indicated that HEDIS
measures are audited and certified by an NCQA auditor, and that using
OED would reduce the administrative burden for State agencies and their
external quality review office by eliminating the need to perform
separate measure audits and would ensure that the rates published in
the QRS were calculated the same way across all managed care plans.
We did not receive support for inclusion of the two MLTSS measures
that were proposed. Several commenters requested the removal of MLTSS-
1: LTSS Comprehensive Assessment and Update because it is not endorsed
and requires case management and record review, which would be
burdensome to collect. Several commenters requested the removal of
MLTSS-7: LTSS Minimizing Institutional Length of Stay because it is not
endorsed. Two commenters suggested removal of MLTSS-7 because MLTSS
plans are limited in their ability to influence the length of the
institutional stay within the first 100 days for dually eligible
beneficiaries. These commenters recommended that we engage with States,
plans, and other interested parties to determine the best two MLTSS
measures to incorporate, and suggested MLTSS-8: LTSS Transition after
Long-Term Facility Stay \210\ or other measures as options to replace
MLTSS-7. Commenters also recommended that the MAC QRS MLTSS measures
align with the initial HCBS core measure set as part of CMS's proposals
in the Medicaid Program; Ensuring Access to Medicaid Services proposed
rule (88 FR 27960 (May 3, 2023)).
---------------------------------------------------------------------------
\210\ Centers for Medicare and Medicaid Services Measures
Inventory Tool (cms.gov).
---------------------------------------------------------------------------
Response: Regarding the suggestion to remove AMR and replace it
with an alternative measure, since there was not an alternative asthma
measure suggestion, and since we are unaware of a better replacement
measure, we continue to believe that AMR is the appropriate measure to
include in the initial mandatory measure set because of its alignment
with CMS programs and initiatives such as the Core Sets, Scorecard, and
QHP quality rating system. Regarding the suggestion to remove
Initiation and Engagement of SUD Treatment (IET) and replace it with an
NCQA measure related to alcohol use screening, we continue to believe
that IET is the appropriate measure to include in the initial mandatory
measure set because it includes both alcohol and drug abuse or
dependence, which will contribute to balanced representation of
beneficiary subpopulations and health conditions. Additionally, we are
including IET because of its alignment with CMS programs such as the
Adult Core Set, Scorecard, and QHP quality rating system. Regarding the
suggestion to remove PPC and replace it with another maternity measure
such as Cesarean Birth, we continue to believe that PPC is the
appropriate measure to include because it applies to a broader set of
beneficiaries than the Cesarean Birth measure, and because of its
alignment with CMS programs such as the Core Sets, Scorecard, and QHP
quality rating system. We will continue to monitor the evolution of
asthma and substance use measures to identify a better replacement
measure, should one be developed in the future, through the
subregulatory process set forth in Sec. 438.510(b) to update the
mandatory measure set address inclusion in the MAC QRS mandatory
measure set. Regarding the suggestion to remove CDF because it is not
endorsed and replace it with NCQA's DSF, endorsement by a consensus-
based entity is not a
[[Page 41194]]
requirement for the MAC QRS mandatory measures. We included CDF in the
initial mandatory measure set over DSF because, while both measure
similar care, when balancing the benefits and burdens of these two,
similar measure under Sec. 438.510(c)(3), we believe CDF would result
in a smaller burden to report (and therefore more feasible) because CDF
is aligned with the Core Set and States are already collecting,
calculating, and reporting this measure at the State level for the Core
Sets. Regarding replacement of the OEV measure with OED, we agree with
the commenter on the importance of reducing burden and ensuring
consistency in measure calculation across health plans. Like our
rationale with CDF, we included OEV in the initial mandatory measure
set because OEV aligned with the Child Core Set and alignment with
mandatory Child Core Set measures increases feasibility and reduces
burden on States. Further, to ensure quality ratings remain comparable
within and among States, we note that validation of all data collected
is required under Sec. 438.515(a)(2).
Regarding the request to remove MLTSS measures because they are not
endorsed, endorsement by a consensus-based entity is not a requirement
for MAC QRS mandatory measures. We reassessed our proposal to include
MLTSS-1 based on comments that the case management and record review
required for reporting on MLTSS-1 would be burdensome for providers and
plans. Additionally, we reassessed MLTSS-7 based on the comments
received about implications for dually eligible individuals. Based on
the comment suggesting that we replace MLTSS-7 with MLTSS-8, we also
considered MLTSS-8, but we did not include MLTSS-8 because we have
concerns that this measure could not be displayed in the QRS due to low
denominator sizes and potential privacy concerns.
Based on our reassessment of MLTSS-1 and MLTSS-7, we are not
finalizing the proposal to include these two MLTSS measures in the
initial mandatory measure set adopted in this final rule, but we intend
to continue evaluating them and other available MLTSS measures for
inclusion as future additions to the mandatory measure set. Because of
the concerns about potential burden for reporting MLTSS-1, we believe
it would not be appropriate to finalize the inclusion of MTLSS-1
without additional feedback from States and other interested parties
that will allow CMS to evaluate it more fully against both the
feasibility criterion in Sec. 438.510(c)(1)(v) and under Sec.
438.510(c)(3) (weighing the burdens and benefits of including the
measure). As we are finalizing paragraph Sec. 438.510(c)(1)(v) with a
modification to consider provider burden (in addition to State and plan
burden) when considering whether a measure is based on data available
without undue burden, we believe that it is appropriate to gather
additional thought and consideration through the subregulatory process
to identify whether there is a more appropriate MLTSS measure than
MLTSS-1 to include. (See Sec. 438.510(c)(4) as finalized.) As for
MTLSS-7, we intend to use the subregulatory process to gain additional
feedback to determine whether it is a better measure for influencing
plan performance (the criterion in Sec. 438.510(c)(1)(iv)) than other
available measures and whether it will contribute meaningfully to a
balanced representation of beneficiary subpopulations, age groups,
health conditions, services, and performance areas within a concise
mandatory measure set (the standard in Sec. 438.510(c)(2)). We believe
that it is important to finalize measures that are a good fit with the
standards we are adopting at Sec. 438.510(c) to ensure that the MAC
QRS provides useful information about managed care plan performance in
this important area.
Inclusion of these or other MLTSS measures in a future mandatory
set will be assessed during the subregulatory process set forth in
Sec. 438.510(b), both through the process finalized in Sec.
438.510(b)(1), through which we will obtain input from interested
parties to determine whether there are MLTSS measures that meet our
standards for inclusion in the mandatory measure set, and the process
finalized in Sec. 438.510(b)(2), through which we will provide notice
and an opportunity for comment on any MLTSS measures identified by CMS
for addition to the mandatory set following the process in paragraph
(b)(1). Specifically, through the subregulatory process States and
other interested parties will have the opportunity to provide
additional information and input on MLTSS measures not finalized here
for CMS to consider for future updates to the mandatory set. States and
interested parties also could propose and consider other MLTSS measures
that may better align with our measure selection criteria. We believe
that these MLTSS measures could include MLTSS-6: LTSS Admission to an
Institution from the Community (which, like MLTSS-7, is a rebalancing
measure) or the NCQA HEDIS Long-Term Services and Supports
Comprehensive Care Plan and Update (CPU-AD) measure, which meets all
six of the measure selection criteria in Sec. 438.510(c)(1), and, like
MLTSS-1, assesses person-centered planning. Further, though CPU-AD
requires case management and record review, it is on the Adult Core Set
and the alignment between programs could address the concerns about
potential burden. We considered these measures as alternatives to
MLTSS-1 and 7 but chose not to finalize here to allow consideration
through the subregulatory process. Feedback on MLTSS measures that we
receive through the initial subregulatory process in 438.510(b)(1) will
be used, in addition to other relevant information, to conduct a
preliminary analysis under Sec. 438.510(c)(1), (2) and (3) to prepare
the call letter (or other mechanism for public notice and comment)
required by Sec. 438.510(b)(2), CMS would evaluate the respective
potential burden of including MLTSS 1 versus CPU-AD or MLTSS-7 versus
MLTSS-6 (and other measures proposed for consideration through the
subregulatory process) . For example, we believe that CPU-AD combined
with MLTSS-6 could contribute to a balanced representation of
beneficiary subpopulations who receive MLTSS services.
Although we are not including either of the proposed MLTSS measures
(that is, MTLSS-1 and MTLSS-7) in the initial mandatory measure set,
States may display quality ratings for additional measures after
following the process described in Sec. 438.520(c)(2). Additional
measures are discussed further in this section and in section I.B.6.g.5
of the final rule. Regarding the recommendations that the MAC QRS MLTSS
measures align with the initial HCBS quality measure set, alignment is
one of the measure selection criteria that will be used to evaluate
these and other MLTSS measures for addition to the MAC QRS measure set
through the subregulatory process.
Comment: Several comments pertained to electronic clinical data
systems (ECDS) measures. One commenter supported our proposal to
include ECDS measures like Colorectal Cancer Screening that can be
collected using administrative or electronic means while another
commenter requested confirmation that the administrative specification
is an acceptable data collection method for the Breast Cancer Screening
(BCS) measure. Another commenter cautioned against using electronic
clinical data measures because they require significant resources for
implementation
[[Page 41195]]
of more robust interoperability between provider EMR and MCOs. One
commenter requested the addition of NCQA's Healthcare Effectiveness
Data and Information Set (HEDIS) Depression Remission or Response for
Adolescents and Adults ECDS measure (DRR-E) to the mandatory measure
set and for CMS to provide support to States seeking to improve
capabilities for reporting ECDS measures. Another commenter cautioned
against using the ECDS version of DSF (DSF-E) because DSF-E has first-
year status for measurement year 2023, and therefore, NCQA has not yet
completed its validation process.
Response: Regarding the comments cautioning against using
electronic clinical data measures, we understand that States and plans
are in different stages of utilization of digital measures, including
ECDS, and that some experience significant challenges in reporting
HEDIS ECDS measures. As discussed in section I.B.6.f., we are requiring
States to calculate MAC QRS quality ratings using approved measure
steward technical specifications, which would require States to
calculate ratings as ECDS-only specified as such by a measure steward's
technical specifications. CMS will provide technical assistance to
States and plans to ensure adherence to measure steward technical
specifications for these measures.
Comment: We received several comments supporting our proposal to
include Agency for Healthcare Research and Quality (AHRQ) Consumer
Assessment of Healthcare Providers and Systems (CAHPS) measures in the
initial mandatory measure set. Several commenters relayed concerns with
the industry-wide challenge of declining response rates to the CAHPS
survey. These commenters encouraged CMS to allow for greater
flexibility in how the CAHPS survey is fielded to increase response
rates, for example, by allowing web-based and mixed-mode surveying,
testing the use of interactive voice response (IVR) technologies, and
use of proxy respondents. One commenter encouraged CMS to consider
using the current AHRQ database directly to report out the CAHPS
measures and suggested that CMS could populate the templates using the
CAHPS data and States could link to the templated page to reduce burden
and promote consistency in the display of these data across States. One
commenter stated CMS should align patient experience survey questions
across Medicaid and Medicare such as the CAHPS for Merit-based
Incentive Payment System (MIPS) Survey but did not specify how they
should be aligned. One commenter requested clarification on how States
should handle situations where there are fewer than 100 responses for
specific plans for the CAHPS measures included in the mandatory measure
set. One commenter stated that the proposed rule does not clarify the
relationship between the enrollee experience survey required under
Sec. 438.66, the required MAC QRS enrollee experience measures, and
other enrollee experience survey efforts.
Response: We appreciate the comments in support of our proposal. We
acknowledge the concerns about CAHPS and will consider commenters'
suggestions as we continue to work in partnership with AHRQ to identify
longer-term solutions to improve CAHPS response rates and streamline
CAHPS reporting. Regarding the comment to align patient experience
survey questions across Medicaid and Medicare, such as MIPS CAHPS
survey questions, we highlight that both the CAHPS health plan survey
used by the Medicaid and CHIP programs as required in the MAC QRS and
the MIPS CAHPS survey contain questions regarding getting care quickly
and how well doctors communicate. Regarding the comment requesting
clarification on situations where there are fewer than 100 responses
for CAHPS survey questions, we will include guidance on how to handle
these situations in accordance with measure steward specifications and,
as applicable, existing CMS guidance such as the CMS Cell Suppression
Policy \211\ in the technical resource manual and will also provide
links to additional resources from AHRQ on administering the CAHPS
Health Plan Survey. We note that the minimum enrollment threshold
established in Sec. 438.515(a)(1)(i) requiring States to collect data
necessary to calculate quality ratings for MAC QRS measures from the
State's contracted managed care plans that have 500 or more enrollees
does not provide a standard for the public display of CAHPS survey
responses but is about data collection, meaning that managed care plans
with less enrollment would not be required under these Federal rules to
provide this data to the State (State contract requirements or
regulations may impose additional survey or data collection
obligations). Regarding the request to clarify the relationship between
the different enrollee experience survey requirements in this final
rule, we note that the five CAHPS measures included in the mandatory
measure set make up the CAHPS health plan survey. By including all of
these CAHPS measures in their MAC QRS, States could also meet the
enrollee experience survey requirements in Sec. 438.66, but may be
sufficient for monitoring, oversight, and quality improvement
activities of some, but not all, programs, such as those with a narrow
set of populations or benefits. For instance, the requirements are
different in that Sec. 438.66 applies to all managed care plans
(regardless of enrollment), whereas the MAC QRS requirement for CAHPS
is only applicable to a portion of a State's managed plans (that is,
those with more than 500 enrollees, per Sec. 438.515(a)(i) of this
final rule).
---------------------------------------------------------------------------
\211\ See CMS Cell Suppression Policy, January 1, 2020, https://www.hhs.gov/guidance/document/cms-cell-suppression-policy.
---------------------------------------------------------------------------
Comment: Many commenters supported our proposal that States may
include additional measures in their MAC QRS. Commenters recommended
that States should have flexibility to use additional measures specific
to their population needs and that the use of additional measures by
States is critical to local health initiatives. Several commenters
suggested that CMS should limit the number of additional measures that
State Medicaid and CHIP agencies can include in their MAC QRS. These
suggestions included limiting the number of additional measures States
can add by requiring them to select from a small menu of additional
measures and prohibiting States from adding more than five additional
measures. One commenter requested CMS to provide detailed guidance on
the appropriate use of additional measures.
Response: We continue to believe it is preferable for States to
have the flexibility to display additional measures that align with
State priorities and are representative of beneficiary subpopulations.
Therefore, we are not limiting the number or type of additional
measures that a State may use in its MAC QRS. However, based on the
feedback we received from beneficiaries and other interested parties
during our pre-rulemaking consultation process, we encourage States to
limit their QRS measure list to under 30 measures. We will take the
request for detailed guidance on the appropriate use of additional
measures into consideration when developing the design guide. Further
discussion on the use of additional measures in a State's MAC QRS and
the steps a State must take prior to their display can be found in
section I.B.6.g.5. of this final rule.
Comment: Several commenters suggested that CMS should not permit
States to create their own custom measures, and stated concern that
allowing States to create their own
[[Page 41196]]
measures when there are multiple measures to choose from will only
confuse providers, create misalignment, and increase costs. Another
commenter recommended that CMS further incentivize States to continue
to develop new, innovative measures, and that CMS should continue to
act as a conduit to share measures across States to promote
collaboration so that multiple States can report new measures for
possible future inclusion in a national data set. Other commenters were
concerned about State variation in the use of additional measures, and
recommended CMS limit this variation by providing States a list of
vetted measures that are nationally recognized or requiring that States
use the CMS measure selection criteria described in Sec. 438.510(c),
and that CMS should develop a process for States to submit potential
measures for inclusion in the list of vetted measures. One commenter
suggested that we prohibit States from displaying any measure removed
from the MAC QRS mandatory minimum measure set because of a lack of
validity.
Response: As to State use of custom measures, we understand that
custom measures can be challenging for health plans and providers.
However, we want to preserve State flexibility and encourage States to
work with health plans and providers regarding the selection and use of
additional measures, including custom measures. As described in Sec.
438.520(c)(2) of the final rule (proposed at Sec. 438.520(b)), we note
that if the State chooses to display quality ratings for additional
measures not included in the mandatory measure set described in Sec.
438.510(a)(2) for Medicaid, which applies to separate CHIP through a
proposed revision to Sec. [thinsp]457.1240(d), the State must first
obtain input on the additional measures from prospective users,
including beneficiaries, caregivers, and, if the State enrolls American
Indians/Alaska Natives in managed care, consult with Tribes and Tribal
Organizations in accordance with the State's Tribal consultation
policy. We encourage States to also work with plans and providers
regarding the selection of additional measures. Additionally, we
appreciate the suggestion to share measures across States to promote
collaboration and will take this into consideration when providing
technical assistance to States and establishing the workgroup process
to update the mandatory measure set. We will use State reporting to
monitor the use of additional measures, including measures that a
measure steward no longer considers valid, and to inform whether any
limitations are necessary in future rulemaking.
After considering all comments on the measure list, we are
finalizing 16 measures for inclusion in the mandatory measure set of
the 18 measures that were proposed. We are not finalizing inclusion of
MLTSS-1: LTSS Comprehensive Assessment and Update, and MLTSS-7: LTSS
Minimizing Institutional Length of Stay in the initial mandatory
measure set based on considerations raised by public comment received
as discussed previously in this section. Under this final rule and
subject to the process adopted in Sec. 438.510, we retain flexibility
for the number of measures to increase as we update the mandatory
measure set over time. We are finalizing flexibility for States to
display quality ratings for additional measures not included in the
mandatory measure set after following the process described in Sec.
438.520(c)(2), (proposed at Sec. 438.520(b)). We encourage States to
work with plans and providers regarding the selection of additional
measures.
Table 2 includes a list of the measures in the initial mandatory
measure set for the MAC QRS finalized in this rule, which maintains a
high level of alignment with CMS programs and initiatives.\212\ The
table of finalized measures incorporates necessary, non-substantive
changes to align with updates implemented by the measure steward to the
proposed measures that occurred after the proposed rule was published
and to address a handful of non-substantives errors in the measure
descriptions that were included in the proposed initial measure table.
Specifically, the non-substantive measure steward updates include
changes to a proposed measure's description, acronym or data sources,
incorporation of gender-affirming terminology within the measure
description,\213\ and, in the case of Hemoglobin A1c Control for
Patients with Diabetes (HBD), a measure name change (to Glycemic Status
Assessment for Patients with Diabetes (GSD)) and conforming edits to
the measure's description.\214\ The finalized measure table also
corrects the non-substantive errors in the proposed measure table
measure descriptions. We are updating the measure description for FUH
(which inadvertently included the description of the FUM measure) as
well as the measure descriptions for FUH, COL, and CAHPS--Health plan
customer service (which each identified the incorrect age range).
---------------------------------------------------------------------------
\212\ Table 2 includes updates to use the CMIT identifiers
instead of NQF identifiers for the measures.
\213\ Table 2 includes updates to measure steward descriptions
for APP, IET, CDF, FUH, WCV, BCS, CCS, CCP, PPC, AMR.
\214\ See HEDIS MY 2024: What's New, What's Changed, What's
Retired, August 1, 2023, https://www.ncqa.org/blog/hedis-my-2024-whats-new-whats-changed-whats-retired/. The measure title for HBD.
was updated in NCQA HEDIS's measure year 2024 along with conforming
changes to the measure description to include a glucose management
indicator with hemoglobin A1c.
---------------------------------------------------------------------------
BILLING CODE 4120-01-P
[[Page 41197]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.002
[[Page 41198]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.003
[[Page 41199]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.004
[[Page 41200]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.005
BILLING CODE 4120-01-C
After reviewing the public comments and for the reasons outlined in
the proposed rule and in response to comments, we are finalizing Sec.
438.510(a), including the cross-reference at Sec. 457.1240(d) to apply
the mandatory minimum measure set to CHIP, as proposed.
(3) Subregulatory Process To Update Mandatory Measure Set (Sec. Sec.
438.510(b) and 457.1240(d))
The current regulations at Sec. 438.334(b)(2) establish that CMS
may, after consulting with States and other interested parties and
providing public notice and opportunity to comment, periodically update
the Medicaid managed care QRS framework developed under current Sec.
438.334(b)(1). We noted in the proposed rule that we remain dedicated
to the policy, currently reflected in Sec. 438.334(b)(1) and (b)(2),
that requires engagement with interested parties for continuous
improvement of the MAC QRS. Continued engagement with States is
consistent with our obligations under sections 1932(c)(1)(D) and
2103(f)(3) of the Act to consult with States in setting standards for
measuring and monitoring managed care plan performance. Our proposal
reflected that commitment and our understanding of our obligations
under these statutory provisions.
We noted that we believe that requiring rulemaking to add new
measures that may better meet beneficiaries' and States' needs or to
remove measures whose utility has been surpassed by other measures
would be overly restrictive and would undermine our ability to adapt
the mandatory set to keep pace with changes in the quality field and
user preferences. A robust subregulatory process involving extensive
input from interested parties would ensure that any changes the
mandatory measure set are consistent with the regulatory standards
established in the final rule. Therefore, we proposed to revise Sec.
438.334(b)(2), redesignated at new proposed Sec. 438.510(b) for
Medicaid, and for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d), that we would use a subregulatory
process to engage with States and other interested parties, to obtain
expert and public input and recommendations prior to modifying the
mandatory measure set. Under our proposal, we would adopt the initial
mandatory measure set in the final rule (see section I.B.6.e.) and
subsequent, periodic updates to add, remove, or update measures would
occur through a subregulatory process. To ensure that the mandatory
measure set stays current to changes in the quality field, we proposed
to engage in this subregulatory process to make any needed
modifications at least every other year (biennially).
With exceptions for removing measures for specific reasons proposed
at Sec. 438.510(d) and non-substantive updates to existing measures as
proposed at Sec. 438.510(e)(1), we proposed in new Sec. 438.510(b)
that we will engage in a two-step subregulatory process to obtain input
and recommendations from States and other interested parties prior to
finalizing certain types of changes to the mandatory measure set in the
future. This proposed engagement with States is like the public notice
and comment process currently required by Sec. 438.334(b) and
consistent with our obligations under sections 1932(c)(1)(D) and
2103(f)(3) of the Act to consult with States in setting standards for
measuring and monitoring managed care plan performance. Proposed Sec.
438.510(b) would apply to separate CHIP by cross-reference through a
proposed revision to Sec. 457.1240(d).
As the first step in the process, we proposed at Sec.
438.510(b)(1) that CMS will engage with States and interested parties
(such as State officials, measure experts, health plans, beneficiaries
and beneficiary advocates or organizations, tribal organizations,
health plan associations, health care providers, external quality
review organizations and other organizations that assist States with
MAC QRS ratings) to evaluate the current mandatory measure set and make
recommendations to add, remove, or update existing measures. The
purpose of this evaluation will be to ensure the mandatory measures
continue to meet the standards proposed in Sec. 438.510(c). We noted
our vision that this engagement could take several forms. For example,
a workgroup could be convened to hold public meetings where the
workgroup attendees will make recommendations to CMS to add and remove
measures. Alternatively, a smaller series of meetings with interested
parties could be held, or a request for information could be published
to solicit recommendations from experts. In either case, we proposed
that recommendations would be based on the standards proposed in Sec.
438.510(c) and discussed in section I.B.6.e.1. of the proposed rule.
At Sec. 438.510(b)(2), we proposed that the second step in the
process would be for CMS to provide public notice and
[[Page 41201]]
opportunity to comment through a call letter (or similar subregulatory
process using written guidance) that sets forth the mandatory measures
identified for addition, removal or updating and that this second step
would provide an opportunity for interested parties to provide
comments. Following this public notice and opportunity for comment, we
proposed at Sec. 438.510(f) that we would publish the modifications to
the mandatory measure set and the timeline for State implementation of
such modifications in the technical resource manual proposed at Sec.
438.530. Section Sec. 438.510(f) is discussed in section I.B.6.e.7. of
this final rule. The technical resource manual is discussed in more
detail in section I.B.6.i. of the final rule.
This subregulatory process is like the process used by the QHP
quality rating system, which uses a call letter to communicate changes
and gather feedback on proposed measure updates and refinements to the
QHP quality rating system. It also aligns with how the Core Sets are
updated annually. As part of the Core Set annual review and selection
process, a workgroup made up of Medicaid and CHIP interested parties
and measurement experts convenes annually, in a public meeting, and
develops a set of recommendations for changes to the Core Sets. These
recommendations are posted in a draft report for public comment, and
the final report that is submitted to CMS includes both the workgroup
recommendations and public comments. The annual updates to the Core
Sets are based on the workgroup recommendations and comments, and using
input from States and Federal partners, CMS decides whether to accept
the input in the final, updated Core Sets (see 88 FR 60280). Details on
this process are available at https://www.medicaid.gov/medicaid/quality-of-care/downloads/annual-core-set-review.pdf. We noted that
while we are aligning the MAC QRS workgroup processes, as noted above,
with the QHP quality rating system and Core Set processes as
appropriate, the MAC QRS is independent and the process for changes to
the MAC QRS measure set would be conducted separately.
We provided an example of when the measure set might be updated
using this subregulatory process as follows. Assuming that the proposal
was finalized with an effective date in 2024, the implementation
deadline for each State's MAC QRS per proposed Sec. 438.505(b) (which
provides for implementation to be no later than the fourth calendar
year following publication of the final rule) would be December 31,
2028, and the first measurement year would be 2026. Since we proposed
to finalize our initial measure set in this rulemaking, any updates to
the initial mandatory measure list made pursuant to the subregulatory
process proposed at Sec. 438.510(b) would be effective no earlier than
the year after the implementation of States' MAC QRS. We noted our
belief that it would be appropriate to initiate the proposed
subregulatory process for the second display year (for example, 2029 if
the rule is finalized in 2024) because the mandatory measure list would
be 5 years old by then, and at least biennially thereafter (in line
with proposed Sec. 438.510(b)(2)).
We solicited comments on whether we should instead initiate the
subregulatory process to update the mandatory measure list for the
third display year (for example, 2030 if the rule was finalized in
2024). We also solicited comments on the types of engagement that would
be important under the proposed subregulatory process (for example,
workgroups, smaller meetings, requests for information), the types of
experts that CMS should include in the engagement, and the use of a
call letter or similar guidance to obtain public input.
We summarize and respond to public comments received on
subregulatory process to update mandatory measure set (Sec. Sec.
438.510(b) and 457.1240(d)) below.
Comment: Many commenters supported our proposal to use a
subregulatory process to update the mandatory measure set, and several
of these commenters indicated that using a rulemaking process would be
too cumbersome and slow. One commenter was opposed to creating a
separate MAC QRS subregulatory process and suggested that we use the
Medicaid and CHIP Child and Adult Core Sets Annual Review Workgroup
process instead. Several commenters suggested that we use CMS's
consensus-based entity (CBE) and existing pre-rulemaking process to
obtain input on the proposed MAC QRS mandatory measure set and future
updates to the mandatory measure set.
Response: We believe that the proposed subregulatory process--the
use of an engagement process to evaluate the current measure set and
gather potential changes for consideration and the public notice and
comment process before changes are finalized--is sufficiently flexible
to address the underlying policy goals described by the commenters.
Regarding the comment to use the Medicaid and CHIP Child and Adult
Core Sets Annual Workgroup process to determine inclusion of measures
in the MAC QRS mandatory measure set, we believe that the MAC QRS
should have its own process to determine mandatory measures because the
Core Sets and MAC QRS have different purposes. The measures on the Core
Sets are collected and reported on the State level and are intended to
serve as a set of measures which, taken together, can be used to
estimate the overall national quality of health care for Medicaid and
CHIP beneficiaries. The MAC QRS measures are collected and reported at
the plan level and are intended to provide beneficiaries and their
caregivers with information to compare Medicaid and CHIP managed care
plans, to hold States and plans accountable for care provided through
its managed care program, and to provide a tool for States to measure
and drive improvement of plan performance and quality of care. Each
program has similar, but different, measure selection criteria based on
the program's scope and purpose. Having separate processes will allow
us and interested parties to focus on the specific standards and goals
in each program.
Regarding the suggestion to use CMS's CBE review process to obtain
interested party input on the mandatory measure set, that process is
not used in Medicaid programs or for the Core Sets and we do not
believe using that process for public input on updates to the mandatory
measure set for the MAC QRS would be most appropriate or fitting.
However, we may use available relevant information from the CBE process
when we consider measures for inclusion in the MAC QRS. For example, to
the extent that an MA quality measure is evaluated under the CBE review
process, and we consider that measure for inclusion in the MAC QRS
against the criteria we proposed and are finalizing at Sec.
438.510(c), information from the public CBE process may be considered
by CMS in making the necessary determinations whether to add that
measure to the MAC QRS mandatory measure set. We proposed (and are
finalizing at Sec. 438.505(c)) that the MAC QRS be aligned with the MA
and Part D and QHP quality ratings systems and the Core Sets to the
extent possible, and we maintain this guiding principle in the final
rule. Therefore, information and perspectives gathered as part of the
processes for adopting quality measures for those other programs may be
used, as relevant and appropriate, by CMS in applying Sec. 438.510(b)
and (c) to make changes to the minimum mandatory measure set adopted in
this final rule.
Comment: Most commenters supported the proposed schedule to
[[Page 41202]]
conduct the subregulatory process to modify the mandatory measure set
at least biennially. One commenter recommended that we update the
mandatory measure set more frequently than biennially to ensure that
consumers will receive data in a transparent and timely manner.
Regarding future modifications of the mandatory measure set, several
commenters recommended that we provide consistent schedules for when we
plan to provide public notice and the opportunity to comment and that
we give adequate time for health plans to review and respond to
proposed changes to the MAC QRS measures.
Response: Regarding the comment that we shorten the two-year
timeline, our proposal was to review the measures in the QRS mandatory
measure set at least biennially, meaning we may conduct the
subregulatory process to update the mandatory measure set more
frequently if there is a need to keep pace with changes in the quality
field and user preferences. We intend to regularly assess whether there
are changes in the quality field and user preferences (such as a public
health emergency, the availability of a new or improved quality
measure, or a technology improvement) that would necessitate conducting
the subregulatory process more frequently than biennially. Establishing
the biennial minimum timeframe avoids imposing an unnecessary burden on
us and interested parties to identify, evaluate, and make changes when
it might not be necessary. Upon further consideration, we are modifying
Sec. 438.510(b) to make clear that, while we are required to engage in
the subregulatory process described in Sec. 438.510(b)(1) at least
every other year, we are not required to update the mandatory measure
set at least every other year after completing the subregulatory
process, per Sec. 438.510(b). As proposed, our requirement would have
required us to make at least one update to the mandatory measure set,
whether by adding, removing, or making a substantive update to an
existing measure, at least every other year. Finalizing this change
recognizes the real possibility that no updates are identified or
necessary after we go through the process described in Sec.
438.510(b)(1).
We agree with commenters on the importance of consistent schedules
for providing public notice and the opportunity to comment with
adequate time for health plans to respond to proposed changes to the
MAC QRS measures and are finalizing these provisions as proposed. A
robust subregulatory process will ensure that any changes to the
mandatory measure set will reflect input from interested parties to
take it into consideration when we establish the workgroup process. We
expect and hope for extensive input from interested parties based on
the level of public comments on this proposal and on scope of the MAC
QRS goals and use. Having varied and diverse viewpoints on whether any
measure meets five of the six criteria specified in Sec. 438.510(c)(1)
and on how to apply the standards in Sec. 438.510(c)(2) and (3) would
help ensure that the minimum measure set for the MAC QRS reflects
important quality metrics and provides an accurate and reliable picture
of quality in the Medicaid and CHIP managed care programs.
Comment: Most commenters supported our proposal that we engage with
States and other interested parties (such as State officials, measure
experts, health plans, beneficiary advocates, tribal organizations,
health plan associations, and external quality review organizations) as
the first step of the subregulatory process for changing the minimum
measure set and commenters supported the examples of engagement that we
provided. Several commenters suggested additional types of engagement
as part of the subregulatory process. One commenter suggested that we
convene listening sessions with health plans in addition to a
formalized workgroup of experts and interested parties. One commenter
recommended that we engage the existing Core Sets Annual Workgroup in
the subregulatory process. Another commenter suggested that CMS
establish a quality measure workgroup to develop and test quality
measure sets before requiring mandatory reporting.
Response: We appreciate commenters suggestions on the types of
interested parties we should engage and the forms of engagement we
should use. Throughout the development of the MAC QRS, we engaged with
a broad spectrum of interested parties through numerous workgroups,
listening sessions, and other means of obtaining input on the MAC QRS
mandatory measures set and other parts of the MAC QRS framework. As
discussed in section I.B.6.e.3 of the proposed rule, our continued
dedication to engagement with interested parties to ensure continuous
improvement of the MAC QRS is the basis for the requirement at Sec.
438.510(b)(1), which sets a minimum level of engagement with at least
States and other interested parties including, but not limited to,
State officials, measure experts, health plans, beneficiary advocates,
tribal organizations, health plan associations, and external quality
review organizations. We believe that the subregulatory process will
allow for robust input from interested parties to ensure varied and
diverse viewpoints and that the types of engagement recommended by
commenters are permissible under the regulation we proposed and are
finalizing at Sec. 438.510(b). Therefore, we do not believe that
establishing a specific set of procedures (for example, workgroups,
public hearings, listening sessions with specific interested groups) in
the regulation is necessary or appropriate.
We appreciate the recommendation from a commenter that we establish
a quality measure workgroup to develop and test the mandatory measure
set before requiring mandatory reporting, but are declining to
implement this suggestion. We agree with the commenter that such
engagement is important and a useful way to gather information and
viewpoints, however, as described in section I.B.6.a of the proposed
rule, we have already participated in several years of engagement to
identify the MAC QRS mandatory measure set identified in this final
rule, including a measure set workgroup through which an initial
mandatory measure set was identified and refined over the years through
our engagement with States, health plans, potential MAC QRS users, and
other interested parties. As described in section I.B.6.g of the
proposed rule, this engagement included several years of testing with
potential MAC QRS users to gain additional feedback and insight of the
MAC QRS measure set. Furthermore, as part of our mandatory measure set
development, we engaged in extensive research to identify quality
measures already collected or reported by States. Requiring the same
level of engagement for all potential modifications to the MAC QRS
measure set would be unnecessarily burdensome, especially when some
years will only require minimal or routine updates to the measure set.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. Sec. 438.510(b) and 457.1240(d) related to the subregulatory
process to update the mandatory measure set as proposed.
(4) Adding Mandatory Measures (Sec. Sec. 438.510 and 457.1240(d))
Under proposed Sec. 438.510(c), CMS would add a measure to the
mandatory measure set if all three standards proposed at Sec.
438.510(c)(1) through (3) are met, based on available information,
[[Page 41203]]
including input from the subregulatory process. We proposed that, at
least biennially, we would use the subregulatory process proposed in
Sec. 438.510(b) to gather input that would be used to determine if a
measure meets the proposed standards to be added to the mandatory
measure set. CMS could request an assessment from the engaged
interested parties of the whether each of the measures suggested for
addition (from the interested parties, CMS, or both) meets each of the
three proposed standards at Sec. 438.510(c)--that is, (1) whether it
satisfies at least five of the criteria set forth at proposed Sec.
438.510(c)(1); (2) whether it contributes to balanced representation of
measures across the mandatory measure set as a whole per proposed Sec.
438.510(c)(2); and (3) whether the benefits outweigh the burden of
adopting the measure per proposed Sec. 438.510(c)(3). Under our
proposal CMS would use this input and could identify a subset of
measures from the list of potential suggested additional measures that
meets all three standards. This subset of measures would then be
considered eligible to add to the mandatory measure set and described
in a call letter or similar written guidance, which would explain how
standards in Sec. 438.510(c) were applied using input from prior
engagement activities and CMS's own research and evaluation. Through
the call letter process, CMS would gather public comment to obtain
additional evidence, explanations, and perspectives to make a final
determination of which measures meet the standards in proposed Sec.
438.510(c). Measures that meet these standards would be added to future
iterations of the mandatory measure set.
To further illustrate how we intended for the standards proposed in
Sec. 438.510(c) to be applied using the subregulatory process, we
provided more specific detail of our assessment of two measures
(Follow-Up After ED Visit for Mental Illness (FUM) and the Follow-Up
After Hospitalization for Mental Illness (FUH)) which were considered
for inclusion in the proposed mandatory measure set. We intended for
the proposed subregulatory process for adding measures to follow that
same approach.
In discussions prior to developing the proposed rule, States and
other interested parties had recommended both the Follow-Up After ED
Visit for Mental Illness (FUM) and the Follow-Up After Hospitalization
for Mental Illness (FUH) as potential measures to include in our
preliminary measure set. As a first step in considering these measures,
we used our own research and input from various consultations to assess
the measures against the measure inclusion criteria that we proposed as
our first standard under Sec. 438.510(c)(1) and concluded that both
measures meet each of the six proposed criteria (see Table 3).
[GRAPHIC] [TIFF OMITTED] TR10MY24.006
Second, we considered the two measures in light of our goals for
balanced representation within a concise measure set. Given our goal to
limit the initial mandatory measure set to fewer than 20 measures and
the fact that both measures focus on assessing follow-up care for
mental illness, we determined that including one of the two measures
would best maintain balanced representation both within the overall
measure set and within the behavioral health performance area. We then
weighed the benefits and burdens of including each measure using our
[[Page 41204]]
assessment of the extent to which each measure's benefits compared to
the burden associated with reporting it. As represented in Table 3, we
found that both measures had similar benefits and burdens, but the FUH
measure imposed less burden and had more benefits, as it was more
commonly collected or reported at both the State and Federal level and
more frequently used by States to assess plan performance. Therefore,
we chose to include the FUH measure in the proposed mandatory set.
We did not receive any comments in response to our proposal related
to adding mandatory measures using the proposed subregulatory process
and proposed criteria and standards in Sec. 438.510. For the reasons
outlined in the proposed rule and our responses to comments in other
sections of this final rule on Sec. 438.510(b) and (c), we are
finalizing these provisions as proposed.
(5) Removing Existing Mandatory Measures (Sec. Sec. 438.510(d) and
457.1240(d))
We proposed at Sec. 438.510(d)(1) that we may remove existing
mandatory measures from the mandatory measure set if, after following
the subregulatory process proposed at Sec. 438.510(b), we determine
that the measure no longer meets the standards for the mandatory
measure set proposed at Sec. 438.510(c). We proposed to use the same
approach we described in section I.B.6.e.2. of the proposed rule
(relating to selection of the selection of the initial mandatory
measure set) and stated that the discussion of how we selected the FUH
measure (in section I.B.6.e.4. of the proposed rule) illustrated how we
would assess whether a measure continues to meet our measure inclusion
criteria to remain in the mandatory measure set. We also proposed at
Sec. 438.510(d)(2) through (4) to provide CMS the authority to remove
mandatory measures outside of the subregulatory process proposed in
Sec. 438.510(b) in three circumstances that would indicate that a
measure would no longer be an appropriate indicator of health plan
performance: (1) if the measure steward (other than CMS) retires or
stops maintaining a measure (proposed Sec. 438.510(d)(2)); (2) if CMS
determines that the clinical guidelines associated with the
specifications of the measure change such that the specifications no
longer align with positive health outcomes (proposed Sec.
438.510(d)(3)); or (3) if CMS determines that a measure shows low
statistical reliability under the standard identified in 42 CFR
422.164(e) (proposed Sec. 438.510(d)(4)).
When a measure steward such as NCQA or PQA retires a measure, the
steward goes through a process that includes extensive review by
experts and solicitation of public comments from a variety of
interested parties, including health plans, purchasers, consumers, and
other interested parties. The proposal to allow CMS to remove a measure
if an external measure steward retires or stops maintaining a mandatory
measure would allow us flexibility to ensure that measures included in
the QRS mandatory measure set are maintained by the measure steward and
consistent with the measure steward's underlying standards of clinical
meaningfulness, reliability, and appropriateness for measures. When
there is a change in clinical guidelines such that measure
specifications no longer align with or promote positive health outcomes
or when a measure is shown to have low statistical reliability (that
is, how much variation between measure values that is due to real
differences in quality versus random variation), we believe and thus
proposed that it would be appropriate to remove the measure. The
proposed criteria for removing measures outside the subregulatory
process align with similar criteria in the current regulations at
Sec. Sec. 422.164(e) and 423.184(e) governing the MA and Part D
quality rating system.\215\ Under the proposed rule, we would use the
same standard for statistical reliability as applied for the MA and
Part D quality rating system under Sec. Sec. 422.164(e) and
423.184(e). Any measures removed under any of the three circumstances
proposed at Sec. 438.510(d)(2) through (4) would be announced in the
annual technical resource manual proposed at Sec. 438.530. We sought
comments on the proposal, including specifically on whether there are
additional circumstances in which we should be able to remove a
mandatory measure without engaging in the subregulatory process
proposed at Sec. 438.510(b).
---------------------------------------------------------------------------
\215\ See also ``Medicare Program; Contract Year 2024 Policy and
Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicare Cost Plan Program, and
Programs of All-Inclusive Care for the Elderly'' (CMS-4201-F).),
which appears in the April 12, 2023, Federal Register (88 FR 22120).
Available online at https://www.govinfo.gov/content/pkg/FR-2023-04-12/pdf/2023-07115.pdf.
---------------------------------------------------------------------------
We summarize and respond to public comments received on the
proposed regulations for removing existing mandatory measures
(Sec. Sec. 438.510(b)(2), (d) and (e) and 457.1240(d)) below.
Comment: Overall, commenters supported our proposal for removing
existing mandatory measures for the specified reasons. Two commenters
recommended that a measure no longer endorsed by the consensus-based
entity (CBE) should no longer be included in the MAC QRS.
Response: Regarding the comment to develop criteria to remove a
measure, we believe that the standards we proposed in Sec. 438.510(d)
are sufficient to determine whether a measure should be removed from
the mandatory measure set. Sections Sec. 438.510(b)(1) and (2)
describe the subregulatory process we will use at least biennially to
determine whether measures should be added, removed, or updated and
Sec. 438.510(d)(1) specifies that CMS will use that subregulatory
process and the criteria and standards in Sec. 438.510(c) to identify
measures that CMS may remove if and when a measure that is in the
mandatory measure set no longer meets the regulatory requirements to be
required for the MAC QRS. This approach sufficiently preserves the
integrity of the mandatory minimum measure set by using the same
standards to add and remove measures. In addition, Sec. 438.510(d)(2)
through (4) provide that a measure will be removed without use of the
subregulatory process (and without public input) if the measure steward
retires or stops maintaining a measure, if the clinical guidelines
associated with the specifications of the measure change such that the
specifications no longer align with positive health outcomes, or if CMS
determines that the measure shows low statistical reliability. When one
of these things happen, we believe that a measure is no longer suitable
to be mandated for State use in the MAC QRS. When a measure steward
retires a measure, when a measure is no longer aligned with clinical
guidelines, or when the measure shows low statistical reliability, the
measure would not provide the type of information we believe is most
useful for evaluating managed care plan or program performance. This is
like the process that the MA and Part D quality rating system
(Sec. Sec. 422.164(e) and 423.184(e)) uses to determine removal of
measures; those regulations also provide for removal of measures by CMS
when a measure steward other than CMS retires a measure.
Related to the commenters' recommendation that we remove measures
that are no longer endorsed by the CBE, as discussed in section
I.B.6.e.3 of this final rule, we do not require CBE endorsement for MAC
QRS mandatory measures and therefore do not believe that it would be
appropriate to modify Sec. 438.510(d)(2) to allow CMS to unilaterally
remove a mandatory
[[Page 41205]]
measure due to loss of CBE endorsement. However, we noted in section
I.B.6.e.3 of this final rule that available relevant information from
the CBE process could be considered when assessing a measure for
inclusion in the MAC QRS measure set. Similarly, we believe that
information from the CBE process could be considered to determine
whether a measure meets the criteria for removal by CMS under Sec.
438.510(d) and may also be considered during the process described in
Sec. 438.510(b) to determine whether a measure should be recommended
for removal from the MAC QRS mandatory measure set. For example, to the
extent that an MA quality measure is evaluated under the CBE review
process and lost endorsement for any of the reasons identified at Sec.
438.510(d)(2) through (4), we could rely on information identified
through the CBE process showing that the measure meets any of the
removal criteria in paragraph (d)(2) through (4) to choose to remove
the measure from the MAC QRS mandatory measure set.
Comment: One commenter recommended that CMS set a transparent,
robust reliability standard of no less than .75, which is generally the
minimum standard for high statistical validity, to assess whether the
measure meets the scientific acceptability criterion in Sec.
438.510(b)(vi). The commenter also noted that they have consistently
voiced their concern that CMS' statistical validity minimums for other
quality programs are much too low and undermine the integrity of the
data.
Response: We appreciate commenter's recommendation on how to assess
whether a measure is statistically reliable and will consider this
recommendation as we continue to reflect on our data reliability
standards. We did not propose and are not adopting a new CMS standard
that would apply across CMS program here. For the MAC QRS, we intend to
align with existing CMS policy in this area. For instance, the MA and
Part D Quality Rating System uses the HEDIS reliability standard for
HEDIS measures for contracts with low enrollment (those with at least
500 but less than 1,000 enrollees), which are included only if the
measure score reliability is equal to or greater than 0.7.
After reviewing public comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing
Sec. Sec. 438.510(d) and 457.1240(d) as proposed.
(6) Updating Mandatory Measure Technical Specifications (Sec. Sec.
438.510(e) and 457.1240(d))
In addition to adding and removing measures, we also proposed rules
at Sec. 438.510(e) for Medicaid, and for separate CHIP by cross-
reference through a proposed amendment at Sec. 457.1240(d), governing
how we would handle updates to mandatory measures in the MAC QRS that
are a result of changes made by a measure steward to an existing
mandatory measure's technical specifications. These are updates that
measure stewards routinely make to quality measures and can be non-
substantive (such as changes that clarify instructions to identify
services or procedures) or substantive in nature (for example, major
changes to how the measures are calculated). We proposed different
subregulatory processes by which non-substantive and substantive
updates to existing technical specifications for mandatory measures
would be made. First, in paragraph Sec. 438.510(e)(1) for Medicaid,
and for separate CHIP by cross-reference through a proposed amendment
at Sec. 457.1240(d), we proposed that we would update the technical
resource manual to revise descriptions of the existing mandatory
measures that undergo non-substantive measure technical specification
changes. In alignment with current practices in the MA and Part D
quality rating system, we did not propose to use the subregulatory
notice and comment process proposed in Sec. 438.510(b) for non-
substantive changes because we believe this type of update reflects
routine measure maintenance by measure stewards that do not
significantly affect the measure and would not need additional review
by the interested parties and CMS. We proposed in new paragraph Sec.
438.510(e)(1)(i)-(iv) for Medicaid, and for separate CHIP by cross-
reference through a proposed amendment at Sec. 457.1240(d), to codify
examples of the types of updates that are non-substantive under this
proposal. This proposal is consistent with current practice and
regulations for the MA and Part D quality rating system at Sec. Sec.
422.164(d)(1) and 423.184(d)(1). We identified and described the
proposed non-substantive updates in detail as listed below and sought
comment on the list. Examples of the types of changes we believe would
be non-substantive for purposes of proposed Sec. 438.510(e)(1)
include, but are not limited to, the following:
If the change narrows the denominator or population
covered by the measure with no other changes, the change would be non-
substantive. For example, if an additional exclusion--such as excluding
nursing home residents from the denominator--is added, the change will
be considered non-substantive and would be incorporated through
announcement in the annual technical resource manual.
If the change does not meaningfully impact the numerator
or denominator of the measure, the change would be non-substantive. For
example, if additional codes are added that increase the numerator for
a measure during or before the measurement period, such a change would
not be considered substantive. This type of change has no impact on the
current clinical practices of the plan or its providers.
If revisions are made to the clinical codes used in the
measure specifications without change in the target population or the
intent of the measure and the target population, the change would be
non-substantive. The clinical codes for quality measures (such as HEDIS
measures) are routinely revised as the code sets are updated. Examples
of clinical codes that could be updated this way, include, but are not
limited to:
+ ICD-10-CM code sets, which are updated annually,
+ Current Procedural Terminology (CPT) codes, which are published
and maintained by the American Medical Association (AMA) to describe
tests, surgeries, evaluations, and any other medical procedure
performed by a healthcare provider on a patient, and
+ National Drug Code (NDC)), which is updated bi-annually.
If the measure specification change provides additional
clarifications for reporting, without changing the intent of the
measure, the change would be non-substantive. Examples include but are
not limited to:
+ Adding additional tests that will meet the numerator
requirements.
+ Clarifying documentation requirements (for example, medical
record documentation).
+ Adding additional instructions to identify services or procedures
that meet (or do not meet) the specifications of the measure.
+ Adding alternative data sources or expanding of modes of data
collection to calculate a measure.
Second, we proposed at Sec. 438.510(e)(2) for Medicaid, and for
separate CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), that we could update an existing mandatory measure that
has undergone a substantive measure specification update (that is, an
update not within the scope of non-substantive
[[Page 41206]]
updates) only after following the subregulatory process proposed in
Sec. 438.510(b). We believe that most substantive measure
specification updates to existing measures could result in new or
different measures, thereby necessitating consideration and evaluation
against the criteria and standards in proposed paragraph (c) using the
process in proposed Sec. 438.510(b). We sought comment on our proposal
to incorporate substantive measure specification updates to existing
mandatory measures only after consultation with States, other
interested parties, and the public, or whether we should consider a
separate process for these types of updates.
We did not receive any comments in response to our proposals for
updating mandatory measure technical specifications. For the reasons
outlined in the proposed rule, we are finalizing proposed Sec. Sec.
438.510(e) and 457.1240(d) substantively as proposed. We are making one
minor revision to the proposed regulation in the last sentence of the
introductory language of paragraph (e) to remove the phrase ``but not
limited to'' because it is repetitive and unnecessary. The text is
clear that the list in paragraphs (e)(1)(i) through (iv) is a non-
exhaustive list of examples of non-substantive changes to measure
specifications.
Additionally, in section I.B.6.e.2 of the proposed rule we
incorrectly stated that we proposed rules at Sec. 438.510(e) for
Medicaid, and for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d), governing how we would handle updates
to the mandatory measures in the MAC QRS that are a result of changes
made by a measure steward other than CMS to an existing mandatory
measure's technical specifications. While we proposed, and are
finalizing, that whether CMS is the measure steward should be
considered to determine whether CMS may remove a measure from the
mandatory measure set under Sec. 438.510(d)(2), the regulation text at
Sec. 438.510(e)(1) did not include, and we are not finalizing, that
CMS being the measure steward is a consideration for updates to
existing measures made under Sec. 438.510(e) for either non-
substantive or substantive updates.
(7) Finalization and Display of Mandatory Measures and Updates
(Sec. Sec. 438.510(f) and 457.1240(d))
In new paragraph Sec. 438.510(f) for Medicaid, and for separate
CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), we proposed that CMS would communicate modifications to
the mandatory measure set and the timeline States would be given to
implement modifications to the mandatory measure set that appear in the
annual technical resource manual.
We proposed to use the technical resource manual (described in
proposed Sec. 438.530) to communicate the final changes to the
mandatory measure set for the MAC QRS. We proposed that States would be
given at least 2 calendar years from the start of the measurement year
immediately following the technical resource manual in which the
mandatory measure addition or substantive update was finalized to
display the measurement results and ratings using the new or updated
measure(s). We believe giving States at least 2 years would allow for
contract and systems updates when new measures are added, or
substantive updates are made to the mandatory measure set. For example,
if the technical resource manual finalized updates in August 2026, and
the next measurement year after August 2026 started in January 2027,
States would have, at a minimum, until January 2029 before they would
be required to display the ratings for the mandatory measure updates in
their MAC QRS. A State could elect to display the ratings for a new
mandatory measure sooner. As 2 years from the start of the measurement
year will always be in January, we sought comment on whether there is a
need for States to have the flexibility to update their quality ratings
by the end of the second calendar year, which, based on the example
above, would give States the flexibility to update the rating between
January and December of 2029.
We proposed the same implementation timeline for substantive
updates to existing mandatory measures, since we believe these should
be treated in the same manner as new measures. We proposed this
timeline based on discussions with States and other interested parties
about operational considerations for implementation of new and
substantively updated measures and the posting of the associated
ratings. We did not propose a specific deadline for States to stop
display of a measure that has been removed from the mandatory measure
set because States would have the option to continue to display
measures removed from the mandatory set as additional measures (see
section I.B.6.g.5 of this final rule). We sought comment on this
flexibility, considering the criteria under which measures can be
removed at proposed Sec. 438.510(d). We sought comment on whether our
timeframes are appropriate for updates to the mandatory measure set or
whether we should allow for more or less time, and why.
We also noted that under our proposal, we would release the
technical resource manual annually regardless of whether we made any
modifications to the mandatory measure set, to address any non-
substantive changes to measure specifications or any removals that
occurred outside of the subregulatory process.
We did not receive any comments in response to our proposals
regarding finalization and display of mandatory measures. For the
reasons outlined in the proposed rule we are finalizing Sec. Sec.
438.510(f) and 457.1240(d) regarding the finalization and display of
mandatory measure updates as proposed.
f. MAC QRS Methodology (Sec. Sec. 438.334(d), 438.515 and 457.1240(d))
Fundamental to any QRS is the methodology used to calculate the
quality ratings for States' managed care plans. Under current
regulations at Sec. 438.334(b)(1), CMS must, after consulting with
interested parties and providing public notice and opportunity to
comment, develop a methodology that States must use in the MAC QRS
adopted by the State to calculate its plans' quality ratings, unless we
approve an alternative methodology as part of a State alternative MAC
QRS in accordance with proposed Sec. 438.525. During the extensive
engagement with States and other interested parties described in
section I.B.6.a. of the proposed rule, we identified two main themes to
consider in the development of a MAC QRS methodology: (1) States are
concerned about the burden associated with data collection and quality
rating calculation; and (2) beneficiaries desire transparent,
representative quality ratings. In developing the MAC QRS methodology
that we proposed, we sought to balance these two often competing
preferences, while ensuring that quality ratings remained comparable
within and among States. We also considered the Interoperability and
Patient Access for Medicare Advantage Organization and Medicaid Managed
Care Plans, State Medicaid Agencies, CHIP Agencies and CHIP Managed
Care Entities, Issuers of Qualified Health Plans on the Federally-
Facilitated Exchanges, and Health Care Providers \216\ final rule
(referred to as
[[Page 41207]]
``CMS Interoperability and Patient Access final rule'') published on
May 1, 2020. That rule placed several requirements on State Medicaid
FFS programs, as well as on Medicaid managed care plans, for the
implementation of application programming interfaces to facilitate
sharing information between payers, enrollees, and providers. Based on
these considerations, at Sec. 438.515(a) we proposed requirements for
collecting and using data to calculate managed care quality ratings for
mandatory measures and, in Sec. 438.515(a) a MAC QRS methodology that
must be applied to calculate quality ratings for MAC QRS mandatory
measures, unless we have approved an alternative QRS. The same
requirements were proposed for separate CHIP managed care plans through
a proposed cross-reference at Sec. 457.1240(d).
---------------------------------------------------------------------------
\216\ ``Medicare and Medicaid Programs; Patient Protection and
Affordable Care Act; Interoperability and Patient Access for
Medicare Advantage Organization and Medicaid Managed Care Plans,
State Medicaid Agencies, CHIP Agencies and CHIP Managed Care
Entities, Issuers of Qualified Health Plans on the Federally-
Facilitated Exchanges, and Health Care Providers'' (CMS-9115-F).
Published in the Federal Register on May 1, 2020 (85 FR 25510
through 25640). Available online at https://www.federalregister.gov/documents/2020/05/01/2020-05050/medicare-and-medicaid-programs-patient-protection-and-affordable-care-act-interoperability-and.
---------------------------------------------------------------------------
Under current regulations at Sec. 438.334(d), each year States are
required to collect data from each managed care plan with which they
contract and issue an annual quality rating for each managed care plan
based on the data collected. We proposed to replace that policy with
more specific requirements in proposed new Sec. 438.515(a), pursuant
to which States would collect and validate data to be used to calculate
and issue quality ratings for each mandatory measure for each plan on
an annual basis. We proposed, at Sec. 438.515(a)(1) for Medicaid, and
for separate CHIP by cross-reference through a proposed amendment at
Sec. 457.1240(d), that States must collect the data necessary to
calculate quality ratings for mandatory measures from their larger
contracted managed care plans and, as applicable and available to the
extent feasible without undue burden, from the State's Medicaid FFS
program providers and Medicare. Specifically, we proposed that data be
collected from managed care plans that meet a minimum enrollment
threshold of 500 or more enrollees on July 1 of the measurement year.
This enrollment threshold is the same as the enrollment threshold for
the enrollee satisfaction survey system that evaluates the level of
enrollee satisfaction with QHPs offered through a Marketplace.\217\
---------------------------------------------------------------------------
\217\ See section 1311(c)(4) of the Patient Protection and
Affordable Care Act. Also see 45 CFR 156.1125 and Quality Rating
System and Qualified Health Plan Enrollee Experience Survey:
Technical Guidance for 2024, section 6.1.
---------------------------------------------------------------------------
We believe that requiring States to calculate quality ratings for
plans with fewer than 500 enrollees would be overly burdensome, as such
plans may have limited resources for collecting and reporting data and
are more likely than plans with higher enrollment to have small
denominator sizes that would raise privacy or validity concerns in
issuing and displaying quality ratings for some measures. Further,
through an analysis of 2019 T-MSIS Analytic Files (which are research-
optimized files of T-MSIS data), we determined that neither the number
of managed care plans nor the percentage of beneficiaries reported in
the MAC QRS would be significantly reduced by excluding plans with
enrollment below 500. Thus, we believe the proposed enrollment
threshold maximizes inclusion of plans and enrollees, while also
minimizing the burden of data collection and reporting on smaller
plans. Under the proposed rule, States would have the flexibility to
include plans with fewer than 500 enrollees at their discretion, and we
would encourage States to do so when appropriate and feasible.
At Sec. 438.515(a)(1)(ii) for Medicaid, and for separate CHIP by
cross-reference through a proposed amendment at Sec. 457.1240(d), we
proposed that States would also be required to collect available data
from the State's Medicaid FFS program, Medicare (including Medicare
Advantage (MA) plans), or both if all necessary data cannot be provided
by the managed care plans for the measures and collection of these data
does not impose an undue burden on the State. For example, if a State
delivers behavioral health services through a managed care program and
all other services through its Medicaid FFS program, the State would
need to collect both managed care and FFS data to calculate quality
ratings for the managed care plans participating in its behavioral
health managed care program for many of the proposed behavioral health
mandatory measures. This is because many of the behavioral health
measures require, in addition to data on the behavioral health service
provided by the managed care plan, data on hospital services or
pharmaceutical claims provided through the State's FFS program to
calculate the measure. Similarly, if a managed care plan provides
services to enrollees who are dually eligible for Medicare and Medicaid
services, it will be necessary for the State to collect data about
services provided by Medicare to such enrollees to calculate quality
ratings for some measures included on the proposed mandatory set. While
we proposed that States must collect data from these other sources as
needed to calculate mandatory measures if the data are available for
collection without undue burden, we did not propose that States will
calculate or assign quality ratings to Medicaid FFS or Medicare plans.
We considered requiring States to collect data only from their
contracted managed care plans and then only when a plan can provide all
data necessary to calculate and issue a quality rating for a given
performance measure, which is a common practice among measure stewards.
However, we were concerned that there would be instances where there is
no single plan from which a State could collect all data necessary to
calculate one or more of the measures on the mandatory measure list.
For example, of the 18 measures on our proposed mandatory measure set,
four require data from more than one setting, including three of our
proposed behavioral health mandatory measures. These four measures
include, Use of First-Line Psychosocial Care for Children and
Adolescents on Antipsychotics (APP), Initiation and Engagement of
Alcohol and Other Drug Abuse or Dependence Treatment (IET), Follow-Up
After Hospitalization for Mental Illness) (FUH), and Asthma Medication
Ratio (AMR). To calculate the three behavioral health measures, it is
necessary to collect behavioral health or substance use service data,
as well as either pharmacy or physical health data. When these services
are covered by separate plans or delivery systems, such as where a
State has chosen to split Medicaid coverage of these services between
separate managed care programs or use a combination of managed care and
FFS delivery systems, these mandatory measures would be at risk of
going unreported if States were only required to collect data from
their contracted managed care plans. Similar issues are raised for
obtaining all data needed to generate quality ratings for dually
eligible individuals who receive coverage through Medicare and
Medicaid. We note that Medicaid is the single largest payer of mental
health services in the U.S., and behavioral health and substance use
measures would be at particular risk of going unreported as services
provided in these settings are commonly provided through a separate
managed care plan. We believe that our proposal for States to collect
and use data from multiple sources would mitigate the risk of
[[Page 41208]]
underreporting of mandatory measures, particularly those measures
assessing behavioral health and substance use services.
We stated that our proposal aligned with ongoing efforts to expand
access to health plan data at both the State and Federal levels. For
example, State data collection required for measures in the Child Core
Set \218\ and behavioral health measures in the Adult Core Set \219\,
which will become mandatory effective for CY 2024, requires States to
report measures that will require the use of data from both Medicaid
managed care and FFS programs, as well as Medicare data for dually
eligible beneficiaries.\220\ Many of these measures overlap with the
mandatory measures proposed for the MAC QRS, which means States already
will be obligated to collect Medicaid managed care and FFS data and to
obtain Medicare data needed to calculate certain performance measures.
Thus, we believe that the benefits of proposed Sec. 438.515(a)(1)(ii)
outweigh the costs of any increased burden on States.
---------------------------------------------------------------------------
\218\ See 2024 Child Core Set, https://www.medicaid.gov/media/145571.
\219\ See 2024 Adult Core Set, https://www.medicaid.gov/media/161841.
\220\ See 437.15(a)(4)(requiring States to report on all
Medicaid and CHIP beneficiaries, including those enrolled in fee-
for-service and managed care, in their reporting of all Child and
Adult Core Set measures, unless otherwise specified by the
Secretary).
---------------------------------------------------------------------------
Furthermore, there is an ongoing effort at the Federal and State
levels to increase data availability and interoperability, including
State access to managed care plan data. We noted that at the time of
the proposed rule, data available for collection include encounter data
received from a State's own Medicaid managed care plans under Sec.
438.242 and data from FFS providers through claims and other reporting.
Given existing data availability, we stated our belief that the
collection of such data would rarely result in an undue State burden.
We also noted that States can request Medicare Parts A, B and D data
for dually eligible beneficiaries free of charge through the CMS State
Data Resource Center (SDRC), though not all States do so. Although
Medicare Part C data are not available publicly through the SDRC,
States may use their contracts with MA dual eligible special needs
plans (D-SNPs), which are required under Sec. 422.107, to obtain
Medicare data about the dually eligible individuals enrolled in those
plans. We believe obtaining Medicare Part C data from D-SNPs will not
cause additional undue burden for those States that have already opted
to obtain some Medicare Part C data from these plans in this way.
We understand that making contractual or systems changes to allow a
State to collect such data without causing an undue burden, such as a
substantial financial or resource investment, may mean that a State
implements these changes over time and that this timeline may extend
past the implementation date proposed in Sec. 438.505(a)(2). We
proposed the ``without undue burden'' standard in the regulation to
facilitate a gradual implementation of contract or system changes to
collect the necessary data. We also noted that CMS would be available
to provide technical assistance to help States acquire and use
available Medicare data to calculate MAC QRS quality ratings. We sought
comment on the proposed requirement that States collect available data
from multiple sources on the mandatory measures. In addition, we
requested comment on the type of technical assistance that would be
most helpful in assisting States in obtaining and using data from the
sources specified in the proposed regulation.
Once the necessary data are collected to calculate quality ratings
for each mandatory measure, proposed Sec. 438.515(a)(2) would require
States to ensure that all collected data are validated. This aligns
with similar requirements in 45 CFR 156.1120(a)(2), which requires QHP
issuers to submit validated data for the QHP quality rating system, and
Sec. 422.162(c)(2), which requires MA organizations to provide
unbiased, accurate and complete quality data to CMS for the MA and Part
D quality rating system. Currently, Sec. 438.320 defines validation
for purposes of subpart E of part 438 as the review of information,
data, and procedures to determine the extent to which they are
accurate, reliable, free from bias, and in accord with standards for
data collection and analysis. We proposed the same definition for
purposes of new subpart G at Sec. 438.500. We noted that States could
use the current optional EQR activity at Sec. Sec. 438.358(c)(6) and
457.1250(a)--for which enhanced match may be available for Medicaid
EQR-related activities performed for MCOs per Sec. 438.370(a)--to
assist with the calculation and validation of data used to generate
quality ratings for the MAC QRS. Use of this optional activity may help
reduce burden on States.
We proposed in Sec. 438.515(a)(3) that States use the validated
data to calculate performance rates for managed care plans. Under this
proposal, States would calculate, for each mandatory measure, a measure
performance rate for each managed care plan whose contract includes a
service or action being assessed by the measure, as determined by the
State. Under this proposal, the mandatory measures would be assigned to
plans based on whether the plan's contract covers the service or action
being assessed by the measure, as identified by the State. We believe
this would be straightforward for measures assessing single services or
actions, but, as we noted in this section, some States choose to
deliver Medicaid services through different managed care programs. In
these States, data necessary to calculate a measure performance rate
for a given measure might need to be collected from two managed care
plans. However, a State could determine that only one of the services
or actions for which data must be collected is being assessed by the
measure. In such a case, the State would need to identify, among those
plans from which the State collected data, the plan(s) whose contract
includes the service or action identified by the State as being
assessed by the measure, and calculate and assign quality ratings to
that plan accordingly.
We discussed an example in the proposed rule to illustrate this:
the Follow-Up After Hospitalization (FUH) measure listed in Table 3
requires data on two services: hospitalization and mental health
services. In a State that offers behavioral and physical health
services through separate managed care programs, the State would need
hospitalization data from plans participating in the physical health
program and mental health service data from the plans participating in
the behavioral health program to calculate FUH performance rates.
Because data are collected from more than one plan, the proposed rule
would require States to determine which service or action is being
assessed by the measure. If a State determines that the service or
action being assessed by the FUH measures is the provision of timely
follow-up of mental health services to an enrollee following a
hospitalization for mental illness, the State would be required to
identify all plans that are contracted to provide the follow-up mental
health services that are assessed by the FUH measure and assign each of
those plans a quality rating for the FUH measure.
Lastly, our current regulation at Sec. 438.334(d) requires States
to issue an annual quality rating (that is, a single rating) to each
managed care plan using the Medicaid managed care quality rating
system. However, based on feedback we received from beneficiaries, we
proposed to revise the current policy
[[Page 41209]]
and to require States to issue to each managed care plan a quality
rating for each mandatory measure for which the managed care plan is
accountable. As proposed at Sec. 438.515(a)(4) for Medicaid, and for
separate CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), States would be required to issue quality ratings as
measure performance rates (that is, the individual percentage rates
calculated under proposed Sec. 438.515(a)(3) for each measure). For
example, a managed care plan that furnishes behavioral health services
would likely be issued a measure performance rate for each of the
proposed behavioral health mandatory measures, depending on the
availability of data. We also considered requiring States to calculate
and display a performance rating that reflects a national baseline for
each mandatory measure, which would align with the practice of States
that currently publish managed care quality measures using an
individual, percentage rating. However, we chose not to propose this
requirement. We solicited comments on our proposal to issue individual
performance rates and sought additional input on our decision not to
require additional percentage ratings to reflect a national baseline
for each mandatory measure.
We noted that the proposal to require that States issue quality
ratings for individual quality measures is supported by the user
testing we conducted during our engagement with interested parties.
Beneficiaries stated varying preferences for the level of information
that they would like to have, with half preferring more detailed
information, 40 percent preferring big picture information, and 10
percent falling in the middle. Many beneficiaries stated interest in
quality ratings for specific measures that related to their individual
health care needs, especially those that aligned with their
understanding of important health indicators identified by trusted
health care professionals, such as blood A1c levels for people with
diabetes. We concluded that this beneficiary feedback demonstrated the
value of requiring individual measure quality ratings.
Our user testing suggested that displaying managed care plan
quality ratings both at the individual measure and the domain level
would be most desirable to beneficiaries. Examples of potential care
domains include behavioral health, chronic conditions, infants and
children, and preventive care. This approach would allow beneficiaries
who prefer big picture information to concisely compare plans at the
domain-level, while beneficiaries who desire more detailed information
could drill down into the domains to understand a plan's performance on
the individual quality measures from which the domain score is derived.
These findings are discussed in additional detail in section I.B.6.g.
of the proposed rule. However, we did not significantly test domain
level quality ratings and believe that additional engagement with
interested parties and beneficiary testing would be necessary before
requiring States to calculate and issue domain-level ratings.
Therefore, we proposed at Sec. 438.515(c) for Medicaid, and for
separate CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), that CMS would engage with States, beneficiaries, and
other interested parties before proposing to implement domain-level
quality ratings for managed care plans through future rulemaking.
As we believe that including domain-level quality ratings in the
MAC QRS, in addition to measure-level quality ratings, would align best
with the informational preferences stated by beneficiaries who
participated in testing of a MAC QRS prototype, we intend to propose
care domains, methodology, and website display requirements for domain-
level quality ratings in future rulemaking. We sought feedback on our
proposal to include individual percent scores, intended approach to
domain-level ratings, and potential MAC QRS care domains.
To ensure that services provided to all Medicaid beneficiaries are
reflected in each managed care plan's quality ratings, we proposed at
Sec. 438.515(b)(1) that States must ensure that the quality ratings
issued under proposed Sec. 438.515(a)(4) include data for all
beneficiaries who receive coverage from the managed care plan for a
service or action for which data are required to calculate the quality
rating. We noted that this includes beneficiaries who are dually
eligible for Medicare and Medicaid and receive services through the
Medicaid managed care plan, subject to the availability of Medicare
data needed to generate the quality rating for a given measure. While
we recognized that including dually eligible beneficiaries in quality
ratings may require additional effort to obtain and analyze Medicare
utilization data, especially where dually eligible beneficiaries are
not in programs that integrate Medicare and Medicaid, we believe it is
important to ensure that these beneficiaries can assess the quality of
care furnished by available Medicaid plans for beneficiaries who also
are enrolled in Medicare. Furthermore, including dually eligible
individuals in MAC QRS quality ratings would align with the Adult and
Child Core Sets, as some Core Set measures also require both Medicaid
and Medicare data (see Core Set Final Rule, 88 FR 60278, 60299). We
stated that under proposed Sec. 438.515(b)(1), only dually eligible
individuals who receive full Medicaid benefits would be included in the
MAC QRS, because individuals whose Medicaid eligibility is limited to
assistance with Medicare premiums and/or cost sharing receive services
exclusively through Medicare. We indicated in the proposed rule our
intent to provide additional guidance on which beneficiaries must be
included in the quality ratings for each MAC QRS mandatory measure in
the technical resource manual proposed at Sec. 438.530. For separate
CHIP, Sec. 457.310(b)(2) does not allow for concurrent coverage with
other health insurance, so our proposed amendment to Sec. 457.1240(d)
excludes dually eligible individuals from the scope of the required
CHIP managed care quality rating.
In Sec. 438.515(b)(2) for Medicaid, and for separate CHIP by
cross-reference through a proposed amendment at Sec. 457.1240(d), we
proposed that States would be required to calculate quality ratings at
the plan level by managed care program. While some States have one
managed care program through which they offer all Medicaid services,
most States cover Medicaid services through multiple programs that are
defined by the population served by the program and the set of benefits
covered by the program. For example, a State may have one program that
covers behavioral health services while a second program covers
physical health services. Other States may choose to provide similar
services through different managed care programs that serve different
populations. In these States, different programs cover different
services to meet the needs of different subpopulations of Medicaid
beneficiaries, such as pregnant individuals, children in foster care,
or those with disabilities, chronic conditions, or HIV/AIDS. In States
with multiple managed care programs, managed care plans may choose
which programs they will participate in by contracting with the State.
Generally, beneficiaries will then select from the managed care plans
participating in each program for which the beneficiary is determined
eligible, subject to requirements on access to multiple managed care
plans in Sec. 438.52.
Under our proposals, States that offer multiple managed care
programs would calculate plan level ratings for each
[[Page 41210]]
managed care plan participating in a managed care program using only
the service data described in Sec. 438.515(b)(1) of beneficiaries
enrolled in that plan under that managed care program. A managed care
plan that participates in multiple managed care programs would
therefore receive a distinct rating for each of these programs. These
ratings would be produced using data only from those beneficiaries
enrolled in the managed care plan under the specific managed care
program. That is, ratings would be calculated at the plan level but
with the plan dividing up its enrolled population based on the specific
managed care program(s) that the State has contracted with the plan for
coverage. As eligible beneficiaries select from available managed care
plans within a program, we believe that plan level quality ratings for
each program in which the plan participates would best align with what
beneficiaries may expect to receive from each managed care plan
participating in that program. This approach is distinguishable from
single plan-level ratings for all the programs in which the plan
participates, which would be calculated using all data from the plan
regardless of the managed care program. We believe such single plan-
level ratings would not provide useful information to potential
enrollees because plan-level ratings would reflect the quality of
services provided to all beneficiaries covered by the plan, regardless
of the program through which the beneficiary receives services from the
plan and may not reflect the performance that a beneficiary could
expect based on the beneficiary's enrollment choices. The proposed
plan-level ratings for each managed care program would produce quality
ratings that are most representative of the care beneficiaries can
expect to experience because each rating would be calculated only from
data for beneficiaries enrolled in the same managed care plan under the
same program. If a measure could not be reported for a plan at the
program level this way due to low denominator sizes, the plan would be
issued an appropriate indicator that data for the measure is not
available for that measure as the quality rating. We sought comment on
how this proposed policy would interact with our proposed minimum
enrollment threshold, such as the extent to which a State's smaller
plans may report data unavailable messages.
We considered the level at which ratings are assigned in the MA and
Part D quality rating system and the QHP quality ratings systems as
part of developing our proposal for the MAC QRS. In the MA and Part D
quality rating system, quality ratings for most measures are assigned
at the contract level, which consolidates data from all plan benefit
packages offered under the contract to calculate a quality rating. If
assigned at the contract-level, quality ratings would be calculated
based on data from all enrollees served under a given contract between
a State and a managed care plan, subject to the technical
specifications of the measure.\221\ However, we did not believe that
contract-level ratings will be as useful to Medicaid beneficiaries and
would make it difficult for States to assess the quality of care
provided to beneficiaries in separate programs that are often designed
to improve the quality of care for a particular subpopulation of
beneficiaries with unique care considerations. In the QHP quality
rating system, quality ratings are assigned at the product level.
Different products may provide access to different provider networks
and/or require enrollees follow different processes to obtain services.
Examples include Exclusive Provider Organization Plans (EPO), Health
Maintenance Organizations (HMO), Point of Service Plans (POS), and
Preferred Provider Organizations (PPO)). These products typically
provide coverage of a similar set of comprehensive health care services
but vary in terms of how enrollees can access these services and at
what cost. If a QHP issuer of health care offers multiple products,
each separate product will receive its own ratings. In Medicaid,
product level ratings could correlate with ratings assigned at the
Prepaid Inpatient Health Plan (PIHP), Prepaid Ambulatory Health Plan
(PAHP), or MCO level. Like our concern about contract-level ratings,
one organization could offer multiple PIHPs, PAHPs, or MCOs across
different managed care programs.
---------------------------------------------------------------------------
\221\ Some MA quality measures are limited to MA special needs
plans.
---------------------------------------------------------------------------
Under our proposal at Sec. 438.515(b)(2), managed care plans that
participate in multiple managed care programs would receive separate
quality ratings under each program. These separate quality ratings
would be calculated from data for only those beneficiaries enrolled in
the managed care plan under a given program. We believe that this
approach best balances the need for representative ratings with the
level of effort States must employ to calculate quality ratings for the
MAC QRS, while also accommodating the current way that States structure
their overall Medicaid and CHIP program and the need for comparable
quality ratings both within and among States. While our proposed
reporting unit would require the calculation of more quality ratings
than those used by the MA, Part D, or QHP quality rating systems, we
believe that this additional work would also help States monitor the
quality of the managed care programs that they have developed to ensure
provision of high-quality, cost-efficient care to their beneficiaries.
We noted that States could receive an enhanced match for assistance
with quality ratings of MCOs performed by an EQRO, including the
calculation and validation of MCO data, under the external quality
review optional activity at Sec. 438.358(c)(6), in accordance with
Sec. 438.370 and section 1903(a)(3)(C)(ii) of the Act.
We solicited comments on our proposal to use a program-level
reporting unit for the MAC QRS, as well as other recommendations for
reporting units that would result in quality ratings that are both
representative and less burdensome on States.
We summarize and respond to public comments received on the
proposed rules for the collection and validation of data necessary to
calculate MAC QRS quality ratings, the MAC QRS methodology and
calculation and issuance of measure-level ratings (Sec. Sec. 438.515
and 457.1240(d)) below.
Comment: Several commenters supported the use of Medicaid FFS and
Medicare data, in addition to Medicaid managed care data, as necessary
to calculate mandatory measures, if it can be used without undue
burden. These commenters agreed that the proposal would provide a more
comprehensive view of a State's populations, and that it would be
unfair to exclude mandatory measures if some portions of an enrollee's
care were provided outside of Medicaid managed care. Several other
commenters opposed the use of other data (for example, Medicaid FFS and
Medicare data), and a few opposed the use of data from more than one
Medicaid managed care plan to calculate ratings for a single managed
care plan. The commenters raised concerns about the availability of
data from sources outside of Medicaid, especially Medicare. Some
commenters noted that it could take several years to obtain Medicare
encounter and claims data, which would not be feasible with the
proposed timelines.
Response: We appreciate commenters' support for our proposal to
require States to collect and use data necessary to calculate quality
ratings from sources outside of Medicaid and CHIP managed care plans
when such data are available for collection by the State without
[[Page 41211]]
undue burden. We considered the concerns raised by commenters that were
not in favor of this policy as well. We continue to believe that our
proposed approach best balances State flexibility to provide Medicaid
services through multiple delivery systems and/or multiple managed care
programs, the person-centered goal of measuring quality of care for a
managed care beneficiary even when their care is provided through
multiple delivery systems, and feasibility for providers, plans, health
systems, and States.
We recognize the concerns about States' ability to include certain
populations of Medicaid managed care enrollees in the MAC QRS ratings,
particularly dually eligible enrollees as the Medicaid managed care
program is not the primary payer for most health care services for this
population. We also recognize that there are challenges with
collecting, validating, and integrating the data from both Medicare and
Medicaid FFS that are necessary to achieve the inclusion of these
individuals. However, we disagree with those recommending that States
should not include these individuals in quality ratings for MAC QRS
measures. In the 2023 Medicaid Program and CHIP; Mandatory Medicaid and
Children's Health Insurance Program (CHIP) Core Set Reporting Final
Rule, we stated that our intent in implementing mandatory reporting
requirements for the Adult and Child Core Sets is for the data
collected to be as inclusive of all beneficiaries as possible and noted
that dually eligible individuals experience the health care system and
incur health outcomes as individuals, regardless of whether Medicare or
Medicaid pays for the service.\222\ We believe that this statement is
true for both dually eligible individuals and Medicaid beneficiaries
who receive their care through a Medicaid program that provides
services through both FFS and managed care. As such, we intend the MAC
QRS data collection and quality ratings to be as inclusive of all
managed care beneficiaries as possible. Our intention is reflected in
the requirements proposed and finalized at Sec. 438.515(a)(1)(ii) and
Sec. 438.515(b)(1).
---------------------------------------------------------------------------
\222\ See Medicaid Program and CHIP; Mandatory Medicaid and
Children's Health Insurance Program (CHIP) Core Set Reporting Final
Rule Core Set Final Rule, 88 FR 60297, available online at https://www.govinfo.gov/content/pkg/FR-2023-08-31/pdf/2023-18669.pdf.
---------------------------------------------------------------------------
In the proposed rule, we noted that the proposed ``without undue
burden'' standard is meant to facilitate a gradual implementation of
contract or system changes to collect the data necessary to calculate
managed care quality ratings that include the enrollees described in
Sec. 438.515(b)(1), which may extend past the implementation date
proposed and finalized in Sec. 438.505(a)(2). Because our proposal to
require data collection from non-Medicaid managed care sources applied
to the extent that the collection of data from such additional sources
did not result in an undue burden, we disagree with commenters that it
would not be feasible for States to collect data from sources outside
of Medicaid managed care within the MAC QRS' proposed timeline. As
proposed, States experiencing an undue burden preventing them from
collecting one or more of these additional sources of data necessary to
calculate fully inclusive MAC QRS ratings, which could not be resolved
within the MAC QRS implementation timeline, would have the flexibility
to identify and build a pathway to collect that data over a timeline
that would not constitute an undue burden, which may extend past the
implementation timeline.
However, based on commenter input that the challenges related to
utilizing non-Medicaid managed care data to produce quality ratings for
the MAC QRS extend beyond data collection--to the State's ability to
validate collected data and then use the validated data to calculate
and issue a quality rating as well--we are finalizing Sec.
438.515(a)(1)(ii), (a)(2), and (a)(3) with modifications to clarify
that, for Medicare and Medicaid FFS data, the requirements of these
provisions apply ``to the extent feasible without undue burden.''
As finalized, this standard--``to the extent feasible without undue
burden''--would apply at each of the three stages of quality rating
production described in Sec. 438.515(a). By including the phrase ``to
the extent feasible without undue burden'' in paragraphs (a)(1)(ii),
(a)(2) and (a)(3), we are acknowledging that there may be unique
challenges related to Medicaid FFS, Medicare Advantage, or other
Medicare data at each of these step and we are focusing the flexibility
the standard provides on the specific activities to which we intend
this flexibility to apply. As finalized, the specific requirements in
these paragraphs (collection of data from certain sources outside
Medicaid managed care organizations, validation of that data, and
calculation of ratings using the data) apply to the State in its
administration of its MAC QRS only to the extent that it is feasible
for the State to comply without undue burden. By including ``to the
extent feasible'' in this regulation text, we are clear that we
anticipate that, even where there is an undue burden, it will likely be
feasible without undue burden for a State to comply--to some extent--
with each of the requirements in paragraph (a). That is, the State will
be able to collect some data from these additional sources beyond
Medicaid managed care, validate some data from these additional
sources, and/or calculate ratings using some of the data from these
additional sources, and Sec. 438.515(a) requires the State to collect,
validate and use that data to calculate MAC QRS quality ratings. We
note that we are not including the ``to the extent feasible without
undue burden'' standard in paragraph (a)(4) because we view the
issuance of the MAC QRS ratings as fairly nonburdensome once those
ratings are calculated based on data that has been collected from
relevant sources and validated.
For example, a State that can collect and validate necessary
Medicaid FFS, Medicare Advantage or other Medicare data for the initial
MAC QRS display year could experience barriers to using that validated
data to calculate performance rates if the State does not yet could
integrate data from those other sources with Medicaid managed care data
to produce plan quality ratings. In such a case, the undue burden
standard could permit the State additional flexibility to continue to
work towards the ability to integrate such data without undue burden
over a timeline that extends past the implementation date finalized in
Sec. 438.505(a)(2). However, we expect instances where States are
unable to include any data from non-Medicaid managed care sources,
including Medicare data for any dually eligible individuals, in any MAC
QRS ratings will be the exception, and not the rule.
We emphasize that we do not believe that there will be an undue
burden on a State performing the required steps indefinitely. We intend
the MAC QRS data collection and quality ratings to be as inclusive of
all managed care beneficiaries as possible and for the undue burden
standard to facilitate the gradual implementation of contract or system
changes to collect, validate, and use the Medicaid FFS and Medicare
data necessary to accomplish this goal. While there may be cases where
the ability to collect, validate, and use Medicaid FFS and Medicare
data to calculate a quality rating is all or nothing, we believe that
it is more likely that some of this data can be collected, some can be
validated, and some can be used to calculate quality ratings for some
mandatory measures. Our regulations, as finalized, reflect our belief
that some States will be unable to
[[Page 41212]]
fully comply with Sec. 438.515(b)(1) initially; the goal and intent of
including ``to the extent feasible'' in the undue burden standards are
to give States the ability to continue to work towards full inclusivity
over time. Similarly, we stress that whether the work and effort
necessary to collect, validate and use the data constitute an undue
burden will evolve over time as resource availability, data systems,
and data availability continue to progress. We emphasize here that as
the duties specified in Sec. 438.515 are to occur each year for the
annual issuance of MAC QRS ratings, the evaluation of the feasibility
and scope of the State's burden must also occur each year, applying the
regulatory standard of ``as feasible without undue burden.''
Finally, we note that the obligation in paragraph (b)(1) to include
data for all enrollees who receive coverage through the managed care
plan for a service or action assessed by a measure necessarily means
the data that has been collected, validated, and used as specified in
paragraphs (a)(1) through (a)(3) and the ratings issued as required by
paragraph (a)(4). Repeating the standard ``to the extent feasible
without undue burden'' in paragraph (b)(1) would be repetitive and
suggest that data that can be collected, validated, and used without
undue burden could nonetheless be excluded from the final measure
ratings. Similar to our thinking related to (a)(4), we are not
including this standard (``to the extent feasible without undue
burden'') in paragraph (b)(2) because we believe that issuance of a
quality rating at the program level will be fairly nonburdensome given
that States should have knowledge (or should have the ability to easily
acquire knowledge) of which beneficiaries should be attributed to which
plans under its established programs at the time quality ratings are
calculated using data collected from relevant sources and validated.
In combination, we believe that the MAC QRS's extended timeline and
the undue burden standard best balance our intent for the MAC QRS data
collection and quality ratings to be as inclusive of all managed care
beneficiaries with the implementation of this goal within a landscape
in which the availability of the data necessary to do so is constantly
evolving and expanding. We intend to provide technical assistance to
States to help support our goal of inclusivity, and are also finalizing
Sec. 438.535 with modifications to include additional information in
the MAC QRS annual report that will allow us to identify technical
assistance that will best support the ability of States to collect,
validate and use Medicaid FFS and Medicare data in their MAC QRS
quality ratings and monitor the extent to which the MAC QRS ratings are
inclusive of all plan enrollees as required by Sec. 438.515(b)(1).
We are therefore including a new paragraph (a)(8) at Sec. 438.535
that will require States to report the following data if the data
necessary to calculate a measure described in Sec. 438.510(a)(1) of
this subpart cannot be provided by the managed care plans described in
Sec. 438.515(a)(1) of this subpart: (i) a description of any Medicare
data, Medicaid FFS data, or both that cannot, without undue burden, be
collected, validated, or used to calculate a quality rating for the
measure per Sec. 438.515(a) and (b), including an estimate of the
proportion of Medicare data or Medicaid FFS data that such missing data
represent; (ii) a description of the undue burden(s) that prevents the
State from ensuring that such data are collected, validated, or used to
calculate the measure, the resources necessary to overcome the burden,
and the State's plan to address the burden; and (iii) an assessment of
the missing data's impact on the State's ability to fully comply with
Sec. 438.515(b)(1).
Finally, in the Core Set final rule, we recognized that States were
unlikely to successfully report dually eligible individuals by the
implementation date for that final rule, in 2024, which is four years
prior to the implementation date for the MAC QRS (December 31,
2028).\223\ In addition to the MAC QRS' longer implementation timeline
and the flexibility afforded to States by the undue burden standard, we
are also finalizing at Sec. 438.515(d) (discussed in more detail in
this section) the opportunity to request a one-time, one-year extension
to requirement in Sec. 438.515(b). Such an extension could apply to
the requirement in (b)(1) that all data for applicable enrollees,
including dually eligible individuals, must be included in each plan's
quality rating(s), if the State has requested, and CMS has approved, an
extension for this requirement. States with an approved extension for
Sec. 438.515(b)(1) will have 5 years (until December 31, 2029) to
comply with Sec. 438.515(b)(1). Given the relationship described in
this response between the ability to comply with paragraph (b)(1) and
the State's ability to collect, validate and use enrollee data to
produce MAC QRS quality ratings, the barriers to comply with (b)(1)
that must be identified by a State per finalized Sec. 438.515(d)(iii)
when requesting approval for an extension under Sec. 438.515(d) could
include the State's inability to collect, validate, or use data for
dually eligible enrollees, even when the State's ability to complete
these steps does not rise to the level of an undue burden.
---------------------------------------------------------------------------
\223\ The initial round (2024) of Core Sets reporting must be
submitted and certified by States by December 31, 2024.
---------------------------------------------------------------------------
Comment: Some commenters were concerned that using data from more
than one plan to calculate and assign quality ratings would not result
in valid quality ratings or in fair and accurate comparisons.
Response: We do not agree with commenters that the proposed policy
would result in unfair comparisons because our intent is not to hold
plans accountable for services provided by other plans. Rather, our
intent is for States to use all data obtainable without undue burden to
calculate and assign quality ratings to managed care plans for services
they are accountable for under a given State managed care program,
thereby ensuring that such ratings are as inclusive of all Medicaid
managed care beneficiaries as possible. Furthermore, as finalized in
Sec. 438.515(b)(2) and discussed in the proposed rule and this final
rule in sections I.B.6.f, ratings for MAC QRS measures must be assigned
to managed care plans per program. Therefore, measure ratings must be
calculated using the data of beneficiaries enrolled in a given managed
care plan through the rated program who receive the service or action
being assessed by the measure for which the plan is being rated, even
if some of the data used to calculate the measure comes from other
sources. We also do not believe the validity of the rating would be
affected since all measures are required to be validated as required by
finalized Sec. 438.515(a)(2) for Medicaid, and Sec.
[thinsp]457.1240(d) for CHIP.
Comment: A few commenters supported our proposal to rate managed
care plans only on measures for which they are accountable and agreed
that managed care plans should be held accountable for the full range
of outcomes their enrollees experience. However, we received many
comments expressing concern that our proposed rule would require States
to include measures in their MAC QRS that are not applicable to the
State's managed care program(s). These commenters sought clarification
on whether all mandatory measures would be reported in all States,
noting that not all services assessed by each of the proposed MAC QRS
mandatory measures are furnished through managed care in a State. A
couple of commenters stated concern that managed care plans would be
required to report data for services that
[[Page 41213]]
they are not contracted to provide. Others commented that States would
be required to collect and validate data for measures that assess
services not covered through the State's managed care program(s), and
therefore, would ultimately not be used to calculate quality ratings
for any managed care plan.
Response: We agree with commenters that, as proposed, the
requirement in Sec. 438.510(a) for Medicaid, and for separate CHIP by
cross-reference through an amendment at Sec. [thinsp]457.1240(d),
should be finalized with narrower language to avoid implying that
States are required to include measures in their MAC QRS that are not
applicable to the State managed care programs because they assess
services or actions that are not covered through a managed care program
established by the State. Because we proposed in Sec. 438.515(a)(1)
and (2) that States must collect and validate data for the measures
identified in Sec. 438.510(a) for Medicaid, and for separate CHIP by
cross-reference through an amendment at Sec. [thinsp]457.1240(d), the
proposal could have been interpreted as requiring States to collect and
validate data for measures that were not applicable to the State's
managed care program(s). Therefore, we are finalizing our proposal with
modifications to address these concerns.
First, we are modifying Sec. 438.510(a) (finalized as Sec.
438.510(a)(1)) for Medicaid, and for separate CHIP by cross-reference
through an amendment at Sec. [thinsp]457.1240(d), to narrow the scope
of measures that must be included in a State's MAC QRS to those
measures in the mandatory measure set that are applicable to the State
because the measures assess a service or action covered by a managed
care program established by the State. As finalized, States will be
required to include in their MAC QRS only those mandatory measures that
assess the performance of their managed care plans and report that plan
level performance by managed care program(s). For example, if a State
does not offer dental services through managed care, the Oral
Evaluation, Dental Services (OEV) measure would not be applicable to
the State because the service or action assessed by the measure is not
covered by a managed care program established by the State. Similarly,
all States that provide Medicaid services through managed care would
include the five measures from the CAHPS survey as they assess customer
experience, and therefore are applicable to every State's managed care
program. This modification in the scope of the measures and rating
system (finalized at Sec. 438.510(a)(1)) narrows the scope of measures
that States must include in their MAC QRS and therefore could narrow
the scope of data that must be collected and validated under Sec.
438.515(a)(1) and (2) if a State provides some Medicaid services
through FFS. For example, if a State provides LTSS services through its
FFS program, the State would have no obligation to collect or validate
any data on any LTSS measures because such services are not covered by
a managed care program established by the State.
Second, we are finalizing the reporting requirement in Sec.
438.535(a)(1) with modifications to require that States provide a list
of any mandatory measures identified as not applicable by the State
under Sec. 438.510(a)(1) along with a brief explanation for why the
measure is not applicable to the State's managed care program(s). (See
section I.B.6.j. of this final rule for more detail on Sec. 438.535).
The change to the proposed Medicaid provisions at Sec. Sec. 438.510(a)
(finalized at Sec. 438.510(a)(1)) and 438.535(a)(1)(i) are equally
applied to separate CHIP by cross-reference through revised
457.1240(d).
Comment: One commenter questioned the appropriateness of including
requirements for Medicaid FFS in a Medicaid managed care final rule and
whether there is statutory authority for the reporting of Medicaid FFS
measures under the managed care regulations. However, the commenter did
not specify what specifically they believed that FFS programs would be
required to do under our proposal.
Response: Our rule does not require States to calculate and report
quality ratings for measures that assess services provided to a State's
beneficiaries through FFS and we disagree that our rule establishes
requirements for FFS. First, States are responsible for holding managed
care plans responsible for the quality and timeliness of services they
are contracted to provide, and this may require care coordination
between the managed care plan's providers and providers participating
in other delivery systems, such as Medicaid FFS. In a State that offers
Medicaid services through FFS and managed care, it would be impossible
to assess the quality or timeliness of some managed care services
provided to Medicaid beneficiaries that require care coordination
between the managed care plan and FFS without using the FFS service
data owned by the State.
Second, in the mandatory measure set we are finalizing in this
rule, the FFS data that may be needed to hold managed care plans
responsible for services for which they are accountable is limited to
Use of First-Line Psychosocial Care for Children and Adolescents on
Antipsychotics (APP), Initiation and Engagement of Alcohol and Other
Drug Abuse or Dependence Treatment (IET), Follow-Up After
Hospitalization for Mental Illness (FUH), and Asthma Medication Ratio
(AMR). As we discussed in section I.B.6.f. of the proposed rule, these
MAC QRS measures require data from more than one care setting and
calculating quality ratings for one of these measures for a Medicaid
managed care plan could require FFS data, but only if a State splits
coverage of the services associated with the measure between FFS and
managed care. For example, to calculate the three behavioral health
measures, it is necessary to collect mental health or substance use
service data, as well as either pharmacy or physical health data. In a
State that provides physical and behavioral health services through
managed care, but offers pharmacy benefits through FFS, FFS data would
be required to calculate quality ratings for AAP. If available FFS data
is not leveraged, beneficiaries that receive services necessary to
calculate quality ratings for these measures through both FFS and
managed care would not be represented in the MAC QRS ratings. As stated
previously in this final rule, it is our intent for the data collected
and quality ratings issued in the MAC QRS to be as inclusive of all
managed care beneficiaries as possible. Therefore, our policy to
leverage FFS data is an important mechanism for achieving our goal and
is consistent with our intention identified in the Adult and Child Core
Sets Final Rule in which we stated our intent for the data collected
for mandatory Adult and Child Core Set Reporting to be as inclusive of
all managed care beneficiaries as possible.
While it is our intent for the data to be as inclusive of all
managed care beneficiaries as possible, we reiterate that the
requirement to collect, validate, and use data from other delivery
systems is subject to the undue burden standard described in Sec.
438.515(a)(1)(ii), (a)(2), and (a)(3) for Medicaid, and for separate
CHIP by cross-reference through an amendment at Sec.
[thinsp]457.1240(d), and discussed in section I.B.6.f. of the proposed
rule and this final rule. Given that FFS data is owned by the States
and such data's role in monitoring services provided through a State's
FFS program and the quality of those services, we believe that FFS data
should almost always be available for collection without undue burden.
However, at least one commenter
[[Page 41214]]
communicated that they do not currently collect FFS data and, depending
on the unique circumstances within a State, we recognize that there
could be situations in which it would be an undue burden for States to
validate or use FFS data to calculate certain MAC QRS mandatory
measures. However, we emphasize again that this does not mean that an
undue burden would exist indefinitely in such a State. We noted in the
proposed rule and throughout our responses in this final rule that we
intend for the undue burden standard to facilitate the gradual
implementation of contract or system changes to collect necessary data
and we would expect States to identify a pathway that would allow for
FFS data to be collected, validated, and used by the State for MAC QRS
quality ratings. Furthermore, we have noted throughout our responses in
this final rule that finalized Sec. 438.515(a) requires States to
collect, validate and use FFS data necessary to calculate MAC QRS
ratings that is feasible to collect, validate and use without undue
burden. We expect that instances where States cannot collect, validate,
or use any Medicaid FFS data to calculate MAC QRS quality ratings will
be the exception and not the rule given that the State is responsible
for administering and ensuring the quality of services provided by its
FFS program.
Comment: One commenter requested flexibility for States to provide
explanatory information regarding the inclusion of multiple data
sources as part of the MAC QRS reporting or website display.
Response: Although not required for the MAC QRS website display
under Sec. 438.520 for Medicaid (which also applies to separate CHIP
through a cross-reference at Sec. [thinsp]457.1240(d)), States have
flexibility to include additional explanatory language in their MAC QRS
that will assist MAC QRS users, and we encourage States to do so. Such
explanations could include the source of data used for the different
measures or a description of the specific activities or services
furnished by the managed care plan that are reflected in the measure
rating.
Comment: Several commenters appreciated the undue burden standard
proposed to limit when a State would be required to collect and use
data from Medicaid FFS and Medicare sources and recommended CMS
consider factors such as Medicaid agency administrative capacity,
systems burden, and the general availability of data sources outside of
Medicaid managed care when determining if an undue burden exists.
Response: We agree with commenters that Medicaid agency
administrative capacity, systems burden, and the general availability
of data sources outside of Medicaid managed care should be considered,
among other factors, when determining undue burden. We believe that
whether an undue burden exists for the collection, validation, or use
of Medicare data or Medicaid FFS data to calculate quality ratings for
MAC QRS measures may be highly dependent on the circumstances within a
specific State. The answer to how to obtain and use Medicaid FFS and
Medicare data without undue burden may share similarities and best
practices but will often be unique in each State and for each data
source. We intend to work with States that have identified challenges--
such as through the reporting in Sec. 438.535(a)(8)--and provide
technical guidance on how to address these challenges and determine how
CMS may best support States in collecting and using such data. We also
intend to provide additional guidance on circumstances that may
constitute an undue burden and will continue to engage with States,
plans, providers and other interested parties in the development of
this guidance. We previously noted in this final rule that we proposed
the ``without undue burden'' standard to facilitate a gradual
implementation of contract or system changes to collect the necessary
data that allows States to implement these changes over time, which may
extend past the implementation date proposed in Sec. 438.505(a)(2). As
such, what constitutes an undue burden will evolve over time as
resource availability, data systems, and data availability continue to
progress and, likewise, the technical assistance and guidance on what
constitutes an undue burden will also evolve over time. We reiterate
that the undue burden standard permits States to exclude the specific
data for which the undue burden applies. Where it is feasible to
collect, validate, and use necessary data without undue burden, the
State must ensure that these steps are completed, and the data are used
in the calculation of MAC QRS measures.
Comment: A few commenters supported the proposed minimum enrollment
threshold. One commenter suggested a modification to our proposal that
data be collected from managed care plans that meet a minimum
enrollment threshold of 500 or more enrollees on July 1 of the
measurement year. The commenter requested that CMS add a requirement
that plans also have 500 or more members as of January 1st of the
rating year, which would align with the Medicare and Marketplace
enrollment threshold.
Response: We appreciate the commenter's suggestion to modify our
proposed minimum enrollment threshold to require 500 or more enrollees
on July 1 of the measurement year and as of January 1 of the rating
year to align with other CMS quality rating programs. We agree with
commenters that the MAC QRS should align the dates used to determine
whether a plan meets a minimum enrollment threshold with other CMS
quality ratings programs. However, neither the QHP nor the Medicare
Advantage and Part D quality rating system regulations codify a
specific date used for an overall minimum enrollment threshold for
collection of all quality data and reporting of all quality ratings.
Instead, both the QHP and the Medicare Advantage and Part D quality
rating systems establish minimum enrollment requirements in annual
technical guidance. For instance, the participation criteria for QHP
issuers that must collect and submit validated clinical measure data
for the QHP quality rating system include, among other criteria, that
the QHP issuer ``had more than 500 enrollees as of July 1, 2024, and
more than 500 enrollees as of January 1, 2024.'' \224\ Similarly, the
MA and Part D quality rating system uses its Medicare 2023 Part C & D
Star Ratings Technical Notes to identify minimum enrollment thresholds
for Medicare Advantage and Part D plans that are awarded Star Ratings.
Instead of establishing a threshold that applies across the program
like the QHP quality rating system, the MA and Part D quality rating
system identifies minimum enrollment thresholds for some of its quality
measures if such thresholds are specified in the measure steward's
technical specifications.
---------------------------------------------------------------------------
\224\ See 2024 Quality Rating System and Qualified Health Plan
Enrollee Experience Survey: Operational Instructions'' https://www.cms.gov/files/document/qrs-qhp-enrollee-survey-operational-instructions-2024.pdf. The enrollment threshold used for the QHP
quality rating system aligns with the one for the QHP enrollee
satisfaction survey. See section 1311(c)(4) of the Patient
Protection and Affordable Care Act and 45 CFR 156.1125. Also see the
Quality Rating System and Qualified Health Plan Enrollee Experience
Survey: Technical Guidance for 2024, section 6.1.
---------------------------------------------------------------------------
To better align with the QHP quality rating system and the MA and
Part D quality rating system, we are not finalizing use of the July 1
marker in the regulation text. Like the QHP quality rating system, this
information will instead be communicated through the annual MAC QRS
technical resource manual. To reflect this, we are finalizing Sec.
438.515(a)(1)(i) with modification to
[[Page 41215]]
specify that the enrollment threshold of 500 will be calculated as
described by CMS in the technical resource manual. CMS intends to
require States to use plan enrollment at both the January and July
dates to determine whether a Medicaid managed care plan meets the
minimum enrollment threshold of 500 finalized in Sec.
438.515(a)(1)(i). We recognize that changes to the MAC QRS's minimum
enrollment threshold could impact the scope of data collection required
for the MAC QRS and could be burdensome on States and plans if modified
frequently. While the technical resource manual will be issued
annually, CMS does not intend to modify the minimum enrollment
thresholds discussed here unless CMS determines that changes are
necessitated to better align with other Federal rating programs or to
ensure that Medicaid beneficiaries are appropriately represented in MAC
QRS ratings. We note that the minimum enrollment threshold finalized by
CMS at Sec. 438.515(a)(1)(i) and used to identify which plans must be
included in the MAC QRS is distinct from measure steward specifications
that may use dates of plan enrollment to identify the eligible
beneficiary population for a specific measure and documented in the
measure's technical specifications. This information from measure
stewards would also be provided in the Technical Resource Manual as
part of the MAC QRS technical specifications and any updates to these
specifications would be made per finalized Sec. 438.510(e).
Lastly, in section I.B.6.f. of the proposed rule we noted that
States would have the option to include plans that do not meet the
minimum enrollment threshold in their reported measures, and that we
would encourage States to do so when appropriate. For example, a State
may decide to include in its MAC QRS managed care plans for pregnant
individuals that enroll fewer than 500 individuals because, despite not
meeting the minimum enrollment threshold, the State is able to
calculate and issue quality ratings that are valid and reliable to the
plan for mandatory measures related to the care of pregnant persons
because all enrollees are likely to be part of the beneficiary
population included in such measures. Should a State decide to include
plans with fewer than 500 enrollees in its MAC QRS, this approach would
not be considered an alternative methodology for which the State would
need approval under Sec. 438.515(c) so long as the State ensures that
quality ratings issued to the plan(s) meet the requirements in Sec.
438.515(b). The requirement at Sec. 438.515(a)(1)(i) establishes a
floor for the plans that must be included in the MAC QRS, but States
are free to include additional managed care plans as appropriate, and
could even choose to include data on its FFS program in the MAC QRS.
Furthermore, inclusion of additional plans (or even additional ratings
or performance information) in a State's MAC QRS does not necessarily
impact States' compliance with the CMS methodology established in Sec.
438.515(b)(1) and (2), which establishes requirements related to the
enrollees who must be included in quality ratings for the plan and the
level at which the rating is assigned to the plan.
Comment: One commenter requested input on how low denominator sizes
may impact the requirement to collect data necessary to calculate a
measure, citing concerns about rating validity when there are low
denominator sizes.
Response: Our minimum enrollment threshold policy at Sec.
438.515(a)(1)(i) for Medicaid, and through a cross-reference at Sec.
[thinsp]457.1240(d) for separate CHIP, requires States to collect data
from contracted managed care plans that have 500 or more enrollees. Low
denominator sizes do not impact the requirement to collect data from
individual plans that meet the enrollment threshold but may impact
whether a State reports a measure for a managed care plan if the
measure's denominator size does not meet privacy, validity, or
reliability standards. We noted in the proposed rule that we will
follow data suppression policies for measure stewards in addition to
the CMS Cell Size Suppression Policy such that if sample sizes are too
small, we will not require States to publicly report data to avoid a
potential violation of privacy. At present, CMS cell-size suppression
policy for public reporting prohibits the direct reporting of
beneficiary values from which users can derive values of 1 to 10, so
CMS suppresses in its own release of data any cells with data within
that range. We will also follow data suppression policies for measure
stewards in addition to our Cell Size Suppression Policy. For instance,
some measure stewards permit choosing not to publicly report a quality
rating for a specific quality measure due to small numbers if the
measure has a denominator that is less than 30. We will publish data
suppression guidance in the technical resource manual based on validity
or reliability concerns and intend to align this guidance with existing
quality reporting practices to determine when a MAC QRS measure should
be suppressed due to low denominator sizes to ensure validity of the
ratings and privacy of the included beneficiaries. Through their
managed care contracts, States must ensure that Medicaid and CHIP
managed care plans ensure the privacy of enrollee data pursuant to
Sec. Sec. 438.224 and 457.1233(e) respectively; States are also
required to protect beneficiary confidentiality by Subpart F of part
431 of this chapter. In addition, the privacy and security requirements
under HIPAA apply to Medicaid and CHIP. See 45 CFR part 164.
Comment: Many commenters requested technical assistance on how to
obtain and use data from other sources without imposing an undue burden
on the State, noting existing challenges in collecting Medicaid managed
care data necessary to calculate quality measures from Medicaid data
sources and ensuring that all data sources feed into a single point
that will calculate ratings. A few commenters specifically requested
that CMS provide a standardized data set of Medicare quality data to
Medicaid agencies. Other commenters raised concerns about whether
States could obtain Medicare data in a timely manner considering the
proposed MAC QRS timelines. One commenter noted that some States have
confidentiality clauses in managed care contracts that would forbid the
exchange of any information pertaining to substance use disorder and
HIV, which could affect data collection for the proposed Initiation and
Engagement of SUD Treatment and the Follow-up After Hospitalization for
Mental Illness measures.
Response: We appreciate the input on assistance that may be helpful
to States in the collection and use of Medicaid FFS and Medicare data.
We intend to provide both technical assistance and additional guidance
on how best to meet this requirement, including the timely collection
of Medicare data. We note that in the Medicare Program; Contract Year
2025 Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly; Health Information
Technology Standards and Implementation Specifications proposed rule
(referred to as the CY2025 Medicare Part C/D proposed rule), we have a
solicitation for comment on ``Use of MA Encounter Data to Support
Required Medicaid Quality Reporting'' to better understand how to
balance considerations related to the timeliness of quality reporting
with accuracy and
[[Page 41216]]
completeness of MA encounter data.\225\ [NOTE TO UPDATE IF THIS
RELEASES BEFORE THIS FINAL RULE]. We note that in the Medicare and
Medicaid Programs; Patient Protection and Affordable Care Act;
Advancing Interoperability and Improving Prior Authorization Processes
for Medicare Advantage Organizations, Medicaid Managed Care Plans,
State Medicaid Agencies, Children's Health Insurance Program (CHIP)
Agencies and CHIP Managed Care Entities, Issuers of Qualified Health
Plans on the Federally-Facilitated Exchanges, Merit-based Incentive
Payment System (MIPS) Eligible Clinicians, and Eligible Hospitals and
Critical Access Hospitals in the Medicare Promoting Interoperability
Program final rule (referred to as the CMS Interoperability and Prior
Authorization final rule), impacted payers--including States and MA
plans--must implement and maintain a Payer-to-Payer API by January 1,
2027 to make available certain data to improve care continuity when a
patient changes payers or between concurrent payers for those
patients.\226\ States may be able to collect claims and encounter data
from MA plans under a Payer-to-Payer API for those dually eligible
individuals who opt-in to permit the data exchange. We will also
consider whether additional resources, such as the requested Medicare
data set, should be available through the State Data Resource Center to
meet State needs related to the MAC QRS.
---------------------------------------------------------------------------
\225\ See 88 FR 78531, https://www.govinfo.gov/content/pkg/FR-2023-11-15/pdf/2023-24118.pdf.
\226\ See:https://www.govinfo.gov/content/pkg/FR-2024-02-08/pdf/2024-00895.pdf
---------------------------------------------------------------------------
In response to the commenter's concern about data exchange of
confidential information, we note that the feasibility criterion for
including or adding a measure to the mandatory measure set takes into
consideration whether States and health plans can access the data
needed to calculate the measure. Furthermore, whether an undue burden
exists is highly dependent on the circumstances within a specific
State. We noted previously in this section that to identify whether an
undue burden exists in a particular State may require considering the
State's Medicaid agency administrative capacity, systems burden, and
the general availability of data sources (among other consideration).
As such, the answer to how to obtain and use data from sources other
than a State's Medicaid managed care program without undue burden may
share similarities and best practices, but will often be unique in each
State and for each data source. We will provide technical assistance to
States to help them address their own unique barriers to collecting the
necessary data and reporting measures, including State laws regarding
exchange of health information, and intend to provide best practices
where States may face similar challenges to obtain data. If States have
data restrictions in place, the State may choose to have health plans
calculate the measures.
Comment: Commenters generally supported our proposal to require
that data be validated prior to the display of quality ratings to
support the integrity of the ratings calculated and displayed as part
of a State's MAC QRS. Commenters requested clarification on the role of
External Quality Review Organizations (EQROs) in the calculation and
validation of plan ratings. One commenter requested clarification about
whether data collection and measure calculation must be done by a
State, or if States would have flexibility to allow plans to calculate
and report their own ratings to the State for certain measures (such as
HEDIS measures). The commenter noted that relying on plan-submitted
measures would avoid duplication of administrative work when plans have
experience calculating measures included in the MAC QRS. Another
commenter stated concern over how States would validate Medicare
Advantage data, and recommended CMS provide a standard data set and
technical assistance to support this process.
Response: We agree with commenters that validation of data is a
critical aspect of generating trust in the information displayed on
each State's MAC QRS. As noted in the proposed rule, States may use
their EQRO to assist with quality ratings for the MAC QRS under the
optional EQR activity at Sec. 438.358(c)(6) for Medicaid, which
applies to separate CHIP through an existing cross-reference at Sec.
457.1250(a). Such assistance could include both calculation of
performance measure rates and/or validation of the data used to
calculate the rates. We agree with commenters that plans could collect
the data necessary, calculate the performance rates themselves, and
submit this information to the State (or EQRO) for data validation, and
that allowing plans to submit measures could reduce duplication and
burden on States. Therefore, we are modifying Sec. 438.515(a) for
Medicaid, and for separate CHIP by cross-reference at Sec.
[thinsp]457.1240(d), in the final rule to use language that does not
mandate that the State directly perform the necessary data collection
and measure calculation activities. Specifically, we are removing the
terms ``Must collect'', ``Must ensure that'', ``Must use'' and ``Must
issue'' from Sec. 438.515(a)(1) through (4), respectively.
Under Sec. 438.515(a)(1) and (3), as finalized, collecting
necessary data and calculating performance rates may be performed by
the State, the plan or an EQRO. This reporting structure aligns with
the existing quality reporting regulations at Sec. Sec. 438.330(c) and
438.358 for Medicaid, which apply to separate CHIP through an existing
cross-reference at Sec. 457.1250(a), whereby either the State or the
plan can calculate the performance measures before they are validated.
We do not believe plans are an appropriate entity to validate data
collected pursuant to Sec. 438.515(a)(2) because they are not free
from bias. The definition of validation at Sec. 438.500 of the final
rule requires that the review be free from bias and Sec. 438.515(a)(2)
uses the defined term to ensure that the standards inherent in the
definition apply. We are finalizing Sec. 438.515(a)(2) with
modification to codify this requirement by adding language to require
that the validation of data must not be performed by any entity with a
conflict of interest, including managed care plans.
We also note that for States planning to use the optional EQR
activity at Sec. 438.358(c) to carry out the validation or calculation
of the performance rates, plans are prohibited from performing this
external quality review activity. For the activity in Sec.
438.515(a)(4) for Medicaid, and for separate CHIP by cross-reference
through an amendment at Sec. [thinsp]457.1240(d), to issue the quality
rating, we believe that it would not be appropriate for plans to issue
ratings for themselves, and that this should be solely the State's
responsibility. As noted in the proposed rule, States are in the best
position to determine which quality ratings should be assigned to the
plans within each of their Medicaid managed care programs, based on the
services covered under that program. As such, the revisions to Sec.
438.515(a)(4) include that the ratings be issued by the State (not the
plan or an EQRO) for each managed care plan.
Finally, as previously discussed, we intend for the data collected
and quality ratings issued for the MAC QRS to be as inclusive of all
plan enrollees as possible (including dually eligible individuals), but
we recognize that there are challenges to the collection, validation,
and use of Medicare data necessary to include dually eligible
individuals in the MAC QRS. Under finalized Sec. 438.515(a)(2), States
must
[[Page 41217]]
ensure that all Medicare data collected per Sec. 438.515(a)(1)(ii) is
validated to the extent feasible without undue burden. (See earlier
responses in this section about the standard ``to the extent feasible
without undue burden.'') As finalized, States will be afforded the
flexibility to continue to work towards complete validation of
available Medicare data used for the MAC QRS ratings and their ability
to calculate quality ratings that are inclusive of dually eligible
individuals enrolled in the State's managed care program. Regarding the
commenters' concerns about Medicare Advantage data, including
validation of the data, we intend to discuss methods of data collection
and validation in the technical resource manual and will be available
to provide States with any needed technical assistance. We also believe
the provision at Sec. 438.515(a)(1)(ii) for Medicaid, and for separate
CHIP by cross-reference through an amendment at Sec.
[thinsp]457.1240(d), that requires the use of non-Medicaid data to the
extent feasible without undue burden, provides flexibility for States
that cannot identify a pathway to collect this data without undue
burden by the implementation date established in Sec. 438.505(a)(2).
Comment: A few commenters stated concern about leaving the
determination of whether a quality rating for a measure should be
calculated and assigned to a given managed care plan to the State. Many
commenters stated a concern that our proposal would require States to
issue quality ratings for all mandatory measures to all managed care
plans resulting in some plans being held responsible for measures for
which they have no contractual or financial responsibility under a
State managed care program.
Response: We disagree with commenters that proposed Sec.
438.515(a)(3) and (a)(4) for Medicaid, and for separate CHIP by cross-
reference through an amendment at Sec. [thinsp]457.1240(d), would hold
managed care plans responsible for measures for which they have no
contractual or financial responsibility under a State managed care
program. Under the standard proposed and finalized in Sec.
438.515(a)(3) for Medicaid, and for separate CHIP by cross-reference
through an amendment at Sec. [thinsp]457.1240(d), whether a plan
receives a quality rating for a given MAC QRS measure is dependent on
whether the plan is contractually responsible for the service or action
assessed by the measure under the managed care program in which it
participates. We continue to believe that States should determine which
plans receive a quality rating because they are best situated to
determine whether a given managed care program, and the plans within
the program, cover a service or action assessed by a measure, and
whether the program's participating plans should be assigned a quality
rating for the measure. Ultimately, this discretion allows States to
determine whether it is fair to hold a plan accountable for a given
measure based on the plan's contractual relationship with the State.
Further, the modifications finalized to Sec. 438.510(a) at Sec.
438.510(a)(1) about the scope of measures that must be included in each
State's MAC QRS also clarifies that measures are to be issued to
reflect the services covered and activities performed by each managed
care plan.
Comment: Many commenters noted that the proposal to require States
to issue percentage quality ratings for each measure (meaning the
measure performance rate) was an appropriate starting point for the MAC
QRS. We received many comments supporting the future use of domain
level ratings within the MAC QRS following additional input and
rulemaking. Commenters noted that domain ratings would make it easier
for beneficiaries to quickly evaluate differences across key services
of relevance to them. Several commenters agreed that CMS should test
domain level ratings with beneficiaries prior to proposing domain
ratings. A few commenters requested that CMS identify the specific
domains to be included, the measures included in each domain, and other
technical details such as the methodology for calculating domain
ratings. One commenter suggested that CMS attempt to align MAC QRS
domain categories with existing Adult and Child Core Set domains. A few
commenters, cautioned against the use of a single summary score for
quality performance such as Medicare and Part D quality rating system
ratings in the future, noting CMS's Medicare and Part D quality rating
system has been beset by questions about whether the ratings result in
meaningful and equitable performance comparisons.
Response: We appreciate the support from commenters on our proposal
to require the use of percentage ratings for the display of the MAC QRS
measures. We will take commenters' input into consideration in any
future rulemaking regarding the use of domain ratings. We did not
propose to require single summary scores in the proposed rule and the
final rule similarly does not call for use of single summary scores for
the MAC QRS. The informational preferences of users who participated in
our prototype testing is consistent with the commenters' perspective
that the MAC QRS users' needs are best met by a mix of individual and
domain level ratings scores.
Comment: Some commenters requested clarification on whether
Medicare-covered services would be rated in the proposed MAC QRS, and
whether MAC QRS ratings would be determined based on Medicaid-only
services. A few commenters recommended that dually eligible individuals
should only be included when they are enrolled to receive Medicare and
Medicaid services through the same organization (such as through an
integrated D-SNP). A couple of commenters stated concern about
duplication between MAC QRS and the Medicare and Part C quality rating
system, which could cause confusion. Many commenters requested
technical assistance and additional guidance related to the inclusion
of data for dually eligible beneficiaries in MAC QRS ratings, including
how dually eligible individuals would be included in MAC QRS measures.
Response: We believe it is important for Medicaid managed care
plans to support better health outcomes and access to care for the
totality of an enrollee's needs, not just those that fall within the
covered benefits of a specific contract. While there are some services
that are primarily covered by Medicare (such as preventive services)
and some that are primarily covered by Medicaid (such as behavioral
health and LTSS services), variation on this general rule exists across
States. Furthermore, the factors that influence dually eligible
enrollees' health and well-being do not always completely align with
either the services covered by their Medicaid managed care plan or with
those covered by Medicare services. For example, while Medicare would
primarily cover services associated with a chronic condition such as
diabetes, meals provided to a dually eligible individual diagnosed with
diabetes by an LTSS plan may also influence how well that individual's
A1c is controlled. Accounting for these complex relationships when
rating the quality of an individual plan is an ongoing pursuit, and we
continue to believe that our proposed policy balances the need to
adequately reflect the quality of care experienced by dually eligible
individuals with the challenges associated with care coordination and
data sharing among States and both Medicare and Medicaid plans.
Therefore, we stress that when the service or action assessed by
the measure is provided to the beneficiary
[[Page 41218]]
through Medicare and not the Medicaid managed care plan for which the
rating is being calculated, we are not requiring States to include
dually eligible individuals in quality ratings for MAC QRS
measures.\227\ For example, we do not anticipate that States would
include dually eligible individuals (that is, the data about dually
eligible individuals) in MAC QRS quality ratings for measures of
preventive health services such as Breast Cancer Screening because it
is likely that States would determine that the services or actions
assessed by this measure are covered by Medicare and not covered by the
Medicaid managed care program. This is true even if the Medicaid
managed care plan in which the dually eligible individual is enrolled
is an integrated D-SNP (for example, a D-SNP offered by an organization
that also has a Medicaid managed care contract to cover Medicaid
benefits) or part of an integrated Medicare-Medicaid demonstration.
---------------------------------------------------------------------------
\227\ See Sec. 438.515(a)(3) requiring States to ``calculate a
measure performance rate for each managed care plan whose contract
includes a service or action assessed by the measure, as determined
by the State'' and Sec. 438.515(b)(1) requiring States to ensure
that the quality ratings issued to a managed care plan under (a)(3)
include data for all enrollees who receive coverage through the
managed care plan for a service or action for which data are
necessary to calculate the quality rating for the managed care plan,
including data for enrollees who are dually eligible for both
Medicare and Medicaid, subject to the availability of data under
paragraph (1)(1)(ii).
---------------------------------------------------------------------------
This final rule requires States to include dually eligible
enrollees (that is, the data about dually eligible individuals) in
quality ratings for a Medicaid managed care plan when the State
determines, as described in Sec. 438.515(a)(3), that the service or
action assessed by the MAC QRS measure is covered by the Medicaid
managed care plan's contract with the State. (See prior responses to
public comments in this section about how the undue burden applies to
this requirement). In determining whether a service or action assessed
by the MAC QRS measure is covered by the Medicaid managed care plan's
contract, the State may wish to consider whether the assessed service
or action is, in fact, performed by the Medicaid managed care plan (in
whole or in part), and whether the design of the State's Medicaid
managed care program is such that the plan should be held accountable
for the service or action assessed by the measure. For example, we
anticipate that most States would include dually eligible enrollees in
quality ratings for MAC QRS measures of behavioral health, such as IET,
FUH and LTSS. Because these measures are calculated using data for
services that are commonly covered for dually eligible individuals
through Medicaid as well as data for services covered by Medicare (such
as hospital services), data for services provided by Medicare to dually
eligible individuals also enrolled in a Medicaid managed care plan
would often be necessary to calculate quality ratings for these
measures that comply with Sec. 438.515(b)(1). In such cases, the State
would be required to collect, validate, and use the data necessary to
calculate and issue quality ratings for the plan that include the
plan's dually eligible enrollees, including the necessary Medicare data
when available for collection without undue burden.
Having provided an overview of when a State would and would not be
required to include dually eligible individuals in a managed care
plan's quality ratings, we highlight that the requirement finalized at
Sec. 438.515(a)(3) would not prevent a State from determining that a
Medicaid managed care plan should be issued a quality rating for a MAC
QRS measure, even though the service or action assessed by the measure
is not explicitly covered by the plan's contract with the State, if the
State determines that the plan should be held accountable for the
service or action. Using the example provided earlier, we note that a
State would have the flexibility to choose to issue quality ratings for
the MAC QRS measure Hemoglobin A1c Control for Patients with Diabetes
(HBD) to its LTSS plans.
We disagree with commenters' suggestion that dually eligible
enrollees should only be included when they are enrolled to receive
Medicare and Medicaid services through the same organization. We
believe that including dually eligible individuals who do not receive
their care through an integrated product in MAC QRS ratings will be
feasible for States for many measures and doing so is beneficial to
dually eligible individuals who do not receive their care through an
integrated product. Finally, we intend to provide additional guidance
to assist States in determining how dually eligible individuals would
be included in MAC QRS measures and also intend to provide technical
assistance with integrating Medicare and Medicaid data to achieve this.
Comment: A few commenters requested additional guidance on the
timeframe for including dually eligible individuals in MAC QRS ratings
given the need to collect data from multiple sources.
Response: States must comply with the requirements of Sec.
438.515(b)(1) by the implementation date identified in Sec.
438.505(a)(2), that is, by December 31, 2028. However, as discussed in
section I.B.6. of this final rule, we are finalizing the flexibility
for States to request a one-time, one-year implementation extension for
the MAC QRS methodology requirements described in Sec. 438.515(b),
which includes the inclusion of dually eligible individuals who are
eligible for full Medicaid benefits that may be required under
paragraph (b)(1), at new Sec. 438.515(d). If a State submits an
extension request for its compliance with Sec. 438.515(b)(1) to have
an additional year to fully comply with the requirement by including
dually eligible individuals in their MAC QRS, and CMS approves the
request, the State would have until December 31, 2029 to collect and
utilize the data necessary to calculate and issue quality ratings that
include dually eligible individuals. For instance, a State may have
access to the data necessary to include dually eligible individuals in
a managed care plan's quality ratings through the State's contracts
with its D-SNPs. However, the State may need additional time to
integrate this data with Medicaid managed care data to produce quality
ratings that include the dually eligible individuals in plan ratings
for certain measures. We note, however, that where inclusion of dually
eligible individuals in a plan's quality rating is based on use of
Medicare data, calculation of the measure using that Medicare data is
contingent on the extent to which the Medicare data necessary to
calculate the quality rating is available to the State without undue
burden.
Comment: Several commenters supported assigning MAC QRS ratings at
the plan level by managed care program, noting that this approach would
provide beneficiaries with information that is more tailored to their
specific needs and would allow managed care plans, States, and CMS to
effectively measure and manage all Medicaid programs. One commenter
encouraged CMS to define ``managed care programs'' as based on the
population they enroll, which would allow for transparent measurement
of the performance of MCOs that serve different populations, such as in
States that operate more than one D-SNP-based Medicaid managed care
program for dually eligible individuals, one for individuals under 65
and another for individuals 65 and over.
Response: We appreciate commenters' support for our proposal and
the commenter's request to provide a definition for ``managed care
program.'' We decline to provide a more detailed definition for the
term managed care
[[Page 41219]]
program in this final rule than what is currently defined in Sec.
438.2 for Medicaid. Per that definition, a managed care program means a
managed care delivery system operated by a State as authorized under
sections 1915(a), 1915(b), 1932(a), or 1115(a) of the Act. This
definition broadly covers Medicaid managed care delivery systems and
Medicaid managed care plans that are available to Medicaid
beneficiaries through a managed care program. For separate CHIP, we do
not define the term ``managed care program'' in part 457 but we believe
that it is clear from the context that the term means a managed care
delivery system through which managed care entities have contracts to
cover CHIP beneficiaries. We intend to address this as well in the
technical resource manual, aligning with how ``managed care program''
is defined in Sec. 438.2 and used in subregulatory guidance for other
Medicaid reporting requirements, such as through Sec. Sec. 438.66(e)
and 438.207(d); these other guidance documents generally refer to
managed care programs as having a distinct set of benefits and
eligibility criteria that is articulated in a contract between the
State and managed care plans.228 229 In line with these
existing reporting requirements, we intend to provide guidance on how
States distinguish among their managed care programs in issuing MAC QRS
ratings in the technical resource manual or guidance which will align
with existing guidance on managed care programs provided for reporting
through Sec. Sec. 438.66(e) and 438.207(d). The provisions at Sec.
438.207(d) also apply to separate CHIP through an existing cross-
reference at Sec. [thinsp]457.1230(b).
---------------------------------------------------------------------------
\228\ See Managed Care Program Annual Report template at https://www.medicaid.gov/media/124631.
\229\ See Network Adequacy and Access Assurances Report template
at https://www.medicaid.gov/media/140906.
---------------------------------------------------------------------------
Comment: A few commenters stated concern about the ability of
States and managed care plans to comply with the MAC QRS methodology
requirements proposed at Sec. 438.515(b) by the implementation
deadline. Some commenters noted general challenges with the collection
of data that is required to comply with the data collection and measure
calculation and reporting requirements for each managed care plan in
each program while distinguishing between performance in different
managed care programs when the same plan has multiple contracts or
contracts to participate in multiple managed care programs. Another
commenter stated that States may experience data integration issues
that could make it challenging for States to comply with these
requirements by the implementation date. One commenter stated interest
in allowing a voluntary performance year prior to mandating the
implementation of the proposed MAC QRS to ensure that States and
managed care plans have appropriate time to identify and resolve
challenges.
Response: Under Sec. 438.515(b) as proposed and finalized, States
must ensure that all enrollees who receive coverage through a managed
care plan are included in the MAC QRS ratings issued for that plan and
States must issue ratings at the plan level, by managed care program.
Based on commenters feedback that States may need additional time
beyond the implementation timeline finalized in Sec. 438.505(a)(2) to
obtain necessary data or develop a system to house and utilize the data
necessary to meet these requirements in this final rule, we are
finalizing in Sec. 438.515(d) that States will have the ability to
submit a request for a one-time, one-year extension for the methodology
requirements in Sec. 438.515(b), as discussed in section I.B.6.d. of
this final rule. We believe that this one-year extension is sufficient
as we already proposed, and are finalizing, an additional year for
implementation beyond the date previously codified at Sec. 438.334.
This additional year was proposed in response to State concerns
identified prior to rulemaking requesting that CMS consider State
current workload and resources when establishing the MAC QRS
implementation timeline. Considering the totality of comments we
received on the proposals in this final rule, we have considered how we
may further stagger implementation deadlines across the board, and
believe that the MAC QRS implementation date is one way to reduce State
burden and address these continued concerns.
We are finalizing the information that States must submit with
their extension request at Sec. 438.515(d)(1), the deadline for
submitting an extension request in Sec. 438.515(d)(2), and the
conditions under which CMS will grant a requested extension at Sec.
438.515(d)(3). As finalized, States will need to include four things in
their extension request. We describe here an example of how a State may
meet these requirements when requesting an extension of a requirement
under Sec. 438.515(b). First, the State must identify the specific
requirement(s) for which it is requesting an extension. When
identifying the specific requirement for which a State is requesting an
extension, the State should be as specific as possible. For example, we
will consider how a State may submit an extension request if it has
collected the necessary Medicare data to include dually eligible
individuals in quality ratings for its managed care plans that enroll
dually eligible individuals, but will need additional time to address
technical issues that prevent the State from completing the
infrastructure that will allow the collected Medicare data to be
integrated with Medicaid managed care data to produce plan quality
ratings for MAC QRS measures that require Medicare data to include
dually eligible individuals and comply with Sec. 438.515(b)(1). In
this example, the State should not request an extension for Sec.
438.515(b)(1) as a whole. Instead, the State should specify the
specific requirement under (b)(1) that it will not be able to meet,
which in this case would be the inclusion of dually eligible
individuals in quality ratings for a subset of the mandatory measures
that require data from both Medicaid and Medicare. If the State's
extension request was granted, the State would still be required to
issue quality ratings for MAC QRS measures by the implementation date
finalized in Sec. 438.505(a)(3), but the ratings for any subset of
mandatory measures that require Medicare data to incorporate dually
eligible individuals would not yet include dually eligible individuals.
Second, the State must include a description of the steps the State
has taken to meet the requirement. Continuing with our previous
example, the State should describe the steps it has taken to date to
establish the infrastructure necessary to integrate Medicare data so
that they can be used to calculate MAC QRS quality ratings for managed
care plan. States should include sufficient detail to allow CMS to
assess whether the State has made a good faith effort to meet the
requirement by the implementation date. Third, the State must explain
why the State will be unable to comply with the requirement by the
implementation date, which must include a detailed description of the
specific barriers the State has faced or faces in complying with the
requirement by the implementation date identified by CMS. Again, the
State should provide sufficient detail to allow CMS to understand why
the State will be unable to fully comply with the requirement by the
implementation date. The State in this example may describe technical
issues it has experienced with its data infrastructure that require the
State to solicit a contractor to fix before it can complete
[[Page 41220]]
the work necessary to integrate the Medicare data and may provide
information showing that the required work will extend past the
implementation deadline. Finally, the State must include a detailed
plan to implement the requirement by the end of the one-year extension
including, but not limited to, how the State will address the
identified implementation barrier. Continuing the example, the State
could include an assessment of the work that must be done to allow the
State to use the collected data, identify the steps needed to fix the
data infrastructure issue and a detailed explanation of how long each
step will take and how the State plans to ensure the steps are
completed successfully before the end of the one-year extension.
We are finalizing a deadline of September 1 of the fourth calendar
year following the effective date of the final rule for requests for a
one-year extension to be submitted to CMS. We believe that this is the
appropriate date because it provides more than 4 years for States to
determine that they need an extension but gives CMS enough time to
review and approve the request prior to the implementation deadline of
December 31, 2028. Finally, we are also finalizing the standards that
CMS will apply in evaluating and determining whether to approve a
request for extension of the deadline for collecting data, calculating
ratings, and issuing ratings in Sec. 438.515(d)(3). Those standards
are discussed and noted in section I.B.6.d of this final rule.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to public comments, we are
finalizing Sec. 438.515 generally as proposed but with several
modifications. First, we are finalizing Sec. 438.515(a) for Medicaid,
and for separate CHIP by cross-reference through an amendment at Sec.
457.1240(d), with modifications to clarify when a State may or may not
delegate to a separate party the actions described in Sec. 438.515(a).
Second, we are modifying paragraph (a)(4) to require that quality
ratings are issued by the State ``for'' each managed care plan instead
of ``to'' each managed care plan. We believe this language aligns
better with our proposal because the ratings are publicly posted, not
just issued to the plan itself. Additionally, we are including the
standard for identifying measures that must be included in a State's
MAC QRS for each health plan described in paragraph (a)(3) (measures
which assesses a service or action covered by the plans' contract with
the State, as determined by the State) to (a)(4) instead of including
only a reference to the standard. We believe that this change also more
clearly reflects our proposed and finalized policy. We are not
finalizing the requirement that enrollment as of July 1 of the
measurement year be used to determine which managed care plans are
subject to the MAC QRS ratings in Sec. 438.515(a)(1)(i) for Medicaid,
and for separate CHIP by cross-reference through an amendment at Sec.
457.1240(d) and will instead provide additional detail on how to
determine if a plan has 500 or more enrollees through subregulatory
guidance. We are finalizing Sec. 438.515(a)(1)(i) to specify that the
enrollment threshold of 500 will be calculated as described by CMS in
the technical resource manual. We are also modifying Sec.
438.515(a)(1)(ii), (a)(2), (a)(3) to clarify the circumstances in which
the undue burden standard may be used to exclude Medicaid FFS or
Medicare data from a MAC QRS quality rating, along with minor language
updates throughout Sec. 438.515 to implement this change, including
removing reference to Sec. 438.515(a)(1) in Sec. 438.515(b)(1), which
is no longer necessary due to the modifications made to Sec.
438.515(a)(1)(ii), (a)(2), and (a)(3). We are also modifying Sec.
438.515(a)(2) by adding language to require that the validation of data
used to calculate performance rates for MAC QRS measures must not be
performed by any entity with a conflict of interest, including managed
care plans. We are also adopting a new paragraph (d) to provide an
opportunity for States to request one-time one-year extension of the
deadline by which the first quality ratings must be issued.
Furthermore, we are making minor language updates throughout Sec.
438.515 to better align with how we describe managed care contracts in
other sections of Subpart G. Finally, as discussed in section I.B.6.h.
of this final rule, we are finalizing the provisions on State
alternative methodologies proposed at Sec. 438.525 to Sec.
438.515(c); as part of this final rule, proposed Sec. 438.515(c)
regarding potential domain level ratings is finalized as paragraph (e).
g. MAC QRS Website Display (Sec. Sec. 438.334(e), 438.520(a),
428.520(b), 457.1240(d))
Current regulations at Sec. 438.334(e), which will be redesignated
at Sec. 438.520(a) of this final rule, require States to prominently
display the quality ratings issued for each MCO, PIHP, or PAHP on the
website required under Sec. 438.10(c)(3) in a manner that complies
with the standards in Sec. 438.10(d). Our policies proposed at Sec.
438.520 would establish new requirements for the website display, which
were informed by extensive consultation with Medicaid beneficiaries and
their caregivers and iterative testing of a MAC QRS website prototype.
The consultation and testing revealed that the presentation of quality
ratings greatly influences the usability and utility of the MAC QRS as
a tool to assist beneficiaries in selecting a plan. Providing
information to beneficiaries in a useable way is necessary for
compliance with section 1932(a)(5) of the Act regarding provision of
information, including comparative information on plan quality, to
beneficiaries when a State mandates enrollment in an MCO. The same
standards apply under section 2103(f)(3) of the Act to CHIP. To promote
the efficient and economical operation of the Medicaid State Plan and
CHIP, we proposed to apply the same requirements for all managed care
programs through our regulations. Our proposed requirements for
Medicaid managed care programs in Sec. 438.520 would also be
applicable to separate CHIP through a cross-reference in the CHIP
regulations at Sec. 457.1240(d).
(1) Navigational and Orienting Information (Sec. Sec. 438.334(e),
438.520(a)(1) and (5), 457.1240(d))
In our initial round of testing, participants struggled to
understand how to use the MAC QRS prototype, and often dismissed or
skipped over the quality ratings, noting that they did not understand
the ratings or how they translated to member care. Subsequent revisions
of our MAC QRS prototype focused on identifying how best to present
quality ratings to prospective users in a way that supported
beneficiaries' ability to understand and incorporate quality ratings
and use them to inform their selection of a health plan. Based on our
testing, it was clear that to truly empower beneficiaries as informed
health care consumers, quality ratings are best presented as one part
of a comprehensive website that efficiently guides the user through the
considerations for identifying a quality health plan. We also learned
that to be more useful, the website should address factors commonly
considered by individuals in selecting a health plan, which include
information not traditionally factored into health plan quality
ratings, such as what providers are in the network and drug coverage.
Using this feedback, we designed, tested, and refined the MAC QRS
display components proposed in this rulemaking to align with the stated
preferences of our user-testing participants.
[[Page 41221]]
The display components identified as most critical were included in
proposed Sec. 438.520; these components fall into three categories:
(1) information to help navigate and understand the content of the MAC
QRS website; (2) information to allow users to identify available
managed care plans and features to tailor display information; and (3)
features that allow beneficiaries to compare managed care plans on
standardized information, including plan performance, cost and coverage
of services and pharmaceuticals, and provider network. Based on the
feedback we received during prototype testing, we believe that these
components are critically important to ensure quality rating
information can be readily understood by beneficiaries and used in
decision-making. Therefore, we proposed at Sec. 438.520 that States
display a MAC QRS website that includes: (1) clear information that is
understandable and usable for navigating a MAC QRS website; (2)
interactive features that allows users to tailor specific information,
such as formulary, provider directory, and quality ratings based on
their entered data; (3) standardized information so that users can
compare managed care programs and plans, based on our identified
information; (4) information that promotes beneficiary understanding of
and trust in the displayed quality ratings, such as data collection
timeframes and validation confirmation; and (5) access to Medicaid and
CHIP enrollment and eligibility information, either directly on the
website or through external resources.
Importantly, we understood from our engagement with States and
interested parties that some display requirements we believe align with
the goals discussed in section I.B.6.a. of this final rule may require
more technology-intensive implementation, such as the interactive
features that allow users to tailor displayed information. Therefore,
we proposed to implement the proposed website display requirements in
two phases. The first phase would be implemented by the end of the
fourth year following the release of the final rule, as proposed at
Sec. 438.505(a)(2). In this phase, States would develop the MAC QRS
website, display quality ratings, and would ensure that users can
access information on plan providers, drug coverage, and view quality
ratings by sex, race, ethnicity, and dual eligibility status from the
MAC QRS website. For instance, in lieu of an interactive search tool,
the State could simply hyperlink to each managed care plan's existing
provider directory and formulary to meet our proposed requirements.
This first phase would accomplish the goal of having a one-stop-shop
for beneficiaries to access the information we believe is key to their
decision-making but would not require States to develop the interactive
tools identified in our research as more beneficial and usable by
prospective users. In the second phase, States would be required to
modify the website to provide a more interactive user experience with
more information readily available to users on the MAC QRS website.
This would entail including or moving some of the information required
in other parts of part 438 to the MAC QRS website. For example, users
could tailor the display of information to their needs and search for
plans that cover their providers and medications without leaving the
MAC QRS website. We discuss our proposal for phasing-in more
interactive features of the website display in more detail later in
this section. We sought comment on which requirements should be phased
in, as well as how much time will be needed.
Given the visual nature of the website display, we provided with
the proposed rule a link to two sample MAC QRS prototypes to illustrate
our proposal; a simple website (Prototype A) that represents the
information we were considering to require by the proposed
implementation date in Sec. 438.505(a)(2) and a more complex MAC QRS
prototype (Prototype B) that represents an interactive website that
includes both the display features from the first implementation phase
and the more technology-intensive features we are considering phasing
in. These prototypes can be found at https://www.medicaid.gov/medicaid/quality-of-care/medicaid-managed-care-quality/quality-rating-system/index.html and were meant to show our overall vision for the proposed
progression of the website display. In addition to the two prototypes,
we indicated our intent to release a MAC QRS design guide following the
final rule, which would provide a comprehensive overview of the results
of our user testing that States may reference in the design of their
MAC QRS website display. These materials would also provide CMS's
interpretation of the requirements of the final rule, as well as
guidance on potential best practices in complying with the rule. We
indicated our intent for the design guide to include several
components, including but not limited to desirable features and content
that States could implement at their discretion, plain language
descriptions of mandatory measures, and display templates that States
would have the option to use in the design of their MAC QRS.
We summarize and respond to public comments received on MAC QRS
website Display (Sec. Sec. 438.334(e), 438.520(a), 457.1240(d)) below.
Comment: Almost all commenters supported our decision to include a
website display with clearly defined components identified by CMS in
the framework for the MAC QRS. Many commenters supported our upfront
engagement with States, plans, beneficiaries, and other interested
parties in the identification of the MAC QRS website display
requirements, as well as our proposal to consult with these parties in
the future to continue to evaluate MAC QRS website display requirements
for continued alignment with beneficiary preferences and values.
Several commenters were especially supportive of requirements meant to
assist dually eligible individuals in the selection of a Medicaid
managed care plan. Some commenters supported the MAC QRS website
display requirements but stated concern about the resources required to
develop the website with each of the components identified by CMS, even
with our proposal to implement the mandatory MAC QRS website in 2
phases. One commenter noted that enhanced FFP and technical assistance
for the website would be vital to successful website development. A
couple of commenters requested that we consider providing an exemption
from the MAC QRS website display requirements for States with a small
number of managed care plans or with a managed care program(s) that
offers a single plan. A couple of commenters requested that we clarify
whether States will be required to provide an alternative way to access
the MAC QRS for enrollees who do not have access to the internet. A few
commenters sought clarification on whether it would be acceptable to
house the required website display on a State website that requires a
login, such as where the State has developed a member portal accessible
to those who have already enrolled in Medicaid and are at the stage of
choosing their managed care plan(s).
Response: We agree with commenters that the MAC QRS website will
require additional State resources to implement. Enhanced Federal match
(FFP funding) may be available for the planning, design,
implementation, and maintenance of the State's MAC QRS website, and the
data infrastructure that supports it, when necessary to comply with the
new MAC QRS website requirements we are finalizing in
[[Page 41222]]
Sec. 438.520, as part of FFP available for the State's Medicaid
Enterprise System (MES). See State Medicaid Director Letter #22-001 for
more information. We encourage States to meet with their MES State
Officer for technical assistance on which operational elements of their
MAC QRS implementation may be eligible for enhanced FFP.
We understand that technical assistance will be needed to help
States successfully implement the MAC QRS website display requirements.
To support States, we intend to issue a MAC QRS website design manual
with additional guidance, and we intend to provide technical assistance
for the design and implementation of the MAC QRS website. The design
manual will include CMS developed resources (for example, plain
language descriptions of the importance and impact of mandatory
measures and metrics), the prototypes for phases 1 and 2 described in
the proposed rule, and additional visual resources for how States could
choose to display MAC QRS display requirements.
We considered commenters' requests to exclude certain States from
the MAC QRS website display requirements, such as smaller States or
those in which beneficiaries do not have a choice of managed care plan.
After reviewing each of the proposed website display requirements in
Sec. 438.520(a), in conjunction with the comments, we believe that
each requirement is important to achieve our stated goals for the MAC
QRS, discussed in section I.6.B.a of the proposed rule, regardless of
State size or number of managed care plans with two exceptions.
Specifically, proposed Sec. 438.520(a)(6)(i) and (ii) for Medicaid,
applied to separate CHIPs by cross-reference through a proposed
amendment at Sec. [thinsp]457.1240(d), would require States to
implement search tools that enable users to identify available managed
care plans that provide coverage for a drug identified by the user and
plans that include a provider identified by the user in the plan's
network of providers. The utility of these search tools is applicable
only to programs with two or more plans offering different drug
formularies and provider networks. Therefore, we are finalizing Sec.
438.520(a)(6)(i) and (ii) with modifications to require these search
tools only for managed care programs with more than one plan. As with
all of the MAC QRS regulations in Sec. Sec. 438.500 through 438.535,
the requirements apply to separate CHIP by cross reference adopted in
an amendment to Sec. 457.1240(d), subject to specific exclusions for
references to dually eligible beneficiaries, a beneficiary support
system, and the terms of Sec. 438.525(b)(1) and (c)(2)(ii) of this
chapter related to consultation with the Medical Care Advisory
Committee.
Regarding the commenter's questions about whether States will be
required to provide an additional way to access the MAC QRS for
enrollees who do not have access to the internet, we decline to require
States to provide the MAC QRS in another format other than the website
display in this rule. However, we expect States will make interested
parties who counsel beneficiaries on the selection of a managed care
plan, such as enrollment brokers, aware of the MAC QRS as a resource,
and these interested parties would be available to assist individuals
who lack internet access by communicating the information displayed on
the website. In addition, independent obligations for States to furnish
information (such as in Sec. 438.10) that may be duplicative of
information in the MAC QRS website display are not revised here so
States may be responsible for making information available in
alternative formats or languages under those other rules. We note that
the language and format requirements in Sec. 438.10(d) do apply to the
MAC QRS website display requirements per Sec. 438.525(a).
Finally, we considered whether it may be acceptable for a State to
comply with the website display requirements, or a portion of the
website display requirements, using a website that is accessible only
to individuals who are enrolled in a managed care program. Though this
approach could allow States to better tailor the website display
information to the user, we believe our goal of empowering
beneficiaries with useful information about the managed care plans
available to them is only achievable if the MAC QRS website is
available to the public, including caregivers or organizations that
counsel or assist individuals with enrollment. States interested in
maintaining a log-in only interface could consider allowing
beneficiaries to log-in to access a more tailored and detailed version
of the MAC QRS website, so long as it is also possible to view the
required website display information as a member of the public or as a
guest who is not currently enrolled in a managed care program.
While we believe that the requirement to prominently display the
requirements on the State's Medicaid website implies that the
information must be immediately and easily available to the public, we
are modifying Sec. 438.520(a) to further clarify our policy. We are
therefore revising Sec. 438.520(a) to include language establishing
that the requirements described in Sec. 438.520(a) must be both
prominently displayed and accessible to the public on the website
required under Sec. 438.10(c)(3). Additionally, we are modifying Sec.
438.520(a)(1)(iii) to avoid implying that States may require users to
provide log-in credentials prior to using or accessing a State's QRS.
Under finalized Sec. 438.520(a)(1)(iii), if users are requested to
input user-specific information, including the information described in
paragraph (2)(i) of this section, the State must provide an explanation
of why the information is requested, how it will be used, and whether
it is optional or required to access a QRS feature or type of
information. We intend to provide States with technical assistance on
how a State could achieve such a site, or modify an existing site, with
minimal duplication.
Comment: Many commenters made recommendations for additional
website display requirements. These display recommendations included
requiring a fair method for the order of health plans displayed on the
website, inclusion of State or national benchmarks for displayed
measures to provide additional context to beneficiaries when reviewing
quality ratings, and an explanation of the benefits and advantages of
integrated care products for dually eligible individuals.
Response: We appreciate commenters' enthusiasm to ensure that the
MAC QRS website display is helpful to beneficiaries and includes
information that supports beneficiaries in identifying a plan that best
fits their individual needs. We considered the additional requirements
proposed by commenters and are declining to finalize additional website
display requirements. To balance the preferences identified during our
user testing with the State burden of website development, we included
the most desirable information and features shared by testing
participants in our requirements at Sec. 438.520(a), which is
applicable to separate CHIP under the proposal, through a cross-
reference at Sec. [thinsp]457.1240(d). While the additional
information proposed by commenters aligns with many of the beneficiary
preferences we identified, a main consideration for our proposal was to
establish minimum content and interactive function standards for the
MAC QRS to be a usable and meaningful tool to users without
overburdening States.
Furthermore, in new Sec. 438.505(a)(1)(ii)--discussed in section
I.B.6.d of this final rule--we are clarifying the State's ability to
include website features in addition to those
[[Page 41223]]
required under Sec. 438.520, including additional measures as
described in Sec. 438.520(b). To support States in the development of
additional, optional display elements that will further assist MAC QRS
users, we will consider providing guidance in our design guide on those
elements recommended by commenters that overlap with preferences we
identified in user testing to assist those States that wish to include
additional display features, such as suggested language to use to
describe the benefits and advantages of integrated products for those
who are dually eligible. While we are not finalizing additional website
display features in this final rule, additional mandatory website
display features may be added (or existing required features removed)
over time through rulemaking to reflect evolving beneficiary
preferences and values identified through our obligation, proposed at
Sec. 438.520(c) and finalized at Sec. 438.520(d), to periodically
consult with interested parties to evaluate the website display
requirements for continued alignment with beneficiary preferences and
values.
Lastly, while we agree with commenters that including State or
national benchmarks could help users interpret displayed quality
ratings, we did not test the use of benchmarks in our user testing or
consult with States, plans, or other interested parties on their use,
nor did we propose to require display of such benchmarks in the
proposed rule. We will consider requiring benchmarking of the quality
ratings in future rulemaking after consulting with beneficiaries,
States, and other interested parties. While not required, States have
the flexibility to include benchmarks as part of their MAC QRS website
display as we would consider the display of benchmarks to be an
additional website display feature, which are permitted under Sec.
438.520(c).
Comment: As we discussed in sections I.B.6. and I.B.6.d. of this
final rule, many commenters provided feedback on the overall
implementation timeline for the MAC QRS and the mandatory MAC QRS
website display. Several of these commenters stated concern about the
ability of States to comply with the MAC QRS website display
requirements proposed at Sec. 438.520 by the implementation deadlines,
citing the time and resources necessary to implement a website display
meeting the proposed requirements. Commenters most frequently stated
concern with their ability to display quality ratings stratified as
required by proposed Sec. 438.520(a)(2)(v) and (a)(6)(iii), and to
implement the more technology-intensive requirements in Sec.
438.520(a)(6).
Response: As discussed in section I.B.6.d. in this final rule, we
are finalizing in Sec. 438.520(b) that States will have the ability to
submit a request for a one-time, one-year extension for the website
display requirements specified at Sec. 438.520(a)(2)(v) and (a)(6),
which were the features most commonly characterized as challenging by
States and plans both during pre-rulemaking engagement and by
commenters in response to our proposed rule. Specifically, States will
be able to request a one-year extension to comply with the requirements
at Sec. 438.520(a)(2)(v), which requires States to display quality
ratings for each managed care plan for mandatory measures stratified by
dual eligibility status, race and ethnicity, and sex and Sec.
438.520(a)(6), which requires States to (1) implement interactive
search tools that enable users to identify available managed care plans
that provide coverage for a drug identified or include a provider
identified by the user and (2) to stratify quality ratings by certain
additional factors identified by CMS. States will not be able to
request an extension for implementing the display requirements, at
Sec. 438.520(a)(1), that States include information necessary for
beneficiaries to understand and navigate the MAC QRS website; at Sec.
438.520(a)(2)(i) through (iv), that States include information that
allows beneficiaries to identify managed care plans available to them
that align with their coverage needs and preferences; at Sec.
438.520(a)(3), that States provide standardized information identified
by CMS that allows users to compare available managed care plans and
programs; at Sec. 438.520(a)(4), that information on quality ratings
be displayed in a manner that promotes beneficiary understanding of and
trust in the ratings; and at Sec. 438.520(a)(5), that the QRS website
include information or hyperlinks directing beneficiaries to resources
on how and where to apply for Medicaid and enroll in a Medicaid or CHIP
plan. In our view, States currently should have easy access the
information required to comply with these provisions.
We also discussed in I.B.6.d. and I.B.6.f. of this rule that we are
finalizing authority for States to request and CMS to grant one-time,
one-year extensions for calculating and issuing MAC QRS quality ratings
that fully comply with the methodology described in Sec. 438.515(b)
(Sec. 438.515(d)) and for implementing certain MAC QRS website display
requirements (Sec. 438.520(b)) using the same requirements for what
must be included in the request and what standards CMS will use to
decide whether to grant an extension. We are finalizing at Sec.
438.520(b)(1) that an extension request for a requirement under Sec.
438.520 must also include the information described in Sec.
438.515(d)(1) and will be assessed by CMS using the same standards and
conditions finalized at Sec. 438.515(d)(3).
Finally, at Sec. 438.520(b)(2), we are finalizing the deadlines by
which a State must submit an extension request for a website display
requirement, based on whether the requirement must be implemented in
phase 1 or phase 2 of the website display implementation. For
extensions of the requirements specified in paragraph (a)(2)(v), the
extension request must be submitted to CMS no later than September 1 of
the fourth calendar year following the effective date of the final rule
(that is, September 1, 2028). For extensions of the website
requirements specified in paragraph (a)(6) of this section, the
extension request must be submitted to CMS no later than four months
prior to the implementation date specified by CMS pursuant to paragraph
(a)(6) for those requirements. We have chosen this deadline as it
maximizes the amount of time that a State has to identify that an
extension may be necessary but leaves enough time for CMS to review and
provide a determination for the extension request prior to the
implementation date.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. Sec. 438.520(a) and 457.1240(d) as proposed except we are
modifying Sec. 438.520(a) to require that States must prominently
display and make accessible to the public on the State's Medicaid
website required under Sec. 438.10(c)(3) the display requirements in
Sec. 438.520(a).
(2) Navigational and Orienting Information (Sec. Sec. 438.334(e),
438.520(a)(1) and (5), 457.1240(d))
Throughout our pre-rulemaking engagement activities, beneficiaries
consistently stated the expectation that State Medicaid websites and
the online plan selection processes will be difficult to navigate, and
many users shared that they previously had been confused and
overwhelmed during the process of selecting a managed care plan. When
shown an initial draft MAC QRS prototype, some beneficiaries reported
struggling to understand the purpose of the prototype and how and when
the information could be useful.
[[Page 41224]]
Considering this feedback, we tested a number of features to support
users in understanding and navigating potential websites and found that
beneficiaries responded positively to live assistance services (such as
chat and telephone), and pop-ups and other mechanisms of displaying
information to explain content as participants navigated the prototype.
We found that providing upfront clear information about what the
MAC QRS is (a State -run, unbiased source of information on managed
care plans and their performance) and is not (a sales funnel for a
particular managed care plan) and what it can do (help compare
available managed care plans and their quality and performance) and
what it cannot do (determine eligibility for Medicaid and CHIP or
enroll beneficiaries in a health plan) allowed participants to quickly
determine the purpose of the MAC QRS and whether the information
available will be a useful tool for them when selecting a managed care
plan. We also found that some beneficiaries initially needed additional
background on relevant programs such as Medicaid, CHIP, and Medicare to
understand if they were eligible for, or enrolled in, a plan or program
with ratings or information available through the MAC QRS. Once the
purpose of the MAC QRS was established, beneficiaries positively
responded to features that clearly conveyed how to use the information
available in the MAC QRS to select a managed care plan in a simple,
easy to understand manner, such as providing the steps to identifying,
comparing, and selecting a managed care plan. In our testing prototype,
users were wary about entering personal information to help identify
and tailor the display of available managed care plans, such as zip
code, age, sex, and health conditions-information that can be helpful
in navigating a website designed to help individuals select a plan.
However, when a clear explanation of how their information will be
used, users became more comfortable providing personal information.
Based on these findings from user testing, we proposed certain
navigational requirements for the MAC QRS website display requirements
in proposed Sec. 438.520(a)(1). Specifically, we proposed in Sec.
438.520(a)(1)(i) that States must provide users with information
necessary to understand and navigate the MAC QRS display, including a
requirement to provide users with information on the MAC QRS purpose,
relevant information on Medicaid, CHIP, and Medicare, and an overview
of how the MAC QRS website can be used to select a managed care plan.
We proposed in Sec. 438.520(a)(1)(ii) that States must provide
information on how to access the beneficiary support system required
under existing Sec. 438.71 to answer questions related to the MAC QRS
(described in section I.B.6.d. of this final rule). Since beneficiary
support systems are not currently required for separate CHIPs, our
proposed amendment to Sec. 457.1240(d) excludes references to this
requirement. We solicited comments on whether beneficiary supports like
those proposed for Medicaid should be required for States for separate
CHIP in connection with the MAC QRS information or on a broader basis
through future rulemaking. Under proposed Sec. 438.520(a)(1)(iii) for
Medicaid, and for separate CHIPs by cross-reference through a proposed
amendment at Sec. 457.1240(d), States would be required to explain why
user-specific information is requested, inform users of how any
information they provide would be used, and whether it is optional or
required. Finally, under proposed Sec. 438.520(a)(5), States would be
required to provide users with information or hyperlinks that direct
users to resources on how and where to apply for Medicaid and enroll in
a Medicaid or CHIP plan. This requirement would ensure that users can
easily navigate to the next steps in the plan selection process after
reviewing the MAC QRS website.
We noted in the proposed rule that we believe that States could
implement these features by relying on information already posted on
their websites or expanding current requirements. For instance, States
are required to have a beneficiary support system at Sec. 438.71 in
place and could train staff who support this system to provide similar
support to individuals on navigating the MAC QRS. Through an
environmental scan of State Medicaid websites, we found that all States
currently have information describing their Medicaid and CHIP programs,
as well as programs available to those dually eligible for Medicare and
Medicaid. In both phases of the website display implementation, States
may use these existing resources to comply with the requirements of
proposed Sec. 438.520(a)(1)(i) and (ii) either by hyperlinking to
these resources from the MAC QRS website or incorporating existing
information into the MAC QRS website display. Finally, we noted that as
part of the MAC QRS design guide, we intend to provide plain language
descriptions of the information that States would be required to
provide under the final rule--for example an overview of how to use the
MAC QRS to select a quality managed care plan). We noted that States
would be able to use or tailor these CMS-developed descriptions for
their MAC QRS websites.
We did not receive any comments on the proposed regulations
relating to navigational and orienting information required for the MAC
QRS (Sec. Sec. 438.334(e), 438.520(a)(1) and (5). For the reasons
outlined in the proposed rule we are finalizing Sec. Sec. 438.334(e),
438.520(a)(1) and (5), and 457.1240(d)) as proposed. As discussed in
this final rule in Section I.B.6.g, we are finalizing Sec.
438.520(a)(1)(iii) with modification to avoid implying that States may
require users to provide log-in credentials prior to using or accessing
a State's QRS. This modification aligns with finalized Sec. 438.510(a)
establishing that the requirements described in Sec. 438.520(a) must
be both prominently displayed and accessible to the public on the
website required under Sec. 438.10(c)(3).
(3) Tailoring of MAC QRS Display Content (Sec. Sec. 438.334(e),
438.520(a)(2), 438.520(a)(6) and 457.1240(d))
In conducting user testing to inform development of the proposed
rule, we found that testing participants responded positively to
features that allowed them to reduce the number of plans displayed to
only those that met specific criteria, such as geographic location and
eligibility requirements (for example, beneficiary age). However, we
also found that testing participants were reluctant to provide
information, such as their age, needed for such features unless their
privacy concerns were addressed. Providing information on how and why
such data would be used generally addressed such privacy concerns.
Beneficiaries noted most comfortable providing their age and geographic
location to identify health plans and we believe that these data points
are likely sufficient to reduce the number of plans available to
beneficiaries for comparison while also minimizing burden on States.
Furthermore, dually eligible participants responded positively to the
ability to easily identify those plans for which they were eligible.
Therefore, we proposed at Sec. 438.520(a)(2)(i) for Medicaid, and for
separate CHIPs by cross-reference through a proposed amendment at Sec.
457.1240(d), that each State's website must allow users to view
available plans for which users may be eligible based on their age,
geographic location, and dual eligibility status, as well as other
demographic data identified by CMS in display guidance. Under the
proposed rule, States would
[[Page 41225]]
retain the flexibility to allow users to use additional information or
eligibility criteria to further narrow down available managed care
plans, such as searching by health condition like pregnancy or
diabetes. In both phases of the website display implementation, States
could meet this requirement by linking to a PDF that clearly indicates
plans available to a beneficiary based on the identified factors (see
Prototype A at https://www.medicaid.gov/medicaid/quality-of-care/medicaid-managed-care-quality/quality-rating-system/index.html).
However, States could instead choose to implement an interactive
display that allows the beneficiaries to input information upfront, and
then tailors which managed care plans' information is displayed based
on this information (see Prototype B at https://www.medicaid.gov/medicaid/quality-of-care/medicaid-managed-care-quality/quality-rating-system/index.html).
In our environmental scan of State Medicaid websites, we identified
many States that provide such features to help beneficiaries identify
plans available to them. We believe this requirement would support the
MAC QRS website being a one-stop-shop where beneficiaries could select
a plan based on their characteristics or needs. Therefore, we proposed
to require the development and use of the MAC QRS website in this
manner, which we believe both would support the beneficiary enrollment
and disenrollment protections established in section 1932(a)(4)(A) of
the Act and would be necessary for the proper and efficient operation
of State Medicaid plans, consistent with section 1902(a)(4) of the Act.
Based on our testing, we believe that the additional health plan
information would be necessary and appropriate for beneficiaries to
effectively use the information on plan quality ratings when choosing a
managed care plan. Further, providing this flexibility for
beneficiaries to choose how certain comparative information is
presented is consistent with the requirement in section 1932(a)(5)(C)
of the Act. Note that in Sec. 438.505(b), we have extended the
requirements in section 1932(a)(5)(C) of the Act to PIHPs and PAHPs, as
well as MCOs, under the authority in section 1902(a)(4) of the Act, for
States to provide comparative information to beneficiaries about
Medicaid managed care plans.
Participants in our user testing also prioritized confirming
whether their current provider or prescriptions will be covered under a
plan prior to navigating to other details about the plan. Therefore, we
proposed at Sec. 438.520(a)(2)(ii) and (iii) for Medicaid, and for
separate CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), to require States to display drug coverage and provider
directory information for each managed care plan in phase one of the
website display requirements. This information is already required to
be available from managed care plans under existing Sec. 438.10(h)(1)
and (2) and438.10(i) which set forth the general requirements for
provider directory and formulary information that plans must make
available to beneficiaries. In the first phase, States could satisfy
the proposed requirements by providing hyperlinks to existing plan
formularies and provider directories required under Sec. 438.10(h) and
(i) (See Prototype A); this capability would be required under the
proposed rule by the general implementation date proposed under Sec.
438.505(a)(2).
As previously mentioned, user-testing participants preferred an
integrated search feature that allows them to identify available plans
that offered coverage of specific prescription drugs and providers,
rather than being directed via hyperlink to each managed care plan's
website, which will require them to conduct multiple searches to
identify the plans that cover their prescriptions and providers. When
consulted during the pre-rulemaking process, States were supportive of
the display requirements we ultimately proposed in Sec. 438.520(a)(2)
but noted that a searchable formulary or directory would be difficult
to design and implement by the implementation date proposed in Sec.
438.505(a)(2). Under Sec. 431.60(a) of the May 2020 CMS
Interoperability and Patient Access final rule,\230\ States must
implement an application programming interface (API) that permits
third-party retrieval of certain data specified by CMS, including
information about covered outpatient drugs and preferred drug list
information (Sec. 431.60(b)(4)) and provider directory information
(Sec. 431.70(b)). These requirements are applied in Medicaid managed
care to MCOs, PIHP, and PAHPs under Sec. 438.242(b)(5) and (6).
Therefore, we believe that burden on managed care plans and States to
provide the interactive search tools proposed in Sec. 438.520(a)(2)
would be minimized given that the data necessary to offer such tools is
the same data that plans must make available through an API as
specified in Sec. 438.242(b)(5) and (6); States could compile and
leverage this existing data to offer the search functionality we
proposed. However, we agreed with States that they will need additional
time to implement dynamic, interactive website display features.
Therefore, we proposed, at Sec. 438.520(a)(6)(i) and (ii) for
Medicaid, and for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d), that States would be given at least two
additional years after a State's initial implementation of their MAC
QRS (that is, two additional years after the date proposed at Sec.
438.505(a)(2) for initial implementation) to display provider directory
and drug coverage information for each managed care plan through an
integrated, interactive search feature that would allow users to
identify plans that cover certain providers and prescriptions (see
Prototype B). We solicited comment on this phased-in approach and a
reasonable timeline for the second phase. In addition, we sought
comment on the display requirements and technical assistance needs.
---------------------------------------------------------------------------
\230\ Medicare and Medicaid Programs; Patient Protection and
Affordable Care Act; Interoperability and Patient Access for
Medicare Advantage Organization and Medicaid Managed Care Plans,
State Medicaid Agencies, CHIP Agencies and CHIP Managed Care
Entities, Issuers of Qualified Health Plans on the Federally-
Facilitated Exchanges, and Health Care Providers. CMS-9115-F. (85 FR
25510).), which appeared in the Federal Register on May 1, 2020.
(available online at https://www.govinfo.gov/content/pkg/FR-2020-05-01/pdf/2020-05050.pdf).
---------------------------------------------------------------------------
Proposed Sec. 438.520(a)(6)(iii) and (iv) also included the
display of stratified quality ratings. In this second phase, States
would be required implement an interactive display that allows
beneficiaries to view and filter quality ratings for specific mandatory
measures (to be identified by CMS). The factors by which the quality
ratings would be filtered include the stratification factors already
required in phase one under proposed Sec. 438.520(a)(2)(v) (that is,
dual eligibility status, race and ethnicity, and sex) plus additional
factors identified by CMS for the second implementation phase under
Sec. 438.520(a)(6)(iii) including, but not limited to, age, rural/
urban status, disability, and language spoken by the enrollees who have
received services (see Prototype B). This proposal addressed feedback
we received in testing the MAC QRS prototype websites with
beneficiaries. We tested dynamic filters that allowed participants to
view quality ratings representing services provided only to plan
beneficiaries that aligned with participant-selected factors such as
race, sex, and age. This feature increased participant positivity and
trust in the quality ratings displayed, especially among those who
raised concerns about
[[Page 41226]]
the uniformity of experience among beneficiaries.
Like our proposal to phase-in interactive plan provider directory
and formulary tools, we proposed to phase in the interactive display of
quality ratings stratified by various demographic factors. In Sec.
438.520(a)(2)(v) for Medicaid, and for separate CHIP by cross-reference
through a proposed amendment at Sec. 457.1240(d), we proposed a first
phase of implementation for this information that will require States
to display quality ratings for mandatory measures stratified by factors
including dual eligibility status, race and ethnicity, and sex. To
reduce burden on States, we proposed to permit States to report the
same measurement and stratification methodologies and classifications
as those proposed in the Mandatory Medicaid and CHIP Core Set Reporting
proposed rule and the Access proposed rule.\231\ Measuring health plan
performance and making quality ratings available on a stratified basis
will assist in identifying health disparities. Driving improvements in
quality is a cornerstone of the CMS approach to advancing health equity
and aligns with the CMS Strategic Priorities. In the first phase of
implementation that we proposed for the MAC QRS website display, a
State's website would need to provide access to quality ratings that
reflect the quality of care furnished to all of a plan's enrollees, as
well as quality ratings that reflect the quality of care furnished to
these subpopulations of a plan's enrollees (see Prototype A). We noted
that this requirement would be consistent with current efforts among
measure stewards and other Federal reporting programs, such as the
Child and Adult Core Sets, to stratify data by various demographic
factors to ensure that disparities in health outcomes are identified
and addressed (See Core Set proposed rule, 87 FR 51313). We proposed
selecting the same factors required for the Core Sets as our initial
stratification factors, as we believe this information would be most
likely to be collected as compared to our other potential
stratification factors. Furthermore, many testing participants shared
their concern that health outcomes and customer experience may vary
when stratified by race, ethnicity, or sex. We also believe that those
who are dually eligible to receive Medicare and full Medicaid benefits
would find it particularly useful to see quality ratings that focus
specifically on the experience of such dually eligible beneficiaries.
We believe that such ratings would allow beneficiaries who are dually
eligible for Medicare and Medicaid to best identify a high-quality
health plan, given the unique access considerations among this
population. Under the proposed rule, States would be required to
display this information by the general MAC QRS implementation date
proposed under Sec. 438.505(a)(2). We sought comment on the
feasibility of the proposed factors for stratifying quality ratings by
the initial implementation date for the first phase of the website
display requirements, and whether certain mandatory measures may be
more feasible to stratify by these factors than others. We proposed
that the interactive tools required under the proposed rule would need
to be available no earlier than 2 years after the general MAC QRS
implementation date. We requested comment on this proposal, including
the timeline for implementation, technical assistance that may be
necessary for States to implement the proposed feature, and the
proposed factors by which quality ratings should be stratified.
---------------------------------------------------------------------------
\231\ See Medicaid Program and CHIP; Mandatory Medicaid and
Children's Health Insurance Program (CHIP) Core Set Reporting, 87 FR
51303 page 51328 (finalized at 42 CFR 437.10(b)(7) in 88 FR 60278)
and Medicaid Program; Ensuring Access to Medicaid Services, 88 FR
27960 page 28084.
---------------------------------------------------------------------------
We summarize and respond to public comments received on tailoring
the MAC QRS website display content (Sec. Sec. 438.334(e),
438.520(a)(2) and (a)(6), and 457.1240(d)) below.
Comment: Several commenters supported our proposal to require that
display of quality ratings for mandatory measures be stratified by
factors identified by CMS. Many commenters shared current challenges
related to capturing and reporting high-quality, reliable data that can
be used to stratify quality measures and requested that CMS continue to
work with States and other interested parties to improve collection of
this data, with many requesting that CMS enhance current guidance to
standardize data collection for race, ethnicity and language, sexual
orientation and gender identity (SOGI), and Social Determinants of
Health information so that these data can be stratified. Many
commenters requested that we require age, language and rural/urban
status be implemented as stratification factors in phase 1 instead of
phase 2, because they thought that this information is easily
accessible to plans and the State. Several commenters requested that we
clarify that we would require States to display quality ratings for
mandatory measures stratified by all the factors listed in Sec.
438.520(a)(6)(iii) in the second phase of MAC QRS website
implementation. Many commenters requested that we add to or modify our
proposed stratification factors to include SOGI and that we stratify
not by disability as proposed, but by disability type. One commenter
requested that we include pregnancy as a stratification factor.
Response: We recognize that stratification of measures is an
evolving area and CMS will continue to provide guidance and technical
assistance to support States and plans in the collection of data
necessary to implement CMS required stratification factors. We are
declining to finalize changes to the stratification factors implemented
in phase 1, as we continue to believe that data on dual eligibility
status, race and ethnicity, and sex are most accessible to States and
likely to be collected as compared to the other stratification factors
that are identified in proposed Sec. 438.520 for Medicaid and through
a cross-reference at revised Sec. [thinsp]457.1240(d) for separate
CHIP. We are also declining to identify a definitive list of
stratification factors for phase two, though we encourage States to
include additional stratification factors in either phase if they have
the data to do so. We agree that the stratification factors proposed by
commenters are important in highlighting areas of inequity and we
intend to consider SOGI, pregnancy, and disability type as
stratification factors for phase two of website implementation. When
issuing guidance on stratification of mandatory measures, we will
consider whether stratification is currently required by the measure
steward or other CMS programs and by which factors, in accordance with
our finalized provisions at Sec. 438.530(b) for Medicaid, and for
separate CHIP by cross-reference through an amendment at Sec.
[thinsp]457.1240(d).
Comment: Most commenters supported the additional website
components proposed in Sec. 438.520(a)(6) for phase two, including the
searchable formulary and provider directories and an interactive tool
that allows user to view plan ratings stratified by factors identified
by CMS. A couple of commenters questioned the utility of the phase 2
requirements and whether they would provide beneficiaries with tools
and information that are important to beneficiaries.
Response: We appreciate the support commenters gave to the
additional website components and disagree with commenters that
questioned the utility and desirability of the tools and information
required in phase 2 of the MAC QRS website display. These features were
identified as desirable to MAC QRS users through the extensive user
testing described in section I.B.6.g
[[Page 41227]]
of the proposed rule. The formulary and provider search tools were
developed directly from beneficiary input that they often have several
prescribed medications, several providers, or both and searching each
available plan's formulary or provider directory to determine coverage
of a drug and their current provider(s) is time-consuming and
unrealistic. Once we presented a website prototype that included these
tools, they were consistently identified among the most desirable
features. As noted previously, the provider directory and preferred
drug list data available through the MAC QRS tools is the same data
that plans must make available through an API as specified in Sec.
438.242(b)(5) and (6) and States could compile and leverage this
existing data to offer the required search functionality. Additionally,
our proposal to display stratified quality ratings was based on initial
conversations with beneficiaries during which participants frequently
shared their own experience with health inequities and, once stratified
ratings were included in the prototype, we consistently received
positive feedback from users who found it meaningful to understand the
quality of care provided to ``people like them'' who are enrolled in a
health plan.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. Sec. 438.520(a)(2) and 457.1240(d), including the redesignation
of the requirements about the availability of MAC QRS information from
Sec. 438.334(e) as proposed. We are also finalizing Sec.
438.520(a)(6) with modification to narrow the scope of the requirements
proposed in Sec. 438.520(a)(6)(i) and (ii) that States would be
required to display a search tool that enables users to identify
available managed care plans that provide coverage for a drug
identified by the user and a search tool that enables users to identify
available managed care plans that include a specific provider in the
plan's network. In this final rule we are applying these requirements
only to managed care plans that participate in managed care programs
with two or more participating plans.
(4) Plan Comparison Information (Sec. Sec. 438.334(e), 438.520(a)(3)
and 457.1240(d))
Our prototype testing showed that participants were often
frustrated and confused by the need to navigate multiple websites to
obtain health plan information (such as out of pocket expenses, plan
coverage of benefits, providers, and prescription drug coverage) and
health plan metrics (such as average time spent waiting for care,
weekend and evening hours, and appointment wait times). When all this
information was compiled into a standardized display along with quality
ratings in our website prototype, participants responded positively.
They found the ability to compare plans on out-of-pocket expenses and
covered benefits to be particularly useful. After identifying available
plans that aligned with their needs and preferences on these two
variables, some participants reflected that they would use quality
ratings as an additional way to narrow down and filter their options.
When presented alongside quality ratings, this information allowed
beneficiaries to better compare plans. Based on this testing, we
proposed in Sec. 438.520(a)(3) for Medicaid, and for separate CHIP by
cross-reference through a proposed amendment at Sec. 457.1240(d), to
require States to display, for each managed care plan, standardized
information identified by CMS that would allow users to compare
available managed care plans and programs, including the name, website,
and customer service telephone hot line for the plan; premium and cost
sharing information; a summary of covered benefits; certain metrics of
managed care plan access and performance; and whether the managed care
plan offers an integrated Medicare-Medicaid plan. Under proposed Sec.
438.520(a)(3)(iii) and (iv), States would be required to identify
comparative information about plans, specifically differences in
premiums, cost-sharing, and a summary of benefits including differences
among managed care plans, to help users quickly identify where managed
care plans do and do not differ. We believe that this information
should be readily available to States and that providing comparative
information of this type is consistent with the information disclosure
requirements in section 1932(a)(5) of the Act. These requirements were
illustrated in Prototypes A and B.
Under proposed Sec. 438.520(a)(3)(v), States would also be
required to provide on their MAC QRS website certain metrics of managed
care plan performance that States must make available to the public
under part 438, subparts B and D of the Medicaid regulations, including
certain data most recently reported to CMS on each managed care program
under Sec. 438.66(e) (Medicaid only) and the results of a secret
shopper survey proposed at Sec. 438.68(f). Proposed paragraph
(a)(3)(v) would authorize CMS to specify the metrics that would be
required to be displayed. States already report information related to
grievances, appeals, availability, and accessibility of covered
services under Sec. 438.66(e) and we believe that providing some of
this information on the MAC QRS website would be responsive to input we
received from our testing participants and improve transparency for
beneficiaries without imposing significant burden on States since the
information is already reported to us. Under the proposed rule, States
could integrate these metrics into the display of MAC QRS measures on
the MAC QRS website or, as illustrated in Prototypes A and B, they
could provide a hyperlink to an existing page with the identified
information in the MAC QRS web page. We noted that these proposed
requirements also would support our goal for the MAC QRS to be a one-
stop-shop where beneficiaries can access a wide variety of information
on plan quality and performance in a user-friendly format to help
inform their plan selection. We sought comment on the inclusion of
metrics to be specified by CMS, and whether we should consider phasing
in certain metrics first before others.
Lastly, at Sec. 438.530(a)(3)(vi), we proposed to require States
to indicate when a managed care plan offers an integrated Medicare-
Medicaid plan or a highly or fully integrated Medicare Advantage D-SNP,
and to provide a link to the integrated plan's rating under the MA and
Part D quality rating system. (The definitions of fully integrated dual
eligible special needs plan and highly integrated dual eligible special
needs plan are at 42 CFR 422.2.) We believe this is the simplest and
most efficient way to help dually eligible users understand how to use
the two quality ratings together. Both Prototype A and B illustrate
this requirement through a hyperlink to the integrated plan's MA and
Part D quality rating. We sought comment on these requirements and
requested feedback on the feasibility of providing this information on
plan integration and MA and Part D ratings by the date initial
implementation date.
We summarize and respond to public comments received on the
proposed requirements for the MAC QRS website to include plan
comparison information (Sec. Sec. 438.334(e), 438.520(a)(3), and
457.1240(d)) below.
Comment: A couple of commenters recommended including additional
plan comparison information about the accessibility of covered
benefits, such as an indication of the services and drugs that require
prior authorization by the plan and appointment wait times.
[[Page 41228]]
Response: We agree that including information on the extent to
which a covered service is accessible to beneficiaries (such as whether
prior authorization is required and appointment wait times) is
desirable and helpful to beneficiaries. Our proposed regulations give
CMS discretion to include information about prior authorization
requirements related to drug coverage as ``other similar information''
under Sec. 438.520(a)(2)(ii), which requires States to provide a
description of the drug coverage of each managed care plan, including
the formulary information specified in Sec. 438.10(i) and other
similar information as specified by CMS. To respond to requests to
provide prior authorization information for both drugs and services,
and to align with Sec. 438.520(a)(2)(ii), we are modifying Sec.
438.520(a)(3)(iv) to add discretion for CMS to specify, in addition to
requiring that the MAC QRS website display a summary of benefits
including differences in benefits among available managed care plans
within a single program, other similar information on benefits to be
included on the website such as whether access to the benefit requires
prior authorization from the plan. This modification also aligns with
Sec. 438.520(a)(3)(v), which provides CMS with the discretion to
require States to display in their MAC QRS metrics of existing managed
care performance that States already report to CMS under subparts B and
D of this part. We intend to include access metrics from these sources,
including the Access Standards Report required in Sec. 438.207(d)
through (f), which include new requirements to establish and report on
standards for appointment wait times finalized in this final rule at
Sec. 438.207(f).
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. Sec. 438.520(a)(3) and 457.1240(d) as proposed and with a
modification at Sec. 438.520(a)(3)(iv) to add discretion for CMS to
require States to include on the MAC QRS website, in addition to
displaying a summary of benefits including differences in benefits
among available managed care plans within a single program, other
similar information on benefits such as whether access to the benefit
requires prior authorization from the plan. We are also finalizing the
proposed changes to Sec. 438.334.
(5) Information on Quality Ratings (Sec. Sec. 438.334(e),
438.520(a)(4), 438.520(c) and 457.1240(d))
Our user testing found that participants were initially skeptical
of data provided in the MAC QRS, stating confusion regarding the source
of the data used and mistrust in the ratings generated because they
were uncertain how they were derived. Additionally, some participants
stated that they did not trust information from the health plans. In an
effort to improve user trust through data transparency, we tested
providing clear and comprehensive information on displayed quality
ratings and identified three types of information that together
resulted in increased participant trust of the quality ratings. These
include descriptions of the quality ratings in plain language, how
recent the data displayed are, and how the data were confirmed to be
accurate. Based on this user feedback, in Sec. 438.520(a)(4)(i) for
Medicaid, and for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d), we proposed that States will provide
plain language descriptions of the importance and impact of each
quality measure. We found that a simple explanation of what a quality
measure is assessing, as well as how the measure relates to a
beneficiary's health and well-being, were most helpful to users in
understanding displayed quality ratings. A simple explanation will
satisfy the proposed requirement. Both Prototype A and B include
example explanations for our proposed mandatory measures, and we intend
to include a sample explanation of the quality ratings for each final
mandatory measure in the design guide discussed in section I.B.6.g. of
the proposed rule, which States may choose to use.
Users responded positively to information that showed when data
were collected and whether data were validated. They appreciated
knowing that an external, neutral organization calculated the measures,
noting that they will not trust the measures if they were calculated
solely by the managed care plan. In Sec. 438.520(a)(4)(ii) for
Medicaid, and for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d), we proposed that States be required to
indicate the measurement period during which data were produced to
calculate the displayed quality ratings. In Sec. 438.520(a)(4)(iii)
for Medicaid, and for separate CHIP by cross-reference through a
proposed amendment at Sec. 457.1240(d), we proposed that States must
provide on the MAC QRS website when, how, and by whom quality ratings
have been validated. Under our proposal, this information would be
provided in plain language and convey the role of parties (other than
the rated plans) in validating data used to calculate the quality
ratings, which will promote transparency and trustworthiness in the
data. We note that States may use the External Quality Review optional
activity described at Sec. 438.358(c)(6) for EQRO assistance with
quality ratings and link to the validated data included in the EQR
technical reports. We solicited comments on the display requirement
proposed in Sec. 438.520(a)(4) and request feedback on the feasibility
of implementing these requirements by the initial implementation date
proposed at Sec. 438.505(a)(2).
Finally, we believe that user preferences for how information
should be displayed may change over time as the available data and the
technology that enables website display of available data evolves. To
ensure that the MAC QRS website continues to be a useful tool, we
intend to periodically engage in additional consultations with MAC QRS
users as part of a continuous improvement approach. We proposed in
Sec. 438.520(c) for Medicaid, and for separate CHIP by cross-reference
through a proposed amendment at Sec. 457.1240(d), that CMS
periodically consult with interested parties, including MAC QRS users
such as Medicaid and CHIP beneficiaries and their caregivers, to
maintain and update the website display requirements for the
information required in proposed Sec. 438.520(a). These consultations
may result in proposed changes through rulemaking that add to or refine
existing requirements or remove existing requirements that
beneficiaries no longer find useful.
We did not receive any comments in response to our proposals for
the MAC QRS website to include certain information about the published
quality ratings and, for the reasons outlined in the proposed rule, we
are finalizing Sec. Sec. 438.520(a)(4) and (c), and 457.1240(d) as
proposed along with the proposed changes to Sec. 438.334.
(6) Display of Additional Measures Not on The Mandatory Measure Set
(Sec. Sec. 438.334(e), 438.520(c) and 457.1240(d))
Section Sec. 438.510(a), as proposed and finalized at Sec.
438.510(a)(2), provides that States will have the option to display
additional measures that are not included in the mandatory measure set
if the two requirements set forth in proposed Sec. 438.520(b)(1) and
(2) (finalized at Sec. 438.520(c)(2)(i) and (ii))
[[Page 41229]]
are met. The same standards will apply to separate CHIP as proposed in
Sec. 457.1240(d) by cross-referencing part 438, subpart G.
The first requirement, proposed in Sec. 438.520(b)(1), would
require a State that chooses to display quality ratings for additional
measures not included in the mandatory measures set described in Sec.
438.510(a), to obtain input from prospective MAC QRS users, including
beneficiaries, their caregivers, and, if the State enrolls American
Indians/Alaska Natives in managed care, consult with Tribes and Tribal
Organizations in accordance with the State's Tribal consultation
policy. In both the proposed rule and this final rule, we have
extensively noted the importance of the prospective user testing we
engaged in and the extent to which this feedback directed our design of
the MAC QRS framework and selection of the preliminary mandatory
measure set. Just as beneficiary participation was, and will continue
to be, critical in our design of the MAC QRS, we believe beneficiary
participation is critical in the identification of any additional
measures included in a State's MAC QRS. States could meet this
requirement by ensuring that beneficiary members of the MCAC are
present when obtaining input from the State's MCAC, or may engage in
direct beneficiary interviews, focus groups, or prototype testing.
The second requirement, proposed at Sec. 438.520(b)(2), would
require that States must document the input received from prospective
MAC QRS users on such additional measures, the modifications made to
the proposed additional measures in response to the input, and
rationale for not accepting input. We also proposed this documentation
to be reported as part of the MAC QRS annual report proposed under
Sec. 438.535(a)(3). For States that currently publish a QRS-like
website, measures that are not in the mandatory measure set will be
considered additional measures and will be subject to this process
prior to display. If a State obtained user input for the additional
measure prior to displaying the measure on its current website, the
State may use this input to meet this requirement.
We did not receive any comments in response to our proposals
authorizing display of additional measures not on the mandatory measure
list, subject to requirements for States to obtain and document input
on the additional measures. For the reasons outlined in the proposed
rule, we are finalizing the provisions proposed at Sec. Sec.
438.520(b) and 457.1240(d) largely as proposed and the proposed changes
to Sec. 438.334(e), except that we are finalizing these provisions at
Sec. 438.520(c)(2) to address the addition of new paragraph Sec.
438.520(b) finalizing an implementation extension for certain website
requirements. Furthermore, we are modifying paragraph (c) to clearly
establish that States may implement additional website features not
described in Sec. 438.520(a) in their MAC QRS (to align with
modifications to Sec. 438.505(a)(1)(ii) establishing the same),
including the display of additional measures not included in the
mandatory measure set.
h. Alternative Quality Rating System (Sec. Sec. 438.334(c), 438.525
and 457.1240(d))
Current regulations at Sec. 438.334(c) allow States, with CMS
approval, to implement an alternative managed care quality system
(alternative QRS) that uses different quality measures or applies a
different methodology if the conditions set forth in Sec.
438.334(c)(1)(i) through (iii) are met, including that the measure or
methodology must be substantially comparable to the measures and
methodology established by CMS under the MAC QRS framework. Based on
feedback we received during our engagement with States and other
interested parties, we proposed to redesignate Sec. 438.334(c) at
Sec. 438.525 for Medicaid and to modify the current policy by
narrowing the changes that would require our approval. We proposed to
apply the same requirements for both Medicaid and separate CHIP managed
care programs by revising Sec. 457.1240(d) to require States to comply
with Sec. 438.525.
First, we proposed to remove the requirement in current Sec.
438.334(c)(1) that CMS must approve use of ``different performance
measures'' as part of CMS's approval of an alternative QRS prior to a
State's use of the different measures. Current regulations at Sec.
438.334(c)(1) require States to submit for our review and approval an
alternative QRS request to include measures different than those
included in the mandatory measure set identified by CMS. We believe
requiring States to obtain our approval to include measures not
included in the mandatory measure set creates unnecessary
administrative burden for both States and CMS. Under the proposed
regulation, instead of requiring approval of different measures, we
proposed that States would be required to include all measures in the
mandatory measure set identified by CMS in their MAC QRS, but that they
would have the flexibility to add additional measures without prior
approval from CMS.
We highlighted that the measure specifications established by
measure stewards for measures in the mandatory measure set established
by CMS under proposed Sec. 438.510(a) are not considered part of the
methodology described in proposed Sec. 438.515, and therefore, States
would not have an option to request changes to mandatory measure
technical specifications under our proposal at Sec. 438.525. We stated
that modifications to measure specifications that are approved by the
measure steward would not require a State to request approval of an
alternative QRS in order to use the steward-approved modifications.
These steward-approved modifications could include allowable
adjustments to a measure's specifications published by the measure
steward or measure specification adjustments requested from and
approved by the measure's steward. However, we noted in the proposed
rule that we would consider quality ratings calculated for a mandatory
measure to be ratings for a different measure if the modifications have
not been approved by the measure steward. We believe that this policy
provides flexibility to States while ensuring that ratings for
mandatory measures remain comparable among States because measure
specification modifications approved by a measure steward have been
reviewed and subjected to the measure steward's own process to ensure
that modified specifications allow for comparisons across health plans.
Second, we proposed to further define the criteria and process for
determining if an alternative methodology is substantially comparable
to the MAC QRS methodology described in proposed Sec. 438.515. The
current regulations at Sec. 438.334(c)(4) provide that we would issue
guidance on the criteria and process for determining if an alternative
QRS meets the substantial comparability standard in Sec.
438.334(c)(1)(ii). We proposed to eliminate Sec. 438.334(c)(4) and
redesignate the requirements for an alternative QRS methodology as
proposed Sec. 438.525(c)(2)(i) through (iii). We also proposed at
Sec. 438.525(c)(2)(iv) that States would be responsible for submitting
documents and evidence that demonstrates compliance with the
substantial comparability standard. We believe eliminating Sec.
438.334(c)(4) was appropriate as this rulemaking provides an
opportunity for States and other interested parties to submit comments
on how CMS should evaluate alternative quality rating systems for
substantial comparability.
We indicated in the proposed rule that we intend to issue future
instructions on the procedures and the dates by which States must
submit an alternative QRS request to meet the
[[Page 41230]]
implementation date specified in proposed Sec. 438.505(a)(2). For
requests for a new or modifications of an existing alternative QRS made
after the proposed implementation date, we indicated we would consider
accepting rolling requests instead of specifying certain dates or times
of year when we would accept such requests. We believe this would be
necessary given that States may have different contract cycles with
managed care plans. We solicited comment on these different approaches.
Current Sec. 438.334(c)(2) describes the information that States
would submit to CMS as part of their request to implement an
alternative QRS. We proposed to redesignate and revise Sec.
438.334(c)(2) at Sec. 438.525(c)(2)(iv) to allow States to provide
additional supporting documents and evidence that they believe
demonstrates that a proposed alternative QRS will yield information
regarding managed care plan performance that is substantially
comparable to that yielded by the MAC QRS methodology developed by CMS
and described in proposed Sec. 438.515(b). Examples of such additional
supporting documents could include a summary of the results of a
quantitative or qualitative analysis of why the proposed alternative
methodology yields ratings that are substantially comparable to the
ratings produced using the methodology required under Sec. 438.515(b).
We solicited comments on these proposals, in particular, the
described process and documentation for assessing whether a proposed
alternative QRS framework is substantially comparable, by when States
will need alternative QRS guidance, and by when States will need to
receive approval of an alternative QRS request to implement the
alternative by the implementation date specified in proposed Sec.
438.505(a)(2).
We summarize and respond to public comments received on the
alternative quality rating system section (Sec. Sec. 438.334(c),
proposed 438.525, and 457.1240(d)) below.
Comment: We received comments both in support of the flexibility
provided for use by a State of an alternative QRS, as well as some
concerns about how it would reduce standardization. Those commenters in
support appreciated the flexibility that an alternative QRS would
provide and requested timely approvals of alternative QRS requests by
CMS (that is, within 1 year of the final rule) and technical assistance
on the substantial comparability standard. Many commenters emphasized
the importance of both a standardized set of measures and a
standardized methodology for calculating those measures. These
commenters raised concerns that the alternative QRS may reduce
alignment with other quality rating systems and that substituting
mandatory measures or calculating quality ratings for mandatory
measures without the CMS methodology or the measure steward's technical
specifications would create unnecessary complexity for plans and
undermine the ability to make inter-State comparisons among MAC QRS
plans.
Response: We agree with commenters about the importance of
alignment and standardization for the MAC QRS for the methodology for
calculating quality ratings for mandatory measures and the mandatory
measure set and believe that our proposal has sufficient guardrails to
address these concerns. Regarding concerns related to the
standardization of mandatory measures, we do not agree with commenters
that the flexibility to use an approved alternative rating methodology
will impact the standardization of the mandatory measures set as this
flexibility does not permit a State to substitute a mandatory measure
with another measure that is ``substantially comparable.'' Regardless
of whether a State applies the CMS methodology or an approved
alternative methodology, per finalized Sec. 438.510(a), all States
must include the mandatory measures that are applicable to the State's
managed care program in their QRS.
In response to the concerns stated by commenters related to the
standardization of quality ratings produced using the CMS methodology
versus an approved alternative rating methodology, we believe that
standardization of the MAC QRS quality ratings will be maintained due
to the limitations on the scope of the alternative methodology
flexibility and the substantial comparability standard proposed at
Sec. 438.525(a)(2) and finalized at Sec. 438.515(c)(1)(i). As we
discussed in section I.B.6 of the final rule, the policy we proposed
and are finalizing permits a State to request approval to use an
alternative rating methodology to the methodology finalized at Sec.
438.515(b) for Medicaid, and in separate CHIP by cross-reference
through a proposed amendment at Sec. [thinsp]457.1240(d). Subject to
the undue burden standard finalized at Sec. 438.515(a)(1)(ii), (2),
and (3), all States must ensure that MAC QRS quality ratings comply
with the requirements related to data collection, data validation,
performance rate calculation, and issuance of quality ratings finalized
in Sec. 438.515(a). Additionally, prior to approval, a State must
demonstrate that any alternative methodology generates ratings that
yield information on plan performance that is ``substantially
comparable'' to information yielded by the CMS methodology (that is,
the methodology required by Sec. 438.515(b)).
In response to concerns related to the calculation of MAC QRS
quality ratings that do not align with the measure steward's technical
specification, as we discussed in section I.B.6.h. of the proposed rule
and in section I.B.6.f. of this final rule, the measure steward
specifications for a mandatory measure are not part of the methodology
identified in Sec. 438.515(b) for Medicaid, and for separate CHIP by
cross-reference through an amendment at Sec. [thinsp]457.1240(d).
Those specifications are inherently part of the mandatory minimum
measure set that all States must use when the State's managed care
program covers the service or action assessed by the measure. Per
finalized Sec. 438.510(a)(1), States must display applicable mandatory
measures as described by CMS in the technical resource manual, which
will include the measure steward specifications for measures in the
mandatory set as well as guidance on calculating and issuing quality
ratings. As discussed in section I.B.6.f. of the proposed rule, such
technical specifications could include allowable adjustments identified
by the measure steward as well as adjustments approved by the measure
steward for an individual State. As such, regardless of whether a State
applies the CMS methodology or an alternative methodology, a State must
calculate quality ratings for applicable mandatory measures using
technical specifications approved by the measure steward. Furthermore,
as required under Sec. 438.535(a)(6) and discussed in section I.B.6.j.
of the proposed rule, CMS will require States to report the use of any
technical specification adjustments to mandatory measures that are
outside the measure steward's allowable adjustments, which the measure
steward has approved for use by the State or a plan within the State.
This will allow CMS to better understand if the flexibility to use such
adjustments impact plan-to-plan comparability or comparability within
and among States.
In combination, we believe that quality ratings for mandatory
measure produced in line with these policies, whether calculated using
the CMS methodology or an approved alternative rating methodology, will
be sufficiently standardized and allow ratings that are comparable
among States. To ensure that these guardrails remain sufficient, CMS
will monitor the use of alternative rating methodologies among States
to
[[Page 41231]]
determine if additional guardrails are necessary to maintain alignment
and standardization of the MAC QRS mandatory measure set and
methodology. In response to commenters' concerns about maintaining the
ability to make inter-State comparisons of MAC QRS measures, we believe
that the guardrails that maintain alignment and standardization also
ensure the ability to make these inter-State comparisons.
Comment: One commenter recommended we update the reference to the
MCAC in Sec. 438.525(b)(1) to align with proposed changes to Sec.
431.12, renaming the MCAC as the Medicaid Advisory Group, and creating
a new Beneficiary Advisory Group.
Response: As described in section I.B.6.a. of this rule, we
received many comments noting a general concern about the
administrative complexity and the time and resources needed to
implement the MAC QRS in light of other Medicaid requirements
established in the proposed rule. In that section we also outline
several changes that we are finalizing in this rule after considering
how to reduce the overall implementation burden of the MAC QRS. One of
these changes is the removal of the requirement that States obtain
input from their Medical Care Advisory Committee and provide an
opportunity for public comment on the State's proposed alternative
rating system or modification to an approved alternative rating system.
We believe that eliminating these consultation and public notice and
comment requirements will reduce burden on States to implement an
alternative QRS methodology with minimal impact on the availability of
desirable information. While the MCAC plays an important role in
providing feedback within State Medicaid programs, we believe that it
could be overly burdensome for States to present methodology changes,
many of which may be highly technical and nuanced, in a way that will
elicit actionable feedback through the MCAC and a public comment
process. In response to the suggestion that we rename the MCAC, as
noted, we are removing reference to the MCAC in the final rule.
Comment: Several commenters believed that the alternative
methodology would provide a pathway for States to substitute mandatory
measures with alternative measures or substitute website display
requirement for alternative website display features or to exempt them
from some website display features altogether.
Response: As proposed and finalized, the ability of a State to use
an alternative methodology does not include authority to modify either
the mandatory measure set or the minimum website display requirements
in Sec. 438.520. We are finalizing this proposal in this final rule
largely as proposed, but we are modifying how the alternative QRS
requirements are described and organized in this final rule to address
the confusion stated by commenters.
To address the confusion from commenters on the scope of the of the
alternative methodology, we are finalizing modifications to the
proposed regulation. First, as described in section I.B.6.g.4 of the
proposed rule, we proposed to modify current regulations at Sec.
438.334(c)(1) to no longer require States to obtain CMS approval if
they wished to include measures different than those included in the
mandatory measure set identified by CMS because we believe that
requiring approval of additional, different measures not required in
the mandatory measure set creates unnecessary burden for States and
CMS. To implement this change, we also proposed at Sec. 438.520(b)
(finalized at Sec. 438.520(c)) that States would have the flexibility
to add measures that are not mandatory measures without prior approval
from CMS. Under our proposal, States could add additional measures
beyond those identified by CMS without CMS approval, but neither the
current regulations at Sec. 438.334(c), nor our proposal, would have
allowed States to substitute mandatory measures with different
measures. This final rule also does not permit States to substitute
mandatory measures with different measures. Ratings for the mandatory
measures must always be published when the mandatory measures are
applicable to the State's managed care program (see section I.B.6.f.
for additional detail). How those ratings are calculated under the
State's MAC QRS may be changed using an alternative methodology,
subject to CMS approval.
As the proposed alternative QRS provision in Sec. 438.525 provides
States with the flexibility to request to apply an alternative
methodology only, we are removing references to ``alternative MAC QRS''
throughout this subpart and using instead the term ``alternative QRS
methodology'' in the regulation text. Throughout this final rule, we
use the terms ``alternative QRS methodology,'' ``alternative
methodology,'' or ``alternative rating methodology'' to focus on the
limits of what type of alternative is available to States. We proposed
at Sec. 438.525 and are finalizing at Sec. 438.515(c) the
requirements to receive approval to apply an alternative QRS
methodology in part 438. (As discussed in a prior response to a public
comment, we are not retaining the requirement that the State consult
with the MCAC or engage in a public notice and comment process before
seeking approval from CMS of the State's alternative QRS methodology).
As Sec. 438.515(b) codifies the requirements for the MAC QRS
methodology, we believe that codifying the authority and parameters for
State use of an alternative QRS methodology in the same section
addresses the confusion around the scope of the authority for States to
have an alternative rating methodology. We also believe that including
the alternative methodology provisions in Sec. 438.515, where the CMS
methodology is codified, is more consistent with the MAC QRS framework
definition in Sec. 438.500, which, as finalized, describes the MAC QRS
methodology as either the CMS methodology or an alternative methodology
approved by CMS. We are also finalizing a conforming modification at
Sec. 438.505(a)(1)(i) to reflect the new location of the alternative
QRS methodology provisions.
Second, we are finalizing a new provision, at Sec. 438.515(c)(3),
to further establish the scope of the flexibility to implement an
alternative methodology. As finalized, (c)(3) establishes that CMS will
not review or approve requests to implement a MAC QRS that does not
comply with the requirements to include mandatory measures established
in Sec. 438.510(a)(1), the general requirements for calculating
quality ratings established in Sec. 438.515(a)(1) through (4), or the
requirement to include the website features identified in Sec.
438.520(a)(1) through (6). We are also finalizing that CMS will not
review or approve requests to implement additional measures or website
features as these are permitted, without CMS review or approval, as
established in Sec. 438.520(c). Lastly, we are finalizing that CMS
will not review or approve requests to include plans that do not meet
the threshold established in 483.515(a)(1)(i), which State may choose
to do as appropriate as discussed in section I.B.6.f. We believe that
new paragraph (c)(3) gives States clarity in the requests to use an
alternative methodology that may be submitted to CMS under Sec.
438.515(c) while also reducing burden on States to ensure that they do
not design a MAC QRS that does not comply with the general rule in
Sec. 438.505(a).
Thirdly, we are not finalizing Sec. 438.525(a)(1), which proposed
that an alternative QRS includes the mandatory
[[Page 41232]]
measures identified by CMS under Sec. 438.510(a). This provision is
duplicative of finalized Sec. 438.510(a)(1), which requires States to
include applicable mandatory measures in their MAC QRS, regardless of
whether the State uses the CMS or an alternative methodology.
Finally, we are addressing technical errors in the proposed rule.
We are modifying proposed Sec. 438.525(a) (moved to Sec.
438.515(c)(1) in the final rule), which permits States to implement a
MAC QRS that applies an alternative methodology from that described in
Sec. 438.510(a)(3). Proposed Sec. 438.525(a) should have cited Sec.
438.515(b), which describes the MAC QRS methodology established by CMS
instead of Sec. 438.510(a)(3) (there is no paragraph (a)(3) proposed
in Sec. 438.510). The purpose of the cross reference was to make clear
that requests to implement an alternative methodology may be requested
and approved for the methodology requirements in Sec. 438.515(b). At
Sec. 438.515(a)(3) we proposed to require States to ``use the
methodology described in paragraph (b)'' of Sec. 438.515.
Additionally, we proposed that the methodology requirements in Sec.
438.515(b) were subject to the flexibility to implement an alternative
methodology in Sec. 438.525 and finalized at Sec. 438.515(c)(1).
These two proposals show our intention to establish Sec. 438.515(b) as
the CMS methodology and to require States to implement those
requirements unless the State received CMS approval to apply an
alternative methodology under flexibility proposed in Sec. 438.525 and
finalized at Sec. 438.515(c). We are also making conforming technical
changes to the provision proposed at Sec. 438.525(a)(2), which is
moved to Sec. 438.515(c)(i) in the final rule, by citing specifically
to Sec. 438.515(b) describing the CMS methodology instead of more
broadly to Sec. 438.515. These technical changes apply equally to
separate CHIP by cross-reference through an amendment at Sec.
457.1240(d).
i. Annual Technical Resource Manual (Sec. Sec. 438.334, 438.530 and
457.1240(d))
We proposed at Sec. Sec. 438.530(a) for Medicaid, and for separate
CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), that CMS would develop and update annually a Medicaid
managed care quality rating system technical resource manual no later
than August 1, 2025, and update it annually thereafter. Providing clear
and detailed information for reporting on MAC QRS measures not only
supports States in implementing their MAC QRS but is also essential for
consistent reporting and comparable quality ratings across States and
managed care plans. This manual will include information needed by
States and managed care plans to calculate and issue quality ratings
for all mandatory measures that States will be required to report under
this final rule. This includes the mandatory measure set, the measure
steward technical specifications for those measures, and information on
applying our proposed methodology requirements to the calculation of
quality ratings for mandatory measures. We proposed we would publish an
initial technical resource manual following the final rule and would
update the manual annually thereafter to maintain its relevance. We
considered releasing the technical resource manual less frequently than
annually, but we did not believe this manual could be properly
maintained unless it is updated annually due to the inclusion of
updates to the technical specifications for the mandatory measures.
Proposed Sec. 438.530(a) identifies the components of the
technical resource manual that would be issued by CMS. As described in
Sec. 438.530(a)(1), we proposed to use the technical resource manual
to identify the mandatory measures, as well as any measures newly added
or removed from the previous year's mandatory measure set. We intend
for the first technical resource manual to include details on the
initial MAC QRS mandatory measure set.
These content requirements for the technical resource manual
proposed at new Sec. 438.530(a)(1) through (3) include the following:
The mandatory measure set so States know what they are
required to report.
The specific MAC QRS measures newly added to or removed
from the prior year's mandatory set, as well as a summary of the
engagement and public comments received during the engagement process
in Sec. 438.510(b) used for the most recent modifications to the
mandatory measure set. To provide a complete picture of any changes
being made to the MAC QRS measures, we proposed this summary to include
a discussion of the feedback and recommendations received, the final
modifications and timeline for implementation, and the rationale for
recommendations or feedback not accepted.
The subset of mandatory measures that must be stratified
by race, ethnicity, sex, age, rural/urban status, disability, language,
or such other factors as may be specified by CMS in the annual
technical resource manual as required under Sec. 438.520(a)(2)(v) and
(6)(iii). We discuss the rationale for inclusion of stratification in
section I.B.6.g.2. of this final rule.
How to use the methodology described in Sec. 438.515 to
calculate quality ratings for managed care plans. We sought comment on
which topics States and health plans would like technical assistance or
additional guidance to ensure successful implementation of the rating
system.
Technical specifications for mandatory measures produced
by measure stewards. We believe this information will assist States and
health plans in the calculation of quality ratings for mandatory
measures and aligns with the practices of the Adult and Child Core Set,
the MA and Part D quality rating system, and the QHP quality rating
system.
Lastly, at Sec. 438.530(b) for Medicaid, and for separate CHIP by
cross-reference through a proposed amendment at Sec. 457.1240(d), we
proposed a general rule that CMS consider stratification guidance
issued by the measure steward and other CMS reporting programs when
identifying which measures, and by which factors, States must stratify
mandatory measures. We stated that we plan to implement a phased-in
approach that would increase over time the total number of mandatory
measures for which data must be stratified. We also proposed to phase-
in the factors by which data would be stratified. We stated our intent
to align with the stratification schedule proposed in Sec. 437.10(d)
of the Mandatory Medicaid and CHIP Core Set Reporting Proposed Rule
(see 87 FR 51327). We believe this alignment with the Core Set
stratification will minimize State and health plan burden to report
stratified measures. For any MAC QRS measures that are not Core Set
measures, we will consider, and align where appropriate, with the
stratification policies for the associated measure steward or other CMS
reporting programs. We described additional information regarding MAC
QRS stratification requirements in section I.B.6.g.2. of the proposed
rule.
Based on feedback we received through listening sessions with
interested parties, we considered releasing an updated technical
resource manual at least 5 months prior to the measurement period for
which the technical resource manual will apply. This aligned with the
proposed date for the first technical resource manual of August 1,
2025, for a 2026 measurement year, and ensured that States have enough
time to implement any necessary changes before the
[[Page 41233]]
measurement period and, if necessary, submit and receive approval for
an alternative QRS request. In our listening sessions, interested
parties noted that this timeline will align with those used by other
measure stewards (for example, NCQA for HEDIS measures) and will ensure
that States and managed care plans are able to identify and make
necessary contractual, systems, and data collection changes to
facilitate additional data collection required for the upcoming
measurement period. We sought comment on whether this timing is
appropriate for States to implement any changes included in the
reporting and technical guidance for the initial measurement year, as
well as subsequent measurement years.
We summarize and respond to public comments received on our
proposals related to the annual technical resource manual (Sec. Sec.
438.334, 438.530, and 457.1240(d)) below.
Comment: We received comments related to our proposed date for
releasing the initial technical resource manual, and comments
pertaining to future release dates. In general, these comments
requested that we release the technical resource manual information
earlier than 5 months prior to the measurement year, including requests
for releasing the manual at least 9 months or 12 months before the
start of the measurement year. Additionally, some commenters urged us
to better align the timing of the release of the annual technical
resource manual with the timeline used by measure stewards to update
their measure specifications.
Response: Based on commenter's feedback, we are modifying how the
technical resource manual information identified in Sec. 438.530(a)
will be released. We considered whether we could release a technical
resource manual 9 to 12 months prior to the measurement year as a
couple of commenters requested and still include all the information
identified in Sec. 438.530(a). We found that this timeline is not
feasible because we cannot guarantee that the information identified in
Sec. 438.530(a) will exist 9 to 12 months prior to the measurement
year to which the technical resource manual applies. For example, under
Sec. 438.530(a)(1)(ii) and (a)(4), CMS must include the list of
measures newly added or removed from the prior year's mandatory measure
set and the summary of interested party engagement and public comments.
At 9 to 12 months prior to the measurement year, CMS will likely still
be engaged in the subregulatory process proposed in Sec. 438.510(b)
and unable to publish a manual with the final decision from that
process.
Though it is not feasible to release the technical resource manual
9 to 12 months prior to the measurement year, we believe that we can
get the information identified in Sec. 438.530(a) to States as early
as reasonably possible by releasing the information in installments as
the content of the manual is available throughout the year (as opposed
to releasing all such information at the same time and in one document,
as proposed). Therefore, we are finalizing at Sec. 438.530(a) that CMS
may publish the technical resource manual information identified in
Sec. 438.530(a) in installments throughout the year to give CMS the
flexibility to publish the individual pieces of information identified
in Sec. 438.530(a) as they are available. For instance, as finalized
CMS can release an updated list of mandatory measures, as required
under Sec. 438.530(a)(1)(ii), and the summary of the subregulatory
process used to identify the updated mandatory measure set, as required
under Sec. 438.530(a)(4), prior to releasing the technical
specifications, as required under Sec. 438.530(a)(3).
We have also determined a need to modify the release date of the
first complete technical resource manual from August 1, 2025 to CY
2027. We arrived at this determination after considering a commenter's
input that our proposed release date could align more closely with when
the measure stewards update their specifications. We reviewed schedules
for measure stewards' annual updates and found that the technical
specifications for measurement year 2026 will not be available by the
proposed technical resource manual release date in CY 2025. For
example, NCQA, which is the measure steward for 12 of the measures in
the initial mandatory set, currently finalizes their technical
specifications in the second quarter of the measurement year in which
the technical specifications apply. To ensure that the technical
specifications for the initial measurement year in 2026 align with the
measure steward technical specifications for the same year, CMS can
release those technical specifications no earlier than CY 2027. States
will then be able to use this information as they calculate quality
ratings for MY 2026 in CY 2027. As States and health plans are
accustomed to receiving technical specifications in the measurement
year to which they apply, after data collection has begun, we believe
that receiving the specification soon after the measurement ends will
not impact State's ability to collect the data necessary to calculate
quality ratings for mandatory measures.
Furthermore, because the guidance on the application of the
methodology used to calculate and issue quality ratings required under
Sec. 438.530(a)(2) is related to the technical specifications, the
release date for this information would need to be pushed back as well.
Additionally, the summary of information of the subregulatory process
that must be included in the technical resource manual under Sec.
438.530(a)(4) will not be available by August 1, 2025 as proposed. In
section I.B.6.e.3 of the proposed rule, we discussed options for when
we could begin implementing the subregulatory process to update the
mandatory measure set finalized at Sec. 438.510(b). Due to commenters
support for our proposal to update the mandatory measure set no less
than every 2 years, we intend to implement the subregulatory process by
which these updates will be made no less than two years after the final
rule, so beginning in CY 2026. (See section I.B.6.e.3 for a discussion
of the final policy to engage in the public consultation process to
evaluate the mandatory measure set every 2 years.)
Therefore, we are finalizing that CMS will begin annual publication
of the complete technical resource manual in CY 2027. In combination
with our modification to allow the technical resource information to be
released in increments throughout the year to account for instances
when certain components described in Sec. 438.530(a) can be released
sooner than others, we believe this approach is responsive to both
commenters who requested we release information as soon as possible and
those who requested that we more closely align with the release of
measure steward technical specifications. To implement these changes,
we are finalizing, with modifications, the policy at Sec. 438.530(a)
for Medicaid, and for separate CHIP by cross-reference through an
amendment at Sec. 457.1240(d), to use the new date and authorize the
incremental release of the technical resource manual. We did not
propose and, therefore, are not finalizing the schedule for the annual
technical resource manual beyond 2027. We will continue to balance
recommendations from commenters in setting future release dates for the
technical resource manual and to align closely with the publication of
the Annual Core Set technical specifications.
Finally, based on our pre-rulemaking consultations with States, we
understand that States will need the MAC QRS measure information
[[Page 41234]]
identified in Sec. 438.530(a)(1) prior to the initial measurement year
of CY 2026. Unlike the information in Sec. 438.530(a)(2) through (4),
the measure information will be available for CMS to release prior to
CY 2027. Therefore, we are modifying Sec. 438.530 to add a paragraph
(c), which retains the requirement for CMS to publish the information
specified in paragraph Sec. 438.530(a)(1) no later than August 1,
2025. As finalized, this will require CMS to provide, no later than
August 1, 2025, the initial list of mandatory measures finalized in
this rule, any measures removed from the initial mandatory measure set
before August 2025 by CMS following the final rule as permitted under
Sec. 438.510(d)(2)-(4), and the subset of initial mandatory measures
that must be stratified and by which stratification factors. We note
that, regarding the identification of measures newly added or removed
from the prior year's mandatory measure set as required under Sec.
438.530(a)(1)(ii), CMS cannot add additional measures to the mandatory
measure set for the initial measurement year published with this final
rule. However, it is possible that CMS may remove measures from the set
published in this rule if changes made to the measure that meet the
removal criteria finalized in Sec. 438.515(d)(2) through (4) occur
after CMS finalizes this rule. This includes instances where the
measure steward retires or stops maintaining a measure or CMS
determines either that the clinical guidelines associated with the
specifications of the measure change such that the specifications no
longer align with positive health outcomes or that the measure shows
low statistical reliability under the standard identified in Sec. Sec.
422.164(e) and 423.184(e). Per Sec. 438.510(a), the MAC QRS
implemented by the State must include the measures in this list
released under Sec. 438.530(c).
Comment: We received some comments on the contents of the annual
technical resource manual, including requests that the manual include
resources on data collection and validation, free source coding
materials, and a clear process with timelines that States should
follow. A few commenters noted it would be challenging if CMS deviated
from the measure specifications of the measure steward.
Response: We thank commenters for the recommendation to include
information on data collection and validation. We intend to provide
additional detail on the requirements finalized in Sec. 438.515 for
Medicaid, and for separate CHIP by cross-reference through an amendment
at Sec. 457.1240(d), related to data collection, validation, and
calculation of quality ratings for mandatory measures through two
resources: the annual technical resource manual and the external
quality review protocols associated with the optional activity for the
MAC QRS at Sec. 438.358(c)(6), which would allow States to use an EQRO
if desired to assist with the quality ratings. We appreciate the
recommendation to include free source coding materials in the technical
resource manual and intend to align with the current approach used in
the Core Set technical specifications whereby we include links to
available free source code sets in the manual. We agree that including
a clear process and timeline to follow for each measurement year and
display year, relative to the release of the measure list and measure
technical specifications, will be helpful to detail for States in the
technical resource manual. In response to the concern about deviations
from measure specifications, we agree with commenters that any
deviations in measure specifications could result in complications and
discrepancies across programs and quality reporting systems, and CMS
works closely with measure stewards in developing reporting guidance to
make as few adaptations to the technical specifications as possible.
After reviewing the public comments and for the reasons outlined in
the proposed rule and our responses to comments, we are finalizing
Sec. 438.530, and for separate CHIP by cross-reference through an
amendment at Sec. 457.1240(d), with modifications. We are finalizing
Sec. 438.530(a) with modifications to change the date for the first
annual technical resource manual to no later than CY 2027. We are
adding Sec. 438.530(c) to indicate that the measure list in Sec.
438.530(a)(1)(i) and subset of measures that must be stratified, and by
which factors, in and Sec. 438.530(a)(1)(iii) will be released no
later than August 1, 2025. We are also making a technical change to
Sec. 438.530(a)(4) to indicate that a summary of public comments would
be included in the technical resource manual only in the years when the
engagement with interested parties occurs.
j. Reporting (Sec. Sec. 438.334, 438.535 and 457.1240(d))
We proposed requirements at Sec. 438.535 for States to submit to
CMS, upon request, information on their MAC QRS to support our
oversight of Medicaid and CHIP and compliance with MAC QRS
requirements, to ensure beneficiaries can meaningfully compare ratings
between plans, and to help us monitor trends in additional measures and
use of permissible modifications to measure specifications used among
States, which could inform future additions to the mandatory measures
and modifications of our methodology. We proposed any request for
reporting by States would be no more frequently than annually. We
proposed the report would include the following components:
A list of all measures included in the State's MAC QRS,
including a list of the mandatory measures reported and any additional
measures a State has chosen to display in their MAC QRS, which CMS
could use to inform updates to the measures list;
An attestation that displayed quality ratings for all
mandatory measures were calculated and issued in compliance with Sec.
438.515, and a description of the methodology used to calculate any
additional measures when it deviates from the methodology proposed in
Sec. 438.515;
If a State chooses to display additional quality measures,
a description of and the required documentation for the process
required under proposed Sec. 438.520(b);
The date on which the State publishes or updates their
quality ratings for the State's managed care plans;
The link to the State's MAC QRS website, which will enable
CMS to ensure the MAC QRS ratings are current; and
The use of any technical specification adjustments to MAC
QRS mandatory measures that are outside the measure steward's allowable
adjustment for the mandatory measure, but that the measure steward has
approved for use by the State. As discussed in section I.B.6.f. of the
proposed rule, we do not consider measure steward technical
specifications to be part of the MAC QRS rating methodology, but they
are part of the measures. Therefore, we do not require States to submit
such adjustments to us for approval as an alternative QRS and believe
State reporting is more appropriate to better understand if such
adjustments impact plan-to-plan comparability or comparability within
and among States.
A summary of each alternative QRS (meaning alternative
methodology) approved by CMS, including the effective dates (the period
during which the alternative QRS was, has been, or will be applied by
the State) for each approved alternative QRS.
We proposed these reporting requirements at new Sec. 438.535(a)(1)
through (7) for Medicaid, and for separate CHIP by cross-reference
through a proposed amendment at
[[Page 41235]]
Sec. 457.1240(d). We proposed in Sec. 438.535(a) the report would be
``in a form and manner determined by CMS'' because we intend to
establish an online portal that States could access to easily submit
this information to us. At Sec. 438.535(b) for Medicaid, and for
separate CHIP by cross-reference through a proposed amendment at Sec.
457.1240(d), we proposed that States would be given a minimum of 90
days' notice to provide such a report. We sought comment on whether
States prefer one annual reporting date or a date that is relative to
their MAC QRS updates. We summarize and respond to public comments
received on the proposed reporting requirements (Sec. Sec. 438.535 and
457.1240(d)) below.
Comment: Two commenters supported the use of one annual reporting
date versus a State-specific date that is relative to MAC QRS updates.
Response: We will take the comments regarding timing into account
when finalizing our guidance related to annual reporting. However, we
are finalizing that reports will be required no more frequently than
annually, and that CMS will provide no less than 90 days of notice that
a report is due.
After reviewing public comments and for the reasons outlined in
this rulemaking, we are finalizing these provisions largely as proposed
but with modifications. We are finalizing Sec. 438.535(a)(1) with
modifications, which will also apply to separate CHIP, to add content
to the required report: (1) identification of mandatory measures that
are not included in their MAC QRS because they are not appliable to the
State's Medicaid managed care program; (2) for any measures identified
as inapplicable to the State's managed care program, a brief
explanation of why the State determined that the measure is
inapplicable; and (3) for any measure identified as applicable to the
State's managed care program, the managed care programs to which the
measure is applicable. This modification aligns with revisions we are
also finalizing in Sec. 438.510(a), which are discussed in section
I.B.6.e. of the final rule. We are also adding new paragraph (a)(8) to
include additional reporting requirements related to Medicare and
Medicaid data that is not included in MAC QRS quality ratings, as
discussed in section I.B.6.f of this final rule. In addition, we are
finalizing minor changes in references to other regulations to take
into account changes made in this final rule compared to the proposal
(for example, codifying the rules for a State to use an alternative QRS
methodology at Sec. 438.515(c)).
k. Technical Changes (Sec. Sec. 438.334, 438 Subpart G, 438.358 and
457.1240(d))
We proposed several technical changes to conform our regulations
with other parts of our proposed rule, which included:
Redesignating the regulations under current Sec.
438.334(a) to part 438, subpart G, Sec. 438.505 with changes in policy
and modifications to take into account new subpart G provisions, as
discussed throughout section I.B.6 of this final rule; and
In current Sec. 438.358(c)(6), changing the reference for
this EQR optional activity from Sec. 438.334 to part 438, subpart G to
align with the proposed redesignation of Sec. 438.334 Sec. 438.
Unless otherwise noted, these technical changes are equally
proposed for separate CHIP by cross-reference through a proposed
amendment at Sec. 457.1240(d).
II. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), 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. For the purpose of the PRA and this section of
the preamble, ``collection of information'' is defined under 5 CFR
1320.3 of the PRA's implementing regulations. To fairly evaluate
whether a collection of information should be approved by OMB, section
3506(c)(2)(A) of the PRA requires that we solicit comment on the
following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In our May 3, 2023 (88 FR 28092) proposed rule (CMS-2439-P; RIN
0938-AU99) we solicited public comment on each of the aforementioned
issues for the following sections of the rule that contained
information collection requirements. One comment is noted below that
addresses the overall burden of the entire rule. Additionally, ICR #4
(Rate Certification Submission) and #16 (Program Integrity Requirements
Under the Contract) also received public comment and a summary of the
comment and response can be found below under the applicable ICR
section.
Comment: A few commenters opined on the overall level of burden
imposed by this rule. (Individual comments on burden are addressed in
the respective topic areas of this final rule.) Commenters stated that
the numerous, interrelated, and overlapping obligations that Medicaid
agencies will have to undertake if all of the elements of this rule are
adopted as proposed will cost exponentially more than CMS has
estimated, require extensive new Medicaid agency staffing and large-
scale vendor contracts, intersect with numerous systems obligations
that are already in the pipeline, as well as those that are anticipated
under various pieces of Federal legislation, and require staging and
more time than is anticipated by CMS's proposed implementation
deadlines.
Response: We acknowledged commenters' concerns and have reviewed
our burden estimates and made revisions when appropriate. We recognize
that many factors impact the burden associated with each provision and
we attempt to address them appropriately. We also gave careful
consideration to the level of burden associated with each provision and
selected applicability dates for each one that provided time for
activities necessary to implement. The burden estimates in this rule
are incorporated into and comply with the Paperwork Reduction Act and
will be reviewed and revised as required.
Comment: One commenter stated support for CMS's proposals to make
all Medicaid proposals generally applicable to CHIP plans except where
provisions are not relevant, which helps to ensure equal protections
for CHIP recipients, promotes consistency between Federal programs, and
reduces burden on States and providers.
Response: We appreciate the support for the alignment of most CHIP
provisions in this final rule with those finalized for Medicaid. We
agree that alignment promotes consistency between Medicaid and separate
CHIP managed care programs. When appropriate, we made exceptions for
situations in which separate CHIP differs from Medicaid and considered
implications for managed care plans that serve smaller separate CHIP
populations. We also agree with the commenter that alignment between
programs provides equity for beneficiaries, promotes operational and
administrative efficiencies, and reduces financial burden on States,
plans, and providers.
[[Page 41236]]
A. Wage Estimates
To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' May 2022 National Occupational Employment and Wage
Estimates for all salary estimates (https://www.bls.gov/oes/2022/may/oes_nat.htm). Table 4 presents BLS' mean hourly wage, our estimated
cost of fringe benefits and other indirect costs (calculated at 100
percent of salary), and our adjusted hourly wage.
[GRAPHIC] [TIFF OMITTED] TR10MY24.007
States and the Private Sector: 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 other
indirect costs vary significantly from employer to employer, and
because methods of estimating these costs vary widely from study to
study. Nonetheless, we believed that doubling the hourly wage to
estimate total cost is a reasonably accurate estimation method.
After reviewing the public comments, we are updating the specific
occupation title and code for 15-1251. In error, the proposed rule
listed the occupation code 15-1251 for ``computer programmer.''
However, the occupation code 15-1250 ``Software and web developers,
programmers, and testers'' encompasses a larger pool of work types for
information technology related tasks.
Beneficiaries: To derive average costs for beneficiaries we
believed that the burden will be addressed under All Occupations (BLS
occupation code 00-0000) at $29.76/hr. Unlike our State and private
sector wage adjustments, we are not adjusting beneficiary wages for
fringe benefits and overhead since the individuals' activities will
occur outside the scope of their employment.
B. Information Collection Requirements (ICRs)
To estimate the burden for the requirements in part 438, we
utilized State submitted data by States for enrollment in managed care
plans for CY 2021.\232\ The enrollment data reflected 67,655,060
enrollees in MCOs, 36,285,592 enrollees in PIHPs or PAHPs, and
5,326,968 enrollees in PCCMs, and a total of 77,211,654 Medicaid
managed care enrollees. This includes duplicative counts when enrollees
are enrolled in multiple managed care plans concurrently. These data
also showed 43 States that contract with 467 MCOs, 11 States that
contract with 162 PIHPs or PAHPs, 19 States that contract with 21 non-
emergency transportation PAHPs, and 13 States with 26 PCCM or PCCM
entities. The estimates below reflect deduplicated State counts as data
permitted.
---------------------------------------------------------------------------
\232\ https://www.medicaid.gov/medicaid/managed-care/enrollment-report/index.html.
---------------------------------------------------------------------------
To estimate the burden for these requirements in part 457, we
utilized State submitted data for enrollment in managed care plans for
CY 2017. The enrollment data reflected 4,580,786 Medicaid expansion
CHIP and 2,593,827 separate CHIP managed care enrollees.\233\ These
data also showed that 32 States use managed care entities for CHIP
enrollment contracting with 199 MCOs, PIHPs, and PAHPs, as well as 17
PCCMs.
---------------------------------------------------------------------------
\233\ Data source: Statistical Enrollment Data System (SEDS)
Form 21E, Children Enrolled in Separate CHIP, and Form 64.21E,
Children enrolled in Medicaid expansion CHIP.
---------------------------------------------------------------------------
1. ICRs Regarding Standard Contract Requirements (Sec. Sec. 438.3 and
457.1203)
The following changes to Sec. 438.3 will be submitted to OMB for
approval under control number 0938-1453 (CMS-10856). The following
changes to Sec. 457.1203 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.3(i) and 457.1203(f) will require that
MCOs, PIHPs, and PAHPs report provider incentive payments based on
standard metrics for provider performance. Amendments to Sec.
438.8(e)(2) will define the provider incentive payments that could be
included in the MLR calculation; however, the administrative burden for
these changes is attributable to the managed care contracting process,
so we are attributing these costs to the contracting requirements in
Sec. 438.3(i). Approximately half (or 315 Medicaid contracts and 100
CHIP contracts) of all MCO, PIHP, and PAHP contracts will require
modification to reflect these changes. For the contract modifications,
we estimate it will take 2 hours at $79.50/hr for a business operations
[[Page 41237]]
specialist and 1 hour at $118.14/hr for a general operations manager.
In aggregate for Medicaid for Sec. 438.3(i), we estimate a one-time
State burden of 945 hours (315 contracts x 3 hr) at a cost of $87,299
[315 contracts x ((2 hr x $79.50/hr) + (1 hr x $118.14/hr))]. As this
will be a one-time requirement, we annualize our time and cost
estimates to 315 hours (945 hr/3 yr) and $29,100 ($87,299/3 yr). The
annualization divides our estimates by 3 years to reflect OMB's likely
approval period. We are annualizing the one-time burden estimates since
we do not anticipate any additional burden after the 3-year approval
period expires.
In aggregate for CHIP for Sec. 457.1203(f) we estimate a one-time
State burden of 300 hours (100 contracts x 3 hr) at a cost of $27,714
[100 contracts x ((2 hr x $79.50/hr) + (1 hr x $118.14/hr))]. As this
will be a one-time requirement, we annualize our time and cost
estimates to 100 hours (300 hr/3 yr) and $9,238 ($27,714/3 yr). The
annualization divides our estimates by 3 years to reflect OMB's likely
approval period. We are annualizing the one-time burden estimates since
we do not anticipate any additional burden after the 3-year approval
period expires.
To report provider incentive payment based on standard metrics,
MCOs, PIHP, and PAHPs will need to select standard metrics, develop
appropriate payment arrangements, and then modify the affected
providers' contracts. We estimate it will take 120 hours consisting of
80 hours x $79.50/hr for a business operations specialist and 40 hours
x $118.14/hr for a general and operations manager. In aggregate for
Medicaid for Sec. 438.3(i), we estimate a one-time private sector
burden of 37,800 hours (315 contracts x 120 hr) at a cost of $3,491,964
[315 contracts x ((80 hr x $79.50/hr) + (40 hr x $118.14/hr))]. As this
will be a one-time requirement, we annualize our time and cost
estimates to 12,600 hours and $1,163,988. The annualization divides our
estimates by 3 years to reflect OMB's likely approval period. We are
annualizing the one-time burden estimates since we do not anticipate
any additional burden after the 3-year approval period expires.
In aggregate for CHIP for Sec. 457.1203(f) we estimate a one-time
private sector burden of 12,000 hours (100 contracts x 120 hr) at a
cost of $1,108,560 [100 contracts x ((80 hr x $79.50/hr) + (40 hr x
$118.14/hr))]. As this will be a one-time requirement, we annualize our
time and cost estimates to 4,000 hours (12,000hr/3 yr) and $369,520
($1,108,560/3 yr). The annualization divides our estimates by 3 years
to reflect OMB's likely approval period. We are annualizing the one-
time burden estimates since we do not anticipate any additional burden
after the 3-year approval period expires.
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
2. ICRs Regarding Special Contract Provisions Related to Payment (Sec.
438.6)
The following changes will be submitted to OMB for approval under
control number 0938-1453 (CMS-10856).
Amendments to Sec. 438.6(c)(2) will require all SDP expenditures
under paragraphs (c)(1)(i) and (ii) and (c)(1)(iii)(C) through (E)
(that is, the SDPs that require prior written approval under this final
rule) must be submitted and have written approval by CMS prior to
implementation.
We estimate that 38 States will submit 50 new SDP proposals for
minimum/maximum fee schedules, value-based payment, or uniform fee
increases. To complete a new preprint, we estimate that it will take 2
hours at $122.68/hr for an actuary, 6 hours at $79.50/hr for a business
operations specialist, and 2 hours at $118.14/hr for a general and
operations manager for development and submission. We estimate an
annual State burden of 500 hours (50 proposals x 10 hr) at a cost of
$47,932 [50 proposals x ((2 hr x $122.68/hr) + (6 hr x $79.50/hr) + (2
hr x $118.14/hr))].
We estimate that 38 States will submit 150 renewals of existing
SDPs or amendments to existing SDPs per year. To make revisions to an
existing preprint, we estimate it will take 1 hour at $79.50/hr for a
business operations specialist, 1 hour at $122.68/hr for an actuary,
and 1 hour at $118.14/hr for a general and operations manager for any
proposal updates or renewals. In aggregate, we estimate an annual State
burden of 450 hours (150 proposals x 3 hr) and $48,048 [150 renewal/
amendment proposals x ((1 hr x $79.50/hr) + (1 hr x $118.14/hr) + (1 hr
x 122.68/hr))].
The amendments to Sec. 438.6(c)(2)(iii) will require that all SDPs
subject to prior approval under paragraphs (c)(1)(i) through (iii) for
inpatient hospital services, outpatient hospital services, nursing
facility services, and qualified practitioner services at an academic
medical center, include a written analysis, showing that the total
payment for such services does not exceed the average commercial rate.
We estimate that 38 States will develop and submit 60 of these SDPs
that include a written analysis to CMS. We also estimate it will take 6
hours at $122.68/hr for an actuary, 3 hours at $118.14/hr for a general
and operations manager, and 6 hours at $120.14/hr for a software and
web developers, programmers and testers for each analysis. In aggregate
we estimate a one-time State burden of 900 hours (60 SDPs x 15 hr) and
at a cost of $108,680 [60 certifications x ((6 hr x $122.68/hr) + (3 hr
x $118.14/hr) + (6 hr x $120.14/hr))]. As this will be a requirement to
update once every 3 years, we annualize our time and cost estimates to
300 hours and $36,227. The annualization divides our estimates by 3
years to reflect OMB's likely approval period.
Section 438.6(c)(2)(iv) will require that States that use SDPs
under paragraphs (c)(1)(i) and (ii) and (c)(1)(iii)(C) through (E) must
prepare and submit a written evaluation plan to CMS. The evaluation
plan must include specific components under this proposal and is
intended to measure the effectiveness of those State directed payments
in advancing at least one of the goals and objectives in the quality
strategy on an annual basis and whether specific performance targets
are met. We estimate that 38 States will submit 50 written evaluation
plans for new proposals. We also estimate it will take 5 hours at
$120.14/hour for a software and web developers, programmers and
testers, 2.5 hours at $118.14/hr for a general and operations manager,
and 2.5 hours at $79.50/hr for a business operations specialist for
each new evaluation plan. In aggregate, we estimate an annual State
burden of 500 hours (50 evaluation plans x 10 hr) and at a cost of
$54,741 [50 evaluation plans x ((5 hr x 120.14/hr) + (2.5 hr x $118.14)
+ (2.5 hr x $79.50/hr))].
We estimate that 38 States will prepare and submit 150 written
evaluation plans for amendment and renewal of existing proposals. We
also estimate it will take 2 hours at $120.14/hr for a software and web
developers, programmers and testers, 2 hours at $118.14/hr for a
general and operations manager and 2 hours at $79.50/hr for a business
operations specialist for each evaluation plan amendment and renewal.
In aggregate we estimate an annual State burden of 900 hours (150
evaluation plans x 6 hr) at a cost of $95,334 [150 evaluation plans x
((2 hr x 120.14/hr) + (2 hr x $118.14) + (2 hr x $79.50/hr))].
Section 438.6(c)(2)(v) will require for all SDPs under paragraphs
(c)(1)(i) and (ii) and (c)(1)(iii)(C) through (E) that have an actual
Medicaid managed care spending percentage greater than 1.5 must
complete and submit an evaluation report using the approved
[[Page 41238]]
evaluation plan to demonstrate whether the SDP results in achievement
of the State goals and objectives in alignment with the State's
evaluation plan. Section 438.6(c)(2)(ii)(F) also requires that States
provide evaluation reports to CMS, upon request, that demonstrate
whether the SDP results in achievement of the State goals and
objectives in alignment with the State's evaluation plan.
We estimate 38 States will submit 57 evaluation reports. We also
estimate it will take 3 hours at $120.14/hr for a software and web
developers, programmers, and testers, 1 hour at $118.14/hour for a
general and operations manager, and 2 hours at $79.50/hr for a business
operations specialist for each report. In aggregate we estimate an
annual State burden of 342 hours (57 reports x 6 hr) at a cost of
$36,341 [57reports x ((3 hr x $120.14/hr) + (1 hr x $118.14/hr) + (2 hr
x $79.50hr)].
The provision at Sec. 438.6(c)(7) will require States to submit a
final SDP cost percentage as a separate actuarial report concurrently
with the rate certification only if a State wishes to demonstrate that
the final SDP cost percentage is below 1.5 percent. We anticipate that
10 States will need: 5 hours at $122.68/hr for an actuary, 5 hours at
$120.14/hr for a software and web developers, programmers and testers,
and 7 hours at $79.50/hr for a business operations specialist. In
aggregate, we estimate an annual State burden of 170 hours (17 hr x 10
States) at a cost of $17,706 (10 States x [(5 hr x $122.68/hr) + (5 hr
x $120.14/hr) + (7 hr x $79.50/hr)]).We did not receive any public
comments on the aforementioned collection of information requirements
and burden estimates and are finalizing them as proposed.
3. ICRs Regarding Special Contract Provisions Related to Payment--
Attestations (Sec. 438.6(c)(2)(ii)(H))
The following changes will be submitted to OMB for approval under
control number 0938-TBD (CMS-10856). Upon approval, it will be folded
into 0938-1453 (CMS-10856).
Amendments to Sec. 438.6(c)(2)(ii)(H) will require all States with
managed care delivery systems to collect attestations from providers
who would receive an SDP attesting that they do not participate in any
hold harmless arrangements. The paperwork burdens associated with this
requirement include the following for States: developing instructions
and communication for providers/plans; recordkeeping; and reporting to
CMS when requested. For providers, the burden associated with this
requirement relates to reviewing and signing the attestations. Although
States will have the flexibility to delegate work of collecting
attestations to managed care plans, we cannot predict how many States
will elect this option. As such, we are not accounting for that burden
separately in these estimates.
States: We estimate that 44 States with MCOs, PIHPs and PAHPs will
need to develop an attestation process and prepare attestations and
communicate with providers. For each State, we estimate on a one-time
basis it will take 200 hours at $79.50/hr for a business operations
specialist to plan the data collection process and develop the
attestations and communications providers, and 200 hours at $120.14/hr
for a software and web developers, programmers, and testers to program
an ingest and recordkeeping process for the attestations. In total, we
estimate a one-time burden of $1,756,832 and 17,600 hours (44 States x
[(200 x $79.50/hr) + (200 x $120.14/hr)]), or $39,928 per State. Taking
into account the 50 percent Federal administrative match, we estimate
one time cost per State of $19,964 ([$15,900 + $24,028] x 0.5).
On an ongoing basis, we estimate that annually, it will take 200
hours at $79.50/hr for a business operations specialist to manage the
data collection process and 232 hours at $39.56/hr for an office clerk
to input the attestations. On an annual, national basis, we estimate
States will submit 55 SDPs across 44 States with MCOs, PIHPs, and PAHPs
for which they would need to provide attestations at CMS's request. We
estimate at each instance it will take a general and operations manager
2 hours at $118.14/hr for to prepare the submission and any necessary
explanations, or 110 hours annually across all States. In total, we
estimate an annual burden of $1,116,424 and 19,118 hours [(44 States x
[(200 x $79.50) + (232 x $39.56)]) + (55 SDPs x (2 x $118.14)], or
$25,373 per State. Taking into account the 50 percent Federal
administrative match, we estimate ongoing costs per State of $12,687
($25,373 x 0.5).
Providers: For the purposes of these estimates, we are using a
provider estimate of 1,088,050 providers enrolled with MCOs, PIHPs, and
PAHPs, based on T-MSIS Analytic Files (also known as TAF) data, that
will need to submit an attestation to the State. We are further
assuming for the purposes of these estimates that these collections
will occur on an annual basis, one per provider, but want to note
States may elect different timing or number of attestations per
provider that would increase or decrease these estimates. We estimate
it will take a healthcare administrator at a provider 6 minutes to
review and sign the attestation at $93.04/hr. In total, we estimate an
annual burden of $10,123,217 and 108,805 hours (1,088,050 providers x
($93.04/hr x 0.1)).
4. ICRs Regarding Rate Certification Submission (Sec. 438.7)
The following changes will be submitted to OMB for approval under
control number 0938-1453 (CMS-10856). One public comment was received.
It is summarized and responded to under this ICR section.
Amendments to Sec. 438.7 set out revisions to the submission and
documentation requirements for all managed care actuarial rate
certifications. The certification will be reviewed and approved by CMS
concurrently with the corresponding contract(s). Currently, Sec.
438.7(b) details certain requirements for documentation in the rate
certifications. We believed these requirements are consistent with
actuarial standards of practice and previous Medicaid managed care
rules.
We estimate that 44 States would develop 253 certifications at 250
hours for each certification. Of the 250 hours, we estimate that it
will take 110 hours at $122.68/hr for an actuary, 15 hours at $118.14/
hr for a general and operations manager, 53 hours at $120.14/hr for a
software and web developers, programmers and testers, 52 hours at
$79.50/hr for a business operations specialist, and 20 hours at $39.56/
hr for an office and administrative support worker. In aggregate we
estimate an annual State burden of 63,250 hours (250 hr x 253
certifications) at a cost of $6,719,559 [253 certifications x ((110 hr
x $122.68/hr) + (15 hr x $118.14/hr) + (53 hr x $120.14/hr) + (52 hr x
$79.50/hr) + (20 hr x $39.56/hr))]. We solicited public comment on
these issues. We summarize and respond to public comments below:
Comment: One commenter stated that the provisions at Sec.
438.7(c)(4) and (5) could increase State administrative burden if a
revised rate certification would be required when there is a
programmatic change for ILOSs and SDPs.
Response: We agree with the commenter that the provisions at Sec.
438.7(c)(4) could increase State administrative burden. The commenter
did not provide an estimate on the potential administrative burden. We
believe it would be reasonable to increase the ICR by approximately 2
percent (that is, 5 rate certifications) to account for any revised
rate certifications necessary for ILOS
[[Page 41239]]
changes and to increase the ICR by approximately 10 percent (23
certifications) to account for any revised rate certifications for SDP
changes. This increases the total number of rate certifications for the
ICR from 225 certifications to 253 rate certifications.
After reviewing the public comments, we are finalizing the ICRs
with revision to account for a total of 253 rate certifications rather
than 225 certifications while all ICR estimates on the total number of
hours remains unchanged. In aggregate, we estimate an annual State
burden of 63,250 hours at a cost of $6,719,559 as reflected in the
estimate above.
5. ICRs Regarding Medical Loss Ratio Standards (Sec. Sec. , 438.8,
438.74, and 457.1203)
The following changes to Sec. Sec. 438.8 and 438.74 will be
submitted to OMB for approval under control number 0938-1453 (CMS-
10856). The following changes to Sec. 457.1203 will be submitted to
OMB for approval under control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.8 and 457.1203 will require that MCOs,
PIHPs, and PAHPs report to the State annually their total expenditures
on all claims and non-claims related activities, premium revenue, the
calculated MLR, and, if applicable, any remittance owed.
We estimate the total number of MLR reports that MCOs, PIHPs, and
PAHPs were required to submit to States amount to 629 Medicaid
contracts and 199 CHIP contracts. All MCOs, PIHPs, and PAHPs need to
report the information specified under Sec. Sec. 438.8 and 457.1203
regardless of their credibility status.
Amendments to Sec. Sec. 438.8(k)(1)(vii) and 457.1203(f) will
require that MCOs, PIHPs, and PAHPs develop their annual MLR reports
compliant with the expense allocation methodology.\234\ To meet this
requirement we anticipate it will take: 1 hr at $83.40/hr for an
accountant, 1 hr at $79.50/hr for a business operations specialist, and
1 hr at $118.14/hr for a general operations manager. In aggregate for
Medicaid for Sec. 438.8(k)(1)(vii), we estimate an annual private
sector burden of 1,887 hours (629 contracts x 3 hr) at a cost of
$176,775 [629 contracts x ((1 hr x $83.40/hr) + (1 hr x $79.50/hr) + (1
hr x $118.14/hr))]. In aggregate for CHIP for Sec. 457.1203(f), we
estimate an annual private sector burden of 597 hours (199 contracts x
3 hr) at a cost of $55,927 [199 contracts x ((1 hr x $83.40/hr) + (1 hr
x $79.50/hr) + (1 hr x $118.14/hr))].
---------------------------------------------------------------------------
\234\ Methodology(ies) for allocation of expenditures as
described at 45 CFR 158.170(b).
---------------------------------------------------------------------------
To do the annual reconciliations needed to make the incentive
payments and include the expenditures in their annual report required
by Sec. 438.8(k), we estimate MCOs, PIHPs, and PAHPs will take 1 hour
at $79.50/hr for a business operations specialist. In aggregate for
Medicaid we estimate an annual private sector burden of 315 hours (315
contracts x 1 hr) at a cost of $25,043 (315 contracts x 1 hr x $79.50/
hr). In aggregate for CHIP for Sec. 457.1203(f), we estimate an annual
private sector burden of 100 hours (100 contracts x 1 hr) and $7,950
(100 contracts x 1 hr x $79.50/hr).
Amendments to Sec. Sec. 438.74 and 457.1203(e) will require States
to comply with data aggregation requirements for their annual reports
to CMS. We estimate that only 5 States will need to resubmit MLR
reports to comply with the data aggregation changes. We anticipate that
it will take 5 hours x $79.50/hr for a business operations specialist.
In aggregate, for Medicaid for Sec. 438.74, we estimate a one-time
State burden of 25 hours (5 States x 5 hr) at a cost of $1,988 (5
States x 5 hr x $79.50/hr). As this will be a one-time requirement, we
annualize our time and cost estimates to 8 hours (25 hr/3 yr) and $663
($1,988/3 yr).
In aggregate for CHIP for Sec. 457.1203(e) we estimate a one-time
State burden of 25 hours (5 States x 5 hr) at a cost of $1,988 (5
States x 5 hr x $79.50/hr). As this will be a one-time requirement, we
annualize our time and cost estimates for CHIP to 8 hours (25 hr/3 yr)
and $663 ($1,988/3 yr).
The annualization divides our estimates by 3 years to reflect OMB's
likely approval period. We are annualizing the one-time burden
estimates since we do not anticipate any additional burden after the 3-
year approval period expires. We did not receive any public comments on
the aforementioned collection of information requirements and burden
estimates and are finalizing them as proposed.
6. ICRs Regarding Information Requirements (Sec. Sec. 438.10 and
457.1207)
The following changes to Sec. 438.10 will be submitted to OMB for
approval under control number 0938-1453 (CMS-10856). The following
changes to Sec. 457.1207 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.10(c)(3) and 457.1207 will require
States to operate a website that provides the information required in
Sec. 438.10(f). We are estimating 45 States will need to operate the
website. We are finalizing that States must include required
information on one page, use clear labeling, and verify correct
functioning and accurate content at least quarterly. We anticipate it
will take 20 hours at $120.14/hr once for a software and web
developers, programmers, and testers to place all required information
on one page and ensure the use of clear and easy to understand labels
on documents and links.
In aggregate for Medicaid for Sec. 438.10(c)(3), we estimate a
one-time State burden of 900 hours (45 States x 20 hr) at a cost of
$108,126 (900 hr x $120.14/hr). As this will be a one-time requirement,
we annualize our time and cost estimates to 300 hours and $36,042.
In aggregate for CHIP for Sec. 457.1207, we estimate a one-time
State burden of 640 hours (32 States x 20 hr) at a cost of $76,890 (640
hr x $120.14/hr). As this will be a one-time requirement, we annualize
our time and cost estimates to 213 hours and $25,630.
The annualization divides our estimates by 3 years to reflect OMB's
likely approval period. We are annualizing the one-time burden
estimates since we do not anticipate any additional burden after the 3-
year approval period expires.
We also anticipate that it will take 40 hours at $120.14/hr for a
software and web developers, programmers, and testers to periodically
add content and verify the function of the site at least quarterly (10
hours/quarter).
In aggregate for Medicaid, we estimate an annual State burden of
1,800 hours (45 States x 40 hr) at a cost of $216,252 (1,800 hr x
$120.14/hr).
Due to the additional finalized requirement to post summary
enrollee experience survey results by separate CHIP managed care plan
on the State's website, we estimate an additional 1 hour at $120.14/hr
for a software and web developers, programmers, and testers to post
these comparative data annually for a total of 41 hours. For CHIP, we
estimate an annual State burden of 1,312 hours (32 States x 41 hr) at a
cost of $157,624 (1,312 hr x $120.14/hr).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
7. ICRs Regarding ILOS Contract and Supporting Documentation
Requirements (Sec. Sec. 438.16 and 457.1201)
The following changes to Sec. 438.16 will be submitted to OMB for
approval
[[Page 41240]]
under control number 0938-1453 (CMS-10856). The following changes to
Sec. 457.1201 will be submitted to OMB for approval under control
number 0938-1282 (CMS-10554).
The provisions at Sec. Sec. 438.16 and 457.1201 will require
States that provide ILOSs, with the exception of short term IMD stays,
to comply with additional information collection requirements. 44
States utilize MCOs, PIHPs and PAHPs in Medicaid managed care programs.
We do not have current data readily available on the number of States
that utilize ILOSs and the types of ILOSs in Medicaid managed care. We
believed it is a reasonable estimate to consider that half of the
States with MCOs, PIHPs and PAHPs (22 States) may choose to provide
non-IMD ILOSs. Similarly, for CHIP, we estimated that half of the
States with MCOs, PIHPs, and PAHPS (16 States) provide ILOSs and would
be subject to the additional information collection requirements.
The provision at Sec. 438.16(c)(4)(i) will require States to
submit a projected ILOS cost percentage to CMS as part of the rate
certification. The burden for this provision is accounted for in ICR #2
(above) for Sec. 438.7 Rate Certifications.
The provision at Sec. 438.16(c)(5)(ii) will require States to
submit a final ILOS cost percentage and summary of actual MCO, PIHP and
PAHP ILOS costs as a separate actuarial report concurrently with the
rate certification. We anticipated that 22 States will need: 5 hours at
$122.68/hr for an actuary, 5 hours at $120.14/hr for a software and web
developers, programmers and testers, and 7 hours at $79.50/hr for a
business operations specialist. In aggregate, we estimate an annual
State burden of 374 hours (17 hr x 22 States) at a cost of $38,953 (22
States x [(5 hr x $122.68/hr) + (5 hr x $120.14/hr) + (7 hr x $79.50/
hr)]).
Provisions at Sec. Sec. 438.16(d)(1) and 457.1201(e) will require
States that elect to use ILOS to include additional documentation
requirements in their managed care plan contracts. We anticipate that
22 States for Medicaid and 16 States for CHIP will need 1 hour at
$79.50/hr for a business operations specialist to amend 327 Medicaid
MCO, PIHP, and PAHP contracts and 100 CHIP contracts annually. In
aggregate for Medicaid for Sec. 438.16(d)(1), we estimated an annual
State burden of 327 hours (327 contracts x 1 hr) at a cost of $25,997
(327 hr x $79.50/hr). In aggregate for CHIP for Sec. 457.1201(e) we
estimated an annual State burden of 100 hours (100 contracts x 1 hr) at
a cost of $7,950 (100 hr x $79.50/hr).
Provisions at Sec. Sec. 438.16(d)(2) and 457.1201(e) will require
some States to provide to CMS additional documentation to describe the
process and supporting data the State used to determine each ILOS to be
a medically appropriate and cost effective substitute. This additional
documentation will be required for States with a projected ILOS cost
percentage greater than 1.5 percent. We anticipated that approximately
5 States may be required to submit this additional documentation. We
estimated it will take 2 hours at $79.50/hr for a business operations
specialist to provide this documentation. In aggregate for Medicaid for
Sec. 438.16(d)(2), we estimated an annual State burden of 10 hours (5
States x 2 hr) at a cost of $795 (10 hr x $79.50/hr). In aggregate for
CHIP for Sec. 457.1201(e) we estimate the same annual State burden of
10 hours (5 States x 2 hr) at a cost of $795 (10 hr x $79.50/hr).
Provisions at Sec. Sec. 438.16(e)(1) and 457.1201(e) will require
States with a final ILOS cost percentage greater than 1.5 percent to
submit an evaluation for ILOSs to CMS. We anticipated that
approximately 5 States may be required to develop and submit an
evaluation. We estimated it will take 25 hours at $79.50/hr for a
business operations specialist. In aggregate for Medicaid for Sec.
438.16(e)(1), we estimated an annual State burden of 125 hours (5
States x 25 hr) at a cost of $9,938 (125 hr x $79.50/hr). In aggregate
for CHIP for Sec. 457.1201(e), we estimated the same annual State
burden of 125 hours (5 States x 25 hr) at a cost of $9,938 (125 hr x
$79.50/hr).
An ILOS may be terminated by either a State, a managed care plan,
or by CMS. Provisions as Sec. Sec. 438.16(e)(2)(iii) and 457.1201(e)
will require States to develop an ILOS transition of care policy. We
believed all States with non-IMD ILOSs should proactively prepare a
transition of care policy in case an ILOS is terminated. We estimated
both a one-time burden and an annual burden for these provisions. We
believed there is a higher one-time burden as all States that currently
provide non-IMD ILOSs will need to comply with this requirement by the
applicability date, and an annual burden is estimated for States on an
on-going basis. We estimated for a one-time burden, it will take: 2
hours at $120.14/hr for a software and web developers, programmers and
testers and 2 hours at $79.50/hr for a business and operations
specialist for initial development of a transition of care policy. In
aggregate for Medicaid for Sec. 438.16(e)(2)(iii), we estimate a one-
time State burden 88 hours (22 States x 4 hr) at a cost of $8,784 (22
States x [(2 hr x $120.14/hr) + (2 hr x $79.50/hr)]). As this will be a
one-time requirement, we annualized our time and cost estimates to 30
hours and $2,928. In aggregate for CHIP for Sec. 457.1201(e), we
estimated a one-time State burden 64 hours (16 States x 4 hr) at a cost
of $6,389 (16 States x [(2 hr x $120.14/hr) + (2 hr x $79.50/hr)]). As
this will be a one-time requirement, we annualized our time and cost
estimates to 21 hours and $2,130. The annualization divides our
estimates by 3 years to reflect OMB's likely approval period. We are
annualizing the one-time burden estimates since we do not anticipate
any additional burden after the 3-year approval period expires.
For updates to reflect specific ILOSs, we also estimated that this
ILOS transition of care policy will have an annual burden of 1 hour at
$79.50/hr for a business operations specialist per State. In aggregate
for Medicaid for Sec. 438.16(e)(2)(iii), we estimate an annual State
burden of 22 hours (22 States x 1 hr) at a cost of $1,749 (22 hr x
$79.50/hr). In aggregate for CHIP for Sec. 457.1201(e), we estimate an
annual State burden of 16 hours (16 States x 1 hr) at a cost of $1,272
(16 hr x $79.50/hr).
For MCOs, PIHPs, or PAHPs that will need to implement a transition
policy when an ILOS is terminated, we estimate that on an annual basis,
20 percent of managed care plans (65 plans for Medicaid and 40 plans
for CHIP) may need to implement this policy. We estimated an annual
managed care plan burden of 2 hours at $79.50/hr for a business
operations specialist to implement the policy. In aggregate for
Medicaid for Sec. 438.16(e)(2)(iii)(B), we estimated an annual burden
of 130 hours (65 plans x 2 hr) at a cost of $10,335 (130 hr x $79.50/
hr). In aggregate for CHIP for Sec. 457.1201(e), we estimate an annual
burden of 80 hours (40 plans x 2 hr) at a cost of $6,360 (80 hr x
$79.50/hr).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
8. ICRs Regarding State Monitoring Requirements (Sec. 438.66)
The following changes will be submitted to OMB for approval under
control number 0938-1453 (CMS-10856).
Amendments to Sec. 438.66(c) will require States to conduct, or
contract for, an enrollee experience survey annually. We believed most,
if not all, States will use a contractor for this task and base our
burden estimates on that assumption. In the first year, for
procurement, contract implementation
[[Page 41241]]
and management, and analysis of results, we estimate 85 hours at
$79.50/hr for a business operations specialist and 25 hours at $118.14/
hr for general operations manager. In aggregate for Sec. 438.66(c), we
estimate a one-time State burden of 5,390 hours (49 States x 110 hr) at
a cost of $475,840 (49 States x [(85 hr x $79.50/hr) + (25 hr x
$118.14)]). As this will be a one-time requirement, we annualize our
time and cost estimates to 1,796 hours and $158,614. The annualization
divides our estimates by 3 years to reflect OMB's likely approval
period. We are annualizing the one-time burden estimates since we do
not anticipate any additional burden after the 3-year approval period
expires.
In subsequent years, for contract management and analysis of
experience survey results, we estimated 50 hours at $79.50/hr for a
business operations specialist and 15 hours at $118.14/hr for general
operations manager. In aggregate, we estimated an annual State burden
of 3,185 hr (49 States x 65 hr) at a cost of $281,608 (49 States x [(50
hr x $79.50/hr) + (15 hr x $118.14/hr)]).
Amendments to Sec. 438.66(e)(1) and (2) will require that States
submit an annual program assessment report to CMS covering the topics
listed in Sec. 438.66(e)(2). The data collected for Sec. 438.66(b)
and the utilization of the data in Sec. 438.66(c), including reporting
in Sec. 438.16, will be used to complete the report. We anticipate it
will take 80 hours at $79.50/hr for a business operations specialist to
compile and submit this report to CMS. In aggregate, we estimate an
annual State burden of 3,920 hours (49 States x 80 hr) at a cost of
$311,640 (3,920 hr x $79.50/hr).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
9. ICRs Regarding Network Adequacy Standards (Sec. Sec. 438.68 and
457.1218)
The following changes to Sec. 438.68 will be submitted to OMB for
approval under control number 0938-1453 (CMS-10856). The following
changes to Sec. 457.1218 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
Sections 438.68(e) and 457.1218 will require States with MCOs,
PIHPs, or PAHPs to develop appointment wait time standards for four
provider types. We anticipate it will take: 20 hours at $79.50/hr for a
business operations specialist for development and 10 hours at $79.50/
hr a business operations specialist for ongoing enforcement of all
network adequacy standards. In aggregate for Medicaid for Sec.
438.68(e), we estimate a one-time State burden of 880 hours (44 States
x 20 hr) at a cost of $69,960 (880 hr x $79.50/hr). As this will be a
one-time requirement, we annualize our one-time burden estimates to 293
hours and $23,320. The annualization divides our one-time by 3 years to
reflect OMB's likely approval period. We are annualizing the one-time
burden estimates since we do not anticipate any additional burden after
the 3-year approval period expires.
Additionally, Sec. 438.68(e) has an annual State burden. We
anticipate it will take: 10 hours at $79.50/hr for a business
operations specialist for development. In aggregate for Medicaid for
Sec. 438.68(e), we anticipate an annual State burden of 440 hours (44
States x 10 hr) at a cost of $34,980 (440 hr x $79.50/hr).
In aggregate for CHIP for Sec. 457.1218, we estimate a one-time
State burden of 640 hours (32 States x 20 hr) at a cost of $50,880 (640
hr x $79.50/hr) for States to develop appointment wait time standards
for four provider types and an annual State burden of 320 hours (32
States x 10 hr) at a cost of $25,440 (320 hr x $79.50/hr) for
enforcement of all network adequacy standards. As the development of
appointment wait time standards will be a one-time requirement, we
annualize our one-time burden estimates to 213 hours (640hr/3yr) and
$16,960 (50,880/3yr). The annualization divides our one-time estimates
by 3 years to reflect OMB's likely approval period. We are annualizing
the one-time burden estimates since we do not anticipate any additional
burden after the 3-year approval period expires.
Amendments to Sec. Sec. 438.68(f) and 457.1218 will require States
with MCO, PIHPs, or PAHPs to contract with an independent vendor to
perform secret shopper surveys of plan compliance with appointment wait
times and accuracy of provider directories and send directory
inaccuracies to the State within three days of discovery. In the first
year, for procurement, contract implementation, and management, we
anticipate it will take: 85 hours at $79.50/hr for a business
operations specialist and 25 hours at $118.14/hr for general operations
manager. In aggregate for Medicaid for Sec. 438.68(f), we estimate a
one-time State burden of 4,840 hours (44 States x 110 hr) at a cost of
$427,284 (44 States x [(85 hr x $79.50/hr) + (25 hr x $118.14/hr)]). As
this will be a one-time requirement, we annualize our time and cost
estimates to 1,614 hours and $142,428. In aggregate for CHIP for Sec.
457.1218, we estimate a one-time State burden of 3,520 hours (32 States
x 110 hr) at a cost of $310,752 (32 States x [(85 hr x $79.50/hr) + (25
hr x $118.14/hr)]). As this will be a one-time requirement, we
annualize our time and cost estimates to 1,173 hours and $103,584. The
annualization divides our estimates by 3 years to reflect OMB's likely
approval period. We are annualizing the one-time burden estimates since
we do not anticipate any additional burden after the 3-year approval
period expires.
In subsequent years, for contract management and analysis of
results, we anticipate it will take 50 hours at $79.50/hr for a
business operations specialist and 15 hours at $118.14/hr for general
operations manager. In aggregate for Medicaid for Sec. 438.68(f), we
estimate an annual State burden of 2,860 hours (44 States x 65 hr) at a
cost of $252,872 (44 States x [(50 hr x $79.50/hr) + (15 hr x
$118.14)]).
In aggregate for CHIP for Sec. 457.1218 we estimate an annual
State burden of 2,080 hours (32 States x 65 hr) at a cost of $183,907
(32 States x [(50 hr x $79.50/hr) + (15 hr x $118.14/hr)]).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
10. ICRs Regarding Assurance of Adequate Capacity and Services
(Sec. Sec. 438.207 and 457.1230)
The following changes to Sec. 438.207 will be submitted to OMB for
approval under control number 0938-1453 (CMS-10856). The following
changes to Sec. 457.1230 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.207(b) and 457.1230(b) will require
MCOs, PIHPs, and PAHPs to submit documentation to the State of their
compliance with Sec. 438.207(a). As we finalized in this rule to add a
reimbursement analysis at Sec. 438.207(b)(3) (and at Sec. 457.1230(b)
for separate CHIP), we estimate a one-time plan burden of: 50 hours at
$79.50/hr for a business operations specialist, 20 hours at $118.14/hr
for a general operations manager, and 80 hours at $120.14/hr for
software and web developers, programmers and testers. In aggregate for
Medicaid for Sec. 438.207(b), we estimate a one-time private sector
burden of 94,350 hours (629 MCO, PIHPs, and PAHPs x 150 hr) at a cost
of $10,031,921 (629 MCOs, PIHPs, and PAHPs x [(50 hr x $79.50/hr) + (20
hr x $118.14/hr) + (80 hr x $120.14/hr)]). As this will be a one-time
requirement, we annualize our time and cost estimates to 31,449 hours
and $3,343,974. The annualization divides our estimates by 3 years to
reflect OMB's likely approval period. We are
[[Page 41242]]
annualizing the one-time burden estimates since we do not anticipate
any additional burden after the 3-year approval period expires.
In aggregate for CHIP for Sec. 457.1230(b), we estimate a one-time
private sector burden of 29,850 hours (199 MCO, PIHPs, and PAHPs x 150
hr) at a cost of $3,173,851 (199 MCOs, PIHPs, and PAHPs x [(50 hr x
$79.50/hr) + (20 hr x $118.14/hr) + (80 hr x $120.14/hr)]). As this
will be a one-time requirement, we annualize our time and cost
estimates to 9,950 hours and $1,057,950. The annualization divides our
estimates by 3 years to reflect OMB's likely approval period. We are
annualizing the one-time burden estimates since we do not anticipate
any additional burden after the 3-year approval period expires.
For ongoing analyses and submission of information that will be
required by amendments to Sec. 438.207(b), we estimate it will take:
20 hours at $79.50/hr for a business operations specialist, 5 hours at
$118.14/hr for a general operations manager, and 20 hours at $120.14/hr
for software and web developers, programmers and testers. In aggregate
for Medicaid, we estimate a one-time private sector burden of 28,305
hours (629 MCO, PIHPs, and PAHPs x 45 hr) at a cost of $2,883,021 (629
MCO, PIHPs, and PAHPs x [(20 hr x $79.50/hr) + (5 hr x $118.14/hr) +
(20 hr x $120.14/hr)]).
In aggregate for CHIP, we estimate a one-time private sector burden
of 8,955 hours (199 MCO, PIHPs, and PAHPs x 45 hr) at a cost of
$912,117 (199 MCO, PIHPs, and PAHPs x [(20 hr x $79.50/hr) + (5 hr x
$118.14/hr) + (20 hr x $120.14/hr)]).
Amendments to Sec. Sec. 438.207(d) and 457.1230(b) will require
States to submit an assurance of compliance to CMS that their MCOs,
PIHPs, and PAHPs meet the State's requirements for availability of
services. The submission to CMS must include documentation of an
analysis by the State that supports the assurance of the adequacy of
the network for each contracted MCO, PIHP or PAHP and the accessibility
of covered services. By including the requirements in this rule at
Sec. Sec. 438.68(f) and 438.208(b)(3), we anticipate it will take 40
hours at $79.50/hr for a business operations specialist. Although
States may need to submit a revision to this report at other times
during a year (specified at Sec. 438.207(c)), we believed these
submissions will be infrequent and require minimal updating to the
template; therefore, the burden estimated here in inclusive of
occasional revisions. In aggregate for Medicaid, we estimate an annual
State burden of 1,760 hours (44 States x 40 hr) at a cost of $139,920
(1,760 hr x $79.50/hr).
Due to the additional finalized requirement to include enrollee
experience survey results in the State's separate CHIP analysis of
network adequacy, we anticipate an additional 4 hours at $79.50/hr for
a business operations specialist to analyze these data for a total of
44 hours annually. In aggregate for CHIP, we estimate an annual State
burden of 1,408 hours (32 States x 44 hr) at a cost of $111,936 (1,408
hr x $79.50/hr).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
11. ICRs Regarding External Quality Review Results (Sec. Sec. 438.364
and 457.1250)
The following changes to Sec. 438.364 and Sec. 438.360 will be
submitted to OMB for approval under control number 0938-0786 (CMS-R-
305), and the changes to Sec. 457.1250 will be submitted to OMB for
approval under control number 0938-1282 (CMS-10554).
Amendments to Sec. 438.360(a)(1) will remove the requirement that
plan accreditation must be from a private accrediting organization
recognized by CMS as applying standards at least as stringent as
Medicare under the procedures in Sec. 422.158. Eliminating this
requirement will simplify the plan accreditation process. We assume
that States will apply the non-duplication provision to 10 percent of
MCOs, PIHPs, and PAHPs, we anticipate that this provision will offset
the burden associated with Sec. 438.358(b)(1)(i) through (iii) for 65
MCOs, PIHPs, and PAHPs (since these activities will no longer be
necessary for these 65 plans). To develop the burden reduction
estimate, we applied the currently approved estimates in CMS-R-305,
which quantifies the burden for Sec. 438.358(b)(1)(i) through (iii).
The existing burden estimate assumes for the first mandatory EQR-
related activity that each MCO, PIHP, or PAHP will conduct 2 PIPs at 65
hours per PIP for a total of 130 hours (65 hr x 2 PIP validations). For
the next two mandatory activities, we estimate that each MCO, PIHP,
PAHP, or PCCM entity will calculate 3 performance measures each year at
53 hours per performance measure. A compliance review will also occur
every three years and burden is annualized. This totals 279.33 hours
([53 hours x 3 performance measures] + [361 hours/3 years compliance
review]). In total, for one entity we estimate 409.33 hours (130 +
279.33) to conduct the mandatory EQR activities. All activities are
conducted by a business operations specialist at $79.50/hr for a total
cost per entity of $32,541.74 (409.33 x $79.50/hr). Therefore, for
Sec. 438.358(b)(1)(i) through (iii), we estimate an aggregated offset
of annual State burden of minus 26,606 hours [(-65 MCOs, PIHPs x 409.33
hr)] and minus $2,115,213 (-26,606.45 hr x $79.50/hr).
The proposed amendments to Sec. 438.364(a)(2)(iii) for Medicaid,
and through an existing cross-reference at Sec. 457.1250(a) for
separate CHIP, will (1) require that the EQR technical reports include
``any outcomes data and results from quantitative assessments'' for the
applicable EQR activities in addition to whether or not the data has
been validated, and (2) add the mandatory network adequacy validation
activity to the types of EQR activities to which the requirement to
include data in the EQR technical report applies. For Medicaid Sec.
438.364(a)(2)(iii), we assume 44 States and 654 MCOs, PIHPs and PAHPs
will be subject to the EQR provisions. For CHIP, we assume 32 States
and 199 MCOs, PIHPs and PAHPs will be subject to the proposed EQR
provisions.
We estimate it will take 1 hour at $79.50/hr for a business
operations specialist to describe the data and results from
quantitative assessments and 30 minutes at $39.56/hr for an office
clerk to collect and organize data. In aggregate for Medicaid, we
estimate an annual State burden of 981 hours (654 MCOs, PIHPs, and
PAHPs yearly reports x 1.5 hr) at a cost of $64,929 (654 reports x [(1
hr x $79.50/hr) + (0.5 hr x $39.56/hr)]). In aggregate for CHIP for
Sec. 457.1250(a), we estimate an annual State burden of 299 hours (199
MCOs, PIHPs, and PAHPs yearly reports x 1.5 hr) at a cost of $19,757
(199 reports x [(1 hr x $79.50/hr) + (0.5 hr x $39.56/hr)]).
Amendments to Sec. 438.364(c)(2)(i) for Medicaid, and through an
existing cross-reference at Sec. 457.1250(a) for separate CHIP, will
require States to notify CMS within 14 calendar days of posting their
EQR technical reports on their quality website and provide CMS with a
link to the report. Previously States were not required to notify CMS
when reports were posted. We estimate it will take 30 minutes at
$79.50/hr for a business operations specialist to notify CMS of the
posted reports. In aggregate for Medicaid, we estimate an annual State
burden of 22 hours (44 States x 0.5 hr) at a cost of $1,749 (22 hr x
$79.50/hr). In aggregate for CHIP, we estimate an annual State burden
of 16 hours (32
[[Page 41243]]
States x 0.5 hr) at a cost of $1,272 (16 hr x $79.50/hr).
Amendments to Sec. 438.364(c)(2)(iii) for Medicaid, and through an
existing cross-reference at Sec. 457.1250(a) for separate CHIP, will
require States to maintain an archive of at least the previous 5 years
of EQR technical reports on their websites. Currently, almost half of
States maintain an archive of at least 2 years' worth of EQR reports.
Initially, we assume 75 percent of reports completed within the
previous 5 years need to be archived on State websites. We estimate it
will take 5 minutes (0.0833 hr) at $79.50/hr for a business operations
specialist to collect and post a single EQR technical report to a State
website. In aggregate for Medicaid for Sec. 438.364(c)(2)(iii), we
estimate a one-time burden of 204 hours (654 MCOs, PIHPs, and PAHPs
yearly reports x 0.75 x 5 years x 0.0833 hr) at a cost of $16,218 (204
hr x $79.50/hr). As this will be a one-time requirement, we annualize
our time and cost estimates to 68 hours and $5,406. In aggregate for
CHIP for Sec. 457.1250(a), we estimate a one-time burden of 62 hours
[(199 MCOs, PIHPs, and PAHPs yearly reports x 0.75 x 5 years x 0.0833/
hr) at a cost of $4,929 (62 hr x $79.50/hr). As this will be a one-time
requirement, we annualize our time and cost estimates to 21 hours and
$1,643. The annualization divides our estimates by 3 years to reflect
OMB's likely approval period. We are annualizing the one-time burden
estimates since we do not anticipate any additional burden after the 3-
year approval period expires.
Based on the public comments received on our proposed change to
438.364(c)(1) to the annual due date of the EQR technical reports, we
decided not to finalize this change, and therefore, have removed the
associated burden. The associated burden was based on an estimate of 1
hour at $79.50/hr for a business operations specialist and 30 minutes
at $118.14/hr a general operations manager to amend vendor contracts to
reflect the new reporting date. In aggregate for Medicaid, we estimated
an annual State burden of 981 hours (654 MCOs, PIHPs, and PAHPs yearly
reports x 1.5 hr) at a cost of $90,625 (654 contracts [(1 hr x $79.50/
hr) + (0.5 hr x $118.14/hr)]). This change is discussed in more detail
in section I.B.5.c. of this final rule.
12. ICRs Regarding Requirements for PCCMs and New Optional EQR Activity
(Sec. Sec. 438.310(c)(2), 438.350, 438.358, and 457.1250)
The following changes to Sec. 438.310(c)(2) and Sec. 438.350 will
be submitted to OMB for approval under control number 0938-0786 (CMS-R-
305). The following changes to Sec. 457.1250 will be submitted to OMB
for approval under control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.310(c)(2), 438.350, and 457.1250(a)
will remove PCCMs from the managed care entities subject to EQR. We
estimate the burden on States of completing EQR mandatory and optional
activities which include:
Mandatory EQR activities include the validation of performance
measures and a compliance review. We assume States validate 3
performance measures each year and conduct a compliance review once
every 3 years. We expect it will take 53 hours at $79.50/hr for a
business operations specialist to complete each performance measure
validation and 361 hours at $79.50/hr for a business operations
specialist to conduct a compliance review. Alleviating this burden will
result in an annual State Medicaid savings of minus 2,793 hours (10
PCCM entities x [(53 hr/validation x 3 performance measure validations)
+ (361 hr/3 years compliance review)]) and minus $222,044 (- 2,793 hr x
$79.50/hr). For CHIP for Sec. 457.1250(a), we estimate an annual State
savings of minus 2,196 hours (7 PCCM entities x [(53 hr/validation x 3
performance measure validations) + (361 hr/3 years compliance review)])
and minus $174,582 (- 2,196 hr x $79.50/hr).
Optional EQR activities include: (1) validation of client level
data (such as claims and encounters); (2) administration or validation
of consumer or provider surveys; (3) calculation of performance
measures; (4) conduct of PIPs; (5) conduct of focused studies; and (6)
assist with the quality rating of MCOs, PIHPs, and PAHPs consistent
with Sec. Sec. 438.334 and 457.1240(d). Based on our review of recent
EQR technical report submissions we estimate and assume that each year
10 percent of PCCM entities (approximately 1 PCCM) will be subject to
each of the optional EQR-related activities. To conduct the optional
activities we estimate it will take: 250 hours at $120.14/hr for a
software and web developers, programmers and testers to program and
synthesize the data; 549 hours at $79.50/hr for a business operations
specialist to collect data and administer surveys; and 200 hours at
$118.14/hr for general and operations manager to oversee and manage the
process. Alleviating this burden will result in an annual state
Medicaid savings of minus 999 hours (250 hr + 549 hr + 200hr) and minus
$97,309 ([250 hr x $120.14/hr] + [549 hr x $79.50/hr] + [200 hr x
$118.14). Adjusting for 7 PCCMs for CHIP for Sec. 457.1250(a), we
estimate annual State savings of minus 650 hours (-228 hr -49 hr -16 hr
-103 hr -127 hr -127 hr) and minus $63,302 [(-650 hr x 0.20 x $118.14/
hr) + (-650 hr x 0.25 x $120.14/hr) + (-650 hr x 0.55 x $79.50/hr)].
Per Sec. 438.364(c)(2)(ii), each State agency will provide copies
of technical reports, upon request, to interested parties such as
participating health care providers, enrollees, and potential enrollees
of the MCO, PIHP, or PAHP, beneficiary advocacy groups, and members of
the general public. This change will eliminate the burden on States to
provide PCCM EQR reports. We estimate an annual State burden of 5
minutes (on average) or 0.0833 hours at $39.56/hr for an office clerk
to disclose the reports (per request), and that a State will receive
five requests per PCCM entity. Alleviating this burden, for Sec.
438.310(c)(2) and Sec. 438.350, will result in an annual Medicaid
State savings of minus 4 hours (10 PCCM entities x 5 requests x 0.0833/
hr) and minus $158 (-4 hr x $39.56/hr). For CHIP for Sec. 457.1250(a),
we estimate an annual State savings of minus 3 hours (7 PCCM entities x
5 requests x 0.0833/hr) and minus $119(-3 hr x $39.56/hr).
For the mandatory and optional EQR activities, in aggregate for
Medicaid, for Sec. 438.310(c)(2) and Sec. 438.350, we estimate an
annual State savings of minus 3,796 hours (-2,793 hr + -999 hr + -4 hr)
and minus $319,4951($222,044 + $97,309 + $158). Similarly, in aggregate
for CHIP for Sec. 457.1250(a), we estimate an annual State savings of
minus 2,849 (-2,196 hr -650 hr-3 hr) and minus $238,003 (-$174,582 -
$63,302 -$119).
Additionally, the burden associated with Sec. 438.358(b)(2) also
includes the time for a PCCM entity (described in Sec. 438.310(c)(2))
to prepare the information necessary for the State to conduct the
mandatory EQR-related activities. The currently approved burden
estimate in CMS-305 assumes 200 hr for a MCO, PIHP, or PAHP to prepare
the information for all mandatory EQR activities. Given the estimate of
200 hr for an MCO, PIHP, or PAHP, and that there are only 2 mandatory
EQR-related activities for PCCM entities (described in Sec.
438.310(c)(2)), we estimate it will take half the time (or 100 hr) to
prepare the documentation for these 2 activities, half (50 hr) at
$79.50/hr by a business operations specialist and half (50 hr) at
$39.56/hr by an office clerk. In aggregate for Medicaid, we estimate an
annual private sector savings of minus 1,000 hours (10 PCCM entities x
100 hr) and minus $59,530 [(-500 hr x $79.50/hr) +
[[Page 41244]]
(-500 hr x $39.56/hr)]. In aggregate for CHIP for Sec. 457.1250(a), we
estimate an annual private sector savings of minus 200 hours (2 PCCM
entities x 100 hr) and minus $11,906 [(-100 hr x $79.50/hr) + (-100 hr
x $39.56/hr)].
Amendments to Sec. Sec. 438.358(c)(7) and 457.1250(a) add a new
optional EQR activity to assist in evaluations for ILOSs, quality
strategies and SDPs that pertain to outcomes, quality, or access to
health care services. Based on our review of recent EQR technical
report submissions we estimate and assume that each year 10 percent of
MCOs, PIHPs and PAHPs will be subject to each of the optional EQR-
related activities, though we note that the exact States and number
vary from year to year. We also estimate that it will take 80 hours for
a mix of professionals will work on each optional EQR-related activity:
16 hours for a general and operations manager at $118.14/hr; 20 hours
for software and web developers, programmers and testers at $120.14/hr;
and 44 hours for a business operations specialist at $79.50/hr. In
aggregate for Medicaid, the annual State burden to assist in
evaluations is 4,640 hours (58 MCOs, PIHPs and PAHPs x 80 hr) at a cost
of $451,880 [(58 MCOs, PIHPs and PAHPs x 16 hr x $118.14/hr) + (58
MCOs, PIHPs and PAHPs x 20 hr x $120.14/hr) + (58 MCOs, PIHPs and PAHPs
x 44 hr x $79.50/hr)]. In aggregate for CHIP for Sec. 457.1250(a), the
annual State burden to assist in evaluations is 1,600 hours (20 MCOs,
PIHPs and PAHPs x 80 hr) at a cost of $155,821 [(1,600 hr x 0.20 x
$118.14/hr) + (1,600 hr x 0.25 x $120.14/hr) + (1,600 hr x 0.55 x
$79.50/hr)].
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
13. ICRs Regarding Quality Rating System Measure Collection (Sec. Sec.
438.515 and 457.1240)
The following changes to Sec. 438.515 will be submitted to OMB for
approval under control number 0938-1281 (CMS-10553). The following
changes to Sec. 457.1240 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. [thinsp]438.515(a)(1) and 457.1240(d) will
revise the existing QRS requirements by mandating that the State
collect specified data from each managed care plan with which it
contracts that has 500 or more enrollees on July 1 of the measurement
year. Based on the data collected, the State will calculate and issue
an annual quality rating to each managed care plan. The State will also
collect data from Medicare and the State's FFS providers, if all data
necessary to issue an annual quality rating cannot be provided by the
managed care plans. Annual quality ratings will serve as a tool for
States, plans and beneficiaries. The annual quality ratings will hold
States and plans accountable for the care provided to Medicaid and CHIP
beneficiaries, provide a tool for States to drive improvements in plan
performance and the quality of care provided by their programs, and
empower beneficiaries with useful information about the plans available
to them. States will be required to collect data using the framework of
a mandatory QRS Measure Set. We used the mandatory measure set, found
in Table 2 of this final rule, as the basis for the measure collection
burden estimate. The mandatory measure set consists of 16 measures,
including CAHPS survey measures, and reflects a wide range of
preventive and chronic care measures representative of Medicaid and
CHIP beneficiaries. For Medicaid managed care, we assume 629 MCOs,
PIHPs and PAHPs and 44 States to be subject to the mandatory QRS
measure set collection and reporting provision. For CHIP managed care,
we assume 199 MCOs, PIHPs and PAHPs and 32 States to be subject to the
mandatory QRS measure set collection and reporting provision. We assume
that plans with CHIP populations will report the subset of QRS measures
which apply to beneficiaries under 19 years of age and to pregnant and
postpartum adults, where applicable.
For Medicaid, we expect reporting the QRS non-survey measures will
take: 680 hours at $120.14/hr for a software and web developers,
programmers and testers to program and synthesize the data; 212 hours
at $79.50/hr for a business operations specialist to manage the data
collection process; 232 hours at $39.56/hr for an office clerk to input
the data; 300 hours at $85.60/hr for a registered nurse to review
medical records for data collection; and 300 hours at $49.12/hr for
medical records and health information analyst to compile and process
medical records. For Medicaid, for Sec. 438.515(a)(1) for one managed
care entity we estimate an annual private sector burden of 1,724 hours
(680 hr + 212 hr + 232 hr + 300 hr + 300 hr) at cost of $148,143([680
hr x $120.14/hr] + [212 hr x $79.50/hr] + [232 hr x $39.56/hr] + [300
hr x $85.60/hr] + [300 hr x $49.12/hr]).
For Medicaid, we also estimate that conducting the QRS survey
measures comprised of the CAHPS survey will take: 20 hours at $79.50/hr
for a business operations specialist to manage the data collection
process; 40 hours at $39.56/hr for an office clerk to input the data;
and 32 hours at $101.46/hr for a statistician to conduct data sampling.
For 438.515(a)(1), for one Medicaid managed care entity we estimate an
annual private sector burden of 92 hours (20 hr + 40 hr + 32 hr) at
cost of $6,419 ([20 hr x $79.50/hr] + [40 hr x $39.56/hr] + [32 hr x
$101.46]).
For one Medicaid managed care entity, for mandatory QRS non-survey
and survey measures we estimate an annual private sector burden of
1,816 hours (1,724 hr + 92 hr) at a cost of $154,562 ($148,143 +
$6,419). In aggregate, for Medicaid, for 438.515(a)(1), we estimate an
annual private sector burden of 1,142,264 hours (629 Medicaid MCOs,
PIHPs and PAHPs x 1,816 hours) and $97,219,498 (629 Medicaid MCOs,
PIHPs and PAHPs x $154,562).
For CHIP for Sec. 457.1240(d), we expect reporting non-survey QRS
measures will take: 400 hours at $120.14/hr for a software and web
developers, programmers and testers to program and synthesize the data;
148 hours at $79.50/hr for a business operations specialist to manage
the data collection process; 152 hours at $39.56/hr for an office clerk
to input the data; 60 hours at $85.60/hr for a registered nurse to
review medical records for data collection; and 60 hours at $49.12/hr
for medical records specialist to compile and process medical records.
For one CHIP managed care entity we estimate an annual private sector
burden of 820 hours (400 hr + 148 hr + 152 hr + 60 hr + 60 hr) at cost
of $68,782 ([400 hr x $120.14/hr] + [148 hr x $79.50/hr] + [152 hr x
$39.56/hr] + [60 hr x $85.60/hr] + [60 hr x $49.12/hr])
For CHIP for Sec. 457.1240(d), we also estimate that conducting
the survey measures (comprised of the CAHPS survey and secret shopper)
will take: 20 hours at $79.50/hr for a business operations specialist
to manage the data collection process; 56 hours at $39.56/hr for an
office clerk to input the data; and 32 hours at $101.46/hr for a
statistician to conduct data sampling. For one CHIP managed care entity
we estimate an annual private sector burden of 108 hours (20 hr + 56 hr
+ 32 hr) at cost of $7,052 ([20 hr x $79.50/hr] + [56 hr x $39.56/hr] +
[32 hr x $101.46]).
For one CHIP managed care entity, for mandatory QRS non-survey and
survey measures, we estimate an annual private sector burden of 928
hours (820 hr +108 hr) at a cost of $80, 970 ($73,918 + $7,052). In
aggregate, for CHIP for Sec. 457.1240(d), we estimate an annual
[[Page 41245]]
private sector burden of 184,672 hours (199 CHIP MCOs, PIHPs and PAHPs
x 928hr) and $16,113,110 (199 CHIP MCOs, PIHPs and PAHPs x $80,970).
The CAHPS survey measures also include a new burden on Medicaid
beneficiaries. Beneficiaries complete the survey via telephone or mail.
Response rates vary slightly by survey population. The adult CAHPS
survey aims for 411 respondents out of a 1,350-person sampling and the
Child CAHPS survey aims for 411 respondents out of a 1,650-person
sampling. For Medicaid, the survey will be conducted twice, once for
children and once for adults. We estimate it will take 20 minutes (0.33
hr) at $29.76/hr for a Medicaid beneficiary to complete the CAHPS
Health Plan Survey. For Medicaid, in aggregate, we estimate a new
beneficiary burden of 170,623 hours (629 MCOs, PIHPs and PAHPs x 0.33
hr per survey response x 822 beneficiary responses) at a cost of
$5,077,727 (170,623 hr x $29.76/hr). Since it is not a new requirement
for States to complete CAHPS surveys for CHIP beneficiaries, no new
burden estimates are provided CHIP.
Additionally, amendments to Sec. [thinsp]438.515(a)(1)(i) that
require reporting of QRS measures will require States to update
existing managed care contracts. We estimate it will take 1 hour at
$79.50/hr for a business operations specialist and 30 minutes at
$118.14/hr a general operations manager to amend vendor contracts to
reflect the new reporting requirements. In aggregate for Medicaid, we
estimate a one-time State burden of 944 hours (629 MCOs, PIHPs, and
PAHPs x 1.5 hours) at a cost of $87,161 (629 contracts x [(1 hr x
$79.50/hr) + (0.5 hr x $118.14/hr)]). As this will be a one-time
requirement, we annualize our time and cost estimates to 315 hours and
$29,054. The annualization divides our estimates by 3 years to reflect
OMB's likely approval period. We are annualizing the one-time burden
estimates since we do not anticipate any additional burden after the 3-
year approval period expires. In aggregate for CHIP for Sec.
457.1240(d), we estimate a one-time State burden of 299 hours (199
MCOs, PIHPs, and PAHPs x 1.5 hours) at a cost of $27,575 (199 contracts
x [(1 hr x $79.50/hr) + (0.5 hr x $118.14/hr)]). As this will be a one-
time requirement, we annualize our time and cost estimates to 99 hours
and $9,192. The annualization divides our estimates by 3 years to
reflect OMB's likely approval period. We are annualizing the one-time
burden estimates since we do not anticipate any additional burden after
the 3-year approval period expires.
Amendments to Sec. [thinsp]438.515(a)(1)(ii) require States to
collect data from Medicare and the State's FFS providers, if all data
necessary to issue an annual quality rating cannot be provided by the
managed care plans and the data are available for collection by the
State without undue burden. We expect a that subset of States will need
to collect Medicare data or State Medicaid FFS data to report the
mandatory quality measures. We assume that plans have access to
Medicare data for their enrollees and have included this burden in the
cost of data collection described above. However, we assume Medicaid
FFS data will need to be provided and that this requirement will impact
5 States. For a State to collect the FFS data needed for QRS reporting,
we expect it will take: 120 hours at $120.14/hr for a software and web
developers, programmers and testers to program and synthesize the data
and 20 hours at $79.50/hr for a business operations specialist to
manage the data collection process. In aggregate for Medicaid, we
estimate an annual State burden of 700 hours (5 States x [120 hr + 20
hr]) at a cost of $80,034 (5 States x [(120 hr x $120.14/hr) + (20 hr x
$79.50/hr)]).
Amendments to Sec. Sec. [thinsp]438.515(a)(2) and 457.1240(d)
require the QRS measure data to be validated. We estimate it will take
16 hours at $79.50/hr for a business operations specialist to review,
analyze and validate measure data. In aggregate for Medicaid, we
estimate an annual private sector burden of 10,064 hours (629 MCOs,
PIHPs, PAHPs and PCCMs x 16 hr) at a cost of $800,088 (10,064 hr x
$79.50/hr). In aggregate for CHIP for Sec. 457.1240(d), we estimate an
annual private sector burden of 3,184 hours (199 MCOs, PIHPs and PAHPs
x 16 hr) at a cost of $253,128 (3,184 hr x $79.50/hr).
Amendments to Sec. Sec. 438.515(d)(2) and 457.1240(d) allow the
State to request a one-year extension on the implementation of certain
methodology requirements outlined in Sec. 438.515. The extension
request must: identify the specific requirement(s) for which the
extension is requested; describe the barriers to the requirement's
implementation; demonstrate that, despite making good-faith efforts to
identify and begin executing an implementation strategy, the State has
good reason to believe that it will be unable to meet the specified
requirement(s) by the implementation date identified by CMS in this
subpart. The request must also include a detailed plan to implement the
requirement(s) by the end of the extension including, but not limited
to, the operational steps the State will take to address any identified
implementation barrier(s). We assume that a small subset of States (7
States) will be unable to meet the QRS methodology requirements, and
therefore, will submit an extension request. We estimate it will take
24 hours at $118.14/hr for a general operations manager to draft and
submit the extension request. In aggregate for Medicaid, we estimate an
annual private sector burden of 168 hours (7 States x 24 hr) at a cost
of $19,848 (168 hr x $118.14/hr).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed except modifications to reflect the
inclusion of the option to submit a MAC QRS extension request in the
final rule, discussed in more detail in section I.B.6.d. of this final
rule and finalized at Sec. Sec. 438.515(d) and 438.520(b). We have
updated our burden calculations to reflect the inclusion of the option
to submit a MAC QRS extension request.
14. ICRs Regarding Requirements for QRS Website Display (Sec. Sec.
438.520(a) and 457.1240)
The following changes to Sec. 438.520(a) will be submitted to OMB
for approval under control number 0938-1281 (CMS-10553). The following
changes to Sec. 457.1240 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
The amendments to Sec. Sec. 438.520(a) and 457.1240(d) will
require the State to prominently post an up-to-date display on its
website that provides information on available MCOs, PIHPs and PAHPs.
The display must: allow users to view tailored information, compare
managed care plans, provide information on quality ratings and directs
users to resources on how to enroll in a Medicaid or CHIP plan.
Additionally, the display must offer consumer live assistance services.
After the display is established, the State will need to maintain the
display by populating the display with data collected from the
mandatory QRS measure set established in this final rule. The final
rule outlines a phase-in approach to the QRS website display
requirements; however, the burden estimate reflects the full
implementation of the website. We recognize this may result in an
overestimate during the initial phase of the website display but
believed the estimate is representative of the longer-term burden
associated with the QRS website display requirements.
To develop the initial display, we estimate it will take: 600 hours
at
[[Page 41246]]
$120.14/hr for a software and web developers, programmers and testers
to create and test code; 600 hours at $84.22/hr for a web developer to
create the user interface; 80 hours at $79.50/hr for a business
operations specialist to manage the display technical development
process; and 450 hours at $98.58/hr for a database administrator to
establish the data structure and organization. We estimate that 44
States for Medicaid and 32 States for CHIP will develop QRS website
displays. For one State, we estimate a burden of 1,730 hours (600 hr +
600 hr + 80 hr + 450 hr) at a cost of $173,337 ([600 hr x $120.14/hr] +
[600 hr x $84.22/hr] + [80 hr x $79.50/hr] + [450 hr x $98.58/hr]). In
aggregate for Medicaid, we estimate a one-time State burden of 76,120
hours (44 States x 1,730 hr) at a cost of $7,626,828 (44 States x
$173,337). As this will be a one-time requirement, we annualize our
Medicaid burden estimates to 25,373 hours and $2,542,276. In aggregate
for CHIP for Sec. 457.1240(d), we estimate a one-time State burden of
55,360 hours (32 States x 1,730 hr) and $5,546,784 (32 States x
$173,337). As this will be a one-time requirement, we annualize our
time and cost estimates for CHIP to 18,453 hours and $1,848,928. The
annualization divides our estimates by 3 years to reflect OMB's likely
approval period. We are annualizing the one-time burden estimates since
we do not anticipate any additional burden after the 3-year approval
period expires.
To maintain the QRS display annually, we estimate it will take: 384
hours at $120.14/hr for a software and web developers, programmers and
testers to modify and test code; 256 hours at $84.22/hr for a web
developer to update and maintain the user interface; 120 hours at
$79.50/hr for a business operations specialist to manage the daily
operations of the display; and 384 hours at $98.58/hr for a database
administrator to organize data. We estimate that 44 States for Medicaid
and 32 States for CHIP will maintain QRS displays annually. For one
State, we estimate a burden of 1,144 hours (384 hr + 256 hr + 120 hr +
384 hr) at a cost of $115,089 ([384 hr x $120.14/hr] + [256 hr x
$84.22/hr] + [120 hr x $79.50/hr] + [384 hr x $98.58/hr]). In aggregate
for Medicaid, we estimate an annual State burden of 50,336 hours (1,144
hours x 44 States) at a cost of $5,063,916 ($115,089 x 44 States). In
aggregate for CHIP for Sec. 457.1240(d), we estimate an annual State
burden of 36,608 hours (1,144 hr x 32 States) at a cost of
$3,682,842($115,089 x 32 States).
Amendments to Sec. Sec. 438.520(a)(2)(iv) and 457.1240(d) will
require the display to include quality ratings for mandatory measures
which may be stratified by factors determined by CMS. We estimate it
will take 24 hours at $120.14/hr for a software and web developers,
programmers, and testers to develop code to stratify plan data. In
aggregate for Medicaid (Sec. 438.520(a)(2)(iv)), we estimate an annual
private sector burden of 15,096 hours (629 MCOs, PIHPs and PAHPs x 24
hr) at a cost of $1,813,633, (15,096 hr x $120.14/hr). In aggregate for
CHIP for Sec. 457.1240(d), we estimate an annual private sector burden
of 4,776 hours (199 MCOs, PIHPs and PAHPs x 24 hr) at a cost of
$573,789 (4,776 hr x $120.14/hr).
Amendments to Sec. 438.520(a)(3)(v) will require the QRS website
display to include certain managed care plan performance metrics, as
specified by CMS including the results of the secret shopper survey
specified in Sec. 438.68(f). The secret shopper survey is currently
accounted for by OMB under control number 0938-TBD (CMS-10856). Plans
will complete the secret shopper independent of the QRS requirements.
To meet QRS requirements, States will enter data collected from the
secret shopper survey and display the results of the survey on the QRS.
Since the burden for the secret shopper survey is accounted for under a
separate control number, for the purposes of MAC QRS, we account for
the incremental burden associated with meeting the QRS requirements. We
estimate it will take 16 hours at $39.56/hr for an office clerk to
enter the results from the secret shopper survey into the QRS. In
aggregate for Medicaid Sec. 438.520(a)(3)(v), we estimate an annual
private sector burden of 10,064 hours (629 MCOs, PIHPs and PAHPs x 16
hr) at a cost of $398,132 (10,064 hr x $39.56/hr). In aggregate for
CHIP for Sec. 457.1240(d), we estimate an annual private sector burden
of 3,184 hours (199 MCOs, PIHPs and PAHPs x 16 hr) at a cost of
$125,959 (3,184 hr x $39.56/hr).
Amendments to Sec. Sec. 438.520(b)(1) and 457.1240(d) allow the
State to request a one-year extension on the implementation of certain
website display requirements outlined in Sec. Sec. 438.520(a). The
extension request must: identify the specific requirement(s) for which
the extension is requested; describe the barriers to the requirement's
implementation; demonstrate that, despite making good-faith efforts to
identify and begin executing an implementation strategy, the State has
good reason to believe that it will be unable to meet the specified
requirement(s) by the implementation date identified by CMS in this
subpart. The request must also include a detailed plan to implement the
requirement(s) by the end of the extension including, but not limited
to, the operational steps the State will take to address any identified
implementation barrier(s). We assume that a small subset of States (11
States) will be unable to meet the QRS website requirements, and
therefore, will submit an extension request. We estimate it will take
24 hours at $118.14/hr for a general operations manager to draft and
submit the extension request. In aggregate for Medicaid, we estimate an
annual private sector burden of 264 hours (11 States x 24 hr) at a cost
of $31,189 (264 hr x $118.14/hr).
We did not receive any public comments on the aforementioned
collection of information requirements and burden estimates and are
finalizing them as proposed.
15. ICRs Regarding QRS Annual Reporting Requirements (Part 438 Subpart
G and Sec. Sec. 438.520(a) and 457.1240)
The following changes will be submitted to OMB for approval under
control number 0938-1281 (CMS-10553). The following changes to Sec.
457.1240 will be submitted to OMB for approval under control number
0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.535(a) and 457.1240(b) will mandate
that on an annual basis, the State submit a Medicaid managed care
quality rating system report in a form and manner determined by CMS. We
estimate that 44 States for Medicaid and 32 States for CHIP will submit
annual MAC QRS reports. We estimate it will take 24 hours at $79.50/hr
for a business operations specialist to compile the required
documentation to complete this report and attestation that the State is
in compliance with QRS standards. In aggregate for Medicaid for Sec.
438.535(a), we estimate an annual State burden of 1,056 hours (44
States x 24 hr) at a cost of $83,952 (1,056 hr x $79.50/hr). In
aggregate for CHIP for Sec. 457.1240(b), we estimate an annual State
burden of 768 hours (32 States x 24 hr) at a cost of $61,056 (768 hr x
$79.50/hr).
The addition of part 438, subpart G for Medicaid, and through an
amendment at Sec. 457.1240(d) for separate CHIP, will revise the
quality rating system requirements and associated burden previously
issued under Sec. 438.334. Given the QRS requirements have
substantively changed, our currently approved burden estimates for
making changes to an approved alternative Medicaid managed care QRS are
no longer applicable.
[[Page 41247]]
To implement an alternative Medicaid managed care QRS, we estimate
it will take: 5 hours at $39.56/hr for an office and administrative
support worker, 25 hours at $79.50/hr for a business operations
specialist to complete the public comment process, and 5 additional
hours at $79.50/hr for a business operations specialist to seek and
receive approval from CMS for the change. We assume that a subset of
States will opt for an alternative QRS and that the subset will revise
their QRS once every 3 years.
Therefore, alleviating this burden will result in an annual
Medicaid State reduction of minus 116.7 hours [(10 States x 35 hr)/3
years] and minus $8,609 (10 States x [(5 hr x $39.56/hr) + (30 x
$79.50/hr)]/3 years). Similarly, we estimate an annual CHIP State
savings of minus 117 hours [(10 States x 35 hr)/3 years] and minus
$8,609 [(10 States x ((5 hr x $39.56/hr) + (30 x $79.50/hr))/3 years)].
We did not receive any public comments on the aforementioned collection
of information requirements and burden estimates and are finalizing
them as proposed.
16. ICRs Regarding Program Integrity Requirements Under the Contract
(Sec. Sec. 438.608 and 457.1285)
The following changes to Sec. 438.608 will be submitted to OMB for
approval under control number 0938-1453 (CMS-10856). The following
changes to Sec. 457.1285 will be submitted to OMB for approval under
control number 0938-1282 (CMS-10554).
Amendments to Sec. Sec. 438.608 and 457.1285 will require States
to update all MCO, PIHP, and PAHP contracts to require managed care
plans to report overpayments to the State within 30 calendar days of
identifying or recovering an overpayment. We estimate that the changes
to the timing of overpayment reporting (from timeframes that varied by
State to 30 calendar days for all States) will apply to all MCO, PIHP,
and PAHP contracts, excluding contracts for NEMT, that is, a total of
629 contracts for Medicaid, and 199 contracts for CHIP. We estimate it
will take: 2 hours at $79.50/hr for a business operations specialist
and 1 hour at $118.14/hr for a general and operations manager to modify
State contracts with plans. In aggregate for Medicaid for Sec.
438.608, we estimate a one-time State burden of 1,887 hours (629
contracts x 3 hr) at a cost of $174,321 [629 contracts x ((2 hr x
$79.50/hr) + (1 hr x $118.14/hr))]. As this will be a one-time
requirement, we annualize our time and cost estimates to 629 hours and
$58,107.
In aggregate for CHIP for Sec. 457.1285, we estimate a one-time
State burden of 597 hours (199 contracts x 3 hr) at a cost of $55,151
[199 contracts x ((2 hr x $79.50/hr) + (1 hr x $118.14/hr))]. As this
will be a one-time requirement, we annualize our time and cost
estimates to 199 hours and $18,384. The annualization divides our
estimates by 3 years to reflect OMB's likely approval period. We are
annualizing the one-time burden estimate since we do not anticipate any
additional burden after the 3-year approval period expires.
We also estimate that it will take MCOs, PIHPs, and PAHPs 1 hour at
$120.14/hr for software and web developers, programmers, and testers to
update systems and processes already used to meet the previous
requirement for ``prompt'' reporting. In aggregate for Medicaid for
Sec. 438.608, we estimate a one-time private sector burden of 629
hours (629 contracts x 1 hr) at a cost of $75,568 (629 hr x $120.14/
hr). As this will be a one-time requirement, we annualize our time and
cost estimates to 210 hours and $25,189. In aggregate for CHIP for
Sec. 457.1285, we estimate a one-time private sector burden of 199
hours (199 contracts x 1 hr) at a cost of $23,908 (199 contracts x
$120.14/hr). As this will be a one-time requirement, we annualize our
time and cost estimates to 66 hours and $7,969. The annualization
divides our estimates by 3 years to reflect OMB's likely approval
period. We are annualizing the one-time burden estimate since we do not
anticipate any additional burden after the 3-year approval period
expires.
One public comment was received with regard to program integrity
requirements under the contract (Sec. Sec. 438.608 and 457.1285). A
summary of the comment and our response follows:
Comment: One commenter noted that CMS should clarify if the
proposed changes applied to NEMT PAHPs.
Response: We note that the proposed changes to overpayment
reporting (from 10 calendar days to 30 calendar days) do not apply to
NEMT PAHPs. We have updated the applicable number of contracts in these
estimates to exclude NEMT contracts.
BILLING CODE 4120-01-P
[[Page 41248]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.008
[[Page 41249]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.009
[[Page 41250]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.010
[[Page 41251]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.011
[[Page 41252]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.012
[[Page 41253]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.013
[[Page 41254]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.014
[[Page 41255]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.015
[[Page 41256]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.016
[[Page 41257]]
BILLING CODE 4120-01-C
III. Regulatory Impact Analysis
A. Statement of Need
This final rule will advance CMS's efforts to improve access to
care, quality and health outcomes, and better address health equity
issues for Medicaid and CHIP managed care enrollees. The final rule
will specifically address standards for timely access to care and
States' monitoring and enforcement efforts, reduce burden for State
directed payments and certain quality reporting requirements, add new
standards that will apply when States use ILOSs to promote effective
utilization and identify the scope and nature of ILOS, specify MLR
requirements, and establish a QRS for Medicaid and CHIP managed care
plans.
B. Overall Impact
We have examined the impacts 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), and the
Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Section
3(f) of Executive Order 12866, as amended by Executive Order 14094,
defines a ``significant regulatory action'' as an action that is likely
to result in a rule: (1) having an annual effect on the economy of $200
million or more in any 1 year, or adversely and materially affecting a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local or tribal
governments or communities; (2) creating a serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising legal or policy issues for which
centralized review will meaningfully further the President's priorities
or the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for regulatory
actions that are significant under section 3(f)(1). Based on our
estimates, OMB's Office of Information and Regulatory Affairs has
determined this rulemaking is significant under Section 3(f)(1).
Pursuant to Subtitle E of the Small Business Regulatory Enforcement
Fairness Act of 1996 (also known as the Congressional Review Act, 5
U.S.C. 801 et seq.), OMB's Office of Information and Regulatory Affairs
has determined that this final rule does meet the criteria set forth in
5 U.S.C. 804(2). Accordingly, we have prepared a Regulatory Impact
Analysis that to the best of our ability presents the costs and
benefits of the rulemaking. Therefore, OMB has reviewed these proposed
regulations, and the Departments have provided the following assessment
of their impact.
C. Detailed Economic Analysis
We have examined the proposed provisions in this rule and
determined that most of the proposed revisions to part 438 and part 457
outlined in this final rule are expected to minimally or moderately
increase administrative burden and associated costs as we note in the
COI (see section II. of this final rule). Aside from our analysis on
burden in the COI, we believed that certain provisions in this final
rule should specifically be analyzed in this regulatory impact analysis
as potentially having a significant economic impact. Those proposed
provisions include State directed payments, MLR reporting standards,
and ILOS due to the impact these proposed provisions could have on the
associated and corresponding managed care payments.
1. State Directed Payments (SDPs) (Sec. Sec. 438.6 and 438.7)
Neither the May 6, 2016 final rule (81 FR 27830) nor the November
13, 2020 final rule (85 FR 72754) included a regulatory impact analysis
that discussed the financial and economic effects of SDPs. At the time
the 2016 final rule was published and adopted regulations explicitly
governing State directed payments, we believed that States would use
the SDPs in three broad ways to: (1) transition previous pass-through
payments into formal arrangements as SDPs; (2) add or expand provider
payment requirements to promote access to care; and (3) implement
quality or value payment models that include Medicaid managed care
plans. However, since Sec. 438.6(c) was issued in the 2016 final rule,
States have requested approval for an increasing number of SDPs. The
scope, size, and complexity of the SDPs being submitted by States for
approval has also grown steadily. In CY 2017, CMS received 36 preprints
for our review and approval from 15 States; in CY 2021, CMS received
223 preprints from 39 States. For CY 2022, CMS received 309 preprints
from States. As of March 2023, CMS has reviewed more than 1,100 SDP
proposals and approved more than 1,000 proposals since the 2016 final
rule was issued. To accommodate these requests from States, CMS applied
discretion in interpreting and applying Sec. 438.6(c) in reviewing and
approving SDPs. The 2016 final rule required criteria to determine if
provider payment rates are ``reasonable, appropriate, and attainable''
and that SDPs must relate to utilization, quality, or other goals
described in Sec. 438.6(c). CMS has interpreted these sections of the
regulation broadly, and therefore, the amount of SDP payments has grown
significantly over time.
SDPs also represent a substantial amount of State and Federal
spending. The MACPAC reported that CMS approved SDPs in 37 States, with
spending exceeding more than $25 billion.\235\ The U.S. Government
Accountability Office also reported that at least $20 billion has been
approved by CMS for preprints with payments to be made on or after July
1, 2021, across 79 proposals.\236\
---------------------------------------------------------------------------
\235\ Medicaid and CHIP Payment and Access Commission, ``Report
to Congress on Medicaid and CHIP,'' June 2022, available at https://www.macpac.gov/wp-content/uploads/2022/06/MACPAC_June2022-WEB-Full-Booklet_FINAL-508-1.pdf.
\236\ U.S. Government Accountability Office, ``Medicaid: State
Directed Payments in Managed Care,'' June 28, 2022, available at
https://www.gao.gov/assets/gao-22-105731.pdf.
---------------------------------------------------------------------------
We have tracked SDP spending trends as well. Using the total
spending captured for each SDP through the end of 2023, we calculate
that SDP payments in 2022 were $52.2 billion and that such payments
were $78.1 billion in 2023. We note that there may be some SDPs for
which CMS does not have projected or actual spending data. In addition,
our data reporting and collection is not standardized, and in some
cases may be incomplete, so spending data for some SDP approvals may be
less accurate. CMS began collecting total dollar estimates for SDPs
incorporated through adjustments to base rates, as well as those
incorporated through separate payment terms with the revised preprint
form published in January 2021; States were required to use the revised
preprint form for rating periods beginning on or after July 1, 2021.
[[Page 41258]]
We estimate that SDP spending comprises approximately 15.6 percent
of total managed care payments in 2023 ($499.8 billion) and 9.0 percent
of total Medicaid benefit expenditures ($869.7 billion). SDP spending
varies widely across States. Thirty-nine (39) States reported the use
of one or more SDPs in 2022 and/or 2023. In 2022, the percentage of
Medicaid managed care spending paid through SDPs ranged from 1 percent
to 58 percent across these States, with a median of 8 percent; as a
share of total Medicaid spending, SDPs ranged from 0 percent to 33
percent, with a median of 3 percent. (Data for 2023 is not yet
available.)
From 2016 through 2023, SDPs were a significant factor in Medicaid
expenditure growth. Total benefit spending increased at an average
annual rate of 6.8 percent per year from 2016 through 2023; excluding
SDPs, benefit spending grew at an average rate of 5.4 percent. Managed
care payments grew 9.6 percent on average over 2016 to 2023, but
excluding SDPs, the average growth rate was 6.9 percent. While some SDP
spending may have been included in managed care payments prior to 2016
(either as a pass-through payment or some other form of payment), by
2023 we expect that much of this is new spending.
In 2023, we estimate that about 70 percent of SDP spending went to
hospitals for inpatient and outpatient services, and another 4 percent
went to academic medical centers. 10 percent of SDP spending was
reported for multiple provider types, which mostly were hospitals and
academic medical centers. The remaining 16 percent of SDP spending went
to nursing facilities, primary care physicians, specialty physicians,
HCBS and personal care service providers, behavioral health service
providers, and dentists.
The data available do not allow us to determine how much of this
baseline SDP spending was incorporated into managed care expenditures
prior to the 2016 final rule, or reflected historical transfers from
prior payment arrangements. For example, States transitioned pass-
through payments to SDPs or transferred spending from FFS payments (for
example, supplemental payments) to SDPs. Some States indicate that the
SDP has had no net impact on rate development while other States have
reported all estimated spending for the services and provider class
affected by the SDP. Based on our experience working with States, we
believed much of the earlier SDP spending was largely existing Medicaid
spending that was transitioned to managed care SDPs. However, in more
recent years, we believed that most SDP spending reflects new
expenditures. For context, States reported $6.7 billion in pass-through
payments after the 2016 final rule.\237\ States also have reported only
a small decrease in FFS supplemental payments since 2016 (from $28.7
billion in 2016 to $27.5 billion in 2022).\238\ SDP spending in 2023
significantly exceeds the originally reported pass-through payments and
the changes in FFS supplemental payments.
---------------------------------------------------------------------------
\237\ Our data reflects documentation provided from 15 States
with pass-through payments in rating periods beginning from July 1,
2017 through June 30, 2018.
\238\ CMS-64. https://www.medicaid.gov/medicaid/financial-management/state-expenditure-reporting-for-medicaid-chip/expenditure-reports-mbescbes/index.html.
---------------------------------------------------------------------------
The proposals in this rule are intended to ensure the following
policy goals: (1) Medicaid managed care enrollees receive access to
high-quality care under SDPs; (2) SDPs are appropriately linked to
Medicaid quality goals and objectives for the providers participating
in the SDPs; and (3) CMS has the appropriate fiscal and program
integrity guardrails in place to strengthen the accountability and
feasibility of SDPs.
The proposal expected to have the most significant economic impact
is setting a payment ceiling at 100 percent of the ACR for SDPs for
inpatient hospital services, outpatient hospital services, nursing
facility services, and qualified practitioner services at academic
medical centers. As discussed in section I.B.2.f. of this final rule,
we have used the ACR as a benchmark for total payment levels for all
SDP reviews since 2018 and have not knowingly approved an SDP that
includes payment rates that are projected to exceed the ACR. Based on
the available data, we estimate that $15 billion to $20 billion of SDPs
in 2023 reflect payments at or near the ACR. It is difficult to
determine the amounts of these payments due to data quality and
inconsistent reporting of these details. For example, if payment data
are aggregated across multiple providers or provider types, it can be
difficult to determine if providers are being paid at different levels.
Additionally, many SDPs report payment rates relative to Medicare
instead of ACR; for some SDPs, the payment rates relative to Medicare
suggest effective payment rates will be near the ACR. These will
include SDPs with effective payment rates of 150 percent or more of the
Medicare rate (with several over 200 percent).
Under current policy, we project that SDP spending will increase
from $78 billion in 2023 (or 15.6 percent of managed care spending) to
about $99 billion by 2029 (or 16.5 percent of managed care spending).
[GRAPHIC] [TIFF OMITTED] TR10MY24.017
Estimating the impact of the proposed SDP provisions is challenging
for several reasons. First, as noted previously, the projected and
actual spending data that we collect from States is not standardized,
and in some cases aggregated across providers. It is also often
difficult to determine how payment rates compare, especially when
States use different benchmarks for payment (for example, comparing
SDPs using Medicare payment rates to those
[[Page 41259]]
using ACR payment rates). In addition, there is frequently limited
information on ACR payment rates. It is difficult to determine how the
ACR may be calculated and how the calculation may vary across different
States and providers. Furthermore, it may be difficult to determine how
many more providers are not paid under SDPs and how much they could be
paid if SDPs were expanded to them.
Second, it is difficult to determine how much providers are paid in
managed care programs without SDPs. These data appear to be less
frequently reported, and we have virtually no information about
provider payments when the State does not use an SDP. This information
is important when estimating the impact of changes in SDPs, because the
initial payment rate matters as much as the final rate. In some cases,
the initial payment rates for existing SDPs are significantly low (for
example, there are several SDPs where the reported initial payment
rates are 10 to 20 percent of ACR or commercial rates, 25 to 30 percent
of Medicare rates, or 10 to 35 percent of Medicaid State plan rates).
In other cases, the initial payment rates are relatively higher. Thus,
it may be difficult to determine how large new SDPs will be.
Third, there is significant variation in the use of SDPs across
States. States have significant discretion in developing SDPs
(including which providers receive SDPs and the amounts of the
payments), and it is challenging to predict how States will respond to
changes in policy. Some States may add more SDPs or expand spending in
existing SDPs. Moreover, as many SDPs are funded through sources other
than State general revenues (such as intergovernmental transfers or
provider taxes), decisions about SDPs may be dependent on the
availability of these funding sources.
Fourth, how states finance these arrangements may also have some
effect on the increase in spending through SDPs. The final rule
requires states to obtain provider attestations of compliance with
Federal restrictions on hold harmless arrangements no later than the
first rating period for contracts with MCOs, PIHPs, and PAHPs beginning
on or after January 1, 2028. We acknowledge that States may be
motivated to submit SDP preprints at a higher than usual rate prior to
the effective date of these provisions.
For these reasons, we believe it is prudent to provide a range of
estimated impacts for this section of the final rule. The following
estimates reflect a reasonable expectation of the impacts of this final
rule on Medicaid expenditures, but do not necessarily include all
possible outcomes.
The estimate of the upper end of the range is based on the
expectation that the provisions of the final rule will prompt States to
increase SDP spending. We believed that by setting the payment limit at
the ACR rates for certain services, States may increase the size and
scope of future SDPs to approach this limit. In particular, there are
many SDPs that currently have effective reimbursement rates at or
around 100 percent of Medicare reimbursement rates, and others with
rates below 100 percent of ACR, and that States may potentially
increase payments associated with these SDPs. The high end of the range
also reflects possible short-term increases of SDPs prior to the
effective date of the hold harmless requirements.
For the high scenario, we assumed that Medicaid SDP spending will
increase at a faster rate than projected under current law. Under
current law, Medicaid SDP spending is projected to reach 16.5 percent
of managed care spending by 2027. We assumed in the high scenario that
SDP spending will reach about 22.8 percent of managed care spending in
2027, and then decrease to 21.5 percent in 2028 as the financing
requirements go into effect. Under this scenario, SDP spending will
increase by approximately 49 percent by 2027 (or about $43 billion).
From 2025 through 2027, SDP spending will increase somewhat faster than
assumed under current law to reach those levels. This increase will
include additional spending from current SDPs increasing payment rates
to the ACR and may also include new or expanded SDPs. We also expected
that this will occur mostly among SDPs for hospitals and academic
medical centers, as those are currently the providers that receive the
majority of SDPs. We have not estimated a breakdown of impacts by
provider type or by State in this analysis. We project that SDPs would
increase by $129.6 billion over 2024 through 2028 in the high case.
In the proposed rule, we estimated that the low end of the range of
impacts for the changes to SDPs would be 0. However, we have updated
our estimates in the final rule for the low end of the range to reflect
an increase in expenditures. In particular, some States have already
indicated that they would increase SDPs with the clarification that CMS
would allow effective payment rates up to ACR. As a result, we believe
that it is more accurate to estimate for the low case that there are
some increases in spending. We estimate that the low end of the range
of impacts for these provisions in the final rule would be half of the
impact of the high end of the range. We project that SDPs would
increase by $27.0 billion over 2024 through 2028 in the low case.
The median estimates of these two cases are the middle scenario.
The estimated impacts are provided in Table 9.
[[Page 41260]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.018
In Table 10, we provide estimates of the impacts on the Federal
government and on States.
[GRAPHIC] [TIFF OMITTED] TR10MY24.019
Under the high scenario, we project that Federal spending would
increase $83.9 billion over 2024 through 2028, and States spending
would increase by $45.7 billion. For the middle scenario, projected
Federal spending would be $50.7 billion higher from 2024 through 2028,
and projected State spending would be $27.6 billion higher over these 5
years. In the low scenario, we project the Federal impact would be
$17.6 billion over the next 5 years, and the impact on the States would
be $9.4 billion over that time period. We note that the States will
have discretion of whether or not to increase SDP spending (through
existing or new SDPs), and that the source of the non-Federal share may
vary. Many States already use sources other than State general revenues
(such as IGTs and provider taxes, as noted previously) and certain
financing provisions are not effective in this final rule until 2028,
and therefore, the direct impact to State expenditures may be less than
projected.
As noted previously, there is a wide range of possible outcomes of
this final rule on SDP expenditures. The actual changes in spending may
be difficult to determine, as there is uncertainty in the future amount
of spending through SDPs in the baseline. The specific impacts could
also vary over time, by State, and by provider type. We believed actual
impacts can reasonably be expected to fall within the range shown here.
There are additional proposals in this rule that may also slightly
increase SDP spending. This includes allowing States to:
(1) Direct expenditures for non-network providers;
(2) Set the amount and frequency for VBP SDPs;
(3) Recoup unspent funds for VBP SDPs; and
(4) Exempting minimum fee schedules at the Medicare rate from prior
approval.
We did not have quantitative data to analyze the impact of these
provisions. However, based on a qualitative analysis of our work with
States, we believed these regulatory changes will have much more
moderate effects on the economic impact in comparison to the
[[Page 41261]]
ceiling on payment levels described above. Allowing States to direct
expenditures for non-network providers will likely increase the number
of State contract provisions; however, we anticipated that most States
will want to require minimum fee schedules tied to State plan rates,
which will likely result in very small changes from existing rate
development practices. Regarding the proposal to remove the existing
regulatory requirements for setting the amount and frequency for VBP
SDPs and recouping unspent funds for VBP SDPs, we anticipated this will
change the types of SDPs States seek, encouraging them to pursue VBP
models, that will replace existing VBPs, though a few States may pursue
new models. The proposed regulatory requirement to exempt minimum fee
schedules tied to Medicare rates will likely cause some increase in
spending as more States may take up this option, but again, we did not
anticipate this to have as significant impact on rate development.
There are a few proposals in this rule that are likely to exert
some minor downward pressure on the rate of growth in SDP spending,
such as the enhanced evaluation requirements, requirements related to
financing of the non-Federal share, the elimination of the use of
separate payment terms, and eliminating States' ability to use
reconciliation processes. We expect that these provisions will not have
any significant effect on Medicaid expenditures.
Aside from spending, we believe many of the proposals in section
I.B.2. of this final rule will have significant qualitative impacts on
access, quality, and transparency. One example is our proposal to
permit the use of SDPs for non-network providers (section I.B.2.d. of
this final rule). One of the most frequently used non-network provider
types is family planning. Permitting States to use SDPs for family
planning providers could greatly improve access and ease access for
enrollees consistent with the statutory intent of section
1902(a)(23)(B) of the Act. Our proposal to permit States to set the
frequency and amount of SDP payments (section I.B.2.h. of this final
rule) should remove unnecessary barriers for States implementing VBP
initiative. This should have direct impacts on quality of care as
States will be more inclined to use VBP SDPs. It will allow the
payments to be more closely linked to the services provided in a timely
fashion, and it will allow States to establish strong parameters and
operational details that define when and how providers will receive
payment to support robust provider participation. Lastly, our proposal
(section I.B.2.b. of this final rule) to require specific information
in managed care plan contracts will improve accountability to ensure
that the additional funding included in the rate certification is
linked to a specific service or benefit provided to a specific enrollee
covered under the contract.
Taken together, we believed our SDP related proposals in this rule
will enable us to ensure that SDPs will be used to meet State and
Federal policy goals to improve access and quality, used for the
provision of services to enrollees under the contract, and improve
fiscal safeguards and transparency. The proposals in this rule will
provide a more robust set of regulations for SDPs and are informed by 6
years of experience reviewing and approving SDP preprints. We believe
the resulting regulations will enable more efficient and effective use
of Medicaid managed care funds.
We summarize and respond to public comments received on detailed
economic analysis below.
Comment: Several commenters were critical of the analysis in the
proposed rule. Some commenters were critical of the analysis because
they claimed that the provisions in the rule would reduce payments and
access to care and harm beneficiaries. Some requested analyses on the
impact by individual hospital, by population, and by State.
Response: We disagree with the commenters' assertions that these
provisions would reduce spending and access to care. As we note, we
expect that these provisions will increase spending, not decrease
spending. To date, CMS is not aware of any SDP that results in
effective payment rates in excess of ACR. We also believe it would be
impossible to project how changes in the rule would lead to changes by
provider given the large amount of discretion States continue to have
regarding SDP.
After reviewing the public comments, we are finalizing this section
of the regulatory impact analysis with changes described above.
2. Medical Loss Ratio (MLR) and Program Integrity Standards (Sec. Sec.
438.3, 438.8, 438.74, 457.1201, 457.1203, 457.1285)
We proposed to amend Sec. Sec. 438.3(i), 438.8(e)(2), 457.1201,
and 457.1203 to specify that only those provider incentives and bonuses
that are tied to clearly defined, objectively measurable, and well-
documented clinical or quality improvement standards that apply to
providers may be included in incurred claims for MLR reporting. In
States that require managed care plans to pay remittances back to the
State for not meeting a minimum MLR, and where remittance calculations
are based on the MLR standards in Sec. 438.8, the remittance amounts
may be affected. If managed care plans currently include (in reported
incurred claims) payments to providers that significantly reduce or
eliminate remittances while providing no value to consumers, the
proposed clarification will result in transfers from such managed care
plans to States in the form of higher remittances or lower capitation
rates. Although we did not know how many managed care plans currently
engage in such reporting practices or the amounts improperly included
in MLR calculations, using information from a prior CCIIO RIA
analysis,\239\ we estimated the impact of the proposed clarification by
assuming that provider incentive and bonus payments of 1.06 percent or
more paid claims (the top 5 percent of such observations) may represent
incentives based on MLR or similar metrics. Based on this assumption
and the Medicaid MLR data for 2018, the proposed clarification will
increase remittances paid by managed care plans to States by
approximately $12 million per year (total computable).
---------------------------------------------------------------------------
\239\ 87 FR 703.
---------------------------------------------------------------------------
We proposed to amend Sec. Sec. 438.8(e)(3) and 457.1203(c) to
specify that only expenditures directly related to activities that
improve health care quality may be included in QIA expenses for MLR
reporting. In States that require managed care plans to pay remittances
back to the State for not meeting a minimum MLR, and where the
remittance calculations are based on the MLR standards in Sec. 438.8,
the remittance amounts may be affected. This proposed change will
result in transfers from managed care plans that currently include
indirect expenses in QIA to States in the form of higher remittances or
lower capitation rates. Although we did not know how many managed care
plans include indirect expenses in QIA, using information from a
previous CCIIO RIA analysis,\240\ we estimated the impact of the
proposed change by assuming that indirect expenses inflate QIA by 41.5
percent (the midpoint of the 33 percent to 50 percent range observed
during CCIIO MLR examinations) for half of the issuers that report QIA
expenses (based on the frequency of QIA-related findings in CCIIO MLR
examinations). Based on these assumptions and the Medicaid MLR data for
2018, the proposed
[[Page 41262]]
clarification will increase remittances paid by managed care plans to
States by approximately $49.8 million per year.
---------------------------------------------------------------------------
\240\ 87 FR 703.
---------------------------------------------------------------------------
We proposed to amend Sec. Sec. 438.608(a)(2) and (d)(3), and
457.1285 to require States' contracts with managed care plans to
include a provision requiring managed care plans to report any
overpayment (whether identified or recovered) to the State. In States
that require managed care plans to pay remittances back to the State
for not meeting a minimum MLR, and where the remittance calculations
are based on the MLR standards in Sec. 438.8, the remittance amounts
may be affected. Given that States do not provide this level of payment
reporting to CMS, we were unable to quantify the benefits and costs of
this proposed change; however, this proposed change may result in
transfers from managed care plans to States in the form of higher
remittances or lower capitation rates.
At the low end of the range, we projected that there will be no
impact on Medicaid expenditures. In these cases, we will assume (1)
most States currently base provider incentive payments on performance
metrics; and (2) most States currently monitor QIA for unallowable
administrative expenditures. At the high end of the range, we projected
that there will be some increase in Medicaid remittances, that is,
savings to States and the Federal government. In total these changes
would increase remittances by $61.8 million in 2024. We project that
remittances would increase by $373 million between 2024 and 2028. The
estimates are provided in Table 10.
[GRAPHIC] [TIFF OMITTED] TR10MY24.020
We proposed to amend Sec. 438.8(e) and (f) to require managed care
plans to report SDPs to States in their MLR reports. In States that
require managed care plans to pay remittances back to the State for not
meeting a minimum MLR, and the remittance calculation arrangements are
based on Sec. 438.8, the remittance amounts may be affected. Given
that CMS does not have data on actual revenue and expenditure amounts
for SDPs that will allow for modeling the effect of the line-item
reporting on remittances, we were unable to quantify the benefits and
costs of this proposed change. We expected that this proposed change
may result in transfers from States and the Federal government to
managed care plans in the form of lower remittances or higher
capitation rates.
We did not receive any comments in response to our regulatory
impact analysis on our proposed Medical Loss Ratio (MLR) and program
integrity standards (Sec. Sec. 438.3, 438.8, 438.74, 457.1201,
457.1203, 457.1285). Therefore, we are finalizing these provisions as
described in section I.B.3. of this final rule.
3. In Lieu of Services and Settings (ILOSs) (Sec. Sec. 438.2, 438.3,
438.16, 457.1201, 457.120)
In the May 6, 2016 final rule (81 FR 27830), the regulatory impact
analysis addressed the financial and economic effects of allowing FFP
for capitation payments made for enrollees that received inpatient
psychiatric services during short-term stays in an institution for
mental disease (IMD) as an ILOS; however, it did not address other
potential ILOS (see 81 FR 27840 and 27841 for further details). When we
analyzed the May 6, 2016 final rule for the regulatory impact analysis,
we concluded that the financial and economic effects of all other ILOSs
will be offset by a decrease in expenditures for the State plan-covered
services and settings for which ILOSs are a medically appropriate and
cost effective substitute. The use of ILOSs is a longstanding policy in
managed care given the flexibility that managed care plans have
historically had in furnishing care in alternate settings and services
in a risk-based delivery system, if cost effective, on an optional
basis and to the extent that the managed care plan and the enrollee
agree that such setting or service will provide medically appropriate
care. States and managed care plans historically have utilized ILOSs
that are immediate substitutes for covered services and settings under
the State plan, such as a Sobering Center as a substitute for an
emergency department visit. More recently, a few States and managed
care plans have begun utilizing ILOSs as longer term substitutes for
covered services and settings under the State plan. On January 7, 2021,
CMS published a State Health Official (SHO) letter (SHO# 21-001) \241\
that described opportunities under Medicaid and CHIP to better address
SDOH. Additionally, on January 4, 2023, CMS published a State Medicaid
Director (SMD) letter (SMD# 23-001) \242\ that outlined additional
guidance for ILOSs in Medicaid managed care. Since CMS published this
guidance, States have been working to implement changes in their
Medicaid managed care programs to meet the HRSNs of Medicaid
beneficiaries more effectively, including partnering with community-
based organizations that routinely address HRSNs.
---------------------------------------------------------------------------
\241\ Opportunities in Medicaid and CHIP to Address Social
Determinants of Health, https://www.medicaid.gov/federal-policy-guidance/downloads/sho21001.pdf.
\242\ Additional Guide on Use of In Lieu of Services and
Settings in Medicaid Managed Care, https://www.medicaid.gov/federal-policy-guidance/downloads/smd23001.pdf.
---------------------------------------------------------------------------
We believe that expanding the definition of what is allowable as
ILOSs in Medicaid managed care will likely lead to an increase in
Medicaid expenditures. Many of these services intended to address HRSNs
may not have been previously eligible for coverage under Medicaid as an
ILOS. While guidance requires these to be cost effective, the proposed
rule does not require cost effectiveness to be ``budget neutral.''
Moreover, for ILOSs that are intended to be in lieu of some future
service, the cost effectiveness may need to be measured over years.
Data on ILOS is extremely limited, and CMS does not currently
collect any data (outside of ILOS spending for IMDs as part of the
managed care rate contract). Moreover, there is limited
[[Page 41263]]
information on the additional ILOSs that States may use. Therefore, we
provided a range of potential impacts for this section as well.
At the low end of the range, we projected that there will be no
impact on Medicaid expenditures. In these cases, we will assume (1) the
use of new ILOSs are relatively lower; and (2) additional ILOS spending
is offset by savings from other Medicaid services.
At the high end of the range, we projected that there will be some
increase in Medicaid spending. We made the following assumptions for
the high scenario: (1) half of States will use new ILOSs; (2) States
will increase use of ILOSs to 2 percent of total Medicaid managed care
spending; and (3) additional ILOSs will offset 50 percent of new
spending. Table 12 shows the impacts in the high scenario.
[GRAPHIC] [TIFF OMITTED] TR10MY24.021
We also believed it is important for CMS to begin to capture data
on ILOS expenditures as a portion of total capitation payments that are
eligible for FFP to ensure appropriate fiscal oversight, as well as
detail on the managed care plans' ILOS costs. Therefore, we proposed
reporting related to the final ILOS cost percentage and actual MCO,
PIHP and PAHP ILOS costs in Sec. Sec. 438.16(c) and 457.1201(c). This
will also aid us in future regulatory impact analyses.
We did not receive any public comments on in Lieu of Services and
Settings (ILOSs) (Sec. Sec. 438.2, 438.3, 438.16, 457.1201, 457.120)
in response to our proposals. Therefore, we are finalizing these
provisions as proposed.
4. Regulatory Review Cost Estimation
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this final rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the total number of unique
commenters on the 2016 final rule will be the number of reviewers of
this final rule. We received 415 unique comments on the proposed rule.
We acknowledge that this assumption may understate or overstate the
costs of reviewing this rule. It is possible that not all commenters
reviewed the 2016 proposed rule in detail, and it is also possible that
some reviewers chose not to comment on the proposed rule. For these
reasons, we thought that the number of commenters was a fair estimate
of the number of reviewers of this rule. We welcome any comments on the
approach in estimating the number of entities which will review this
final rule.
We also recognize that different types of entities are in many
cases affected by mutually exclusive sections of this final rule, and
therefore, for the purposes of our estimate, we assume that each
reviewer reads approximately 50 percent of the rule. We sought comments
on this assumption.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimated that the cost of
reviewing this rule is $100.80 per hour, including overhead and fringe
benefits https://www.bls.gov/oes/current/oes_nat.htm. Assuming an
average reading speed, we estimated that it will take approximately 20
hours for the staff to review half of this final rule. For each entity
that reviews the rule, the estimated cost is $4,032. Therefore, we
estimated that the total cost of reviewing this regulation is $2
million.
We did not receive any comments in response to our proposals on
regulatory review cost estimation. Therefore, we are finalizing this
estimate as proposed.
D. Alternatives Considered
1. State Directed Payments (SDPs)
As discussed in section I.B.2.f. of this final rule on provider
payment limits, we considered alternatives to the ACR as a total
payment rate limit for inpatient hospital services, outpatient hospital
services, nursing facility services, and qualified practitioner
services at an academic medical center for each SDP. The alternatives
we considered include the Medicare rate, some level between Medicare
and the ACR, or a Medicare equivalent of the ACR. We also considered an
alternative that will establish a total payment rate limit for any SDPs
described in paragraphs (c)(1)(i) and (ii) that are for any of these
four services, at the ACR, while limiting the total payment rate for
any SDPs described in paragraph Sec. 438.6(c)(1)(iii)(C) through (E),
at the Medicare rate. We also considered and sought public comment on
establishing a total payment rate limit for all services for all SDP
arrangements described in Sec. 438.6(c)(1)(i) and (ii), and
(c)(1)(iii)(C) through (E) at the Medicare rate. For each of these
alternatives, we acknowledged that some States currently have SDPs that
have total payment rates up to the ACR. Therefore, these alternative
proposals could be more restrictive, and States could need to reduce
funding from current levels, which could have a negative impact on
access to care and health equity initiatives.
Public comments received on the alternatives described above are
responded to in detail in section I.B.2.f. of this final rule. We are
finalizing these provisions as described in section I.B.2.f. of this
final rule.
2. Medical Loss Ratio (MLR) Standards
For all MLR-related proposed changes, except those relating to SDP
reporting, the only alternative considered was no change. We considered
alternatives to requiring actual SDP amounts as part of MLR reports,
including creating a new separate reporting process for SDPs or
modifying existing reporting processes to include SDPs. We determined
that creating a new separate reporting process specific to SDPs will
impose significant burden on States as it will require State staff to
learn a new process and complete an additional set of documents for SDP
reporting. We considered modifying other State managed care reporting
processes, for
[[Page 41264]]
example, MCPAR, to include SDPs but, unlike MLR reporting, those
processes were not specific to reporting financial data. We proposed
integrating SDP reporting in the MLR as the current MLR process
requires reporting of financial data from managed care plans, and in
turn, States provide a summary of these reports to CMS in the form of
the annual MLR summary report. The integration of managed care plan and
State SDP reporting using current MLR processes will encourage States
to add the monitoring and oversight of SDPs as a part of a State's
established MLR reporting process.
Public comments received on the alternatives to MLR-related
changes, except those relating to SDP reporting, are responded to in
detail in section I.B.3. of this final rule. We are finalizing those
provisions as described in section I.B.3. of this final rule. Public
comments received on the alternatives to MLR-related changes for SDP
reporting are responded to in section I.B.2.o. of this final rule. We
are finalizing those provisions as described in section I.B.2.o. of
this final rule.
3. In Lieu of Services and Settings (ILOSs) (Sec. Sec. 438.2, 438.3,
438.16, 457.1201, 457.120)
One alternative we considered was leaving the 2016 final rule as it
is today; however, since the rule was finalized in 2016, we continue to
hear of increased State and plan utilization and innovation in the use
of ILOSs, and we did not believe the current regulation ensures
appropriate enrollee and fiscal protections. As a result, we proposed
many additional safeguards in this rule. The ILOS proposals seek to
ensure appropriate safeguards while also specifying that States and
managed care plans can consider both short term and longer term
substitutes for State plan-covered services and settings. Additionally,
we considered including enrollee protections and ILOS transparency
without the 5 percent limit on the ILOS cost percentage and the ILOS
evaluation, when applicable. However, we have concerns regarding the
potential unrestrained growth of ILOS expenditures.
We did not receive any public comments in response in lieu of
services and settings (ILOSs) (Sec. Sec. 438.2, 438.3, 438.16,
457.1201, 457.120) below. Therefore, we are finalizing these provisions
as proposed.
E. Accounting Statement and Table
As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), we have prepared an accounting statement in
Table 13 showing the classification of the impact associated with the
provisions of this final rule. In the case of SDPs, we categorize these
as transfers from the Federal government and States to health care
providers. For ILOSs, we categorize these as transfers from the Federal
government and States to beneficiaries in the form of additional
services. Finally, for MLR requirements, we categorize these as
transfers from managed care plans to the Federal government and States.
This provides our best estimates of the transfer payments outlined
in the ``Section C. Detailed Economic Analysis'' above. We detail our
estimates of the low and high end of the ranges in this section, and
the primary estimate is the average of the low and high scenario
impacts. This reflects a wide range of possible outcomes but given the
uncertainty in the ways and degrees to which States may use the SDPs
and ILOSs, we believed that this is a reasonable estimate of the
potential impacts under this final rule. For the MLR provisions, we
have not provided a range given the relatively small size of the
estimated impact.
These impacts are discounted at seven percent and three percent,
respectively, as reflected in Table 13.
[[Page 41265]]
[GRAPHIC] [TIFF OMITTED] TR10MY24.022
F. Regulatory Flexibility Act (RFA)
Effects on MCOs, PIHPs or PAHPs (referred to as ``managed care
plans'') will not have a significant economic impact. As outlined in
section II.B. of this final rule, we utilized data submitted by States
for enrollment in Medicaid managed care plans for CY 2020. The
enrollment data reflected 58,521,930 enrollees in MCOs, 37,692,501
enrollees in PIHPs or PAHPs, and 6,089,423 enrollees in PCCMs, for a
total of 67,836,622 Medicaid managed care enrollees.\243\ This includes
duplicative counts when enrollees are enrolled in multiple managed care
plans concurrently. This data also showed 43 States that contract with
467 MCOs, 11 States that contract with 162 PIHPs or PAHPs, 19 States
that contract with 21 non-emergency transportation PAHPs, and 13 States
with 26 PCCM or PCCM entities. For CHIP, we utilized State submitted
data for enrollment in managed care plans for CY 2017. The enrollment
data reflected 4,580,786 Medicaid expansion and 2,593,827 separate CHIP
managed care enrollees.\244\ These data also showed that 32 States use
managed care entities for CHIP enrollment contracting with 199 managed
care entities.\245\
---------------------------------------------------------------------------
\243\ Medicaid Managed Care Enrollment and Program
Characteristics (2020).
\244\ Centers for Medicare and Medicaid Services, Statistical
Enrollment Data System (2017), Quarterly Enrollment Data Form 21E:
Number of Children Served in Separate CHIP Program/Quarterly
Enrollment Data Form 64.21E: Number of Children Served in CHIP
Medicaid Expansion Program/Quarterly Enrollment Data Form 21PW:
Number of Pregnant Women Served, accessed December 5, 2022.
\245\ Results of managed care survey of States completed by
Centers for Medicare & Medicaid Services, Center for Medicaid and
CHIP Services, Children and Adults Health Programs Group, Division
of State Coverage Programs, 2017.
---------------------------------------------------------------------------
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, we estimate that
some managed care plans
[[Page 41266]]
may be small entities as that term is used in the RFA. We believed that
only a few managed care plans may qualify as small entities.
Specifically, we believed that approximately 14-25 managed care plans
may be small entities. We believed that the remaining managed care
plans have average annual receipts from Medicaid and CHIP contracts and
other business interests in excess of $41.5 million; therefore, we did
not believe that this final rule will have a significant economic
impact on a substantial number of small businesses.
For purposes of the RFA, approximately 0.04 percent of Medicaid
managed care plans may be considered small businesses according to the
Small Business Administration's size standards with total revenues of
$8 million to $41.5 million in any 1 year. Individuals and States are
not included in the definition of a small entity. The cost impact on
Medicaid managed care plans on a per entity basis is approximately
$54,500. This final rule will not have a significant impact measured
change in revenue of 3 to 5 percent on a substantial number of small
businesses or other small entities.
The final rule will specifically address standards for (1) timely
access to care and States' monitoring and enforcement efforts; (2)
reduce burden for State directed payments (SDPs) and certain quality
reporting requirements; (3) add new standards that will apply when
States use in lieu of services and settings (ILOSs) to promote
effective utilization and identify the scope and nature of ILOS; (4)
specify medical loss ratio (MLR) requirements; and (5) establish a
quality rating system (QRS) for Medicaid and CHIP managed care plans.
As outlined, these efforts do not impact small entities.
As its measure of significant economic impact on a substantial
number of small entities, HHS uses a change in revenue of more than 3
to 5 percent. We did not believe that this threshold will be reached by
the requirements in this final rule. Therefore, the Secretary has
certified that this final rule will not have a significant economic
impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has fewer than 100 beds. We do not anticipate that
the provisions in this final rule will have a substantial economic
impact on most hospitals, including small rural hospitals. Provisions
include some proposed new standards for State governments and managed
care plans but no direct requirements on providers, including
hospitals. The impact on individual hospitals will vary according to
each hospital's current and future contractual relationships with
Medicaid managed care plans, but any additional burden on small rural
hospitals should be negligible. We invited comment on our proposed
analysis of the impact on small rural hospitals regarding the
provisions of this final rule. We have determined that we are not
preparing analysis for either the RFA or section 1102(b) of the Act
because we have determined, and the Secretary certifies, that this
final rule will not have a significant economic impact on a substantial
number of small entities or a significant impact on the operations of a
substantial number of small rural hospitals in comparison to total
revenues of these entities.
G. Unfunded Mandates Reform Act (UMRA)
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2024, that
is approximately $183 million. This final rule does not contain any
Federal mandate costs resulting from (A) imposing enforceable duties on
State, local, or tribal governments, or on the private sector, or (B)
increasing the stringency of conditions in, or decreasing the funding
of, State, local, or tribal governments under entitlement programs. We
have determined that this final rule does not impose any mandates on
State, local, or tribal governments, or the private sector that will
result in an annual expenditure of $183 million or more.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a final rule that imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has Federalism implications. We believed this
proposed regulation gives States appropriate flexibility regarding
managed care standards (for example, setting network adequacy
standards, setting credentialing standards, EQR activities), while also
better aligning Medicaid and CHIP managed care standards with those for
QHPs in the Marketplaces and MA to better streamline the beneficiary
experience and to reduce administrative and operational burdens on
States and health plans across publicly-funded programs and the
commercial market. We have determined that this final rule will not
significantly affect States' rights, roles, and responsibilities.
H. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule that imposes
substantial direct requirement costs on State and local governments,
preempts State law, or otherwise has Federalism implications. This
final rule will not have a substantial direct effect on State or local
governments, preempt States, or otherwise have a Federalism
implication.
I. Waiver Fiscal Responsibility Act Requirements
The Director of OMB has waived the requirements of section 263 of
the Fiscal Responsibility Act of 2023 (Pub. L. 118-5) pursuant to
section 265(a)(2) of that Act.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on February 28, 2024.
List of Subjects
42 CFR Part 430
Administrative practice and procedure, Grant programs-health,
Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 438
Citizenship and naturalization, Civil rights, Grant programs-
health, Individuals with disabilities, Medicaid, Reporting and
recordkeeping requirements, Sex discrimination.
42 CFR Part 457
Administrative practice and procedure, Grant programs-health,
Health insurance, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 430--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
0
1. The authority citation for part 430 is revised to read as follows:
Authority: 42 U.S.C. 1302.
[[Page 41267]]
0
2. Amend Sec. 430.3, by adding paragraph (e) to read as follows:
Sec. 430.3 Appeals under Medicaid.
* * * * *
(e) Disputes that pertain to disapproval of written approval by CMS
of State directed payments under 42 CFR 438.6(c)(2)(i) are also heard
by the Board in accordance with procedures set forth in 45 CFR part 16.
45 CFR part 16, appendix A, lists all the types of disputes that the
Board hears.
PART 438--MANAGED CARE
0
3. The authority citation for part 438 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
4. Amend Sec. 438.2 by--
0
a. Adding the definition of ``In lieu of service or setting (ILOS)'' in
alphabetical order;
0
b. Revising paragraph (9) in the definition of ``Primary care case
management entity (PCCM entity)''; and
0
c. Adding the definition of ``State directed payment (SDP)'' in
alphabetical order.
The additions and revision read as follows:
Sec. 438.2 Definitions.
* * * * *
In lieu of service or setting (ILOS) is a service or setting that
is provided to an enrollee as a substitute for a covered service or
setting under the State plan in accordance with Sec. 438.3(e)(2). An
ILOS can be used as an immediate or longer-term substitute for a
covered service or setting under the State plan, or when the ILOS can
be expected to reduce or prevent the future need to utilize the covered
service or setting under the State plan.
* * * * *
Primary care case management entity (PCCM entity) * * *
(9) Coordination with mental and substance use disorder health
systems and providers.
* * * * *
State directed payment (SDP) means a contract arrangement that
directs an MCO's, PIHP's, or PAHP's expenditures under Sec. 438.6(c).
* * * * *
0
5. Amend Sec. 438.3 by:
0
a. Revising paragraphs (c)(1)(ii) and (e)(2);
0
b. Adding paragraphs (i)(3) and (4); and
0
c. Revising paragraph (v).
The additions and revisions read as follows:
Sec. 438.3 Standard contract requirements.
* * * * *
(c) * * *
(1) * * *
(ii) The final capitation rates must be based only upon services
covered under the State plan, ILOS, and additional services deemed by
the State to be necessary to comply with the requirements of subpart K
of this part (applying parity standards from the Mental Health Parity
and Addiction Equity Act), and represent a payment amount that is
adequate to allow the MCO, PIHP or PAHP to efficiently deliver covered
services to Medicaid-eligible individuals in a manner compliant with
contractual requirements.
* * * * *
(e) * * *
(2) An MCO, PIHP, or PAHP may cover, for enrollees, an ILOS as
follows:
(i) The State determines that the ILOS is a medically appropriate
and cost effective substitute for the covered service or setting under
the State plan;
(ii) The enrollee is not required by the MCO, PIHP, or PAHP to use
the ILOS, and the MCO, PIHP, or PAHP must comply with the following
requirements:
(A) An enrollee who is offered or utilizes an ILOS offered as a
substitute for a covered service or setting under the State plan
retains all rights and protections afforded under part 438, and if an
enrollee chooses not to receive an ILOS, they retain their right to
receive the service or setting covered under the State plan on the same
terms as would apply if an ILOS was not an option; and
(B) An ILOS may not be used to reduce, discourage, or jeopardize an
enrollee's access to services and settings covered under the State
plan, and an MCO, PIHP, or PAHP may not deny access to a service or
setting covered under the State plan, on the basis that the enrollee
has been offered an ILOS as an optional substitute for a service or
setting covered under the State plan, is currently receiving an ILOS as
a substitute for a service or setting covered under the State plan, or
has utilized an ILOS in the past;
(iii) The approved ILOS is authorized and identified in the MCO,
PIHP, or PAHP contract, and will be offered to enrollees at the option
of the MCO, PIHP, or PAHP;
(iv) The utilization and actual cost of the ILOS is taken into
account in developing the component of the capitation rates that
represents the covered State plan services and settings, unless a
statute or regulation explicitly requires otherwise; and
(v) With the exception of a short term stay as specified in Sec.
438.6(e) in an Institution for Mental Diseases (IMD), as defined in
Sec. 435.1010 of this chapter, for inpatient mental health or
substance use disorder treatment, an ILOS must also comply with the
requirements in Sec. 438.16.
* * * * *
(i) * * *
(3) The State, through its contracts with an MCO, PIHP, and PAHP
must require that incentive payment contracts between the MCO, PIHP,
and PAHP and network providers:
(i) Have a defined performance period that can be tied to the
applicable MLR reporting periods.
(ii) Be signed and dated by all appropriate parties before the
commencement of the applicable performance period.
(iii) Include clearly-defined, objectively measurable, and well-
documented clinical or quality improvement standards that the provider
must meet to receive the incentive payment.
(iv) Specify a dollar amount or a percentage of a verifiable dollar
amount that can be clearly linked to successful completion of the
metrics defined in the incentive payment contract, including a date of
payment.
(4) The State through its contracts with an MCO, PIHP, and PAHP
must:
(i) Define the documentation that must be maintained by the MCO,
PIHP, and PAHP to support the provider incentive payments.
(ii) Prohibit the use of attestations as supporting documentation
for data that factor into the MLR calculation.
(iii) Require the MCO, PIHP, and PAHP to make incentive payment
contracts, and any documentation in paragraph (e)(4)(i) of this
section, available to the State upon request and at any routine
frequency established in the State's contract with the MCO, PIHP, and
PAHP.
* * * * *
(v) Applicability date. Paragraphs (e)(2)(v) of this section
applies to the first rating period for contracts with MCOs, PIHPs and
PAHPs beginning on or after 60 days following July 9, 2024, and
paragraphs (i)(3) and (4) of this section apply to the first rating
period for contracts with MCOs, PIHPs and PAHPs beginning on or after 1
year following July 9, 2024.
0
6. Amend Sec. 438.6--
0
a. In paragraph (a) by:
0
i. Revising the introductory text;
0
ii. Adding definitions for ``Academic medical center,'' ``Average
commercial rate,'' ``Condition-based payment,'' ``Final State directed
payment cost percentage,'' ``Inpatient hospital
[[Page 41268]]
services,'' ``Maximum fee schedule,'' ``Minimum fee schedule,''
``Nursing facility services,'' ``Outpatient hospital services,''
``Performance measure,'' ``Population-based payment,'' ``Qualified
practitioner services at an academic medical center,'' ``Total payment
rate,'' ``Total published Medicare payment rate,'' and ``Uniform
increase'' in alphabetical order; and
0
b. By revising paragraphs (c) and (e).
The revisions and additions read as follows:
Sec. 438.6 Special contract provisions related to payment.
(a) Definitions. As used in this section, the following terms have
the indicated meanings:
Academic medical center means a facility that includes a health
professional school with an affiliated teaching hospital.
Average commercial rate means the average rate paid for services by
the highest claiming third-party payers for specific services as
measured by claims volume.
* * * * *
Condition-based payment means a prospective payment for a defined
set of Medicaid covered service(s) that are tied to a specific
condition and delivered to Medicaid managed care enrollees under the
contract.
Final State directed payment cost percentage means the annual
amount calculated, in accordance with paragraph (c)(7)(iii) of this
section, for each State directed payment for which written prior
approval is required under paragraph (c)(2)(i) of this section and for
each managed care program.
* * * * *
Inpatient hospital services means the same as specified at Sec.
440.10.
Maximum fee schedule means any State directed payment where the
State requires an MCO, PIHP, or PAHP to pay no more than a certain
amount for a covered service(s).
Minimum fee schedule means any State directed payment where the
State requires an MCO, PIHP, or PAHP to pay no less than a certain
amount for a covered service(s).
Nursing facility services means the same as specified in Sec.
440.40(a).
Outpatient hospital services means the same as specified in Sec.
440.20(a).
* * * * *
Performance measure means, for State directed payments, a
quantitative measure with a numerator and denominator that is used to
monitor performance at a point in time or track performance over time,
of service delivery, quality of care, or outcomes as defined in Sec.
438.320 for enrollees.
Population-based payment means a prospective payment for a defined
set of Medicaid service(s) for a population of Medicaid managed care
enrollees covered under the contract attributed to a specific provider
or provider group.
Qualified practitioner services at an academic medical center means
professional services provided by both physicians and non-physician
practitioners affiliated with or employed by an academic medical
center.
* * * * *
Total payment rate means the aggregate for each managed care
program of:
(i) The average payment rate paid by all MCOs, PIHPs, or PAHPs to
all providers included in the specified provider class for each service
identified in the State directed payment;
(ii) The effect of the State directed payment on the average rate
paid to providers included in the specified provider class for the same
service for which the State is seeking prior approval under paragraph
(c)(2)(i) of this section;
(iii) The effect of any and all other State directed payments on
the average rate paid to providers included in the specified provider
class for the same service for which the State is seeking prior
approval under paragraph (c)(2)(i) of this section; and
(iv) The effect of any and all allowable pass-through payments, as
defined in paragraph (a) of this section, to be paid to any and all
providers included in the provider class specified in the State
directed payment for which the State is seeking prior approval under
paragraph (c)(2)(i) of this section on the average payment rate to
providers in the specified provider class.
Total published Medicare payment rate means amounts calculated as
payment for specific services that have been developed under Title
XVIII Part A and Part B.
Uniform increase means any State directed payment that directs the
MCO, PIHP, or PAHP to pay the same amount (the same dollar amount or
the same percentage increase) per Medicaid covered service(s) in
addition to the rates the MCO, PIHP or PAHP negotiated with the
providers included in the specified provider class for the service(s)
identified in the State directed payment.
* * * * *
(c) State directed payments under MCO, PIHP, or PAHP contracts--(1)
General rule. Except as specified in this paragraph (c), in paragraph
(d) of this section, in a specific provision of Title XIX, or in
another regulation implementing a Title XIX provision related to
payments to providers, that is applicable to managed care programs, the
State may not in any way direct the MCO's, PIHP's or PAHP's
expenditures under the contract.
(i) The State may require the MCO, PIHP or PAHP to implement value-
based purchasing models for provider reimbursement, such as pay for
performance arrangements, bundled payments, or other service payment
models intended to recognize value or outcomes over volume of services.
(ii) The State may require MCOs, PIHPs, or PAHPs to participate in
a multi-payer or Medicaid-specific delivery system reform or
performance improvement initiative.
(iii) The State may require the MCO, PIHP, or PAHP to:
(A) Adopt a minimum fee schedule for providers that provide a
particular service under the contract using State plan approved rates.
(B) Adopt a minimum fee schedule for providers that provide a
particular service under the contract using a total published Medicare
payment rate that was in effect no more than 3 years prior to the start
of the rating period and the minimum fee schedule to be used by the
MCO, PIHP, or PAHP is equivalent to 100 percent of the specified total
published Medicare payment rate.
(C) Adopt a minimum fee schedule for providers that provide a
particular service under the contract using rates other than the State
plan approved rates or one or more total published Medicare payment
rates described in paragraph (c)(1)(iii)(B) of this section.
(D) Provide a uniform dollar or percentage increase for providers
that provide a particular service under the contract.
(E) Adopt a maximum fee schedule for 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.
(2) Standards for State directed payments. (i) State directed
payments specified in paragraphs (c)(1)(i) and (ii) and (c)(1)(iii)(C)
through (E) of this section must have written prior approval that the
standards and requirements in this section are met.
(ii) Each State directed payment must meet the following standards.
Specifically, each State directed payment must:
(A) Be based on the utilization and delivery of services;
(B) Direct expenditures equally, and using the same terms of
performance,
[[Page 41269]]
for a class of providers providing the service under the contract;
(C) Expect to advance at least one of the goals and objectives in
the quality strategy in Sec. 438.340;
(D) Have an evaluation plan that measures the degree to which the
State directed payment advances at least one of the goals and
objectives in the quality strategy in Sec. 438.340 and includes all of
the elements outlined in paragraph (c)(2)(iv) of this section;
(E) Not condition provider participation in State directed payments
on the provider entering into or adhering to intergovernmental transfer
agreements;
(F) Result in achievement of the stated goals and objectives in
alignment with the State's evaluation plan and, upon request from CMS,
the State must provide an evaluation report documenting achievement of
these stated goals and objectives;
(G) Comply with all Federal legal requirements for the financing of
the non-Federal share, including but not limited to, 42 CFR 433,
subpart B;
(H)(1) Ensure that providers receiving payment under a State
directed payment attest that they do not participate in any hold
harmless arrangement for any health care-related tax as specified in
Sec. 433.68(f)(3) of this subchapter in which the State or other unit
of government imposing the tax provides for any direct or indirect
payment, offset, or waiver such that the provision of the payment,
offset, or waiver directly or indirectly guarantees to hold the
taxpayer harmless for all or any portion of the tax amount, and
(2) Ensure either that, upon CMS request, such attestations are
available, or that the State provides an explanation that is
satisfactory to CMS about why specific providers are unable or
unwilling to make such attestations;
(I) Ensure that the total payment rate for each service and
provider class included in the State directed payment must be
reasonable, appropriate, and attainable and, upon request from CMS, the
State must provide documentation demonstrating the total payment rate
for each service and provider class; and
(J) Be developed in accordance with Sec. 438.4, and the standards
specified in Sec. Sec. 438.5, 438.7, and 438.8.
(iii) The total payment rate for each State directed payment for
which written prior approval is required under paragraph (c)(2)(i) of
this section for inpatient hospital services, outpatient hospital
services, nursing facility services, or qualified practitioner services
at an academic medical center must not exceed the average commercial
rate. To demonstrate compliance with this paragraph, States must
submit:
(A) The average commercial rate demonstration, for which States
must use payment data that:
(1) Is specific to the State;
(2) Is no older than from the three most recent and complete years
prior to the rating period of the initial request following the
applicability date of this section;
(3) Is specific to the service(s) addressed by the State directed
payment;
(4) Includes the total reimbursement by the third-party payer and
any patient liability, such as cost sharing and deductibles;
(5) Excludes payments to FQHCs, RHCs, and from any non-commercial
payers, such as Medicare; and
(6) Excludes any payment data for services or codes that the
applicable Medicaid MCOs, PIHPs, or PAHPs do not cover.
(B) A total payment rate comparison, for which States must provide
a comparison of the total payment rate for these services included in
the State directed payment to the average commercial rate that:
(1) Is specific to each managed care program that the State
directed payment applies to;
(2) Is specific to each provider class to which the State directed
payment applies;
(3) Is projected for the rating period for which the State is
seeking prior approval of the State directed payment under paragraph
(c)(2)(i) of this section;
(4) Uses payment data that are specific to each service included in
the State directed payment; and
(5) Describes each of the components of the total payment rate as a
percentage of the average commercial rate (demonstrated by the State as
provided in paragraph (c)(2)(iii)(A) of this section) for each of these
services included in the State directed payment.
(C) The ACR demonstration described in paragraph (c)(2)(iii)(A) of
this section must be included with the initial documentation submitted
for written prior approval of the State directed payment under
paragraph (c)(2)(i) of this section, and then subsequently updated at
least once every 3 years thereafter as long as the State continues to
include the State directed payment that requires prior approval under
paragraph (c)(2)(i) of this section in any MCO, PIHP, or PAHP contract.
The total payment rate comparison described in paragraph (c)(2)(iii)(B)
of this section must be included with the documentation submitted for
written prior approval under paragraph (c)(2)(i) of this section and
updated with each amendment and subsequent renewal.
(iv) For State directed payments for which written prior approval
under paragraph (c)(2)(i) of this section is required, the State must
include a written evaluation plan with its submission for written prior
approval under paragraph (c)(2)(i) of this section and an updated
written evaluation plan with each amendment and subsequent renewal. The
evaluation plan must include the following elements:
(A) Identification of at least two metrics that will be used to
measure the effectiveness of the State directed payment in advancing at
least one of the goals and objectives in the quality strategy on an
annual basis, which must:
(1) Be specific to the State directed payment and, when practicable
and relevant, attributable to the performance by the providers for
enrollees in all of the State's managed care program(s) to which the
State directed payment applies; and
(2) Include at least one performance measure as defined in Sec.
438.6(a) as part of the metrics used to measure the effectiveness of
the State directed payment;
(B) Include baseline statistics on all metrics that will be used in
the evaluation of the State directed payment for which the State is
seeking written prior approval under paragraph (c)(2)(i) of this
section;
(C) Include performance targets for all metrics to be used in the
evaluation of the State directed payment for which the State is seeking
written prior approval under paragraph (c)(2)(i) of this section that
demonstrate either maintenance or improvement over the baseline
statistics and not a decline relative to baseline. The target for at
least one performance measure, as defined in Sec. 438.6(a), must
demonstrate improvement over baseline; and
(D) Include a commitment by the State to submit an evaluation
report in accordance with Sec. 438.6(c)(2)(v) if the final State
directed payment cost percentage exceeds 1.5 percent.
(v) For any State directed payment for which written prior approval
is required under paragraph (c)(2)(i) of this section that has a final
State directed payment cost percentage greater than 1.5 percent, the
State must complete and submit an evaluation report using the
evaluation plan outlined during the prior approval process under
paragraph (c)(2)(iv) of this section.
(A) This evaluation report must:
(1) Include all of the elements in paragraph (c)(2)(iv) of this
section as specified in the approved evaluation plan;
[[Page 41270]]
(2) Include three most recent and complete years of annual results
for each metric as required in paragraph (c)(2)(iv)(A) of this section;
and
(3) Be published on the public facing website as required under
Sec. 438.10(c)(3).
(B) States must submit the initial evaluation report as described
in paragraph (c)(2)(v)(A) of this section to CMS no later than 2 years
after the conclusion of the 3-year evaluation period. Subsequent
evaluation reports must be submitted to CMS every 3 years.
(vi) Any State directed payments described in paragraph (c)(1)(i)
or (ii) of this section must:
(A) Make participation in the value-based purchasing, 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) If the State directed payment for which written prior approval
is required under paragraph (c)(2)(i) of this section conditions
payment upon performance, the payment to providers under the State
directed payment:
(1) Cannot be conditioned upon administrative activities, such as
the reporting of data nor upon the participation in learning
collaboratives or similar administrative activities;
(2) Must use a common set of performance measures across all of the
payers and providers specified in the State directed payment;
(3) Must define and use a performance measurement period that must
not exceed the length of the rating period and must not precede the
start of the rating period in which the payment is delivered by more
than 12 months, and all payments must be documented in the rate
certification for the rating period in which the payment is delivered;
(4) Must identify baseline statistics on all metrics that will be
used to measure the performance that is the basis for payment to the
provider from the MCO, PIHP, or PAHP; and
(5) Must use measurable performance targets, which are attributable
to the performance by the providers in delivering services to enrollees
in each of the State's managed care program(s) to which the State
directed payment applies, that demonstrate maintenance or improvement
over baseline data on all metrics that will be used to measure the
performance that is the basis for payment to the provider from the MCO,
PIHP, or PAHP.
(C) If the State directed payment is a population-based or
condition-based payment, the State directed payment must:
(1) Be based upon the delivery by the provider of one or more
specified Medicaid covered service(s) during the rating period or the
attribution of a covered enrollee to a provider for treatment during
the rating period;
(2) If basing payment on the attribution of enrollees to a
provider, have an attribution methodology that uses data that are no
older than the three most recent and complete years of data; seeks to
preserve existing provider-enrollee relationships; accounts for
enrollee preference in choice of provider; and describes when patient
panels are attributed, how frequently they are updated, and how those
updates are communicated to providers;
(3) Replace the negotiated rate between an MCO, PIHP, or PAHP and
providers for the Medicaid covered service(s) included in the
population or condition-based payment; no other payment may be made by
an MCO, PIHP, or PAHP to the same provider on behalf of the same
enrollee for the same services included in the population or condition-
based payment; and
(4) Include at least one metric in the evaluation plan required
under paragraph (c)(2)(iv) of this section that measures performance at
the provider class level; the target for this performance measure, as
defined in Sec. 438.6(a), must be set to demonstrate improvement over
baseline.
(vii) Any State directed payment described in paragraph (c)(1)(iii)
of this section must:
(A) Condition payment from the MCO, PIHP, or PAHP to the provider
on the utilization and delivery of services under the contract for the
rating period for which the State is seeking written prior approval
only; and
(B) Not condition payment from the MCO, PIHP, or PAHP to the
provider on utilization and delivery of services outside of the rating
period for which the State is seeking written prior approval and then
require that payments be reconciled to utilization during the rating
period.
(viii) A State must complete and submit all required documentation
for each State directed payment for which written prior approval is
required under (c)(2)(i) and for each amendment to an approved State
directed payment, respectively, before the start date of the State
directed payment or the start date of the amendment.
(3) Approval and renewal timeframes. (i) Approval of a State
directed payment described in paragraphs (c)(1)(i) and (ii) of this
section is for one rating period unless a multi-year approval of up to
three rating periods is requested and meets all of the following
criteria:
(A) The State has explicitly identified and described the State
directed payment in the contract as a multi-year State directed
payment, including a description of the State directed payment by year
and if the State directed payment varies by year.
(B) The State has developed and described its plan for implementing
a multi-year State directed payment, including the State's plan for
multi-year evaluation, and the impact of a multi-year State directed
payment 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
State directed payment methodology, or magnitude of the payment,
described in the contract for all years of the multi-year State
directed payment without CMS written prior approval. If the State
determines that changes to the State directed payment methodology, or
magnitude of the payment, are necessary, the State must obtain written
prior approval of such changes under paragraph (c)(2) of this section.
(ii) Written prior approval of a State directed payment described
in paragraph (c)(1)(iii)(C) through (E) of this section is for one
rating period.
(iii) State directed payments are not automatically renewed.
(4) Reporting requirements. The State must submit to CMS, no later
than 1 year after each rating period, data to the Transformed Medicaid
Statistical Information System, or in any successor format or system
designated by CMS, specifying the total dollars expended by each MCO,
PIHP, and PAHP for State directed payments, including amounts paid to
individual providers. The initial report will be due after the first
rating period that begins after the release of reporting instructions
by CMS. Minimum data fields to be collected include the following, as
applicable:
(i) Provider identifiers.
(ii) Enrollee identifiers.
(iii) MCO, PIHP or PAHP identifiers.
(iv) Procedure and diagnosis codes.
(v) Allowed, billed, and paid amounts. Paid amounts include the
amount that represents the MCO's, PIHP's or PAHP's negotiated payment
amount, the amount of the State directed payment, and any other amounts
included in the total amount paid to the provider.
(5) Requirements for Medicaid Managed Care contract terms for State
directed payments. State directed payments must be specifically
described and documented in the MCO's, PIHP's,
[[Page 41271]]
or PAHP's contracts. The MCO's, PIHP's or PAHP's contract must include,
at a minimum, the following information for each State directed
payment:
(i) The State directed payment start date and, if applicable, the
end date within the applicable rating period;
(ii) A description of the provider class eligible for the State
directed payment and all eligibility requirements;
(iii) A description of the State directed payment, which must
include at a minimum:
(A) For State directed payments described in paragraphs
(c)(1)(iii)(A), (B), and (C) of this section:
(1) The required fee schedule;
(2) The procedure and diagnosis codes to which the fee schedule
applies;
(3) The applicable dates of service within the rating period for
which the fee schedule applies;
(4) For State directed payments that specify State plan approved
rates, the contract must also reference the State plan page, when it
was approved, and a link to the currently approved State plan page when
possible; and
(5) For State directed payments that specify a Medicare-referenced
fee schedule, the contract must also include information about the
Medicare fee schedule(s) that is necessary to implement the State
directed payment, including identifying the specific Medicare fee
schedule, the time period for which the Medicare fee schedule is in
effect, and any material adjustments due to geography or provider type
that need to be applied.
(B) For State directed payments described in paragraphs
(c)(1)(iii)(D) of this section:
(1) Whether the uniform increase will be a specific dollar amount
or a percentage increase of negotiated rates;
(2) The procedure and diagnosis codes to which the uniform dollar
or percentage increase applies;
(3) The specific dollar amount or percentage increase that the MCO,
PIHP or PAHP must apply or the methodology to establish the specific
dollar amount or percentage increase;
(4) The applicable dates of service within the rating period for
which the uniform increase applies; and
(5) The roles and responsibilities of the State and the MCO, PIHP,
or PAHP, the timing of payments, and other significant relevant
information.
(C) For State directed payments described in paragraph
(c)(1)(iii)(E) of this section:
(1) The fee schedule the MCO, PIHP, or PAHP must ensure that
payments are below;
(2) The procedure and diagnosis codes to which the fee schedule
applies;
(3) The applicable dates of service within the rating period for
which the fee schedule applies; and
(4) Details of the State's exemption process for MCOs, PIHPs, or
PAHPs and providers to follow if they are under contractual obligations
that result in the need to pay more than the maximum fee schedule.
(D) For State directed payments described in paragraphs (c)(1)(i)
and (ii) of this section that condition payment based upon performance:
(1) The approved performance measures upon which payment will be
conditioned;
(2) The approved measurement period for those measures;
(3) The approved baseline statistics for all measures against which
performance will be measured;
(4) The performance targets that must be achieved on each measure
for the provider to obtain the performance-based payment;
(5) The methodology to determine if the provider qualifies for the
performance-based payment, as well as the amount of the payment; and
(6) The roles and responsibilities of the State and the MCO, PIHP,
or PAHP, the timing of payments, what to do with any unearned payments,
and other significant relevant information.
(E) For State directed payments described in paragraphs (c)(1)(i)
and (ii) of this section using a population-based or condition-based
payment as defined in paragraph (a) of this section:
(1) The Medicaid covered service(s) that the population or
condition-based payment is for;
(2) The time period that the population or condition-based payment
covers;
(3) When the population or condition-based payment is to be made
and how frequently;
(4) A description of the attribution methodology, if one is used,
which must include at a minimum the data used, when the panels will be
established, how frequently those panels will be updated, and how the
attribution methodology will be communicated to providers; and
(5) The roles and responsibilities of the State and the MCO, PIHP,
or PAHP in operationalizing the attribution methodology if an
attribution methodology is used.
(iv) Any encounter reporting and separate reporting requirements
necessary for auditing the State directed payment in addition to the
reporting requirements in paragraph (c)(4) of this section; and
(v) All State directed payments must be specifically described and
documented in the MCO's, PIHP's, and PAHP's contracts that must be
submitted to CMS no later than 120 days after the start date of the
State directed payment.
(6) Payment to MCOs, PIHPs, and PAHPs for State Directed Payments.
The final capitation rate for each MCO, PIHP, or PAHP as described in
Sec. 438.3(c) must account for all State directed payments. Each State
directed payment must be accounted for in the base data, as an
adjustment to trend, or as an adjustment as specified in Sec. 438.5
and Sec. 438.7(b). The State cannot withhold a portion of the
capitation rate to pay the MCO, PIHP, or PAHP separately for a State
directed payment nor require an MCO, PIHP, or PAHP to retain a portion
of the capitation rate separately to comply with a State directed
payment.
(7) Final State directed payment cost percentage. For each State
directed payment for which written prior approval is required under
paragraph (c)(2)(i) of this section, unless the State voluntarily
submits the evaluation report per paragraph (c)(2)(v) of this section,
the State must calculate the final State directed payment cost
percentage and if the final State directed payment cost percentage is
below 1.5 percent the State must provide a final State directed payment
cost percentage report to CMS as follows:
(i) State directed payment cost percentage calculation. The final
State directed payment cost percentage must be calculated on an annual
basis and recalculated annually.
(ii) State directed payment cost percentage certification. The
final State directed payment cost percentage must be certified by an
actuary and developed in a reasonable and appropriate manner consistent
with generally accepted actuarial principles and practices.
(iii) Calculation of the final State directed payment cost
percentage. The final State directed payment cost percentage is the
result of dividing the amount determined in paragraph (c)(7)(iii)(A) of
this section by the amount determined in paragraph (c)(7)(iii)(B) of
this section.
(A) The portion of the actual total capitation payments that is
attributable to the State directed payment for which the State has
obtained written prior approval under paragraph (c)(2)(i) of this
section, for each managed care program.
(B) The actual total capitation payments, defined at Sec. 438.2,
for each managed care program, including all State directed payments in
effect under Sec. 438.6(c) and pass-through payments in effect under
Sec. 438.6(d).
[[Page 41272]]
(iv) Annual CMS review of the final State directed payment cost
percentage. The State must submit the final State directed payment cost
percentage annually to CMS for review as a separate report concurrent
with the rate certification submission required in Sec. 438.7(a) for
the rating period beginning 2 years after the completion of each 12-
month rating period that includes a State directed payment for which
the State has obtained written prior approval under paragraph (c)(2)(i)
of this section.
(8) Applicability dates. States must comply with:
(i) Paragraphs (a), (c)(1), (c)(1)(iii), (c)(2)(i), (c)(2)(ii)(A)
through (C), (c)(2)(ii)(E), (c)(2)(ii)(G), (c)(2)(ii)(I) and (J),
(c)(2)(vi)(A), (c)(3) of this section beginning on July 9, 2024.
(ii) Paragraphs (c)(2)(iii), (c)(2)(vi)(B), and (c)(2)(vi)(C)(1)
and (2) of this section no later than the first rating period for
contracts with MCOs, PIHPs and PAHPs beginning on or after July 9,
2024.
(iii) Paragraphs (c)(2)(vi)(C)(3) and (4), (c)(2)(viii) and
(c)(5)(i) through (iv) of this section no later than the first rating
period for contracts with MCOs, PIHPs and PAHPs beginning on or after 2
years after July 9, 2024.
(iv) Paragraphs (c)(2)(ii)(D) and (F), (c)(2)(iv), (c)(2)(v),
(c)(2)(vii), (c)(6) and (c)(7) of this section no later than the first
rating period for contracts with MCOs, PIHPs and PAHPs beginning on or
after 3 years after July 9, 2024.
(v) Paragraph (c)(5)(v) of this section no later than the first
rating period for contracts with MCOs, PIHPs and PAHPs beginning on or
after 4 years after July 9, 2024.
(vi) Paragraph (c)(4) of this section no later than the date
specified in the T-MSIS reporting instructions released by CMS.
(vii) Paragraph (c)(2)(ii)(H) of this section no later than the
first rating period for contracts with MCOs, PIHPs, and PAHPs beginning
on or after January 1, 2028.
* * * * *
(e) Payments to MCOs and PIHPs for enrollees that are a patient in
an institution for mental disease. The State may make a monthly
capitation payment to an MCO or PIHP for an enrollee aged 21-64
receiving inpatient treatment in an Institution for Mental Diseases, as
defined in Sec. 435.1010 of this chapter, so long as the facility is a
hospital providing mental health or substance use disorder inpatient
care or a sub-acute facility providing mental health or substance use
disorder crisis residential services, and length of stay in the IMD is
for a short term stay of no more than 15 days during the period of the
monthly capitation payment. The provision of inpatient mental health or
substance use disorder treatment in an IMD must meet the requirements
for in lieu of services at Sec. 438.3(e)(2)(i) through (iii). For
purposes of rate setting, the State may use the utilization of services
provided to an enrollee under this section when developing the
inpatient mental health or substance use disorder component of the
capitation rate, but must price utilization at the cost of the same
services through providers included under the State plan.
0
7. Amend Sec. 438.7 by--
0
a. Revising paragraph (b)(6); and
0
b. Adding paragraphs (c)(4) through (6) and (f).
The revisions and additions read as follows:
Sec. 438.7 Rate certification submission.
* * * * *
(b) * * *
(6) Special contract provisions. A description of any of the
special contract provisions related to payment in Sec. 438.6 and ILOS
in Sec. 438.3(e)(2) that are applied in the contract.
(c) * * *
(4) The State must submit a revised rate certification for any
changes in the capitation rate per rate cell, as required under
paragraph (a) of this section for any special contract provisions
related to payment described in Sec. 438.6 and ILOS in Sec.
438.3(e)(2) not already described in the rate certification, regardless
of the size of the change in the capitation rate per rate cell.
(5) Retroactive adjustments to the capitation rates, as outlined in
paragraph (c)(2) of this section, resulting from a State directed
payment described in Sec. 438.6(c) must be a result of adding or
amending any State directed payment consistent with the requirements in
Sec. 438.6(c), or a material error in the data, assumptions or
methodologies used to develop the initial capitation rate adjustment
such that modifications are necessary to correct the error.
(6) The rate certification or retroactive adjustment to capitation
rates resulting from any State directed payments must be submitted no
later than 120 days after the start date of the State directed payment.
* * * * *
(f) Applicability dates. (1) Paragraph (b)(6) of this section
applies to the rating period for contracts with MCOs, PIHPs and PAHPs
beginning on or after 60 days following July 9, 2024. Until that
applicability date, States are required to continue to comply with
paragraph (b)(6) of this section contained in 42 CFR, parts 430 to 481,
edition most recently published prior to the final rule.
(2) Paragraph (c)(6) of this section apply no later than the first
rating period for contracts with MCOs, PIHPs and PAHPs beginning on or
after 4 years after July 9, 2024.
0
8. Amend Sec. 438.8 by--
0
a. Revising paragraph (e)(2)(iii)(A);
0
b. Adding paragraph (e)(2)(iii)(C);
0
c. Revising paragraph (e)(3)(i);
0
d. Adding paragraph (f)(2)(vii); and
0
e. Revising paragraphs (h)(4) introductory text and (k)(1)(vii).
The revisions and additions read as follows:
Sec. 438.8 Medical loss ratio (MLR) standards.
* * * * *
(e) * * *
(2) * * *
(iii) * * *
(A) The amount of incentive and bonus payments made, or expected to
be made, to network providers that are tied to clearly-defined,
objectively measurable, and well-documented clinical or quality
improvement standards that apply to providers.
* * * * *
(C) The amount of payments made to providers under State directed
payments described in Sec. 438.6(c).
* * * * *
(3) * * *
(i) An MCO, PIHP, or PAHP activity that meets the requirements of
45 CFR 158.150(a) and (b) and is not excluded under 45 CFR 158.150(c).
* * * * *
(f) * * *
(2) * * *
(vii) Payments to the MCO, PIHP, or PAHP for expenditures under
State directed payments described in Sec. 438.6(c).
* * * * *
(h) * * *
(4) CMS will publish base credibility factors for MCOs, PIHPs, and
PAHPs that are developed according to the following methodology:
* * * * *
(k) * * *
(1) * * *
(vii) Methodology(ies) for allocation of expenditures, which must
include a detailed description of the methods used to allocate
expenses, including incurred claims, quality improvement expenses,
Federal and State taxes and licensing or regulatory fees, and other
non-claims costs, as described in 45 CFR 158.170(b).
* * * * *
[[Page 41273]]
0
9. Amend Sec. 438.10 by--
0
a. Revising paragraphs (c)(3), (d)(2), (g)(2)(ix), and (h)(1)
introductory text;
0
b. Adding paragraph (h)(1)(ix);
0
c. Revising paragraph (h)(2)(iv);
0
d. Adding paragraph (h)(3)(iii); and
0
e. Revising paragraph (j).
The revisions and additions read as follows:
Sec. 438.10 Information requirements.
* * * * *
(c) * * *
(3) The State must operate a website that provides the content,
either directly or by linking to individual MCO, PIHP, PAHP, or PCCM
entity web pages, specified at Sec. 438.602(g) and elsewhere in this
part. States must:
(i) Include clear and easy to understand labels on documents and
links;
(ii) Include all content, either directly or by linking to
individual MCO, PIHP, PAHP, or PCCM entity websites, on one web page;
(iii) Verify no less than quarterly, the accurate function of the
website and the timeliness of the information presented; and
(iv) Explain that assistance in accessing the required information
on the website is available at no cost and include information on the
availability of oral interpretation in all languages, written
translation available in each prevalent non-English language, how to
request auxiliary aids and services, and a toll-free and TTY/TDY
telephone number.
* * * * *
(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 and experience surveys for enrollees must include taglines in
the prevalent non-English languages in the State, explaining the
availability of written translations or oral interpretation to
understand the information provided, information on how to request
auxiliary aids and services, 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.
* * * * *
(g) * * *
(2) * * *
(ix) Enrollee rights and responsibilities, including the elements
specified in Sec. 438.100 and, if applicable, Sec. 438.3(e)(2)(ii).
* * * * *
(h) * * *
(1) Each MCO, PIHP, PAHP, and when appropriate, the PCCM entity,
must make available in paper form upon request and searchable
electronic form, the following information about its network providers:
* * * * *
(ix) Whether the provider offers covered services via telehealth.
(2) * * *
(iv) Mental health and substance use disorder providers; and
* * * * *
(3) * * *
(iii) MCOs, PIHPs, or PAHPs must use the information received from
the State pursuant to Sec. 438.68(f)(1)(iii) to update provider
directories no later than the timeframes specified in paragraphs
(h)(3)(i) and (ii) of this section.
* * * * *
(j) Applicability. States will not be held out of compliance with
the requirements of paragraph (c)(3) of this section prior to the first
rating period for contracts with MCOs, PIHPs, or PAHPs beginning on or
after 2 years after July 9, 2024, so long as they comply with the
corresponding standard(s) codified in 42 CFR 438.10(c)(3) (effective as
of October 1, 2023). States will not be held out of compliance with the
requirements of paragraph (d)(2) of this section prior to the first
rating period for contracts with MCOs, PIHPs, or PAHPs beginning on or
after 3 years after the July 9, 2024, so long as they comply with the
corresponding standard(s) codified in 42 CFR 438.10(d)(2) (effective as
of October 1, 2023). States will not be held out of compliance with the
requirements of paragraph (h)(1) of this section prior to July 1, 2025,
so long as they comply with the corresponding standard(s) codified in
42 CFR 438.10(h)(1) (effective as of October 1, 2023). States will not
be held out of compliance with the requirements of paragraph (h)(1)(ix)
of this section prior to July 1, 2025. Paragraph (h)(3)(iii) of this
section applies to the first rating period for contracts with MCOs,
PIHPs and PAHPs beginning on or after 4 years after July 9, 2024.
* * * * *
0
10. Section 438.16 is added to read as follows:
Sec. 438.16 In lieu of services and settings (ILOS) requirements.
(a) Definitions. As used in this part, the following terms have the
indicated meanings:
Final ILOS cost percentage is the annual amount calculated, in
accordance with paragraph (c)(3) of this section, specific to each
managed care program that includes ILOS.
Projected ILOS cost percentage is the annual amount calculated, in
accordance with paragraph (c)(2) of this section, specific to each
managed care program that includes ILOS.
Summary report of actual MCO, PIHP, and PAHP ILOS costs is the
report calculated, in accordance with paragraph (c)(4) of this section,
specific to each managed care program that includes ILOS.
(b) General rule. An ILOS must be approvable as a service or
setting through a waiver under section 1915(c) of the Act or a State
plan amendment, including section 1905(a), 1915(i), or 1915(k) of the
Act.
(c) ILOS Cost Percentage and summary report of actual MCO, PIHP,
and PAHP ILOS costs.
(1) General rule. (i) The projected ILOS cost percentage calculated
as required in paragraph (c)(2) of this section may not exceed 5
percent and the final ILOS cost percentage calculated as required in
paragraph (c)(3) of this section may not exceed 5 percent.
(ii) The projected ILOS cost percentage, the final ILOS cost
percentage, and the summary report of actual MCO, PIHP, and PAHP ILOS
costs must be calculated on an annual basis and recalculated annually.
(iii) The projected ILOS cost percentage, the final ILOS cost
percentage, and the summary report of actual MCO, PIHP, and PAHP ILOS
costs must be certified by an actuary and developed in a reasonable and
appropriate manner consistent with generally accepted actuarial
principles and practices.
(2) Calculation of the projected ILOS cost percentage. The
projected ILOS cost percentage is the result of dividing the amount
determined in paragraph (c)(2)(i) of this section by the amount
determined in paragraph (c)(2)(ii) of this section.
(i) The portion of the total capitation payments that is
attributable to all ILOSs, excluding a short term stay in an IMD as
specified in Sec. 438.6(e), for each managed care program.
(ii) The projected total capitation payments for each managed care
program, all State directed payments in effect under Sec. 438.6(c),
and pass-through payments in effect under Sec. 438.6(d).
(3) Calculation of the final ILOS cost percentage. The final ILOS
cost percentage is the result of dividing the amount determined in
paragraph
[[Page 41274]]
(c)(3)(i) of this section by the amount determined in paragraph
(c)(3)(ii) of this section.
(i) The portion of the total capitation payments that is
attributable to all ILOSs, excluding a short term stay in an IMD as
specified in Sec. 438.6(e), for each managed care program.
(ii) The actual total capitation payments, defined at Sec. 438.2,
for each managed care program, all State directed payments in effect
under Sec. 438.6(c), and pass-through payments in effect under Sec.
438.6(d).
(4) Summary report of actual MCO, PIHP, and PAHP ILOS costs. The
State must submit to CMS a summary report of the actual MCO, PIHP, and
PAHP costs for delivering ILOSs based on the claims and encounter data
provided by the MCO(s), PIHP(s), and PAHP(s).
(5) CMS review of the projected ILOS cost percentage, the final
ILOS cost percentage and the summary report of actual MCO, PIHP, and
PAHP ILOS costs.
(i) The State must annually submit the projected ILOS cost
percentage to CMS for review as part of the rate certification required
in Sec. 438.7(a).
(ii) The State must submit the final ILOS cost percentage and the
summary report of actual MCO, PIHP, and PAHP ILOS costs annually to CMS
for review as a separate report concurrent with the rate certification
submission required in Sec. 438.7(a) for the rating period beginning 2
years after the completion of each 12-month rating period that includes
an ILOS.
(d) Documentation requirements--(1) State requirements. All States
that include an ILOS in an MCO, PIHP, or PAHP contract are required to
include, at minimum, the following:
(i) The name and definition of each ILOS;
(ii) The covered service or setting under the State plan for which
each ILOS is a medically appropriate and cost effective substitute;
(iii) The clinically defined target populations for which each ILOS
is determined to be medically appropriate and cost effective substitute
by the State;
(iv) The process by which a licensed network or MCO, PIHP, or PAHP
staff provider, determines and documents in the enrollee's records that
each identified ILOS is medically appropriate for the specific
enrollee;
(v) The enrollee rights and protections, as defined in Sec.
438.3(e)(2)(ii); and
(vi) A requirement that the MCO, PIHP, or PAHP will utilize
specific codes established by the State that identify each ILOS in
encounter data, as required under Sec. 438.242.
(2) Additional documentation requirements. A State with a projected
ILOS cost percentage that exceeds 1.5 percent is also required to
provide the following documentation concurrent with the contract
submission for review and approval by CMS under Sec. 438.3(a).
(i) A description of the process and supporting evidence the State
used to determine that each ILOS is a medically appropriate service or
setting for the clinically defined target population(s), consistent
with paragraph (d)(1)(iii) of this section.
(ii) A description of the process and supporting data the State
used to determine that each ILOS is a cost effective substitute for the
clinically defined target population(s), consistent with paragraph
(d)(1)(iii) of this section.
(3) Provision of additional information. At the request of CMS, the
State must provide additional information, whether part of the MCO,
PIHP, or PAHP contract, rate certification or supplemental materials,
if CMS determines that the requested information is pertinent to the
review and approval of a contract that includes ILOS.
(e) Monitoring, evaluation, and oversight. (1) Retrospective
evaluation. A State is required to submit at least one retrospective
evaluation of all ILOSs to CMS when the final ILOS cost percentage
exceeds 1.5 percent in any of the first 5 rating periods that each ILOS
is authorized and identified in the MCO, PIHP, or PAHP contract as
required under Sec. 438.3(e)(2)(iii) following the applicability date
in paragraph (f) of this section, or as required in paragraph (v) of
this section. The retrospective evaluation must:
(i) Be completed separately for each managed care program that
includes an ILOS and include all ILOSs in that managed care program.
(ii) Be completed using 5 years of accurate and validated data for
the ILOS with the basis of the data being the first 5 rating periods
that the ILOS is authorized and identified in the MCO, PIHP, or PAHP
contract as required under Sec. 438.3(e)(2)(iii). The State must
utilize these data to at least evaluate cost, utilization, access,
grievances and appeals, and quality of care for each ILOS.
(iii) Evaluate at least:
(A) The impact each ILOS had on utilization of State plan approved
services or settings, including any associated cost savings;
(B) Trends in MCO, PIHP, or PAHP and enrollee use of each ILOS;
(C) Whether encounter data supports the State's determination that
each ILOS is a medically appropriate and cost effective substitute for
the identified covered service and setting under the State plan or a
cost effective measure to reduce or prevent the future need to utilize
the covered service and setting under the State plan;
(D) The impact of each ILOS on quality of care;
(E) The final ILOS cost percentage for each year consistent with
the report in paragraph (c)(5)(ii) of this section with a declaration
of compliance with the allowable threshold in paragraph (c)(1)(i) of
this section;
(F) Appeals, grievances, and State fair hearings data, reported
separately, related to each ILOS, including volume, reason, resolution
status, and trends; and
(G) The impact each ILOS had on health equity efforts undertaken by
the State to mitigate health disparities.
(iv) The State must submit the retrospective evaluation to CMS no
later than 2 years after the later of either the completion of the
first 5 rating periods that the ILOS is authorized and identified in
the MCO, PIHP, or PAHP contract as required under Sec.
438.3(e)(2)(iii) or the rating period that has a final ILOS cost
percentage that exceeds 1.5 percent.
(v) CMS reserves the right to require the State to submit
additional retrospective evaluations to CMS.
(2) Oversight. Oversight for each ILOS must include the following:
(i) State notification requirement. The State must notify CMS
within 30 calendar days if:
(A) The State determines that an ILOS is no longer a medically
appropriate or cost effective substitute for the covered service or
setting under the State plan identified in the contract as required in
paragraph (d)(1)(ii) of this section; or
(B) The State identifies noncompliance with requirements in this
part.
(ii) CMS oversight process. If CMS determines that a State is out
of compliance with any requirement in this part or receives a State
notification in paragraph (e)(2)(i) of this section, CMS may require
the State to terminate the use of an ILOS.
(iii) Process for termination of ILOS. Within 30 calendar days of
receipt of a notice described in paragraph (e)(2)(iii)(A), (B), or (C)
of this section, the State must submit an ILOS transition plan to CMS
for review and approval.
(A) The notice the State provides to an MCO, PIHP, or PAHP of its
decision to terminate an ILOS;
[[Page 41275]]
(B) The notice an MCO, PIHP, or PAHP provides to the State of its
decision to cease offering an ILOS to its enrollees.
(C) The notice CMS provides to the State of its decision to require
the State to terminate an ILOS.
(iv) Requirements for an ILOS Transition Plan. The transition plan
must include at least the following:
(A) A process to notify enrollees of the termination of an ILOS
that they are currently receiving as expeditiously as the enrollee's
health condition requires.
(B) A transition of care policy, not to exceed 12 months, to
arrange for State plan services and settings to be provided timely and
with minimal disruption to care to any enrollee who is currently
receiving the ILOS that will be terminated. The State must make the
transition of care policy publicly available.
(C) An assurance the State will submit the modification of the MCO,
PIHP, or PAHP contract to remove the ILOS and submission of the
modified contracts to CMS as required in Sec. 438.3(a), and a
reasonable timeline for submitting the contract amendment.
(D) An assurance the State and its actuary will submit an
adjustment to the actuarially sound capitation rate, as needed, to
remove utilization and cost of the ILOS from capitation rates as
required in Sec. Sec. 438.4, 438.7(a) and 438.7(c)(2), and a
reasonable timeline for submitting the revised rate certification.
(f) Applicability date. Section 438.16 applies to the rating period
for contracts with MCOs, PIHPs, and PAHPs beginning on or after 60 days
following July 9, 2024.
0
11. Amend Sec. 438.66 by revising paragraphs (b)(4), (c)(5),
(e)(2)(vi) and (vii), (e)(3)(i), and (f) to read as follows:
Sec. 438.66 State monitoring requirements.
* * * * *
(b) * * *
(4) Enrollee materials, enrollee experience, and customer services,
including the activities of the beneficiary support system.
* * * * *
(c) * * *
(5) Results from an annual enrollee experience survey conducted by
the State (or as otherwise conducted when all enrollees are also in
affiliated Medicare Advantage dual eligible special needs plans subject
to the condition in Sec. 422.107(e)(1)(i)) and any provider
satisfaction survey conducted by the State or MCO, PIHP, or PAHP.
* * * * *
(e) * * *
(2) * * *
(vi) Availability and accessibility of covered services, including
any ILOS, within the MCO, PIHP, or PAHP contracts, including network
adequacy standards.
(vii) Evaluation of MCO, PIHP, or PAHP performance on quality
measures and results of an enrollee experience survey, including as
applicable, consumer report card, provider surveys, or other reasonable
measures of performance.
* * * * *
(3) * * *
(i) Posted on the website required under Sec. 438.10(c)(3) within
30 calendar days of submitting it to CMS.
* * * * *
(f) Applicability. States will not be held out of compliance with
the requirements of paragraphs (b)(4), (c)(5), and (e)(2)(vii) of this
section prior to the first rating period for contracts with MCOs,
PIHPs, or PAHPs beginning on or after 3 years after July 9, 2024, so
long as they comply with the corresponding standard(s) 42 CFR 438.66
(effective as of October 1, 2023).
0
12. Amend Sec. 438.68 by--
0
a. Revising paragraphs (b)(1) introductory text, (b)(1)(iii), (d)(1)
and (2), and (e); and
0
b. Adding paragraphs (f) through (h).
The revisions and additions read as follows:
Sec. 438.68 Network adequacy standards.
* * * * *
(b) * * *
(1) Provider types. At a minimum, a State must develop a
quantitative network adequacy standard, other than appointment wait
times, for the following provider types, if covered under the contract:
* * * * *
(iii) Mental health and substance use disorder, adult and
pediatric.
* * * * *
(d) * * *
(1) To the extent the State permits an exception to any of the
network standards developed under this section, the standard by which
the exception will be evaluated and approved must:
(i) Be specified in the MCO, PIHP, or PAHP contract.
(ii) Be based, at a minimum, on the number of providers in that
specialty practicing in the MCO, PIHP, or PAHP service area.
(iii) Include consideration of the payment rates offered by the
MCO, PIHP, or PAHP to the provider type or for the service type for
which an exception is being requested.
(2) States that grant an exception in accordance with paragraph
(d)(1) of this section to an MCO, PIHP, or PAHP must monitor enrollee
access to that provider type or service on an ongoing basis and include
the findings to CMS in the managed care program assessment report
required under Sec. 438.66(e).
(e) Appointment wait time standards. States must establish and
enforce appointment wait time standards.
(1) Routine appointments. Standards must be established for routine
appointments for the following services and within the specified
limits:
(i) If covered in the MCO's, PIHP's, or PAHP's contract, outpatient
mental health and substance use disorder, adult and pediatric, within
State-established timeframes but no longer than 10 business days from
the date of request.
(ii) If covered in the MCO's, PIHP's, or PAHP's contract, primary
care, adult and pediatric, within State-established timeframes but no
longer than 15 business days from the date of request.
(iii) If covered in the MCO's, PIHP's, or PAHP's contract,
obstetrics and gynecological within State-established timeframes but no
longer than 15 business days from the date of request.
(iv) State-selected, other than those listed in paragraphs
(e)(1)(i) through (iii) of this section and covered in the MCO's,
PIHP's, or PAHP's contract, chosen in an evidence-based manner within
State-established timeframes.
(2) Minimum compliance. MCOs, PIHPs, and PAHPs will be deemed
compliant with the standards established in paragraph (e)(1) of this
section when secret shopper results, consistent with paragraph (f)(2)
of this section, reflect a rate of appointment availability that meets
the standards established at paragraph (e)(1)(i) through (iv) of this
section of at least 90 percent.
(3) Selection of additional types of services. After consulting
with States and other interested parties and providing public notice
and opportunity to comment, CMS may select additional types of services
to be added to paragraph (e)(1) of this section.
(f) Secret shopper surveys. States must contract with an entity,
independent of the State Medicaid agency and any of its contracted
MCOs, PIHPs and PAHPs subject to the survey, to conduct annual secret
shopper surveys of each MCO's, PIHP's, and PAHP's compliance with the
provider directory requirements in Sec. 438.10(h) as specified in
paragraph (f)(1) of this section and appointment wait time requirements
as specified in paragraph (f)(2) of this section.
(1) Provider directories. (i) A secret shopper survey must be
conducted to determine the accuracy of the information specified in
paragraph
[[Page 41276]]
(f)(1)(ii) of this section in each MCO's, PIHP's, and PAHP's most
current electronic provider directories, as required at Sec.
438.10(h), for the following provider types:
(A) Primary care providers, if they are included in the MCO's,
PIHP's, or PAHP's provider directory;
(B) Obstetric and gynecological providers, if they are included in
the MCO's, PIHP's, or PAHP's provider directory;
(C) Outpatient mental health and substance use disorder providers,
if they are included in the MCO's, PIHP's, or PAHP's provider
directory; and
(D) The provider type that provides the service type chosen by the
State in paragraph (e)(1)(iv) of this section.
(ii) A secret shopper survey must assess the accuracy of the
information in each MCO's, PIHP's, and PAHP's most current electronic
provider directories for at least:
(A) The active network status with the MCO, PIHP, or PAHP;
(B) The street address(es) as required at Sec. 438.10(h)(1)(ii);
(C) The telephone number(s) as required at Sec. 438.10(h)(1)(iii);
and
(D) Whether the provider is accepting new enrollees as required at
Sec. 438.10(h)(1)(vi).
(iii) States must receive information, sufficient to facilitate
correction by the MCO, PIHP, or PAHP, on errors in directory data
identified in secret shopper surveys from the entity conducting the
secret shopper survey no later than 3 business days from the day the
error is identified by the entity conducting the secret shopper survey.
(iv) States must send information required in paragraph (f)(1)(iii)
of this section to the applicable MCO, PIHP, or PAHP no later than 3
business days from receipt.
(2) Timely appointment access. A secret shopper survey must be used
to determine each MCO's, PIHP's, and PAHP's rate of network compliance
with the appointment wait time standards in paragraph (e)(1) of this
section.
(i) After consulting with States and other interested parties and
providing public notice and opportunity to comment, CMS may select
additional types of appointments to be added to a secret shopper
survey.
(ii) Appointments offered via telehealth can only be counted toward
compliance with the appointment wait time standards in paragraph (e)(1)
of this section if the provider being surveyed also offers in-person
appointments to the MCO's, PIHP's, or PAHP's enrollees and must be
identified separately from in-person appointments in survey results.
(3) Independence. An entity will be considered independent of the
State as specified in paragraph (f)(3)(i) of this section and
independent of the MCOs, PIHPs, or PAHPs subject to the surveys as
specified in paragraph (f)(3)(ii) of this section.
(i) An entity will be considered independent of the State if it is
not part of the State Medicaid agency.
(ii) An entity will be considered independent of an MCO, PIHP, or
PAHP subject to the secret shopper surveys if the entity is not an MCO,
PIHP, or PAHP, is not owned or controlled by any of the MCOs, PIHPs, or
PAHPs subject to the surveys, and does not own or control any of the
MCOs, PIHPs, or PAHPs subject to the surveys.
(4) Methodological standards. Secret shopper surveys required in
this paragraph must:
(i) Use a random sample;
(ii) Include all areas of the State covered by the MCO's, PIHP's,
or PAHP's contract; and
(iii) For secret shopper surveys required in paragraph (f)(2) of
this section for appointment wait time standards, be completed for a
statistically valid sample of providers.
(5) Results reporting. Results of the secret shopper surveys
conducted pursuant to paragraphs (f)(1) and (2) of this section must be
analyzed, summarized, and:
(i) Reported to CMS using the content, form, and submission times
as specified at Sec. 438.207(d); and
(ii) Posted on the State's website required at Sec. 438.10(c)(3)
within 30 calendar days of submission to CMS.
(g) Publication of network adequacy standards. States must publish
the standards developed in accordance with paragraphs (b)(1) and (2),
and (e) of this section on the website required by Sec. 438.10(c)(3).
Upon request, network adequacy standards must also be made available at
no cost to enrollees with disabilities in alternate formats or through
the provision of auxiliary aids and services.
(h) Applicability. States will not be held out of compliance with
the requirements of paragraph (b)(1) and of this section prior to the
first rating period for contracts with MCOs, PIHPs, or PAHPs beginning
on or after 3 years after July 9, 2024, so long as they comply with the
corresponding standard(s) codified in 42 CFR 438.68 (b) (effective as
of October 1, 2023). Paragraph (d)(1)(iii) of this section applies to
the first rating period for contracts with MCOs, PIHPs, or PAHPs
beginning on or after 2 years after July 9, 2024. States will not be
held out of compliance with the requirements of paragraph (d)(2) and of
this section prior to the first rating period for contracts with MCOs,
PIHPs, or PAHPs beginning on or after 2 years after July 9, 2024, so
long as they comply with the corresponding standard(s) codified in 42
CFR 438.68 (d)(2) (effective as of October 1, 2023). Paragraph (e) of
this section applies to the first rating period for contracts with
MCOs, PIHPs, or PAHPs beginning on or after 3 years after July 9, 2024.
Paragraph (f) of this section applies to the first rating period for
contracts with MCOs, PIHPs, or PAHPs beginning on or after 4 years
after July 9, 2024. States will not be held out of compliance with the
requirements of paragraph (g) of this section prior to the first rating
period that begins on or after 3 years after July 9, 2024, so long as
they comply with the corresponding standard(s) codified in paragraph 42
CFR 438.68 (g) (effective as of October 1, 2023).
0
13. Amend Sec. 438.74 by revising paragraph (a) to read as follows:
Sec. 438.74 State oversight of the minimum MLR requirement.
(a) State reporting requirement. (1) The State must annually submit
to CMS a summary description of each report(s) received from the
MCO(s), PIHP(s), and PAHP(s) under contract with the State, according
to Sec. 438.8(k), with the rate certification required in Sec. 438.7.
(2) The summary description must be provided for each MCO, PIHP, or
PAHP under contract with the State and must include, at a minimum, the
amount of the numerator, the amount of the denominator, the MLR
percentage achieved, the number of member months, and any remittances
owed by each MCO, PIHP, or PAHP for that MLR reporting year.
* * * * *
0
14. Amend Sec. 438.206 by revising paragraphs (c)(1)(i) and (d) to
read as follows:
Sec. 438.206 Availability of services.
* * * * *
(c) * * *
(1) * * *
(i) Meet and require its network providers to meet State standards
for timely access to care and services taking into account the urgency
of the need for services, as well as appointment wait times specified
in Sec. 438.68(e).
* * * * *
(d) Applicability date. States will not be held out of compliance
with the requirements of paragraphs (c)(1)(i) of this section prior to
the first rating
[[Page 41277]]
period that begins on or after 3 years after July 9, 2024, so long as
they comply with the corresponding standard(s) codified in 42 CFR
438.206(c)(1)(i) (effective as of October 1, 2023).
0
15. Amend Sec. 438.207--
0
a. In paragraph (b)(1), by removing the ``.'' at the end of the
paragraph and adding in its place ``;''.
0
b. In paragraph (b)(2), by removing the ``.'' at the end of the
paragraph and adding in its place ``; and'';
0
c. By adding paragraph (b)(3);
0
d. By revising paragraphs (d) through (f); and
0
e. By adding paragraph (g).
The revisions and additions read as follows:
Sec. 438.207 Assurances of adequate capacity and services.
* * * * *
(b) * * *
(3) Except as specified in paragraphs (b)(3)(iii) and (iv) of this
section and if covered by the MCO's, PIHP's, or PAHP's contract,
provides an annual payment analysis using paid claims data from the
immediate prior rating period that demonstrates each MCO's, PIHP's, or
PAHP's level of payment as specified in paragraphs (b)(3)(i) and (ii)
of this section.
(i) The payment analysis must provide the total amount paid for
evaluation and management current procedural terminology codes in the
paid claims data from the immediate prior rating period for primary
care, obstetrical and gynecological, mental health, and substance use
disorder services, as well as the percentage that results from dividing
the total amount paid by the published Medicare payment rate for the
same services.
(A) A separate total and percentage must be reported for primary
care, obstetrics and gynecology, mental health, and substance use
disorder services; and
(B) If the percentage differs between adult and pediatric services,
the percentages must be reported separately.
(ii) For homemaker services, home health aide services, personal
care services, and habilitation services, the payment analysis must
provide the total amount paid and the percentage that results from
dividing the total amount paid by the amount the State's Medicaid FFS
program would have paid for the same services.
(A) A separate total and percentage must be reported for homemaker
services, home health aide services, personal care services, and
habilitation services; and
(B) If the percentage differs between adult and pediatric services,
the percentages must be reported separately.
(iii) Payments by MCOs, PIHPS, and PAHPs for the services specified
in Sec. 438.207(b)(3)(i) and (ii) for which the MCO, PIHP, or PAHP is
not the primary payer are excluded from the analysis required in this
paragraph.
(iv) Services furnished by a Federally-qualified health center as
defined in section 1905(l)(2) and services furnished by a rural health
clinic as defined in section 1905(l)(1) are excluded from the analysis
required in this paragraph.
* * * * *
(d) State review and certification to CMS. After the State reviews
the documentation submitted by the MCO, PIHP, or PAHP as specified in
paragraph (b) of this section and the secret shopper evaluation results
as required at Sec. 438.68(f), the State must submit an assurance of
compliance to CMS, in the format prescribed by CMS, that the MCO, PIHP,
or PAHP meets the State's requirements for availability of services, as
set forth in Sec. Sec. 438.68 and 438.206.
(1) The submission to CMS must include documentation of an analysis
that supports the assurance of the adequacy of the network for each
contracted MCO, PIHP or PAHP related to its provider network.
(2) The analysis in paragraph (d)(1) of this section must include
the payment analysis submitted by each MCO, PIHP, or PAHP, as required
in paragraph (b)(3) of this section, and contain:
(i) The data provided by each MCO, PIHP, and PAHP in paragraph
(b)(3) of this section; and
(ii) A State level payment percentage for each service type
specified in paragraphs (b)(3)(i) and (ii) of this section produced by
using the number of member months for the applicable rating period to
weight each MCO's, PIHP's, or PAHP's reported percentages, as required
in paragraph (b)(3) of this section.
(3) States must submit the assurance of compliance required in
paragraph (d) of this section as specified in paragraphs (i) through
(iii) of this section and post the report on the State's website
required in Sec. 438.10(c)(3) within 30 calendar days of submission to
CMS.
(i) Sufficiently in advance to enable CMS to make a determination
that the contract entered into as specified at Sec. 438.207(c)(1) is
approved under Sec. 438.3(a).
(ii) On an annual basis and no later than 180 calendar days after
each rating period.
(iii) At any time there has been a significant change as specified
in paragraph (c)(3) of this section and with the submission of the
associated contract, as required at Sec. 438.3(a).
(e) CMS's right to inspect documentation. The State must make
available to CMS, upon request, all documentation collected by the
State from the MCO, PIHP, or PAHP, as well as documentation from all
secret shopper surveys required at Sec. 438.68(f).
(f) Remedy plans to improve access. (1) When the State, MCO, PIHP,
PAHP, or CMS identifies an area in which an MCO's, PIHP's, or PAHP's
access to care under the access standards in this part could be
improved, including the standards at Sec. Sec. 438.68 and 438.206, the
State must:
(i) Submit to CMS for approval a remedy plan as specified in
paragraph (f)(ii) of this section no later than 90 calendar days
following the date that the State becomes aware of an MCO's, PIHP's, or
PAHP's access issue;
(ii) Develop a remedy plan that addresses the identified access
issue within 12 months and that identifies specific steps with
timelines for implementation and completion, and responsible parties.
State's and MCO's, PIHP's, or PAHP's actions may include a variety of
approaches, including but not limited to: increasing payment rates to
providers, improving outreach and problem resolution to providers,
reducing barriers to provider credentialing and contracting, providing
for improved or expanded use of telehealth, and improving the
timeliness and accuracy of processes such as claim payment and prior
authorization;
(iii) Ensure that improvements in access are measurable and
sustainable; and
(iv) Submit quarterly progress updates to CMS on implementation of
the remedy plan.
(2) If the remedy plan required in paragraph (f)(1) of this section
does not result in addressing the MCO's, PIHP's, or PAHP's access issue
by improving access within 12 months, CMS may require the State to
continue the remedy plan for another 12 months and may require revision
to the remedy plan required in paragraph (f)(1) of this section.
(g) Applicability date. Paragraphs (b)(3) and (d)(2) of this
section apply to the first rating period for contracts with MCOs,
PIHPs, or PAHPs beginning on or after 2 years after July 9, 2024.
Paragraph (d)(3) of this section applies to the first rating period for
contracts with MCOs, PIHPs, or PAHPs beginning on or after 1 year after
July 9, 2024. States will not be held out of compliance with the
requirements of paragraph (e) of this section prior to the
[[Page 41278]]
rating period for contracts with MCOs, PIHPs, or PAHPs beginning on or
after 4 year after July 9, 2024, so long as they comply with the
corresponding standard(s) codified in 42 CFR 438.207 (e) (effective as
of October 1, 2023) Paragraph (f) of this section applies to the first
rating period for contracts with MCOs, PIHPs, or PAHPs beginning on or
after 4 years after July 9, 2024.
0
16. Amend Sec. 438.214 by revising paragraph (b)(1) and adding
paragraph (d)(2) to read as follows:
Sec. 438.214 Provider selection.
* * * * *
(b) * * *
(1) Each State must establish a uniform credentialing and
recredentialing policy that addresses acute, primary, mental health,
substance use disorders, and LTSS providers, as appropriate, and
requires each MCO, PIHP and PAHP to follow those policies.
* * * * *
(d) * * *
(2) States must ensure through its contracts that MCOs, PIHPs, and
PAHPs terminate any providers of services or persons terminated (as
described in section 1902(kk)(8) of the Social Security Act) from
participation under this title, title XVIII, or title XXI from
participating as a provider in any network.
* * * * *
0
17. Amend Sec. 438.310 by revising paragraphs (b)(5) introductory
text, (c)(2), and (d) to read as follows:
Sec. 438.310 Basis, scope, and applicability.
* * * * *
(b) * * *
(5) Requirements for annual external quality reviews of each
contracting MCO, PIHP, PAHP including--
* * * * *
(c) * * *
(2) The provisions of Sec. 438.330(b)(2) and (3), (c), and (e),
and Sec. 438.340 apply to States contracting with PCCM entities whose
contracts with the State provide for shared savings, incentive payments
or other financial reward for the PCCM entity for improved quality
outcomes.
* * * * *
(d) Applicability dates. States will not be held out of compliance
with the following requirements of this subpart prior to the dates
noted below so long as they comply with the corresponding standard(s)
in 42 CFR part 438 contained in the 42 CFR parts 430 to 481, edition
revised as of July 9, 2024:
(1) States must comply with updates to Sec. 438.340(c) no later
than 1 year from July 9, 2024.
(2) States must comply with updates to Sec. Sec. 438.358(a)(3),
438.358(b)(1) and 438.364(c)(2)(iii) no later than December 31, 2025.
(3) States must comply with Sec. 438.364(a)(2)(iii) no later 1
year from the issuance of the associated protocol.
0
18. Amend Sec. 438.330 by revising paragraph (d)(4) to read as
follows:
Sec. 438.330 Quality assessment and performance improvement program.
* * * * *
(d) * * *
(4) The State may permit an MCO, PIHP, or PAHP exclusively serving
dual eligibles to substitute an MA organization chronic care
improvement program conducted under Sec. 422.152(c) of this chapter
for one or more of the performance improvement projects otherwise
required under this section.
* * * * *
Sec. 438.334 [Removed and reserved]
0
19. Section 438.334 is removed and reserved.
0
20. Amend Sec. 438.340 by revising paragraphs (b)(4), (c)(1)
introductory text, (c)(2)(ii), and (c)(3) to read as follows:
Sec. 438.340 Managed care State quality strategy.
* * * * *
(b) * * *
(4) Arrangements for annual, external independent reviews, in
accordance with Sec. 438.350, of the quality outcomes and timeliness
of, and access to, the services covered under each MCO, PIHP, and PAHP
contract.
* * * * *
(c) * * *
(1) Make the strategy available for public comment before
submitting the strategy to CMS for review in accordance with paragraph
(c)(3) of this section, including:
* * * * *
(2) * * *
(ii) The State must make the results of the review, including the
evaluation conducted pursuant to paragraph (c)(2)(i) of this section,
available on the website required under Sec. 438.10(c)(3).
* * * * *
(3) Prior to adopting as final, submit to CMS the following:
(i) A copy of the initial strategy for CMS comment and feedback.
(ii) A copy of the strategy--
(A) Every 3 years following the review in paragraph (c)(2) of this
section;
(B) Whenever significant changes, as defined in the State's quality
strategy per paragraph (b)(10) of this section, are made to the
document;
(C) Whenever significant changes occur within the State's Medicaid
program.
* * * * *
0
21. Amend Sec. 438.350 by revising the introductory text and paragraph
(a) to read as follows:
Sec. 438.350 External quality review.
Each State that contracts with MCOs, PIHPs, or PAHPs must ensure
that--
(a) Except as provided in Sec. 438.362, a qualified EQRO performs
an annual EQR for each such contracting MCO, PIHP, or PAHP.
* * * * *
0
22. Amend Sec. 438.354 by revising paragraph (c)(2)(iii) to read as
follows:
Sec. 438.354 Qualifications of external quality review organizations.
* * * * *
(c) * * *
(2) * * *
(iii) Conduct, on the State's behalf, ongoing Medicaid managed care
program operations related to oversight of the quality of MCO, PIHP,
PAHP, or PCCM entity (described in Sec. 438.310(c)(2)) services that
it will review as an EQRO, except for the related activities specified
in Sec. 438.358;
* * * * *
0
23. Amend Sec. 438.358 by--
0
a. Revising paragraph (a)(1);
0
b. Adding paragraph (a)(3);
0
c. Revising and republishing paragraph (b)(1);
0
d. Revising paragraphs (b)(2); and
0
e. Revising and republishing paragraph (c).
The revisions and addition read as follows:
Sec. 438.358 Activities related to external quality review.
(a) * * *
(1) The State, its agent that is not an MCO, PIHP, or PAHP or an
EQRO may perform the mandatory and optional EQR-related activities in
this section.
* * * * *
(3) For the EQR-related activities described in paragraph (b)(1) of
this section (except paragraph (b)(1)(iii) of this section), the review
period begins on the first day of the most recently concluded contract
year or calendar year, whichever is nearest to the date of the EQR-
related activity and is 12 months in duration.
(b) * * *
(1) For each MCO, PIHP, or PAHP the following EQR-related
activities must be performed in the 12 months preceding the
finalization of the annual report:
(i) Validation of performance improvement projects required in
[[Page 41279]]
accordance with Sec. 438.330(b)(1) that were underway during the EQR
review period per paragraph (a)(3) of this section.
(ii) Validation of MCO, PIHP, or PAHP performance measures required
in accordance with Sec. 438.330(b)(2) or MCO, PIHP, or PAHP
performance measures calculated by the State during the EQR review
period described in paragraph (a)(3) of this section.
(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.
(iv) Validation of MCO, PIHP, or PAHP network adequacy during the
EQR review period per paragraph (a)(3) of this section to comply with
requirements set forth in Sec. 438.68 and, if the State enrolls
Indians in the MCO, PIHP, or PAHP, Sec. 438.14(b)(1).
(2) For each PCCM entity (described in Sec. 438.310(c)(2)), the
EQR-related activities in paragraphs (b)(1)(ii) and (iii) of this
section may be performed.
(c) Optional activities. For each MCO, PIHP, PAHP, and PCCM entity
(described in Sec. 438.310(c)(2)), the following activities may be
performed:
(1) Validation of encounter data reported by an MCO, PIHP, PAHP, or
PCCM entity (described in Sec. 438.310(c)(2)).
(2) Administration or validation of consumer or provider surveys of
quality of care.
(3) Calculation of performance measures in addition to those
reported by an MCO, PIHP, or PAHP and validated by an EQRO in
accordance with paragraph (b)(1)(ii) of this section.
(4) Conduct of performance improvement projects in addition to
those conducted by an MCO, PIHP or PAHP and/or validated by an EQRO in
accordance with paragraph (b)(1)(i) of this section.
(5) Conduct of studies on quality that focus on a particular aspect
of clinical or nonclinical services at a point in time.
(6) Assist with the quality rating of MCOs, PIHPs, and PAHPs
consistent with 42 CFR part 438, subpart G.
(7) Assist with evaluations required under Sec. Sec. 438.16(e)(1),
438.340(c)(2)(i), and 438.6(c)(2)(iv) and (v) pertaining to outcomes,
quality, or access to health care services.
* * * * *
0
24. Amend Sec. 438.360 by revising paragraph (a)(1) to read as
follows:
Sec. 438.360 Nonduplication of mandatory activities with Medicare or
accreditation review.
(a) * * *
(1) The MCO, PIHP, or PAHP is in compliance with the applicable
Medicare Advantage standards established by CMS, as determined by CMS
or its contractor for Medicare, or has obtained accreditation from a
private accrediting organization recognized by CMS;
* * * * *
0
25. Amend Sec. 438.362 by revising and republishing paragraph (b)(2)
to read as follows:
Sec. 438.362 Exemption from external quality review.
* * * * *
(b) * * *
(2) Medicare information from a private accrediting organization.
(i) If an exempted MCO has been reviewed by a private accrediting
organization, the State must require the MCO to provide the State with
a copy of all findings pertaining to its most recent accreditation
review if that review has been used to fulfill certain requirements for
Medicare external review under subpart D of part 422 of this chapter.
(ii) These findings must include, but need not be limited to,
accreditation review results of evaluation of compliance with
individual accreditation standards, noted deficiencies, corrective
action plans, and summaries of unmet accreditation requirements.
* * * * *
0
26. Amend Sec. 438.364 by--
0
a. Revising paragraphs (a)(1), (a)(2)(iii), (a)(3) through (6), and
(c)(2)(i) and (ii); and
0
b. Adding paragraph (c)(2)(iii).
The revisions and addition read as follows:
Sec. 438.364 External quality review results.
(a) * * *
(1) A description of the manner in which the data from all
activities conducted in accordance with Sec. 438.358 were aggregated
and analyzed, and conclusions were drawn as to the quality, timeliness,
and access to the care furnished by the MCO, PIHP, or PAHP.
(2) * * *
(iii) The data and a description of data obtained, including
validated performance measurement, any outcomes data and results from
quantitative assessments, for each activity conducted in accordance
with Sec. 438.358(b)(1)(i), (ii) and (iv) of this subpart; and
* * * * *
(3) An assessment of each MCO's, PIHP's, or PAHP's-strengths and
weaknesses for the quality, timeliness, and access to health care
services furnished to Medicaid beneficiaries.
(4) Recommendations for improving the quality of health care
services furnished by each MCO, PIHP, or PAHP, including how the State
can target goals and objectives in the quality strategy, under Sec.
438.340, to better support improvement in the quality, timeliness, and
access to health care services furnished to Medicaid beneficiaries.
(5) Methodologically appropriate, comparative information about all
MCOs, PIHPs, or PAHPs, consistent with guidance included in the EQR
protocols issued in accordance with Sec. 438.352(e).
(6) An assessment of the degree to which each MCO, PIHP, or PAHP
has addressed effectively the recommendations for quality improvement
made by the EQRO during the previous year's EQR.
* * * * *
(c) * * *
(2) * * *
(i) Post the most recent copy of the annual EQR technical report on
the website required-under Sec. 438.10(c)(3) by April 30th of each
year and notify CMS, in a form and manner determined by CMS, within 14
calendar days of the Web posting.
(ii) Provide printed or electronic copies of the information
specified in paragraph (a) of this section, upon request, to interested
parties such as participating health care providers, enrollees and
potential enrollees of the MCO, PIHP, or PAHP, beneficiary advocacy
groups, and members of the general public.
(iii) Maintain at least the previous 5 years of EQR technical
reports on the on the website required under Sec. 438.10(c)(3).
* * * * *
0
27. Add subpart G to part 438 to read as follows:
Subpart G--Medicaid Managed Care Quality Rating System
Sec.
438.500 Definitions.
438.505 General rule and applicability.
438.510 Mandatory QRS measure set for Medicaid managed care quality
rating system.
[[Page 41280]]
438.515 Medicaid managed care quality rating system methodology.
438.520 website display.
438.525 [Reserved]
438.530 Annual technical resource manual.
438.535 Annual reporting.
Sec. 438.500 Definitions.
(a) Definitions. As used in this subpart, the following terms have
the indicated meanings:
Measurement period means the period for which data are collected
for a measure or the performance period that a measure covers.
Measurement year means the first calendar year and each calendar
year thereafter for which a full calendar year of claims and encounter
data necessary to calculate a measure are available.
Medicaid managed care quality rating system framework (QRS
framework) means the mandatory measure set identified by CMS in the
Medicaid and CHIP managed care quality rating system technical resource
manual described in Sec. 438.530, the methodology for calculating
quality ratings described in Sec. 438.515, and the website display
described in Sec. 438.520 of this subpart.
Medicare Advantage and Part D 5-Star Rating System (MA and Part D
quality rating system) means the rating system described in subpart D
of parts 422 and 423 of this chapter.
Qualified health plan quality rating system (QHP quality rating
system) means the health plan quality rating system developed in
accordance with 45 CFR 156.1120.
Quality rating means the numeric or other value of a quality
measure or an assigned indicator that data for the measure is not
available.
Technical resource manual means the guidance described in Sec.
438.530.
Validation means the review of information, data, and procedures to
determine the extent to which they are accurate, reliable, free from
bias, and in accord with standards for data collection and analysis.
Sec. 438.505 General rule and applicability.
(a) General rule. As part of its quality assessment and improvement
strategy for its managed care program, each State contracting with an
applicable managed care plan, as described in paragraph (b) of this
section, to furnish services to Medicaid beneficiaries--
(1)(i) Must adopt the QRS framework developed by CMS, which must
implement either the MAC QRS methodology developed by CMS or an
alternative MAC QRS rating methodology approved by CMS in accordance
with Sec. 438.515(c) of this subpart.
(ii) May, in addition to the MAC QRS framework adopted under
paragraph (a)(1)(i) of this section, implement website features in
addition to those identified in Sec. 438.520(a), as described in Sec.
438.520(c).
(2) Must implement such managed care quality rating system by the
end of the fourth calendar year following July 9, 2024, unless
otherwise specified in this subpart.
(3) Must use the State's beneficiary support system implemented
under Sec. 438.71 to provide the services identified at Sec.
438.71(b)(1)(i) and (ii) to beneficiaries, enrollees, or both seeking
assistance using the managed care quality rating system implemented by
the State under this subpart.
(b) Applicability. The provisions of this subpart apply to States
contracting with MCOs, PIHPs, and PAHPs for the delivery of services
covered under Medicaid. The provisions of this subpart do not apply to
Medicare Advantage Dual Eligible Special Needs Plans that contract with
States for only Medicaid coverage of Medicare cost sharing.
(c) Continued alignment. To maintain the QRS framework, CMS aligns
the mandatory measure set and methodology described in Sec. Sec.
438.510 and 438.515 of this subpart, to the extent appropriate, with
the qualified health plan quality rating system developed in accordance
with 45 CFR 156.1120, the MA and Part D quality rating system, and
other similar CMS quality measurement and rating initiatives.
Sec. 438.510 Mandatory QRS measure set for Medicaid managed care
quality rating system.
(a) Measures required. The quality rating system implemented by the
State--
(1) Must include the measures that are:
(i) In the mandatory QRS measure set identified and described by
CMS in the Medicaid and CHIP managed care quality rating system
technical resource manual, and
(ii) Applicable to the State because the measures assess a service
or action covered by a managed care program established by the State.
(2) May include other measures identified by the State as provided
in Sec. 438.520(c)(1).
(b) Subregulatory process to update mandatory measure set. Subject
to paragraph (d) of this section, CMS will--
(1) At least every other year, engage with States and other
interested parties (such as State officials, measure experts, health
plans, beneficiary advocates, tribal organizations, health plan
associations, and external quality review organizations) to evaluate
the current mandatory measure set and make recommendations to CMS to
add, remove or update existing measures based on the criteria and
standards in paragraph (c) of this section; and
(2) Provide public notice and opportunity to comment through a call
letter (or similar subregulatory process using written guidance) on any
planned modifications to the mandatory measure set following the
engagement described in paragraph (b)(1) of this section.
(c) Standards for adding mandatory measures. Based on available
relevant information, including the input received during the process
described in paragraph (b) of this section, CMS will add a measure in
the mandatory measure set when each of the standards described in
(c)(1) through (3) of this section are met.
(1) The measure meets at least 5 of the following criteria:
(i) Is meaningful and useful for beneficiaries or their caregivers
when choosing a managed care plan;
(ii) Aligns, to the extent appropriate, with other CMS programs
described in Sec. 438.505(c);
(iii) Measures health plan performance in at least one of the
following areas: customer experience, access to services, health
outcomes, quality of care, health plan administration, and health
equity;
(iv) Presents an opportunity for managed care plans to influence
their performance on the measure;
(v) Is based on data that are available without undue burden on
States, managed care plans, and providers such that it is feasible to
report by many States, managed care plans, and providers;
(vi) Demonstrates scientific acceptability, meaning that the
measure, as specified, produces consistent and credible results;
(2) The proposed measure contributes to balanced representation of
beneficiary subpopulations, age groups, health conditions, services,
and performance areas within a concise mandatory measure set, and
(3) The burdens associated with including the measure does not
outweigh the benefits to the overall quality rating system framework of
including the new measure based on the criteria listed in paragraph
(c)(1) of this section.
(4) When making the determinations required under paragraphs (c)(2)
and (3) of this section, to add, remove, or update a measure, CMS may
consider the measure set as a whole, each
[[Page 41281]]
specific measure individually, or a comparison of measures that assess
similar aspects of care or performance areas.
(d) Removing mandatory measures. CMS may remove existing mandatory
measures from the mandatory measure set if--
(1) After following the process described in paragraph (b) of this
section, CMS determines that the measure no longer meets the standards
described in paragraph (c) of this section;
(2) The measure steward (other than CMS) retires or stops
maintaining a measure;
(3) CMS determines that the clinical guidelines associated with the
specifications of the measure change such that the specifications no
longer align with positive health outcomes; or
(4) CMS determines that the measure shows low statistical
reliability under the standard identified in Sec. Sec. 422.164(e) and
423.184(e) of this chapter.
(e) Updating existing mandatory measures. CMS will modify the
existing mandatory measures that undergo measure technical
specifications updates as follows--
(1) Non-substantive updates. CMS will update changes to the
technical specifications for a measure made by the measure steward;
such changes will be in the technical resource manual issued under
paragraph (f) of this section and Sec. 438.530. Examples of non-
substantive updates include those that:
(i) Narrow the denominator or population covered by the measure.
(ii) Do not meaningfully impact the numerator or denominator of the
measure.
(iii) Update the clinical codes with no change in the target
population or the intent of the measure.
(iv) Provide additional clarifications such as:
(A) Adding additional tests that would meet the numerator
requirements;
(B) Clarifying documentation requirements;
(C) Adding additional instructions to identify services or
procedures; or
(D) Adding alternative data sources or expanding of modes of data
collection to calculate a measure.
(2) Substantive updates. CMS may adopt substantive updates to a
mandatory measure not subject to paragraphs (e)(1)(i) through (iv) of
this section only after following the process specified in paragraph
(b) of this section.
(f) Finalization and display of mandatory measures and updates. CMS
will finalize modifications to the mandatory measure set and the
timeline for State implementation of such modifications in the
technical resource manual. For new or substantively updated measures,
CMS will provide each State with at least 2 calendar years from the
start of the measurement year immediately following the release of the
annual technical resource manual in which the modification to the
mandatory measure set is finalized to display measurement results and
ratings using the new or updated measure(s).
Sec. 438.515 Medicaid managed care quality rating system methodology.
(a) Quality ratings. For each measurement year, the State must
ensure that--
(1) The data necessary to calculate quality ratings for each
quality measure described in Sec. 438.510(a)(1) of this subpart are
collected from:
(i) The State's contracted managed care plans that have 500 or more
enrollees from the State's Medicaid program, to be calculated as
described by CMS in the technical resource manual; and
(ii) Sources of Medicare data (including Medicare Advantage plans,
Medicare providers, and CMS), the State's Medicaid fee-for-service
providers, or both if all data necessary to calculate a measure cannot
be provided by the managed care plans described in paragraph (a)(1) of
this section and such data are available for collection by the State to
the extent feasible without undue burden.
(2) Validation of data collected under paragraph (a)(1) of this
section is performed, including all Medicaid managed care data and, to
the extent feasible without undue burden, all data from sources
described in paragraph (a)(1)(ii) of this section. Validation of data
must not be performed by any entity with a conflict of interest,
including managed care plans.
(3) A measure performance rate for each managed care plan whose
contract covers a service or action assessed by the measure, as
determined by the State, is calculated, for each quality measure
identified under Sec. 438.510(a)(1) of this subpart, using the
methodology described in paragraph (b) of this section and the
validated data described in paragraph (a)(2) of this section, including
all Medicaid managed care data and, to the extent feasible without
undue burden, all data from sources described in paragraph (a)(1)(ii)
of this section.
(4) Quality ratings are issued by the State for each managed care
plan for each measure that assesses a service or action covered by the
plan's contract with the State, as determined by the State under
paragraph (a)(3) of this section.
(b) Methodology. The State must ensure that the quality ratings
issued under paragraph (a)(4) of this section:
(1) Include data for all enrollees who receive coverage through the
managed care plan for a service or action for which data are necessary
to calculate the quality rating for the managed care plan including
Medicaid FFS and Medicare data for enrollees who receive Medicaid
benefits for the State through FFS and managed care, are dually
eligible for both Medicare and Medicaid and receive full benefits from
Medicaid, or both).
(2) Are issued to each managed care plan at the plan level and by
managed care program, so that a plan participating in multiple managed
care programs is issued distinct ratings for each program in which it
participates, resulting in quality ratings that are representative of
services provided only to those beneficiaries enrolled in the plan
through the rated program.
(c) Alternative QRS methodology. (1) A State may apply an
alternative QRS methodology (that is, other than that described in
paragraph (b) of this section) to the mandatory measures described in
Sec. 438.510(a)(1) of this subpart provided that--
(i) The ratings generated by the alternative QRS methodology yield
information regarding managed care plan performance which, to the
extent feasible, is substantially comparable to that yielded by the
methodology described in Sec. 438.515(b) of this subpart, 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.
(ii) The State receives CMS approval prior to implementing an
alternative QRS methodology or modifications to an approved alternative
QRS methodology.
(2) To receive CMS approval for an alternative QRS methodology, a
State must:
(i) Submit a request for, or modification of, an alternative QRS
methodology to CMS in a form and manner and by a date determined by
CMS; and
(ii) Include the following in the State's request for, or
modification of, an alternative QRS methodology:
(A) The alternative QRS methodology to be used in generating plan
ratings;
(B) Other information or documentation specified by CMS to
[[Page 41282]]
demonstrate compliance with paragraph (c)(1) of this section; and
(C) Other supporting documents and evidence that the State believes
demonstrates compliance with the requirements of (c)(1)(i) of this
section.
(3) Subject to requirements established in paragraphs (c)(1)(i) and
(ii) and (c)(2) of this section, the flexibility described in paragraph
(c)(1) of this section permits the State to request and receive CMS
approval to apply an alternative methodology from that described in
paragraph (b)(1) and (2) of this section when calculating quality
ratings issued to health plans as required under paragraph (a)(4) of
this section. CMS will not review or approve an alternative methodology
request submitted by the State that requests to implement a MAC QRS
that--
(i) Does not comply with--
(A) The requirement to include mandatory measures established in
Sec. 438.510(a)(1).
(B) The general requirements for calculating quality ratings
established in paragraphs (a)(1) through (4) of this section.
(C) The requirement to include the website features identified in
Sec. 438.520(a)(1) through (6) established in Sec. 438.520(a).
(ii) Requests to include plans that do not meet the threshold
established in paragraph (a)(1)(i) of this section, which is permitted
without CMS review or approval.
(iii) Requests to implement additional measures or website
features, which are permitted, without CMS review or approval, as
described Sec. 438.520(c).
(d) Request for implementation extension. In a form and manner
determined by CMS, the State may request a one-year extension to the
implementation date specified in this subpart for one or more MAC QRS
requirements established in paragraph (b) of this section.
(1) A request for extension of the implementation deadline for the
methodology requirements in this section must meet the following
requirements:
(i) Identify the specific requirement(s) for which an extension is
requested and;
(ii) Include a timeline of the steps the State has taken to meet
the requirement as well as an anticipated timeline of the steps that
remain;
(iii) Explain why the State will be unable to fully comply with the
requirement by the implementation date, which must include a detailed
description of the specific barriers the State has faced or faces in
complying with the requirement; and
(iv) Include a detailed plan to implement the requirement by the
end of the one-year extension including, but not limited to, the
operational steps the State will take to address identified
implementation barriers.
(2) The State must submit an extension request by September 1 of
the fourth calendar year following July 9, 2024.
(3) CMS will approve an extension for 1 year if it determines that
the request:
(i) Includes the information described in paragraph (d)(1) of this
section;
(ii) Demonstrates that the State has made a good-faith effort to
identify and begin executing an implementation strategy but is unable
to comply with the specified requirement by the implementation date
identified in this subpart; and
(iii) Demonstrates that the State has an actionable plan to
implement the requirements by the end of the 1-year extension.
(e) Domain ratings. After engaging with States, beneficiaries, and
other interested parties, CMS implements domain-level quality ratings,
including care domains for which States are required to calculate and
assign domain-level quality ratings for managed care plans, a
methodology to calculate such ratings, and website display requirements
for displaying such ratings on the MAC QRS website display described in
Sec. 438.520.
Sec. 438.520 website display.
(a) website display requirements. In a manner that complies with
the accessibility standards outlined in Sec. 438.10(d) of this part
and in a form and manner specified by CMS, the State must prominently
display and make accessible to the public on the website required under
Sec. 438.10(c)(3):
(1) Information necessary for users to understand and navigate the
contents of the QRS website display, including:
(i) A statement of the purpose of the Medicaid managed care quality
rating system, relevant information on Medicaid, CHIP and Medicare and
an overview of how to use the information available in the display to
select a quality managed care plan;
(ii) Information on how to access the beneficiary support system
described in Sec. 438.71 to answer questions about using the State's
managed care quality rating system to select a managed care plan; and
(iii) If users are requested to input user-specific information,
including the information described in paragraph (a)(2)(i) of this
section, an explanation of why the information is requested, how it
will be used, and whether it is optional or required to access a QRS
feature or type of information.
(2) Information that allows beneficiaries to identify managed care
plans available to them that align with their coverage needs and
preferences including:
(i) All available managed care programs and plans for which a user
may be eligible based on the user's age, geographic location, and
dually eligible status, if applicable, as well as other demographic
data identified by CMS;
(ii) A description of the drug coverage for each managed care plan,
including the formulary information specified in Sec. 438.10(i) and
other similar information as specified by CMS;
(iii) Provider directory information for each managed care plan
including all information required by Sec. 438.10(h)(1) and (2) and
such other provider information as specified by CMS;
(iv) Quality ratings described at Sec. 438.515(a)(4) that are
calculated by the State for each managed care plan in accordance with
Sec. 438.515 for mandatory measures identified by CMS in the technical
resource manual, and
(v) The quality ratings described in Sec. 438.520(a)(2)(iv)
calculated by the State for each managed care plan in accordance with
Sec. 438.515 for mandatory measures identified by CMS, stratified by
dual eligibility status, race and ethnicity, and sex.
(3) Standardized information identified by CMS that allows users to
compare available managed care plans and programs, including:
(i) The name of each managed care plan;
(ii) An internet hyperlink to each managed care plan's website and
each available managed care plan's toll-free customer service telephone
number;
(iii) Premium and cost-sharing information including differences in
premium and cost-sharing among available managed care plans within a
single program;
(iv) A summary of benefits including differences in benefits among
available managed care plans within a single program and other similar
information specified by CMS, such as whether access to the benefit
requires prior authorization from the plan;
(v) Certain metrics, as specified by CMS, of managed care plan
performance that States must make available to the public under
subparts B and D of this part, including data most recently reported to
CMS on each managed care program pursuant to Sec. 438.66(e) of this
part and the results of the secret shopper survey specified in Sec.
438.68(f) of this part;
[[Page 41283]]
(vi) If a managed care plan offers an integrated Medicare-Medicaid
plan or a highly or fully integrated Medicare Advantage D-SNP (as those
terms are defined in Sec. 422.2 of this chapter), an indication that
an integrated plan is available and a link to the integrated plan's
most recent rating under the Medicare Advantage and Part D 5-Star
Rating System.
(4) Information on quality ratings displayed in accordance with
paragraph (a)(2)(iv) of this section in a manner that promotes
beneficiary understanding of and trust in the ratings, including:
(i) A plain language description of the importance and impact of
each quality measure assigned a quality rating;
(ii) The measurement period during which the data used to calculate
the quality rating was produced; and
(iii) Information on quality ratings data validation, including a
plain language description of when, how and by whom the data were
validated.
(5) Information or hyperlinks directing users to resources on how
and where to apply for Medicaid and enroll in a Medicaid or CHIP plan.
(6) By a date specified by CMS, which shall be no earlier than 2
years after the implementation date for the quality rating system
specified in Sec. 438.505:
(i) The quality ratings described in paragraph (a)(2)(iv) of this
section calculated by the State for each managed care plan in
accordance with Sec. 438.515 for mandatory measures identified by CMS,
including the display of such measures stratified by dual eligibility
status, race and ethnicity, sex, age, rural/urban status, disability,
language of the enrollee, or other factors specified by CMS in the
annual technical resource manual.
(ii) An interactive tool that enables users to view the quality
ratings described at paragraph (a)(2)(iv) of this section, stratified
by the factors described in paragraph (a)(6)(i) of this section.
(iii) For managed care programs with two or more participating
plans--
(A) A search tool that enables users to identify available managed
care plans within the managed care program that provide coverage for a
drug identified by the user; and
(B) A search tool that enables users to identify available managed
care plans within the managed care program that include a provider
identified by the user in the plan's network of providers.
(b) Request for implementation extension. In a form and manner
determined by CMS, the State may request a 1-year extension to the
implementation date specified in this subpart for one or more of the
requirements established under paragraphs (a)(2)(v) and (6) of this
section.
(1) A request for extension of the implementation deadline for the
website display requirements in this section must meet the requirements
described in Sec. 438.515(d)(1);
(2) For extensions of the website requirements specified in
paragraph (a)(6) of this section, the extension request must be
submitted no later than 4 months prior to the implementation date
specified pursuant to paragraph (a)(6) of this section for those
requirements; for extensions of the requirements specified in
paragraphs (a)(2)(v) of this section, the extension request must be
submitted no later than September 1, 2027.
(3) CMS will approve the State's request for a 1-year extension if
CMS determines that the request meets the conditions described in Sec.
438.515(d)(3).
(c) Additional website features. The State may choose to display
additional website features not described in Sec. 438.520(a) in their
MAC QRS, or may choose to implement the features described in Sec.
438.520(a)(6)(i) through (iv) before the date specified by CMS as
described in paragraph (a)(6) of this section.
(1) Additional website features may include additional measures not
included in the mandatory measure set described in Sec. 438.510(a)(1),
supplementary data on displayed quality measures, and extra interactive
functions, and may be implemented without CMS review.
(2) If the State chooses to display quality ratings for additional
measures as described in paragraph (c)(1) of this section, the State
must:
(i) Obtain input on the additional measures, prior to their use,
from prospective users, including beneficiaries, caregivers, and, if
the State enrolls American Indians/Alaska Natives in managed care,
consult with Tribes and Tribal Organizations in accordance with the
State's Tribal consultation policy; and
(ii) Document the input received from prospective users required
under paragraph (c)(2)(i) of this section, including modifications made
to the additional measure(s) in response to the input and rationale for
input not accepted.
(d) Continued consultation. CMS will periodically consult with
States and interested parties including Medicaid managed care quality
rating system users to evaluate the website display requirements
described in this section for continued alignment with beneficiary
preferences and values.
Sec. 438.525 [Reserved]
Sec. 438.530 Annual technical resource manual.
(a) Beginning in calendar year 2027, CMS will publish a Medicaid
managed care quality rating system technical resource manual annually,
which may be released in increments throughout the year. Subject to the
limitation described in paragraph (a)(4) of this section, the technical
resource manual must include all the following:
(1) Identification of all Medicaid managed care quality rating
system measures, including:
(i) A list of the mandatory measures
(ii) Any measures newly added or removed from the prior year's
mandatory measure set.
(iii) The subset of mandatory measures that must be displayed and
stratified by factors such as race and ethnicity, sex, age, rural/urban
status, disability, language, or such other factors as may be specified
by the CMS in accordance with Sec. 438.520(a)(2)(v) and (a)(6)(i).
(2) Guidance on the application of the methodology used to
calculate and issue quality ratings as described in Sec. 438.515(b).
(3) Measure steward technical specifications for mandatory
measures.
(4) If the public notice and comment process described in Sec.
438.510(b) of this subpart occurs in the calendar year in which the
manual is published, a summary of interested party engagement and
public comments received during the notice and comment process using
the process identified in Sec. 438.510(c) for the most recent
modifications to the mandatory measure set including:
(i) Discussion of the feedback and recommendations received on
potential modifications to mandatory measures;
(ii) The final modifications and the timeline by which such
modifications must be implemented; and
(iii) The rationale for not accepting or implementing specific
recommendations or feedback submitted during the consultation process.
(b) In developing and issuing the manual content described in
paragraphs (a)(1) and (2) of this section, CMS will take into account
whether stratification is currently required by the measure steward or
other CMS programs and by which factors when issuing guidance that
identifies which measures, and by which factors, States must stratify
mandatory measures.
(c) No later than August 1, 2025, CMS will publish the information
described at paragraph (a)(1) of this section for the initial mandatory
measure set.
[[Page 41284]]
Sec. 438.535 Annual reporting.
(a) Upon CMS' request, but no more frequently than annually, the
State must submit a Medicaid managed care quality rating system report
in a form and manner determined by CMS. Such report must include:
(1) The following measure information:
(i) A list of all mandatory measures identified in the most recent
technical resource manual that indicates for each measure:
(A) Whether the State has identified the measure as applicable or
not applicable to the State's managed care program under Sec.
438.510(a)(1) of this subpart;
(B) For any measures identified as inapplicable to the State's
managed care program, a brief explanation of why the State determined
that the measure is inapplicable; and,
(C) For any measure identified as applicable to the State's managed
care program, the managed care programs to which the measure is
applicable.
(ii) A list of any additional measures the State chooses to include
in the Medicaid managed care quality rating system as permitted under
Sec. 438.510(a)(2).
(2) An attestation that all displayed quality ratings for mandatory
measures were calculated and issued in compliance with Sec. 438.515,
and a description of the methodology used to calculate ratings for any
additional measures if such methodology deviates from the methodology
in Sec. 438.515.
(3) The documentation required under Sec. 438.520(c), if including
additional measures in the State's Medicaid managed care quality rating
system.
(4) The date on which the State publishes or updates the quality
ratings for the State's managed care plans.
(5) A link to the State's website for their Medicaid managed care
quality rating system.
(6) The application of any technical specification adjustments used
to calculate and issue quality ratings described in Sec. 438.515(a)(3)
and (4), at the plan- or State-level, that are outside a measure
steward's allowable adjustments for a mandatory measure but that the
measure steward has approved for use by the State.
(7) A summary of each alternative QRS methodology approved by CMS,
including the effective dates for each approved alternative QRS.
(8) If all data necessary to calculate a measure described in Sec.
438.510(a)(1) of this subpart cannot be provided by the managed care
plans described in Sec. 438.515(a)(1) of this subpart:
(i) A description of any Medicare data, Medicaid FFS data, or both
that cannot, without undue burden, be collected, validated, or used to
calculate a quality rating for the measure per Sec. 438.515(a) and
(b), including an estimate of the proportion of Medicare data or
Medicaid FFS data that such missing data represent.
(ii) A description of the undue burden(s) that prevents the State
from ensuring that such data are collected, validated, or used to
calculate the measure, the resources necessary to overcome the burden,
and the State's plan to address the burden.
(iii) An assessment of the impact of the missing data on the
State's ability to fully comply with Sec. 438.515(b)(1).
(b) States will be given no less than 90 days to submit such a
report to CMS on their Medicaid managed care quality rating system.
0
28. Amend Sec. 438.602 by adding paragraphs (g)(5) through (13) and
(j) to read as follows:
Sec. 438.602 State responsibilities.
* * * * *
(g) * * *
(5) Enrollee handbooks, provider directories, and formularies
required at Sec. 438.10(g) through (i).
(6) The information on rate ranges required at Sec.
438.4(c)(2)(iv), if applicable.
(7) The reports required at Sec. Sec. 438.66(e) and 438.207(d).
(8) The network adequacy standards required at Sec. 438.68(b)(1)
through (2) and (e).
(9) The results of secret shopper surveys required at Sec.
438.68(f).
(10) State directed payment evaluation reports required in Sec.
438.6(c)(2)(v)(C).
(11) Information on all required Application Programming Interfaces
including as specified in Sec. 431.60(d) and (f).
(12) Quality related information as required in Sec. Sec.
438.332(c)(1), 438.340(d), 438.362(c) and 438.364(c)(2)(i).
(13) Documentation of compliance with requirements in subpart K--
Parity in Mental Health and Substance Use Disorder Benefits.
* * * * *
(j) Applicability. Paragraphs (g)(5) through (13) of this section
apply to the first rating period for contracts with MCOs, PIHPs and
PAHPs beginning on or after 2 years after July 9, 2024.
0
29. Amend Sec. 438.608 by revising paragraphs (a)(2) and (d)(3) and
adding paragraph (e) and (f) to read as follows:
Sec. 438.608 Program integrity requirements under the contract.
(a) * * *
(2) Provision for reporting within 30 calendar days all
overpayments identified or recovered, specifying the overpayments due
to potential fraud, to the State.
* * * * *
(d) * * *
(3) Each MCO, PIHP, or PAHP must report annually to the State on
all overpayments identified or recovered.
* * * * *
(e) Standards for provider incentive or bonus arrangements. The
State, through its contract with the MCO, PIHP or PAHP, must require
that incentive payment contracts between managed care plans and network
providers meet the requirements as specified in Sec. Sec. 438.3(i)(3)
and (4).
(f) Applicability date. Paragraphs (a)(2), (d)(3) and (e) of this
section apply to the first rating period for contracts with MCOs,
PIHPs, or PAHPs beginning on or after 1 year from July 9, 2024.
PART 457--ALLOTMENTS AND GRANTS TO STATES
0
30. The authority citation for part 457 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
31. Amend Sec. 457.10 by adding the definition of ``In lieu of service
or setting (ILOS)'' in alphabetical order to read as follows:
Sec. 457.10 Definitions and use of terms.
* * * * *
In lieu of service or setting (ILOS) is defined as provided in
Sec. 438.2 of this chapter.
* * * * *
0
32. Amend Sec. 457.1200 by adding paragraph (d) to read as follows:
Sec. 457.1200 Basis, scope, and applicability.
* * * * *
(d) Applicability dates. States will not be held out of compliance
with the following requirements of this subpart prior to the dates
established at Sec. Sec. 438.3(v), 438.10(j), 438.16(f), 438.68(h),
438.206(d), 438.207(g), 438.310(d), 438.505(a)(2), 438.602(j), and
438.608(f) of this chapter, so long as they comply with the
corresponding standard(s) of this subpart, edition revised as of July
9, 2024. States will not be held out of compliance with the requirement
at Sec. 457.1207 to post comparative summary results of enrollee
experience surveys by managed care plan annually on State websites, nor
the requirement for States to evaluate annual enrollee experience
survey results as part of the State's annual analysis of network
adequacy as described at Sec. 457.1230(b), so long as
[[Page 41285]]
they comply with the corresponding standard(s) of this subpart, 2 years
after July 9, 2024.
0
33. Amend Sec. 457.1201 by revising paragraphs (c), (e), and (n)(2) to
read as follows:
Sec. 457.1201 Standard contract requirements.
* * * * *
(c) Payment. The final capitation rates for all MCO, PIHP or PAHP
contracts must be identified and developed, and payment must be made in
accordance with Sec. Sec. 438.3(c) and 438.16(c)(1) through (3) of
this chapter, except that the requirement for preapproval of contracts,
certifications by an actuary, annual cost reports, contract
arrangements described in Sec. 438.6(c), and references to pass
through payments do not apply, and contract rates must be submitted to
CMS upon request of the Secretary.
* * * * *
(e) Services that may be covered by an MCO, PIHP, or PAHP. An MCO,
PIHP, or PAHP may cover, for enrollees, services that are not covered
under the State plan in accordance with Sec. Sec. 438.3(e) and
438.16(b), (d), and (e) of this chapter, except that references to
Sec. 438.7, IMDs, and rate certifications do not apply and that
references to enrollee rights and protections under part 438 should be
read to refer to the rights and protections under subparts K and L of
this part.
* * * * *
(n) * * *
(2) Contracts with PCCMs must comply with the requirements of
paragraph (o) of this section; Sec. 457.1207; Sec. 457.1240(b)
(cross-referencing Sec. 438.330(b)(2), (b)(3), (c), and (e) of this
chapter); Sec. 457.1240(e) (cross-referencing Sec. 438.340 of this
chapter).
* * * * *
0
34. Amend Sec. 457.1203 by revising paragraphs (e) and (f) to read as
follows:
Sec. 457.1203 Rate development standards and medical loss ratio.
* * * * *
(e) The State must comply with the requirements related to medical
loss ratios in accordance with the terms of Sec. 438.74 of this
chapter, except contract arrangements described in Sec. 438.6(c) do
not apply and the description of the reports received from the MCOs,
PIHPs and PAHPs under Sec. 438.8(k) of this chapter will be submitted
independently, and not with the rate certification described in Sec.
438.7 of this chapter.
(f) The State must ensure, through its contracts, that each MCO,
PIHP, and PAHP complies with the requirements in Sec. 438.8 of this
chapter, except that contract arrangements described in Sec. 438.6(c)
do not apply.
0
35. Revise Sec. 457.1207 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 and that
references to enrollee rights and protections under part 438 should be
read to refer to the rights and protections under subparts K and L of
this part. The State must annually post comparative summary results of
enrollee experience surveys by managed care plan on the State's website
as described at Sec. 438.10(c)(3) of this chapter.
0
36. Revise Sec. 457.1230(b) to read as follows:
Sec. 457.1230 Access standards.
* * * * *
(b) Assurances of adequate capacity and services. The State must
ensure, through its contracts, that each MCO, PIHP and PAHP has
adequate capacity to serve the expected enrollment in accordance with
the terms of Sec. 438.207 of this chapter, except that the reporting
requirements in Sec. 438.207(d)(3)(i) of this chapter do not apply.
The State must evaluate the most recent annual enrollee experience
survey results as required at section 2108(e)(4) of the Act as part of
the State's analysis of network adequacy as described at Sec.
438.207(d) of this chapter.
* * * * *
0
37. Amend Sec. 457.1240 by revising paragraphs (d) and (f) to read as
follows:
Sec. 457.1240 Quality measurement and improvement.
* * * * *
(d) Managed care quality rating system. The State must determine a
quality rating or ratings for each MCO, PIHP, and PAHP in accordance
with the requirements set forth in subpart G of part 438 of this
chapter, except that references to dually eligible beneficiaries, a
beneficiary support system, and the terms related to consultation with
the Medical Care Advisory Committee do not apply.
* * * * *
(f) Applicability to PCCM entities. For purposes of paragraphs (b)
and (e) of this section, a PCCM entity described in this paragraph is a
PCCM entity whose contract with the State provides for shared savings,
incentive payments or other financial reward for improved quality
outcomes.
0
38. Revise Sec. 457.1250(a) to read as follows:
Sec. 457.1250 External quality review.
(a) Each State that contracts with MCOs, PIHPs, or PAHPs must
follow all applicable external quality review requirements as set forth
in Sec. Sec. 438.350 (except for references to Sec. 438.362),
438.352, 438.354, 438.356, 438.358 (except for references to Sec.
438.6), 438.360 (only for nonduplication of EQR activities with private
accreditation) and 438.364 of this chapter.
* * * * *
0
39. Revise Sec. 457.1285 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. Sec. 438.66(e), 438.362(c),
438.602(g)(6) and (10), 438.604(a)(2), 438.608(d)(4) and references to
LTSS of this chapter do not apply and that references to subpart K
under part 438 should be read to refer to parity requirements at Sec.
457.496.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-08085 Filed 4-22-24; 4:15 pm]
BILLING CODE 4120-01-P