Today, the Department of Health and Human Services (HHS) issued a final rule on managed care in Medicaid and the Children’s Health Insurance Program (CHIP). The rule, which is the first overhaul of Medicaid and CHIP managed care regulations in more than a decade, advances the Administration’s efforts to transform the health care system to deliver better care, smarter spending, and healthier people.  It supports state delivery system reform efforts, strengthens the consumer experience and key consumer protections, strengthens program integrity by improving accountability and transparency, and aligns key rules with those of other health coverage programs.

Currently, 39 states and the District of Columbia contract with private managed care plans to furnish services to Medicaid beneficiaries, and almost two thirds of the 72 million Medicaid beneficiaries are enrolled in managed care. The final rule will affect Medicaid managed care plans and the beneficiaries enrolled in them, including low-income children and families, pregnant women, elderly, and individuals with disabilities.

“Medicaid delivers cost-effective, affordable health insurance coverage to millions of Americans,” said HHS Secretary Sylvia M. Burwell. “Today’s significant changes strengthen the program by improving the consumer’s care experience and supporting state efforts to deliver more coordinated, higher-quality care.”

The final rule has four key goals:  (1) supporting states’ efforts to advance delivery system reform and improvements in quality of care for Medicaid and CHIP beneficiaries; (2) strengthening the consumer experience of care and key consumer projections; (3) strengthening program integrity by improving accountability and transparency; and (4) aligning rules across health insurance coverage programs to improve efficiency and help consumers who are transitioning between sources of coverage.

“Medicaid improves the health, well-being, and financial security of millions of Americans,” said Vikki Wachino, CMS Deputy Administrator and Director of the Center for Medicaid and CHIP Services. “These new rules will help Medicaid continue to be a leader in providing high-quality care to diverse populations with diverse health needs.”

To support states’ efforts to advance delivery system reform and improve quality, the rule establishes Medicaid’s first Quality Rating System and clarifies states’ authority to enter into contracts that pay plans for quality or encourage participation in alternative payment models and other delivery system reform efforts.

To strengthen the consumer experience of care, the rule improves state and managed care plan standards in the areas of enrollment, communications, care coordination, and the availability and accessibility of covered services. For consumers requiring long term services and supports, the rule establishes mechanisms for providing support, education, and a central contact for complaints or concerns for beneficiaries, including assistance with enrollment, disenrollment, and the appeals process.  It offers flexibility for plans to cover inpatient short-term mental health services, which are an important tool in addressing behavioral health issues.

The rule also establishes network adequacy standards in Medicaid and CHIP managed care for key types of providers, while leaving states flexibility to set the actual standards.

To promote accountability and strengthen program integrity, the rule requires additional transparency on how Medicaid rates are set to help ensure the fiscal integrity of Medicaid managed care programs, including with respect to data relating to utilization and quality of services.

To align rules across programs, the rule better aligns reporting of medical loss ratios with the Medicare Advantage program and the Marketplace, Medicaid plans’ appeals processes with those of other programs, and Medicaid’s requirements for disseminating consumer information with private market best practices. This will improve the consumer experience for consumers who transition between coverage programs and ease administrative burden on issuers participating in multiple programs.

The provisions of the rule will be implemented in phases over the next three years, starting on July 1, 2017.

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