Medicaid Managed Care

Ms. Vikki Wachino
Director, Center for Medicaid and CHIP Services
Centers for Medicare and Medicaid Services
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201

Re: Proposed Regulation Medicaid and Children’s Health Insurance Programs; Medicaid Managed Care, CHIP Delivered in Managed Care, Medicaid and CHIP Comprehensive Quality Strategies and Revisions Related to Third Party Liability (CMS-2390-P).

Dear Ms. Wachino:

On behalf of the nation’s governors, we commend your efforts to modernize the regulatory framework for state Medicaid managed care programs and ask for your assistance in strengthening the proposed rule (CMS-2390-P).

Governors share the Centers for Medicare and Medicaid Services’ (CMS) interest in aligning economic incentives to improve care and health outcomes for Medicaid enrollees while lowering the growth of health care costs for states, patients and taxpayers. The proposed regulatory revision offers an opportunity to drive toward this shared goal by providing additional support for states in their efforts to be strategic purchasers and fiscal stewards of their Medicaid programs. We also would like to thank you for participating in discussions with the National Governors Association (NGA). Your dialogue with NGA is instrumental to furthering collaboration between states and the federal government vis-à-vis their Medicaid programs.

As CMS prepares to finalize the rule, we urge you to ensure it preserves state flexibility and promotes cooperative federalism, a key principle underlying Medicaid and other state-federal programs. Governors are concerned that certain provisions pose significant barriers to improving the operation of state Medicaid programs. We ask for your assistance in addressing those issues, as outlined below.

Limitations on Provider Payments 
Governors support provisions in the proposed rule that would allow states to require managed care plans to adopt value-based purchasing models, which are critical to governors’ efforts to improve the quality and efficiency of their Medicaid programs. However, we are concerned that with very narrow exception, the rule otherwise restricts the ability of states to direct expenditures through their Medicaid managed care contracts, thereby curtailing states’ ability to rely on traditional sources of non-federal funding for Medicaid.

From the inception of the Medicaid program, states have relied on local public entities and permissible provider taxes and donations to assist in financing the non-federal share of Medicaid expenditures and provide care to Medicaid-eligible individuals. States have long recognized the contributions of these partners through directed payments and other funds. This partnership, as expressly allowed under federal law, is a fundamental aspect of virtually all state Medicaid programs.

Prohibiting states from directing managed care expenditures would put significant new pressure on already tight state budgets. If states are required to choose between traditional Medicaid funding streams and the use of managed care, states may consider eliminating Medicaid managed care along with the important programmatic, fiscal and clinical oversight such programs provide. As a result, we urge CMS to allow for appropriate directed provider payments through managed care contracting to ensure that states have the ability to maintain integral funding partnerships within managed care arrangements.

Enhanced Medicaid Managed Care Rate Certification Process
Governors support the development of a more transparent, uniform and efficient process for Medicaid managed care rate review and certification. Often there is a significant delay on the part of CMS in approving rates, which may require states to assume the risk of paying plans provisional rates until receiving approval. In fact, it is not uncommon for rates to be approved by CMS months into the plan year in which they are effective.

In the proposed rule, CMS is seeking to adopt, as well as supplement, existing rate review requirements. We urge CMS to balance new requirements with their ability to review information in a timely and efficient manner. This balance is essential to fostering an efficient rate review process that promotes improvements and innovation in the operation of Medicaid managed care programs.  Importantly, the agency should consider augmenting its internal resources and processes to ensure rates are consistently finalized before the period in which they would be effective. This would include identifying a time frame for rate approvals with an outer limit beyond which states awaiting final approval from CMS would be permitted to move forward without risk.

New Standards for Medicaid Managed Care Rate Development
Historically, CMS has permitted states to use approved Medicaid managed care rate ranges that are actuarially appropriate. With rate ranges, states can increase or decrease rates when needed within the year to account for events such as an unexpected increase in the cost of pharmaceuticals or to address new requirements from state legislatures. Rate ranges allow states to respond more effectively to unexpected events and ultimately protect access to Medicaid services. CMS is seeking to eliminate this important state flexibility in the proposed rule by prohibiting the use of rate ranges and requiring states to seek approval of any rate change throughout the year.

Governors share CMS’ goal of ensuring that appropriate rates are paid to plans—rates that accurately reflect program costs. However, eliminating rate ranges will exacerbate existing delays in the rate approval process without significantly furthering this shared goal. Other provisions in the proposed rule would more effectively enhance the rate review process and oversight of rate ranges. As an alternative to prohibiting the use of rate ranges altogether, we urge CMS to consider limiting the ranges to a certain deviation above and below the target rate. Establishing targets will allow for needed state flexibility in rate setting subject to appropriate oversight.

New Enrollment and Screening Requirements
Governors are concerned that CMS’ proposal requiring states to provide Medicaid enrollees with 14-days of fee-for-service (FFS) coverage before they choose a health plan will not further the shared goal of ensuring enrollees have adequate opportunity to select the right plan. The proposed requirement would be especially challenging for states with little or no FFS infrastructure, and undermine state efforts to eliminate gaps between eligibility determinations and enrollment into a plan. This seamless approach to enrollment aligns with practices in the commercial market designed to ensure immediate access to services and streamlined administration of benefits. Moreover, states already have protections in place to ensure beneficiaries have sufficient opportunity to select a plan, such as the ability to switch plans within a certain period after enrollment.

Governors urge CMS not to include this14-day requirement in the final rule. Instead, we encourage you to consider other policies that would better advance the goal of protecting enrollees, such as requiring coverage for certain out-of-network benefits during limited enrollment periods.

Governors also are concerned by the proposed requirement that all providers under contract with managed care plans enroll in a state’s FFS screening system. Though we recognize and fully support the need for program integrity, this is an administrative burden that could be alleviated by requiring—as some states already do—that managed care plans bear responsibility under the terms of their contract for assuring providers meet the same FFS criteria.

Coverage of Services Provided in Institutions for Mental Diseases
Governors applaud CMS’ decision to allow Medicaid managed care plans to cover services provided to certain patients in institutions for mental diseases (IMD) as an alternative service “in lieu of a covered Medicaid service.” With a renewed focus across the nation on the behavioral health and substance use disorder treatment needs, IMDs can fill a critical gap in the continuum of care for Medicaid enrollees.

We are concerned, however, that the proposed 15-day monthly limit is not consistent with the clinical needs of individuals with behavioral health diagnoses, for whom a longer stay may be appropriate. Medicaid managed care plans historically cover alternative services “in lieu of covered services” if the provision of such services is cost-effective. As long as the services conform to this implicit fiscal limitation, plans have the flexibility to determine coverage policies without specific limits. Thus, CMS should not limit the plans’ ability to cover IMD services if the coverage is cost-effective. Rather, states and managed care plans should have flexibility to determine what IMD length-of-stay is cost-effective and will result in improved health outcomes for enrollees. Should CMS determine that a cap is needed, we encourage you to work with states to identify the most appropriate day limit consistent with current evidence-based practices.

Phased-In Implementation
New Medicaid managed care regulations will require significant changes in operations at the state and federal level. Given the extensive nature of the rule and the resources states will need to comply with new requirements, we urge CMS to consider a phased-in implementation approach that will support states and provide them sufficient time to make major programmatic changes. Importantly, the timelines developed by CMS for compliance with the new rule should be developed in close consultation with states.

Thank you for your attention to governors’ concerns and recommendations for strengthening the proposed rule. We look forward to working with you to further craft and implement a regulatory framework that allows states to continue leveraging Medicaid managed care to deliver high-value care and better outcomes for some of the nation’s most vulnerable citizens.


Governor Charlie Baker
NGA Health and Human Services Committee

Governor Maggie Hassan
Vice Chair
NGA Health and Human Services Committee

cc: Shaun L. Donovan
Office of Management and Budget
301 G Street, S.W.
Washington, DC 20024