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Maximize Value March 01, 2016

4 Takeaways: Managed Medicaid Moves Step Closer to Major Overhaul

Partner, Health and Life Sciences, Oliver Wyman
Key Takeaway
For states struggling to balance budgets, new Medicaid rules may pose significant burdens - @OliverWyman analysis

The Centers for Medicare & Medicaid Services (CMS) proposed last year a new set of rules for Managed Medicaid with the intent to alleviate some of the coverage and access challenges that face the States and their Medicaid populations, as well as align Managed Medicaid to Medicare Advantage and market standards. The proposed rules, which CMS accepted comments on through the end of July, could have a significant impact on each of the categories it is intended to cover and affect all stakeholders that have major roles to play in the Medicaid space. Since Medicaid is largely a procurement business – with States purchasing services from Managed Care Organizations – these rules are expected to have an impact on the State requirements for procurement. Oliver Wyman Principal Parie Garg provides a recap of the possible implications of this historic guidance, which the Centers for Medicare & Medicaid Services (CMS) recently forwarded to the Office of Management and Budget (OMB) for review:

1. What are the rules?

  • CMS released a set of proposed rules for standardizing managed Medicaid, in an effort to strengthen the quality of care provided to Medicaid enrollees, while also enhancing the integrity of the program.
  • This was first foray made by CMS into Medicaid in over a decade, making these rules particularly noteworthy in terms of federal interest regarding state initiatives.
  • Highlights of the rules include an 85% MLR floor, integration of LTSS, time and distance standards for provider networks, actuarial rate setting regulations, and a Stars-like rating program for Medicaid.
  • It is at the discretion of the states to choose to adopt any of these rulings; ultimately CMS can only serve in an advisory capacity.

2. What does this mean for health plans?

3. What does this mean for states?

  • While the administrative burden for health plans is anticipated to be meaningful but not crippling, it's a different story for the States.
  • The actuarial soundness rules, Star ratings, integration of LTSS, and FFS coverage for 14 days will present significant burdens for States.
  • For states that are already struggling to balance their budgets, adoption of these rules as written will likely pose a significant problem.
  • Some state Medicaid Directors have publicly called for non-adoption of the rules.

4. However, they are not final yet….

  • CMS released its proposed rules for Medicaid Managed Care Organizations on June 1, 2015.
  • More than 900 comments were received during the comment period of June 1 to July 27.
  • The rules were updated and sent to OMB on February 19, 2015.
  • The OMB has 90 days to review the rules; the final version will likely be released in May, almost a year from the initial release date.

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