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CMS grants more flexibility to Medicaid managed care programs in final rule

The rule seeks to reduce federal regulatory barriers, support adaptability and promote transparency and innovation.

Mallory Hackett, Associate Editor

The Centers for Medicare and Medicaid Services on Monday unveiled its 2020 Medicaid and Children's Health Insurance Program Managed Care final rule.

The rule seeks to reduce federal regulatory barriers, support flexibility, and promote transparency and innovation when states develop and implement managed care programs for their Medicaid and CHIP beneficiaries.

A group of stakeholders, including the National Association of Medicaid Directors and state Medicaid Directors, worked with CMS to create the regulatory framework of this final rule after a 2016 Medicaid and CHIP Managed Care final rule received backlash for being overly prescriptive, costly and burdensome to state programs.

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The new final rule ensures that CMS will issue guidance for states completing the federal rate review process, while still requiring that states implement a Quality Rating System for the managed care plans they contract with.

It changes the minimum standards states must use in developing network adequacy requirements in a way that CMS says will support telehealth facilitation in rural areas.

The rule will require states going from a fee-for-service delivery system to a managed care delivery system to instruct plans to make pass-through payments for up to three years that are less than or equal to the amount of their current upper payment limit payments under fee-for-service.

States will be given the flexibility to adopt payment models based on a state plan-approved fee-for-service fee schedule without having to receive written approval from CMS and to provide for the approval of multiyear payment arrangements when specified criteria are met.

It also prohibits states from adding or modifying risk-sharing agreements after the start of the rating period.

Additionally, the new rule changes the requirements for beneficiary claim appeals and updates requirements regarding beneficiary information.

The majority of provisions will take effect 30 days after the issuance of the final rule. There are, however, two provisions that will be effective with contract rating periods starting on or after July 1, 2021, and two provisions that states will be required to come into compliance with for certain reports and quality strategies submitted on or after July 1, 2021.


The new rule was applauded by the American Hospital Association for giving state Medicaid managed care programs greater flexibility and removing some of the administrative burdens of the past rule. However, the AHA expressed concern that the rule allows states to set quantitative network adequacy standards, because it no longer requires states to set time and distance standards for network adequacy.

There are more than 75 million people enrolled in Medicaid, with more than 6 million of them enrolled in CHIP, according to CMS. Of those, 55 million beneficiaries are enrolled in Medicaid managed care plans.

America's Health Insurance Plans calls Medicaid the "nation's essential safety net," and says it is "critical not only to maintaining health for our most vulnerable populations but also to ensuring our nation's economic recovery."


"The era of prescriptive regulations has failed," said CMS Administrator Seema Verma. "This rule represents a concerted effort to transform Medicaid to improve quality and access for its beneficiaries. This will remove the burden on states while ensuring appropriate oversight of managed care organizations. The government should identify expected outcomes, results, and standards – not micromanage processes."

Twitter: @HackettMallory
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