Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

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1 Presenting a live 90-minute webinar with interactive Q&A Modernizing Medicaid Managed Care: Navigating CMS Long-Awaited and Overhauled Proposed Regulations Calculating Medical Loss Ratio, Complying with Network Adequacy Standards, Setting Capitation Rates, and More TUESDAY, JULY 21, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: J. Peter Rich, Partner, McDermott Will & Emery, Los Angeles Ariane Tschumi, McDermott Will & Emery, Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Modernizing Medicaid Managed Care: Navigating CMS Proposed Regulations Strafford Webinar - July 21, 2015 J. Peter Rich Ariane Tschumi McDermott Will & Emery, LLP McDermott Will & Emery, LLP 2049 Century Park East, 38 th Floor 500 North Capitol St NW Los Angeles, California Washington, DC (310) (202) jprich@mwe.com atschumi@mwe.com Boston Brussels Chicago Dallas Strategic alliance with MWE China Law Offices (Shanghai) Düsseldorf Frankfurt Houston London Los Angeles Miami Milan Munich New York Orange County Paris Rome Seoul Silicon Valley Washington, D.C McDermott Will & Emery. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery AARPI, McDermott Will & Emery Belgium LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome.

6 Road Map: Key Aspects of Proposed Rule 1. Medicaid MLR 2. Actuarial Soundness 3. Incentive and Withhold Arrangements 4. Program Integrity 5. State Oversight 6. Network Adequacy 6

7 Road Map: Key Aspects of Proposed Rule 7. Beneficiary Protections 8. Quality 9. Care Coordination 10.MLTSS 11.State-Led Payment and Delivery System Reform 12.Care in Alternate Settings / IMD 7

8 Key Themes First substantive revisions to the Medicaid managed care program since Thematic goals: Align Medicaid managed care, where feasible, with commercial markets, QHPs, and MA and Part D Programs. Preserve role of the state in Medicaid federal-state partnership (e.g., through establishing minimum standards and deferring to states on how best to implement or oversee the proposed policy). 8

9 Background: Medicaid Managed Care Penetration by State, October

10 Background: Medicaid Enrollment in Managed Care, October

11 Background: Over Half of States Have Adopted Medicaid Expansion 11

12 1. Overview of MLR Proposals Establishes a national Medicaid MLR standard for Medicaid and CHIP managed care programs States may elect to: Establish minimum MLR threshold with a repayment requirement Solely implement mandatory Medicaid MLR reporting CMS would require a projected Medicaid MLR of at least 85% for state capitation rates to be viewed as actuarially sound. 12

13 Calculating the MLR Goals of MLRs: Incentivize spending on patient care and QI activities Limit spending on administrative expenses and profit The MLR equals: (Incurred medical claims) + (Expenses to improve quality) (Premium revenue) (Federal and state taxes and licensing or regulatory fees) Not for External Use or Distribution 13

14 Classifying Expenses Aligns expense classifications with existing commercial MLR requirements (45 C.F.R ) Medicaid-specific classifications: Medicaid External Quality Review Organizations Medicaid-specific program integrity requirements (subject to a cap of 0.5 percent of premium revenue) Activities related to service coordination, case management, and activities supporting community integration of individuals with more complex needs (via Preamble) Not for External Use or Distribution 14

15 Classifying Expenses Exclusions from Medicaid MLR numerator: Payments to third-party vendors for administrative fees, network development, claims processing and utilization management Unclear whether CMS-issued FAQs on commercial market MLR standards, including third-party vendor reporting, clinical risk-bearing entity payments, and other issues apply 15

16 Minimum Medicaid MLR Standards Option to mandate a minimum Medicaid MLR or solely to require Plan sponsor reporting If adopt minimum MLR, must be 85% or higher State discretion to require repayment for failure to achieve imposed MLR requirement Federal government must receive its share of any remittances that are returned by Plan sponsors (False Claims Act liability) 16

17 MLR and Actuarial Soundness CMS to consider whether Plan sponsors would reasonably achieve MLR of at least 85% when evaluating actuarial soundness of state capitation rates Declines to extend maximum Medicaid MLR States must take into account Plan sponsors past and projected MLRs when developing future rates. 17

18 Minimum MLRs Requirements for Medicaid MCOs, October

19 2. Actuarial Soundness Challenges identified (see, e.g., GAO ): Adequacy of Plan sponsor rates; capitation methodologies; CMS oversight Existing legal standard: Actuarially sound according to GAAP, certification by qualified actuary, appropriateness for populations and services covered 19

20 Actuarial Soundness Proposals: Adopt standard that a rate is actuarially sound if for business for which the certification is being prepared and for the period covered by the certification, projected capitation rates and other revenue sources provide for all reasonable, appropriate, and attainable costs. (American Academy of Actuaries) Proposes parameters around appropriate data sources for rate setting, trend factors, adjustments, non-benefit costs, risk adjustment, etc Broad effort to shift from process-based framework to substantive review of assumptions and methodologies underlying rate development 20

21 3. Incentive and Withhold Arrangements Under the actuarially sound standard, incentives and withholds tied to performance would count toward actuarial soundness only if their attainment is reasonable and attainable. Existing regulatory requirements: Incentive arrangements must be (i) time limited; (ii) not renewed automatically; (iii) made available to both public and private contractors; (iv) not conditioned on intergovernmental transfer agreements; (v) necessary for the specified activities and targets; and (vi) limited to 5% of the certified capitation rate. 21

22 Incentive and Withhold Arrangements Proposals: Requirement that incentive arrangements be designed to support program initiatives tied to meaningful quality goals and performance measure outcomes Withhold arrangements must meet above incentive arrangements requirements (with the exception of the 5% upper limit); there are additional documentation and certification requirements for withholds. 22

23 4. Program Integrity Goals: Strengthen program integrity requirements through mandates similar to those for MAO and PDP Sponsors Note: Would extend provisions to health care and administrative service providers Proposals: All healthcare providers that participate in a Plan sponsor s network (and are not enrolled in FFS Medicaid) must enroll with State Medicaid. Plan sponsors must certify accuracy, completeness and truthfulness of data and information submitted to State. 23

24 Program Integrity Proposals: Plan sponsors must implement fraud, waste and abuse procedures providing for the prompt referral of any potential fraud, waste, or abuse that the [Plan sponsor] identifies to the State Medicaid program integrity unit or any potential fraud directly to the State Medicaid Fraud Control Unit. Plan sponsors must implement new compliance program requirements and incorporate standards in downstream subcontracting relationships. Plan sponsors must suspend payment to network provider following a state s determination of a credible allegation of fraud. 24

25 Program Integrity Proposals: States must audit Plan sponsors encounter and financial data at least every three years. Codifies ACA s 60-day overpayment provisions Contracts must contain a provision to ensure that the Plan sponsor reports when it has identified the capitation payments or other payments in excess of the amounts specified in the contract. Provision applies to any overpayment (i.e., not solely capitation amount) No information as to what constitutes identification of payments in excess of contract amount 25

26 5. State Monitoring Requirements States must implement a Medicaid managed care monitoring strategy. Minimum areas include: administration and management, appeal and grievance systems, claims management, enrollee materials and customer services, finance and medical loss ratios, information systems and encounter reporting, marketing, medical management and utilization management, program integrity and provider network management, quality improvement, LTSS delivery, other items of the contract as appropriate Readiness reviews of Medicaid managed care plans prior to effective start date (required submission to CMS prior to contract approval) 26

27 6. Network Adequacy Challenges identified (see, e.g., OIG, OEI ): Ensure access to health care providers Existing standard: Each Plan sponsor must maintain a provider network sufficient to provide adequate access to all services. Plan sponsor must consider (i) anticipated enrollment, (ii) expected utilization, (iii) numbers and types of providers required to furnish the contracted services, (iv) number of contracted providers accepting (or not accepting) new patients, and (v) the geographic location of providers and enrollees. 27

28 Network Adequacy Proposals: Establish minimum standards for network adequacy States must establish and publish on their websites time and distance standards for select provider types: Hospitals Primary care (adult and pediatric) Specialists (adult and pediatric) Behavioral health (adult and pediatric) Obstetrics/gynecologists Pharmacy Pediatric dental 28

29 Network Adequacy Proposals (cont d): States must consider specified elements when developing network adequacy standards (e.g., anticipated Medicaid enrollment, number of professionals needed to provide the contracted services, number of network providers not accepting new Medicaid patients, geographic location of network professionals and Medicaid patients). Time and distance standards may vary by provider type and geographic area (i.e., states may vary standards to accommodate numbers of providers practicing in a defined geographic area). States must consider the ability of health care professionals to communicate with limited English proficient enrollees in their preferred language. 29

30 7. Beneficiary Protections QHPs may market to Medicaid enrollees, including when QHP is also a Medicaid managed care plan. Required 14-day FFS coverage during which potential Medicaid enrollee may choose his or her Medicaid managed care plan Required provision of choice counseling by state (with independent, COI-compliant brokers) 30

31 8. Quality Standardized set of performance measures and performance improvement projects to be developed through rulemaking, alongside state-specific measures States must develop and update at least once every three years a comprehensive quality strategy across Medicaid programs. No less than once every three years, states must review and reissue approval of plans on the basis of plan performance standards. Participation review process must be at least as stringent as private accreditation standards 31

32 Quality Medicaid managed care quality rating system Consistent in format and scope to QHP system 3-5 year development process with robust public engagement Must use summary indicators of clinical quality management, member experience, and plan efficiency, affordability, management Requirement for quality improvement strategy would apply to all state Medicaid programs as a state plan administration requirement, i.e., not specific to use of managed care by state. 32

33 9. Care Coordination Expand care coordination definition beyond medical care to include a range of community-based social support services Establish standards for care coordination, assessment and treatment plans Plan sponsors must coordinate care transitions Best effort requirement to complete initial HRAs for new enrollees within 90 days of enrollment 33

34 Care Coordination States must have transition of care policies governing movement of Medicaid enrollees between Medicaid FFS and managed care, or between managed care plans. Required transition period in which an enrollee changing plans may continue to receive services from current providers 34

35 10. Managed Long-Term Services and Supports LTSS as defined in Proposed Rule: services and supports provided to beneficiaries of all ages who have functional limitations and/or chronic illnesses that have the primary purpose of supporting the ability to live or work in the setting of their choice, which may include the individual s home, a provider-owned or controlled residential setting, a nursing facility, or other institutional setting. Considerable state flexibility to use Medicaid funding to provide LTSS (state plan services, waivers, other programs) Annual Medicaid Expenditure: $150+ billion (KCMU, 2013) 35

36 Medicaid LTSS Spending,

37 Growth in Medicaid LTSS Expenditures,

38 Managed Long-Term Services and Supports Codifies managed long-term services and supports standards and best practices, including: State-developed time and distance standards Comprehensive enrollee assessment and regular updates of treatment plans Assurances that authorization standards do not disadvantage enrollees with chronic conditions or long-term support needs Sponsor may not discontinue coverage pending an appeal If the provider of a Medicaid enrollee receiving MLTSS is not in-network, enrollee may switch to FFS Medicaid. 38

39 11. State-Led Payment and Delivery System Reform: Value-Based Purchasing Existing law: 42 CFR 438.6(c)(4): Capitation rate paid to Plan sponsors is limited to the cost of covered services under the contract and associated administrative expense. 42 CFR : State must ensure that no payment is made to a provider for a service covered under the contract other than payment to the Plan sponsor, with certain limited exceptions). 39

40 State-Led Payment and Delivery System Reform: Value-Based Purchasing Proposals: CMS formalizes policy that states may require Plan sponsors to: adopt value-based purchasing for provider reimbursement (e.g., pay for performance, bundled payments, and other service payment models rewarding value and outcomes over the volume); and/or participate in multi-payer delivery system reforms or performance improvement initiatives (e.g., patient-centered medical homes, provider health information exchanges); and/or adopt a minimum fee schedule or provide a uniform dollar or percentage increase for all providers that provide a particular service under the contract. State must receive prior approval from CMS before imposing any contractual arrangement that directs Plan sponsor expenditures. 40

41 12. Care in Alternate Settings, Including Institutions for Mental Disease Clarifies in lieu of standard: Plan sponsors have flexibility to provide alternative services or services in alternative settings in lieu of covered services or settings if (i) cost-effective, (ii) on an optional basis, and (iii) to the extent enrollee agrees would offer medically appropriate care. 41

42 Care in Alternate Settings, Including Institutions for Mental Disease Existing law: No Federal Financial Participation for the cost of services for adult beneficiaries ages during the period that the beneficiary is a resident of an IMD Proposals: States may provide Plan sponsors with monthly capitation payments for an enrollee receiving inpatient treatment in an IMD, as long as stay is no more than 15 days. Would partially overturn exclusion for institutions for mental disease 42

43 Concluding Themes Most significant proposals for Medicaid managed care program in 10+ years Potential to address issues such as: Reported coverage and access challenges; Disruptions from churn (through improved care coordination); Quality of care Aligns Medicaid managed care, where feasible, with other sources of coverage ( consistency, administrative burden) 43

44 Concluding Themes Competing interests of beneficiary advocates, providers and Plan sponsors (e.g., network adequacy, payment rates) Costs States Plan sponsors Tension between increased federal oversight (and administration) of Medicaid managed care plans and deference to state agencies 44

45 Questions? J. Peter Rich Ariane Tschumi McDermott Will & Emery, LLP McDermott Will & Emery, LLP 2049 Century Park East, 38 th Floor 500 North Capitol St NW Los Angeles, California Washington, DC (310) (202)