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CMS Issues Revisions to Medicaid Managed Care Final Rule (42 CFR Part 438)

Updated: Nov 20, 2020

On November 9, 2020, the Centers for Medicare & Medicaid Services adopted a final rule (“Final Rule”) revising the regulations governing Medicaid managed care programs. The updated regulations will be published in the Federal Register on November 13, 2020. Athene Law has performed a redline of the new regulations to the prior version of the regulations, which can be accessed here:

Updated Redline - Megareg
Download PDF • 470KB

As a preliminary matter, the future of this Final Rule is as yet uncertain. As we anticipate a transfer of power in January, the new administration may elect to withdraw this regulation or implement it.

The major revisions in this Final Rule affecting healthcare providers are:

1. Directed Payments:

  • A major change in the 2016 overhaul of the Medicaid managed care regulations was a prohibition on states directing payments from Medicaid managed care plans to network providers unless approved by CMS and meeting specified criteria. CMS has confirmed that the State may only direct payments that are tied to specific services, either using State plan approved rates or rates other than the State plan approved rates. This excludes supplemental payments that are not tied to specific services.

  • CMS has clarified that the implementation of directed payments based on a minimum fee schedule using State plan approved rates does not require prior written approval, but must meet the requirements that otherwise would be required for written approval. CMS also would permit standards for multi-year approval for directed payments, previously limited to approval for a single rating period.

2. Pass-through Payments: CMS clarified the authority for states to utilize pass-through payments (payments not related to specific services) as they transition from fee-for-service to managed care.

3. Network Adequacy:

  • The current regulations require states to develop and implement time-and-distance standards for network adequacy for specified provider types. This has been an important backstop for providers in negotiating contracts and an important safeguard for beneficiary access.

  • The Final Rule will grant states more flexibility by setting a “quantitative” network adequacy standard. It is uncertain how this would be implemented as some states like California have already adopted time and distance standards through legislation that continues to be in effect notwithstanding amendments in the Final Rule.

  • The Final Rule also adds pediatric dentistry as a category to be governed by quantitative network adequacy standards.

4. Provider Appeals: The Final Rule confirms that claims denied solely because they do not meet the definition of a “clean claim” do not constitute adverse benefit determinations, triggering the requirement for a written notice to the enrollee.

5. Language Access: The Final Rule also reduces the requirements for providing linguistically appropriate beneficiary information, not unlike CMS’ reductions in protections for limited English proficient patients in the amendments to the regulations implementing Section 1557 of the Affordable Care Act. This is an area that a new administration is almost certain to reconsider in 2021.

For more information on the Final Rule and its impact on providers, please contact Felicia Y Sze.

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