Like the proposed rules,[1] the Final Rules[2], [3] are intended to enhance access to Medicaid services and focus largely on services covered and paid by Medicaid managed care plans. In the preamble to the Managed Care Final Rule, CMS describes the critical role that the Medicaid program plays in the U.S. health care system — accounting for 18 percent of national health expenditures — and the increasingly important role of Medicaid managed care plans, given that nearly three quarters of Medicaid beneficiaries are enrolled in comprehensive managed care plans.[4]

The Final Rules place a variety of obligations on states that will necessarily flow down to contracted Medicaid managed care plans. As explained below, in some cases states retain significant discretion with respect to the implementation of the new CMS requirements, and, therefore, plans will need to look to state Medicaid agencies for further guidance. In other cases, the rules are fairly specific, and we expect that nearly identical standards will apply across the country. The new regulations also require oversight by third parties and data reporting by the state, which will be used to evaluate plan performance.

Below we highlight select, noteworthy policies that CMS has adopted in the Final Rules to (A) obtain greater provider payment and overpayment data, and (B) improve beneficiary access and experience. We also briefly summarize additional policies that may be of interest.

Payment and overpayment reporting

1. Provider payment analysis[5]

Plan Requirement. To facilitate “greater transparency and oversight” of managed care payments, managed care plans will be required to submit an annual provider payment analysis to the states. The analysis must:

• Include claims data from the prior rating period to determine the amount paid for evaluation and management current procedural terminology codes for primary care, obstetrics and gynecology, mental health, and substance use services;
• Compare Medicaid managed care plan and Medicare payment rates for identical claims and codes; and
• Include the total amount paid towards home health aides, homemakers, and personal care services.[6]

The analysis will result in an aggregate report and will not require plans to report information about specific payments or individual providers.

State Requirement. States will be required to review these analyses and submit them to CMS. They can also use this data to compare manage care plans and support efforts to improve quality of care and access.

Effective date. The first rating period that begins on or after July 9, 2026.

2. Overpayment reporting[7]

Plan Requirement. The Managed Care Final Rule will require managed care plans to report and investigate overpayments to network providers resulting from fraud, waste, abuse, or other billing errors within 30 calendar days of identifying or recovering an overpayment. States have the “flexibility” to require overpayment reporting within a shorter timeframe. CMS declined to provide detailed guidance about how to determine that an “overpayment” has been “identified,” but stated that states should “work with their managed care plan to ensure theses terms are clearly and consistently defined in their contracts.”

State Requirement. States are expected to use overpayment information to require Medicaid managed care plans to look for and address issues with their provider networks; recover unallowable claims, correct problematic billing practices; and, where appropriate, “consider a potential law enforcement referral.”

Effective date. The rating period for contracts beginning on or after September 7, 2024.

3. Medical Loss Ratio (MLR)[8]

Plan and State Requirements. Medicaid and CHIP managed care plans have been required to submit MLR data since 2016. MLRs help CMS and States to assess whether “adequate amounts of the capitation payments are spent on services for enrollees.”[9] The Managed Care Final Rule implements a number of changes to the processes and standards related to MLR that are generally intended to enhance alignment between Medicaid and CHIP MLR reporting requirements and private health insurance market requirements. Among other things, plans will also be required to separate state-directed payments (SDPs) and other revenue in their MLR reports, and states will be required to report SDP expenditures submitted by managed care plans to CMS.[10] CMS will also require states to impose specific requirements on managed care plans related to provider incentive contracts, including where the contract between a managed care plan and its network provider ties incentive payments to applicable MLRs—e.g., a requirement that provider incentive contracts include a specified dollar amount or percentage of a verifiable dollar amount that can be “clearly linked to successful completion of metrics.”

Effective date. July 9, 2024.

Beneficiary access and experience

1. Wait time standards[11]

Plan Requirement. To improve access to care for Medicaid and CHIP managed care enrollees, CMS has established wait time standards for the following routine appointments:

1. Routine outpatient mental health and substance use disorder: 10 business days
2. Adult and pediatric primary care: 15 business days
3. Adult and pediatric obstetrics and gynecology: 15 business days
4. Services determined by the State: Determined by the state

State Requirement. States will be required to update their contracts to include wait time standards. States will evaluate compliance with these standards — which require the rate of appointment availability to be at least 90 percent — through secret shopper surveys (discussed below).

Effective date. The first rating period that begins on or after July 9, 2027.

2. Secret shopper surveys[12]

Plan Requirement. The Managed Care Final Rule requires states to engage independent entities to conduct annual secret shopper surveys to ensure Medicaid managed care plans comply with the appointment wait time standards described above. Secret shopper surveys will also be used to confirm that managed care plans electronic provider directories contain accurate and up-to-date information. States can also use the surveys to collect additional information to enhance certain program goals and support other types of monitoring.

State Requirement. States will report their survey results related to wait time standards and electronic provider directory data to CMS and post this information on their websites.

Effective date. The first rating period that begins on or after July 9, 2028.

3. Additional requirements

To enhance beneficiary access and experience, the Managed Care Final Rule also requires states to:

• Conduct annual enrollee experience surveys to monitor performance of managed care programs,[13] and

• Ensure their websites comply with certain new accessibility requirements intended to create enhanced transparency, user-friendliness (including for individuals with limited English proficiency (LEP)), and more accurate and functional information for users.[14]

Other Notable Changes

As noted, the Managed Care Final Rule includes significant new policies relevant to state-directed payments.[15] The Final Rule also includes new policies for “In Lieu of Service and Settings” (ILOS).[16] ILOS are a mechanism by which states and Medicaid managed care plans can cover certain alternative services or settings as substitutes for services or settings that would otherwise be covered under a given State Plan. The Final Rule imposes new standards and reporting requirements related to ILOS, and CMS notes that, like state-directed payments, ILOS are areas of growing interest and state uptake, and can have significant fiscal impact on Medicaid programs.

CMS also finalizes a quality rating system for Medicaid and CHIP managed care plans, referred to as the Medicaid and CHIP Quality Rating System (MAC QRS), which states will be required to implement by December 31, 2028.[17] This includes state requirements for implementing the MAC QRS, such as an initial set of mandatory measures for quality ratings (and processes for adding additional future mandatory measures) — as well as new processes for states to implement an alternative QRS. CMS says its objective is for states’ MAC QRS websites to represent a “one-stop shop” for beneficiaries to access key information bearing on their decision-making when evaluating Medicaid and CHIP eligibility and comparing managed care plans.

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If you have any questions about the Final Rules, please contact any of the authors of this alert or the Hogan Lovells lawyer with whom you regularly work.

Authored by James Huang, Lindsey Johnson, and Breanna Reeves