Washington Watch

CMS Medicaid Managed Care Proposal Under Close Scrutiny

Michael Levin-Epstein

Bioterrorism. Medicaid managed care plans. No link between them? Guess again. It all has to do with how proposed Medicaid regulations would affect patients' rights and funding for Medicaid programs ranging from nursing home care to emergency rooms.

In August, the Centers for Medicare and Medicaid Services (CMS, formerly HCFA) delayed implementation of an 11th-hour Clinton administration final rule that would have established consumer-protection and quality-assurance requirements for Medicaid managed care programs. Instead, Health and Human Services Secretary Tommy Thompson proposed new regulations to give Medicaid beneficiaries in managed care plans the same protections that commercial managed care enrollees would receive under pending patient-rights legislation. The new rules would guarantee Medicaid beneficiaries access to emergency room care, second opinions when needed, and the right to appeal adverse coverage decisions.

The proposed regulations build on protections for Medicaid beneficiaries that were created under the Balanced Budget Act of 1997. Specifically, the proposal would ensure that beneficiaries will have:

  • Emergency room care: Health plans must pay for a beneficiary's ER care whenever and wherever the need arises.
  • Access to second opinions: All beneficiaries will be allowed to get a second opinion from "a qualified health professional."
  • Direct access for women's health services: Women can see an in-network women's health specialist without a referral for routine and preventive services now available to Medicaid fee-for-service enrollees.
  • Network adequacy: Managed care plans will have to prove that they have the capacity to serve the expected number of enrollees in their service areas.
  • Marketing activities: States will be required to review plans' marketing materials. Plans are prohibited from using door-to-door, telephone, and any cold-call marketing to Medicaid beneficiaries.
  • Grievance systems: All plans must have a system to accommodate grievances and appeals. Grievances must be resolved within state-established time frames that cannot be longer than 90 days. Expedited times exist for resolving appeals when the life or health of the enrollee is in jeopardy.

MCOs also must provide Medicaid beneficiaries with comprehensive yet easy-to-understand information about their health plans.

States' roles

Under the new regulations, states will have significantly more flexibility. The proposed rules allow states, many of which have already implemented protections, to keep important aspects of existing programs in place.

While the comment period for the proposed rules ended Oct. 19, CMS was, at press time, still reviewing comments. CMS plans to have final regulations in place early in the new year.

In a report titled "Pieces of the Puzzle," the Kaiser Commission on Medicaid and the Uninsured argued that the administration's proposal may not go far enough in safeguarding Medicaid recipients with special health needs, such as those under 2 or over 65, pregnant women, and those in risk-adjusted, high-cost payment categories. "So many things are involved in delivering quality services, it is difficult to reduce essential activities to a tidy list," the authors wrote. And, a spokesman adds, the final form of regulations "is still a pretty big piece of the puzzle."

The National Association of State Medicaid Directors is supportive of the revised regulations. Lee Partridge, health policy director, views them as an improvement over the Clinton version: "The January regulations had many detailed requirements, which we felt were overprescriptive. They assumed all states and plans would do things the same way." His group, as well as the National Governors Association and the National Association of State Legislatures, met with Medicaid advocates to discuss the Bush administration revisions and to present alternatives. "We think the proposed rule would be easier to administer," Partridge says.

Removal of much of the highly detailed language in the January rule will help states, says Jerry W. Friedman, executive director of the American Public Human Services Association. In addition, APHSA worked with state Medicaid leaders, the administration, and industry officials to develop an alternative rate-setting methodology not tied to the fee-for-service upper payment limit (UPL) that is included in the new proposal. The change, he says, should "enable us to set appropriate rates and assist us in sustaining managed care plan participation."

UPL key to all?

The UPL draws attention from Congress and Medicaid officials, and therein lies the bioterrorism connection. The UPL establishes Medicaid payment as 150 percent of Medicare. In a letter to the House leadership, the California congressional delegation wrote that changes to the limit would "severely compromise California's emergency and trauma care system," cutting $300 million annually to "safety net hospitals" if the 150-percent UPL is eliminated.

"With the serious threat of bioterrorism to our country, a viable and capable emergency-and-trauma-care system is critical," the congressmen wrote. "Lives would be jeopardized if ERs and trauma centers are not prepared to respond effectively or are forced to reduce services or even close due to the loss of Medicaid funds that will result under a change to the UPL."

But in a recent audit, HHS' Office of the Inspector General found that some states use their federal Medicaid funds for non-health care purposes (and some have developed new programs under the 150-percent limit to try to increase their Medicaid payments). In November, Virginia lawmakers were moving to use a soon-to-be-outlawed accounting strategy that allows the state to divert $260 million from Medicaid funds to the state treasury to offset falling revenues. Virginia has defended the practice as legal — and Florida, Michigan, and Wisconsin have moved to use the loophole before it closes.

Other states are making varied uses of those Medicaid monies, says the Federation of American Health Systems (FAHS), but it believes the efforts generally are related to health care. The scenario has cities and counties borrowing money on behalf of public nursing homes and transferring the money to the state — which then returns the money to the local governments as Medicaid payments. The state, in turn, receives additional matching Medicaid funding from the federal government. The new rules will prevent that practice in the future, but the four states received waivers from the Bush administration for this year. CMS Administrator Tom Scully has opposed the waivers, but admits he has had no legal basis to reject them.

Scully has proposed scaling back the UPL to 100 percent of Medicare. "That could endanger a lot of programs," one health care executive tells Managed Care, "because most states have budgeted their money, and their legislatures aren't in session. With all these other things going on — such as anthrax attacks — this would not be an opportune time for these kinds of cuts."

FAHS has been generally supportive of the Medicaid-regulation changes, but spokesman Richard Coorsh concurs there is concern about how they could change funding strategies.

While no one is sure what the final rules will say, it is certain that until implementation, they will receive a close examination from all.

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