Medicaid Overhaul Includes an MLR Rule

653-page rule handed down yesterday by CMS definitely represents one giant step for Medicaid managed care, and a step taken (for the most part) in the right direction, according to one industry insider.

Jeff Myers, president and CEO of the Medicaid Health Plans of America (MHPA), told us last week to expect something big, and big is what CMS provided for the most substantial change in Medicaid in over a decade.

The rule includes a medical loss ratio (MLR), something commercial health plans know all too well. Under the ACA, health insurers must spend at least 80% to 85% of premium dollars on medical care, or refund the difference to consumers. The new rule says that Medicaid plans will also have to meet the 85% MLR goal, but the penalty would be definitely delayed or even, possibly, discarded, depending on how states react.

However, Vikki Wachino, CMS deputy administrator, tells Kaiser Health News (KHN), that states will take falling short of the MLR goal into account when they set new rates the next year. That’s not exactly music to Myers’s ears.

“CMS is trying to set a profit standard,” he tells Managed Care. “They are arbitrarily trying to tell the states and plans what should or should not be considered medical spend regardless of value to the taxpayer.”

He continues that “given that some states have already set their own minimum MLR that the plans have to comply with, a national standard would hamper each unique state’s flexibility and limit plans’ ability to spend administrative funds that can actually contribute to the care of beneficiaries; essentially it will affect what items can be considered medical versus administrative. Plans need to be able to fine-tune care coordination and quality, which are the hallmarks of managed care, and a federal MLR unnecessarily cuts that ability off.”