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Awaiting New Medicaid Managed Care Rules: Key Issues to Watch

Today, more than half of all Medicaid beneficiaries are enrolled in risk-based managed care organizations (MCOs) through which they receive all or most of their care.1 In addition, many beneficiaries receive at least some services through prepaid health plans that provide limited benefits, such as dental or mental health care, on an at-risk basis. Not all state Medicaid programs contract with MCOs, but a large and growing number are doing so, and some states mandate that beneficiaries enroll in MCOs to receive Medicaid benefits.2 Many states are expanding their MCO programs to include larger geographic areas and more medically complex beneficiaries, and integrating additional services, including behavioral health care and long-term services and supports (LTSS), with physical health care.3 Further, states that have adopted the Affordable Care Act (ACA)’s Medicaid expansion are also relying largely on MCOs to serve the millions of newly eligible adults. In FY 2013, capitation payments to comprehensive MCOs accounted for about 28% of Medicaid spending nationally.4

States design, administer, and oversee their own Medicaid managed care programs within minimum federal requirements set forth in federal Medicaid law and further elaborated in regulations.5 The federal regulations, last updated in 2002, set forth state responsibilities and requirements in areas including enrollee rights and protections, quality assessment and performance improvement (including provider access standards), external quality review, grievances and appeals, program integrity, and sanctions. The Centers for Medicare and Medicaid Services (CMS) is slated to issue a Notice of Proposed Rulemaking (NPRM) this Spring, revising and updating the current regulations. Numerous stakeholders submitted input and recommendations to CMS to consider in drafting the new rules, and the public will have an opportunity to comment on it before CMS finalizes the regulations.

Agency officials have offered some indications about what issues the new rules might address, including rate-setting, stronger beneficiary protections, and easing beneficiary transitions between Medicaid MCOs, Medicare Advantage plans, and Marketplace qualified health plans.6 The new rules also may address areas that have emerged since the last revision, such as managed LTSS. While this brief focuses on key issues to watch related specifically to states’ MCO programs, many of the same issues are implicated for limited-benefit prepaid plans, and parts of the proposed rule may apply, or further extend, MCO requirements and standards to them, too.7  The issues we have identified reflect assessments of Medicaid managed care over the past decade and the concerns and priorities expressed by a wide range of stakeholders, including states and groups representing beneficiaries, MCOs, and health care providers.

Issue Brief

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.