CMS’s 2020 Final Medicaid Managed Care Rule: A Summary of Major Changes

Managed care is the predominant Medicaid delivery system in most states, with over two-thirds of beneficiaries enrolled in comprehensive risk-based managed care organizations as of July 2019, and millions of others covered by limited-benefit risk-based plans or primary care case management programs. On November 13, 2020, the Centers for Medicare and Medicaid Services (CMS) finalized revisions to the Medicaid managed care regulations which were proposed in November 2018. CMS previously finalized a major revision to these regulations in 2016, under the Obama Administration. A few months after taking office, the HHS Secretary and CMS Administrator under the Trump Administration released a letter to state governors noting their plan to conduct a “full review of [Medicaid] managed care regulations to prioritize beneficiary outcomes and state priorities.” CMS then released a June 2017 Informational Bulletin, indicating it would use “enforcement discretion” to work with states on achieving compliance with many provisions of the 2016 final rule while the rule was under review.

Most of the new provisions take effect on December 14, 2020, which means that the incoming Biden Administration would have to issue a new notice of proposed rule-making, with a reasonable justification for any changes, to modify the new rule. The changes, including modifications to network adequacy standards and relaxed requirements for accessibility of written health plan materials for people with disabilities and Limited English Proficiency, take effect in the midst of the COVID-19 public health emergency, when states are using various Medicaid emergency authorities to facilitate access to coverage and care during the pandemic.

The November 2020 final rule is not a wholesale revision of the 2016 regulations but adopts changes in areas including network adequacy, beneficiary protections, quality oversight, and rates and payment. Most changes were finalized as originally proposed with very few changes between the Trump Administration’s proposed to final rule. Key changes between the new Trump Administration rule and prior Obama Administration rule include the following:

Network adequacy. The 2020 final rule removes the requirement that states use time and distance standards to ensure provider network adequacy and instead lets states choose any quantitative standard.

Beneficiary protections. The 2020 final rule relaxes requirements for accessibility of written materials for people with disabilities and those with limited English proficiency; modifies some provider directory requirements; and changes the timeframe within which plans must tell enrollees that a provider is leaving the network. It also lets states shorten the timeframe for enrollees to request a state fair hearing and eliminates the requirement for enrollees to submit a written appeal after an oral appeal.

Quality oversight. The 2020 final rule revises the requirement that a state’s alternative managed care quality rating system (QRS) yield information substantially comparable to the CMS-developed QRS; clarifies that health plan encounter data must include allowed and paid amounts; allows but does not require states to broaden the definition of disability when addressing health disparities under states’ managed care quality strategies; and requires states to annually post online which health plans are exempt from external quality review.

Rates and payment. The 2020 final rule allows states to set capitation rate cell ranges instead of a single rate per cell. It also expressly prohibits states from varying capitation rates based on the amount of federal financial participation for covered populations in a manner that increases federal costs. Under the final rule, states also cannot retroactively add or modify risk-sharing mechanisms after the start of a rating period. The final rule recognizes two minimum fee schedules for directed payment arrangements from health plans to providers; codifies sub-regulatory guidance for multi-year approvals of value-based purchasing models; and allows states to make new supplemental provider pass-through payments for up to three years when transitioning populations or services from fee-for-service to managed care.

Table 1: Key Provisions in CMS’s November 2020 Medicaid Managed Care Rule
Topic	2016 Final Rule	2020 Final Rule (effective 12/14/20, unless otherwise noted)
Network adequacy	Required states to develop and enforce enrollee travel time and distance standards.	Allows states to choose any quantitative standard.
Beneficiary information	Required taglines in large print and locally prevalent non-English languages on all written materials. Required paper plan directories to be updated monthly. Established timeframe for plans to notify enrollees when provider leaves network.	Requires taglines only on written materials determined critical to obtaining services. Requires paper directories to be updated quarterly if mobile-enabled electronic version is available. Modifies timeframe within which plans must notify enrollees when provider leaves network.
Appeals	Required states to provide enrollees with 120 days to request a state fair hearing after the health plan appeal notice of resolution. Required enrollees to submit a written signed appeal after an oral appeal.	Allows states to provide enrollees with 90 to 120 days to request a state fair hearing after the health plan appeal notice of resolution. Eliminates requirement for written signed appeal after oral appeal.
Quality rating system	Allowed states to adopt an alternative quality rating system (QRS) that yields information substantially comparable to the CMS-developed QRS.	Requires a state alternative QRS to yield information substantially comparable to the CMS-developed QRS only to the extent feasible.
Encounter data	Conditioned federal matching funds on state reporting of encounter data.	Clarifies that plan submission of encounter data must include allowed and paid amounts.
Quality strategy	Required state quality strategy to address health disparities for enrollees with disabilities, identified as those who are eligible for Medicaid based on a disability.	Allows states to adopt a broader definition of disability when addressing health disparities In state quality strategy, effective for all quality strategies submitted after 7/1/21.
External quality review	Required states to have an external quality review (EQR) for health plans.	Requires states to annually post online which health plans are exempt from EQR.
Capitation rate development	Required states to set a single rate per cell.	Allows states to set a rate range per cell, effective for contract rating periods beginning on or after 7/1/21. Expressly prohibits states from varying rates based on the amount of federal financial participation for a covered population in a way that increases federal costs. Clarifies that states can adjust certified rates within a rating period by +/-1.5% without submitting a revised certification to CMS. Prohibits states from retroactively adding or modifying risk-sharing mechanisms after the start of the rating period.
Payment	Allowed states to adopt minimum or maximum fee schedules for plan payments to providers. Phases out pass-throughs of state supplemental provider payments in capitation rates.	Recognizes 2 minimum fee schedules for states’ directed payment arrangements from health plans to providers. Allows new pass-throughs of supplemental provider payments up to 3 years when states are transitioning populations or services from fee-for-service to managed care, effective for rating periods beginning on or after 7/1/21. Codifies guidance on multi-year approvals of value-based purchasing models.