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September 4, 2014Cindy Mann
Director, Centers for Medicare & Medicaid Services Department of Health and Human Services
P.O. Box 8016
Baltimore, MD 21244–8016 Dear Director Mann:
On behalf of Medicaid Health Plans of America (MHPA), I would like to thank you for leading the efforts at the Centers for Medicare & Medicaid Services (CMS) to update federal regulations for states and Medicaid managed care entities, and to promote access to health care services for Medicaid beneficiaries. As you know, the health care system, including Medicaid managed care, has undergone significant transformation since 2002 when the current regulations were last updated. MHPA’s member plans appreciate the opportunity to inform the process with the goal of ensuring that the forthcoming regulations meet the needs of all Medicaid stakeholders including
beneficiaries, states, providers, and Medicaid managed care organizations (MCOs).
As the national trade group representing MCOs, MHPA’s members include 123 plans that contract with state Medicaid agencies to assume the full risk of covering the valuable health services and benefits delivered to Medicaid beneficiaries, our nation’s poorest and most vulnerable individuals. MHPA member plans currently serve about 20 million Medicaid beneficiaries nationwide. Today, full risk managed care covers over half of all Medicaid recipients in the country, and this percentage continues to grow.
As managed care has become the predominant payment and delivery system for Medicaid throughout most of the country, regulations that help create a strong and viable managed care program are extremely important. The following sections of this letter address some of the ways in which MHPA believes that CMS can accomplish this goal with the latest regulatory update.
Rate-Setting and Actuarial Soundness
The Actuarial Standards Board established the following definition of actuarial soundness in its December 2013 draft actuarial standard of practice. MHPA requests that CMS incorporate this definition into part 438.6 of the managed care regulations.
“Medicaid capitation rates are ‘actuarially sound’ if, for business for which the certification is being prepared and for the period covered by the certification, projected capitation rates, and other revenue sources provide for all reasonable, appropriate, and attainable costs. For purposes of this definition, other revenue sources include, but are not limited to, expected reinsurance and governmental stop-loss cash flows, governmental risk-adjustment cash flows, and investment income. For purposes of this definition, costs include, but are not limited to, health benefits; health benefit settlement expenses; administrative expenses; government-mandated assessments, fees and taxes; and the cost of capital.”1
1
Actuarial Standards Board, Medicaid Managed-Care Capitation Rate Development and Certification, December 2013.
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MHPA recommends that language be added to 42 CFR part 438.6 (c) (i) that includes in the definition of “actuarially sound capitation rates” an explicit requirement that rates include both medical costs as well as the cost of doing business in the state.
Transparency
Currently there is a lack of transparency (and often a lack of predictability) in the current rate-setting process that creates challenges for ensuring that rates are, in fact, actuarially sound. MHPA believes that some important modifications to the existing regulations would improve transparency and predictability for all stakeholders including:
Establishing a mechanism for plans to request additional review of the actuarial soundness of a state’s MCO rate setting process and/or methodology.
Requiring a greater level of transparency in state practices related to rate setting. Specifically, CMS should require states to share their actuarial memorandum with MCOs before contracts are signed. In addition, the state’s actuary should also share the assumptions made in setting rates and any other backup materials used in the development of
benefit/reimbursement adjustments to ensure they are developed appropriately.
Requiring an evaluation by states of the effect of rate reductions on access to care and to provide plans with access to data and methodologies used for this evaluation.
Requiring the timely establishment of rates by states and approval of rates by CMS before coverage year begins.
As new medical procedures, devices, and medications come onto the market and become available to Medicaid beneficiaries, it is also important that Medicaid managed care regulations support a clear, transparent process for capitation rates to be appropriately set and adjusted to account for new, higher-cost procedures and medications. The importance of this is illustrated by FDA’s recent approval of sofosbuvir, or Sovaldi®, a new hepatitis C drug, which costs $84,000 per average dosage regimen. Given the significant gap in time between setting of MCO capitation rates and the approval of Sovaldi®, it is clear that the full price/costs of Sovaldi® could not have been known and fully accounted for. As a result, MCOs are facing enormous challenges in covering the costs of the full regimen of this drug. In order to ensure patients have access to needed products, states in collaboration with MCOs should be granted the flexibility to periodically adjust rates to reflect the entry of new, high cost products to the market.
Non-Deductibility of Taxes
Significant confusion persists among states regarding the treatment of taxes and fees, including the health insurer fee imposed under section 9010 of the Affordable Care Act. MHPA’s May 13 letter to CMS explains the need for clear, written guidance to states on the treatment of taxes and fees under section 9010 of the ACA. Consistent with our recommendation that CMS adopt the Actuarial
Standards Board definition of actuarially sound rates above, we also recommend that CMS provide guidance to states that they adopt the Board’s December 2013 draft actuarial standard of practice,
Medicaid Managed-Care Capitation Rate Development and Certification, which explains that taxes and fees that apply to Medicaid managed care entities should be treated as follows -
“The actuary should include an adjustment for any taxes, assessments, or fees that the MCO(s) are required to pay out of the capitation rates. If the tax, assessment, or fee is not deductible as an expense for corporate tax purposes, the actuary should apply an
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Again, the ASB’s recommendation acknowledges the importance of ensuring Medicaid plans are robust and able to meet all of the care coordination needs of their members. Moreover, MHPA plans meet quality measures and deploy quality improvement projects that produce positive health outcomes. Through our health plans’ partnership with state Medicaid agencies, MHPA health plans provide valuable cost savings and budget predictability to states in a time of sweeping changes to our health care system, uncertainty, and tight budgets. MHPA requests that the definition of an actuarially sound payment at 42 CFR part 438.6 (c) (i) include coverage of any costs that plans incur as a result of taxes and fees that are not deductible for tax purposes.
Medical Loss Ratio (MLR)
The Medicaid population has unique needs that are unlike those of commercial populations. Medicaid beneficiaries have higher needs for care coordination and disease management, and they benefit from the innovative programs that Medicaid health plans provide to serve these needs. Some examples include: medication adherence, diabetes management, cultural and linguistic programs, programs that target mental health and substance use disorders, care management activities, coordination with other government entities (i.e., departments of housing or
departments of justice) as well as coordination with community-based organizations.
MHPA believes that the application of a one-size-fits-all minimum MLR would create significant operational challenges for MCOs and threaten many types of innovative programs noted above, as they do not all fit neatly into the health care or quality improvement portion of the MLR. States should be able to retain flexibility to determine if a minimum MLR makes sense given the needs of their unique populations and the types of plans serving the state's Medicaid beneficiaries. For example, a CHIP program with low medical costs may require a higher percentage of administrative expenses to cover basic fixed costs. Similarly, a high medical cost plan that includes long term support services may require a higher administrative load due to the greater care coordination efforts needed to get members to the appropriate services. Additionally, plans are also responsible for managing pass-through payments for other programs, such as accountable care teams and health homes, which may increase plans’ administrative costs.
As a result, MHPA opposes the application of a federal minimum MLR standard in the Medicaid program for the following reasons:
Capitation rates are prescribed by states and already have an embedded MLR that is certified by the state’s actuary. As a result, a separate MLR for Medicaid plans is unnecessary and redundant.
States also set Medicaid Fee-For-Service (FFS) rates, which serve as the basis for
establishing MCO provider payments. That said, many MCOs pay above the state’s FFS rates in order to ensure provider participation to meet access to care standards. Because
actuaries often use FFS rates as the basis for calculating the imbedded MLR in the capitation rates, establishing a separate minimum MLR would distort the actuarial soundness of the capitation rates and work against MCOs that pay above the state’s FFS rates.
Because states adjust capitation rates annually based on plans’ financial performance, imposing a separate MLR reduces the administrative resources that serve as an incentive for health plans to invest in programs that may reduce unnecessary utilization or acute care cost and achieve overall cost savings.
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MCOs are legally required to meet certain outreach, enrollment, and care coordination requirements that may cause them to experience higher administrative costs than commercial health insurers. By imposing an MLR in Medicaid, these requirements fail to acknowledge that MCOs may experience higher administrative costs as a result of additional outreach and coordination activities they have to perform.
Implementing an MLR has the potential to create adverse incentives for plans to promote appropriate patient care. For example, a tight MLR creates incentives for decision-making to be directed toward services for which the medical portion of the costs is significantly
greater than the administrative portion. This can reduce the health plan’s ability to support and facilitate early intervention, care coordination, disease management, and other patient-centered care activities.
Implementing and administering an MLR within Medicaid is particularly complex because Medicaid covers several very unique subpopulations. As a result, medical costs, and fixed administrative costs vary for different populations. For example, children covered by Medicaid typically have lower medical costs and fixed enrollment costs. Conversely, LTSS members have very high medical costs relative to administrative costs. In addition, states often carve some populations and benefits out of managed care (e.g. aged, blind and disabled beneficiaries or the pharmacy benefit) and not all MCOs within a state contract to cover the same mix of populations and benefits. This variation creates additional
administrative complexities for states and plans and makes it difficult to ensure a level playing field across plans.
Upper Payment Limit
Currently, states have authority to claim federal Medicaid matching funds for supplemental Upper Payment Limit (UPL) payments meant to serve as an invaluable source of funds that protect safety-net hospitals programs and certain types of providers against the challenges posed by the rising costs of uncompensated care. In many states and for certain providers these UPLs are currently calculated using Medicaid FFS utilization. These UPL funds often outweigh the initial projected savings that Medicaid MCOs can provide to states, making states reluctant to implement or expand managed care within their Medicaid program. However, instead of forfeiting federal UPL funds, states can look to innovative policy options that preserve the existing flow of UPL funds while removing barriers to Medicaid managed care. CMS has historically afforded states the opportunity to develop flexible payment models that promote the ability of states to capture additional funding in managed care programs. These flexible approaches have ensured appropriate funding to support safety-net providers without undermining the success of managed care models.
In the current environment, the lack of a regulatory remedy has caused many states to postpone the introduction and expansion of Medicaid managed care. In addition, to expand managed care, states often have to invest substantial resources in order to file the appropriate 1115 Medicaid waiver, which can prove challenging. As Medicaid managed care has proven effective at controlling costs and providing high-quality of care, CMS should work to remove barriers to the introduction and expansion of Medicaid managed care, as well as to promote policies that protect providers, states, and beneficiaries.
MHPA recommends that federal regulations be revised to permit managed Medicaid days to be counted towards the hospital UPL, subject to the limitation that total additional UPL-related federal payments not exceed specified annual ceilings. This approach would begin by establishing an overall annual ceiling on extra federal funds paid through the UPL mechanism for each state. The ceiling would be based on each state’s existing stream of added federal funds. Further, the ceiling
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would be trended upwards annually in accordance with an appropriate inflation index and would be adjusted for changes in overall Medicaid eligibility and/or inpatient volume. MHPA emphasizes that regulatory changes should not compromise current MCO protections in negotiating provider rates.
Enrollee Rights and Protections
Currently, states must ensure that MCO enrollees have basic rights that comply with state and federal law. These basic rights include the right to receive information on available treatment options and alternatives presented in a manner appropriate to the enrollee's condition and ability to understand.
Since the federal Medicaid managed care regulations were last updated, an explosion in
technological advances has increased the options for communicating with individuals about their health care needs and coverage. Medicaid beneficiaries are using the internet, cell phones, smart phones, text messaging, and other devices in their daily lives. As a result, MHPA recommends that CMS recognize the rapid evolution in technology and allow for the appropriate use of new
communication tools to deliver information to enrollees in a meaningful and efficient way.
HHS has already recognized the value of increased public use of cell phones and text messaging on population health. For example, HHS’s partnership with Text4baby—a public private partnership that sends women free texts every week throughout their pregnancy and until a baby reaches one year of age. A recently released study on Text4baby, headed by the Milken Institute School of Public Health at the George Washington University and the Madigan Army Medical Center, found that women exposed to Text4baby were more likely to develop a stronger understanding of the importance of pre-natal care, vitamins, and alcohol usage risks.
As currently written, the managed care regulations state that beneficiaries have the right to receive information on available treatment options and alternatives presented in a manner appropriate to the enrollee's condition and ability to understand. As more Medicaid beneficiaries gain access to new technological devices, MHPA recommends that CMS allow MCOs to use these communication tools in meaningful ways to assist and benefit beneficiaries.
In addition to adopting appropriate rules for the use of technology, like cell phones and the Internet, to engage Medicaid beneficiaries, CMS should consider establishing policies that permit broader adoption of emerging technologies. MHPA recognizes that barriers may exist within state-level policies and not at the federal state-level, but the revision of Medicaid managed care regulations presents an opportunity for CMS to permit states to contemplate emerging technologies that have the potential to improve access and ultimate care for beneficiaries.
Marketing
While current regulations govern MCOs’ marketing of Medicaid products to Medicaid managed care enrollees, MHPA recognizes that some MCOs may now also be offering qualified health plan (QHP) products on the Marketplace. As such, it is possible that current federal Medicaid managed care marketing rules could limit these issuers’ ability to communicate with potential enrollees in a QHP product. This could create an uneven playing field between MCOs and traditional commercial insurers, as commercial insurers offering QHPs are not subject to Medicaid managed care
marketing restrictions. The regulations should be rewritten to align MCO marketing guidelines with QHP guidelines.
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MHPA would also support modernizing the marketing rules to provide the appropriate balance between beneficiary protections and plan flexibilities to perform outreach to specific populations, including the uninsured. Further, we recommend that CMS provide additional clarity to help states distinguish “marketing” from “outreach” as well as how to distinguish activities that require prior state approval (e.g., billboards).
Quality
Currently, states implementing a Medicaid managed care program are required under federal rules to enforce certain health plan quality requirements through MCO contracts. Specifically, states must contractually require that each MCO maintain an ongoing quality assessment and
performance improvement program, measure performance regularly, and contract with an External Quality Review Organization, in addition to maintaining a certain level of beneficiary access. As CMS revisits the quality provisions of the managed care regulation, MHPA would like to promote the following principles for consideration. Principles for an effective quality measurement program within Medicaid include:
Plan rates should be actuarially sound before the application of any performance incentives, including bonus payments used to improve quality.
Where MCOs operate in tandem with other models such as PCCM or ACOs, all models should be required to apply the same performance measurement criteria.
Quality measures should rely on national, field-tested, widely accepted, and peer-reviewed NQF-endorsed standards (for example, HEDIS measures). Selected measures should have baseline data readily available. To encourage reporting uniformity, there should be a limited set of standardized measures in place, for which all plans must report. This allows states to make meaningful comparisons between health plans and between states.
As measures change over time, the process for modification should include a well-defined timeline, entail a transparent process, and stakeholder engagement.
Any changes to the standardized set, including the addition, elimination, or modification of measures should be applied prospectively.
As the Medicaid managed care program expands and plans become more familiar with the health care needs of members, care management and member health should
improve. Therefore, the core set should include an improvement measurement system, similar to those used in other federal programs.
Measures applicable to only limited populations within a plan can result in skewed outcomes. States should work with participating MCOs to ensure that measurements are based on credible data samples. Specifically, given the expected rate of churn for the Medicaid population, plans should only be required to report metrics for beneficiaries enrolled with the plan for at least twelve consecutive months.
New plans and newly covered populations/services will need time to develop full capacity, including time to develop baseline data for evaluating performance. Similar to Medicare Advantage, these MCOs should be noted as “too new” for measurement until they have had sufficient time to develop full capacity.
A methodology should be developed to enable valid quality comparisons across states that factor in population differences and risk.
CMS should encourage states to "deem" accreditation so that plans are not required to undergo multiple review cycles.
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Since QHPs will be required to attain accreditation, states may seek to standardize MCO requirements across markets. Uniform standards will streamline the accreditation process by utilizing a single set of accreditation requirements for MCOs choosing to operate in Medicaid and as a QHP.
Principles that effective quality measurement programs should avoid:
Reliance on untested, hybrid measures that lack an established baseline or particular relevance to enrollees in a specific plan.
Implementing measures that are slightly different from those that plans are already required to report to NCQA. This requires plans to expend additional resources to collect and report similar findings, which unnecessarily diverts dollars away from more productive and meaningful activities for beneficiaries.
Program Integrity
States and MCOs already employ strong program integrity protections, often making federal regulation unnecessary and duplicative. For example, the Commonwealth of Virginia has
established the VA Managed Care Program Integrity Collaborative (VMCPIC) to provide a venue for the state and MCOs to partner with one another, by regularly meeting to discuss specific efforts to combat fraud, waste and abuse. Currently, the states and the MCOs are collaborating to redefine the quarterly fraud and abuse report to more accurately capture and quantify Program Integrity Plans, which prevent unnecessary waste and recover millions of Medicaid dollars every year.
Further, MCOs have strong natural incentives to ensure program integrity and currently invest heavily in a variety of tools and techniques as part of their Program Integrity Plans. MCOs’ programs are systematic and data-driven as they rely on data analysis, system edits, educational programs, and investigations.
Churn Mitigation
To the extent that CMS is focused on policies for mitigating the impact of churn as beneficiaries transition between Medicaid and commercial coverage, we offer the following issue specific suggestions:
Beneficiary Education: MHPA encourages CMS to develop tools for beneficiaries and enrollment facilitators to better understand the renewal process and special enrollment periods. This will help to reduce the impacts of churning between Medicaid, CHIP and the Marketplace, by equipping individuals and families to make better choices about coverage options with aligned benefits, providers and cost-sharing. We recognize and commend CMS for its efforts in furthering consumer education, but believe there remains a need for further education targeted to the churn population.
Benefits: The two main benefits that differentiate Medicaid from commercial coverage are non-emergency medical transportation and early periodic screening, diagnosis, and
treatment (EPSDT). These existing benefits are important for Medicaid beneficiaries and we suggest maintaining them under any coverage option.
Data Sharing: CMS should help facilitate data sharing, including the transmission of diagnosis codes, between Medicaid plans and Qualified Health Plans (QHPs) in the Marketplace to promote better continuity of care and improve risk adjustment. Thank you in advance for considering MHPA’s comments as you develop updated Medicaid managed care regulations. As an important stakeholder organization, MHPA believes a thoughtful,
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deliberate approach to improving managed care regulations should carefully account for the issues outlined in this letter. Please contact Amy Ingham at 202-857-5726 or aingham@mhpa.org should you have any questions.
Sincerely,
Jeff Myers
President and CEO
