Explaining the New Medicaid Managed Care Regulation – Center for Children and Families

Medicaid managed care plans have long included services-in-lieu of services (ILOS), which are services provided in lieu of traditional state Medicaid plan services. For example, a managed care plan may include a community-based depression screening instead of an in-office screening visit. In 2016, CMS defined ILOS contours in regulations for the first time. In the final managed care regulations announced last month (the “Managed Care Rule”), CMS updated the definition and oversight of ILOS in important ways that should both increase flexibility in the use of ILOS as a health improvement tool AND increase the integrity of ILOS spending. (You can see all of our blogs about the managed care rule and the accompanying access rule here.)

ILOS background

Let’s start with a reminder Why ILOS are very important. The fundamental premise of Medicaid managed care is that capitated managed care plans will provide an incentive to make efficient, innovative investments in health services beyond traditional state plan services. However, the long-term mechanism for such ‘value-added services’ raises incentive problems. These “additional” services are not counted in determining plan capitation rates. Moreover, if successful, additional services may in fact reduce future plan rates because they reduce the need for future services. Furthermore, additional services may also be counted as “administrative” expenses rather than “services” for medical loss ratio (MLR) purposes, making the plan look ineffective. In short, there are major disincentives to planning to provide value-added services that go beyond traditional state Medicaid plan services.

ILOS help solve this problem because they replace state Medicaid plan services, and therefore CMS, in the past he let them count for rate setting and on the services side of the MLR ledger (and the new rule codifies this for ILOS). This means that if a service can be included in ILOS (rather than as a value-added service), there is a stronger incentive for the managed care plan to provide that service and therefore the services are much more likely to be delivered. In recent years, ILOS has become an especially important tool for states as states consider how to creatively expand access to services that meet health-related community needs (HRSN) but are not traditional state plan services. ILOS can be a tool to provide these services AND ensuring that rates reflect costs – so that they are actually quoted in practice.

Extended ILOS definition

The first and most important thing the new managed care rule does is expand the definition of ILOS services. The current regulatory definition reasonably requires that they be “medically appropriate and cost-effective,” but also tends to limit ILOS to services that are an accurate and direct substitute for state plan services (such as my community-based screening rather than the office-based screening above ). ). The new definition will clearly include services that are “direct or”. longer period replaces a covered service or setting” or “can be expected to reduce or prevent the need came to use a covered service or setting.” For example, CMS suggests in the rule’s preamble that the state could fund meals tailored to the needs of people with diabetes based on potential reductions in emergency room visits and hospital stays.

By taking into account long-term substitution and future needs, the new definition opens the door for countries to creatively use ILOS to strategically prevent and address unmet HRSNs. It is important to note that while this definition is new in the regulations, CMS has already leaned toward it in practice over the past few years by approving ILOS that invest in HRSNs in several states (e.g., California). The new definition, along with the protections for individuals described in the next section, officially goes into effect on July 9, 2024 (the effective date of the Managed Care Rule).

Protection of people using ILOS

The second and most important thing that the Managed Care Rule does is codify many of the protections that CMS has built into ILOS policy guidelines in recent years. These include requirements that: (1) individuals accessing ILOS have all rights and protections that apply to traditional Medicaid managed care services (including the right to appeal); (2) individuals retain the right to receive State plan services, regardless of whether they were offered, used, or previously used ILOS; (3) ILOS may not be used to discourage access to state plan services; (4) plans must describe these protections in their registrant handbooks; and (5) states must include these requirements in plan contracts. These safeguards will help ensure that addition ILOS substitute service options do not result in a reduction in access to traditional services covered by Medicaid.

However, CMS will also need to ensure that the payment policy ensures that managed care is actually and sufficient to provide financial resources Both alternative and traditional services; especially if CMS expects ILOS to sometimes represent “long-term” health investments. CMS will also need to provide providers and Medicaid enrollees with sufficient information about available ILOS options. Finally, the CMS rule includes certain protections, including public policy changes, for Medicaid enrollees that apply if a state or managed care plan withdraws the ILOS option.

Supervision of the use and expenditure of ILOS

The third important thing the managed care rule does is increase oversight of ILOS. Overseeing ILOS can be a challenge. For example, consider a country offering ILOS, a new, innovative preventive service. By definition, it will often not be a service with a long and predictable healthcare experience. It can be difficult to predict how often a service will be used or how much it will cost over time. Because cap rates are actuarial estimates utilization and spending, it will be difficult to accurately fund managed care to account for some of these ILOS. In addition, of course, some ILOS may prove more effective in improving health than others. To ensure that ILOS spending is appropriate, effective, and provides value to Medicaid, the managed care rule establishes several new rules for oversight of ILOS use and spending. The provisions described in this section are effective for rating periods beginning on or after September 9, 2024.

The regulation requires states to document the content and basis of the ILOS provided, including: the name and definition of the ILOS, the type of service being replaced, medical documentation of the appropriateness and cost-effectiveness of the ILOS, and the clinically defined target population for the ILOS. State contracts must also require plans to use specific codes to identify ILOS in encounter data so that services are easier to track and monitor.

States will also be required to submit at least three separate annual ILOS reports: (1) predicted QUANTITY poll tax as a percentage of total capitalization (for the coming year); (2) final report on actual ILOS poll tax paid as a percentage of the total capital paid; and (3) a summary report of the actual ILOS expenses based on claims and encounter data from managed care plans. States will have increased documentation requirements if their predicted ILOS capitalization exceeds 1.5% of total capitalization and an additional retrospective assessment report must be submitted if their final the percentage of costs exceeds 1.5% of the total capital. Finally, the rule also establishes an external funding limit for ILOS, with 5% of capital being the maximum amount allowed for the projected or final percentage of costs. This combination of surveillance requirements should help ensure CMS traceability What is paid and how much is paid, with a 5% barrier implemented to ensure that ILOS expenditure does not overtake supervision.

The rule also includes requirements for states to adjust ILOS rates if the ILOS option expires (new requirement) or the actual payment deviates too much from projected rates (clarification of current policy), and new processes related to the expiration of the ILOS option, including a transition plan for the requirement.

The disappointing news is that while CMS has developed strong new oversight rules, the regulation does not contain similarly broad requirements for public transparency all ILOS supervisory information that will be collected. Instead, CMS suggests that existing public availability of managed care contracts and T-MSIS data may satisfy public interest Some surveillance data. However, other key information, such as annual reports on actual ILOS expenditure, will simply not be available for now. (CMS actually said it would “take this into consideration in the future”).

Application

The ILOS provisions of the new managed care rules confirm the arrival of a new era in Medicaid. State Medicaid programs and related managed care plans now have explicit authority to expand managed care services, including primarily HRSN-focused services. Considering that more than 80% of people on Medicaid are in managed care, this is significant progress. At the same time, CMS has worked diligently to implement oversight policies that should help protect the integrity of the Medicaid program as the expanded ILOS definition leads to new types of services and spending. We hope that CMS will take action soon to address the final missing pieces regarding public transparency of ILOS spending.

(This is part of a blog series on two key federal regulations aimed at improving access to care for Medicaid and CHIP enrollees across various delivery systems. Learn more about “Ensuring Access to Medicaid Services”” and the “Medicaid, CHIP Managed Care Access, Finance and Quality” policies here.)