Vol. 81 Wednesday, No. 61 March 30, 2016

Part V

Department of Health and Human Services

Centers for Medicare & Medicaid Services 42 CFR Parts 438, 440, 456, et al. Medicaid and Children’s Health Insurance Programs; Mental Health Parity and Addiction Equity Act of 2008; the Application of Mental Health Parity Requirements to Coverage Offered by Medicaid Managed Care Organizations, the Children’s Health Insurance Program (CHIP), and Alternative Benefit Plans; Final Rule

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DEPARTMENT OF HEALTH AND M. Scope of Services NQTL Nonquantitative Treatment HUMAN SERVICES N. Increased Cost Exemption Limitation O. Enforcement, Managed Care Rate Setting PAHP Prepaid Ambulatory Health Plan Centers for Medicare & Medicaid and Contract Review and Approval PHS Act Public Health Service Act Services P. Applicability and Compliance PIHP Prepaid Inpatient Health Plan Q. Utilization Control SHO State Health Official R. Institutions for Mental Diseases SUD Substance Use Disorder 42 CFR Parts 438, 440, 456, and 457 S. Medicare-Medicaid Dual Eligible Treasury Department of the Treasury [CMS–2333–F] Beneficiaries IV. Summary of Changes I. Executive Summary RIN 0938–AS24 V. Collection of Information Requirements This final rule addresses the VI. Regulatory Impact Analysis application to Medicaid and the Medicaid and Children’s Health A. Statement of Need Children’s Health Insurance Program Insurance Programs; Mental Health B. Overall Impact (CHIP) of certain mental health parity Parity and Addiction Equity Act of C. Anticipated Effects D. Alternatives Considered requirements added to the Public Health 2008; the Application of Mental Health Service Act (PHS Act) by the Paul Parity Requirements to Coverage E. Accounting Statement and Table F. Regulatory Flexibility Act Wellstone and Pete Domenici Mental Offered by Medicaid Managed Care G. Unfunded Mandates Reform Act Health Parity and Addiction Equity Act Organizations, the Children’s Health H. Federalism of 2008 (MHPAEA) (Pub. L. 110–343, Insurance Program (CHIP), and I. Conclusion enacted on October 3, 2008). Alternative Benefit Plans Regulations Text Specifically, this final rule addresses the AGENCY: Centers for Medicare & Acronyms, Abbreviations, and Short application of MHPAEA parity Medicaid Services (CMS), HHS. Forms requirements to: (1) Medicaid managed care organizations (MCOs) as described ACTION: Final rule. Because of the many terms to which in section 1903(m) of the Social Security we refer by acronym, abbreviation, or SUMMARY: This final rule will address Act (the Act); (2) Medicaid benchmark the application of certain requirements short form in this final rule, we are and benchmark-equivalent plans set forth in the Public Health Service listing the acronyms, abbreviation, and (referred to in this rule as Medicaid Act, as amended by the Paul Wellstone short forms used and their Alternative Benefit Plans (ABPs)) as and Pete Domenici Mental Health Parity corresponding terms in alphabetical described in section 1937 of the Act; and Addiction Equity Act of 2008, to order below: and (3) Children’s Health Insurance coverage offered by Medicaid managed 2008 Extenders Act Tax Extenders and Program (CHIP) under title XXI of the care organizations, Medicaid Alternative Alternative Minimum Tax Relief Act of Act. Benefit Plans, and Children’s Health 2008 (Division C) Under section 1932(b)(8) of the Act, Insurance Programs. The Act Social Security Act Medicaid MCOs are required to comply The Affordable Care Act Patient Protection with the requirements of subpart 2 of DATES: These regulations are effective and Affordable Care Act (Pub. L. 111–148, part A of title XXVII of the PHS Act, to on May 31, 2016. enacted on March 23, 2010), as amended the same extent that those requirements FOR FURTHER INFORMATION CONTACT: by the Health Care and Education apply to a health insurance issuer that John O’Brien, (410) 786–5529, Reconciliation Act of 2010 (Pub. L. 111– offers group health insurance. Subpart 2 Alternative Benefit Plan. 152) Debra Dombrowski, (312) 353–1403, The Departments Departments of the includes mental health parity Managed Care. Treasury, Labor, and Health and Human requirements added by MHPAEA that Amy Lutzky, (410) 786–0721. Services are now found at section 2726 of the ABP Alternative Benefit Plan PHS Act (as renumbered; formerly SUPPLEMENTARY INFORMATION: BBA Balanced Budget Act of 1997 section 2705 of the PHS Act). Table of Contents CHIP Children’s Health Insurance Program Under section 1937(b)(6) of the Act, CHIPRA Children’s Health Insurance Medicaid ABPs that are not offered by I. Executive Summary Program Reauthorization Act of 2009 II. Background CMS Centers for Medicare and Medicaid an MCO and that provide both medical A. Introduction Services and surgical benefits and mental health B. Legislative Overview The Code Internal Revenue Code of 1986 or substance use disorder (MH/SUD) III. Provisions of the Final Rule DOL Department of Labor benefits are required to ensure that A. Definitions DSM Diagnostic and Statistical Manual of financial requirements and treatment B. Parity Requirements for Aggregate, Mental Disorders (current edition) limitations for such benefits comply Lifetime and Annual Limits EHB Essential Health Benefit with the mental health parity C. Parity Requirements for Financial EPSDT Early and Periodic Screening, requirements of the PHS Act Requirements and Treatment Limitations Diagnostic and Treatment (renumbered section 2726(a) of the PHS D. Cumulative Financial Requirements ERISA Employee Retirement Income E. Compliance With Other Cost-sharing Security Act of 1974 Act), in the same manner as such Rules FFP Federal Financial Participation requirements apply to a group health F. Nonquantitative Treatment Limitations FFS Fee for Service plan. The section 1937 provision (NQTLs) HHS Department of Health and Human applies only to ABPs that are not offered G. Parity for Mental Health and Substance Services by MCOs; ABPs offered by MCOs are Use Disorder Benefits in CHIP Programs ICD International Classification of Diseases already required to comply with these Covering EPSDT MCE Managed Care Entity requirements under section 1932(b)(8) H. Availability of Information MCO Managed Care Organization of the Act. I. Application to EHBs and Other ABP MH Mental Health Section 2103(c)(6) of the Act requires Benefits MH/SUD Mental Health or Substance Use J. ABP State Plan Requirements Disorder that state CHIP plans that provide both K. Application of Parity Requirements to MHPA Mental Health Parity Act of 1996 medical and surgical benefits and MH/ the Medicaid State Plan MHPAEA Paul Wellstone and Pete SUD benefits shall ensure that financial L. Scope and Applicability of the Final Domenici Mental Health Parity and requirements and treatment limitations Rule Addiction Equity Act of 2008 for such benefits comply with mental

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health parity requirements of the PHS in the same manner as a group health regulations do not apply to Medicaid Act (referencing renumbered section plan. MCOs, ABPs, or CHIP state plans. 2726(a) of the PHS Act) to the same The Patient Protection and Affordable In 2013, we released a State Health extent as such requirements apply to a Care Act (Pub. L. 111–148) was enacted Official (SHO) letter that provided group health plan. In addition, section on March 23, 2010 and the Health Care guidance to states regarding the 2103(f)(2) of the Act requires that CHIP and Education Reconciliation Act of implementation of requirements under benchmark or benchmark equivalent 2010 (Pub. L. 111–152) was enacted on MHPAEA to Medicaid benchmark and plans comply with all of the March 30, 2010 (collectively referred to benchmark-equivalent plans (referred to requirements of subpart 2 of part A of as the ‘‘Affordable Care Act’’). Section in the letter as ABPs) as described in the title XXVII of the PHS Act, which 1001 of the Affordable Care Act section 1937 of the Act, CHIP under title includes the mental health parity reorganized and renumbered certain XXI of the Act, and MCOs as described requirements of the PHS Act, insofar as provisions of the PHS Act, including in section 1903(m) of the Act.2 We such requirements apply to health renumbering section 2705 of the PHS previously issued a SHO letter on insurance issuers that offer group health Act as section 2726 of the PHS Act. The November 4, 2009, concerning the insurance coverage. Affordable Care Act did not make application of section 502 of CHIPRA.3 These final rules incorporate these conforming changes to cross-references In April 2015, we published a requirements into our regulations. to the renumbered provisions; instead, it proposed rule on the Medicaid and contained new cross-references to the Children’s Health Insurance Programs; II. Background former section numbers. However, there Mental Health Parity and Addiction A. Legislative History was no indication that Congress Equity Act of 2008; the Application of intended to alter the meaning of the Mental Health Parity Requirements to On September 26, 1996, the Congress existing cross-references. As a result, we Coverage Offered by Medicaid Managed enacted the Mental Health Parity Act of read the cross-references to continue to Care Organizations, the Children’s 1996 (Pub. L. 104–204) (MHPA), which refer to the same section originally Health Insurance Program (CHIP), and required parity in aggregate lifetime and referenced, as renumbered. We believe ABPs (80 FR 19418–19452). In this rule, annual dollar limits for mental health it is clear that the new cross-references we are finalizing regulations to address benefits and medical/surgical benefits. were also intended to refer to the how the MHPAEA requirements in Those mental health parity provisions renumbered provisions. section 2726 of the PHS Act, as were codified in section 712 of ERISA, The Affordable Care Act expanded the implemented in the MHPAEA final section 2726 of the PHS Act application of section 2705(a) of the regulations, apply to MCOs, ABPs, and (renumbered under section 1001 of the PHS Act, as amended by MHPAEA, and CHIP. For a more detailed description of Affordable Care Act), and section 9812 renumbered as section 2726(a) of the the proposed provisions, please refer to of the Code, and applied to PHS Act, to benefits in Medicaid ABPs the proposed rule (80 FR 19418). employment-related group health plans delivered outside of a MCO. ABPs B. Stakeholder Input and health insurance coverage offered in delivered through an MCO would connection with a group health plan. already have to comply with these We received a total of 158 comments The Balanced Budget Act of 1997 (Pub. requirements under section 1932(b)(8) from state agencies, advocacy groups, L. 105–33, enacted on August 5, 1997) of the Act. Also, section 2001(c) of the health care providers, health insurers, (BBA) added sections 1932(b)(8) and Affordable Care Act modified the health care associations, and the general 2103(f)(2) of the Act to generally apply benefit provisions of section 1937 of the public. The comments ranged from certain aspects of MHPA, including the Act. Specifically, section 2001(c) of the general support or opposition (to provisions of section 2726 of the PHS Affordable Care Act added mental various provisions in the proposed rule) Act, to Medicaid MCOs and CHIP health benefits and prescription drug to very specific questions or comments benefits. coverage to the list of benefits that must regarding the proposed changes. After MHPAEA was enacted as sections 511 be included in benchmark-equivalent consideration of the comments and and 512 of the Tax Extenders and coverage; required the inclusion of feedback received from stakeholders, we Alternative Minimum Tax Relief Act of essential health benefits (EHBs) are adopting these final regulations. The 2008 (Division C of Pub. L. 110–343) beginning in 2014; and directed that following are brief summaries of each (the 2008 Extenders Act). MHPAEA plans described in section 1937 of the proposed provision, a summary of amended the Employee Retirement Act (now known as ABPs) that include public comments received, and our Income Security Act of 1974 (ERISA), medical/surgical benefits and MH/SUD responses to the comments. Comments the PHS Act, and the Internal Revenue benefits ensure that the financial related to the paperwork burden and the Code of 1986 (the Code). The changes requirements and treatment limitations impact analyses are addressed in the made by MHPAEA consist of new applicable to such MH/SUD benefits ‘‘Collection of Information standards, including parity for coverage comply with the mental health parity of substance use disorder benefits, as provisions of the PHS Act. on the first day of the first plan year beginning on well as amendments to the existing or after July 1, 2014. The preamble to the MHPAEA The Departments of Health and final regulations stated that each plan or issuer mental health parity provisions enacted Human Services (HHS), Labor, and the subject to the interim final regulations, issued on in MHPA. Treasury (collectively the Departments) February 2, 2010 (75 FR 5410), must continue to In 2009, section 502 of the Children’s published interim final regulations comply with the applicable provisions of the Health Insurance Program interim final regulations until the corresponding implementing MHPAEA on February 2, provisions of these final regulations become Reauthorization Act of 2009 (Pub. L. 2010 (75 FR 5410), and final regulations applicable to that plan or issuer (78 FR 68252 and 111–3) (CHIPRA) amended section applicable to group health plans and 253). Note: for ease of reference, the citations to 2103(c) of the Act by adding paragraph health insurance issuers on November provisions of the MHPAEA final rules throughout (6), which requires that CHIP plans that this document will only refer to the provisions 13, 2013 (78 FR 68240) (MHPAEA final adopted by HHS in 45 CFR part 146. provide both medical and surgical 1 regulations). The MHPAEA final 2 http://www.medicaid.gov/federal-policy- benefits and MH/SUD benefits comply guidance/downloads/sho-13-001.pdf. with the provisions of section 2705(a) of 1 The MHPAEA final regulations generally apply 3 http://downloads.cms.gov/cmsgov/archived- the PHS Act, as amended by MHPAEA, to group health plans and health insurance issuers downloads/SMDL/downloads/SHO110409.pdf.

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Requirements’’ and ‘‘Regulatory Impact clearly exclude long term care services MHPAEA ‘‘to the same extent that those Analysis’’ sections in this preamble. in the Medicaid and CHIP context. We requirements apply to a health stated that this clarification was insurance issuer that offers group health III. Provisions of the Final Rule and consistent with the intent of the insurance.’’ Underlying this claim from Analysis of and Responses to Public MHPAEA final regulations, given that commenters is the view that commercial Comments the kinds of long term care services insurers of group health plans would be The provisions of this final rule included in benefit packages for obligated to meet parity requirements in generally mirror the policies set forth in Medicaid and CHIP beneficiaries were connection with coverage of long term the MHPAEA final regulations to not commonly provided in the care services in order to comply with implement the statutory provisions that commercial market as part of health PHS Act section 2726. To the extent that require MCOs, ABPs and CHIP to benefits coverage. We sought comments Medicaid coverage does differ from the comply with certain requirements of on our proposal to exclude long term commercial market, commenters stated section 2726 of the PHS Act (mental care services from the definitions of that the regulations must reflect the health parity requirements). ‘‘medical/surgical benefits,’’ ‘‘mental differences between commercial The following sections, arranged by health benefits,’’ and ‘‘substance use insurance and Medicaid and CHIP, as subject area, include a summary of the disorder benefits.’’ well as the different needs of the public comments that we received, and Comment: We received many populations that each type of health our responses. comments on the proposal to exclude coverage serves. These commenters long term care services from the A. Definitions (§ 438.900, § 440.395, stated that the proposed rule’s approach definitions of ‘‘medical/surgical § 457.496) misconstrues the intent and substance benefits,’’ ‘‘mental health benefits,’’ and of the parity requirements if parity The definitions of terms in the ‘‘substance use disorder benefits.’’ A requirements only apply to Medicaid proposed rule and in this final rule few commenters supported the proposal and CHIP services that are also covered include most terms included in the to exclude long term care services from by commercial insurance. Commenters MHPAEA final regulation at 45 CFR the definitions of ‘‘medical/surgical suggested that there is no statutory basis 146.136(a). The proposed rule modified benefits,’’ ‘‘mental health benefits,’’ and for the interpretation underlying the or added several terms to reflect the ‘‘substance use disorder benefits’’ as proposed rule on this point and the terminology used in the Medicaid used in this rule. The commenters corresponding application that long program and CHIP statutes, regulations requested that additional guidance term services be excluded from the or policies. Some terms that are not regarding the definition of long term parity analysis. Commenters also stated relevant to the Medicaid program or care services be provided to ensure that there are many services covered in CHIP were not included in the proposed consistency in states’ and plans’ parity the commercial plans that are rule. There were also several proposed analyses. comparable to long term services terms that modified, added or deleted However, a large majority of covered by Medicaid such as personal language from those definitions in the commenters opposed this approach, and care, where the services might be MHPAEA final regulations. For recommended that the final rule apply covered for medical-surgical conditions, example: parity protections to long term MH/SUD but not for MH/SUD because they are • We proposed to add the terms ABP benefits. Commenters who opposed the defined as ‘‘long term care.’’ This opens and Early and Periodic Screening, proposed rule approach provided three the door for decisions to exclude Diagnostic and Treatment (EPSDT) general concerns. First, many coverage or impose different financial or benefits since these terms are unique to commenters noted that Medicaid is the treatment limitations that would be the Medicaid program. nation’s largest provider of benefits • We proposed to add the definition coverage for individuals with MH/SUD otherwise prohibited by this rule but are of ‘‘essential health benefits’’, since conditions and the only benefits wholly justified on any plausible Medicaid benchmark and benchmark- coverage for most disabled individuals rationale that characterizes the services equivalent plans (now also known as with these conditions; these as long term care. ABPs) must cover EHBs and MH/SUD commenters stated that parity Third, and finally, many commenters services provided as an EHB must be protections in Medicaid should be at also identified the difficulty of compliant with parity. least as strong as the rules governing the formulating clear and consistent • We proposed a different definition commercial market. The commenters standards to distinguish between long for the term ‘‘medical/surgical benefits,’’ also discussed the importance of access term care services and other services to reflect that the state defines these to long term care services for the across treatment settings, from both a benefits in the Medicaid and CHIP effective treatment of many MH/SUD definitional and an operational contexts. Under existing law, the state conditions, particularly within the perspective; they stated that it would be has the responsibility of identifying populations served by Medicaid and administratively difficult to implement what is a covered benefit for Medicaid CHIP programs. a policy that carved these services out and CHIP; MCOs, PIHPs or PAHPs are Second, several commenters noted of medical, surgical, MH/SUD benefits responsible for providing the covered that commercial plans typically do to exclude long term care services from benefits identified by the state. This is cover some forms of long term care parity protections. Many commenters different from the MHPAEA final services for both MH/SUD and medical/ also raised concerns that adopting this regulations, where medical/surgical surgical conditions, including skilled exclusion without providing a benefits are defined under the terms of nursing, inpatient rehabilitation, and regulatory definition of long term care the group health plan or health home health services. From this services would allow states and plans to insurance coverage and in accordance perspective, commenters stated that declare a number of services to be long with applicable federal or state law. CMS is prohibited from excluding the term care and thus not subject to parity • We also proposed that the application of parity to long term care in an inconsistent manner. Having no definitions of ‘‘medical/surgical services because section 1932(b)(8) of consistent definition of long term benefits,’’ ‘‘mental health benefits,’’ and the Act requires Medicaid MCOs to service would create disparate policies ‘‘substance use disorder benefits’’ would comply with the requirements of across states as to which services would

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not be subject to parity and therefore conditions. We also believe that by regarding generally recognized would have allowable quantitative and requiring the categorization of long term independent standards of current nonquantitative treatment limits on services used to treat MH/SUD medical practice to determine what services that were needed on a long conditions, this final rule could improve conditions are medical/surgical, mental term basis. In addition, some services beneficiary access to needed MH/SUD health, and substance use disorders. that may be currently considered benefits. Finally, finalizing the Comment: One commenter suggested intermediate and subject to parity may regulations in this final rule with this that CMS should clarify that be intentionally classified by states or change will provide MCOs and states quantitative visit limits do not apply to MCOs, PIHPs or PAHPs to be long term with needed clarity regarding the required services such as services services and excluded from parity. application of parity to these services. provided by clinical psychologists and Commenters stated that if all long term Comment: Many commenters clinical social workers in FQHCs. care services are excluded from parity supported the guidance provided in the Response: We believe that the current protections, MCOs, PIHPS and PAHPs proposed rule regarding state-defined regulation provides sufficient may financially benefit from the MH/SUD benefits. Commenters noted information regarding the application of anticipated cost savings of shifting away that requiring state definitions to be parity standards to treatment limits from acute care to long term care and consistent with generally recognized imposed on MH/SUD services. To the have no obligation to ensure that there independent standards of current extent permissible under existing law, is mental health parity within long term medical practice will help ensure states and MCOs may impose care benefits. This may also preclude Medicaid managed care beneficiaries quantitative treatment limits for MH/ any systematic basis to audit MCOs, receive clinically appropriate levels of SUD benefits, so long as these limits are PIHPs or PAHPs compliance with care. However, several commenters no more restrictive than the relevant MHPAEA requirements applied offered specific recommendations predominant limits applied to to long term services. regarding the scope of definitions for substantially all medical/surgical For these reasons, most commenters medical/surgical services and MH/SUD benefits in each classification; if existing requested that parity requirements services in the proposed rule. For law prohibits the imposition of any under this final rule be applied to long instance, one commenter recommended treatment limitation on a service term care services that are within the that CMS define the scope of MH/SUD covered by a Medicaid or CHIP state scope of medical/surgical or mental to be consistent with the psychiatric plan, this rule does not provide health/substance use disorder services, diagnoses listed in the new DSM–5 and authority to impose such limits merely or that if the exclusion were to be in the Diagnostic Classification of because parity standards would be met. maintained, that very clear definitions Mental Health and Developmental This rule allows states to apply and guidelines be provided regarding Disorders Infancy and Early Childhood. quantitative treatment limits, consistent the services to be characterized as long Several commenters also cautioned that with other law, to services regardless of term care services that are excluded Medicaid’s medical/surgical benefits the type of practitioner that renders from these other classification of should be defined specifically for the either a medical/surgical service or MH/ services set forth in this rule. child and adolescent population to SUD service so long as the parity Response: We agree with the ensure consistent implementation. requirements are met. A discussion of commenters and have revised this final Several other commenters the mandatory coverage requirements rule to include long term care services recommended that CMS provide a non- for Medicaid and CHIP is otherwise in the definitions of medical/surgical, exhaustive list of ‘‘mental health outside the scope of this final rule. mental health, and substance use conditions’’ that must be included Comment: Another commenter disorder benefits, and, thus, to apply within a state’s definition of ‘‘mental recommended that CMS should clarify parity protections under this final rule health condition’’. They added that that utilization management and prior to long term care services. Therefore, simply stating that this term must be authorization or concurrent review can long term care services will need to be defined consistent with generally function as ‘‘soft limits’’ that allow for included in the appropriate recognized independent standards of an individual to exceed medical/ classification(s) of benefits provided for medical practice does not provide surgical or MH/SUD benefit limits based in this rule for the purposes of the parity sufficient clarity and guidance to states. on medical necessity. analysis. We intend to provide Commenters suggested that a non- Response: We are clarifying in this additional information to states exhaustive list would give greater clarity final rule that benefit limits that allow regarding the application of parity to and uniformity among states, thus for an individual to exceed numerical long term services. This information facilitating the collection and analysis of limits for medical/surgical or MH/SUD will assist states in determining how data and outcomes measures. benefits based on medical necessity are various medical/surgical and MH/SUD Response: We believe that requiring not considered to be quantitative long term services would be classified states to include specific diagnosis or treatment limits under this rule, but are in the four areas (inpatient, outpatient, providing a non-exhaustive list of subject to the provisions of this rule pharmacy and emergency). mental health conditions in a state’s governing Nonquantitative Treatment We believe this change will reduce definition of mental health conditions is Limitations (NQTLs) for medical/ the likelihood that states would have beyond the scope of this regulation and surgical or MH/SUD benefits. The disparate policies regarding which CMS authority. Since Medicaid is a state processes, strategies, evidentiary services would be subject to parity and and federal partnership, we believe that standards, or other considerations that could ensure that beneficiaries have the state, and not CMS, should identify are used to determine whether to apply similar protections regardless of where which conditions are considered a soft limit must be comparable to and they live. In addition, this prevents medical/surgical and MH/SUD applied no more stringently than factors states from applying treatment limits to conditions. Therefore, we do not used in applying the limitation for long term care services needed for MH/ provide a list (either exhaustive or non- medical surgical/benefits in the SUD conditions more restrictively than exhaustive) of mental health conditions classification. treatment limits are applied for long in this final rule. The language in the Comment: Another commenter term care services for medical/surgical final regulation provides states guidance suggested that CMS include a list of

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terms that have different meanings in impose an aggregate lifetime or annual plans by section 2103(f)(2) of the Act (as Medicaid and commercial plans and dollar limit on MH/SUD benefits that is section 2711 is part of subpart 2 of part clarify how these meanings apply in the no more restrictive than the average A of title XXVII of the PHS Act). ABP context of parity protections provided in limit for medical/surgical benefits. and CHIP benefits that are offered Medicaid and the commercial market. These requirements do not address the through an MCO, or through a PIHP or Response: We appreciate the provisions of section 2711 of the PHS PAHP that provides coverage to MCO commenter’s suggestion. However, we Act, which prohibit imposing lifetime enrollees are also subject to the believe that we provide adequate and annual limits on the dollar value of prohibition on lifetime and annual discussion of the similarities and essential health benefits. limits. However, the prohibition on differences in the use of terms in We noted in the proposed rule that for annual and lifetime limits in section Medicaid and commercial plans in the managed care arrangements, we are 2711 of the PHSA does not apply to text of this regulation and other using our authority in section 1902(a)(4) ABPs that are not offered by an MCO or regulations governing Medicaid, CHIP of the Act to require PIHPs and PAHPs by a PIHP, or PAHP to enrollees of an and the commercial health insurance to comply with mental health parity MCO. market. requirements when providing coverage Regardless of whether services are For the reasons described in the for MCO enrollees. The proposed delivered in managed care or non- proposed rule and in consideration of regulations included definitions of managed care arrangements, all the comments received, we are ‘‘aggregate lifetime dollar limit’’ and Medicaid ABPs (including benchmark finalizing the provisions proposed in ‘‘annual dollar limit’’ at § 438.900, equivalent and Secretary–approved § 438.900, § 440.395, and § 457.496 of § 440.395(a), and § 457.496(a). benchmark plans) and CHIP plans are the proposed rule with modification. Comment: One commenter suggested statutorily required by sections We are finalizing revised definitions of that CMS should consider including a 1937(b)(6) and 2103(c)(6) of the Act to medical/surgical, mental health, and definition of ‘‘coverage unit’’ that meet the financial requirements and substance use disorder services so that mirrors the definitions in the MHPAEA treatment limitations components of the they include, rather than exclude, long final regulations. mental health parity provisions set forth term care services. Additional Response: We did not include a at section 2726(a) of the PHS Act. modifications to the definitions definition of coverage unit in this rule Comment: One commenter indicated proposed in § 457.496 are discussed in because in Medicaid and CHIP that CMS should consider the extent to section III.G of this final rule. programs, the coverage unit will always which § 438.905 appears to sanction aggregate lifetime or annual dollar limits B. Parity Requirements for Aggregate be the individual beneficiary, regardless in the Medicaid program. For example, Lifetime and Annual Dollar Limits of marital or family status. paragraph (c) discusses a Medicaid (§ 438.905 and § 457.496(c)) Comment: Another commenter requested that CMS provide clarification MCO with an annual or lifetime dollar In proposed § 438.905 and on the use of aggregate lifetime and limit on two-thirds of all medical and § 457.496(c), we addressed the parity annual dollar limits in the context of surgical benefits. The commenter requirements for aggregate lifetime and section 2711 of the PHS Act, as added further states that it is difficult to annual dollar limits for MCOs by section 1001 of the Affordable Care imagine how a lifetime limit on two- (including PIHPs and PAHPs when Act, which generally prohibits lifetime thirds of all medical and surgical providing coverage for MCO enrollees) and annual limits on the dollar amount benefits would meet the sufficiency, and CHIP. As noted above, the of EHB, including MH/SUD services. access and comparability requirements application of these requirements under Response: Section 2711 of the PHS of Medicaid. this rule is generally the same as under Act, as added by the Affordable Care Response: This final rule neither the MHPAEA final regulations (45 CFR Act, generally prohibits lifetime and sanctions nor prohibits aggregate 146.136(b)). If a regulated entity applies annual limits on the dollar amount of lifetime and annual dollar limits; this an aggregate lifetime or annual dollar EHB in group health plans and health rule merely provides the standards for limit to at least two-thirds of all insurance coverage. As set forth in applying parity requirements to such medical/surgical benefits, it must either section 1302(b) of the Affordable Care limits if the limits are otherwise apply the aggregate limit to both to Act, the definition of EHB includes authorized. While we agree that a medical/surgical benefits and to MH/ ‘‘mental health and substance use lifetime limit on two-thirds of all SUD benefits in a manner that does not disorder services, including behavioral medical and surgical benefits would not distinguish between the medical/ health treatment.’’ 4 Thus, likely meet the sufficiency, access, and surgical and MH/SUD benefits, or not notwithstanding the provisions of comparability requirements of include an aggregate lifetime or annual MHPAEA that permit aggregate lifetime Medicaid, sufficiency, access, and dollar limit on MH/SUD benefits that is and annual dollar limits with respect to comparability requirements are outside less than the aggregate limit on medical/ MH/SUD benefits as long as those limits of the scope of this final rule. surgical benefits. If a regulated entity are in accordance with the parity Comment: One commenter noted that does not include an aggregate lifetime or requirements for such limits, such the use of the phrase ‘‘in states that annual dollar limit on medical/surgical dollar limits are prohibited with respect cover both medical and surgical benefits benefits or includes a limit that applies to MH/SUD benefits that are covered as and mental health and substance use to less than one-third of all medical/ EHB, regardless of the service delivery disorder benefits under their State plan’’ surgical benefits, it may not impose an system within Medicaid Alternative is not necessary. All state Medicaid aggregate lifetime or annual dollar limit, Benefit Plans. programs contain at least some mental respectively, on MH/SUD benefits. If a Section 2711 of the PHS Act is health and SUD benefits, because regulated entity applies an aggregate applied to Medicaid MCOs by section hospital and physician services are lifetime or annual dollar limit to 1932(b)(8) of the Act and to CHIP mandatory benefits that include mental between one-third and two-thirds of all benchmark or benchmark-equivalent health and SUD treatment. medical/surgical benefits, it must either Response: We agree that inpatient impose no aggregate lifetime or annual 4 See section 1302(b)(1)(E) of the Affordable Care hospital and physician services are dollar limit on MH/SUD benefits, or Act. mandatory state plan services that

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furnish services to address MH/SUD. regulations, we proposed in this inpatient; outpatient; emergency care; However, as noted, under section Medicaid and CHIP rule that parity and prescription drugs. 1932(b)(8) of the Act, Medicaid MCOs requirements for financial requirements As discussed in this final rule, we are required to comply with mental and treatment limitations be applied on maintain this classification structure. health parity requirements in section a classification by classification basis. The four classifications in this final rule 2726 of the PHS Act to the same extent We proposed the term ‘‘type’’ to refer are the only classifications to be used that those requirements apply to a to financial requirements and treatment for purposes of applying the parity health insurance issuer that offers group limitations of the same nature. Different requirements of MHPAEA to Medicaid health insurance. The parity types of financial requirements and and CHIP. Moreover, these requirements in section 2726 of the PHS treatment limitations include classifications must be used for all Act are limited to group health plans or copayments, coinsurance, annual visit financial requirements and treatment health insurance issuers offering group limits, and episode visit limits. We limitations to the extent that a MCO, or individual health insurance coverage proposed that a financial requirement or PIHP, PAHP, ABP, or CHIP provides that provides both medical and surgical treatment limitation must be compared benefits in a classification and imposes benefits and MH/SUD benefits. only to financial requirements or any separate financial requirement or Similarly, section 2103(c)(6) of the Act treatment limitations of the same type treatment limitation (or separate level of requires that state CHIP plans that within a classification. a financial requirement or treatment provide both medical and surgical In addition, we proposed the term limitation) for benefits in the benefits and MH/SUD benefits shall ‘‘level’’ to refer to the magnitude (such classification. Similar to the MHPAEA ensure that financial requirements and as the dollar, percentage, day, or visit final rule, this final rule does not define treatment limitations for such benefits amount) of the financial requirement or what services are included in the comply with mental health parity treatment limitation. We did not receive inpatient, outpatient, or emergency care classifications. These terms are subject requirements of section 2726(a) of the any comments on the definitions of to the design of a state’s managed care PHS Act to the same extent as such terms described at § 438.910, program and their meanings may differ requirements apply to a group health § 440.395(b), and § 457.496(d) and are depending on the benefit packages. plan. Therefore, we are retaining the finalizing these terms as proposed. clarifying language in §§ 438.905(a), For the purposes of applying parity 438.910(b), 457.496(d)(2), and 457.496(f) 2. General Parity Requirement for requirements to Medicaid, we proposed of this final rule that these requirements Financial Requirements and Treatment that the classifications of benefits apply to states that offer both medical Limitations should relate to how states construct and manage their Medicaid benefits. All and surgical and MH/SUD benefits. At proposed § 438.910(b), We are finalizing the provisions at Medicaid benefits provided should fall § 440.395(b)(2), and § 457.496(d)(2), we §§ 438.905 and 457.496(c) about into one of the classifications of included general parity provisions to aggregate lifetime and annual limits for benefits. We noted that the MHPAEA prohibit a MCO, PIHP or PAHP (when Medicaid MCOs and CHIP as proposed. final regulations discussed the providing benefits to an MCO enrollee), In the proposed rule, we included under application of parity requirements to ABP (when used in a non-managed care § 438.905 the title of ‘‘General’’ under intermediate services (such as arrangement), or CHIP state plan from paragraph (a), with paragraph of residential treatment, partial applying any financial requirement or ‘‘General parity requirement’’ under hospitalization, and intensive outpatient treatment limitation to MH/SUD (a)(1). As we do not intend to use treatment) provided under the health benefits in any classification that is paragraph (a)(2), in the final rule we plan. Specifically, the MHPAEA final more restrictive than the predominant have removed the paragraph numbering regulations required group health plans financial requirement or treatment for (a)(1) and named ‘‘General parity and issuers to assign covered limitation of that type that is applied to requirement’’ simply under paragraph intermediate MH/SUD benefits to a substantially all medical/surgical (a) of this section, rather than including benefit classification in the same benefits in the same classification. For ‘‘General’’ in the title. manner that they assign comparable this purpose, the general parity intermediate medical/surgical benefits C. Parity Requirements for Financial requirement of MHPAEA would apply to a classification. The MHPAEA final Requirements and Treatment separately for each type of financial regulations do not specifically define Limitations (§§ 438.910, 440.395(b), and requirement or treatment limitation (for intermediate services; nor do current 457.496(d)) example, unit limits are compared to statutory and regulatory provisions Sections 438.910, 440.395(b), and unit limits, or co-pays are compared to governing the Medicaid and CHIP 457.496(d) of the proposed rule set forth co-pays). programs define intermediate services parity requirements for financial We noted in the proposed rule that within state plan benefits. Therefore, we requirements and treatment limitations. the MHPAEA final regulations at did not propose to specify an § 146.136(c)(2)(ii) set forth the following intermediate classification to be used in 1. Clarification of Terms classifications of benefits: inpatient in- the parity analysis for Medicaid or CHIP In the proposed rule, we indicated network; inpatient out-of-network; programs. As in the MHPAEA final rule, that ‘‘classification of benefits’’ means a outpatient in-network; outpatient out-of- we proposed to allow the applicable classification as described in § 438.910, network; emergency care; and regulated entity (the MCO, PIHP or § 440.395(b), and § 457.496(d), which prescription drugs. We proposed to PAHP, or state in connection with the describe parity requirements for follow the general structure of the ABP, and CHIP) to assign intermediate financial requirements and treatment classifications used in the MHPAEA level services to any of the limitations. Specifically, we proposed to final regulations with a significant classifications listed, but require that modify the classifications of benefits set distinction. Specifically, we proposed to assignment to those classifications be forth in the regulations that were eliminate the in-network and out-of- done using the same standards for both adopted by the Departments in the 2010 network distinctions for the inpatient medical/surgical services and MH/SUD MHPAEA final rule (as discussed in and outpatient classifications, and services (see § 438.910(b)(2), section III.C.2). As in the MHPAEA final therefore to provide four classifications: § 440.395(b)(2)(ii), and

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§ 457.496(d)(2)(ii)). This final rule also definitions of the four classifications Therefore, the distinction between requires that the method used to assign used by this rule are subject to the intermediate services and long term care services to the four classifications be design of a state’s managed care services is not material to the reasonable. program, and their meanings may differ application or enforcement of this final We note that similar concerns may depending on the benefit packages. rule. However, we have amended the arise regarding the classification of long State health insurance laws may define provisions at §§ 438.910(b)(2), term care services, given the revised these terms, and in the event that these 440.395(b)(2)(ii) and 457.496(d)(2)(ii) to definitions of mental health benefits and are not defined, we expect each note that the factors used to classify substance use disorder benefits set forth regulated entity within a state to define services in the four classifications must in this final rule. We did not propose these classifications in a similar be reasonable in addition to being the and do not finalize any specific rules for manner. Further, each regulated same for medical/surgical and MH/SUD the classification of long term care managed care plan (MCOs, PIHPs and services. We believe that this services. This final rule allows the PAHPs) or the state in connection with reasonableness requirement should help applicable regulated entity (the MCO, ABP, or CHIP, must apply these terms to allay concerns that services could be PIHP or PAHP, or state in connection uniformly for both medical/surgical classified according to arbitrary factors with the ABP, a carve-out managed care benefits and MH/SUD benefits under in an attempt to permit the application delivery system, and CHIP) to assign § 438.910(b)(2), § 440.395(b)(2)(ii) and of discriminatory limitations to MH/ long term care services to any of the four § 457.496(d)(2)(ii). Therefore, we are not SUD services under this rule. listed classifications, but, as with including a new intermediate level Comment: One commenter intermediate and other services, services classification in this final rule. emphasized the difficulty of ensuring requires that assignment to those Comment: Some commenters parity requirements across delivery classifications be done using the same requested that the final rule clearly state platforms, especially as they relate to reasonable standards for both medical/ that intermediate services offered in NQTLs and intermediate services. The surgical services and MH/SUD services. Medicaid and CHIP are subject to the commenter noted that the line between Comment: Many commenters parity requirements. The commenters intermediate services and long term care provided feedback on this approach. urged CMS to provide guidance services is not always clear, and stated Some commenters requested that CMS regarding MH/SUD intermediate care that medical necessity criteria would create a new intermediate level services services and provide examples and need to be established to differentiate classification and clarify that resources that mirror the provisions levels of care within long term care intermediate services for MH/SUD must included in the MHPAEA final rule. services. The commenter requested be covered if similar types of services Many commenters also requested additional guidance on how to address are covered for medical/surgical guidance on the types of factors and parity requirements for services that are conditions. However, most commenters processes that should be used to classify unique to Medicaid and for which supported the consistency of the intermediate care services into the comparable services on the medical/ proposed approach with the MHPAEA benefit classifications for parity surgical side do not exist. final rules, and appreciated that this assessments to ensure consistency Response: As noted above, this final approach would give some flexibility to across payers in the application of rule applies parity requirements to all states and health plans to assign parity to these services. Many intermediate and long term care intermediate level services to the four commenters requested additional services. Medical necessity classifications in the proposed rule. examples of intermediate services that determinations for long term care Commenters noted that consistency can be classified as inpatient or services or other services are an NQTL with the MHPAEA final rules would outpatient. Commenters expressed that must comply with the requirements make it easier for states and plans to particular concern about the need to of this rule. The parity analysis does not comply. Since other aspects of the define intermediate services clearly if require a one-to-one comparison of a benefit, including financial long term care services were excluded MH/SUD service to a medical/surgical requirements and NQTLs, are from the final rule. Given the service, but instead requires that a influenced by the classification a service similarities and overlap between many NQTL may not be imposed for a MH/ is put into, this flexibility would allow intermediate services and long term care SUD benefit in any classification unless, states and plans to determine the most services, commenters expressed concern under the terms of the coverage, as appropriate classification for that plans would be able to classify written and in operation, any factors intermediate services based on the services as long term care and exclude used in applying the NQTL to the MH/ entire benefit package that is offered. them from parity protections. SUD benefit are comparable to and Response: Similar to the MHPAEA Response: We reiterate that all applied no more stringently than factors final rule, this final rule does not define Medicaid services provided should be used in applying the same NQTL to what services are included in the placed into one of the classifications of medical/surgical benefits in the inpatient, outpatient, or emergency care benefits for the purposes of this final classification; we address NQTL classifications. Similar to the reasoning rule. This final rule does not provide standards in greater detail in section F. provided in the MHPAEA final any authority for a medical/surgical or If questions persist regarding the regulations, we did not intend to impose mental health/substance use disorder development and use of medical a benefit mandate through the parity benefit to be classified or characterized necessity criteria under this rule, and/or requirement in order to require greater as something other than the four methodologies for classifying benefits for mental health conditions classifications in § 438.910(b)(2), intermediate and long term care services and substance use disorders than for § 440.395(b)(2)(ii) and into the four benefit classifications medical/surgical conditions. In § 457.496(d)(2)(ii). In addition, as noted provided in this rule, we may develop addition, as noted above, current in section III.A, this final rule includes further guidance or provide technical statutory and regulatory provisions long term care services in the assistance as needed. governing the Medicaid and CHIP definitions of ‘‘medical/surgical Comment: One commenter requested programs do not define intermediate benefits,’’ ‘‘mental health benefits,’’ and guidance to the states on developing services within state plan benefits. The ‘‘substance use disorder benefits.’’ clinically appropriate intensity of

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service and licensure expectations of financial requirements and quantitative effective date of the approved ABP or facilities that provide behavioral health treatment limitations in MCOs, PIHPs, CHIP state plan; effective dates for these services which are not readily PAHPs, ABP and CHIP state plans. The plans will vary based on the date the classifiable. general parity requirement at proposed ABP or CHIP state plan was approved Response: This final rule clarifies that §§ 438.910(b), 440.395(b)(2), and by CMS. For purposes of this mental health parity requirements under 457.496(d)(2) and now finalized in this calculation, the MCOs (when such this final rule do not apply to state rule would prohibit a MCO, PIHP or organizations are responsible for licensure laws, and therefore such PAHP (in connection with coverage coverage of MH/SUD benefits) or the guidance is beyond the scope of this provided to an MCO enrollee), or ABP state (in cases where PIHPs and PAHPs final regulation. Clinical determinations state plan (when used in a non-managed are used in conjunction with MCOs) regarding medical necessity, such as the care arrangement), or CHIP state plan or must determine the total amount intensity of services that is medically MCE contracting with a CHIP state plan projected to be expended to determine necessary for an individual, are subject from applying any financial requirement the two-thirds threshold. to the NQTL requirements set forth in or treatment limitation to MH/SUD We included a detailed example to this final rule. In addition, any benefits in any classification that is illustrate how our proposal would work: processes, strategies, evidentiary more restrictive than the ‘‘predominant’’ Example. Facts. A state is providing a standards, or other considerations that financial requirement or treatment comprehensive service package through are used to guide clinical limitation of that type applied to an MCO. The MCO is currently determinations concerning the ‘‘substantially all’’ medical/surgical providing coverage of services with appropriate intensity of service are also benefits in the same classification. In limits that are consistent with the subject to the NQTL requirements set the proposed regulation text (that is, approved state plan. The MCO benefit forth in this final rule. §§ 438.910(c), 440.395(b)(3) and package includes: As indicated in the responses to 457.496(d)(3)), we proposed standards • Inpatient Hospital services for comments, we are finalizing these that are the same as those in the medical/surgical—30 days per year provisions mostly as proposed. We are MHPAEA final regulations for limit. determining the portion of medical/ finalizing §§ 438.910(b)(2), • Inpatient Hospital services for MH/ surgical benefits subject to a financial 440.395(b)(2)(ii) and 457.496(d)(2)(ii) SUD—30 days per year limit. with a modification that requires that requirement or quantitative treatment • Primary Care Physician Services for the standards used to assign benefits to limitation for purposes of the parity medical/surgical—unlimited. a classification be reasonable as well as analysis. Under the proposed and now • Specialist Physician Services for the same for both medical/surgical and final rule, the portion of medical/ surgical benefits in a classification medical/surgical—50 visits per year. MH/SUD benefits. • subject to a financial requirement or Outpatient MH services—20 visits 3. Applying the General Parity quantitative treatment limitation would per year limit. Requirement to Financial Requirements be based on the dollar amount of all • Physical Therapy—20 visits per and Quantitative Treatment Limitations payments for medical/surgical benefits year limit. (§§ 438.910(c), 440.395(b)(3), and in the classification expected to be paid • Occupational Therapy—20 visits 457.496(d)(3)) during a specific year. For MCOs, PIHPS per year limit. At proposed §§ 438.910(c), and PAHPs, this means dollar amounts • Emergency Services—Unlimited for 440.395(b)(3) and, 457.496(d)(3), we for payment during a contract year. For medical/surgical or MH/SUD addressed the application of the general ABPs and CHIP state plans, this means The MCO projects its payments as parity requirement of MHPAEA to dollar amounts for the year starting the follows for medical/surgical benefits:

TABLE 1—EXAMPLE OF QUANTITATIVE TREATMENT LIMIT

Percent of Percent of total classification Benefit/classification—Medical/Surgical Projected payment costs subject to a limit

Inpatient Hospital ...... $400x 100 100

Inpatient total ...... 400x 100 100

Physician Services ...... 150x 27 0 Specialist Services ...... 250x 46 46 Physical Therapy ...... 75x 13.5 13.5 Occupational Therapy ...... 75x 13.5 13.5

Outpatient total ...... 550x 100 73

Emergency Services ...... 100x 100 0

Emergency total ...... 100x 100 0

Example. Conclusion. In this because both classifications meet the of limits (100 percent of all medical/ example, the MCO would be able to ‘‘substantially all’’ standard—in other surgical inpatient benefits are subject to maintain some level of day and visit words, more than two-thirds of the a day limit, and 73 percent of all limits on benefits in both the inpatient medical/surgical benefits in each medical/surgical outpatient benefits are and outpatient MH/SUD classifications classification are subject to those types subject to a visit limit).

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With regards to the level of the The MHPAEA final regulations at 45 may be network tiers used to commonly quantitative treatment limitation on CFR 146.136(c)(3)(iii)(C) permit a refer enrollees or for purposes of inpatient MH/SUD services, the MCO subclassification for office visits, building the network and have varying may maintain its 30 day limit because separate from other outpatient items and payment rates to providers, but the use 100 percent of all inpatient medical/ services. Other subclassifications not of multiple network tiers in the context surgical benefits are also subject to a 30 specifically permitted, such as separate of NQTLs is discussed in section III.E. day limit, making it the predominant sub-classifications for generalists and of this final rule. level. specialists, cannot be used for purposes Comment: One commenter stated that However, with regards to the level of of determining parity. As proposed and network adequacy provisions in the quantitative treatment limitation on finalized in this rule, we will retain this § 438.206 are not specific enough and outpatient MH/SUD services, the MCO approach to subclassifications in the encouraged CMS to provide more may not maintain its current limit of 20 application of these parity requirements specificity in the number, types of visits per year. Of the total amount of established in parts 438, 440 and 457 providers that must be in network, as outpatient medical/surgical benefits (that is, to services provided to enrollees well as time and distance requirements subject to a visit limit ($400x), 62.5 in Medicaid MCOs, and to ABPs and in current Medicaid managed care percent ($250x) are subject to a 50 visit CHIP). After the subclassification is regulations. limit (specialist services), and only 37.5 established, a MCO, PIHP, PAHP, ABP, Response: We believe that providing percent ($150x) are subject to a 20 visit or CHIP state plan may not impose any standards that specify the number and limit (physical therapy and financial requirement or quantitative types of providers that must be in the occupational therapy). Because the 20 treatment limitation on MH/SUD network is beyond the scope of this rule. visit limitation is not the predominant benefits in any sub-classification (for These standards are addressed in level (that is, it does not apply to at least example, office visits or non-office existing regulations at § 438.206 and 50 percent of the medical/surgical visits) that is more restrictive than the § 438.207.5 The parity proposed rule benefits in the classification subject to predominant financial requirement or stated that a plan complying with the the visit limit), the MCO would need to quantitative treatment limitation that network adequacy requirements of either remove the visit limits altogether applies to substantially all medical/ § 438.206(b)(4) will be deemed in on outpatient MH/SUD services or surgical benefits in the sub- compliance with § 438.910(d)(3). In this increase the visit limitation to at least 50 classification, using the parity analysis final rule we removed the provision to visits per year to align with the least for financial requirements and deem compliance with §§ 438.910(d)(3) restrictive level of visit limits on quantitative treatment limitations. and 457.496(d)(5) of this rule (regarding outpatient medical/surgical benefits. parity requirements for access to out-of- Lastly, because there are currently In the MHPAEA final regulations, the Departments recognized that tiered network providers) where an MCO, unlimited emergency visits under the PIHP, PAHP, or CHIP state plan is found medical/surgical benefits, the MCO provider networks have become an important tool for health plan efforts to to be in compliance with the provider would need to maintain unlimited visits network standard found in for emergency services for MH/SUD, manage care and control costs. Therefore, for purposes of applying the § 438.206(b)(4). and would not be able to impose any As indicated in the responses to the limits on MH/SUD unless limits were financial requirement and treatment limitation rules under MHPAEA, the comments, we are finalizing the also imposed on medical/surgical provisions regarding multi-tiered services and such limits were consistent MHPAEA final regulations provide that if a plan (or health insurance coverage) prescription drug benefits and other with parity requirements. benefits at §§ 438.910(c)(2), We received no comments on provides benefits through multiple tiers of in-network providers (such as an in- 440.395(b)(3)(ii), 457.496(d)(3)(ii) as applying the general parity requirement proposed. to financial requirements and network tier of preferred providers with quantitative treatment limitations as more generous cost-sharing to D. Cumulative Financial Requirements described in §§ 438.910(c), participants than a separate in-network (§ 438.910(c)(3), § 440.395(b)(3)(iii), 440.395(b)(3), and 457.496(d)(3). We are tier of participating providers in any § 457.496(d)(3)(iii)) classification), the plan may divide its finalizing these provisions as proposed. While financial requirements such as benefits furnished on an in-network copayments and coinsurance generally 4. Special Rules for Multi-Tiered basis into sub-classifications that reflect apply separately to each covered Prescription Drug Benefits and Other those network tiers, if the tiering is done expense, other financial requirements Benefits (§§ 438.910(c)(2), without regard to whether a provider is (in particular, deductibles) accumulate 440.395(b)(3)(ii), 457.496(d)(3)(ii)) a MH/SUD provider or a medical/ across covered expenses. In the case of surgical provider. While network tiers The MHPAEA final regulations at 45 deductibles, generally an amount of may also be used in Medicaid managed CFR 146.136(c)(3)(iii)(A) permit plans otherwise covered expenses must be care, we do not believe that the parity under certain circumstances to apply accumulated before the plan pays standards for Medicaid managed care different levels of financial benefits. Financial requirements that need to address such network structures requirements to different tiers of determine whether and to what extent so we did not propose regulation text to prescription drugs and still satisfy the benefits are provided based on address financial limitations (for parity requirements. The proposed rule accumulated amounts were defined in example, different cost-sharing would allow a MCO, PIHP, PAHP, ABP, the proposed rules as cumulative or CHIP state plan to subdivide the requirements) in that context in this prescription drug classification into rule. Medicaid cost-sharing rules apply 5 We note that CMS proposed changes to tiers based on reasonable factors as regardless of network status. Any §§ 438.206 and 438.207 that we believe are described in the proposed regulations quantitative treatment limitation consistent with the intent of these final rules in and without regard to whether a drug is outlined in the contract must be applied CMS–2390–P Medicaid and CHIP Programs; Medicaid Managed Care, CHIP Delivered in generally prescribed for medical/ to the service broadly and therefore Managed Care, Medicaid and CHIP Comprehensive surgical benefits or for MH/SUD cannot have separate limitations based Quality Strategies, and Revisions Related to Third benefits. on network tiers. We recognize there Party Liability.

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financial requirements. As in the Medicaid programs generally do not may need to change to be compliant MHPAEA final rule at § 146.136(c)(v), have financial requirements that are with the MHPAEA parity standards we proposed and are finalizing in this cumulative, such as deductibles, and addressed in this rule. To clarify this, in final rule that separate cumulative that financial requirements such as co- § 438.910(c)(4) we reiterated that financial requirements (separate for pays, which are common in Medicaid requirement with a cross-reference to mental health, substance use or programs, do not typically include the cost-sharing rules applicable to medical/surgical) will not be permitted cumulative limits. While we recognize MCOs, PIHPs and PAHPs. for entities subject to our proposed the potential for ABPs to include We received no comments on this requirements (namely, MCOs, PIHPs deductibles, we note that nearly all specific proposal and are finalizing and PAHPs in connection with coverage group health plans and insurers had § 438.910(c)(4) as proposed. provided to MCO enrollees, and in ABP eliminated the use of separate F. Nonquantitative Treatment and CHIP). deductibles for MH/SUD benefits by Limitations (NQTLs) (§ 438.910(d), However, unlike the MHPAEA final 6 2011. § 440.395(b)(4), and § 457.496(d)(4) and rule for insurers of group health plans, Comment: A few commenters (d)(5)) in the Medicaid and CHIP proposed rule supported the proposal to follow the we proposed to permit quantitative general approach in the MHPAEA final MCOs, PIHPs, PAHPs, ABP and CHIP treatment limitations to accumulate rule, but to allow entities subject to our state plans may impose a variety of separately for medical/surgical and MH/ proposed requirements to maintain limits affecting the scope or duration of SUD services as long as they comply separate accumulation of quantitative benefits that are not expressed with the general parity requirement. We treatment limits. Commenters noted that numerically. Nonetheless, such proposed to allow this separate unified quantitative treatment nonquantitative provisions are also accumulation of treatment limits in limitations that accumulate across treatment limitations affecting the scope Medicaid and CHIP for several reasons. entities would be very difficult for or duration of benefits. As proposed and First, benefits for MCO beneficiaries Medicaid managed care plans to now finalized, §§ 438.910(d), must be provided in at least the same administer, particularly if they do not 440.395(b)(4), and 457.496(d)(4) amount, duration, and scope as set forth have contractual relationships with prohibit the imposition of any in the state plan. Requiring plans to other entities, and also supported that nonquantitative treatment limitation have cumulative limits across medical/ view that this provision is necessary to (NQTL) to MH/SUD benefits unless surgical benefits and MH/SUD benefits address the complex health needs of certain requirements are met. In within a classification may incentivize Medicaid and CHIP populations. addition, the proposed provisions and MCOs to retain the quantitative Response: We appreciate the this final rule provide an illustrative list treatment limitation level applied on the comments in support of our approach. of NQTLs, including medical medical/surgical benefits in the state As indicated in the response to management standards; prescription plan as the total cumulative limit for comments, we are finalizing drug formulary design; standards for both medical/surgical and MH/SUD §§ 438.910(c)(3), 440.395(b)(3)(iii), provider admission to participate in a benefits. This would comply with the 457.496(d)(3)(iii) as proposed. network; and conditioning benefits on requirements of parity, but would not completion of a course of treatment. E. Compliance With Other Cost-Sharing Under the MHPAEA final regulations meet the requirements of providing at Rules (§ 438.910(c)(4)) least what is in the state plan. In at § 146.136(c)(4), a NQTL may not be addition, we believe that requiring States and the MCOs, PIHPs and imposed for MH/SUD benefits in any quantitative treatment limitations PAHPs that contract with states are classification unless, under the terms of within a classification of benefits to bound by the existing Medicaid and the plan (or health insurance coverage) accumulate jointly toward a unified CHIP cost-sharing rules (§ 438.108 and as written and in operation, any factors limit level may not benefit the enrollee. part 457, subpart E). As previously used in applying the NQTL to MH/SUD Specifically, if there were a combined indicated, the Medicaid program and benefits in a classification are visit or treatment limit individuals that CHIP are held to strict cost-sharing comparable to and applied no more have co-occurring disorders may not be requirements for both managed care and stringently than factors used in applying able to use the same level of MH/SUD non-managed care delivery systems. In the limitation for medical surgical/ services they would have been able to the proposed rule, we emphasized that benefits in the classification. For these use if benefits accumulated separately. all financial requirements included in a purposes, factors mean the processes, In recognition of the positive beneficiary MHPAEA analysis must also be in strategies, evidentiary standards, or impact, we proposed and are finalizing compliance with both existing cost- other considerations used in in this rule to permit the MCO, PIHP, or sharing rules and the requirements of determining limitations on coverage of PAHP to maintain separate quantitative this rule. Compliance with the parity services. treatment limitations, provided that any requirements does not mean that a state, We proposed to adopt the same such limit for MH/SUD benefits is no or MCO, PIHP or PAHP can violate approach to NQTLs in the application of more restrictive than the predominant existing cost-sharing requirements. parity requirements to Medicaid MCOs, limit applied to substantially all Therefore, some cost-sharing structures PIHPs and PAHPs providing services to medical/surgical benefits in a given in a state’s Medicaid program or CHIP MCO enrollees, ABPs, and CHIP state classification. plans. For states that are using a non- However, as noted in this section, to 6 Final Report: Consistency of Large Employer managed care delivery system for their align with the MHPAEA final and Group Health Plan Benefits with Requirements ABPs and CHIP, the state (through its of the Paul Wellstone and Pete Domenici Mental regulations, we are retaining the Health Parity and Addiction Equity Act of 2008. ABP and CHIP state plan) may only proposal that separate cumulative NORC at the University of Chicago for the Office of impose a NQTL on a MH/SUD benefit financial requirements will not be the Assistant Secretary for Planning and Evaluation. in any classification if it has written and permitted. This is because we also This study analyzed information on large group operable processes, strategies, health plan benefit designs from 2009 through 2011 believe that a unified cumulative in several databases maintained by benefits evidentiary standards or other factors deductible is also more beneficial for consulting firms that advise plans on compliance used in applying—to MH/SUD benefits the beneficiary and is in recognition that with MHPAEA as well as other requirements. in that classification—the NQTL that are

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comparable to or less restrictive and § 457.496(d)(5), although the state will determining whether a course of applied no more stringently than any want to review how the plan is doing treatment is medically necessary. For processes, strategies, evidentiary this in practice. We noted that the MH/SUD treatments that do not have standards, or other factors used in additional example of a NQTL regarding prior approval, no benefits will be paid; applying the limitation for medical/ out-of-network providers is not relevant for medical/surgical treatments that do surgical services in that classification. for states that are using a non-managed not have prior approval, providers will The phrase ‘‘applied no more care delivery system for ABPs and CHIP only receive a 25 percent reduction in stringently’’ requires that any processes, state plan, since providers must be payments for these treatments from the strategies, evidentiary standards, or enrolled in Medicaid or CHIP and MCO. other factors that are comparable on would not be considered out-of- Example 3. Conclusion. In this their face be applied in the same network. As discussed below, we are example, the MCO violates the NQTL manner to medical/surgical benefits and not finalizing this approach to deemed provision of this rule. Although the MH/SUD benefits. compliance in this final rule in same NQTL—medical necessity—is We proposed and are finalizing in this §§ 438.910(d)(3) and 457.496(d)(5), and applied both to MH/SUD benefits and to rule an example of an NQTL regarding instead are clarifying that regulated medical/surgical benefits for outpatient standards for accessing out-of-network entities must comply with both sets of services, it is not applied in a providers. As discussed earlier, in the requirements. comparable way. The penalty for failure context of CHIP or ABPs that use a FFS We included in the proposed rule the to obtain prior approval for MH/SUD delivery system or other non-managed examples, which have been modified benefits is not comparable to the penalty care arrangement, absent a waiver, slightly for greater clarity below, to for failure to obtain prior approval for beneficiaries may choose from any illustrate the operation of the medical/surgical benefits. qualified provider that has signed a requirements for NQTLs. Example 4. Facts. A MCO generally Medicaid or CHIP provider agreement Example 1. Facts. A MCO requires covers medically appropriate and are not limited to a network. In a prior authorization that a treatment is treatments. For both medical/surgical Medicaid managed care environment, if medically necessary for all inpatient benefits and MH/SUD benefits, a provider network is unable to provide medical/surgical benefits and for all evidentiary standards used in necessary services covered under the inpatient MH/SUD benefits. In practice, determining whether a treatment is contract to a particular enrollee, the inpatient benefits for medical/surgical medically appropriate are based on MCO, PIHP or PAHP must adequately conditions are routinely approved for 7 recommendations made by panels of (and on a timely basis) cover these days, after which a treatment plan must experts with appropriate training and services out-of-network for the enrollee be submitted by the patient’s attending experience in the fields of medicine for as long as the MCO, PIHP or PAHP provider and approved by the MCO. involved. The evidentiary standards are is unable to provide them in-network.7 Conversely, for inpatient MH/SUD applied in a manner that is based on The proposed rule specified that the benefits, routine approval is given only clinically appropriate standards of care standard for providing access to out-of- for 1 day, after which a treatment plan for a condition. network services (when they cannot be must be submitted by the beneficiary’s Example 4. Conclusion. In this provided in-network) is considered to attending provider and approved by the example, the MCO complies with the be an NQTL for the purposes of this MCO. NQTL provision of the rule because the rule. The proposed regulation stated Example 1. Conclusion. In this processes for developing the evidentiary that regulated entities providing access example, the MCO violates the NQTL standards used to determine medical to out-of-network providers for medical/ provision of this rule (§ 438.910(d)) appropriateness and the application of surgical benefits within a classification because it is applying a stricter NQTL in these standards to MH/SUD benefits are must use the same processes, strategies, practice to MH/SUD benefits than is comparable to and are applied no more evidentiary standards, or other factors in applied to medical/surgical benefits. stringently than for medical/surgical determining access to out-of-network Example 2. Facts. A MCO applies benefits. This is the result even if the providers for MH/SUD benefits within concurrent review to inpatient care application of the evidentiary standards the same classification. As discussed where there are high levels of variation does not result in similar numbers of further, we are revising the proposed in length of stay (as measured by a visits, days of coverage, or other benefits regulation in this final rule for coefficient of variation exceeding 0.8). utilized for MH/SUDs as it does for any consistency with the general NQTL In practice, the application of this particular medical/surgical condition, standard, to require that the factors used standard affects 60 percent of MH/ so long as the outcomes are the result in determining access to out-of-network SUDs, but only 30 percent of medical/ of consistent application of the providers for MH/SUD benefits be surgical conditions. guidelines. comparable to and applied no more Example 2. Conclusion. In this Example 5. Facts. Training and state stringently than the factors used in example, the MCO complies with the licensing requirements often vary determining access to out-of-network NQTL provisions of this rule because among types of providers. An MCO providers for medical/surgical benefits the evidentiary standard used by the applies a general standard that any in the classification, rather than MCO is applied no more stringently for provider must meet the minimum requiring that the same factors be MH/SUD benefits than for medical/ requirement related to supervised applied to both sets of benefits. surgical benefits, even though it results clinical experience under applicable Finally, the proposed rule provided in an overall difference in the state licensure laws to participate in the that if MCOs, PIHPs or PAHPs, ABPs application of concurrent review for MCO’s provider network. State law and CHIP State plans provided through MH/SUDs than for medical/surgical requires master’s level general medical managed care are found to be in conditions. providers to have post-degree, compliance with § 438.206(b)(4), that Example 3. Facts. A MCO requires supervised clinical experience; therefore would be evidence that they are in prior approval that a course of treatment the MCO requires all master’s level compliance with § 438.910(d)(3) and is medically necessary for outpatient providers in its network (including medical/surgical and MH/SUD benefits mental health providers) to have post- 7 See § 438.206(b)(4). and uses comparable criteria in degree, supervised clinical experience.

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State law does not require master’s level than, those applied to medical/surgical of this rule. Although the same NQTL— mental health therapists to have post- benefits. prior authorization to determine degree, supervised clinical experience; Example 7. Facts. A MCO provides medical appropriateness—is applied to therefore the MCO requirement to coverage for medically appropriate both MH/SUD benefits and medical/ participate in the network is effectively medical/surgical benefits, as well as surgical benefits for outpatient services, higher than state law for master’s level MH/SUD benefits. The MCO excludes it is not applied in a comparable way. mental health therapists. coverage for inpatient SUD services Example 10. Facts. A state’s ABP Example 5. Conclusion. In this when obtained outside of the state. requires preauthorization for all example, the MCO complies with the There is no similar exclusion for outpatient substance use disorder provision of this rule pertaining to medical/surgical benefits within the services. The state ABP does not require NQTLs. The requirement that all same classification. preauthorization for any medical/ master’s-level providers (including Example 7. Conclusion. In this surgical services. mental health providers) must have example, the MCO violates the NQTL Example 10. Conclusion. The state supervised post-degree supervised provisions of this rule. The MCO is ABP does not comply with the NQTL clinical experience to join the network imposing a NQTL that restricts benefits requirements in this rule. If a state ABP is permissible because the MCO is based on geographic location. Because requires preauthorization for each consistently applying the same standard there is no comparable exclusion that outpatient SUD service it cannot remain to all providers, even though it may applies to medical/surgical benefits, this in compliance if there is no comparable have a disparate impact on certain exclusion may not be applied to MH/ limitation on medical/surgical services. Example 11. Facts. In cases where an mental health providers. SUD benefits. Example 8. Facts. A state’s CHIP MCO is unable to provide necessary Example 6. Facts. A state contracts program requires prior authorization for outpatient services to a particular with an external utilization review all outpatient MH/SUD services after the enrollee, the MCO requires that the entity to review inpatient admissions for ninth visit and will only approve up to enrollee must get prior approval in all beneficiaries participating in its ABP. 5 additional visits per authorization. For order to see any outpatient out-of- All inpatient services in the ABP are outpatient medical/surgical benefits, the network provider. The MCO approves delivered on a FFS basis. The state’s state’s CHIP program allows an initial the use of an out-of-network provider utilization review contractor considers a visit without prior authorization. After for medical/surgical outpatient services wide array of factors in designing the initial visit, benefits must be pre- if there is not an in-network provider medical management techniques for approved based on the individual within 10 miles of the person’s both MH/SUD and medical/surgical treatment plan recommended by the residence. Approval of an out-of- inpatient benefits, such as cost of attending provider based on that network provider for outpatient MH/ treatment; high cost growth; variability individual’s specific medical condition. SUD services is only authorized if there in cost and quality; elasticity of There is no explicit, predetermined cap is not an in-network provider within 30 demand; provider discretion in on the amount of additional visits miles of a person’s residence. determining diagnosis, or type or length approved per authorization. Example 11. Conclusion. In this of treatment; clinical efficacy of any Example 8. Conclusion. In this example, the MCO violates the NQTL proposed treatment or service; licensing example, the state’s CHIP program provisions of this rule. The MCO is and accreditation of providers; and violates the NQTL provisions of the imposing a restriction that limits access claim types with a high percentage of rule. Although the same NQTL—prior to out-of-network providers. Although fraud. Based on application of these authorization to determine medical the same nonquantitative treatment factors in a comparable fashion, prior appropriateness—is applied to both limitation is applied to both the MH/ authorization is required for some (but MH/SUD benefits and medical/surgical SUD benefits and to medical/surgical not all) inpatient MH/SUD benefits, as benefits for outpatient services, it is not benefits for outpatient services, it is not well as for some (but not all) medical/ applied in a comparable way. While the applied in a comparable way. surgical benefits. The evidence state CHIP plan is more generous in the Example 12. Facts. A state contracts considered in developing its medical number of visits initially provided with MCO A to provide coverage for management techniques includes without pre-authorization for MH/SUD inpatient and outpatient mental health consideration of a wide array of benefits, treating all MH/SUDs in the services to its Medicaid enrollees. MCO recognized medical literature and same manner, while providing for A requires prior authorization in person professional standards and protocols individualized treatment of medical from MCO A’s staff for all inpatient (including comparative effectiveness conditions, is not a comparable admissions for any mental health studies and clinical trials). This application of this NQTL. condition. The state provides medical/ evidence and how it was used to Example 9. Facts. A state provides an surgical benefits to its Medicaid develop these medical management ABP that is compliant with EHB enrollees through a separate MCO techniques is also well documented by requirements, including the provision of (‘‘MCO B’’). MCO B does not require the state’s utilization review MH/SUD services. The state aligns its prior authorization in person but organization. ABP’s outpatient benefits with those instead provides that authorization for Example 6. Conclusion. In this described in the state plan and applies an inpatient admission may be obtained example, the state and its utilization the same prior authorization from MCO B over the phone. The in- review contractor comply with the requirements. For outpatient MH/SUD person prior authorization process for NQTL rules. Under the terms of the ABP services, prior authorization is required MCO A imposes a higher administrative as written and in operation, the for each individual treatment session. In burden on providers than the telephonic processes, strategies, evidentiary contrast, for outpatient medical/surgical prior authorization, and in many cases standards, and other factors considered services, a series of treatments is also involves a longer waiting period for by the contractor in implementing the provided under a single authorization. approval. prior authorization requirement for MH/ Example 9. Conclusion. In this Example 12. Conclusion. In this SUD inpatient benefits are comparable example, the state’s ABP design does example, MCO A violates the NQTL to, and applied no more stringently not comply with the NQTL provisions provisions of this rule. The in-person

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prior authorization requirement in MCO strategies, evidentiary standards, or application of parity requirements to A applies to all inpatient mental health other considerations used in provider networks, including additional benefits whereas prior authorization determining limitations on coverage of examples. A few commenters noted that may be obtained more easily and services. Therefore, we are not the proposed regulatory language quickly over the phone for inpatient providing additional criteria for regarding access to out-of-network medical/surgical benefits in MCO B. determination of whether an NQTL is providers differed slightly from the MCO A is applying a stricter NQTL in applied to a given service. If questions language of the general rule for NQTLs. practice to mental health and substance arise about the appropriateness of Proposed § 438.910(d)(3) provided that use disorder benefits than is applied to criteria that are being used to apply any MCO, PIHP or PAHP providing medical/surgical benefits. NQTLs to MH/SUD benefits, we will access to out-of-network providers for Example 13. Facts. An MCO includes consider whether additional medical/surgical benefits within a buprenorphine, a medication for subregulatory guidance or further classification, must use the same treating opioid dependence, on its rulemaking is needed. processes, strategies, evidentiary formulary. However, coverage is limited Comment: Many commenters standards, or other factors in to one year total over a beneficiary’s requested additional details to clarify determining access to out-of-network lifetime. The MCO does not apply this what constitutes an NQTL and providers for MH/SUD benefits. In type of limit (a lifetime limit) to any additional examples of typical parity contrast, for other NQTLs the proposed other prescription drugs. violations. Most commenters also rule required only that the factors used Example 13. Conclusion. In this requested supplementary materials to in applying the NQTL to MH/SUD example, the MCO violates the parity provide further guidance, including benefits be comparable to and applied requirements for financial requirements information regarding typical violations no more stringently than factors used in and treatment limitations in this rule. as they are identified, along with regular applying the limitation to medical/ The lifetime limit on coverage of this and ongoing technical assistance to surgical benefits in the classification. medication does not apply to states and plans to help them Response: We have revised this substantially all medical/surgical implement the requirements of parity requirement in the final regulatory benefits in the prescription drug regarding NQTLs and to minimize the language. This final rule has been classification. administrative burden related to this revised to require that the factors used Comment: A few commenters analysis. to apply the limitation to MH/SUD proposed additional, very specific Response: We clarify that all NQTLs benefits be ‘‘comparable to’’ and applied criteria for determinations of whether a imposed on MH/SUD benefits by no more stringently than the factors NQTL is applied to a given service. For regulated entities are to be applied in used in applying the limitation to example, one commenter suggested that accordance with the requirements of medical/surgical benefits in the the final rule stipulate that criteria this rule. We believe that the illustrative classification. This language is in including the following would justify list of NQTLs provided in this final rule alignment with the general NQTL the application of an NQTL to a MH/ (§§ 438.910(d)(2), 440.395(b)(4)(ii), and standard. We believe that it will reduce SUD service in a classification where 457.496(d)(4)(ii)) is sufficient to provide administrative burden on regulated similar NQTLs are not applied to an understanding of the NQTLs that are entities and simplify enforcement to medical/surgical services: commonly used in current health care apply the same standard to all NQTLs. • Treatments involving multiple practices. Given our attempts to align This final rule clarifies that the types of services per session, with an increasing these provisions with the requirements factors used to apply the NQTL will likelihood of medically unnecessary of the MHPAEA final rules, we depend on the nature of both the NQTL services with the higher number of encourage interested parties to review and the benefit, and that in some cases services per session; guidance issued by Department of Labor it may be appropriate to use the same • Services with highly variable rates (DOL), Department of Health and factors to apply the NQTL for both of progress for individuals patients; and Human Services (HHS) and Department medical/surgical and MH/SUD benefits, • Services with highly variable of the Treasury (Treasury) about whereas in other cases there may not be treatment approaches among providers. application of the parity standards to a single factor or set of factors that can Response: We believe that the group health plans and health insurance practically be applied to both medical/ standards proposed and finalized in this issuers. In addition, we will provide surgical and MH/SUD benefits, and rule and illustrated in the examples technical assistance to states regarding instead factors that are comparable may above in this section strike an the implementation of these provisions need to be used. appropriate balance between the need and questions or issues that may arise. Comment: Many commenters for clarity and the need to provide We will develop educational materials requested that the rule address access to flexibility to regulated entities to about the requirements of parity for in-network providers. Several determine the most effective way to Medicaid managed care, ABPs and CHIP commenters also requested clarification structure the covered benefits: a NQTL programs, and about effective quality regarding the interplay between may not be imposed for MH/SUD control strategies to ensure that proposed § 438.910(d)(3) of the parity benefits in any classification unless, managed care contracts include rule and § 438.206(b)(4) of the existing under the policies and procedures of the provisions that reflect best practices and managed care rule. The parity proposed MCO, PIHP, or PAHP, or under the promote quality of care in the context of rule stated that a plan complying with terms of the ABP or CHIP state plan, as parity. We will also identify and the network adequacy requirements of written and in operation, any factors promote best practices and quality § 438.206(b)(4) will be deemed in used in applying the NQTL to MH/SUD control strategies for states to help compliance with § 438.910(d)(3), but benefits in a classification are managed care organizations ensure that commenters noted that § 438.206(b)(4) comparable to and applied no more their benefits and service delivery does not stipulate the same stringently than factors used in applying strategies adhere to the requirements of requirements regarding parity in the limitation for medical surgical/ parity. determining access to MH/SUD and benefits in the classification. For these Comment: Many commenters medical/surgical providers. For this purposes, factors mean the processes, requested additional clarity on the reason, commenters stated that finding

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provider networks to be in compliance applied no more stringently for MH/ requirements for prior authorization, with parity based only on adherence to SUD benefits than they are for medical/ concurrent review, or other NQTLs that § 438.206(b)(4) would thwart the intent surgical conditions. are applied when the beneficiary begins of the MHPAEA statute. Commenters Comment: Some commenters raised receiving outpatient mental health also stated that it is unclear what the concerns about situations where services under FFS would be subject to purpose of § 438.910(d)(3) is if it medical/surgical services are provided the general parity analysis given this requires nothing more than compliance through FFS and MH/SUD services are beneficiary is an enrollee of an MCO. with existing law. provided by an MCO, PIHP, or PAHP. Comment: Some commenters Response: We agree and in this final The commenters expressed concern that requested clarification regarding the use rule, we removed the provision to deem because FFS delivery systems typically of NQTLs for MH/SUD services where compliance with §§ 438.910(d)(3) and use extremely limited NQTL Diagnosis-Related Group (DRG) based 457.496(d)(5) of this rule (regarding management of benefits, the MCO, reimbursement is used for medical/ parity requirements for access to out-of- PIHP, or PAHP will not be able to use surgical services. Commenters stated network providers) where an MCO, any strategies to manage the utilization that DRG-based reimbursement typically PIHP, PAHP, or CHIP state plan is found of MH/SUD services. functions as an alternative to the use of to be in compliance with the provider Response: Under this final rule, states NQTLs, and stated that it is not network standard found in have the flexibility to offer benefits commonly used for MH/SUD benefits § 438.206(b)(4). We clarify that through a variety of service delivery due to factors including higher compliance with § 438.910(d)(3) and/or systems, and to employ financial variability in outcomes, lower § 457.496(d)(5) does not affect the requirements, quantitative treatment predictability of length of stay, and requirement to comply with limits, and NQTLs as appropriate in related considerations regarding § 438.206(b)(4). We may provide alignment with the requirements of this payment for MH/SUD services. additional guidance or technical rule. As stated earlier, we do not apply Commenters questioned whether assistance to states regarding the mental health parity requirements to NQTLs may be used to manage requirements of §§ 438.206(b)(4) and state plan services provided to utilization of MH/SUD services when 438.910(d)(3) and 457.496(d)(5) if beneficiaries covered only through a DRG-based reimbursement is being used questions persist. In response to the FFS or PCCM delivery system, even if for medical/surgical services. comments requesting that the rule care for other beneficiaries is delivered Response: The application of NQTLs address access to in-network providers, through a managed care delivery to MH/SUD services is subject to the we also note that §§ 438.910(d)(2)(iii) system. However, as indicated in our requirements of parity under this final and 457.496(d)(4)(ii)(C) include the 2013 SHO letter, we strongly encourage rule. Thus, the use of concurrent review example of an NQTL pertaining to states to consider changes to the state (a type of NQTL) for MH/SUD services network design for MCOs, PIHPs and plan benefit package to comport with in a classification would have to be PAHPs with multiple network tiers the mental health parity requirements of based on processes, strategies, because although network tiers may not section 2726 of the PHS Act. Benefits evidentiary standards or other factors be used to impose financial provided to an individual enrolled in an that are comparable to and applied no requirements or quantitative treatment ABP or CHIP program are subject to more stringently than those used by the limitations in Medicaid and CHIP, we parity regardless of how they receive plan to determine when to use recognize that MCOs, PIHPs and PAHPs their services, as explained in sections concurrent review for a medical service may still use them in developing G and I. in the same classification. Some NQTLs. For example, the MCO, PIHP, or We understand there could be acceptable factors may include PAHP may use network tiers when instances where an MCO enrollee variability in outcomes and lower recommending providers to enrollees, or receives the majority of his or her predictability in length of stay. In this how they structure their provider services through a FFS delivery system. scenario, the regulated entity would directories. MCOs, PIHPs and PAHPs In those cases, the MCO will still need need to apply comparable criteria to with multiple network tiers should be to deliver any MH/SUD services in medical/surgical services in a constructing them and providing compliance with these regulations; even classification to determine whether to beneficiary access to them in a way that if that means that the ability to use apply concurrent review to a MH/SUD is consistent with the parity standard for NQTLs is limited. However, states that service in that classification. NQTLs. contract with MCOs typically use them Comment: Many commenters Comment: Many commenters to deliver a comprehensive set of recommended that no restrictions be expressed concerns about the ability of medical/surgical benefits. allowed for MH/SUD medications that regulated entities to manage utilization Comment: Some commenters noted do not exist for medications used for of MH/SUD services under the proposed that in some delivery systems, the use medical/surgical treatment, including requirements. For example, one of multiple delivery options (MCO, tiered drug formularies and other commenter requested that MCOs be PIHP, and PAHP) results in mechanisms used to limit access. Other provided the flexibility to require prior segmentation of management of the commenters simply requested authorization of inpatient benefits for benefit amongst different delivery clarification regarding the application of psychiatric admissions directly from system mechanisms. For example, a the NQTL standard to prescription emergency departments to ensure that state may provide outpatient mental drugs, including formulary tiering enrollees have access to alternative health benefits through the MCOs for standards that include off-label use. crisis stabilization options, even where the first 20 visits per year, but provide Commenters noted that Medicaid a parallel review is not needed for all additional visits through the FFS programs often impose limits on medical/surgical admissions. system. medications for MH/SUD, including Response: We disagree and we are Response: In this situation, because limits on dosage, exclusion of certain finalizing this provision as discussed. coverage for the service remains medications used to treat SUD, lifetime The factors used to determine whether available to the beneficiary, we do not limits on medications used to treat SUD, and when the use of prior authorization believe that this arrangement constitutes and complex initial prior authorization is appropriate must be comparable and a quantitative treatment limit. Any requirements.

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Response: We note that all of these comparably to and no more stringently to reflect that compliance with the restrictions constitute quantitative or than those applied for medical/surgical requirements at section 1902(a)(43) of nonquantitative treatment limits that are services, noting that disparate results the Act is also necessary in order for a subject to the parity analysis. However, alone do not mean that the NQTLs in separate CHIP to be deemed compliant we are not prohibiting the use of all use fail to comply with these with parity provisions. We are also quantitative or nonquantitative requirements. revising several proposed definitions set treatment limits for MH/SUD After consideration of the comments forth in § 457.496(a) as discussed later medications, as we believe these may be received and further analysis of the in this section of the final rule. important tools for ensuring the reasons described in the proposed rule, We received the following comments appropriate management and delivery of we are revising the provisions proposed on these proposed provisions. effective MH/SUD treatments and in § 438.910(d)(3) and § 457.496(d)(5) by Comment: The majority of services. finalizing them without the language to commenters were generally supportive Comment: Many commenters deem compliance with § 438.910(d)(3) of the application of parity requirements requested that Medicare Part D and § 457.496(d)(5) of this final rule related to mental health/substance use standards be integrated into this final (regarding parity requirements for disorder (MH/SUD) benefits to CHIP. rule to ensure non-discriminatory access access to out-of-network providers) However, many commenters expressed to medications used for the treatment of where an MCO, PIHP, or PAHP is found concern about deeming CHIP programs mental illness and substance use to be in compliance with the provider compliant based solely on coverage of disorders. network standard found in EPSDT benefits. In particular, they Response: While we agree that § 438.206(b)(4). We are also revising the emphasized the need for greater beneficiaries should have access to provisions in §§ 438.910(d)(3) and oversight of states’ compliance with appropriate medications used for their 457.496(d)(5) to require that the factors providing the full range of services treatment of medical/surgical and MH/ used to apply the limitation to MH/SUD included within the scope of EPSDT, SUD conditions, MHPAEA does not benefits be ‘‘comparable to’’ and applied citing lawsuits in which children mandate the coverage of specific no more stringently than the factors enrolled in Medicaid allegedly have treatments, services, or drugs, and used in applying the limitation to been denied access to MH/SUD instead governs the limitations imposed medical/surgical benefits in the treatment even though the state is on benefits that are offered. We believe classification, rather than requiring that required to cover MH/SUD services as that existing protections in Medicaid the ‘‘same’’ factors be applied to both part of the EPSDT benefit. Some and CHIP programs are sufficient to sets of benefits. We are also finalizing a commenters noted that a few separate ensure non-discriminatory access to technical change in the punctuation and CHIP plans indicate that they provide medications used for the treatment of the placement of the word ‘‘and’’ in EPSDT benefits, but in fact, apply MH/SUD conditions. We also note that § 457.496(d)(4)(ii)(G) and (H) to increase limitations or exclude benefits that must prescription drug coverage standards clarity in the final rule regulation text. be covered under the EPSDT benefit in under Medicare Part D arise from With the exception of these revisions, as Medicaid. Commenters recommended different statutory provisions, funding indicated in the response to comments, that CMS scrutinize the coverage under mechanisms, and program we are finalizing the provisions CHIP to ensure that programs deemed requirements, than Medicaid and CHIP regarding NQTLs at §§ 438.910(d), compliant are in fact providing EPSDT programs, and therefore are beyond the 440.395(b)(4), and 457.496(d)(4) and (5) benefits as defined under the Medicaid scope of this final regulation. as proposed. statute. Commenters were particularly Comment: Many commenters concerned about the application of requested the inclusion of additional G. Parity for Mental Health and treatment limitations, including NQTLs, examples to demonstrate the application Substance Use Disorder Benefits in to MH/SUD benefits compared to of NQTL requirements to provider CHIP Programs Covering EPSDT medical/surgical benefits for children reimbursement, noting that (§ 457.496(b)) enrolled in separate CHIPs that cover reimbursement rates affect the Consistent with section 2103(c)(6)(B) EPSDT under the CHIP state plan. Some sufficiency of network adequacy, which of the Act, we proposed at § 457.496(b) commenters suggested not providing for can limit access to care. One commenter to deem a separate CHIP compliant with deemed compliance at all. noted that Medicaid and CHIP inpatient mental health parity requirements if the A few commenters were supportive of general acute services are typically state provides EPSDT in accordance deeming separate CHIPs as compliant reimbursed using methods tied to with section 1905(r) of the Act. with MHPAEA strictly based on the diagnosis and severity rather than Proposed § 457.496(a) included a state plan indicating that EPSDT category of service, but that this definition of EPSDT by cross reference benefits are covered for the population, reimbursement methodology is not to section 1905(r) of the Act, which and were opposed to considering other typically used for MH/SUD services. specifies the scope of services and criteria, such as an examination of Response: Similar to the guidance supports that must be provided as well treatment limits, cost sharing, and provided in the MHPAEA final rule, we as the medical necessity standard NQTLs. clarify that regulated entities may applicable to individuals entitled to Response: We agree that EPSDT is a consider a wide array of factors in EPSDT. However, to be deemed critical benefit that ensures children, determining provider reimbursement compliant with the mental health parity adolescents, and young adults under age methodologies and rates for both requirements, section 2103(c)(6)(B) of 21 have access to a comprehensive medical/surgical services and MH/SUD the Act also requires that a separate benefit package and other medically services, such as service type; CHIP provide EPSDT benefits in necessary services tailored to meet their geographic market; demand for services; accordance with section 1902(a)(43) of needs. While we understand some supply of providers; provider practice the Act. This requirement was not commenters are concerned that size; Medicare reimbursement rates; and adequately addressed in the proposed implementation of EPSDT in Medicaid training, experience and licensure of regulation. Therefore, as discussed may not fulfill the requirements of the providers. The NQTL provisions require below in this final rule, we are statute across all states, implementation that these or other factors be applied modifying § 457.496(b) in the final rule of EPSDT in state Medicaid programs is

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a compliance issue that is beyond the based on satisfaction of the standards screening services, and assure necessary scope of this regulation. set forth in § 457.496. transportation as part of the However, we appreciate commenters’ In response to commenters’ concerns administration of those benefits as concerns that it is not sufficient that the that separate CHIPs will be deemed required by section 1902(a)(43) of the state plan only indicate coverage of compliant with MHPAEA without Act. EPSDT under a separate CHIP in order providing the full scope of EPSDT States that elect to apply any type of to be deemed compliant with mental benefits and supports, we are modifying NQTLs under their separate program health parity requirements. We also § 457.496(b) of the final regulation to must ensure that such limits are agree with commenters that separate provide, with new language at consistent with EPSDT requirements at CHIPs that exclude benefits or place paragraph (b)(1), that to be deemed section 1905(r)(5) of the Act. We will limits on benefits that are not consistent compliant with the mental health parity closely review states’ NQTLs to ensure with the scope of EPSDT under the requirements under § 457.496, a state that they meet deemed compliance Medicaid statute should not be must elect in its state plan to cover all standards under § 457.496(b). For considered eligible for deemed EPSDT services required under section example, states will have the discretion compliance with mental health parity 1905(r) of the Act, as well as meet the to exclude some experimental services, requirements. Section 2103(c)(6)(B) of informing and administrative and this type of NQTL would be the Act provides that CHIPs covering requirements under section 1902(a)(43) unlikely to present a barrier to deemed EPSDT benefits are deemed compliant of the Act and the approved State compliance. Conversely, annual and with parity requirements under Medicaid plan. We are also adding new lifetime limits are not consistent with MHPAEA. Specifically, section language at paragraph (b)(2) to require Medicaid and/or EPSDT, and this 2103(c)(6)(B) provides that a separate that the child health plan include a practice would preclude a state from CHIP which provides EPSDT benefits description of how the state will comply deemed compliance. and services consistent with sections with the applicable Medicaid statute Finally, we have added paragraph 1905(r) and 1902(a)(43) of the Act are and the requirements of paragraph (b)(3) to § 457.496 to be clear that if a deemed compliant with the mental (b)(1)(i). The exclusion of services for state has elected in its state child health health parity requirements, and we have particular conditions or diagnoses is plan to cover EPSDT benefits only for retained that statutorily-prescribed also not permitted under section 1905(r) certain children eligible under the state policy in the final regulation. of the Act for individuals under 21 child health plan, the state is deemed Section 1905(r) of the Act requires entitled to EPSDT services. Therefore, compliant with this section only with states to provide screening and we have added a provision at respect to such children. diagnostic services as well as any § 457.496(b)(1)(ii) to preclude separate Comment: Some commenters medically necessary health care CHIPs from excluding any particular recommended that the states should services, or treatments covered under condition, disorder, or diagnosis under submit documentation beyond state section 1905(a) of the Act needed to EPSDT benefits. We are also revising the plan assurances to show how they plan correct or ameliorate defects and mental meaning of EPSDT at § 457.496(a) to to meet parity requirements. and physical illnesses or conditions, include references to both sections Furthermore, commenters were regardless of whether the service is 1905(r) and 1902(a)(43) of the Act. We covered under the Medicaid state plan. are not finalizing the proposed text that concerned that separate CHIPs deemed This allows for a broad array of services referred to ‘‘expansion of Medicaid compliant with parity regulations would to be available under EPSDT such as programs’’ which we believe was apply NQTLs to MH/SUD benefits in a rehabilitative and therapy services, confusing since the regulation applies manner that is not comparable to or is counseling, personal care services, only to separate CHIP programs. more restrictive than the NQTLs applied immunizations, periodic comprehensive In evaluating whether a state is fully to medical/surgical benefits. well-child checkups and screenings for compliant with the statutory Response: We will develop a state vision, hearing, and dental care, even if requirements governing EPSDT benefits plan amendment (SPA) template for not covered for adults under the with respect to children enrolled in its states to use in indicating how they will Medicaid state plan. Section 1905(r) of separate CHIP, we will consider comply with the requirements of the Act also requires states to provide whether there are any outstanding § 457.496. For states that report screening services at intervals that align compliance issues associated with the providing EPSDT, we anticipate asking with periodicity schedules that meet state’s provision of EPSDT in its them to attest that the full EPSDT reasonable standards of medical or Medicaid program. While we recognize benefits being offered to children in the dental practice. Section 1902(a)(43) of that in some states, the Medicaid and separate CHIP, as described in section the Act requires states to provide and CHIP programs may not be identical 1905(r) of the Act, are being provided in arrange for these medically necessary and/or administered by different a manner that is compliant with section screenings, diagnostic services, and agencies, what is critical to be deemed 1902(a)(43) of the Act. treatments, and to inform individuals compliant with the mental health parity States will also be required to affirm under 21 in Medicaid about the requirements is that the provision of in their state plan that the processes, availability of the full range of EPSDT EPSDT in CHIP is compliant with the strategies, evidentiary standards, or services available to them. Separate requirements in sections 1902(a)(43) other factors used in applying NQTLs to CHIP programs that comply with these and 1905(r) of the Act. For example, if MH/SUD benefits are comparable to and statutory requirements will be a separate CHIP covers all benefits applied no more stringently than those considered to provide ‘‘full’’ EPSDT in identified in section 1905(a) of the Act used in applying the limitation to their separate CHIPs and will be deemed in accordance with the requirements set medical/surgical benefits. As a part of compliant with the parity requirements. forth in section 1905(r)(5) of the Act, we the review process, we will work closely Separate CHIPs that do not comply with would deem compliance with parity with states to ensure compliance with all of the statutory requirements in requirements in this final rule only if the parity requirements and assist states sections 1905(r) and 1902(a)(43) of the the separate CHIP also had procedures in their efforts to address any Act will not be deemed compliant; to inform individuals of the availability inconsistencies discovered during the compliance for these programs will be of those services, provide or arrange for review process.

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Comment: Commenters expressed individuals under age 21 that entitles Many commenters believed that states concern about how states not providing these individuals to medically necessary would view the proposed regulation as EPSDT in CHIP would document services, as described in section 1905(a) superseding current regulations. To compliance with MHPAEA. One of the Act, to treat physical or mental avoid this confusion, many commenters commenter asked for clarification about illnesses or conditions, whether or not suggested adding clarifying language the assurances states will provide when these services are otherwise covered that the proposed regulation does not submitting their CHIP state plan under the Medicaid state plan. Under trump the state’s obligation to comply amendments to CMS. section 1905(r)(5) of the Act, the EPSDT with current Medicaid regulations Response: For CHIP programs that do benefit includes services necessary to regarding discrimination based on not provide full EPSDT benefits (and correct or ameliorate defects and diagnosis or other legislation such as the therefore do not meet the deeming physical or mental illnesses and Americans with Disabilities Act (ADA). requirements), a full benefit and cost conditions discovered by screening Other commenters recommended not sharing analysis of the CHIP state plan services. To be deemed compliant with including the exclusion in the final must be conducted by the state to the parity requirements under regulations. determine compliance with the parity § 457.496(b) of the final regulations, the Response: In this final rule we standards in this final rule. The state’s coverage of EPSDT under a separate maintain the definition of ‘‘treatment parity analysis must also include an CHIP requires the same scope of limitation’’ set forth at § 457.496(a) in examination of the processes, strategies, coverage that a child covered by the proposed rule under which a evidentiary standards, and other factors Medicaid would receive—that is, a CHIP permanent exclusion of all benefits for used in the application of NQTLs to enrollee would have to be entitled to all a particular condition or disorder is not MH/SUD benefits. The state must benefits and services described in a treatment limitation. This definition ensure these factors are comparable to section 1905(a) of the Act if medically aligns with the definition of ‘‘treatment and applied no more stringently than necessary and consistent with section limitation’’ provided in the MHPAEA those used in applying NQTLs to 1905(r) of the Act. We believe that final regulations (the final rules medical/surgical benefits in the same including a list of specific services that applicable outside of Medicaid and classification. We will develop a state are required to be provided under CHIP, as defined in section II of this plan template to facilitate this analysis. EPSDT is outside of the scope of this final rule). As previously discussed, we Comment: Another commenter regulation. Additional information on agree that states providing EPSDT expressed concerns about lack of the scope of benefits required under the benefits in their separate CHIP must be current tracking of certain mental health EPSDT benefit can be found in compliant with the all requirements benefits that are required under EPSDT ‘‘EPSDT—A Guide for States: Coverage associated with EPSDT in the Medicaid because they are not reported on the in the Medicaid Benefit for Children statute. Exclusion of treatment for any CMS–416 form. and Adolescents,’’ available at http:// conditions is not permitted under Response: The CMS–416 mandatory www.medicaid.gov/medicaid-chip- section 1905(r) of the Act for reporting form does not include a program-information/by-topics/benefits/ individuals under age 21 who are measure specific to any mental health downloads/epsdt_coverage_guide.pdf. enrolled in Medicaid, so if a separate screenings, diagnostic methods, or Comment: One commenter noted that CHIP excludes coverage for particular treatments. The CMS–416 is primarily applied behavior analysis (ABA) is conditions, disorders, or diagnoses, that focused on defining the number of another service that is considered a separate CHIP will not be considered as children eligible for EPSDT, the overall medically necessary service that must providing EPSDT benefits consistent number of screenings these children be provided under EPSDT. with section 1905(r)(5) of the Act. receive, and oral health and dental care Response: Whether or not a specific Therefore, states which exclude measurements. However, section 401 of service is medically necessary for a treatment for particular conditions, the CHIPRA required that the HHS particular child is beyond the scope of disorders, or diagnoses cannot be Secretary develop a standardized set of this final rule. However, we direct the deemed compliant with the mental measures for voluntary state use relating commenter to the CMCS Informational health parity requirements under to a variety of topics within children’s Bulletin ‘‘Clarification of Medicaid § 457.496(b) of the final regulations. In health. The initial Child Core Set was Coverage of Services to Children with response to comments, we have added published in February 2011 and has Autism’’ at https://www.medicaid.gov/ language in § 457.496(b)(1)(ii) to been expanded to include measures Federal-Policy-Guidance/Downloads/ expressly provide that a separate CHIP specific to behavioral health. We will CIB-07-07-14.pdf, and the frequently cannot be deemed compliant with continue our efforts to collaborate with asked question issuance entitled mental health parity requirements under states to improve the quality of the ‘‘Services to Address Autism’’, which the final regulation if it excludes behavioral health measures data. discusses the provision of ABA therapy benefits for a particular condition, Additional information on the Child under EPSDT, available at http:// disorder, or diagnosis. Core Measurement Set is available at www.medicaid.gov/Federal-Policy- In considering the comments http://www.medicaid.gov/Medicaid- Guidance/downloads/FAQ-09-24- received, we are finalizing the CHIP-Program-Information/By-Topics/ 2014.pdf. provisions proposed in § 457.496(a) Quality-of-Care/CHIPRA-Initial-Core- Comment: Many commenters with modifications to revise the Set-of-Childrens-Health-Care-Quality- expressed concern that the exclusion of definition of EPSDT benefits to specify Measures.html. coverage for services related to specific that, for the purposes of § 457.496, Comment: Many commenters diagnoses is not considered a treatment EPSDT benefits means benefits defined recommended clarifying what medically limitation under this rule. Commenters in section 1905(r) of the Act that are necessary services separate CHIP believed that excluding benefits for provided in accordance with section programs are required to provide certain diagnoses or conditions would 1902(a)(43) of the Act to mirror the through EPSDT, such as home services directly conflict with current Medicaid statutory requirement in section and intensive care coordination. regulations that prohibit discrimination 2103(c)(6)(B) of the Act regarding Response: EPSDT is a required based on diagnosis and could lead to deemed compliance. Additional Medicaid benefit for categorically needy states not fulfilling their obligations. changes to proposed definitions in

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paragraph (a) include the modification affected providers, and, upon request to group health plans will be found in of ‘‘CHIP State Plan’’ to ‘‘State Plan’’ in enrollees and potential enrollees, will compliance with the MHPAEA order to use terminology consistent with be deemed to meet this requirement. In disclosure requirements for denials.8 existing CHIP regulations. addition, we proposed in § 438.915(b) to The standards at 29 CFR 2560.503–1 do Furthermore, § 457.496(b) is being require MCOs, PIHPs, or PAHPs to make not themselves apply to Medicaid; we finalized with substantive changes and available the reason for any denial of did not propose in this rule to make a technical change to clarify the reimbursement or payment for services them applicable as a condition for standards which must be met to be for MH/SUD benefits to the enrollee. As deemed compliance because similar deemed compliant with § 457.496, noted in the proposed rule, § 438.210(c) requirements are already applicable including the provision of all EPSDT already requires each contract with an under existing law. MCOs, PIHPs, benefits as defined in section 1905(r) of MCO, PIHP, or PAHP to provide for the PAHPs and states are required to give a the Act, and compliance with MCO, PIHP, or PAHP to notify the ‘‘reason’’ for any adverse benefit requirements for providing EPSDT requesting provider and give the determinations under requirements for benefits in accordance with section enrollee written notice of any decision notices in, respectively, § 438.404 and 1902(a)(43) of the Act. Additional by the MCO, PIHP, or PAHP to deny a § 431.210. The information provided in language is also being incorporated to service authorization request or to this disclosure of the reason for the clarify that the state plan must include authorize a service in an amount, adverse benefit determination must be a description of how the state will duration, or scope that is less than made in compliance with these and all comply with the EPSDT deeming requested. other provisions of applicable federal or requirements in § 457.496(b). Although the statute that applies state law. MHPAEA to ABPs does not include H. Availability of Information For similar reasons, the proposed rule specific provisions regarding the (§ 438.915, § 440.395(d), § 457.496(e)) did not make claim denial requirements availability of plan information, in the of 29 CFR 2560.503–1 a condition of Under the MHPAEA final regulations proposed rule we proposed to use our deemed compliance for CHIP programs. at § 146.136 (d)(1), the criteria for authority under section 1902(a)(4) of the medical necessity determinations made CHIP enrollees have an opportunity for Act to extend this provision to all ABPs, an external review of denials, reduction under a group health plan or health as well as those ABPs with services insurance coverage for MH/SUD or suspension of health services under delivered through MCOs, PIHPs and all § 457.1130. benefits must be made available by the PAHP. This final rule retains this We requested comments on any plan administrator or the health provision. At § 440.395(c)(1), we additional provisions concerning the insurance issuer offering such coverage proposed that all states delivering ABP availability of plan information or in accordance with regulations to any services through a non-MCO must make current or potential participant, available to beneficiaries and notice of adverse determinations that beneficiary, or contracting provider contracting providers on request the may be necessary to facilitate upon request, in accordance with criteria for medical necessity compliance with MHPAEA for MCOs, section 2726(a)(4) of the PHS Act. Under determinations for MH/SUD benefits. PIHPs, PAHPs, ABPs, and CHIP. the same authority, the MHPAEA final Similarly, § 440.395(c)(2) in the Comment: Some commenters regulations also require at proposed rule required the state to make expressed concern that the requirements § 146.136(d)(2) that the reason for any available to the enrollee the reason for for MCOs, PIHPs, and PAHPs that are denial under a group health plan or any denial of reimbursement or specific to parity compliance were less health insurance coverage of payment for services for MH/SUD stringent than the disclosure reimbursement or payment for services benefits. For the same reasons, using our requirements that apply to commercial for MH/SUD benefits in the case of any authority under section 2101(a) of the plans under the final MHPAEA rule. participant or beneficiary be made Act, we proposed at § 457.496(e) to The commenters recommended that the available, upon request or as otherwise require disclosure, upon request, to any final rule be revised to set more specific required, by the plan administrator or current or potential CHIP enrollee or standards for the release of medical the health insurance issuer to the contracting provider of the criteria for necessity determinations. participant or beneficiary. The proposed medical necessity determinations and to Response: We disagree and believe rule also addressed these issues. require that the reason for any denial of the proposed rule set forth the same We proposed to apply these reimbursement or payment for MH/SUD standards regarding availability of disclosure requirements imposed on the benefits be made available to the medical necessity information for MCOs health insurance issuer under MHPAEA enrollee. As proposed, the CHIP rule and to PIHPs and PAHPs that provide and the MHPAEA final regulations would also apply to managed care coverage to MCO enrollees that are regarding availability of information in plans, so we included a provision in imposed on the health insurance issuer a similar manner to MCOs and to PIHPs that proposal for deeming compliance through section 2726 of the PHS Act and PAHPs that provide coverage to with the parity disclosure requirement if and the MHPAEA final regulations. We MCO enrollees. As proposed and the managed care entity complied with proposed and are finalizing the finalized in this rule in § 438.915(a), § 438.236(c) disclosure requirements. regulation at § 438.915(a) to provide that MCOs, PIHPs, and PAHPs subject to We also proposed for CHIP plans that MCOs, PIHPs and PAHPs subject to parity requirements must make their other laws requiring disclosure would MHPAEA requirements must make their medical necessity criteria for MH/SUD still apply. medical necessity criteria for MH/SUD benefits available to any enrollee, The MHPAEA final regulations at benefits available to any enrollee, potential enrollee or contracting § 146.136(d)(2) state that non-federal provider upon request. We proposed governmental group health plans (or 8 The requirements of 29 CFR 2560.503–1 are that MCOs, PIHPs, and PAHPs found to health insurance coverage offered in applicable to ERISA plans, as well as all non- be in compliance with connection with such plans) that grandfathered group health plans and health insurance issuers in the group and individual § 438.236(c),which requires provide the reason for claim denial in a markets, through the claims and appeals regulations dissemination by MCOs, PIHPs and form and manner consistent with the adopted under the Affordable Care Act. See 78 FR PAHPs of practice guidelines to all requirements of 29 CFR 2560.503–1 for 68247 for a full discussion.

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potential enrollee or contracting provided to plan beneficiaries and be required to publish their medical provider upon request. providers upon request. necessity criteria for MH/SUD treatment Comment: Some commenters were Response: The current managed care and medical/surgical treatment on their concerned that the proposed rule did rules § 438.236 do require Medicaid Web sites and in other formats easily not have the same claims denial managed care plans to provide practice accessible to consumers, families, and requirements as required for group guidelines (including medical/surgical treatment providers including health plans. The commenters and MH/SUD) to enrollees and potential requirements for persons with limited recommended that CMS require MCOs, enrollees. Additionally, § 431.210 and English proficiency or disabilities. Some PIHPs, and PAHPs to provide the reason § 438.404 require MCOs, PIHPs, PAHPs commenters made other for a claim denial in a form and manner and states (for state fair hearings) to recommendations to improve health consistent with the requirements of 29 provide the reason for a denial. In plans’ transparency, including a request CFR 2560.503–1. In addition, some addition, under § 438.404 beneficiaries that MCOs, PIHPs, and PAHPs should commenters suggested that CMS can be provided medical necessity be required to periodically publish establish a firm timeframe for the criteria for medical/surgical benefits as information about denial rates for release of such information and for the well as MH/SUD benefits. In addition, inpatient and outpatient MH/SUD release of claims denials. Several § 438.402 allows providers acting on treatment and denial rates for inpatient commenters recommended that CMS behalf of beneficiaries to file a grievance and outpatient medical/surgical establish penalties for Medicaid MCOs, to request and receive information. treatment which would allow states to CHIP plans and ABPs that fail to make In regards to CHIP, under § 457.1130 identify possible issues with parity plan information available in a timely and § 457.1180, beneficiaries have the compliance and to take necessary and easily accessible manner. right to an external review related to actions to ensure that the provisions of health service matters and must receive Response: As we stated in the this rule are enforced. a notice that includes the reasons why proposed rule, the provisions under 29 Response: We believe that existing a determination was made. We believe CFR 2560.503–1 do not themselves requirements in § 438.236 (governing these requirements allow beneficiaries the adoption, dissemination and apply to Medicaid and CHIP and we did to request and receive the necessary application of practice guidelines by not see a reason to propose to extend medical necessity information MCOs, PIHPs and PAHPs) as well as the those provisions to Medicaid and CHIP. especially in terms of a denial to make requirements in § 438.10 mandating that There is a disclosure requirement a determination that access to the member materials be provided in applicable in Medicaid and CHIP. service is in compliance with these alternative formats is sufficient for MCOs, PIHPs, PAHPs and states are rules. providing the necessary information to required to give a ‘‘reason’’ for any Comment: Some commenters beneficiaries. We also believe that the adverse benefit determinations under expressed concern that transparency language in § 438.10 can be interpreted requirements for notices in, should not be predicated upon to include posting information on the respectively, § 438.404 and § 431.210. Medicaid and CHIP beneficiaries having Web site as that modality becomes more CHIP enrollees have an opportunity for the knowledge and wherewithal to available to individuals enrolled in an external review of denials, reduction request information from health plans Medicaid. However, we would or suspension of health services under after specific services have been denied. encourage states to post this information § 457.1130. There are current rules that These commenters made several regarding practice guidelines on their do require states to provide notice of recommendations to improve this Web site. We are providing technical adverse action within certain transparency. Some commenters assistance to states regarding the data timeframes and (§ 432.211 and recommended that plans be required to and information that would be helpful § 432.213). In addition, there is specific provide beneficiaries and, when to review to identify possible issues information that must be included in a appropriate, providers with written with plans’ efforts to understand and notice of action to a beneficiary criteria for medical necessity comply with parity. Further, we believe including: The action, reason for the determinations whenever requests for that data regarding denial rates across action, right to appeal and the right to MH/SUD services are denied rather than classifications will be important continue benefits pending the result of requiring beneficiaries request this information for states to analyze and the appeal (§ 438.404). Therefore, we do information. determine if there are potential issues not believe it is necessary or appropriate Response: We agree that transparency with complying with the provisions of to adopt additional general disclosure is important and we would like to this rule and taking corrective action standards in this rule. remind beneficiaries and providers that when appropriate with their MCOs, Comment: Many commenters they can request that information at any PIHPs, or PAHPs. expressed concern that the proposed time. However, providing written Comment: Several commenters raised rule would not provide beneficiaries, criteria for medical necessity concerns that additional requirements providers and stakeholders with determinations to all beneficiaries when regarding the availability of information comparable information regarding services are denied may be could have unintended consequences. medical necessity standards for overwhelming for all beneficiaries and One example of such consequences medical/surgical service, and therefore, may be administratively burdensome for included duplicating or complicating would not provide sufficient states and MCOs, PIHPs and PAHPs. existing efforts to ensure transparency information to compare medical Therefore, we are not imposing a and adequate information to enrollees; necessity requirements for MH/SUD requirement in this final rule to provide another example suggested that against similar requirements for beneficiaries and, when appropriate, additional requirements would make it medical/surgical services. The providers with written criteria for more difficult for members to navigate commenters recommended the rule medical necessity determinations the available information and could also should specify that information about whenever requests for MH/SD services divert plan resources away from criteria used for making medical are denied. Medicaid beneficiaries who were necessity determinations for comparable Comment: Commenters recommended enrolled in managed care. Several medical/surgical treatment should be that MCOs, PIHPs, and PAHPs should commenters noted that current

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Medicaid regulations already provide Specifically, this commenter regarding medical necessity criteria and sufficient protections for Medicaid and recommended that CMS specify that the basis of service denials. CHIP enrollees regarding medical licensed and proprietary criteria should Response: Currently parents or legal necessity determinations indicating that not be made available unless such guardians of children participating in CMS already requires Medicaid MCOs criteria are relevant to specific the Medicaid or CHIP program may to notify the requesting provider and/or treatments or services and are requested request the medical necessity criteria or give the enrollee written notice of any by current or prospective insured receive information on service denials. decision to deny a service authorization patients, or healthcare providers with Individuals that have a power of request or to authorize a service in an appropriate notice of disclosure of attorney for an individual would also amount, duration, or scope that is less confidential and proprietary have authority to make these requests. than requested. In addition, the information. In addition, § 438.406(b)(4) provides commenters indicated that the Medicaid Response: We agree with the that the enrollee and his or her program already has disclosure commenter that this final rule requires representative must be included in the requirements concerning the availability information regarding the medical appeals process. of plan information and notice of necessity criteria for specific treatments As indicated in the response to adverse determinations and those be made available upon request to comments, we are finalizing the should be followed instead of increasing current or prospective beneficiaries or provisions regarding availability of the administrative burden for states and health care provider; this final rule does information at § 438.915, § 440.395(d), plans by creating new requirements not require that this information be § 457.496(e) as proposed with a specific to parity. The commenters more broadly disseminated to the technical change in § 457.496(e)(1) to stated that creating additional or new general public. use the term ‘‘deemed’’ in place of requirements would increase the Comment: Another commenter ‘‘determined.’’ There was an oversight administrative and operational burden recommended that CMS require states to of an inconsistency between the for both plans and states. One engage all stakeholders in an open and corresponding Medicaid regulations at commenter recommended that if public process on the state’s plans to § 438.915 that has been corrected in this additional guidance was needed, comply with the parity requirements. final rule. subregulatory guidance, such as a State Response: While the regulation requires states to post information on I. Application to EHBs and Other ABP Medicaid Director Letter, could address Benefits (§ 440.395(c), § 440.395(e)(1)) some of the complexities around their parity analysis on the state Web availability of information such as site, the proposed rule did not address Section 1937(b)(6) of the Act, as medical necessity and adverse stakeholder engagement regarding added by section 2001(c) of the determination notices. Another states’ efforts to determine if MCOs or Affordable Care Act, and implemented commenter recommended that CMS other delivery systems were parity through regulations at § 440.345(c) engage states, accreditation compliant. Without prior notice and directs that ABPs that provide both organizations, and Medicaid managed opportunity for comment, we do not medical and surgical benefits and MH or care plans to better understand activities believe it appropriate to finalize a SUD benefits must comply with certain already occurring before layering on requirement that states develop parity requirements. Further, ABPs must additional monitoring requirements on stakeholder engagement processes provide the 10 EHBs, including MH/ states and plans. regarding their efforts to review SUD services. As states determine their Response: We believe that current compliance with the final regulation. ABP service package, states must use all Medicaid and CHIP regulations provide However, we do encourage states to of the EHB services from the base- sufficient disclosure to current undertake these efforts and to include benchmark plan selected by the state to beneficiaries; the proposed regulation stakeholders as much as possible. define EHBs, consistent with the solidifies a provider’s ability to obtain Comment: One commenter applicable requirements in 45 CFR part medical necessity information. The recommended that CMS require states to 156. current provisions require MCOs, PIHPs educate both beneficiaries and providers Section 1937 of the Act offers or PAHPs to provide their medical regarding any new benefit changes. flexibility for states to provide medical necessity criteria for mental health and Response: We agree that beneficiary assistance by designing different benefit substance disorder benefits to education is important which is shown packages, including other services beneficiaries and affected providers. We in current managed care regulations beyond the EHBs for different groups of proposed and are finalizing § 438.915(a) under § 438.10. Section 438.10(f) eligible individuals, as long as each that will require the plan administrators currently specifies that enrollees must benefit package contains all of the EHBs to provide such medical necessity be notified of their benefits available and meets certain other requirements, criteria to any contracting provider. We under the MCO, PIHP or PAHP contract, including parity provisions under believe that an affected provider in how to obtain a prior authorization, how section 2726 of the PHS Act. § 438.236(c) is consistent with this the enrollee can obtain benefits While we did not request comment definition because given certain referral including benefits that are available specifically on this section, we did practices in place within an MCO, PIHP under the state plan but not covered receive many comments on ABPs. For or PAHP; providers may need to under the contract. Enrollees must be the reasons set forth below, we are understand practice guidelines for more notified at the time of enrollment and finalizing the proposed provisions at than their area of expertise. also at any time a change to the benefits paragraphs (c) and (e)(1), with Comment: One commenter expressed or processes listed here is considered modification, which we describe below. concern regarding issues with sharing significant. Comment: Several commenters medical necessity criteria because the Comment: Another commenter remarked on various topics regarding proposed provisions (and this final rule) recommended CMS consider including, the intersections between MHPAEA require provision of medical necessity or clarifying, the ability of a Medicaid requirements and ABPs. Several criteria or practice guidelines to beneficiary to designate a personal commenters requested that we clarify if enrollees and prospective enrollees as representative with the legal authority parity requirements differ by type of well as participating providers. to request information from the MCOs ABP such as ABPs that offer only state

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plan benefits or ABPs that serve states flexibility in designing NQTLs on Comment: Some commenters stated medically frail beneficiaries and have a benefit by benefit basis. that there is no stipulation in the benefits that are more than the state Response: We appreciate the preamble or proposed regulations that plan benefits. commenter’s feedback and agree this define a required methodology and/or Response: Consistent with the was the intent of the proposed rule and documentation of the analysis to proposed rule, the final regulation is maintained in the final rule. determine if an ABP complied with requires every approved ABP to meet Comment: One commenter asked parity where ABPs are provided on a parity requirements, regardless of the CMS to confirm that § 440.396 FFS basis. The commenters maintained benefit package offered by the ABP. In Benchmark and Benchmark-Equivalent that the state has no responsibility to the final § 440.395, we address ABPs that Coverage that was reviewed and public to disclose its documentation of are provided other than through a approved by CMS has been determined compliance other than providing managed care delivery system and in to be in compliance with parity. sufficient information to CMS. final § 438.900 through § 438.930, we Response: We have reviewed all Response: To clarify, where ABPs are address ABPs that are delivered through approved ABPs for parity compliance provided on a FFS basis, this regulation MCOs, PIHPs and PAHPs. As noted and states have attested to their would require states to provide throughout this rule, the parity compliance with MHPAEA in the ABP sufficient information in the ABP state standards are virtually identical in these SPAs. New SPA applications that are plan amendment request to assure and different regulations. submitted to create ABPs will be document compliance with parity Comment: Additional commenters reviewed by CMS to determine if the requirements. We will review the plan noted that section 1937(b)(6)(B) of the plan complies with this final rule. amendment to assure compliance with Comment: Many commenters Act specifies that ABP coverage parity requirements and EHB anti- requested clarification and examples providing EPSDT should be deemed discrimination provisions. about how parity applied to long term We are finalizing this provision as compliant with parity. services and supports in ABPs for EHB. proposed, with a different designation, Response: We agree with the The commenters believe that many of at § 440.395(e)(3). commenter. We are therefore finalizing the EHBs in ABPs include long term K. Application of Parity Requirements to § 440.395(c) to implement the statutory services and that the Affordable Care the Medicaid State Plan deeming provision for ABPs. Act does not allow such long term Comment: Many commenters believed benefits offered for SUD/mental health The provisions of section 2726 of the that CMS afforded states too much to be more restrictive than long term PHS Act that are incorporated through discretion regarding how parity analyses medical/surgical benefits. sections 1932 and 1937 of the Act do are conducted for EHB in ABPs and Response: We have included long not apply directly to the benefit design provided too little oversight of state term services and supports in the for Medicaid fee-for-service and non- processes used and how services are definition of medical/surgical benefits, ABP state plan services. Under the offered (that is, whether services are mental health benefits and substance proposed rule, the requirements would offered through managed care contracts use disorder benefits as such terms are apply to the benefits offered by the MCO or in fee for service (FFS) arrangements). defined and used in this final rule. (See (or, as discussed above, if benefits are Several commenters requested that CMS section III.A. of this final rule for a more carved out, to all benefits provided to provide more structured requirements detailed discussion). Therefore, this rule MCO enrollees regardless of service or a mandatory methodology for such is clear that parity standards apply to delivery system) but did not apply to all analyses in ABPs; one commenter these services. Medicaid state plan benefit designs; for wanted CMS to conduct a As indicated in the response to states that did not use an MCO at all in comprehensive review of EHBs in all comments, we are finalizing the connection with delivery of services, the ABPs with special attention on substance of the applicability standard proposed rule at § 438.900 through intermediate behavioral healthcare as proposed in § 440.395(d)(1); we note § 438.930 would have not been services. that this provision is being designated applicable. States that have individuals Response: We are not adding as § 440.395(e)(1) in this final rule enrolled in MCOs and have MH/SUD additional requirements or a mandatory because of the addition of regulation services offered through FFS would, methodology in this final rule with text to address EPSDT in the context of under the proposed rule, have the regard to our proposal that states ABPs and the parity requirements. In option of amending their non-ABP state oversee the parity analysis for EHBs in addition, a comma was added to this plan to be consistent with the proposed ABPs. This final rule provides that text (which follows the word ‘‘PAHP’’) regulations or offering MH/SUD services states have oversight responsibility for for grammatical reasons. Further, we are through a managed care delivery system ensuring parity in ABPs, similar to their finalizing regulation text, in (MCOs, PIHPs, and/or PAHPs) to be responsibility for ensuring parity in § 440.395(c), to deem compliance with compliant with the proposed rules. managed care contracts. However, we the parity provisions when an ABP As noted in the proposed rule, for will provide technical assistance to covers EPSDT. beneficiaries who are not enrolled in a states regarding the implementation of MCO, and thus not covered by section these provisions and questions or issues J. ABP State Plan Requirements 1932(b)(8) of the Act, this rule would that may arise. This technical assistance (§ 440.395(e)(3)) not affect coverage (other than when the may include the identification and We proposed to require states using services are part of an ABP). However, promotion of best practices, tools, and/ ABPs to provide sufficient information we encourage states to provide state or other assistance for analyzing ABPs in the ABP state plan amendment to plan benefits in a way that comports for compliance with the requirements of assure and document compliance with with the mental health parity this rule. parity provisions. The requirement was requirements of section 2726 of the PHS Comment: One commenter noted that included in the proposed rule at Act. the proposed rule NQTL requirements § 440.395(d)(3) and is being re- Comment: Many commenters for ABPs mirrors the requirements for designated as § 440.395(e)(3) in the final expressed gratitude to CMS for group health insurance plans, offering rule. including important language in the

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proposed rule encouraging states to services, the requirements would apply and innovative programs based on new provide state Medicaid plan benefits in to all benefits provided to the majority evidence-based models. The commenter compliance with parity even when they of Medicaid participants because that suggested that the state’s flexibility to are not required to do so under the majority of enrollees are MCO enrollees. develop new models should be MHPAEA or regulations. Many The rule, as proposed and as finalized, preserved. commenters supported application of imposes parity requirements in terms of Response: We disagree that the parity requirements to all benefits for the total benefits package provided to proposed mental health parity rules Medicaid managed care enrollees, MCO enrollees, regardless of service impermissibly encroach on states’ including benefits that are provided by delivery system. States that have flexibility to decide how to operate their PIHPs, PAHPs, or FFS. Some individuals enrolled in MCOs and have Medicaid programs. We maintain that commenters recommended that CMS MH/SUD services offered through FFS applying various parity provisions work closely with states to ensure that will have the option of amending their across the different delivery systems all Medicaid beneficiaries have strong non-ABP state plan to be consistent would allow states the most flexibility coverage for MH/SUD services. with these regulations or offering MH/ in designing delivery systems while Response: We will to continue to SUD services through a managed care ensuring that parity in coverage of provide support and technical delivery system (MCOs, PIHPs, and/or medical/surgical and MH/SUD services assistance to states to strengthen PAHPs) to be compliant with these final is provided to MCO enrollees. Under coverage of MH/SUD services for all rules. We also encourage states that this final rule, parity requirements Medicaid participants even when states have some beneficiaries not enrolled in apply to the entire package of services are not required to do so through this an MCO to offer these beneficiaries the MCO enrollees receive, whether from rule. protections afforded under parity. the MCO, PIHP, PAHP, or FFS. If states Comment: Many commenters Comment: Some commenters strongly carve out some MH/SUD services from encouraged CMS to apply parity suggested that CMS work with states the MCO contract and furnish those protections beyond what is required and other interested parties to find services by PIHPs, PAHPs, or through under federal law. The commenters alternative means to ensuring quality FFS, we are applying the parity indicated that CMS should encourage and access to MH/SUD services in states requirements to the entire package of states to apply parity benefits equally that have chosen to provide those services MCO enrollees receive. for all Medicaid enrollees, regardless of services outside of a managed care Requiring the standards for parity to be whether they are enrolled in managed product. care, ABPs or traditional FFS. Some Response: As indicated above, the applied to the overall package of commenters were concerned that provisions of the Act impose parity benefits received by MCO enrollees will individuals being served entirely in the requirements in limited cases. allow MCOs to comply with MHPAEA FFS environment are being denied the Therefore, we can only encourage states requirements without requiring same protections as individuals who get to take the necessary actions to apply inclusion of additional MH/SUD some portion of their care through a parity to MH/SUD benefits for FFS benefits in the MCO benefit package, as managed care arrangement. The beneficiaries. States can choose to long as these MH/SUD benefits are commenters maintained that the maintain these services on a FFS basis provided elsewhere within the delivery proposed rule did not promote a level in their state plan and make the system. In states where MH/SUD playing field between managed care necessary changes to their state plan to benefits are provided across multiple arrangements and FFS. In addition, the comply with this final regulation. delivery systems (including FFS), states commenters stated that exempting Nothing in this final regulation are required under § 438.920(b)(1) to Medicaid FFS from the proposed mental prohibits states from including review the full scope of benefits health parity requirements will create additional MH/SUD services in their provided to MCO enrollees to ensure inequality in service delivery for state plan or in managed care compliance with the parity Medicaid beneficiaries and could have arrangements. requirements. As part of complying with serious implication for the viability of Comment: Many commenters stated this regulation, we expect states to work Medicaid managed care plans. A that CMS’s proposed mental health with their MCOs (or PIHPs and PAHPs) commenter suggested that requiring parity rules impermissibly encroach on to determine the best method of Medicaid FFS to comply with the parity states’ flexibility to decide how to achieving compliance with parity requirements outlined in the proposed operate their Medicaid programs. The requirements for benefits provided to rule would allow for continuity of care, commenters indicated that the various the MCO enrollees. Based on the increased access to care and services, delivery system arrangements that states commenter noting that services may be care coordination and improved quality use will become significantly more driven into the MCO and in light of our of MH/SUD services for all complex and difficult to administer policy in this final rule, we reviewed beneficiaries. under CMS’s proposal to apply the the proposed § 438.920(b)(2) and Response: We acknowledge that this mental health parity standards to state discovered that proposed (b)(2) was final rule does not provide the same plan services delivered outside of a written to indicate a state responsibility protections to Medicaid beneficiaries Medicaid MCO. Specifically, in some only when some services are carved out receiving only FFS benefits as it does for states, the administrative complexity of of the MCO. We finalize this rule those enrolled in MCOs. However, applying the rules to services delivered without that limitation; all states, section 1932(b)(8) of the Act does not outside of an MCO may drive behavioral regardless of how services are delivered provide authority to apply parity health services into the MCO contracts to MCO enrollees; have the protections to beneficiaries who are not to the detriment of a longstanding, responsibility to ensure that the enrolled in an MCO and section 1937 of publicly operated service delivery program is in compliance with these the Act limits the application of parity system. Another commenter indicated requirements. We believe that because requirements to ABPs. that requiring that all state plan MH/ of this oversight requirement and the While the provisions of this rule do SUD services to be included in all MCO flexibility found in these final rules, the not apply directly to the benefit design contracts diminishes the state’s state should not have incentives to for Medicaid non-ABP state plan flexibility and ability to develop new either move benefits into the MCO or

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outside of the MCO for purposes of methods necessary for the proper and services needed outside of the package complying with these rules. Because of efficient operation of the state plan, that are referred to the MCO organization for these reasons we are finalizing if MH/SUD state plan services are prior authorization. § 438.920(b)(2) in the final rule with provided to MCO enrollees through a Response: In this final regulation we revisions to require states to monitor the PIHP, PAHP, or under FFS Medicaid are requiring states to apply parity to all program in any instance where an (because such services are carved out of MH/SUD services offered in their non- enrollee is receiving benefits through an the MCO contract scope), MCO ABP state plan for individuals that are MCO. enrollees will still receive the MHPAEA enrolled in an MCO. For MH/SUD benefits offered through parity protections with respect to MH/ As indicated throughout this final FFS, states would not necessarily be SUD state plan services. We are rule, we are finalizing the overall scope required to amend their non-ABP state committed to and agree with of the parity requirements as proposed. plan to meet parity requirements, but commenters’ recommendations to work Specifically, the parity requirements could use their existing state plan or with states and other interested parties will apply to benefits provided to MCO waiver services to achieve parity when to ensure quality and access to mental enrollees (regardless of the delivery individuals are receiving some benefits health and SUD services in states that system of those benefits), to ABPs and (whether MH/SUD or medical/surgical) have chosen to provide those services to CHIP. As discussed in the responses from a MCO and also some benefits outside of a managed care product. to comment, § 438.920(b)(2) is being through FFS (or through PIHPs or Comment: Several commenters finalized with changes to require states PAHPs)). However, if a state did not requested CMS to clarify in the final to monitor the program in any instance have MH/SUD benefits in every rule that only beneficiaries receiving where an enrollee is receiving benefits classification in which medical/surgical both their MH/SUD and medical through an MCO. benefits are provided across all surgical benefits through a FFS delivery authorities, the state would have to system are not provided parity L. Scope and Applicability of the Final choose either to offer these services protections. Rule (§ 438.920(a) and (b), through a MCO, PIHP or PAHP or Response: To clarify, the rule does not § 440.395(e)(2), and § 457.496(f)(1)) apply to Medicaid state plan amend its state plan (or a waiver of its Sections 438.920, 440.395(d), and beneficiaries who are not enrolled in an state plan) to include these benefits to 457.496(f) of the proposed rule MCO, and thus, not covered by section achieve compliance with proposed addressed the applicability and scope of 1932(b)(8) of the Act. However, this rule § 438.920(a) and (b). the rule. Specifically: Comment: Several commenters does apply to all beneficiaries enrolled • indicated that the Medicaid statute in ABPs and CHIP, regardless of the Section 438.920(a) proposed that provides that each Medicaid managed benefit delivery system. We encourage the requirements of the subpart apply to care organization shall comply with the states to provide all state plan benefits delivery of Medicaid services when an mental health parity requirements. The in a way that comports with the mental MCO is used to deliver some or all of commenters indicated that Congress did health parity requirements of section the Medicaid services; section not mean for the statute to be 2726 of the PHS Act. 438.920(b) proposed state interpreted the way it was in the Comment: A commenter responsibilities when the MCO delivers proposed rule and that only individuals recommended CMS develop a chart for only some of the Medicaid services. that received all of their services beneficiaries, providers, authorized Section 438.920(b)(1) proposed that in through the MCO would be subject to representatives and plans to explain the cases where some services are the requirements in these rules. The which insurance arrangements must delivered outside of the MCO, the state commenters stated that CMS meet parity and which do not. The must complete the parity analysis and acknowledges the Congress’ intent, but commenter indicated there is much provide evidence to the public. States nonetheless applies the mental health confusion among beneficiaries about completing the parity analysis must do parity rules more broadly based on the whether MHPAEA applies to such plans so consistently with the parameters section 1902(a)(4) authority to provide as Medicare, Department of Defense and discussed in this rule, meaning they for methods of administration that are Federal Employee Health Benefits need to review the MH/SUD benefits to necessary for the proper and efficient Program. ensure they are included in the operation of the Medicaid state plan. Response: We appreciate the contracts with limitations or financial The commenters stated that CMS cannot commenters’ recommendations for CMS requirements that are no more stringent use its section 1902(a)(4) authority to to provide further guidance to states on than the predominant limitations or specify Medicaid methods of ensuring and applying parity financial requirements applied to administration that are inconsistent requirements through all service substantially all of the medical/surgical with a clear congressional directive. delivery systems in Medicaid and CHIP benefits provided to the MCO enrollees. Response: We disagree that this rule programs, including to individuals Under section 439.920(b)(2), we is contrary to the purpose of section receiving services as part of an ABP. We proposed that the state must ensure that 1932(b)(8) of the Act. We also disagree will be providing additional information MCO enrollees receive services in that the authority of section 1902(a)(4) and technical assistance to states and compliance with subpart K when the cannot be employed to link the delivery MCOs regarding this final rule. MCO did not provide all medical/ systems that would furnish MH/SUD Medicare, Department of Defense, and surgical and mental health/substance services to individuals enrolled in a the Federal Employee Health Benefits use disorder benefits. Our proposal Medicaid MCO to ensure that enrollees Programs are outside the scope of this contemplated that these responsibilities in an MCO receive benefits that are rule. could be met through appropriate consistent with the parity standards. To Comment: A few commenters reporting from the MCOs in order for ensure that the goal of parity is met and requested further guidance for ensuring the state to adequately oversee the avoid incentives to carve out all MH/ parity for services authorized as part of program. SUD services from an MCO contract, we a mental health rehabilitation and • Proposed § 440.395(d)(1) indicated are requiring, through our authority in mental health targeted case management that § 440.395 applied to ABPs that are section 1902(a)(4) of the Act to specify as a package of services and when not delivered through managed care.

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• Proposed § 457.496(f)(1) indicated package of services MCO enrollees requirements. Underlying our proposal that § 457.496 applied to CHIP state receive. Requiring the standards for was an anticipation that states would plans, including when benefits are parity to be applied to the overall need to include contract provisions in furnished under a contract with MCEs. package of benefits received by MCO these MCO contracts to make sure they The tri-Department MHPAEA final enrollees allows MCOs to comply with can see the results of the parity analysis rules state that if a group health plan or these requirements without requiring completed by the MCO and have health insurance coverage provides MH/ inclusion of additional MH/SUD adequate oversight of the program to SUD benefits in any classification of benefits in the MCO benefit package, as ensure that enrollees are receiving benefits, MH/SUD benefits must be long as these MH/SUD benefits are services in compliance with these rules provided in every classification in provided elsewhere within the delivery so they can be in compliance with the which medical/surgical benefits are system. In states where MH/SUD rules as amended in § 438.920(b)(2). In provided. Under our proposed benefits are provided across multiple states where some or all MH/SUD amendments to part 438, for parity delivery systems (including FFS), we benefits are provided to MCO enrollees standards to apply, a beneficiary must proposed in § 438.920(b)(1) that states through PIHPs, PAHPs, or FFS, we be enrolled in an MCO, as defined in would be required to review the full proposed in § 438.920(b)(1) that the § 438.2, under a Medicaid contract. scope of benefits provided to MCO state would have the responsibility for Enrollment in a PIHP or PAHP alone enrollees to ensure compliance with the undertaking the parity analysis across would not be not sufficient for parity to requirements of this rule. We noted that these delivery systems and determining apply if a beneficiary were not also we would expect states to work with if the existing benefits and any financial enrolled in an MCO. The proposed rule their MCOs (or PIHPs and PAHPs) to or treatment limitations are consistent noted that whether the MCO provides determine the best method of achieving with MHPAEA. The state, based on this medical/surgical or MH/SUD benefits compliance with these parity analysis, would have to make the under that contract is irrelevant for the requirements for benefits provided to necessary changes to ensure compliance MCO coverage to trigger parity the MCO enrollees. For MH/SUD with parity requirements for its requirements. benefits offered through FFS, states Medicaid MCO enrollees. We also While many Medicaid MCOs are would not be required under the proposed in § 438.920(b)(1) that the contracted to offer benefits in each of proposed rule to amend their non-ABP state provide documentation of its the classifications of benefits described state plan to meet parity requirements, compliance with this analysis to the in this rule, there are other state- but could use their existing state plan or general public within 18 months of the initiated ‘‘carve out’’ arrangements (for waiver services to achieve parity when effective date of this rule. example, PIHPs, PAHPs, or FFS) in individuals are receiving some MH/SUD For ABPs and CHIP state plans, we which the MCOs are only contracted to benefits from a MCO (including PIHPs proposed to require states to apply the provide benefits in one MH/SUD or PAHPs) and also some benefits provisions of this rule across all classification, while PIHPs, PAHPs, through FFS. However, if a state does delivery systems to ensure that FFS, or a combination of all three not have MH/SUD benefits in every beneficiaries have access to MH/SUD provide coverage of benefits in other classification in which medical/surgical benefits in every classification in which classifications; the division of coverage benefits are provided across all medical/surgical benefits are provided. might be across the classifications authorities, the state would have to If states offer services through an ABP identified in § 438.910(b), choose either to offer these services or CHIP state plan with various delivery § 440.395(b)(2)(ii), and § 457.496(d)(2) through a MCO, PIHP or PAHP or to or might be based on the nature of systems (managed care and non- amend its state plan (or a waiver of its services as medical/surgical services, managed care), the state must apply the mental health services or substance use state plan) to include these benefits to provisions of the rule across the disorder services. For example, MCOs in achieve compliance with proposed delivery systems utilized for its ABP these carve-out arrangements could § 438.920(a) and (b). Applying various and CHIP state plan. The proposed rule have contracts that include MH/SUD parity provisions across the different included an example of how the benefits in the prescription drug and delivery system allows states the most proposal would apply across the emergency care classifications of flexibility in designing delivery systems delivery system in Medicaid: benefits, but some or all of the MH/SUD while ensuring that parity in medical/ Example 1. Facts. A Medicaid MCO outpatient or inpatient benefits may be surgical and MH/SUD services is enrollee can access Medicaid benefits in covered instead through a PIHP, PAHP, provided to MCO enrollees. Given that the following way at any given time or FFS delivery system. there are many different delivery system during their MCO enrollment: In instances where the MH/SUD configurations that carve out MH/SUD • The MCO comprehensive benefits services are delivered through multiple services, this allows compliance with include inpatient medical/surgical managed care delivery vehicles, we parity requirements while reducing benefits; outpatient medical/surgical proposed in § 438.920(a) that parity incentives for states to completely carve benefits; emergency for medical/surgical provisions apply across the managed in all MH/SUD benefits to a MCO or and MH/SUD benefits; and prescription care delivery systems; this rule was carve out or terminate coverage of MH/ drugs for medical/surgical and MH/SUD proposed to apply for managed care SUD services. benefits. delivery in the Medicaid program and in In states where the MCO has • The PIHP carve out benefits include CHIP. Coverage parity requirements responsibility for offering all medical/ inpatient MH benefit and the outpatient would apply to the entire package of surgical and MH/SUD benefits, we MH benefit. services MCO enrollees receive, whether noted in the proposed rule that • The PAHP carve out benefits from the MCO, PIHP, PAHP, or FFS. If compliance with our proposal would include outpatient SUD benefits. states carve out some MH/SUD services mean that the MCO is responsible for • The FFS system provides access to from the MCO contract and furnish undertaking the parity analysis and inpatient SUD benefits. those services by PIHPs, PAHPs, or FFS, working with the state on changes found For purposes of this example, we we proposed to apply the foregoing to be necessary to the MCO contract for assume there are no financial parity requirements to the entire it to be compliant with parity requirements or treatment limitations

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imposed on any of the benefits in any reach to services provided to believe will create delays in the 18- of the delivery systems noted above. beneficiaries who do not enroll with month timeline for compliance. Example 1. Conclusion. In this MCOs. In situations where a state uses Response: We considered affording example, the MCO, PIHP or PAHP a PCCM program to provide medical/ the state the option of choosing who would not need to add any additional surgical services and uses a PIHP or would have responsibility for the parity services to its benefit package because PAHP to provide MH/SUD services analysis in situations when the MCO the MCO enrollee has access to MH/ (meaning that the state does not use an does not provide all MH/SUD services, SUD services through PIHPs, PAHPs MCO at all), the state would not be but we were concerned about the and FFS. The state is responsible for required to meet the requirements in timeliness and consistency of the parity undertaking the parity analysis across part 438 this final rule. Similarly, reviews if the state was not responsible delivery systems and making sure the accountable care collaborative models for this analysis under the regulation. coverage complies with parity using managed FFS authority such as Therefore, we are finalizing text in requirements under § 438.920(a) and (b). PCCM are not considered MCO § 438.920(b)(1) to require the state to The example would apply in the same contracts under the definition provided perform the parity analysis when the way to a CHIP enrollee. in § 438.2, and therefore, are not MCO is not providing all MH/SUD Comment: We received several required to comply with part 438, services to Medicaid beneficiaries; this comments regarding the proposal to subpart K. However, as noted above, we is the scope and intent of the regulation apply the protections of MHPAEA to all do encourage states to consider applying text requiring states to review all MCO enrollees regardless of the delivery the MHPAEA protections to the state services to ensure compliance with the system for MH/SUD services. Most plan so that individuals using a PCCM rule and implicit in the requirement for comments received were in support of will still benefit from provisions in this the state to provide documentation of CMS’ interpretation and expressed that final rule. that compliance. The state may use if CMS limited the protections of Comment: Some commenters were third parties to gather information and MHPAEA to apply only to the benefits unclear if parity requirements were make a preliminary parity analysis on provided by the MCO, this would not applicable, and if so how those its behalf, but the state must review and fulfill the intent of the law. In contrast, requirements would be applied, to accept that preliminary analysis. And, some commenters did not support CMS’ section 1115 demonstrations and other the state will be responsible for interpretation and felt that the rule waiver authorities. Commenters were providing documentation supporting should require all services for both concerned because many states use compliance with these rules when medical/surgical and MH/SUD these programs to provide a variety of submitting the MCO contracts to us for conditions to be provided by the MCO, services to vulnerable populations or to review and approval. To the extent that based primarily on the premise that it is treat specific behavioral health a state chooses to use contractor or other easier to provide a level of care conditions, such as autism spectrum resources to complete the analysis, we coordination that is appropriate for the disorder. would expect the state to answer any needs of people requiring intensive Response: Parity requirements set questions about the analysis and we will levels of MH/SUD services if all benefits forth in this final regulation apply to hold the state accountable for its are provided by one entity. MCOs and ABP regardless of the accuracy and completeness. Response: We appreciate the authority a state employs for its When the MCO provides all medical/ comments related to the application of Medicaid program. While we welcome surgical and MH/SUD benefits, the this rule to all MCO enrollees regardless Demonstrations and other Waivers that statute imposes the parity compliance of how the MH/SUD services are that seek better outcomes for on the MCO. It is implicit in our final delivered. We believe that our beneficiaries in need of MH/SUD, we rule, at § 438.920(a), that the MCO interpretation is in line with the intent believe these parity requirements are perform the analysis in those of section 1932(b)(8) of the Act and necessary to provide adequate circumstances. We believe that states allows the most flexibility to states to protections for beneficiaries enrolled in should be aware of the timeframe for determine the best delivery system in demonstration and waiver programs. completing the parity analysis and the their state. Therefore, we are Therefore, we will not approve any outcomes when the MCO does it to be maintaining this interpretation in the Waivers of the parity requirements set sure the state oversees the delivery of final rule. In any system that the state forth in this final regulation in a request benefits in a manner that is compliant chooses, we recommend that the state for an 1115 Waiver. with these rules, including pay close attention to the care Comment: We received several implementing any appropriate contract coordination aspects of the program to comments about who should be changes. States should be sure to ensure that medical/surgical services responsible for the parity analysis in include contract provisions in their and MH/SUD services are coordinated varying situations. Some commenters MCO contracts in these cases to be sure and integrated to the greatest extent believed that the state should be able to they get the necessary reporting during possible. delegate the responsibility to other the 18-month implementation period. Comment: One commenter suggested parties when using a carve-out system, Comment: One commenter stated that, CMS require parity compliance for all such as the entities themselves or in cases where an MCO does the parity managed care entities that contract with county agencies, whereas other analysis, the MCO could simply provide a PIHP or PAHP to deliver behavioral commenters believed that the state an assurance of compliance. This health services. This would include Medicaid Agency should be the sole commenter noted that the proposed rule primary care case management (PCCM) party completing the parity analyses, did not require the MCO to tell the state entities or providers. even in the case where the MCO is Medicaid Agency what changes needed Response: While we encourage states providing all medical/surgical and MH/ to be made to their contracts, and that to apply parity broadly across the state SUD benefits within its contract. Some the state Medicaid Agency would need plan and to any service delivery system, comments expressed concern that even to determine those changes based on section 1932(b)(8) of the Act only in the case of a carve-out system, the their regulatory oversight. applies MHPAEA parity requirements to MCO will end up needing to do the Response: While we agree that the MCOs; therefore, we cannot extend its parity analysis, which commenters final rule does not require specific

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documentation from the MCOs when process. As noted in a previous Response: To make compliance they complete the parity analysis, we response, states should consider information available to the public more believe that it would be in the interest including provisions in their contract quickly, and to simplify compliance of the states to require the MCOs to for MCOs to report on the outcome of deadlines across requirements for report the findings and the analysis that the parity analysis to ensure that parity MCOs, ABPs, and CHIP, we have they complete. We encourage states to is achieved and can be overseen changed the date by which states must include contract provisions that they appropriately. States may want to provide such information from 18 believe are necessary during the consider requiring the MCOs to months from the effective date of the implementation period to get the complete the analysis in a way that is final rule to 18 months from the information necessary to make changes consistent with how the state completes publication date of the final rule. to the contract that would demonstrate the analysis for its ABP or CHIP state Because the provisions of the final rule compliance with these rules. We are not plans. do not become effective until 60 days including any additional regulatory Comment: We received some after publication, this change will reporting requirements in this rule as comments noting that, in the proposed ensure that information regarding states’ we believe states should be at liberty to rule, states were only required to review compliance with this subpart becomes collect the appropriate reporting they MH/SUD services to ensure the full available to the public in a timely deem necessary for the oversight and scope of services meets the manner. implementation of their programs requirements. Commenters believed that As specified in § 438.920(b)(1) of this consistent with these requirements. We states need to review both the medical/ final rule, states must make are available to help states consider surgical criteria and the MH/SUD documentation available to the public contract language to achieve this if criteria to determine full compliance within 18 months after the publication necessary during the 18 month with this rule. of this final rule about compliance with Response: We agree with the transition period. these rules; this means that states must commenters, and in the final rule we Comment: The proposed rule would report how they are complying in order have revised to § 438.920(b)(1) to have required states to provide to document compliance. We have provide that the state must review both documentation to CMS with their clarified in the final regulation at medical/surgical and MH/SUD benefits contract submission in cases where § 438.920(b)(1) that this documentation provided to determine compliance with some or all MH/SUD benefits are must be updated when benefits change. provided to MCO enrollees through the final rules where in the proposed PIHPs, PAHPs, or FFS. We received rule we only indicated that the state We do not require through regulation several comments requesting guidance would review the MH/SUD benefits. that states consult with stakeholders on on what documents must be provided States should consider including how to comply with these rules because with contracts and state plan contract provisions in all MCO and in doing so we believe we would have amendments to document compliance applicable PIHP and PAHP contracts to needed to specify how and when that with the requirements of this rule. Some achieve this requirement. public input process occurred which commenters requested that these Comment: One commenter expressed could create further delays in the documents be required to be submitted concern over the term ‘‘scope of implementation timeline, making it on an annual basis. Commenters also services,’’ citing the fact that it has longer than 18 months. Although we are raised concerns about situations where become a term of art within the context not requiring states to work with the MCO provides the full scope of of parity and may be misconstrued stakeholders and other public interests services, stating that an assurance of when reviewing the regulation text in to determine the best way to comply parity compliance from the state in § 438.920(b). with these rules, we believe that states these cases is insufficient and creates Response: We appreciate that ‘‘scope will need to discuss options with inconsistency in documentation of of services’’ may have different stakeholders in their current delivery compliance requirements. Another meanings in different contexts, but we systems to be able to ascertain the best commenter requested that CMS provide believe that for the purposes of this delivery system for any additional technical assistance to states as they regulation, it is sufficiently clear that we benefits that may be required. We also complete their parity analyses in order mean the full set of benefits available to encourage states to have discussions to give ‘‘best practices’’ in determining the Medicaid beneficiary. with stakeholders other than their compliance. Comment: We received several providers and plans to ensure they Response: We will provide technical comments that requested that CMS achieve compliance in the best way for assistance and tools for states and MCOs require states to publicly report on the their beneficiaries. We do not believe that clarify expectations around the progress of compliance during the 18- we also need to post the materials on types of documentation that must be month period between the publication Medicaid.gov, as states will be posting submitted with the MCO contracts and date of the final rule and date of their documentation on their own Web ABP state plan amendments to compliance, and to make sure states sites. Posting on state Web sites is more demonstrate compliance with parity. engage the public on the progress targeted and would be more effective in MCO contracts are typically submitted towards compliance with the facilitating discussions with the on an annual basis, and should include requirements of this rule. Several stakeholders in that state. We are not materials that demonstrate that the state commenters urged CMS to develop a mandating the use of a common is confident in the parity analysis. We common methodology for federal and methodology for state oversight of parity do not believe that the parity analysis state regulators to provide identifiable compliance, given the diversity of needs to be completed on an annual transparent information on parity approaches that states use to structure basis if the state can show that the plans compliance investigations to encourage their treatment delivery systems, and or state did not change their operations uniform compliance practices. given our desire to provide states in a way that would affect compliance Commenters requested that CMS post flexibility to tailor their administrative with this rule. We will use the the compliance plans on Medicaid.gov processes to the context and needs in submitted documentation as part of our and on state Medicaid Web sites, and to their state. However, as noted in other MCO contract review and approval closely monitor states on their progress. sections, we will make technical

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assistance available to states that wish and a requirement for the state to update management techniques that include to discuss compliance strategies. its analysis and documentation. preferred drug lists and prior authorization processes for the coverage Comment: We received comments M. Scope of Services (§ 438.920(c), of covered outpatient drugs. about the use of a Web site for the § 440.395(e)(2), § 457.496(f)(2)) location of where states make the However, under the requirements of documentation of compliance available In the proposed rule, we included this rule, a regulated entity may not to the public. One commenter noted that provisions relating to the scope of the impose NQTLs (including prior the use of a Web site would be too parity requirements for Medicaid MCOs authorization or other utilization administratively burdensome on states and CHIP state plans that were similar management strategies) for drugs used and questioned why this particular to the provisions set forth in the to treat MH/SUD conditions unless any provision would be called out when MHPAEA final regulations processes, strategies, evidentiary others do not require to be posted on a (§ 146.136(e)(3)). Specifically, the standards, or other factors used in state’s Web site. Another commenter proposed regulations did not require a applying the NQTL to the MH/SUD requested that CMS clarify in the text of MCO, PIHP, or PAHP to provide any benefit are comparable to, and are the regulation that the state must use a MH/SUD benefits for conditions or applied no more stringently than, the Web site, noting that the proposed disorders beyond the conditions or processes, strategies, evidentiary language only indicates that the state disorders that are covered as required by standards, or other factors used in must make the documentation available their contract with the state. For MCOs, applying the limitation for medical/ but did not specify the location. PIHPs, or PAHPs that provide benefits surgical benefits in the same for one or more specific MH conditions Response: We believe that the use of classification. Similarly, under certain or SUDs under their contracts, the a Web site operated by the state is circumstances, regulated entities may proposed regulations did not require the consistent with other managed care apply different levels of financial MCO, PIHP, or PAHP to provide proposed rules and in line with other requirements and treatment limitations benefits for additional MH conditions or requirements. Therefore, we are to different tiers of prescription drugs SUDs. The proposed regulations did not and still satisfy the parity requirements. modifying the regulation in this final affect the terms and conditions relating Regulated entities may subdivide the rule to require, in § 438.920(b)(1), that to the amount, duration, or scope of prescription drug classification into the documents demonstrating MH/SUD benefits under the MCO, PIHP tiers based on reasonable factors as compliance must be made available to or PAHP contract except as specifically described in this rule and without the general public through the state’s provided in § 438.905 and § 438.910 of regard to whether a drug is generally Web site. part K. For states providing benefits prescribed for medical/surgical benefits As indicated in the response to through ABPs, we clarified in proposed or for MH/SUD benefits. comments here and in other sections, § 440.395(d)(2) (which is being re- Comment: We received a few we are finalizing these provisions in designated as § 440.395(e)(2) in this comments that wanted CMS to § 438.920(a) and (b), § 440.395(e), and final rule), that § 440.395 does not encourage states to cover MH/SUD § 457.496(f)(1) as proposed with several require a state to provide any specific services through a broad range of revisions. We revised § 438.920(b)(1) to MH/SUD benefits; however in providing providers as a way to ensure adequate clarify that the state must review both coverage through an ABP, the state must access to services. medical/surgical and MH/SUD services include EHBs based on the applicable Response: Although we believe that delivered to MCO enrollees to EHB reference benchmark plan, this comment is outside the scope of determine compliance with the final including the ten EHBs specifically this rule, we have issued guidance over rules and we revised § 438.920(b)(2) to required in § 440.347. the past several years and provided clarify that the state needs to complete Comment: We received comments states with information to encourage oversight to ensure enrollees receive requesting that CMS strengthen its access to mental health and substance services in compliance with these rules requirements around prescription drug use services, including clarifications in every instance that there is an coverage for MH/SUD conditions and regarding additional agencies and enrollee of an MCO. The requirements require that the full range of mental practitioners that can render MH/SUD of § 457.496(f)(1) were also modified to health and addiction medications services. require states to indicate in their state approved by the FDA must be covered. Comment: One commenter expressed plan the standard used, such as state Response: Under Federal Medicaid concern with language at § 438.920(c)(1) guidelines or the most current versions law, states are required to comply with that stated that MCOs are not required of the DSM or ICD, when classifying the requirements of section 1927(g)(1) of to provide any services beyond what is benefits into their respective category as the Act to the extent that they provide described in their contract. This a medical/surgical, mental health, or assistance for covered outpatient drugs commenter believed that this could substance abuse disorder benefit. The under their Medicaid FFS programs or provide a loophole for MCOs looking to intent of this requirement is to capture Medicaid managed care plans. reduce benefits. this information within the state plan in Therefore, states are required to provide Response: We included this provision order to increase transparency and coverage of all drugs that meet the based on the ability of the state to facilitate our understanding of the definition of covered outpatient drugs as determine compliance with the state’s parity analysis during our review outlined in section 1927 of the Act, requirements in Subpart K of 42 CFR of their compliance SPA. Furthermore, when such drugs are prescribed for part 438 across multiple delivery the collection of this standard is medically accepted indications, systems. If a state is using a PIHP, consistent with the approach taken in including those indicated for the PAHP, or FFS benefits to comply with CHIP to describe other required benefits treatment of mental health conditions these rules, the MCO should not also provided in separate CHIPs. We are also and substance use disorders. Consistent have to provide additional benefits on finalizing § 438.920(b)(1) with a change with section 1927(d) of the Act, state the basis that its contract, on its own, in the date by which the state must Medicaid FFS programs and Medicaid does not comply with the requirements publish the documentation of its managed care plans have the discretion in this subpart. We believe that other compliance with part 438, subpart K to establish certain utilization areas of 42 CFR part 438 protect against

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the MCO arbitrarily reducing benefits, coordination required to ensure capitation payments during the course most notably § 438.210, which provides compliance with parity requirements. of the contract year to account for that the MCO may not arbitrarily deny Response: We affirm that this rule unexpected changes in benefits, costs, or reduce the amount, duration or scope does not include an increased cost and utilization if they find that the of a required service solely because of exemption for MCOs, PIHPs, or PAHPs. assumptions included in the initial rate the diagnosis of a beneficiary. We do not expect Medicaid managed development are different than actual As indicated in the response to care entities to incur any net increase in experience. This final rule authorizes comments, we are finalizing the costs because we are finalizing a states, in instances where they choose provisions regarding scope of services at provision stating that the costs of not to change their state plan, to include § 438.920(c), § 440.395(e)(2), and complying with parity requirements the cost of services that are necessary to § 457.496(f)(2) as proposed. may be taken into account within an comply with this rule but are beyond actuarially sound payment what is specified in the state plan into N. Increased Cost Exemption methodology. However, the development of actuarially sound The proposed rule did not include an recommendations regarding rates. This is different from the increased cost exemption for MCOs, requirements for medical loss ratios or circumstances of the commercial market PIHPs, or PAHPs. However, the reimbursement rates are beyond the and removes the rationale for an proposed rule did include changes to scope of this final regulation. increased cost exemption for Medicaid payment provisions in part 438 to allow Comment: Many commenters MCOs, PIHPs, and PAHPs. States may states to include the cost of providing disagreed with denying states access to also choose to use a risk mitigation additional services or removing or a cost exemption. The commenters strategy in their rates the first year(s) aligning treatment limitations in their maintained that MHPAEA allows group that the additional benefits are added to health plans and insurance issuers to actuarially sound rate methodology a MCO, PIHP, or PAHP contract. This seek a cost exemption, and the Medicaid where such costs are necessary to would ensure that any over- or under- statute specifies that the mental health comply with the MHPAEA parity payments are reconciled at the end of requirements apply to Medicaid MCOs, provisions. These proposed changes to the year and give the state a more ABPs, and CHIP ‘‘insofar as such the managed care rate setting process accurate sense of the utilization of requirements apply and are effective would give states and MCOs the ability services for future years of rate setting. with respect to a health insurance issuer to fully comply with these mental As indicated in the response to that offers group health insurance comments, as proposed, we do not health parity requirements by giving coverage,’’ or ‘‘in the same manner as include provisions in the final rule for them flexibility to provide services such requirements apply to a group an increased cost exemption. compliant with this regulation or health plan.’’ The commenters remove or align service limits. We stated explained that there was no basis for O. Enforcement, Managed Care Rate that the Medicaid program rather than CMS to apply MHPAEA to Medicaid Setting (§ 438.6(e)) and Contract Review the plan should bear the costs of these and CHIP, but then for CMS to refuse to and Approval (§ 438.6(n)) changes, and proposed to provide up to apply MHPAEA’s cost exemption Proposed § 438.6(e) allowed a state’s 18 months after the date of the provision. rate-setting structure to account for publication of the final rule for states to The commenters suggested that services covered by an MCO, PIHP, or establish compliance with the although MCOs may receive increased PAHP in excess of services and/or provisions of this final rule (see capitation payments to comply with the treatment limits that are listed in the discussion in section P: ‘‘Applicability parity requirements in this final rule, State plan if such services are necessary and Compliance’’). This would allow there is still an increased cost for the for the MCO, PIHP or PAHP to comply states to take the actions to make the state (and the federal government). In with this rule. However, the proposed policy and budgetary changes needed addition, the commenters indicated that rule only allowed the state to adjust its for compliance. The proposed rule also it does not make sense to prevent ABPs capitation rates to provide for additional excluded permission for states from accessing the cost exemption services to the extent that these services delivering services through an ABP or simply because they must cover EHBs would not be included but for the CHIP State plan to apply for a cost and must comply with parity requirements of this rule. exemption due to the mandatory requirements. The commenters reasoned Proposed § 438.6(n) required states to delivery of EHB and the requirement that Federal law also requires include contract provisions requiring that ABPs be compliant with MHPAEA. commercial group plans to comply with compliance with parity requirements in Comment: Many commenters agreed MHPAEA, and it requires commercial all applicable MCO, PIHP, and PAHP that an increased cost exemption for small group and individual plans to contracts. We noted that we expected parity was not needed. The commenters cover EHBs, but that does not exclude states, in order to comply with the supported building in increased costs them from seeking for a cost exemption proposal, to include a methodology for associated with parity into the state’s under MHPAEA. The commenters the MCO, PIHP, or PAHP to establish rate setting structure. In addition, the applied the same logic to CHIP. and demonstrate compliance with parity commenters recommended that the Response: As we proposed, we are not requirements within the contracts. This regulation require a behavioral health extending the cost exemption provision methodology would have to provide a medical loss ratio of 90 percent for to MCOs, PIHPs, PAHPs, or states. We mechanism for all MCOs, PIHPs, or clinical services, MH/SUD services and require MCOs to be paid on an PAHPs included in the delivery system activities that improve health care actuarially sound basis, which would to work together to ensure that any MCO quality in their MCO contracts. One include the cost of adding services or enrollee in a state is provided access to commenter recommended that CMS removing or aligning treatment a set of benefits that meets the allow cost exemptions for limitations in managed care benefits so requirements of this rule regardless of administrative expenses to MCOs in long as those additional benefits are the MH/SUD benefits provided by the instances where states may not develop necessary to comply with mental health MCO. If it was not shown through the rates that adequately support the parity requirements. States have the MCO contract itself that an enrollee has additional care management and ability to make changes to their access to parity-compliant MH/SUD

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services in each classification in which plan services was necessary for plans techniques meet the requirements of medical and surgical services are and states to meet the requirements of these rules. provided, the state would be asked to Subpart K when changes to the Comment: We received some provide supplemental materials to the Medicaid state plan are not required by comments requesting CMS clarify its MCO contract or an amendment to the federal law. We do not agree that it is role in oversight of these regulations contract to demonstrate that the necessary to explicitly amend and urged CMS to improve enforcement standards provided here are met. § 438.6(e)(3) as suggested by the in the commercial market, as well as for If a state did not adequately commenter to achieve this result, Medicaid and CHIP. demonstrate that an MCO’s contract and because we believe it will be inherent in Response: Oversight of commercial practices are in compliance with the 438.6(n). If services are necessary products and compliance with the tri- proposed rule, CMS proposed to defer beyond what is included in the state Department MHPAEA final rules are federal financial participation (FFP) on plan to ensure compliance with this outside the scope of this final rule. expenditures for the MCO contract rule, states and their actuaries must take As with other Medicaid MCO because compliance with section 1932 the expected reasonable and appropriate contracts and state plan amendments, is a requirement for FFP payment under cost of those additional services into we will review associated and relevant section 1903(m)(2)(A)(xii) of the Act. consideration while setting actuarially documents submitted by the state. This Where there are services outside of the sound rates. In addition, as noted in will include the review of the MCO MCO contract that are needed to other areas of the rule, states have the contracts and SPA documents, as well demonstrate compliance, the state flexibility to include those additional as any documentation of the parity would be required to show how the services either through the MCO, PIHP, analysis the state has done to determine MCO enrollees are provided all the or PAHP benefit package, or they can that their system and/or benefit design services needed to comply with the add them to the state plan by meet the requirements of this rule. requirements in this rule. completing a state plan amendment. To States will be the primary oversight Comment: We received a number of make the payment rate adjustment entity to ensure that services are delivered in compliance with these comments in support of CMS’s proposal under § 438.6(e)(3) a requirement could rules. Beneficiaries and/or stakeholders to allow states to include the costs of prohibit states from making changes to should first direct any issues related to coming into compliance with the their state plan which could allow for a compliance with this rule to the state. requirements of this rule into the broader application of parity than is We are willing to accept complaints actuarially sound capitation rates paid required through this rule. to the MCO, PIHP or PAHP providing around compliance with this rule and Comment: We received several MH/SUD services under § 438.6(e). One we may discuss these issues with states comments requesting model contract commenter noted that CMS can use its to determine if any corrective actions language that states can use to be able review and approval of managed care need to take place. to demonstrate compliance with these contracts to ensure FFP is being used Comment: There were several rules. Contract language is requested to solely for state plan items and services comments that CMS should specify that clarify which additional MH/SUD and those services necessary to satisfy CMS, states, MCOs, PIHPs, and PAHPs services plans would be required to the parity requirements. Commenters pay particular attention to MH/SUD further stated that they believe the costs provide when a carve-out approach is parity requirements for children and of coming into compliance will be used, and to require states to reimburse adolescents as a distinct population minimal, and over time may save money the plan in an actuarially sound group. The commenters encouraged as timely access to MH/SUD services manner. CMS and states, when assessing may reduce the need for costly Response: Considering there are a compliance with these rules, to obtain emergency and crisis care. One number of different models the states input on delivery of services from child commenter added that this was an can choose to demonstrate compliance, and adolescent MH/SUD providers, opportunity for plans to enhance care we would not be able to provide model including pediatric medical providers. coordination, to the extent that these contract language for every situation. In addition, the commenters strongly requirements ensure access to a wider However, we are working with a suggested CMS regularly monitor range of specialists than previously contractor to develop technical pediatric MH/SUD network adequacy, covered. Some commenters requested assistance materials, and we are access standards for children and that CMS require states to include the available to states during the transition adolescents (including inpatient cost of any additional services in period if states would like to discuss admission), EPSDT service coverage § 438.6(e)(3) rather than providing states their plans for compliance and possible mandate and prior authorization the option to adjust these rates. Other contract language. criteria, data showing the number of commenters believed that the language Comment: We received a number of reasons for child and adolescent was too broad and CMS should follow comments requesting CMS to provide denials, and pre- and post-utilization the guidance issued in the 2013 State more clarity on what documentation it patterns by children of intensive home Health Official letter which encouraged expects states to provide to show that it and community based services, and states to make changes to their state complies with the regulations when inpatient MH/SUD services. plan. Finally, others thought that the submitting MCO contracts. Response: This final rule does not language was sufficiently clear and Response: We will release create specific oversight requirements strongly requested that CMS refrain subregulatory guidance around for distinct population groups, nor does from adopting more prescriptive documentation that will be required to it provide for access reviews to needed language regarding what additional show compliance with these services. States are required to ensure benefits may be included because it is regulations. Additionally, we are compliance with the requirements of clear that the services need to be working with a contractor to develop this rule for all enrollees whose benefits included to ensure parity. tools and provide technical assistance to are subject to this rule. However, we Response: We believe that allowing states in completing the analysis of their will provide technical assistance to capitation rates to reflect additional delivery systems to ensure the benefit states upon request to assist with the compliance costs related to non-state design and medical management implementation of this rule. If questions

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or confusion persist about the methodology for including additional Comment: Some commenters requirements of this rule for pediatric services required by parity into the expressed concern about the potential to populations, we may provide tools or capitation rates. States should work defer FFP on MCO contracts when a guidance to respond to those questions. with their MCOs, PIHPs and PAHP as carve-out delivery system is in place CHIP and ABP programs that include well as their actuaries when they and the MCO is not the party that is full coverage of EPSDT, in the same develop their rates, which are required determined to be out of compliance. manner as in regular Medicaid coverage, to be actuarially sound. These commenters requested that in will be deemed compliant with this rule Comment: One commenter expressed these cases states be required to in accordance with the statutory concern that the rate setting provisions continue to pay the contracting plan authority. However, we will review a in this rule may limit states’ ability to actuarially sound capitation payments. state’s assurance carefully as a part of pursue innovation, and stated that states Response: Payment obligations under the CHIP or ABP SPA review process to should remain free to continue to allow contracts between the state and the ensure compliance with all EPSDT MCOs to provide additional non- MCO are governed by state law, and requirements, including the methods covered services, in-lieu of covered contracts are subject to CMS approval. and procedures for implementing the benefits, or value added additional States and plans will want to discuss EPSDT benefit. We also anticipate benefits with their savings. payment arrangements to ensure both providing clarification through Response: We do not believe that this parties understand if and when subregulatory guidance to states about rule limits a state’s ability to pursue payments to the MCOs may or may not the proper implementation of the innovation by allowing MCOs to offer be paid which could include instances EPSDT benefit. With regard to the additional services not specified under where a compliance issue with these comments on the issue of monitoring the state plan or contract, commonly rules is discovered either in the MCO access to services that issue is outside referred to as in-lieu of benefits or value contract or another delivery system that the scope of this final rule. We are added benefits. States and MCOs are the MCO enrollee receives services engaged in separate rulemaking to still permitted to provide these benefits from. strengthen state and federal reviews of under this rule. This final rule only Comment: Several commenters beneficiary access to needed services. specifies that states must include the recommend that CMS instruct states to Comment: We received a number of cost of additional benefits necessary for establish specific capitation rates for comments that requested CMS compliance with parity in the capitation children and adolescents due to strengthen its oversight role of the rate rate development process. Comments concerns about assuring network setting process to ensure that rates are about the rate setting process in general participation for appropriate providers set on an actuarially sound basis when are outside the scope of this final rule. for that age range, recognizing other services beyond the state plan are Comment: CMS should articulate pediatric providers not typically included. These comments included a penalties for violations of parity and considered MH/SUD providers, and variety of suggested approaches and publish announcements about the accounting for appropriate utilization of requirements, including: Not requiring remedies implemented and sanctions MH/SUD services through EPSDT in MCOs to cover additional services until imposed to deter parity non- those specific rate cells. actuarially sound rates are in place; compliance. Response: Current rules, at greater transparency about how states Response: In the proposed rule and as § 438.6(c)(3)(iii), require that when will accommodate the additional costs remains in the final rule, where there states set actuarially sound rates they of compliance in their rate setting are services outside of the MCO contract must apply rate cells by eligibility approaches; requirements that rates be that are needed to demonstrate category, age, gender, locality and risk set based on the specific benefit set compliance, the state is required to adjustment or explain why they are not instead of a historical look-back; show how the MCO enrollees are applicable. We do not require states to development of a template that expected to receive all the services use a specific rate cell structure when translates service changes into rate- needed to comply with the requirements developing their rates for MCOs, PIHPs, setting formulations; annual end-of-year in this rule. States would be able to do and PAHPs. States will want to consider reconciliations of the increased costs this by providing evidence of the other all factors of their program when associated with the additional benefits services provided through a FFS system, determining their rate cell structure and added to be in compliance with this rule or included in contracts with other ensure that it is done in compliance compared to capitation rates; requiring types of managed care entities such as with the managed care rules and in states to consult with MCOs to select through a PIHP or a PAHP. We would consideration of anticipated utilization appropriate proxy data prior to also expect that the state provide the of a benefit package in compliance with development of the capitation rates; or analysis that shows services provided this final rule. requiring a robust analysis of past and through the MCO meet the requirements Comment: We received several projected claims experience. of this final rule. We clarify our intent comments about care coordination Response: We believe that these that this demonstration would be a when states are using a carve-out comments stem from a perceived lack of precondition to CMS approval of the system. This includes ensuring there is transparency on the rate setting process MCO contract under § 438.6. If the state appropriate care coordination with in general, and that the majority of these cannot provide evidence of this providers of all types, including concerns are not specific to this rule. compliance outside of the MCO pediatric primary care providers, other These issues are beyond the scope of contract, then the state has not managed care entities, and MH/SUD this rule; we note that we are working demonstrated that the contract complies providers. Commenters urged CMS to to increase the transparency and with parity requirements and we will consider care coordination as service oversight of Medicaid managed care rate not approve the contract until evidence costs to ensure they are included in the setting. We believe that the suggestions of compliance is provided. We may costs when developing actuarially included in the comments are all defer claims for FFP in expenditures for sound capitation rates. helpful, but that no single approach will capitation rates paid based on Response: Care coordination is be appropriate for all states, and unapproved MCO contracts in this typically considered part of the non- therefore, decline to require a specific circumstance. benefit costs when developing

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actuarially sound capitation payments, delivery, and we will work with states requirements that affect parity though states have some ability to if any issues are identified. compliance. include care coordination as a service if Comment: Some commenters Comment: A few commenters they include targeted case management expressed concern that plans and states requested that additional reporting in the benefit package. When states may put in place additional requirements be included to increase develop their non-benefit costs, administrative measures or limits on health plan transparency and enhance including care coordination, states medical/surgical benefits as a way to enforcement for NQTLs. should consider the costs directly comply with these rules. Commenters Response: We believe that sufficient related to providing the services covered requested that we put in place a guidance exists regarding the recording by the contract. Additionally, when maintenance-of-effort provision, or a of NQTLs in plan materials to provide states include targeted case management requirement that states and plans can transparency to beneficiaries and the as a benefit, they must adequately price only comply with this rule by reducing public. We will make technical the service. Requiring states to account restrictions on MH/SUD services to assistance available to states to help for care coordination as a service is ensure that plans are not able to use them develop strategies for providing outside the scope of this regulation. administrative processes to deny access proper oversight of parity requirements Comment: Some commenters to services. regarding the application of NQTLs to requested that CMS provide additional Response: MCOs must provide MH/SUD benefits. guidance on care coordination with benefits in the same amount, duration, Comment: One commenter requested pediatric primary care providers and and scope as the benefits offered under that CMS require states to share with how states should require their plans to the state plan. States may have some MCOs the methodology the state used to coordinate with these provider types. restrictions on services provided under determine that the delivery system was Response: We do not believe there is their state plan, particularly services in compliance with this rule. any one way to provide appropriate care that are optional. If a state chooses to Response: As states will be required coordination for individuals with MH/ reduce or restrict the amount, duration to report publicly, under § 438.920(b)(1), SUD conditions. However, we do agree or scope of covered medical/surgical how they are complying with the that when services are better services it must do so through an requirements in this final rule in cases coordinated and all providers caring for amendment to its state plan. When where not all benefits are provided the individual are informed of treatment reducing benefits in the state plan, a through the MCO, we believe that MCOs planning, the beneficiary is likely to state must meet sufficiency will be able to see the information just have better outcomes. Therefore, we requirements, so any reduction in as other stakeholders do. As plans in encourage states to include contract medical/surgical benefits must be that delivery system (such as MCOs, provisions to ensure that MCOs, PIHPs reviewed and approved by CMS. PIHPs and PAHPs) will be reporting and PAHPs work to coordinate among Consistent with the experience we have information to the state for the state to themselves and with providers to seen in the commercial market around complete the analysis, the plans will deliver an integrated set of benefits to reductions of benefits, we believe that have an opportunity to discuss the enrollees. For more detail regarding care states will not typically choose to go methodology with the state to report coordination in a Medicaid managed through the state plan amendment information; we anticipate that care environment, please refer to process to reduce medical/surgical discussions will occur as the nature and § 438.208. benefits in order to make it easier for extent of the analysis will determine the Comment: We received several MCO coverage to meet the requirements nature and scope of the underlying data comments requesting that CMS of this rule. As some commenters noted needed from plans. We do not believe prioritize oversight and transparency in previously, states may also realize our regulation should require states to the delivery of services, including savings over time because of increased share the methodology with the plans pharmacy services and formulary access to MH/SUD services. just as we are not requiring the MCOs design/benefit tiering. Commenters Comment: One commenter requested to share their methodology with the requested that CMS carefully monitor that CMS undertake an annual state-by- state in instances where all benefits are claims data to quickly identify and state analysis of benefit packages to provided through the MCO through this remedy any problems. determine that states and MCOs are in rule. Response: States provide the first compliance with the requirements of Comment: One commenter was level of oversight under this rule, and this rule. concerned that CMS did not propose to we expect states to monitor all aspects Response: Although we agree that include additional administrative of service delivery to ensure compliance regular monitoring of the provisions of funding within the capitated rate setting with this rule. We are always available this rule is important, we do not agree process to cover the costs of providing for technical assistance to states for that this needs to be done on an annual the additional services through the assistance in monitoring and if basis. All managed care contracts must MCO, PIHP or PAHP. necessary to develop corrective action be reviewed and approved to be in Response: As part of an actuarially plans if issues are identified. In compliance with these rules. However, sound rate setting process, states should addition, we will review all areas of mature programs do not make frequent cover the costs of providing what is compliance with this rule, including changes in their operation that would included in the contract. If a state whether the delivery of pharmacy cause them to come out of compliance believes that additional administrative services is compliant with parity with this final rule. We may ask a state funding is necessary on the part of the requirements. As with other service to affirm that the delivery system is still MCO, PIHP or PAHP to provide any classifications under this rule, states in compliance at any time, including additional services necessary to comply will be required to provide evidence during the state plan amendment with this rule, those costs should be that covered pharmacy benefits meet the process and annual contract reviews; included as part of their regular rate requirements of this rule. We may further we will undertake reviews as setting process. consider using data reported through needed. However, states will be Comment: One commenter requested CMS claims and encounter data permitted to attest that there are no that CMS revise § 438.6(n) to state that reporting systems to monitor service changes in benefit design or contracts must ‘‘specify that services

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must be provided in compliance with Quality Strategies, and Revisions October 1, 2009, however, states would Subpart K’’ as opposed to requiring that Related to Third Party Liability’’ (80 FR have up to 18 months after the they ‘‘ensure that enrollees receive 31098 through 31297) are intended to publication date of the final rule for services that are compliant with subpart increase the overall transparency of the CHIP plans to establish compliance with K.’’ rate setting process and should not provisions in the final rule. Response: We agree that the use of impact the specific provisions of this Comment: Commenters recommended ‘‘ensure’’ when discussing contract rule. We have included the rate setting a range of timeframes for states to come provisions is not consistent with other provisions that are specific to into compliance with these final provisions in § 438.6 and that it is more compliance with parity standards in this regulations from 6 months to 24 months. appropriate to target the requirement on final rule. Many of these commenters suggested the provision, rather than the receipt, of Comment: One commenter requested that states that illustrate that they are services. To be consistent with the that CMS broaden the scope of the making a good faith effort at compliance phrasing throughout § 438.6 and to payment for services to MCOs so that it should be granted an extension no address the commenter’s concern that a also includes payment to providers. matter what the final rule states in terms contract cannot ensure that appropriate Response: We believe that payment to of timeline for compliance. Several services are received, we are finalizing providers is addressed through our commenters noted that they believed § 438.6(n) with modifications to state discussion of NQTLs in this rule. the 18-month timeline would be that contracts must provide for services Payments for services are negotiated sufficient to come into compliance. One to be delivered in compliance with between the health care provider and commenter noted that the rules lacked subpart K. the MCO, PIHP, or PAHP, and plans and a timeline for CMS to complete its Comment: One commenter providers have the autonomy to review and approval process for state encouraged state departments of negotiate payment rates so long as they compliance. Depending on policies and insurance to take a stronger role in are adequate to cover services in an structures, states will need to conduct monitoring parity compliance. For amount, duration and scope that is at thorough policy analysis and may need example, the commenter requested that least equal to what is provided in the state plan amendments, systems a report be made to the state department state plan which is consistent with changes and contract revisions. of insurance when a plan has medical § 438.210. An overwhelming number of necessity criteria that are more stringent As indicated in the response to commenters urged CMS to shorten the than generally accepted medical comments, we are finalizing the timeframe for states to come into standards. provisions regarding enforcement and compliance with the parity rules. Many Response: We believe that states may managed care rate setting at § 438.6(e) referenced the fact that the proposed choose to use a number of ways to and the provisions regarding contract rule comes more than 5 years after the monitor compliance with these rules. A review and approval at § 438.6(n) as MHPAEA parity protections were state Medicaid agency may choose to proposed, with the exception of the applied to MCOs in 2008. States have use the state department of insurance to revision in § 438.6(n) to target contract been aware since passage of MHPAEA help monitor compliance, but we are requirements on the provision, rather that its requirements apply to Medicaid not requiring this approach. It is not than the receipt, of services. MCOs and CHIP programs. Additionally within the scope of this final rule to states have known that these address how state departments of P. Applicability and Compliance requirements apply to Medicaid ABPs insurance may have a role in monitoring (§ 438.930, § 440.395(d), § 457.496(f)) since the passage of the Affordable Care compliance by private insurers or group The proposed rule noted that MCOs, Act in 2010. Recommendations to CMS health plans with the tri-Department PIHPs, PAHPs, and states would have from these commenters proposed a MHPAEA rules. up to 18 months after publication of the range of 6 to 12 months for states to Comment: One commenter requested final rule to establish compliance with come into compliance with this final CMS postpone the application of these the provisions of the final rule before we regulation. rules until there is an opportunity for would take enforcement action. Several commenters recommended to stakeholders to comment on the Specifically, we proposed as follows: CMS that health plans and their combined impact of these changes with • Managed care: Although the subcontractors not be penalized as a the proposed changes to rate setting requirements of MHPAEA have applied result of a state Medicaid agency requirements included in the proposed to Medicaid MCOs through section experiencing delays in implementing rule titled ‘‘Medicaid and Children’s 1932(b)(8) of the Act since 2008, for the final rule in the required timeline. Health Insurance Program (CHIP) Medicaid MCOs, PIHPs, or PAHPs with Additionally, it was requested that CMS Programs; Medicaid Managed Care, existing contracts, states would have to allow plans an additional six months CHIP Delivered in Managed Care, establish compliance with the specific after a state has completed the parity Medicaid and CHIP Comprehensive provisions in this final rule no later than analysis and developed the necessary Quality Strategies, and Revisions the beginning of the contract year standards to come into compliance. Related to Third Party Liability’’ (80 FR starting 18 months after the publication Response: We are finalizing § 438.930 31098 through 31297). of the final rule. New managed care with a modification from the proposed Response: We do not believe that an contracts, or amendments, would be text; § 438.930, as finalized, states that opportunity for states and stakeholders required to be compliant. contracts with MCOs, PIHPs, and to comment on the combination of these • ABPs: Although the requirements of PAHPs offering Medicaid state plan two proposed rules is needed. The MHPAEA have applied since January 1, services to enrollees, and those entities, changes proposed to Medicaid managed 2014, states would have up to 18 must comply with the requirements of care rate setting in the proposed rule months after the publication of the final this subpart no later than 18 months entitled ‘‘Medicaid and Children’s rule to establish that its ABPs are after the date of publication of this final Health Insurance Program (CHIP) compliant with provisions in the final rule. The proposed rule required such Programs; Medicaid Managed Care, rule. compliance no later than the beginning CHIP Delivered in Managed Care, • CHIP: The requirements of of the contract year starting 18 months Medicaid and CHIP Comprehensive MHPAEA have applied to CHIP since after the date of publication of this final

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rule. Because a contract year could to the deadline in order to fully comply, Medicaid agency review of the need for begin just before the date of publication ensuring that all FFS CHIP and ABP admission to a mental hospital. The of this final rule, the proposed rule coverage meets parity and that states commenters supported the elimination could potentially have allowed a plan have taken all steps for compliance of required review for inpatient an additional period of up to 12 months except some of the more time admissions because the requirement beyond expected compliance date (that consuming steps such as renegotiating would be inconsistent with the is, roughly 18 months after the MCO contracts or passing authorizing proposed rule’s provisions that publication date of this final rule) before legislation. utilization management techniques need being subject to any CMS enforcement Response: We understand the utility to be applied in a comparable and no action. Therefore, this change responds of providing states with guidance about more restrictive manner with respect to to commenter concerns about delays in the states’ role in ensuring that mental health and substance use implementation by ensuring that compliance is achieved in a timely services as compared to medical/ necessary changes are implemented no manner. We have procured a contractor surgical services. more than 18 months after the date of to provide technical assistance as Response: This final rule removes the publication of this final rule. This requested by the states that may include Medicaid regulation at § 456.171 which change also aligns the compliance date toolkits or guidance regarding the prescribed requirements for medical and for MCOs, PIHPs, and PAHPs with the creation of a parity implementation other professionals within the Medicaid compliance dates proposed for ABPs plan. agency (or its designee) evaluating the and CHIP, finalized here in As indicated in the response to need for admission of each applicant or § 440.395(e)(4) and § 457.496(g). We comments, we are finalizing the beneficiary into inpatient services in a note that it is common practice for states provisions regarding applicability and mental hospital. The Medicaid agency to amend MCO contracts mid-year, so compliance at § 438.930, § 440.395(d), (or its designee) was required to review we do not anticipate that it will cause § 457.496(f) as proposed, with two and assess the hospital’s medical, an undue burden to states to make any exceptions. First, we are finalizing the psychiatric, and social evaluations. needed changes to their MCO, PIHP, or ABP compliance provision with a There was not a similar requirement for PAHP contracts by the stated different paragraph designation, the Medicaid agency to review the compliance date. § 440.395(e). Second, we are modifying hospital’s evaluation of each applicant’s For ABPs and CHIP, we will finalize the MCO compliance provision to align or beneficiary’s need for medical/ the proposed policy to allow 18 months with the timing in final § 440.395(e) and surgical admissions. As a result, this from the publication date of this final § 457.496(g), applicable to ABPs and requirement presented a challenge to rule for states to establish compliance CHIP respectively. achieving parity for inpatient services with the provisions of this final rule. Q. Utilization Control rendered in a mental hospital. While we understand that many Comment: Some commenters opposed commenters believe that states and Current Medicaid regulations the elimination of the requirement at MCOs should be complying with parity concerning utilization control include § 456.171. Specifically, the commenters given the statute and subregulatory requirements for the review of need for believed in the importance of this pre- guidance, we believe that the admission into mental hospitals admission evaluation to protect regulations will require states and plans (§ 456.171). These regulations individual rights, which is also required to make additional changes to their specifically require medical and other under state law. The commenters benefits and how they manage these professionals within the Medicaid recognized that the proposed rule benefits. In addition, the major reasons agency (or its designee) to evaluate each allowed states to continue these for allowing states 18 months to beneficiary’s need for admission into evaluations as long as the standards and establish compliance with these rules inpatient services in a mental hospital. processes for nonquantitative treatment are still relevant, including states’ There is not a similar requirement for limitations are also met, but were ability to get the necessary information the Medicaid agency to review each concerned that this may prove difficult to perform the parity analysis across beneficiary’s medical/surgical to impossible to do. The commenters delivery systems. As noted in other admission to other hospitals. States were concerned that removing the sections of the preamble, we may have indicated that this regulation ability for appropriate evaluation of decline to approve MCO contracts and presents challenges to achieving parity inpatient admissions could remove a defer FFP if the state cannot establish for inpatient services rendered in a certain level of protection for the that the benefits and delivery system are mental hospital. We proposed to individual that the regulation currently compliant with these rules. States may eliminate § 456.171 (namely, the current provides. want to consider including penalties in regulatory language that requires Another commenter recommended their contracts if it is found that one of Medicaid agencies to evaluate each against the elimination of evaluations of the managed care plans is the reason for applicant’s or beneficiary’s need for medical necessity of inpatient the non-compliance. admission into inpatient services in a psychiatric hospital admissions Comment: Many commenters mental hospital by reviewing and proposed within the proposed suggested that CMS include in the final assessing the hospital’s medical, regulations. The commenter maintained rule language describing the CMS psychiatric and social evaluations). A that the elimination of these evaluations process for review and oversight of state state could continue these evaluations, could compromise states’ and MCOs’ attestations of compliance including but would have to ensure that the ability to ensure that the services benchmarks for states to follow for standards and processes are consistent provided are necessary and appropriate complying with this final regulation. with the provisions in this regulation within the context of the entire The commenters recommended that regarding nonquantitative treatment spectrum of behavioral health care benchmarks include the state’s actions limits when parity requirements under provided within the state. to bring coverage into compliance with this rule are applicable. Response: This final rule eliminates the final regulation. Recommended Comment: Several commenters the requirement at § 456.171. actions included having all MCO supported the elimination of the Eliminating this requirement will still contracts implemented or renewed prior requirement at § 456.171 regarding the allow states to evaluate individuals

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need for admission to inpatient regulation on our IMD payment policy. facilities that fall under the IMD psychiatric facilities. However the While we understand commenters’ exclusion. factors used in states’ reviews of the concerns, we are not making changes to Response: The payment exclusion for inpatient hospital evaluations for this rule on this topic for the reasons set Medicaid services provided to admission must be comparable to and forth below. beneficiaries in IMDs is a statutory applied no more stringently than factors Comment: Many commenters requirement established by the Congress used in applying the limitation for suggested that CMS revisit IMD policies. in 1965 and therefore beyond the scope medical surgical/benefits in the The commenters stated that the of this regulation. The full range of classification. As stated in this final Medicaid payment exclusion for covered services, including MH/SUD regulation, factors mean the processes, services in IMDs is a barrier to equitable services, could be provided to strategies, evidentiary standards, or access to inpatient behavioral health beneficiaries when they are in facilities other considerations used in services. The commenters indicated that that are not IMDs. determining limitations on coverage of federal action is needed to remove this Comment: Several commenters services. The phrase ‘‘applied no more obstacle to parity and ensure Medicaid recommended reconciling the IMD stringently’’ requires that any processes, programs can meet the needs of exclusion with the parity rules in the strategies, evidentiary standards, or beneficiaries with mental health and ABP context by interpreting the other factors that are comparable on substance use disorders across the Medicaid statute as not applying the their face be applied in the same continuum of care. Several commenters IMD exclusion to ABPs. The manner to medical/surgical benefits and recommended that CMS pursue commenters maintained that CMS’s MH/SUD benefits. congressional action to repeal or grant current position is inconsistent with Comment: One commenter exceptions to the IMD exclusion for section 1937 of the Act, which provides recommended removing the federal psychiatric patients admitted that ABP coverage is provided preadmission requirement from 42 CFR emergently to acute, short-stay notwithstanding * * * any other part 441 Subpart D, Inpatient psychiatric hospitals regardless of their provision of Title XIX that ‘‘would be directly contrary to [section 1937].’’ Psychiatric Services for Individuals bed size. A few commenters These commenters also state that Under Age 21 in Psychiatric Facilities or recommended that the final rule should section 1937 of the Act requires that Programs. In addition, this commenter clearly state that the IMD exclusion does ABPs cover EHBs, which must include requested CMS use precise language to not or should not apply to SUD MH/SUD services based on the benefits avoid confusion and misperceptions residential or detoxification services or in a commercial benchmark plan that is that Institution for Mental Disease (IMD) psychiatric patients admitted to crisis likely to cover some services in exclusion does not apply to children stabilization or other short-term psychiatric hospitals or other facilities under 21. residential rehabilitation services Response: To clarify, the final rule that would be considered IMDs. regardless of bed size. Another does not make changes to the Response: States must offer services commenter indicated that the IMD certification of need and other under ABPs that reflect the ten EHB requirements applicable to the Inpatient exclusion precludes providers from categories, including MH/SUD services Psychiatric Services for Individuals creating specialized, centers of (42 CFR 440.347). As this final rule under Age 21 benefit described at excellence for treating mental health states, we did not intend to require § 440.160 and Subpart D § 441.150 and substance use disorders when 24- states to include specific services within through 441.182. The Inpatient hour care is needed. EHB categories offered through an ABP. Psychiatric Services for Individuals Response: The text following section Nor did we specifically require coverage under Age 21 benefit remains an 1905(a)(29) of the Act provides that FFP of any particular inpatient or residential exception to the IMD exclusion. is not available for any medical mental health services or treatment As indicated in the response to assistance under title XIX for services settings as part of ‘‘inpatient services’’ comments, we are finalizing the removal provided to an individual ages 21 to 64 provided that the coverage complies of § 456.171 as proposed. who is a patient in an IMD facility. with MHPAEA parity requirements. Under this broad exclusion, FFP is States may, however, be required to R. Institutions for Mental Disease generally unavailable for the cost of provide inpatient or residential mental The IMD exclusion is a statutory services (regardless of whether the health services that are included in the prohibition on providing Medicaid services address physical or mental section 1937 coverage plan that is the matching funds for services provided to health) provided either inside or outside basis for the ABP, or that are included individuals aged 21 to 64 who are the IMD while the individual is a in the base-benchmark plan selected by inpatients in IMDs. IMDs are defined in patient in the facility. states to define EHBs for Medicaid. We statute as any hospital, nursing facility, Comment: Several commenters were clarified in the preamble of the final or other institution of more than 16 concerned about the IMD exclusion rule 42 CFR part 440 published in the beds, that is primarily engaged in from a parity standpoint because there Federal Register on July 15, 2013 (78 FR providing diagnosis, treatment, or care is no comparable restriction for 42197) and we clarify for this rule that of persons with mental diseases, medical/surgical benefits, and therefore, the IMD payment exclusion applies to including medical attention, nursing the exclusion unnecessarily serves to all medical assistance, even medical care, and related services. This limit access to services based upon a assistance furnished through an ABP. exclusion has been in place since quantitative restriction. Other To provide required coverage, a state Medicaid was established in 1965 and commenters requested guidance about may thus have to demonstrate that the was based on amendments to the statute how to apply the IMD exclusion coverage of inpatient (residential) that predated Medicaid and prohibited alongside this rule’s guidance that mental health services is provided in cash assistance payments for services restrictions based on facility type are a integrated environments that include for individuals in IMDs. The proposed NQTL. Commenters also requested treatment of both physical and mental regulation did not address the IMD information about how parity health conditions and patients. Finally, payment exclusion. We received several protections apply to the full range of we clarify that the requirement that all comments on the applicability of this MH/SUD services typically provided in ABPs comply with MHPAEA parity

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requirements includes compliance with Demonstration project,9 and we will capitated model in which beneficiaries MHPAEA requirements regarding submit a final report in 2016. This are enrolled in managed care plans, we treatment limits. report will provide information on the will provide technical assistance as Comment: Many commenters impact that this demonstration project needed about how to structure and requested that CMS clarify how parity had on access to care and the cost of assess those plans for compliance with could be achieved given the coverage these services. MHPAEA. For the reasons indicated in the and payment exclusion for services to For the reasons indicated in the response to comments, we do not response to comments, we do not individuals in IMDs. The commenters include provisions in the final rule that include provisions in the final rule that requested clarification on access to out- are specific to IMDs. are specific to coverage provided to of-network benefits where networks are Medicare-Medicaid beneficiaries. inadequate. S. Medicare-Medicaid Dual Eligible Response: To clarify, in a Medicaid Beneficiaries IV. Summary of Changes managed care environment, if a provider We received a number of comments For the most part, this rule finalizes network is unable to provide necessary about individuals who are dually the provisions of the proposed rule. services covered under the contract to a eligible for both Medicaid and Medicare Those provisions of this final rule that particular enrollee, the MCO, PIHP, or and the provision of both Medicaid and differ from the proposed rule are as PAHP must adequately (and on a timely Medicare benefits to such beneficiaries. follows: basis) cover these services out-of- Mental health parity requirements • We have revised the definitions in network for the enrollee as long as the under section 2726 of the PHS Act do § 438.900, § 440.395(a) and § 457.496(a) MCO, PIHP, or PAHP is unable to not apply to Medicare Parts A, B, or D so that long term services are included provide them in-network. Therefore if a services covered by Medicaid MCOs, in the definition of medical/surgical beneficiary needs a specific service such as those covered by integrated benefits, mental health benefits, and covered under the contract but the plans for Medicare-Medicaid substance use disorder benefits and that service or provider is not available in beneficiaries. The proposed rule noted the provisions of this final regulation the current network, such as inpatient that Medicare benefits are controlled by apply to these services. mental health services, the MCO, PIHP, the Medicare statute and regulations, • We are finalizing § 438.910(b)(2), or PAHP will need to cover such which are not within the scope of this § 440.395(b)(2)(ii) and § 457.496(d)(2)(ii) services in a non-network hospital that rule. with a modification that requires the provides inpatient mental health Comment: Several commenters stated standards used to assign mental health/ services. However, the IMD payment that it would be impractical, if not substance use disorder benefits to a exclusion would apply regardless of impossible, to isolate Medicare benefits classification be reasonable as well as whether the facility that provides from Medicaid benefits for the purposes the same as the standards used for inpatient mental health services is in of determining which aspects of a medical/surgical benefits. • network or out-of-network. Medicare-Medicaid integrated care We have revised § 438.910(d)(3) and § 457.496(d)(5) to eliminate the deeming Comment: Several commenters model must comply with MHPAEA. provision; as finalized these rules do not requested guidance about how to align Other commenters noted that provide that MCOs or CHIP state plans parity requirements with policies that administrative difficulties that could will be deemed in compliance with will be finalized regarding IMDs in the arise under the proposed policy, parity solely based on adherence to Medicaid managed care proposed rule. including the complexity of applying NQTL standards to drugs covered by § 438.206(b)(4); this revision clarifies Response: Because the proposed rule, Medicaid but not covered by Medicare that the requirements of these two Medicaid and Children’s Health Part D. The commenters raised concerns provisions are complementary. • Insurance Program (CHIP) Programs; that situations like this could result in We have also revised the language Medicaid Managed Care, CHIP increased fragmentation at a time when in § 438.910(d)(3) and § 457.496(d)(5), as Delivered in Managed Care, Medicaid CMS has taken steps to better integrate proposed it included a requirement to and CHIP Comprehensive Quality coverage for Medicare-Medicaid use the ‘‘same’’ standards regarding Strategies, and Revisions Related to beneficiaries. The commenters access to out-of-network providers, to Third Party Liability (80 FR 31098 encouraged CMS to ensure that a more closely align with the general through 31297) has not yet been beneficiary’s entire benefit package of requirement for NQTLs; the rule is finalized, we are unable to comment on items and services meets parity finalized to require the use of the alignment of those requirements ‘‘comparable’’ standards. standards, regardless of the entity or • with this final rule at this time. When program that is responsible for financing We have revised § 438.6(n) to the Medicaid managed care rule is the care, stating that this approach require MCO contracts to provide for finalized, CMS will provide guidance would ensure equitable access to MH/ services to be delivered in compliance and technical assistance as needed to SUD by beneficiaries across all with this rule and new subpart K, rather help states understand the interplay programs, and would also support than requiring those contracts to ensure between the requirements of these rules. issuers and states in meeting that enrollees actually receive such services. Comment: A few commenters urged compliance standards. • CMS to continue to examine, through Response: The MHPAEA statute does We have modified § 438.905(a) to the Medicaid Emergency Psychiatric not apply to Medicare, and we lack the change the heading and delete Demonstration project, whether statutory authority to apply this rule to designation of (a)(1). • We have revised § 438.920(b)(1) to eliminating or restricting the scope of Medicare benefits. In states participating clarify that states have to review both the IMD exclusion can improve access in the CMS Financial Alignment medical/surgical benefits and MH/SUD to care and help reduce costs. Initiative that are implementing a benefits when completing the parity Response: In December 2013, we analysis. We have also specified in 9 This interim report can be accessed online at provided an interim Report to Congress http://innovation.cms.gov/files/reports/mepd_ § 438.920(b)(1) that information on on the Medicaid Emergency Psychiatric rtc.pdf. compliance with the rule must be made

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available on a state’s Web site, that such follow in order for their separate CHIP we solicit comment on the following documentation must be provided within to be deemed compliant with the issues: 18 months of the date of publication of MHPAEA parity requirements. These • The need for the information this final rule, and that the modifications include not excluding collection and its usefulness in carrying documentation must be updated with benefits on the basis of condition or out the proper functions of our agency. any change in MCO, PIHP, PAHP or diagnosis, and including a description • The accuracy of our estimate of the Medicaid state plan benefits. Minor of their efforts to comply with the information collection burden. revisions have also been made to the deeming requirements within the state • The quality, utility, and clarity of wording of this provision. plan.. We also provide that if a state has the information to be collected. • We have revised § 438.920(b)(2) to elected in its state child health plan to • Recommendations to minimize the require the state to ensure that all cover EPSDT benefits only for certain information collection burden on the services be delivered to the enrollees of children eligible under the state child affected public, including automated the MCO in compliance with this rule, health plan, the state is deemed collection techniques. regardless of whether the MCO covers compliant with this section only with all services or only a portion of the respect to such children. In our April 10, 2015, proposed rule services. • We have modified § 457.496(d)(5) to (80 FR 19418) we solicited public • We have modified § 438.930 to refer to ‘‘providers for mental health or comment on each of the section provide that contracts with MCOs, substance use disorder benefits’’ instead 3506(c)(2)(A) required issues for the PIHPs, and PAHPs offering Medicaid of ‘‘providers for mental health and following information collection state plan services to enrollees, and substance use disorder benefits.’’ requirements. PRA-related comments those entities, must comply with the • We have modified § 457.496(f)(1) to were received as indicated below in requirements of this subpart no later specify that states must describe the section V.D. under ‘‘Comments than 18 months after the date of standard being used to define medical/ Associated with the Proposed Collection publication of this final rule, regardless surgical, MH, and SUD benefits in their of Information Requirements.’’ While whether that date is the start or middle state plan. the changes that were made as a result of a contract year. • We have modified § 457.496(f)(1) to of these comments did not revise the • Consistent with the statute, we have replace ‘‘State Medicaid agency’’ with majority of the proposed requirements added a new provision at § 440.395(c) to ‘‘State.’’ and burden estimates, burden for the state that when ABPs are offering • We have added a new requirements under § 438.920 (specific EPSDT services, they will be deemed in § 457.496(f)(1)(i) and (ii) and to performing and posting the parity compliance with parity. We have also redesignated the remaining provisions analysis on the state’s Web site) have redesignated the remaining paragraphs of this section. been added to this final rule based on and references accordingly. • We have revised the regulatory text the comments received. Commenters • We have modified § 440.935(d)(1) to as applicable throughout to replace the raised concerns that the cost analysis of replace ‘‘Alternative Benefit Plans’’ with acronym ‘‘MH/SUD’’ with the full the proposed rule fails to consider the ‘‘ABPs’’ in the heading. phrase ‘‘mental health and substance administrative cost to the states of • We have revised 440.395(e)(2) to use disorder’’ or ‘‘mental health or providing MH/SUD services through reflect that Essential Health Benefits are substance use disorder MCOs and through FFS delivery defined to potentially include more than systems. The proposed rule did not set V. Collection of Information the minimum 10 EHBs. forth such burden since we requested Requirements • We have modified § 457.496 comments on our proposed approach. Under the Paperwork Reduction Act throughout to replace ‘‘CHIP state A. Wage Estimates plans’’ with ‘‘state plan.’’ of 1995 (PRA), we are required to • We have added clarifying language provide 60-day notice in the Federal To derive average costs, we used data to the definition of EPSDT benefits Register and solicit public comment from the U.S. Bureau of Labor Statistics’ within § 457.496(a) to indicate that before a collection of information (BLS) May 2014 National Occupational states must provide services described requirement is submitted to the Office of Employment and Wage Estimates for all in section 1905(r) of the Act in manner Management and Budget (OMB) for salary estimates (www.bls.gov/oes/ that is compliant with section review and approval. To fairly evaluate current/oes_nat.htm). In this regard, 1902(a)(43) of the Act. whether an information collection Table 2 presents the mean hourly wage, • We have modified § 457.496(b) to should be approved by OMB, section the cost of fringe benefits, and the specify the requirements states must 3506(c)(2)(A) of the PRA requires that adjusted hourly wage.

TABLE 2—HOURLY WAGE ESTIMATES *

Fringe benefit Occupation title Occupation Mean hourly (at 100%) Adjusted code wage (per hour) hourly wage

Business Operations Specialists ...... 13–1000 $33.69 $33.69 $67.38 Medical Secretaries ...... 43–6013 16.12 16.12 32.24 Social Scientists and Related Workers ...... 19–3099 38.48 38.48 76.96 * The wage estimates from the proposed rule have been revised to account for more recent BLS data.

We have adjusted all our employee and overhead costs vary significantly Nonetheless, there is no practical hourly wage estimates by a factor of 100 from employer to employer, and alternative and we believe that doubling percent. This is necessarily a rough because methods of estimating these the hourly wage to estimate total cost is adjustment, both because fringe benefits costs vary widely from study to study.

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a reasonably accurate estimation regulated entities. While we did not estimated that 38 percent of the requests method. receive any public comments on this would be delivered electronically with point, the MHPAEA final rule’s impact B. Information Collection Requirements de minimis cost. The remaining requests analysis set forth assumptions that we (ICRs) would require materials, printing, and believe are relevant for calculating costs postage amounting to approximately 66 1. ICRs Regarding the Availability of for the Medicaid and CHIP program. cents per request. We believe that the Information and the Criteria for Medical The impact analysis assumed that each same mailing and supply costs per Necessity Determinations (§ 438.915(a), plan would receive 3 medical necessity request will apply to the disclosure § 440.395(c)(1), and § 457.496(e)(1)) criteria disclosure requests for every requirements of this rule. As shown in 1,000 beneficiaries. This assumption Table 3, mailing and supply costs are Sections 438.915(a), 440.395(c)(1), equated to 0.003 requests per enrollee $58,272 (88,291 responses × $.66). State and 457.496(e)(1) require that the which was applied to the number of medical necessity determination criteria beneficiaries enrolled in Medicaid share for this cost is $23,309. Total state used by regulated entities for MH/SUD MCOs (33.1 million), ABP (8.7 million) share costs are $176,346 ($153,037 in benefits be made available to potential and CHIP (5.7 million) to project labor costs and $23,309 in mailing costs) participants, beneficiaries, or 142,403 expected requests (99,328 for Table 3 also displays the added contracting providers upon request. MCOs + 26,100 for ABPs +16,975 for burden estimates, nationally and per In the tri-Department MHPAEA final CHIP). program, for Medicaid MCOs and CHIP rule, the regulatory impact analysis (78 To estimate the time it will take to comply with the medical necessity FR 68253 through 68266) quantified the medical staff to respond to each request, determination criteria’s disclosure costs for health insurance issuers and we used the assumption in the procedures. These estimates reflect the group health plans to disclose medical MHPAEA final rule’s impact analysis. necessity criteria. For consistency and requests for medical necessity Specifically, we assumed that it took a determination criteria’s disclosure comparability, we are using the same staff member (in this case, a medical procedures by beneficiaries or method for determining this rule’s secretary) 5 minutes to respond to the contracting providers. The number of disclosure costs, with adjustments to request. In this rule, this results in a account for Medicaid MCOs, PIHPs and total annual burden of 11,867 hours enrollees for MCOs/HIOs is based on the PAHPs, ABPs and CHIP, and the (142,403 requests × 5 min/60) at a cost CMS national breakout as of July 2012 population covered. of $382,592.08 (11,867 hours × $32.24/ while the number for ABPs is based on Labor Costs for Medical Necessity hour) for all Medicaid and CHIP the estimated enrollment growth due to Disclosures. Consistent with our programs. The state costs for this burden Medicaid expansion (‘‘National Health proposed rule, we are unable to estimate is $153,037 (state match is 40 percent of Expenditure Projections 2012–2022,’’ with certainty the number of requests costs). CMS).10 CHIP enrollment is based on for medical necessity criteria Mailing and Supply Costs. The Medicaid and CHIP Payment and disclosures that will be received by MHPAEA final rule’s impact analysis Access Commission’s 2014 estimates.

TABLE 3—NATIONAL AND PER PROGRAM BURDEN FOR THE MEDICAL NECESSITY DETERMINATION CRITERIA’S DISCLOSURE REQUIREMENTS

Number of expected Time Mailed Mailing and Number of requests (@5 min/ Labor cost responses supply cost Plan type enrollees (0.003 response) ($)@$32.24/hr (62% of ($)@$0.66/ Total cost State costs * requests per (hours) expected mailing enrollee) enrollees)

MCO/HIO ...... 33,109,462 99,328 8,277 $266,850.48 61,584 $40,645 $307,496 $122,998 ABP ...... 8,700,000 26,100 2,175 70,122.00 16,182 10,680 80,802 32,321 CHIP ...... 5,658,460 16,975 1,415 45,619.60 10,525 6,947 52,567 21,027

Total ...... 47,467,922 142,403 11,867 382,592.08 88,291 58,272 440,865 176,346

Submitting Requests for Medical CHIP potential participants, submit this request is unknown and the Necessity Disclosures (Potential beneficiaries and providers to request staff costs in these agencies would vary Participants, Beneficiaries, and the medical necessity determination based on the level of professional Contracting Providers). Table 4 displays criteria. It is difficult to determine the (physician, licensed clinician, or the added burden estimates, nationally financial impact on providers since the medical claims staff) that may request and per program, for Medicaid and proportion of providers that would this information.

10 Estimates are based on the most recent data available at the time of the analysis.

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TABLE 4—NATIONAL AND PER POTENTIAL PARTICIPANT, BENEFICIARIES AND PROVIDER BURDEN FOR THE MEDICAL NECESSITY DETERMINATION CRITERIA’S DISCLOSURE REQUIREMENTS

Number of expected Time Number of requests (@15 min/ Plan type enrollees (0.003 request) requests per (hours) enrollee)

MCO/HIO ...... 33,109,462 99,328 24,832 ABP ...... 8,700,000 26,100 6,525 CHIP ...... 5,658,460 16,975 4,244 Total ...... 47,467,922 142,403 35,601

The aforementioned requirements and amendment (§ 440.300) request to assure apply to no more than 1 to 2 states per burden will be submitted to OMB for compliance with the requirements of year. approval under control number 0938– (§ 440.395(e)(3)), including the 4. ICRs Regarding State Plan 1280 (CMS–10556). application of parity to treatment Amendments (SPAs) limitations as addressed in this rule. 2. ICRs Regarding the Availability of This rule does not impose any new or Information and Reason for Any Denial The ABP state Plan Application is employed by states to identify benefits revised SPA-specific reporting, (§§ 438.915(b), 440.395(c)(2), and recordkeeping, or third-party disclosure 457.496(e)(2)) offered to Medicaid beneficiaries receiving services under section 1937 of requirements and therefore does not MHPAEA requires that the reason for the Act. The application requires that require additional OMB review under any denial—under a group health plan states identify the MH/SUD services that the authority of the Paperwork or health insurance coverage—of will be offered under the plan. The plan Reduction Act of 1995 (44 U.S.C. 3501 reimbursement or payment for MH/SUD also collects information on any et seq.). The rule does not require a state benefits must be made available (upon limitations (quantitative and to amend its current non-ABP SPA since request or as otherwise required) by the nonquantitative treatment limitations) states have the option of including plan administrator (or the health and financial requirements across all additional services necessary to meet insurance issuer) to the beneficiary in benefit categories (including all parity requirements in the MCO, PIHP accordance with MHPAEA regulations medical/surgical services). or PAHP contracts. The burden for (45 CFR 146.136(d)(2)). amending such contracts is set out This final rule only addresses The parity requirements in § 440.395 below under § 438.6(n). disclosure of information concerning do not impose any new or revised The currently approved ABP SPA the denial of reimbursement or payment reporting, recordkeeping, or third-party template was designed to capture the for MH/SUD benefits. We believe that disclosure requirements for 10 or more MHPAEA final rule classifications and these requirements are already met by states since only one state and three identify if there are specific treatment complying with existing disclosure territories operates their ABP state plan limitations or financial requirements. requirements in parts 438 and 431, and in FFS, and therefore, do not require The ABP SPA template’s information therefore, do not create any new or additional OMB review under the collection requirements and burden are revised requirements or burden beyond authority of the Paperwork Reduction not affected by this rule and are what is currently approved by OMB Act of 1995 (44 U.S.C. 3501 et seq.). approved by OMB under control under control number 0938–1080 These states that operate the ABP number 0938–1188 (CMS–10434). (CMS–10307). We also believe that these programs in a fee-for-service only States are required to review their requirements are already met for CHIP delivery system would not have to respective CHIP state plans to determine by complying with existing notification perform an additional parity analysis if they are in compliance with federal and disclosure requirements in across the various delivery systems. law, and states must submit a CHIP SPA § 457.110 and § 457.1130, and therefore, States that operate their ABP programs to make the necessary changes to the do not create any requirements or through a managed care arrangement state plan to comply with changes in burden beyond what is currently would be required to attest that they are federal law as described in § 457.60(a). approved by OMB under control compliant with parity, and to solicit Section 502 of the CHIPRA amended number 0938–1148 (CMS–10398 #34) comments on their ABP state plan section 2103(c) of the Act, which was (formerly, CMS–R–211, control number (which includes requests for comments described in SHO letters #09–014 and 0938–0707). For ABPs, these provisions on this attestation), but that attestation #13–001. Many states have performed do not create any new or revised third- is in an existing PRA: OMB under parity analyses based on that guidance party disclosure requirements beyond control number 0938–1188 (CMS– and submitted SPAs to come into what is currently approved by OMB 10434). While states are required to compliance with MHPAEA. under control number 0938–1188 solicit public comment, we maintain However, as described in section III. (CMS–10434). that the information collection G of this final rule, we plan on requirement is exempt from the developing state plan pages specific to 3. ICRs Regarding Parity in Mental requirements of the Paperwork MHPAEA, so all states with a separate Health and Substance Use Disorder Reduction Act of 1995 (44 U.S.C. 3501 CHIP must submit a SPA to update their Benefits in Alternative Benefit Plans et seq.) since we estimate fewer than ten state plan. We anticipate that up to 42 (§ 440.395) annual respondents (5 CFR 1320.3(c)). states will need to submit a SPA, which When a state plan provides for an As ABPs are most often used by states may add up to 160 hrs. of additional ABP, the state must provide sufficient to expand Medicaid to the adult burden on states based on the estimated information in an ABP state plan population, we project that this would burden of submitting a SPA (80 hrs.)

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approved by OMB under control was provided in the November 2009 services are not provided through the number 0938–1148 (CMS–10398 #34) letter regarding section 502 of CHIPRA. MCO, § 438.920 specifies that the state (formerly CMS–R–211, control number Since the letters are discussed in section must review the MH/SUD and medical/ 0938–0707). This additional SPA II.A. of this final rule (as background), surgical benefits provided through the burden is estimated to cost $12,313.60 we wish to clarify that this rule does not MCO, PIHP, PAHP, and fee-for service (160 hrs × $76.96/hr.) for a social include any new or revised reporting, (FFS) coverage to ensure that the full science analyst to submit a complete recordkeeping, or third-party disclosure scope of services available to all SPA package; however, the final costs requirements pertaining to either of the enrollees of the MCO complies with the for the states will be much lower letters. Consequently, the PRA does not requirements in this subpart K. The because in CHIP it is important to take apply. state is also expected to review the into account the Federal government’s 6. ICRs Regarding Contract parity analysis provided by an MCO that contribution to the cost of administering Requirements (§ 438.6(n)) is responsible for delivering all MH/ CHIP. States receive an enhanced FMAP SUD Medicaid services. The state must for administering their CHIP program In § 438.6(n), states are now required provide documentation of compliance that now includes a 23 percentage to include contract provisions in all increase beginning in FFY 2016, which applicable MCO, PIHP, and PAHP with the requirements under this was maintained through the passage of contracts to comply with part 438, subpart to the general public and post the Medicare Access and CHIP subpart K. We estimate a one-time state this information on the state’s Medicaid Reauthorization Act of 2015 (MACRA). burden of 30 minutes at $67.38/hour for Web site. The 36 states that have an The average enhanced FMAP has a business operations specialist to MCO model would be responsible for increased to 92.7 percent, decreasing the amend each contract with provisions developing or reviewing the benefits state’s share of this additional burden to that implement the requirements offered by MCOs, PIHPs, PAHPs and a nominal cost of $898.89 ($12,313.60 × outlined in part 438, subpart K. FFS to ensure the benefits offered to 0.073). When ready, the SPA template Applicable to 36 states (which is the enrollees of the MCO comply with along with the associated requirements number of states that have an MCO requirements in this subpart. We and burden will be submitted to OMB model), and to a total of 602 contracts estimate a state burden of 8 hours at for approval under control number in those states, in aggregate we estimate $67.38/hour for a business operations 0938–1148 (CMS–10398 #34). This is a 301 hours (602 contracts × 0.5 hours) specialist to perform this analysis and preliminary estimate that is based on and $20,281 (301 hours × $67.38/hr.). document compliance and, on an our experience with existing SPA State costs for this burden is $8,112 (40 ongoing basis, update the templates. percent of costs are state match). The documentation. In aggregate, we requirements and burden will be × 5. ICRs Regarding State Health Official estimate 384 hours (36 states 8 hours) submitted to OMB for approval under × (SHO) Letters SHO #09–014 (November and $19,405 (288 hours $67.38/hr.). control number 0938–1280 (CMS– 4, 2009) and SHO #13–001 (January 16, State costs for this burden is $7,762. The 10556). 2013) requirements and burden will be submitted to OMB for approval under The January 2013 SHO letter 7. ICRs for State Responsibilities (§ 438.920) control number 0938–1280 (CMS– addressed the application of the 10556). MHPAEA requirements in Medicaid and In any instance where the full scope expanded upon the CHIP guidance that of medical/surgical and MH/SUD C. Summary of Burden Estimates TABLE 5—ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Total Regulation section(s) Total annual Hourly labor Total labor mailing under title 42 of the OMB Potential Total Burden per burden cost of cost of and Total State CFR control No. respondents responses response (hours) reporting reporting supply cost share ($/hr) costs *

438.915(a), 0938–1280 602 142,403 5 min...... 11,867 32.24 $382,592 $58,272 $440,864 176,346 440.395(c)(1), and 457.496(e)(1) (States and Plans). 438.915(a), 0938–1280 47,467,922 142,403 15 min...... 35,601 N/A N/A N/A N/A ...... 440.395(c)(1), and 457.496(e)(1) (Po- tential participants, beneficiaries and providers). 438.6(n) (States) ...... 0938–1280 36 602 30 min ...... 301 67.38 20,281 0 20,281 8,112 438.920 (States) ...... 0938–1280 36 36 8 hours ...... 288 67.38 19,405 0 19,405 7,762 457.496 (State Plan 0938–1148 42 2 80 hours...... 160 76.96 12,314 0 12,314 899 Amendments.

Total ...... 47,468,638 285,446 88 hrs 50 min 48,217 ...... 434,592 58,272 492,864 193,119 * This rule does not set forth any capital/maintenance costs.

D. Comments Associated With the analysis of the proposed rule fails to be associated with creating new ongoing Proposed Collection of Information consider the administrative cost to the reporting mechanisms for states and Requirements states of providing MH/SUD services MCOs to provide detailed information through MCOs and through FFS on their quantitative and Comment: Two commenters delivery systems. They stated that nonquantitative limits across multiple expressed concerns that the cost significant administrative costs would MCOs and the FFS structure, perform

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the parity analysis, post on the states care benchmark and benchmark- environmental, public health and safety Web site and report to CMS. equivalent plans (referred to in this final effects, distributive impacts, and Commenters also stated that these rule as Medicaid ABPs) as described in equity). Section 3(f) of Executive Order requirements would require state staff to section 1937 of the Act, CHIP under title 12866 defines a ‘‘significant regulatory review the rule, review each contract, XXI of the Act, and Medicaid MCOs as action’’ as an action that is likely to develop appropriate language needed in described in section 1932 of the Act. result in a rule: (1) (Having an annual each contract, and process the amended In 2013, we released a SHO letter that effect on the economy of $100 million contract through the administrative provided guidance to states regarding or more in any 1 year, or adversely and channels. The actual time needed to the implementation of requirements materially affecting a sector of the address this would be many times under MHPAEA to Medicaid benchmark economy, productivity, competition, greater than the proposed estimate. and benchmark-equivalent plans jobs, the environment, public health or Response: We recognize that the (referred to in this letter as ABPs), CHIP, safety, or state, local or tribal administrative burden of implementing and Medicaid MCOs. governments or communities (also this rule will vary across states and Final regulations implementing referred to as ‘‘economically MCOs, and intend for the numbers cited MHPAEA were published in the tri- significant’’); (2) creating a serious above are a national estimate of burden Department MHPAEA final regulations inconsistency or otherwise interfering across all impacted entities. We note that do not apply to Medicaid MCOs, with an action taken or planned by that efficiencies can be achieved ABPs, or CHIP state plans. another agency; (3) materially altering regarding implementation of this rule We believe that in absence of a the budgetary impacts of entitlement through the use of standardized regulation specific to the application of grants, user fees, or loan programs or the processes, and that technical assistance the parity requirements under MHPAEA rights and obligations of recipients provided to states is intended to help to to Medicaid and CHIP, states would not thereof; or (4) raising novel legal or reduce the administrative burden. be compelled to implement the policy issues arising out of legal However, we do agree with the necessary changes to these programs, mandates, the President’s priorities, or commenters that there will be an resulting in an inequity between the principles set forth in the Executive additional burden to states to perform beneficiaries who have MH/SUD Order. and/or review the parity analysis, conditions in the commercial market A regulatory impact analysis (RIA) document compliance and post it to the (including the state and federal must be prepared for major rules with state’s Web site. We have included the marketplace) and Medicaid and CHIP. economically significant effects ($100 projections of this additional burden in Even for states that are attempting to million or more in any 1 year). We section V.B.7 of this final rule. comply with parity requirements under estimate that this final rule is MHPAEA, the absence of regulation ‘‘economically significant’’ as measured E. Submission of PRA-Related could lead to inconsistent state-specific by the $100 million threshold, and Comments policies. hence, also a major rule under the We submitted a copy of this final This final rule provides the specificity Congressional Review Act. Accordingly, rule’s information collection and and clarity needed to effectively we have prepared a RIA, which to the recordkeeping requirements to OMB for implement the policies set forth by best of our ability presents the costs and review and approval. The requirements MHPAEA and prevent the use of benefits of the rulemaking. are not effective until they have been prohibited limits on coverage, including Because the application of parity formally approved by the OMB. nonquantitative treatment limitations requirements to ABPs; MCOs and PIHPs To obtain copies of the supporting that disproportionately limit coverage of and PAHPs providing services to MCO statement and any related forms for the treatment for MH/SUD conditions. The enrollees; and the CHIP is likely to have proposed collections discussed above, Department’s assessment of the an effect on the economy of $100 please visit CMS’ Web site at expected economic effects of this final million or more in any given year, this www.cms.hhs.gov/Paperwork@ rule is discussed in detail below. final rule is economically significant within the meaning of section 3(f)(1) of cms.hhs.gov, or call the Reports B. Overall Impact the Executive Order as elaborated Clearance Office at 410–786–1326. We have examined the impacts of this below, we believe the benefits of the We invite public comments on these final rule as required by Executive rule justify the costs. potential information collection Order 12866 on Regulatory Planning requirements. If you wish to comment, and Review (September 30, 1993), C. Anticipated Effects please identify the rule (CMS–2333–F) Executive Order 13563 on Improving This final rule would benefit and submit your comments to the OMB Regulation and Regulatory Review approximately 22.3 million Medicaid desk officer via one of the following (January 18, 2011), the Regulatory beneficiaries and 880,000 CHIP transmissions: Flexibility Act (RFA) (September 19, beneficiaries in 2016, based on service Mail: OMB, Office of Information and 1980, Pub. L. 96–354), section 1102(b) of utilization estimates from 2012 Regulatory Affairs; Attention: CMS Desk the Act, section 202 of the Unfunded Medicaid and CHIP enrollment. We Officer. Mandates Reform Act of 1995 (March expect that a significant benefit Fax Number: 202–395–5806 OR 22, 1995; Pub. L. 104–4), Executive associated with the application of the Email: OIRA_submission@ Order 13132 on Federalism (August 4, parity requirements under MHPAEA omb.eop.gov. 1999) and the Congressional Review Act and these final regulations will be ICR-related comments are due April (5 U.S.C. 804(2)). derived from applying parity 29, 2016. Executive Orders 12866 and 13563 requirements to the quantitative VI. Regulatory Impact Analysis direct agencies to assess all costs and treatment limits such as annual or benefits of available regulatory lifetime day or visit limits. Applying A. Statement of Need alternatives and, if regulation is parity requirements to visit or stay This final rule addresses the necessary, to select regulatory limits will help ensure that vulnerable applicability of the requirements under approaches that maximize net benefits populations—those accessing the MHPAEA to Medicaid non-managed (including potential economic, substantial amounts of MH/SUD

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services—have better access to Between 2007 and 2009, approximately that access to treatment increased appropriate care. Among adults aged 18 72 percent of children in Medicaid with earnings for those with jobs, as well as through 64 with Medicaid coverage, a potential mental health need did not increased rates of employment.26 approximately 9.6 percent have a receive mental health services.18 The Application of parity requirements serious mental illness, 30.5 percent have most frequently cited reasons for not may also result in changes to payers’ any mental illness, and 11.9 percent seeking MH/SUD treatment are cost utilization management approaches, have a substance use disorder.11 Among and/or a lack of health insurance specifically when requiring CHIP beneficiaries, approximately 8 coverage, low perceived need, stigma, or preauthorization of mental health percent of children experience serious structural barriers (for example, no services. It was found that even when behavioral or emotional difficulties.12 transportation, did not know where to approval for continued access to mental Evidence-based treatment for severe go).19 20 Removing quantitative limits on health services was in essence and persistent mental illness, and for treatment may be particularly beneficial guaranteed, patients required to obtain substance use disorders, often requires for individuals with severe mental prior approval sought out less treatment, prolonged (possibly lifetime) treatment illness and substance use disorders who perhaps believing they ‘‘should not’’ that consists of pharmacotherapy, may need to receive more services than access further needed supportive counseling, and often the average individual.21 22 Improved treatment.27 Hodgkin, et al, found that rehabilitative services. Individuals with coverage may also reduce the financial removal of utilization management severe MH/SUD conditions often burden on individuals and families, approaches (including preauthorization quickly exhaust their benefits under particularly those families of children for the first set of mental health visits) Medicaid managed care. In addition, with mental health service needs.23 increased use of mental health CHIP programs may restrict coverage, Finally, improving coverage of MH/SUD services.28 Cuffel, et al, note that there such as covering only 40 hours of treatment may also improve are various reasons for why an approach psychotherapy or 5 days of employment, productivity, and earnings like preauthorization can impact detoxification per year. These coverage among those with these provider behavior relative to mental restrictions often result in people conditions.24 Wang, et al, found that health service. Providers may believe forgoing outpatient treatment and a implementing a care program for those that the preauthorization process is too higher likelihood of non-adherence to identified with depression yielded not laborious and not worth their time; they treatment regimes, which produce poor only enhanced clinical outcomes may fear that those reviewing the health and welfare outcomes and create relative to depression, but also request will penalize them for the potential for increased produced positive outcomes relative to 13 14 submitting a preauthorization request; hospitalization costs. For those with decreased sick leave and increased they may assume that the set limits on 25 substance use disorders, treatment productivity. Similarly, the State of services preclude additional requests for retention is of key importance when Washington implemented a substance services; providers may believe that the assessing outcomes, where those who abuse treatment program for those initial limits are in place as an implied stayed in treatment longer had more receiving Aid to Families with recommendation towards shorter success in decreasing their substance Dependent Children (AFDC), and found 15 16 treatment cycles; and some may believe use. In 2011, approximately 8 requests for preauthorization simply 18 percent of adults with Medicaid GAO. Children’s Mental Health: Concerns will not be approved at all.29 Liu, et al, coverage reported at least one Remain about Appropriate Services for Children in Medicaid and Foster Care. December 2012. http:// found a significant correlation between occurrence in the past 12 months of www.gao.gov/assets/660/650716.pdf. Accessed June preauthorization processes and the feeling the need for MH/SUD treatment 27, 2014. probability of ending mental health 17 19 or counseling but not receiving it. Affordability Most Frequent Reason for Not 30 Receiving Mental Health Services. Rockville (MD): treatment prematurely. Substance Abuse and Mental Health Services Application of parity requirements 11 Calculations were based on the Substance Administration (US); 2013. The NSDUH Report under MHPAEA may also have benefits Abuse and Mental Health Services Administration Data Spotlight. (SAMHSA) National Survey of Drug Use and in terms of reduced medical costs. 20 Results from the 2012 National Survey on Drug Health. Use and Health: Summary of National Findings and Mental health and physical health are 12 Pastor P.N., Reuben C.A., Duran C.R. Detailed Tables. Rockville (MD): Substance Abuse interrelated, and individuals with poor Identifying Emotional And Behavioral Problems in and Mental Health Services Administration (US); mental health are likely to have physical Children Aged 4–17 Years: United States, 2001– 2013. 2007. National Health Statistics Report No. 48. 21 Zuvekas S.H., Banthin J.S, Selden T.M. How Hyattsville, MD: National Center for Health would mental health parity affect the marginal price 26 Wickizer TM, Campbell K, Krupski A, Stark K. Statistics; 2012. of care? Health Serv Res. 2001 Feb;35(6):1207–27. Employment outcomes among AFDC recipients 13 Medication-Assisted Treatment for Opioid Review. treated for substance abuse in Washington State. Addiction in Opioid Treatment Programs. Rockville 22 McConnell K.J. The effect of parity on Milbank Q. 2000;78(4):585–608, iv. PubMed PMID: (MD): Substance Abuse and Mental Health Services expenditures for individuals with severe mental 11191450. Administration (US); 2005. Treatment Improvement illness. Health Serv Res. 2013 Oct;48(5):1634–52. 27 Liu, X., R. Sturm, and B.J. Cuffel. 2000. ‘‘The Protocol (TIP) Series, No. 43. doi: 10.1111/1475–6773.12058. Epub 2013 Apr 5. Impact of Prior Authorization on Outpatient 14 Trivedi A.N., Swaminathan S, Mor V. 23 Barry C.L., Busch S.H. Do state parity laws Utilization in Managed Behavioral Health Plans.’’ Insurance parity and the use of outpatient mental reduce the financial burden on families of children Medical Care Research Review 57: 182–95. health care following a psychiatric hospitalization. with mental health care needs? Health Serv Res. 28 Hodgkin D., Merrick E.L., Horgan C.M., Garnick JAMA. 2008 Dec 24;300(24):2879–85. 2007 Jun;42(3 Pt 1):1061–84. D.W., McLaughlin T.J. ‘‘Does Type of Gatekeeping 15 Simpson D, Joe G.W., Rowan-Szal G. Drug 24 Dunigan R, Acevedo A, Campbell K, Garnick Model Affect Access to Outpatient Specialty Mental abuse treatment retention and process effects on D.W., Horgan C.M., Huber A, Lee M.T., Panas L, Health Services?.’’ Health Services Research 42. 1 follow-up outcomes. Drug and Alcohol Ritter G.A. Engagement in outpatient substance (2007): 104–123. Dependence. 1997b;47(3):227–235. abuse treatment and employment outcomes. J Behav 29 Cuffel, B., McCulloch, J., Wade, R., Tam, L., 16 Hartel D.M., Schoenbaum E.E. Methadone Health Serv Res. 2014 Jan;41(1):20–36. doi: Brown-Mitchell, R., & Goldman, W. (2000). Patients’ treatment protects against HIV infection: Two 10.1007/s11414-013-9334-2. and providers’ perceptions of outpatient treatment decades of experience in the Bronx, New York City. 25 Wang P, Simon G.E., Avorn J, Azocar F, termination in a managed behavioral health Public Health Reports. 1998;113(Suppl. 1):107–115. Ludman E.J., McCulloch J, Petukhova M.Z., Kessler organization. Psychiatric Services, 51(4), 469–473. 17 Substance Abuse and Mental Health Services R.C. Telephone screening, outreach and care 30 Liu, X., Sturm, R., Cuffel, B. (2000) The impact Administration (SAMHSA). Behavioral Health management for depressed workers and impact on of prior authorization on outpatient utilization in United States 2012. HHS Publication No. (SMA)13– clinical and work productivity outcomes. JAMA managed behavioral health plans. Med Care Res 4797. Rockville, MD: SAMHSA; 2013. 2007;298(12):1401–11. Rev. Jun;57(2):182–95.

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health problems as well.31 32 33 Increased utilization of MH/SUD benefits. Cost only one to have an explicit quantitative access to and utilization of MH/SUD increases and increases in capitated limit.39 benefits may result in a reduction of rates may occur as a result of increased We conducted an analysis to medical and surgical costs for access and utilization from the determine how the use of services might individuals with mental health application of parity requirements and increase if quantitative limits on conditions and substance use disorders these regulations, but the evidence Medicaid MCO and CHIP programs (so called ‘‘medical cost offsets’’). For suggests that any increases will not be were eliminated. Where quantitative example, after receiving treatment, large. The impact of parity requirements limits exist that are non-compliant with individuals with substance use will depend on the extent to which parity requirements, states also have the disorders may experience fewer MCOs, ABPs, and CHIP plans lack option to align these limits for MH/SUD hospitalizations and emergency room benefits in some classifications or and medical/surgical benefits consistent visits stemming from unintended manage these benefits inconsistent with with the provisions of this final rule. injuries such as accidents and drug such parity requirements. However, to estimate the highest possible cost impact that could be overdose. The evidence that treatment In the April 30, 2010 final rule on expected, we simulated the effect of results in medical care offsets is stronger State Flexibility for Medicaid Benefit removing visit and day limits in states for substance abuse treatment than for Packages (75 FR 23068), the with limits for treatment users by mental health treatment. For example, assumptions utilized in modeling the anticipating that utilization would an evaluation on the expansion of estimated economic impact of the increase for beneficiaries who were near substance abuse treatment in associated provisions took into account or exceeded current limits to equal Washington State’s Medicaid program the costs of the benefit package for the utilization patterns observed in states found per member per month savings of new adult group served through ABPs. without limits for Medicaid managed $160 to $385 depending on the welfare Coverage of these benefits was already 34 care beneficiaries. This simulation cohort. Another study done on welfare accounted for in the April 30, 2010 final clients in Washington State found that indicated the maximum impact of rule, and therefore, does not need to be removing quantitative day and visit those accessing substance use disorder repeated here. Because we approved treatment had on average $2500 less in limits on MH/SUD services by Medicaid ABPs only after ensuring compliance MCOs to be $109.0 million nationwide medical costs than those who did not with MHPAEA, we project that this access treatment. This estimated savings (including federal and state costs) in regulation will result in no additional undiscounted dollars in 2016. Using a equaled the cost of SUD treatment for costs to ABPs. individuals accessing SUD treatment.35 similar approach, we estimated the While a similar reduction in medical (1) Effect of Removing Non-Compliant maximum impact of removing costs may be expected from mental Quantitative Treatment Limitations quantitative limits on CHIP expenditures to be $42.1 million in health treatment, most empirical studies A review of Medicaid managed care have not found a significant medical undiscounted dollars in 2016. benefits in all 50 states and the District However, these estimates are the cost offset from mental health of Columbia revealed that a subset of largest possible cost impacts and the treatment.36 37 states (18 states) had Medicaid managed actual impact is likely to be lower. One 1. Costs care plans that imposed quantitative reason is that some states with treatment limits on outpatient visits, a. Cost Associated With Increased quantitative limits may have inpatient stays, and intermediate Utilization of MH/SUD Benefits mechanisms in place for beneficiaries to services (for example, intensive obtain hospital days or outpatient visits A primary objective of Congress in outpatient treatment). As indicated in beyond the state’s limit if such care is enacting MHPAEA was to eliminate the preamble, some of these quantitative determined to be medically necessary. barriers that impeded access to and treatment limits are a result of what is In practice, we anticipate a potentially currently in a state’s Medicaid plan. lower impact than estimated currently, 31 Druss BG, Walker ER. Mental disorders and given that quantitative limits may medical comorbidity. Synth Proj Res Synth Rep. A review of CHIP plans indicated that 2011 Feb;(21):1–26. Review. most are already compliant with already be routinely exceeded. We 32 National Institute on Drug Abuse. (December MHPAEA. CHIP plans that include found that in most of the 18 states with 2012). Medical Consequences of Drug Abuse. Medicaid EPSDT are already required to visit limits, a number of recipients Retrieved from http://www.drugabuse.gov/related- cover mental health and substance (ranging from 5 to 20 percent) used topics/medical-consequences-drug-abuse. services beyond the treatment limit, 33 Bouchery, E.E., Harwood, H.J., Sacks, J.J., abuse services as needed and they are Simon, C.J., & Brewer, R.D. (2011). Economic costs deemed compliant with MHPAEA suggesting that exceptions to the of excessive alcohol consumption in the US, 2006. parity requirements for financial quantitative limits may occur in these American Journal of Preventive Medicine, 41(5), requirements and treatment limitations. states. This does not appear to be the 516–524. case in all states, because in a few states 34 Wickizer, T.M., Mancuso, D., & Huber, A. It is not permissible to apply annual or (2012). Evaluation of an innovative Medicaid health lifetime limits to the EPSDT benefit. with visit limits ranging from policy initiative to expand substance abuse CHIP stand-alone programs are also approximately 24 to 40 visits, only 1 or treatment in Washington State. Medical Care already compliant with MHPAEA 2 percent of recipients exceeded the Research and Review, 69(5), 540–559. because of changes to treatment limit. 35 Wickizer, T.M., Krupski, A., Stark, K.D., There are no studies to date on how Mancuso, D., & Campbell, K. (2006). The effect of limitations for both MH/SUD benefits substance abuse treatment on Medicaid and medical and surgical benefits the application of federal parity expenditures among general assistance welfare required under the Affordable Care requirements affects Medicaid spending. clients in Washington State. Milbank Act.38 Among CHIP plans that are Quarterly,84(3), 555–576. 39 Medicaid expansion plans, we found McConnell KJ, Gast SH, Ridgely MS, Wallace 36 Simon GE, Katzelnick DJ. Depression, use of N, Jacuzzi N, Rieckmann T, McFarland BH, medical services and cost-offset effects. J McCarty D. Behavioral health insurance parity: does Psychosom Res. 1997 Apr;42(4):333–44. Review. 38 Sarata AK. Mental health parity and the Patient Oregon’s experience presage the national 37 Sturm R. Economic grand rounds: The myth of Protection and Affordable Care Act of 2010. experience with the Mental Health Parity and medical cost offset. PsychiatryServ. 2001 Washington, DC: Congressional Research Service; Addiction Equity Act? Am J Psychiatry 2012 Jun;52(6):738–40. 2011. Jan;169(1):31–8.

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However information from states that Vermont’s parity law is also very identified only two states providing for have passed state-specific parity similar to MHPAEA. A study of MH/SUD services under the state plan legislation (which includes application Vermont’s parity law found that the in which MH/SUD services were to Medicaid) provides additional share of spending on mental and excluded from a classification in which support for the projected impact of these substance use disorders increased from medical/surgical benefits are provided. regulations on service utilization and 2.30 percent to 2.47 percent of total In both states, the excluded services 41 spending. For instance, an evaluation of spending for one health plan. were substance abuse inpatient services. the Oregon parity law found no Finally, a recent evaluation of the For the purposes of this analysis, we effect of MHPAEA on the commercial significant increases in aggregate assumed that substance abuse inpatient market revealed a modest increase in behavioral health spending or in the services would need to be included to spending on substance use disorder percent of individuals using behavioral the extent that they were provided in a treatment per enrollee ($9.99, 95 percent distinct part or unit of a general hospital health services associated with its CI: 2.54, 18.21), but no significant implementation.40 The evaluators or facility with 16 or fewer beds. Using change in the percent of individuals data on current use of Medicaid surmised that the flexibility in using substance use disorder services.42 quantitative limits prior to the parity substance use disorder inpatient law may be one reason that the (2) Effect of Classification of Services services and the cost of those services implementation of parity did not lead to Requirements from Medicaid claims data, we estimated that the additional coverage large increases in spending. This final rule requires that if the state for these services would have led to an Specifically, they found that prior to the provides for MH/SUD services under increase of $11.7 million nationwide in implementation of the state parity law; the state plan, MH/SUD services must undiscounted dollars in 2012. approximately 5 percent of beneficiaries be provided to MCO enrollees in every with any behavioral health visits classification in which medical/surgical Table 6 displays the total costs of exceeded the specified limits of that benefits are provided. After reviewing removing non-compliant QTLs by plan. the MH/SUD services provided under service and meeting classification of Medicaid managed care plans, we services requirements in 2012.

TABLE 6—DETAILS OF ESTIMATED COSTS OF MEETING QTL AND CLASSIFICATION OF SERVICES REQUIREMENTS IN 2012

Inpatient Outpatient Intermediate Administrative Total

Mental Health—Medicaid ($million/year)

$19.8 $62.3 $0 $0.3 $82.4

Mental Health—CHIP ($million/year)

$0 30.8 0.4 0.04 31.2

Substance Use Disorder—Medicaid ($million/year)

$11.7 0 0 0 11.7

Substance Use Disorder—CHIP ($million/year)

$0 0 0 0 0

Total Costs of Removing Quantitative Limits in 2012 ($million/year) 125.3 Note: Administrative costs are listed once for Medicaid and CHIP because the expense is all-inclusive for each program; costs are not broken down by service.

Costs for complying with parity rules These figures are calculated based on expenditures increase over time, the for each service category were estimated 2012 Medicaid and CHIP expenditures, cost impact of mental health parity is based on a simulation of additional which equate to approximately $125.3 expected to rise proportionally. utilization states may incur as a result million in additional costs as a result of Accordingly, to determine the of removing quantitative treatment parity compliance. Given that total anticipated impact of mental health limits.43 For the analysis of intermediate Medicaid and CHIP expenditures in parity in cost in future years, we applied services, we examined limits on partial 2012 were $552.6 billion, the impact of growth in Medicaid and CHIP hospitalization and intensive outpatient this rule would increase Medicaid and expenditures from the mid-session care. CHIP spending by about 0.02 percent review of the President’s FY 2016 each year. As total Medicaid and CHIP budget to this cost.44 Due to the

40 McConnell KJ, Gast SH, Ridgely MS, Wallace Rockville, MD: Substance Abuse and Mental Health benefits in the classification for simplicity, given N, Jacuzzi N, Rieckmann T, McFarland BH, Services Administration; 2003. the complexity of applying the full analysis to every McCarty D. Behavioral health insurance parity: does 42 Busch SH, Epstein AJ, Harhay MO, Fiellin DA, benefit in every state, and because in most cases, Oregon’s experience presage the national Un H, Leader D Jr, Barry CL. The effects of federal less than two-thirds of the medical/surgical benefits experience with the Mental Health Parity and parity on substance use disorder treatment. Am J in that classification are subject to a quantitative Addiction Equity Act? Am J Psychiatry 2012 Manag Care. 2014 Jan;20(1):76–82. limit. Jan;169(1):31–8. 43 We chose to estimate the cost of removing these 44 41 Rosenbach M, Lake T, Young C, et al. Effects limits rather than the cost of aligning these limits President’s Budget for Fiscal Year 2016, of the Vermont Mental Health and Substance Abuse with the predominant level of the quantitative limit available at http://www.whitehouse.gov/omb/ Parity Law. DHHS Pub. No. SMA 03–3822, that applies to substantially all medical/surgical budget.

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complexity and uncertainty of authorization expires, our estimate Costs for 2016 through 2020 are predicting changes to Medicaid assumes that CHIP will be reauthorized displayed in Table 7. enrollment and spending if CHIP in its present form through FY2020.

TABLE 7—ESTIMATED COSTS OF CMS–2333 FY 2016–2020 [In millions]

FY 2016 FY2017 FY 2018 FY 2019 FY 2020

Federal ...... 116.0 121.9 128.7 137.1 131.8 State ...... 50.5 53.3 56.5 59.7 76.5

Total ...... 166.5 175.2 185.3 196.8 208.3

(3) Effect of Medical Cost Offsets medical and surgical benefits. It is effect of utilization review and prior As described above, the cost of difficult to determine whether, at approval on MH/SUD inpatient services improving access to MH/SUD treatment baseline, Medicaid MCOs, PIHPs, have revealed mixed results, with some may be offset by a decline in the PAHPs, ABPs and CHIP programs are studies showing that these managed expenditures on treatments for medical applying medical management more care techniques result in lower costs, conditions resulting from substance use stringently to MH/SUD benefits than to quantities of treatment, or both, and disorders. There is strong evidence from medical and surgical benefits. A state- other studies finding only weak or no Medicaid programs to assume a cost by-state search of available Medicaid effects, or effects that are short offset resulting from improved access to documents indicated that most states term.48 49 50 51 As noted above, the substance use disorder benefits. In that use inpatient utilization studies of Oregon and Vermont, whose contrast, the evidence for cost offset management techniques for MH/SUD parity laws include similar restrictions resulting from improved access to services, such as prior approval or on medical management, have not mental health benefits is weaker. We continuing utilization review for shown increases in costs resulting from anticipate that, on balance, costs inpatient stays, have similar restrictions application of these laws. There is stemming from increased utilization of for medical and surgical conditions. uncertainty regarding the level of substance use disorder services Surveys of commercial plans have also increased costs that will result from resulting from application of parity found that inpatient managed care application of the parity requirement for requirements will be largely offset by restrictions, such as pre-admission prior NQTLs, but there is evidence that any the savings from reduced medical costs, approval, are common for medical and increases may be small. surgical admissions.45 46 There may be yielding very little increase in overall 2. Transfers Resulting From Increased important distinctions in the processes, costs from increased utilization of Access Under Medicaid substance use disorder services. strategies, evidentiary standards, or However, given the difficulty of other factors between MH/SUD services Transfer payments are monetary quantifying the precise cost impact of and medical and surgical services, but payments from one group to another this reduced use of medical services that current data do not indicate that this is that do not affect total resources is expected to result from enhanced the case in a way that would lead to a available to society. There is a potential access to substance use disorder clear cost impact. that application of parity requirements services, we have not included any cost Moreover, if some Medicaid plans under MHPAEA will result in transfers offset in our estimates. have stricter management controls for among different government entities. Comment: One commenter believed MH/SUD services than for medical MH/SUD services receive greater that proper implementation of parity services, there is scant evidence at this funding from public sources, such as may save money as more beneficiaries time as to how utilization management Medicaid, federal government block will be able to access appropriate care will evolve with the application of grants, state government general funds, for their conditions, resulting in fewer parity requirements and whether stricter and local government funding, than do emergency department visits and controls would result in higher costs.47 medical and surgical services.52 Over hospitalizations as well as improved For example, stricter controls may lead time, MH/SUD spending has been physical health. to underutilization of sub-acute levels of shifting away from state and local Response: As noted above, we agree care for MH/SUD conditions, leading to that in many cases, additional spending the worsening of both MH/SUD 48 Dickey B, Azeni H. Impact of managed care on on MH/SUD services may result in conditions and medical or surgical mental health services. Health Aff 1992 savings from reduced medical/surgical conditions that ultimately require more Fall;11(3):197–204. 49 Frank R.G., Brookmeyer R. Managed mental costs. costly acute levels of care. Studies of the health care and patterns of inpatient utilization for b. Effect of Aligning NQTLs treatment of affective disorders. Soc Psychiatry 45 Baker C.A., Diaz IS. Managed care plans and Psychiatric Epidemiol 1995 Aug;30(5):220–3. Under the MHPAEA final rules, managed care features: data from the EBS to the 50 Wickizer T.M., Lessler D, Travis K.M. medical management can be applied to NCS. Compensation and Working Conditions Controlling inpatient psychiatric utilization through MH/SUD benefits if the processes, Spring 2011:30–6. managed care. Am J Psychiatry 1996;153:339–45. 46 Claxton, G., DiJulio, B., Whitmore, H., 51 Wickizer T.M., Lessler D. Do treatment strategies, evidentiary standards, or Pickreign, J., McHugh, M., Finder, B., & Osei-Anto, restrictions imposed by utilization management other factors used in applying medical A. (2009). Job-based health insurance: costs climb increase the likelihood of readmission for management are comparable to, and are at a moderate pace. Health Aff 2009;28(6):w1002– psychiatric patients? Med Care 1998;36(6):844–50. applied no more stringently than, the 12. 52 Levit KR, Mark TL, Coffey RM, Frankel S, 47 Hodgkin D. The impact of private utilization Santora P, Vandivort-Warren R, Malone K. Federal processes, strategies, evidentiary management and psychiatric care: a review of the spending on behavioral health accelerated during standards, or other factors used in literature. Journal of Mental Health Administration recession as individuals lost employer insurance. applying medical management to 1992;19(2):143–57. Health Aff 2013 May;32(5):952–62.

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funding, toward federal financing, services, this approach allows states to years, we have used two SHO letters to especially Medicaid.53 The potential comport with parity requirements for provide guidance to states regarding increase in the availability of MH/SUD MCO enrollees without completely MHPAEA and Medicaid and CHIP. services under Medicaid and CHIP as a carving out MH/SUD services from their While states and other stakeholders result of the MHPAEA parity MCO or dropping MH/SUD coverage found this guidance useful, there were requirements may result in a reduction altogether. many questions or concerns regarding in use of, and spending on, services Also, under current statutes, the lack of specificity regarding financed by other public sources such as regulations and policies, states would application of MHPAEA parity state and local governments and federal not be required under federal law to requirements to Medicaid and CHIP. block grants.54 Limited sound evidence apply MHPAEA provisions to PIHPs There were several issues that states exists about the size of this effect on and PAHPs (many of which provide raised regarding this sub-regulatory states. MH/SUD services) since these guidance. One issue was the actuarial arrangements were not specifically D. Alternatives Considered soundness requirements, which addressed in section 1932(b)(8) of the mandate that MCO payments be based We considered several other Act, and MHPAEA does not directly on services as covered under state plans. approaches for providing guidance to apply to such contracts. Consideration Another was additional clarification of states regarding the application of the of these unique state MH/SUD delivery NQTLs and states’ concerns regarding MHPAEA to Medicaid MCOs, ABPs, systems is an important distinction in existing federal and state policies that and CHIP. As stated in the preamble of Medicaid when compared to the required utilization management this final rule, under our current commercial market. Further, because strategies that were inconsistent with policies, there is no way to ensure that the statutory provisions making mental the intent of MHPAEA. States also MCO enrollees receive state plan health parity requirements applicable to benefits in a way that fully complies raised additional questions regarding MCOs do not explicitly address these application of MHPAEA parity with MHPAEA. This is because section situations, additional interpretation is 1932(b)(8) of the Act does not apply to requirements to other delivery systems needed. including PIHPs, PAHPs, and FFS. We the design of the traditional Medicaid In addition to the delivery system do not believe that additional state plan, and state plans thus may be issues, states would not be required to subregulatory guidance would provide designed in a way that does not comply remove or align limits on services that the necessary authority for MCOs and with MHPAEA requirements. Under were in the state plan for individuals states to implement or enforce MHPAEA current guidance, we have said that if an enrolled in an MCO. As stated parity requirements for Medicaid MCO is simply properly applying state previously in this regulation, these beneficiaries enrolled in an MCO. plan benefits, there is no violation of limits are carried through in the section 1932(b)(8) of the Act even if that development of rates, and cost of E. Accounting Statement and Table benefit design does not conform to services outside of the state plan or a MHPAEA, because the MCO did not waiver of the state plan cannot be As required by OMB Circular A–4 adopt that benefit design and thus was included. Without the change in this (available at http://www.whitehouse. not at fault in its non-compliance. As rule, individuals enrolled in an MCO gov/omb/circulars_a004_a-4/), in Table explained above, we do not believe that could still be subject to treatment 8 we have prepared an accounting this policy effectuates Congressional limitations that are not compliant with statement showing the classification of intent in enacting section 1932(b)(8) of parity requirements, which we believe the impacts associated with the Act. Further, we believe that is inconsistent with the intent of implementation of this final rule. implementation of the statute requires Congress in requiring in section The projected impact on costs in 2016 that MCO enrollees receive benefits in a 1932(b)(8) of the Act that MCOs deliver was calculated by multiplying the manner that complies with MHPAEA. services in a manner consistent with percent anticipated increase in cost due We considered requiring that all state MHPAEA requirements and the policies to the application of parity requirements plan MH/SUD services be included regarding application of MHPAEA to by expected Medicaid expenditures in under MCO contracts as the way to ABPs and CHIP that operate in a FFS 2016. Based on our analysis, the parity ensure that MCO enrollees receive the arrangement. In addition, without these rule will lead to an increase of full protections of MHPAEA. However, changes to the managed care rate setting approximately 0.03 percent in total we believe that this final rule allows process, it will be difficult for MCOs to Medicaid spending each year over 10 states the most flexibility when comply with statutory requirements years. In 2016, Medicaid expenditures applying mental health parity regarding financial requirements and overall are projected to equal requirements to their Medicaid services treatment limitations. approximately $540.3 billion.55 across delivery systems. Given that Thus, Finally, there are mental health parity the undiscounted cost of the rule is there are many different delivery system provisions that are not applicable to the configurations that carve out MH/SUD estimated to be $178.1 million in 2016, FFS delivery systems for Medicaid ABP and to rise proportionate to the growth benefits; these include annual and 52 in overall Medicaid spending in future Levit KR, Mark TL, Coffey RM, Frankel S, lifetime dollar limits, availability of Santora P, Vandivort-Warren R, Malone K. Federal years. These costs are split between the spending on behavioral health accelerated during plan information, and access to out-of- federal and state governments based on recession as individuals lost employer insurance. network providers. the population covered and the Health Aff 2013 May;32(5):952–62. In addition, we considered the ability statutory matching rate. 53 Levit KR, Mark TL, Coffey RM, Frankel S, to provide guidance and enforce the Santora P, Vandivort-Warren R, Malone K. Federal spending on behavioral health accelerated during provisions of MHPAEA’s application to 54 Frank RG, Goldman HH, Hogan M. Medicaid recession as individuals lost employer insurance. Medicaid and CHIP through sub- and mental health: be careful what you ask for. Health Aff 2013 May;32(5):952–62. regulatory guidance. Over the past 6 Health Aff 2003 Jan-Feb;22(1):101–13.

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TABLE 8—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED BENEFIT, COSTS, AND TRANSFERS

Units Category Estimates Discount rate Period Year dollar (%) covered

Transfers From Federal Government to Providers

Annualized Monetized ($million/year) ...... 126.5 2016 7 2016–2020 126.8 2016 3 2016–2020

Transfers From State Government to Providers

Annualized Monetized ($million/year) ...... 58.5 2016 7 2016–2020 59.0 2016 3 2016–2020 Note. The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals.

F. Regulatory Flexibility Act (RFA) also requires that agencies assess Throughout the process of developing The RFA requires agencies to analyze anticipated costs and benefits before these regulations, to the extent feasible options for regulatory relief for small issuing any rule whose mandates within the relevant provisions of the entities, if a rule has a significant impact require spending in any 1 year of $100 Act, PHS Act and MHPAEA, the on a substantial number of small million in 1995 dollars, updated Secretary has attempted to balance the entities. The great majority of hospitals annually for inflation. Currently, that is latitude for states to structure their state and most other health care providers approximately $144 million. UMRA plan services and MCO contracts and suppliers are small entities, either does not address the total cost of a rule. according to the needs and preferences by being nonprofit organizations or by Rather, it focuses on certain categories of the state, and the Congress’ intent to meeting the SBA definition of a small of cost, mainly those ‘‘Federal mandate’’ provide uniform minimum protections business (having revenues of less than costs resulting from (A) imposing to Medicaid and CHIP beneficiaries in $7.5 million to $38.5 million in any 1 enforceable duties on state, local, or every state. By doing so, it is the year). States are not included in the tribal governments, or on the private Secretary’s view that this final rule definition of a small entity. This final sector, or (B) increasing the stringency complies with the requirements of rule does not change the rates at which of conditions in, or decreasing the Executive Order 13132. providers would be reimbursed for any funding of, state, local, or tribal I. Conclusion additional treatments and services that governments under entitlement may be required, and MCOs, PIHPs, and programs. The average state share of In accordance with the provisions of PAHPs will be paid on an actuarially total Medicaid spending in 2016 is Executive Order 12866, this regulation projected to be 38.2 percent. The total sound basis for any additional coverage was reviewed by the Office of cost impact of this rule is estimated to that they will be required to provide. As Management and Budget. indicated previously in this final rule, be $178.1 million in 2016. Therefore, the increased costs will be borne by the total cost to states is projected to be List of Subjects states and the federal government, approximately $68.0 million. Therefore, 42 CFR Part 438 which are not considered small entities. this final rule is not subject to UMRA. Therefore, the Secretary has determined H. Federalism Grant programs-health, Medicaid, that this final rule will not have a Reporting and recordkeeping Executive Order 13132 establishes significant economic impact on a requirements. substantial number of small entities as certain requirements that an agency that term is used in the RFA. must meet when it issues a final rule 42 CFR Part 440 In addition, section 1102(b) of the Act that imposes substantial direct requires us to prepare a regulatory requirement costs on state and local Grant programs-health, Medicaid impact analysis if a rule may have a governments, preempts state law, or reporting. significant impact on the operations of otherwise has federalism implications. 42 CFR Part 456 a substantial number of small rural In the Secretary’s view, this final rule hospitals. This analysis must conform to has Federalism implications, because it Administrative practice and the provisions of section 604 of the has direct effects on the states, the procedure, Drugs, Grant programs- RFA. For purposes of section 1102(b) of relationship between the federal health, Health facilities, Medicaid, the Act, we define a small rural hospital government and states, or on the Reporting and recordkeeping as a hospital that is located outside of distribution of power and requirements. a metropolitan statistical area and has responsibilities among various levels of fewer than 100 beds. The Secretary has government. However, in the Secretary’s 42 CFR Part 457 view, the Federalism implications of determined that this final rule will not Administrative practice and this final rule are substantially mitigated have a significant impact on the procedure, Grant programs-health, because, with regards to MCOs, ABPs, operations of a substantial number of Health insurance, Reporting and and CHIP, the Secretary expects that small rural hospitals. recordkeeping requirements. many states already offer benefits under G. Unfunded Mandates Reform Act their state plan and MCO contracts that For the reasons set forth in the (UMRA) meet or exceed the Federal mental preamble, the Centers for Medicare & Section 202 of the Unfunded health parity standards that would be Medicaid Services amends 42 CFR Mandates Reform Act of 1995 (UMRA) implemented in this rule. chapter IV as set forth below:

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PART 438—MANAGED CARE Subpart K—Parity in Mental Health and guidelines). Mental health benefits Substance Use Disorder Benefits include long term care services. ■ Substance use disorder benefits 1. The authority citation for part 438 § 438.900 Meaning of terms. continues to read as follows: means benefits for items or services for For purposes of this subpart, except substance use disorders, as defined by Authority: Sec. 1102 of the Social Security where the context clearly indicates the State and in accordance with Act (42 U.S.C. 1302). otherwise, the following terms have the applicable Federal and State law. Any meanings indicated: ■ 2. Section 438.6 is amended by disorder defined by the State as being or Aggregate lifetime dollar limit means as not being a substance use disorder revising paragraph (e) and adding a dollar limitation on the total amount paragraph (n) to read as follows: must be defined to be consistent with of specified benefits that may be paid generally recognized independent § 438.6 Contract requirements. under a MCO, PIHP, or PAHP. standards of current medical practice Annual dollar limit means a dollar * * * * * (for example, the most current version limitation on the total amount of of the DSM, the most current version of (e) Additional services that may be specified benefits that may be paid in a the ICD, or State guidelines). Substance covered by a MCO, PIHP, or PAHP. A 12-month period under a MCO, PIHP, or use disorder benefits include long term MCO, PIHP, or PAHP may cover, for PAHP. care services. enrollees, services that are in addition to Cumulative financial requirements Treatment limitations include limits those covered under the state plan as are financial requirements that on benefits based on the frequency of follows: determine whether or to what extent treatment, number of visits, days of (1) Any services necessary for benefits are provided based on coverage, days in a waiting period, or compliance by the MCO, PIHP, or PAHP accumulated amounts and include other similar limits on the scope or with the requirements of subpart K of deductibles and out-of-pocket duration of treatment. Treatment this part and only to the extent such maximums. (However, cumulative limitations include both quantitative services are necessary for the MCO, financial requirements do not include treatment limitations, which are PIHP, or PAHP to comply with aggregate lifetime or annual dollar limits expressed numerically (such as 50 § 438.910; and because these two terms are excluded outpatient visits per year), and from the meaning of financial nonquantitative treatment limitations, (2) Any services that the MCO, PIHP, requirements.) or PAHP voluntarily agrees to provide. which otherwise limit the scope or Early and Periodic Screening, duration of benefits for treatment under (3) Only the costs associated with Diagnostic and Treatment (EPSDT) a plan or coverage. (See § 438.910(d)(2) services in paragraph (e)(1) of this benefits are benefits defined in section for an illustrative list of nonquantitative section may be included when 1905(r) of the Act. treatment limitations.) A permanent determining the payment rates under Financial requirements include exclusion of all benefits for a particular paragraph (c) of this section. deductibles, copayments, coinsurance, condition or disorder, however, is not a * * * * * or out-of-pocket maximums. Financial treatment limitation for purposes of this requirements do not include aggregate definition. (n) Parity in mental health and lifetime or annual dollar limits. substance use disorder benefits. (1) All Medical/surgical benefits means § 438.905 Parity requirements for MCO contracts, and any PIHP and benefits for items or services for medical aggregate lifetime and annual dollar limits. PAHP contracts providing services to conditions or surgical procedures, as (a) General parity requirement. Each MCO enrollees, must provide for defined by the State and in accordance MCO, PIHP, and PAHP providing services to be delivered in compliance with applicable Federal and State law, services to MCO enrollees must comply with the requirements of subpart K of but do not include mental health or with paragraphs (b), (c), or (e) of this this part insofar as those requirements substance use disorder benefits. Any section for all enrollees of a MCO in are applicable. condition defined by the State as being States that cover both medical/surgical (2) Any State providing any services or as not being a medical/surgical benefits and mental health or substance to MCO enrollees using a delivery condition must be defined to be use disorder benefits under the State system other than the MCO delivery consistent with generally recognized plan. This section details the system must provide documentation of independent standards of current application of the parity requirements how the requirements of subpart K of medical practice (for example, the most for aggregate lifetime and annual dollar this part are met with the submission of current version of the International limits. the MCO contract for review and Classification of Diseases (ICD) or State (b) MCOs, PIHPs, or PAHPs with no approval under paragraph (a) of this guidelines). Medical/surgical benefits limit or limits on less than one-third of section. include long term care services. all medical/surgical benefits. If a MCO, Mental health benefits means benefits PIHP, or PAHP does not include an ■ 3. Subpart K is added to part 438 to for items or services for mental health aggregate lifetime or annual dollar limit read as follows: conditions, as defined by the State and on any medical/surgical benefits or Subpart K—Parity in Mental Health and in accordance with applicable Federal includes an aggregate lifetime or annual Substance Use Disorder Benefits and State law. Any condition defined by dollar limit that applies to less than one- Sec. the State as being or as not being a third of all medical/surgical benefits 438.900 Meaning of terms. mental health condition must be provided to enrollees through a contract 438.905 Parity requirements for aggregate defined to be consistent with generally with the State, it may not impose an lifetime and annual dollar limits. recognized independent standards of aggregate lifetime or annual dollar limit, 438.910 Parity requirements for financial current medical practice (for example, respectively, on mental health or requirements and treatment limitations. the most current version of the substance use disorder benefits. 438.915 Availability of information. Diagnostic and Statistical Manual of (c) MCOs, PIHPs, or PAHPs with a 438.920 Applicability. Mental Disorders (DSM), the most limit on at least two-thirds of all 438.930 Compliance dates. current version of the ICD, or State medical/surgical benefits. If a MCO,

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PIHP, or PAHP includes an aggregate treatment of common, low-cost that type applied to substantially all lifetime or annual dollar limit on at least conditions (such as treatment of normal medical/surgical benefits in the same two-thirds of all medical/surgical births), do not constitute categories for classification furnished to enrollees benefits provided to enrollees through a purposes of this paragraph (e)(1)(ii). In (whether or not the benefits are contract with the State, it must either— addition, for purposes of determining furnished by the same MCO, PIHP, or (1) Apply the aggregate lifetime or weighted averages, any benefits that are PAHP). Whether a financial requirement annual dollar limit both to the medical/ not within a category that is subject to or treatment limitation is a predominant surgical benefits to which the limit a separately-designated dollar limit financial requirement or treatment would otherwise apply and to mental under the contract are taken into limitation that applies to substantially health or substance use disorder account as a single separate category by all medical/surgical benefits in a benefits in a manner that does not using an estimate of the upper limit on classification is determined separately distinguish between the medical/ the dollar amount that a MCO, PIHP, or for each type of financial requirement or surgical benefits and mental health or PAHP may reasonably be expected to treatment limitation. The application of substance use disorder benefits; or incur for such benefits, taking into the rules of this paragraph (b) to (2) Not include an aggregate lifetime account any other applicable financial requirements and quantitative or annual dollar limit on mental health restrictions. treatment limitations is addressed in or substance use disorder benefits that (2) Weighting. For purposes of this paragraph (c) of this section; the is more restrictive than the aggregate paragraph (e), the weighting applicable application of the rules of this lifetime or annual dollar limit, to any category of medical/surgical paragraph (b) to nonquantitative respectively, on medical/surgical benefits is determined in the manner set treatment limitations is addressed in benefits. forth in paragraph (d) of this section for paragraph (d) of this section. (d) Determining one-third and two- determining one-third or two-thirds of (2) Classifications of benefits used for thirds of all medical/surgical benefits. all medical/surgical benefits. applying rules. If an MCO enrollee is For purposes of this section, the provided mental health or substance use determination of whether the portion of § 438.910 Parity requirements for financial disorder benefits in any classification of medical/surgical benefits subject to an requirements and treatment limitations. benefits described in this paragraph aggregate lifetime or annual dollar limit (a) Clarification of terms—(1) (b)(2), mental health or substance use represents one-third or two-thirds of all Classification of benefits. When disorder benefits must be provided to medical/surgical benefits is based on the reference is made in this section to a the enrollee in every classification in total dollar amount of all combinations classification of benefits, the term which medical/surgical benefits are of MCO, PIHP, and PAHP payments for ‘‘classification’’ means a classification provided. In determining the medical/surgical benefits expected to be as described in paragraph (b)(2) of this classification in which a particular paid under the MCO, PIHP, or PAHP for section. benefit belongs, a MCO, PIHP, or PAHP a contract year (or for the portion of a (2) Type of financial requirement or must apply the same reasonable contract year after a change in benefits treatment limitation. When reference is standards to medical/surgical benefits that affects the applicability of the made in this section to a type of and to mental health or substance use aggregate lifetime or annual dollar financial requirement or treatment disorder benefits. To the extent that a limits). Any reasonable method may be limitation, the reference to type means MCO, PIHP, or PAHP provides benefits used to determine whether the dollar its nature. Different types of financial in a classification and imposes any amount expected to be paid under the requirements include deductibles, separate financial requirement or MCOs, PIHPs, and PAHPs will copayments, coinsurance, and out-of- treatment limitation (or separate level of constitute one-third or two-thirds of the pocket maximums. Different types of a financial requirement or treatment dollar amount of all payments for quantitative treatment limitations limitation) for benefits in the medical/surgical benefits. include annual, episode, and lifetime classification, the rules of this section (e) MCO, PIHP, or PAHP not described day and visit limits. See paragraph apply separately for that classification in this section—(1) In general. A MCO, (d)(2) of this section for an illustrative for all financial requirements or PIHP, or PAHP that is not described in list of nonquantitative treatment treatment limitations. The following paragraph (b) or (c) of this section for limitations. classifications of benefits are the only aggregate lifetime or annual dollar limits (3) Level of a type of financial classifications used in applying the on medical/surgical benefits, must requirement or treatment limitation. rules of this section: either— When reference is made in this section (i) Inpatient. Benefits furnished on an (i) Impose no aggregate lifetime or to a level of a type of financial inpatient basis. annual dollar limit, on mental health or requirement or treatment limitation, (ii) Outpatient. Benefits furnished on substance use disorder benefits; or level refers to the magnitude of the type an outpatient basis. See special rules for (ii) Impose an aggregate lifetime or of financial requirement or treatment office visits in paragraph (c)(2) of this annual dollar limit on mental health or limitation. section. substance use disorder benefits that is (b) General parity requirement—(1) (iii) Emergency care. Benefits for no more restrictive than an average limit General rule and scope. Each MCO, emergency care. calculated for medical/surgical benefits PIHP and PAHP providing services to (iv) Prescription drugs. Benefits for in the following manner. The average MCO enrollees in a State that covers prescription drugs. See special rules for limit is calculated by taking into both medical/surgical benefits and multi-tiered prescription drug benefits account the weighted average of the mental health or substance use disorder in paragraph (c)(2) of this section. aggregate lifetime or annual dollar benefits under the State plan, must not (c) Financial requirements and limits, as appropriate, that are apply any financial requirement or quantitative treatment limitations—(1) applicable to the categories of medical/ treatment limitation to mental health or Determining ‘‘substantially all’’ and surgical benefits. Limits based on substance use disorder benefits in any ‘‘predominant’’—(i) Substantially all. delivery mechanisms, such as inpatient/ classification that is more restrictive For purposes of this section, a type of outpatient treatment or normal than the predominant financial financial requirement or quantitative requirement or treatment limitation of treatment limitation is considered to

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apply to substantially all medical/ contract year after a change in benefits sub-classification that is more restrictive surgical benefits in a classification of that affects the applicability of the than the predominant financial benefits if it applies to at least two- financial requirement or quantitative requirement or quantitative treatment thirds of all medical/surgical benefits in treatment limitation). limitation that applies to substantially that classification. If a type of financial (iv) Clarifications for certain all medical/surgical benefits in the sub- requirement or quantitative treatment threshold requirements. For any classification using the methodology set limitation does not apply to at least two- deductible, the dollar amount of MCO, forth in paragraph (c)(1) of this section. thirds of all medical/surgical benefits in PIHP, or PAHP payments includes all Sub-classifications other than these a classification, then that type cannot be payments for claims that would be special rules, such as separate sub- applied to mental health or substance subject to the deductible if it had not classifications for generalists and use disorder benefits in that been satisfied. For any out-of-pocket specialists, are not permitted. The two classification. maximum, the dollar amount of MCO, sub-classifications permitted under this (ii) Predominant. (A) If a type of PIHP, or PAHP payments includes all paragraph (c)(2)(ii) are: financial requirement or quantitative payments associated with out-of-pocket (A) Office visits (such as physician treatment limitation applies to at least payments that are taken into account visits); and two-thirds of all medical/surgical towards the out-of-pocket maximum as (B) All other outpatient items and benefits in a classification as well as all payments associated with services (such as outpatient surgery, determined under paragraph (c)(1)(i) of out-of-pocket payments that would have facility charges for day treatment this section, the level of the financial been made towards the out-of-pocket centers, laboratory charges, or other requirement or quantitative treatment maximum if it had not been satisfied. medical items). limitation that is considered the Similar rules apply for any other (3) No separate cumulative financial predominant level of that type in a thresholds at which the rate of MCO, requirements. A MCO, PIHP, or PAHP classification of benefits is the level that PIHP, or PAHP payment changes. may not apply any cumulative financial applies to more than one-half of (v) Determining the dollar amount of requirement for mental health or MCO, PIHP, or PAHP payments. Subject medical/surgical benefits in that substance use disorder benefits in a to paragraph (c)(1)(iv) of this section, classification subject to the financial classification that accumulates any reasonable method may be used to requirement or quantitative treatment separately from any established for determine the dollar amount expected limitation. medical/surgical benefits in the same (B) If, for a type of financial to be paid under a MCO, PIHP, or PAHP classification. requirement or quantitative treatment for medical/surgical benefits subject to a (4) Compliance with other cost- limitation that applies to at least two- financial requirement or quantitative sharing rules. Each MCO, PIHP, and thirds of all medical/surgical benefits in treatment limitation (or subject to any a classification, there is no single level level of a financial requirement or PAHP must meet the cost-sharing that applies to more than one-half of quantitative treatment limitation). requirements in § 438.108 when medical/surgical benefits in the (2) Special rules—(i) Multi-tiered applying Medicaid cost-sharing. classification subject to the financial prescription drug benefits. If a MCO, (d) Nonquantitative treatment requirement or quantitative treatment PIHP, or PAHP applies different levels limitations—(1) General rule. A MCO, limitation, the MCO, PIHP, or PAHP of financial requirements to different PIHP, or PAHP may not impose a may combine levels until the tiers of prescription drug benefits based nonquantitative treatment limitation for combination of levels applies to more on reasonable factors determined in mental health or substance use disorder than one-half of medical/surgical accordance with the rules in paragraph benefits in any classification unless, benefits subject to the financial (d)(1) of this section (relating to under the policies and procedures of the requirement or quantitative treatment requirements for nonquantitative MCO, PIHP, or PAHP as written and in limitation in the classification. The least treatment limitations) and without operation, any processes, strategies, restrictive level within the combination regard to whether a drug is generally evidentiary standards, or other factors is considered the predominant level of prescribed for medical/surgical benefits used in applying the nonquantitative that type in the classification. (For this or for mental health or substance use treatment limitation to mental health or purpose, a MCO, PIHP, or PAHP may disorder benefits, the MCO, PIHP, or substance use disorder benefits in the combine the most restrictive levels first, PAHP satisfies the parity requirements classification are comparable to, and are with each less restrictive level added to of this section for prescription drug applied no more stringently than, the the combination until the combination benefits. Reasonable factors include processes, strategies, evidentiary applies to more than one-half of the cost, efficacy, generic versus brand standards, or other factors used in benefits subject to the financial name, and mail order versus pharmacy applying the limitation for medical/ requirement or treatment limitation.) pick-up/delivery. surgical benefits in the classification. (iii) Portion based on MCO, PIHP or (ii) Sub-classifications permitted for (2) Illustrative list of nonquantitative PAHP payments. For purposes of this office visits, separate from other treatment limitations. Nonquantitative section, the determination of the portion outpatient services. For purposes of treatment limitations include – of medical/surgical benefits in a applying the financial requirement and (i) Medical management standards classification of benefits subject to a treatment limitation rules of this limiting or excluding benefits based on financial requirement or quantitative section, a MCO, PIHP, or PAHP may medical necessity or medical treatment limitation (or subject to any divide its benefits furnished on an appropriateness, or based on whether level of a financial requirement or outpatient basis into the two sub- the treatment is experimental or quantitative treatment limitation) is classifications described in this investigative; based on the total dollar amount of all paragraph (c)(2)(ii). After the sub- (ii) Formulary design for prescription combinations of MCO, PIHP, and PAHP classifications are established, the MCO, drugs; payments for medical/surgical benefits PIHP or PAHP may not impose any (iii) For MCOs, PIHPs, or PAHPs with in the classification expected to be paid financial requirement or quantitative multiple network tiers (such as under the MCOs, PIHPs, and PAHPs for treatment limitation on mental health or preferred providers and participating a contract year (or for the portion of a substance use disorder benefits in any providers), network tier design;

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(iv) Standards for provider admission § 438.920 Applicability. § 438.930 Compliance dates. to participate in a network, including (a) MCOs, PIHPs, and PAHPs. The In general, contracts with MCOs, reimbursement rates; requirements of this subpart apply to PIHPs, and PAHPs offering Medicaid (v) MCO, PIHP, or PAHP methods for each MCO, PIHP, and PAHP offering State plan services to enrollees, and determining usual, customary, and services to enrollees of a MCO, in States those entities, must comply with the reasonable charges; covering medical/surgical and mental requirements of this subpart no later (vi) Refusal to pay for higher-cost health or substance use disorder than October 2, 2017. therapies until it can be shown that a services under the State plan. These PART 440—SERVICES: GENERAL lower-cost therapy is not effective (also requirements regarding coverage for PROVISIONS known as fail-first policies or step services that must be provided to therapy protocols); enrollees of an MCO apply regardless of ■ 4. The authority citation for part 440 (vii) Exclusions based on failure to the delivery system of the medical/ continues to read as follows: complete a course of treatment; surgical, mental health, or substance use disorder services under the State plan. Authority: Sec. 1102 of the Social Security (viii) Restrictions based on geographic Act (42 U.S.C. 1302). (b) State responsibilities. (1) In any location, facility type, provider ■ instance where the full scope of 5. Section 440.395 is added to read as specialty, and other criteria that limit follows: the scope or duration of benefits for medical/surgical and mental health and services provided under the MCO, PIHP, substance use disorder services are not § 440.395 Parity in mental health and or PAHP; and provided through the MCO, the State substance use disorder benefits. (ix) Standards for providing access to must review the mental health and (a) Meaning of terms. For purposes of out-of-network providers. substance use disorder and medical/ this section, except where the context surgical benefits provided through the (3) Application to out-of-network clearly indicates otherwise, the MCO, PIHP, PAHP, and fee-for service providers. Any MCO, PIHP or PAHP following terms have the meanings (FFS) coverage to ensure the full scope providing access to out-of-network indicated: of services available to all enrollees of providers for medical/surgical benefits Aggregate lifetime dollar limit means the MCO complies with the within a classification, must use a dollar limitation on the total amount requirements in this subpart. The State processes, strategies, evidentiary of specified benefits that may be paid must provide documentation of standards, or other factors in under an ABP. compliance with requirements in this determining access to out-of-network Annual dollar limit means a dollar subpart to the general public and post providers for mental health or substance limitation on the total amount of this information on the State Medicaid use disorder benefits that are specified benefits that may be paid in a Web site by October 2, 2017. Such comparable to, and applied no more 12-month period under an ABP. documentation must be updated prior to Alternative Benefit Plans (ABPs) mean stringently than, the processes, any change in MCO, PIHP, PAHP or FFS benefit packages in one or more of the strategies, evidentiary standards, or State plan benefits. benchmark coverage packages described other factors in determining access to in §§ 440.330(a) through (c) and out-of-network providers for medical/ (2) The State must ensure that all 440.335. Benefits may be delivered surgical benefits. services are delivered to the enrollees of the MCO in compliance with this through managed care and non-managed § 438.915 Availability of information. subpart. care delivery systems. Consistent with (a) Criteria for medical necessity (c) Scope. This subpart does not— the requirements of § 440.385, States determinations. The criteria for medical (1) Require a MCO, PIHP, or PAHP to must comply with the managed care necessity determinations, made by a provide any mental health benefits or provisions at section 1932 of the Act MCO or by a PIHP or PAHP providing substance use disorder benefits beyond and part 438 of this chapter, if services to an MCO enrollee, for mental what is specified in its contract, and the benchmark and benchmark-equivalent health or substance use disorder provision of benefits by a MCO, PIHP, benefits are provided through a benefits must be made available by the or PAHP for one or more mental health managed care entity. Cumulative financial requirements MCO, PIHP, or PAHP administrator to conditions or substance use disorders are financial requirements that any enrollee, potential enrollee, or does not require the MCO, PIHP or determine whether or to what extent contracting provider upon request. PAHP to provide benefits for any other benefits are provided based on MCOs, PIHPs, and PAHPs operating in mental health condition or substance accumulated amounts and include compliance with § 438.236(c) will be use disorder; deductibles and out-of-pocket deemed compliant with the (2) Require a MCO, PIHP, or PAHP maximums. (However, cumulative requirements in this paragraph (a). that provides coverage for mental health financial requirements do not include (b) Reason for any denial. The reason or substance use disorder benefits only aggregate lifetime or annual dollar limits for any denial by a MCO, PIHP, or PAHP to the extent required under because these two terms are excluded of reimbursement or payment for 1905(a)(4)(D) of the Act to provide from the meaning of financial services for mental health or substance additional mental health or substance requirements.) use disorder benefits in the case of any use disorder benefits in any EPSDT means benefits defined in enrollee must be made available by the classification in accordance with this section 1905(r) of the Act. MCO, PIHP, or PAHP administrator to section; or Financial requirements include the enrollee. (3) Affect the terms and conditions deductibles, copayments, coinsurance, (c) Provisions of other law. relating to the amount, duration, or or out-of-pocket maximums. Financial Compliance with the disclosure scope of mental health or substance use requirements do not include aggregate requirements in paragraphs (a) and (b) disorder benefits under the Medicaid lifetime or annual dollar limits. of this section is not determinative of MCO, PIHP, or PAHP contract except as Medical/surgical benefits means compliance with any other provision of specifically provided in §§ 438.905 and benefits for items or services for medical applicable Federal or State law. 438.910. conditions or surgical procedures, as

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defined by the State under the terms of (i) Classification of benefits. When benefits in a classification and imposes the ABP and in accordance with reference is made in this paragraph (b) any separate financial requirement or applicable Federal and State law, but to a classification of benefits, the term treatment limitation (or separate level of does not include mental health or ‘‘classification’’ means a classification a financial requirement or treatment substance use disorder benefits. Any as described in paragraph (b)(2)(ii) of limitation) for benefits in the condition defined by the state as being this section. classification, the rules of this paragraph or as not being a medical/surgical (ii) Type of financial requirement or (b) apply separately for that condition must be defined to be treatment limitation. When reference is classification for all financial consistent with generally recognized made in this paragraph (b) to a type of requirements or treatment limitations. independent standards of current financial requirement or treatment The following classifications of benefits medical practice (for example, the most limitation, the reference to type means are the only classifications used in current version of the International its nature. Different types of financial applying the rules of this paragraph (b): Classification of Diseases (ICD) or State requirements include deductibles, (A) Inpatient. Benefits furnished on guidelines). Medical/surgical benefits copayments, coinsurance, and out-of- an inpatient basis. include long term services. pocket maximums. Different types of (B) Outpatient. Benefits furnished on Mental health benefits means benefits quantitative treatment limitations an outpatient basis. See special rules for for items or services for mental health include annual, episode, and lifetime office visits in paragraph (b)(3)(ii)(B)(1) conditions, as defined by the State day and visit limits. See paragraph of this section. under the terms of the ABP and in (b)(4)(ii) of this section for an (C) Emergency care. Benefits for accordance with applicable Federal and illustrative list of nonquantitative emergency care. State law. Any condition defined by the treatment limitations. (D) Prescription drugs. Benefits for State as being or as not being a mental (iii) Level of a type of financial prescription drugs. See special rules for health condition must be defined to be requirement or treatment limitation. multi-tiered prescription drug benefits consistent with generally recognized When reference is made in this in paragraph (b)(3)(ii) of this section. independent standards of current paragraph (b) to a level of a type of (3) Financial requirements and medical practice (for example, the most financial requirement or treatment quantitative treatment limitations—(i) current version of the Diagnostic and limitation, level refers to the magnitude Determining ‘‘substantially all’’ and Statistical Manual of Mental Disorders of the type of financial requirement or ‘‘predominant’’—(A) Substantially all. (DSM), the most current version of the treatment limitation. For purposes of this paragraph (b), a ICD, or State guidelines. Mental health (2) General parity requirement—(i) type of financial requirement or benefits include long term care services. General rule. A State may not apply quantitative treatment limitation is Substance use disorder benefits within an ABP any financial considered to apply to substantially all means benefits for items or services for requirement or treatment limitation to medical/surgical benefits in a substance use disorder, as defined by mental health or substance use disorder classification of benefits if it applies to the State under the terms of the ABP benefits in any classification that is at least two-thirds of all medical/ and in accordance with applicable more restrictive than the predominant surgical benefits in that classification. If Federal and State law. Any disorder financial requirement or treatment a type of financial requirement or defined by the State as being or as not limitation of that type applied to quantitative treatment limitation does being a substance use disorder must be substantially all medical/surgical not apply to at least two-thirds of all defined to be consistent with generally benefits in the same classification. medical/surgical benefits in a recognized independent standards of Whether a financial requirement or classification, then that type cannot be current medical practice (for example, treatment limitation is a predominant applied to mental health or substance the most current version of the DSM, the financial requirement or treatment use disorder benefits in that most current version of the ICD, or State limitation that applies to substantially classification. guidelines). Substance use disorder all medical/surgical benefits in a (B) Predominant—(1) If a type of benefits include long term care services. classification is determined separately financial requirement or quantitative Treatment limitations include limits for each type of financial requirement or treatment limitation applies to at least on benefits based on the frequency of treatment limitation. The application of two-thirds of all medical/surgical treatment, number of visits, days of the rules of this paragraph (b)(2) to benefits in a classification as coverage, days in a waiting period, or financial requirements and quantitative determined under paragraph (b)(3)(i)(A) other similar limits on the scope or treatment limitations is addressed in of this section, the level of the financial duration of treatment. Treatment paragraph (b)(3) of this section; the requirement or quantitative treatment limitations include both quantitative application of the rules of this limitation that is considered the treatment limitations, which are paragraph (b)(2) to nonquantitative predominant level of that type in a expressed numerically (such as 50 treatment limitations is addressed in classification of benefits is the level that outpatient visits per year), and paragraph (b)(4) of this section. applies to more than one-half of nonquantitative treatment limitations, (ii) Classifications of benefits used for medical/surgical benefits in that which otherwise limit the scope or applying rules. ABPs must include classification subject to the financial duration of benefits for treatment under mental health or substance use disorder requirement or quantitative treatment an ABP. (See paragraph (b)(4)(ii) of this benefits in every classification of limitation. section for an illustrative list of benefits described in this paragraph (2) If, for a type of financial nonquantitative treatment limitations.) (b)(2)(ii) in which medical/surgical requirement or quantitative treatment A permanent exclusion of all benefits benefits are provided. In determining limitation that applies to at least two- for a particular condition or disorder, the classification in which a particular thirds of all medical/surgical benefits in however, is not a treatment limitation benefit belongs, the State must apply the a classification, there is no single level for purposes of this definition. same reasonable standards to medical/ that applies to more than one-half of (b) Parity requirements for financial surgical benefits and to mental health or medical/surgical benefits in the requirements and treatment substance use disorder benefits. To the classification subject to the financial limitations—(1) Clarification of terms— extent that a State provides ABP requirement or quantitative treatment

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limitation, the State may combine levels in paragraph (b)(4)(i) of this section applying the nonquantitative treatment until the combination of levels applies (relating to requirements for limitation to mental health or substance to more than one-half of medical/ nonquantitative treatment limitations) use disorder benefits in the surgical benefits subject to the financial and without regard to whether a drug is classification are comparable to, and are requirement or quantitative treatment generally prescribed for medical/ applied no more stringently than, the limitation in the classification. The least surgical benefits or for mental health or processes, strategies, evidentiary restrictive level within the combination substance use disorder benefits, the ABP standards, or other factors used in is considered the predominant level of satisfies the parity requirements of this applying the limitation for medical/ that type in the classification. (For this paragraph (b) for prescription drug surgical benefits in the classification. purpose, a State may combine the most benefits. Reasonable factors include (ii) Illustrative list of nonquantitative restrictive levels first, with each less cost, efficacy, generic versus brand treatment limitations. Nonquantitative restrictive level added to the name, and mail order versus pharmacy treatment limitations include— combination until the combination pick-up/delivery. (A) Medical management standards applies to more than one-half of the (B) Sub-classifications permitted for limiting or excluding benefits based on benefits subject to the financial office visits, separate from other medical necessity or medical requirement or treatment limitation.) outpatient services. For purposes of appropriateness, or based on whether (C) Portion based on ABP payments. applying the financial requirement and the treatment is experimental or For purposes of this paragraph (b), the treatment limitation rules of this investigative; determination of the portion of medical/ paragraph (b), a State may divide its (B) Formulary design for prescription surgical benefits in a classification of benefits furnished on an outpatient drugs; benefits subject to a financial basis into the two sub-classifications (C) Standards for provider admission requirement or quantitative treatment described in this paragraph (b)(3)(ii)(B). to participate in a network, including limitation (or subject to any level of a After the sub-classifications are reimbursement rates; financial requirement or quantitative established, the State may not impose (D) Methods for determining usual, treatment limitation) is based on the any financial requirement or customary, and reasonable charges; dollar amount of all ABP payments for quantitative treatment limitation on (E) Refusal to pay for higher-cost medical/surgical benefits in the mental health or substance use disorder therapies until it can be shown that a classification expected to be paid under benefits in any sub-classification that is lower-cost therapy is not effective (also the ABP for the plan year (or for the more restrictive than the predominant known as fail-first policies or step portion of the plan year after a change financial requirement or quantitative therapy protocols); in ABP benefits that affects the treatment limitation that applies to (F) Exclusions based on failure to applicability of the financial substantially all medical/surgical complete a course of treatment; and requirement or quantitative treatment benefits in the sub-classification using (G) Restrictions based on geographic limitation). the methodology set forth in paragraph location, facility type, provider (D) Clarifications for certain threshold (b)(3)(i) of this section. Sub- specialty, and other criteria that limit requirements. For any deductible, the classifications other than these special the scope or duration of benefits or dollar amount of ABP payments rules, such as separate sub- services provided under the ABP. includes all payments for claims that classifications for generalists and (c) ABP providing EPSDT benefits. An would be subject to the deductible if it specialists, are not permitted. The two ABP that provides EPSDT benefits is had not been satisfied. For any out-of- sub-classifications permitted under this deemed to be compliant with the parity pocket maximum, the dollar amount of paragraph (b)(3)(ii)(B) are: requirements for financial requirements ABP payments includes all payments (1) Office visits (such as physician and treatment limitations with respect associated with out-of-pocket payments visits); and to individuals entitled to such benefits. that are taken into account towards the (2) All other outpatient items and Annual or lifetime limits are not out-of-pocket maximum as well as all services (such as outpatient surgery, permissible in EPSDT benefits. payments associated with out-of-pocket laboratory services, or other medical (d) Availability of information—(1) payments that would have been made items). Criteria for medical necessity towards the out-of-pocket maximum if it (iii) No separate cumulative financial determinations. The criteria for medical had not been satisfied. Similar rules requirements. A State may not apply necessity determinations made by the apply for any other thresholds at which any cumulative financial requirement State for beneficiaries served through the rate of payment changes. for mental health or substance use the ABP for mental health or substance (E) Determining the dollar amount of disorder benefits in a classification that use disorder benefits must be made ABP payments. Subject to paragraph accumulates separately from any available by the State to any beneficiary (b)(3)(i)(D) of this section, any established for medical/surgical benefits or Medicaid provider upon request. reasonable method may be used to in the same classification. (2) Reason for any denial. The reason determine the dollar amount expected (iv) Compliance with other cost- for any denial made by the State in the to be paid for medical/surgical benefits sharing rules. States must meet the case of a beneficiary served through an subject to a financial requirement or requirements of §§ 447.50 through ABP of reimbursement or payment for quantitative treatment limitation (or 447.57 of this chapter when applying services for mental health or substance subject to any level of a financial Medicaid cost-sharing. use disorder benefits must be made requirement or quantitative treatment (4) Nonquantitative treatment available by the State to the beneficiary. limitation). limitations—(i) General rule. A State (3) Provisions of other law. (ii) Special rules—(A) Multi-tiered may not impose a nonquantitative Compliance with the disclosure prescription drug benefits. If a State or treatment limitation for mental health or requirements in paragraphs (d)(1) and plan administrator applies different substance use disorder benefits in any (2) of this section is not determinative levels of financial requirements to classification unless, under the terms of of compliance with any other provision different tiers of prescription drug the ABP as written and in operation, of applicable Federal or State law. benefits based on reasonable factors any processes, strategies, evidentiary (e) Applicability—(1) ABPs. The determined in accordance with the rules standards, or other factors used in requirements of this section apply to

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States providing benefits through ABPs. Annual dollar limit means a dollar accordance with applicable Federal and For those States providing ABPs limitation on the total amount of State law, and consistent with generally through an MCO, PIHP, or PAHP, the specified benefits that may be paid in a recognized independent standards of rules of 42 CFR part 438, subpart K also 12-month period under a State plan or current medical practice. Standards of apply, and approved contracts will be a MCE that contracts with a State plan. current medical practice can be based viewed as evidence of compliance with State plans must meet the requirements on the most current version of the DSM, the requirements of this section. at § 457.480. the most current version of the ICD, or (2) Scope. This section does not— Cumulative financial requirements generally applicable State guidelines. (i) Require a State to provide any are financial requirements that The term includes long term care specific mental health benefits or determine whether or to what extent services. substance use disorder benefits; benefits are provided based on Treatment limitations include limits however, in providing coverage through accumulated amounts and include on benefits based on the frequency of an ABP, the State must include EHBs, deductibles and out-of-pocket treatment, number of visits, days of including the ten EHBs as required in maximums. (However, cumulative coverage, days in a waiting period, or § 440.347, which include mental health financial requirements do not include other similar limits on the scope or and substance use disorder benefits; or aggregate lifetime or annual dollar limits duration of treatment. Treatment (ii) Affect the terms and conditions because these two terms are excluded limitations include both quantitative relating to the amount, duration, or from the meaning of financial treatment limitations, which are scope of mental health or substance use requirements.) expressed numerically (such as 50 disorder benefits under the ABP except Early and Periodic Screening, outpatient visits per year), and as specifically provided in paragraph (b) Diagnostic and Treatment (EPSDT) nonquantitative treatment limitations, of this section. benefits has the meaning defined in which otherwise limit the scope or (3) State plan requirement. If a State section 1905(r) of the Act and must be duration of benefits for treatment under plan provides for an ABP, the State provided in accordance with section the State plan. (See paragraph (d)(4)(ii) must provide sufficient information in 1902(a)(43) of the Act. of this section for an illustrative list of ABP State plan amendment requests to Financial requirements include nonquantitative treatment limitations.) assure compliance with the deductibles, copayments, coinsurance, A permanent exclusion of all benefits requirements of this subpart. or out-of-pocket maximums. Financial for a particular condition or disorder, (4) Compliance dates—(i) In general. requirements do not include aggregate however, is not a treatment limitation ABP coverage offered by States must lifetime or annual dollar limits. for purposes of this definition. comply with the requirements of this Medical/surgical benefits means (b) State plan providing EPSDT section no later than October 2, 2017. benefits for items or services for medical benefits. (1) A State child health plan is (ii) [Reserved] conditions or surgical procedures, as deemed to be in compliance with this defined under the terms of the State PART 456—UTILIZATION CONTROL section if— plan in accordance with applicable (i) The State elects in the State child ■ 6. The authority citation for part 456 Federal and State law, but does not health plan to cover Secretary-approved continues to read as follows: include mental health or substance use coverage defined in § 457.450(a) that disorder benefits. Any condition includes all EPSDT benefits, as defined Authority: Sec. 1102 of the Social Security defined by the State plan as being or not Act (42 U.S.C. 1302), unless otherwise noted. in section 1905(r) of the Act, in being a medical/surgical condition must accordance with the requirement § 456.171 [Removed and Reserved] be defined to be consistent with applied under section 1905(r)(5) of the ■ 7. Section 456.171 is removed and generally recognized independent Act to provide necessary health care, reserved. standards of current medical practice diagnostic services, treatment, and other (for example, the most current version measures described in section 1905(a) of PART 457—ALLOTMENTS AND of the International Classification of the Act to correct or ameliorate defects GRANTS TO STATES Diseases (ICD) or generally applicable and physical and mental illnesses and State guidelines). Medical/surgical conditions discovered by the screening ■ 8. The authority citation for part 457 benefits include long term care services. services, as well as the informing and continues to read as follows: Mental health benefits means benefits administrative requirements under Authority: Section 1102 of the Social for items or services that treat or 1902(a)(43) of the Act and the approved Security Act (42 U.S.C. 1302). otherwise address mental health State Medicaid plan; and ■ 9. Section 457.496 is added to subpart conditions, as defined under the terms (ii) The State child health plan does D to read as follows: of the State plan in accordance with not exclude EPSDT benefits for any applicable Federal and State law, and particular condition, disorder, or § 457.496 Parity in mental health and consistent with generally recognized diagnosis. substance use disorder benefits. independent standards of current (2) The child health plan must (a) Meaning of terms. For purposes of medical practice. Standards of current include a description of how the State this section, except where the context medical practice can be based on the will comply with paragraph (b)(1)(i) of clearly indicates otherwise, the most current version of the DSM, the this section. following terms have the meanings most current version of the ICD, or (3) If a State has elected in its state indicated: generally applicable State guidelines. plan to cover EPSDT benefits only for Aggregate lifetime dollar limit means The term includes long term care certain populations enrolled in the state a dollar limitation on the total amount services. child health plan, the State is deemed of specified benefits that may be paid State Plan has the meaning assigned compliant with this section only with under a State plan or a Managed Care at § 457.10 and § 457.50. respect to such children. Entity (MCE) (as defined at § 457.10) Substance use disorder benefits (c) Parity requirements for aggregate that contracts with the State plan. State means benefits for items or services for lifetime and annual dollar limits. This plans must meet the requirements of substance use disorder, as defined paragraph (c) details the application of § 457.480. under the terms of the State plan in the parity requirements for aggregate

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lifetime and annual dollar limits. A (2) of this section for aggregate lifetime (iii) Level of a type of financial State plan that provides both medical/ or annual dollar limits on medical/ requirement or treatment limitation. surgical benefits and mental health or surgical benefits, must either— When reference is made in this substance use disorder benefits must (A) Impose no aggregate lifetime or paragraph (d) to a level of a type of comply with paragraph (c)(1), (2), or (4) annual dollar limit, as appropriate, on financial requirement or treatment of this section. mental health or substance use disorder limitation, level refers to the magnitude (1) Plan with no limit or limits on less benefits; or of the type of financial requirement or than one-third of all medical/surgical (B) Impose an aggregate lifetime or treatment limitation. benefits. If a State plan does not include annual dollar limit on mental health or (2) General parity requirement—(i) an aggregate lifetime or annual dollar substance use disorder benefits that is General rule. A State plan or a MCE that limit on any medical/surgical benefits or no more restrictive than an average limit contracts with CHIP through its State includes an aggregate lifetime or annual calculated for medical/surgical benefits plan that provides both medical/surgical dollar limit that applies to less than one- in the following manner. The average benefits and mental health or substance third of all medical/surgical benefits, it limit is calculated by taking into use disorder benefits, including when may not impose an aggregate lifetime or account the weighted average of the such benefits are delivered through an annual dollar limit, respectively, on aggregate lifetime or annual dollar MCE, may not apply any financial mental health or substance use disorder limits, as appropriate, that are requirement or treatment limitation to benefits. applicable to the categories of medical/ mental health or substance use disorder (2) State plans with a limit on at least surgical benefits. Limits based on benefits in any classification that is two-thirds of all medical/surgical delivery systems, such as inpatient/ more restrictive than the predominant benefits. If a State plan includes an outpatient treatment or normal financial requirement or treatment aggregate lifetime or annual dollar limit treatment of common, low-cost limitation of that type applied to on at least two-thirds of all medical/ conditions (such as treatment of normal substantially all medical/surgical surgical benefits, it must either— births), do not constitute categories for benefits in the same classification. (i) Apply the aggregate lifetime or purposes of this paragraph (c)(4)(i)(B). Whether a financial requirement or annual dollar limit both to the medical/ In addition, for purposes of determining treatment limitation is a predominant surgical benefits to which the limit financial requirement or treatment would otherwise apply and to mental weighted averages, any benefits that are not within a category that is subject to limitation that applies to substantially health or substance use disorder all medical/surgical benefits in a benefits in a manner that does not a separately-designated dollar limit under the plan are taken into account as classification is determined separately distinguish between the medical/ for each type of financial requirement or a single separate category by using an surgical benefits and mental health or treatment limitation. The application of estimate of the upper limit on the dollar substance use disorder benefits; or the rules of this paragraph (d)(2) to amount that a plan may reasonably be (ii) Not include an aggregate lifetime financial requirements and quantitative expected to incur for such benefits, or annual dollar limit on mental health treatment limitations is addressed in taking into account any other applicable or substance use disorder benefits that paragraph (d)(3) of this section; the restrictions under the plan. is more restrictive than the aggregate application of the rules of this lifetime or annual dollar limit, (ii) Weighting. For purposes of this paragraph (d)(2) to nonquantitative respectively, on medical/surgical paragraph (c)(4), the weighting treatment limitations is addressed in benefits. (For cumulative limits other applicable to any category of medical/ paragraph (d)(4) of this section. than aggregate lifetime or annual dollar surgical benefits is determined in the (ii) Classifications of benefits used for limits, see paragraph (d)(3)(iii) of this manner set forth in paragraph (c)(3) of applying rules. If a State plan provides section prohibiting separately this section for determining one-third or mental health or substance use disorder accumulating cumulative financial two-thirds of all medical/surgical benefits in any classification of benefits requirements.) benefits. described in this paragraph (d)(2)(ii), (3) Determining one-third and two- (d) Parity requirements for financial mental health or substance use disorder thirds of all medical/surgical benefits. requirements and treatment benefits must be provided in every For purposes of this paragraph (c), the limitations—(1) Clarification of terms— classification in which medical/surgical determination of whether the portion of (i) Classification of benefits. When benefits are provided. In determining medical/surgical benefits subject to an reference is made in this paragraph (d) the classification in which a particular aggregate lifetime or annual dollar limit to a classification of benefits, the term benefit belongs, the same reasonable represents one-third or two-thirds of all ‘‘classification’’ means a classification standards must apply to medical/ medical/surgical benefits is based on the as described in paragraph (d)(2)(ii) of surgical benefits and to mental health or dollar amount of all plan payments for this section. substance use disorder benefits. To the medical/surgical benefits expected to be (ii) Type of financial requirement or extent that a State plan provides paid under the State plan for the State treatment limitation. When reference is benefits in a classification and imposes plan year (or for the portion of the plan made in this paragraph (d) to a type of any separate financial requirement or year after a change in plan benefits that financial requirement or treatment treatment limitation (or separate level of affects the applicability of the aggregate limitation, the reference to type means a financial requirement or treatment lifetime or annual dollar limits). Any its nature. Different types of financial limitation) for benefits in the reasonable method may be used to requirements include deductibles, classification, the rules of this paragraph determine whether the dollar amount copayments, coinsurance, and out-of- (d) apply separately for that expected to be paid under the State plan pocket maximums. Different types of classification for all financial will constitute one-third or two-thirds of quantitative treatment limitations requirements or treatment limitations. the dollar amount of all plan payments include annual, episode, and lifetime The following classifications of benefits for medical/surgical benefits. day and visit limits. See paragraph are the only classifications used in (4) Plan not described in this (d)(4)(ii) of this section for an applying the rules of this paragraph (d): section—(i) In general. A State plan that illustrative list of nonquantitative (A) Inpatient. Benefits furnished on is not described in paragraph (c)(1) or treatment limitations. an inpatient basis.

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(B) Outpatient. Benefits furnished on applies to more than one-half of the satisfies the parity requirements of this an outpatient basis. See special rules for benefits subject to the financial paragraph (d) for prescription drug office visits in paragraph (d)(3)(iii) of requirement or treatment limitation.) benefits. Reasonable factors include this section. (C) Portion based on plan payments. cost, efficacy, generic versus brand (C) Emergency care. Benefits for For purposes of this paragraph (d), the name, and mail order versus pharmacy emergency care. determination of the portion of medical/ pick-up/delivery. (D) Prescription drugs. Benefits for surgical benefits in a classification of (B) Sub-classifications permitted for prescription drugs. See special rules for benefits subject to a financial office visits, separate from other multi-tiered prescription drug benefits requirement or quantitative treatment outpatient services. For purposes of in paragraph (d)(3)(iii) of this section. limitation (or subject to any level of a applying the financial requirement and (3) Financial requirements and financial requirement or quantitative treatment limitation rules of this quantitative treatment limitations—(i) treatment limitation) is based on the paragraph (d), a State plan may divide Determining ‘‘substantially all’’ and dollar amount of all State plan its benefits furnished on an outpatient ‘‘predominant’’—(A) Substantially all. payments and combinations of MCE basis into the two sub-classifications For purposes of this paragraph (d), a payments for medical/surgical benefits described in this paragraph (d)(3)(ii)(B). type of financial requirement or in the classification expected to be paid After the sub-classifications are quantitative treatment limitation is under the plan or MCE or combination established, the State plan may not considered to apply to substantially all that contracts with the State plan for the impose any financial requirement or medical/surgical benefits in a plan year (or for the portion of the plan quantitative treatment limitation on classification of benefits if it applies to year after a change in plan benefits that mental health or substance use disorder at least two-thirds of all medical/ affects the applicability of the financial benefits in any sub-classification that is surgical benefits in that classification. If requirement or quantitative treatment more restrictive than the predominant a type of financial requirement or limitation). financial requirement or quantitative quantitative treatment limitation does (D) Clarifications for certain threshold treatment limitation that applies to not apply to at least two-thirds of all requirements. For any deductible, the substantially all medical/surgical medical/surgical benefits in a dollar amount of a State plan payments benefits in the sub-classification using classification, then that type cannot be includes all plan payments for claims the methodology set forth in paragraph applied to mental health or substance that would be subject to the deductible (d)(3)(i) of this section. Sub- use disorder benefits in that if it had not been satisfied. In classifications other than these special classification. accordance with the cumulative cost- rules, such as separate sub- (B) Predominant. (1) If a type of sharing maximum in § 457.560, or any classifications for generalists and financial requirement or quantitative other out-of-pocket maximum in the specialists, are not permitted. The two treatment limitation applies to at least State plan, the dollar amount of plan sub-classifications permitted under this two-thirds of all medical/surgical payments includes all State plan paragraph (d)(3)(ii)(B) are: benefits in a classification as payments associated with out-of-pocket determined under paragraph (d)(3)(i)(A) payments that are taken into account (1) Office visits (such as physician of this section, the level of the financial towards the out-of-pocket maximum as visits); and requirement or quantitative treatment well as all plan payments associated (2) All other outpatient items and limitation that is considered the with out-of-pocket payments that would services (such as outpatient surgery, predominant level of that type in a have been made towards the out-of- facility charges for day treatment classification of benefits is the level that pocket maximum if it had not been centers, laboratory charges, or other applies to more than one-half of satisfied. Similar rules apply for any medical items). medical/surgical benefits in that other thresholds at which the rate of (iii) No separate cumulative financial classification subject to the financial health plan payment changes. requirements. A State plan may not requirement or quantitative treatment (E) Determining the dollar amount of apply any cumulative financial limitation. State plan payments. Subject to requirement for mental health or (2) If, for a type of financial paragraph (d)(3)(i)(D) of this section, substance use disorder benefits in a requirement or quantitative treatment any reasonable method may be used to classification that accumulates limitation that applies to at least two- determine the dollar amount expected separately from any established for thirds of all medical/surgical benefits in to be paid under a State plan for medical/surgical benefits in the same a classification, there is no single level medical/surgical benefits subject to a classification. that applies to more than one-half of financial requirement or quantitative (4) Nonquantitative treatment medical/surgical benefits in the treatment limitation (or subject to any limitations—(i) General rule. A State classification subject to the financial level of a financial requirement or plan may not impose a nonquantitative requirement or quantitative treatment quantitative treatment limitation). treatment limitation for mental health or limitation, the State plan (or health (ii) Special rules—(A) Multi-tiered substance use disorder benefits in any insurance issuer) may combine levels prescription drug benefits. If a State classification unless, under the terms of until the combination of levels applies plan applies different levels of financial the CHIP State plan as written and in to more than one-half of medical/ requirements to different tiers of operation, any processes, strategies, surgical benefits subject to the financial prescription drug benefits based on evidentiary standards, or other factors requirement or quantitative treatment reasonable factors determined in used in applying the nonquantitative limitation in the classification. The least accordance with the rules in paragraph treatment limitation to mental health or restrictive level within the combination (d)(4)(i) of this section (relating to substance use disorder benefits in the is considered the predominant level of requirements for nonquantitative classification are comparable to, and are that type in the classification. (For this treatment limitations) and without applied no more stringently than, the purpose, a State plan may combine the regard to whether a drug is generally processes, strategies, evidentiary most restrictive levels first, with each prescribed for medical/surgical benefits standards, or other factors used in less restrictive level added to the or for mental health or substance use applying the limitation for medical/ combination until the combination disorder benefits, the health plan surgical benefits in the classification.

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(ii) Illustrative list of nonquantitative determining access to out-of-network substance use disorder benefits that any treatment limitations. Nonquantitative providers for medical/surgical benefits. enrollee can simultaneously receive treatment limitations include— (e) Availability of plan information— from the State. (A) Medical management standards (1) Criteria for medical necessity (i) Standard for defining benefits. limiting or excluding benefits based on determinations. The criteria for medical States must indicate the standard used medical necessity or medical necessity determinations made under a for defining the following benefits in the appropriateness, or based on whether State plan including when benefits are State plan: the treatment is experimental or furnished through a MCE contractor for (A) Medical/surgical benefits. investigative; mental health or substance use disorder (B) Mental health benefits. (B) Formulary design for prescription benefits must be made available by the (C) Substance use disorder benefits. drugs; plan administrator (or the State offering (ii) [Reserved] (C) For plans with multiple network the coverage) to any current enrollee or (2) Scope. This section does not— tiers (such as preferred providers and potential enrollee or contracting (i) Require a State plan or a MCE that participating providers), network tier provider upon request. Health plans contracts with a State plan to provide design; operating in compliance with any mental health benefits or substance (D) Standards for provider admission § 438.236(c) of this chapter will be to participate in a network, including use disorder benefits, and the provision deemed compliant with the of benefits by a State plan or a MCE that reimbursement rates; requirements in this paragraph (e). (E) Plan methods for determining contracts with a State plan for one or (2) Reason for any denial. The reason usual, customary, and reasonable more mental health conditions or for any denial under a health plan of charges; substance use disorders does not require (F) Refusal to pay for higher-cost reimbursement or payment for services the plan or health insurance coverage therapies until it can be shown that a for mental health or substance use under this section to provide benefits lower-cost therapy is not effective (also disorder benefits in the case of any for any other mental health condition or known as fail-first policies or step enrollee must be made available by the substance use disorder; therapy protocols); plan administrator or the State to the (ii) Affect the terms and conditions (G) Exclusions based on failure to enrollee. relating to the amount, duration, or complete a course of treatment; (3) Provisions of other law. scope of mental health or substance use (H) Restrictions based on geographic Compliance with the disclosure disorder benefits under the State plan or location, facility type, provider requirements in paragraphs (e)(1) and a MCE that contracts with a CHIP State specialty, and other criteria that limit (2) of this section is not determinative plan except as specifically provided in the scope or duration of benefits for of compliance with any other provision paragraphs (c) and (d) of this section. services provided under the plan or of applicable Federal or State law. (g) Compliance dates—(1) In general. coverage; and (f) Applicability—(1) State plans. The State plans (including those that (I) Standards for providing access to requirements of this section apply to contract with a MCE) must comply with out-of-network providers. State plans offering medical/surgical the requirements of this section no later (5) Application to out-of-network benefits and mental health or substance than October 2, 2017. providers. Any State plan providing use disorder benefits to their enrollees (2) [Reserved]. access to out-of-network providers for including when benefits are furnished Dated: February 4, 2016. medical/surgical benefits within a under a contract with MCEs. If, under classification must use processes, an arrangement or arrangements to Andrew M. Slavitt, strategies, evidentiary standards, or provide State plan benefits any enrollee Acting Administrator, Centers for Medicare other factors in determining access to can simultaneously receive coverage for & Medicaid Services. out-of-network providers for mental medical/surgical benefits and coverage Dated: February 22, 2016. health or substance use disorder for mental health or substance use Sylvia M. Burwell, benefits that are comparable to, and disorder benefits, then the requirements Secretary, Department of Health and Human applied no more stringently than, the of this section apply separately for each Services. processes, strategies, evidentiary combination of medical/surgical [FR Doc. 2016–06876 Filed 3–29–16; 8:45 am] standards, or other factors in benefits and of mental health or BILLING CODE 4120–01–P

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