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DEPARTMENT OF HEALTH AND separate CHIPs must also come into beneficiaries, American Indians/Alaska HUMAN SERVICES compliance with the requirements of Natives, and children with special § 438.364 for external quality reports health care needs. Under this authority, Centers for Medicare & Medicaid submitted on or after July 1, 2021. states may seek additional flexibility to Services FOR FURTHER INFORMATION CONTACT: demonstrate and evaluate innovative John Giles, (410) 786–5545, for policy approaches for delivering 42 CFR Parts 438 and 457 Medicaid Managed Care provisions. Medicaid benefits, as well as the option [CMS–2408–F] Carman Lashley, (410) 786–6623, for to provide services not typically covered the Medicaid Managed Care Quality by Medicaid. Such flexibility is RIN 0938–AT40 provisions. approvable only if the objectives of the Melissa Williams, (410) 786–4435, for Medicaid statute are likely to be met, Medicaid Program; Medicaid and the CHIP provisions. and the demonstration is subject to Children’s Health Insurance Program SUPPLEMENTARY INFORMATION: evaluation. (CHIP) Managed Care The above authorities may permit I. Medicaid Managed Care AGENCY: Centers for Medicare & states to operate their programs without Medicaid Services (CMS), Health and A. Background complying with the following standards Human Services (HHS). of Medicaid law outlined in section of States may implement a managed care 1902 of the Act: ACTION: Final rule. delivery system using four types of • Statewideness [section 1902(a)(1) of Federal authorities—sections 1915(a), SUMMARY: This final rule advances CMS’ the Act]: States may implement a 1915(b), 1932(a), and 1115(a) of the managed care delivery system in efforts to streamline the Medicaid and Social Security Act (the Act); each is Children’s Health Insurance Program specific areas of the state (generally described briefly in this final rule. counties/parishes) rather than the whole (CHIP) managed care regulatory Under section 1915(a) of the Act, framework and reflects a broader state; states can implement a voluntary • Comparability of Services [section strategy to relieve regulatory burdens; managed care program by executing a 1902(a)(10) of the Act]: States may support state flexibility and local contract with organizations that the provide different benefits to people leadership; and promote transparency, state has procured using a competitive enrolled in a managed care delivery flexibility, and innovation in the procurement process. To require system; and delivery of care. These revisions of the beneficiaries to enroll in a managed care • Freedom of Choice [section Medicaid and CHIP managed care program to receive services, a state must 1902(a)(23)(A) of the Act]: States may regulations are intended to ensure that obtain approval from CMS under one of generally require people to receive their the regulatory framework is efficient two primary authorities: Medicaid services only from a managed and feasible for states to implement in • Through a state plan amendment care plan’s network of providers or a cost-effective manner and ensure that that meets standards set forth in section primary care provider. states can implement and operate 1932 of the Act, states can implement a In the May 6, 2016 Federal Register Medicaid and CHIP managed care mandatory managed care delivery (81 FR 27498), we published the programs without undue administrative system. This authority does not allow ‘‘Medicaid and Children’s Health burdens. states to require beneficiaries who are Insurance Program (CHIP) Programs; DATES: dually eligible for Medicare and Medicaid Managed Care, CHIP Effective Date: These regulations are Medicaid (dually eligible), American Delivered in Managed Care, and effective on December 14, 2020, except Indians/Alaska Natives (except as Revisions Related to Third Party for the additions of §§ 438.4(c) permitted in section 1932(a)(2)(C) of the Liability’’ final rule (hereinafter referred (instruction 4) and 438.6(d)(6) Act), or children with special health to as ‘‘the 2016 final rule’’) that (instruction 7), which are effective July care needs to enroll in a managed care modernized the Medicaid and CHIP 1, 2021. program. State plans, once approved, managed care regulations to reflect Compliance Dates: States must remain in effect until modified by the changes in the use of managed care comply with the requirements of this state. delivery systems. The 2016 final rule rule beginning December 14, 2020, • We may grant a waiver under aligned many of the rules governing except for §§ 438.4(c), 438.6(d)(6), section 1915(b) of the Act, permitting a Medicaid and CHIP managed care with 438.340, and 438.364. States must state to require all Medicaid those of other major sources of coverage; comply with §§ 438.4(c) and 438.6(d)(6) beneficiaries to enroll in a managed care implemented applicable statutory as amended effective July 1, 2021 for delivery system, including dually provisions; strengthened actuarial Medicaid managed care rating periods eligible beneficiaries, American Indians/ soundness payment provisions to starting on or after July 1, 2021. States Alaska Natives, or children with special promote the accountability of managed must comply with § 438.340 as health care needs. After approval, a state care program rates; strengthened efforts amended for all Quality Strategies may operate a section 1915(b) waiver for to reform delivery systems that serve submitted after July 1, 2021. As a 2-year period (certain waivers can be Medicaid and CHIP beneficiaries; and § 438.340 applies to CHIP through an operated for up to 5 years if they enhanced policies related to program existing cross-reference in § 457.1240(e), include dually eligible beneficiaries) integrity. separate CHIPs must also come into before requesting a renewal for an In the January 18, 2017 Federal compliance with the requirements of additional 2 (or 5) year period. Register (82 FR 5415), we published the § 438.340 as amended for all Quality We may also authorize managed care ‘‘Medicaid Program; The Use of New or Strategies submitted after July 1, 2021. programs as part of demonstration Increased Pass-Through Payments in States must comply with § 438.364 for projects under section 1115(a) of the Act Medicaid Managed Care Delivery all external quality reports submitted on that include waivers permitting the state Systems’’ final rule (the 2017 pass- or after July 1, 2021. Because § 438.364 to require all Medicaid beneficiaries to through payments final rule) that made applies to CHIP through an existing enroll in a managed care delivery changes to the pass-through payment cross reference in § 457.1250(a), system, including dually eligible transition periods and the maximum

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amount of pass-through payments regulations to ascertain if there were that, prior to the rule, had effective permitted annually during the transition ways to achieve a better balance processes in place to identify and send periods under Medicaid managed care between appropriate Federal oversight appropriate crossover claims to their contract(s) and rate certification(s). That and state flexibility, while also managed care plans from the crossover final rule prevented increases in pass- maintaining critical beneficiary file the states received from us. through payments and the addition of protections, ensuring fiscal integrity, Medicaid beneficiaries can be enrolled new pass-through payments beyond and improving the quality of care for in multiple managed care plans or the those in place when the pass-through Medicaid beneficiaries. This review state’s fee-for-service (FFS) program. For payment transition periods were process culminated in the November 14, example, a beneficiary may have established in the 2016 final Medicaid 2018 proposed rule. After reviewing the medical care covered by an MCO, dental managed care regulations. public comments to the 2018 proposed care covered by a PAHP, and behavioral In the November 14, 2018 Federal rule, this final rule seeks to streamline health care covered by the state’s FFS Register (83 FR 57264), we published the managed care regulations by program. When a Medicaid managed the ‘‘Medicaid Program; Medicaid and reducing unnecessary and duplicative care plan enters into a crossover Children’s Health Insurance Plan (CHIP) administrative burden and further agreement with Medicare, as required in Managed Care’’ proposed rule (the 2018 reducing Federal regulatory barriers to § 438.3(t), we then send to that plan all proposed rule) which included help ensure that state Medicaid agencies the Medicare FFS crossover claims for proposals designed to streamline the are able to work efficiently and their Medicaid managed care enrollees, Medicaid and CHIP managed care effectively to design, develop, and as well as to the state Medicaid agency. regulatory framework to relieve implement Medicaid managed care When this occurs, the managed care regulatory burdens; support state programs that best meet each state’s plan(s) may receive claims for services flexibility and local leadership; and local needs and populations. that are not the contractual promote transparency, flexibility, and B. Medicaid Managed Care Provisions of responsibility of the managed care plan. innovation in the delivery of care. This the Rule and Analysis of and Responses Additionally, states noted that having 2018 proposed rule was intended to to Public Comments all claims sent to the managed care ensure that the Medicaid and CHIP plan(s) can result in some claims being managed care regulatory framework is We received a total of 215 timely sent to the wrong plan when efficient and feasible for states to comments from state Medicaid and beneficiaries change plans. Some states implement in a cost-effective manner CHIP agencies, advocacy groups, health requested regulation changes to permit care providers and associations, health and ensure that states can implement states to send the appropriate crossover insurers, managed care plans, health and operate Medicaid and CHIP claims to their managed care plans; that care associations, and the general managed care programs without undue is, states would receive the CMS public. The following sections, arranged administrative burdens. crossover file and then forward to each by subject area, include a summary of Since publication of the 2016 final Medicaid managed care plan only those the comments we received and our rule, the landscape for healthcare crossover claims for which that plan is responses to those comments. In delivery continues to change, and states responsible. These states have expressed response to the November 14, 2018 are continuing to work toward that to discontinue existing effective proposed rule, some commenters chose reforming healthcare delivery systems to processes for routing crossover claims to to raise issues that were beyond the address the unique challenges and their managed care plans to comply scope of our proposals. In this final rule, needs of their local citizens. To that with this provision adds unnecessary we are not summarizing or responding end, the Department of Health and costs and burden to the state and plans, to those comments. Human Services (HHS) and CMS issued creates confusion for payers and a letter 1 to the nation’s Governors on 1. Standard Contract Requirements providers, and delays provider March 14, 2017, affirming the continued (§ 438.3(t)) payments. HHS and CMS commitment to In the 2016 final rule, we added a new To address these concerns, we partnership with states in the provision at § 438.3(t) requiring that proposed to revise § 438.3(t) to remove administration of the Medicaid program, contracts with a managed care the requirement that managed care and noting key areas where we intended organization (MCO), prepaid inpatient plans must enter into a COBA directly to improve collaboration with states and health plan (PIHP), or prepaid with Medicare and instead would move toward more effective program ambulatory health plan (PAHP) that require a state’s contracts with managed management. In that letter, we cover Medicare-Medicaid dually eligible care plans to specify the methodology committed to a thorough review of the enrollees provide that the MCO, PIHP, by which the state would ensure that managed care regulations to prioritize or PAHP sign a Coordination of Benefits the managed care plans receive all beneficiary outcomes and state Agreement (COBA) and participate in appropriate crossover claims for which priorities. they are responsible. Under this Since our issuance of that letter, the automated crossover claim process proposal, states would be able to stakeholders have expressed that the administered by Medicare. The purpose determine the method that best meets current Federal regulations are overly of this provision was to promote the needs of their program, whether by prescriptive and add costs and efficiencies for providers by allowing requiring the managed care plans to administrative burden to state Medicaid providers to bill once, rather than enter into a COBA and participate in the programs with few improvements in sending separate claims to Medicare and automated claims crossover process outcomes for beneficiaries. As part of the Medicaid MCO, PIHP, or PAHP. The directly or by using an alternative the agency’s broader efforts to reduce Medicare crossover claims process is method by which the state forwards administrative burden, we undertook an limited to fee-for service-claims for crossover claims it receives from analysis of the current managed care Medicare Parts A and B; it does not include services covered by Medicare Medicare to each MCO, PIHP, or PAHP, as appropriate. Additionally, we 1 Letter to the nation’s Governors on March 14, Advantage plans under Medicare Part C. 2017: https://www.hhs.gov/sites/default/files/sec- Since publication of the 2016 final proposed to require, if the state elects to price-admin-verma-ltr.pdf. rule, we heard from a number of states use a methodology other than requiring

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the MCO, PIHP, or PAHP to enter into adopt alternate methodologies to use Informational Bulletin to states,2 that a COBA with Medicare, that the state’s automated processes as appropriate to provision requires states to use standard methodology would have to ensure that achieve efficient and economical cost avoidance when processing the submitting provider is promptly systems. Regardless of the method prenatal claims. Thus if the state informed on the state’s remittance chosen by a state, the provider role in Medicaid agency has determined that a advice that the claim has been sent to the crossover claim submission process third party is likely liable for a prenatal the MCO, PIHP, or PAHP for payment is not changed by this proposal. claim, it must reject, but not deny, the consideration. claim returning the claim back to the Comment: Some commenters noted The following summarizes the public provider noting the third party that the concern that the proposed changes comments received on our proposal to Medicaid state agency believes to be revise § 483.3(t) and our response to would have on plans and providers that legally responsible for payment. If a those comments. operated across state lines. One provider billed Medicaid for a prenatal Comment: Many commenters commenter noted that Medicaid claim for a dually eligible individual, supported the proposed addition of state managed care plans that operate in the state would be required to reject the flexibility to use alternate mechanisms multiple states would need to develop claim but note that Medicare is the to send crossover claims to managed and maintain different processes in liable third party, as Medicare would be care plans. Commenters stated that the different states. Another commenter the primary payer. changes would provide states and plans who supported the proposed changes By contrast, the regulation in more flexibility while continuing to noted that it may pose challenges for § 438.3(t), which is triggered because the promote better coordination of benefits providers that furnish services in state enters into a COBA with Medicare, for dually eligible individuals and multiple states. applies when the provider bills reducing burden on the providers who Response: We carefully considered Medicare for any Part A or B service serve them. the benefits of national uniformity for under Medicare FFS for a dually eligible Response: We appreciate the support Medicaid managed care plans and individual for which there is cost- for the proposed change to the providers that serve multiple states. In sharing covered by Medicaid. Medicare regulation. this instance, we believe that states would generate the crossover consistent Comment: One commenter supported should have the flexibility to adopt the with the COBAs in place. If the state has the proposed rule but added that it is methodology that works best within elected to require its Medicaid managed necessary for CMS to ensure that any their state to ensure that the appropriate care plans to enter into a COBA with alternative state crossover methodology MCO, PIHP, or PAHP will receive all Medicare, then Medicare would forward separates Medicare claims from the crossover claims to the Medicaid Medicaid rate setting and actuarial applicable crossover claims for which the MCO, PIHP, or PAHP is responsible. managed care plan. If the state has soundness. elected under § 438.3(t) to use a Response: While Medicare Part A or This flexibility will allow states to maintain current processes and not different methodology for ensuring that Part B cost-sharing payments—which the appropriate managed care plan are Medicaid costs—must be factored incur unnecessary costs or burden to providers and beneficiaries to conform receives the applicable crossover claims, into Medicaid rate setting if a Medicaid then Medicare would forward the to a new mandated process. We note plan is responsible for covering them, crossover claims to the state pursuant to here that this revision to § 438.3(t) does we agree that other costs for the the state’s COBA with Medicare; the not require states to change their current provision of Medicare covered services state would then forward that crossover cross over claim handling processes; it should not be. Nothing in our proposal claim to the Medicaid managed care merely provides states with an option. or the revision to § 438.3(t) that we plan for payment. If a state adopts an Regardless of which methodology a state finalize here will impact the processes alternate methodology as provided in chooses to implement, it should not for Medicaid rate-setting or § 438.3(t), the state must ensure that the have any effect on providers, who determination of actuarial soundness. submitting provider is promptly should be able to submit their claims Comment: One commenter supported informed on the state’s remittance once and have it routed to the the proposed changes but offered a note advice that the claims have not been of caution relating to potentially appropriate MCO, PIHP, or PAHP for denied, but instead, has been sent to the opening the door to subpar manual adjudication. MCO, PIHP, or PAHP for consideration. processes that states might adopt that Comment: One commenter who Comment: One commenter requested could incur additional costs and objected to the proposed changes that CMS add regulatory language at unnecessary complexity. requested clarification about how it § 438.3(t) stating that ‘‘The coordination Response: As discussed in this final intersects with a similar provision in methodology also must ensure that rule, the regulations at § 438.3(t) section 53102(a)(1) of the Bipartisan dually eligible individuals are not finalized in 2016 established a crossover Budget Act (BBA) of 2018 (Pub. L. 115– denied Medicaid benefits they would be process in which providers only bill 123, enacted February 9, 2018) eligible to receive if they were not also once, rather than multiple times. The concerning procedures for states eligible for Medicare benefits.’’ revision to § 438.3(t) that we are processing prenatal claims when there Response: We agree that it is essential finalizing here maintains a process in is a known third party liability. that dually eligible individuals are not which providers only bill once (to denied Medicaid benefits they would be Response: We do not believe that Medicare), because the regulation only eligible to receive if they were not also § 438.3(t), as amended here, conflicts applies when the state enters into a eligible for Medicare benefits; however, with the third party liability COBA but allows greater state flexibility this is outside the scope of this requirements added by section in how that claim is routed from regulation, which is limited to how 53102(a)(1) of the BBA of 2018. We note Medicare to Medicaid and Medicaid states must ensure the appropriate that section 53102(a)(1) of the BBA of managed care plans. We agree that managed care plan receives all automated processes are usually optimal 2018 applies when the provider bills Medicaid directly for a prenatal claim. and create efficiencies for states, plans, 2 See https://www.medicaid.gov/federal-policy- and providers. We encourage states that As further discussed in our June 1, 2018 guidance/downloads/cib060118.pdf.

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applicable crossover claims for which it where plans already did so as required CMS’ ‘‘Patients Over Paperwork’’ is responsible. We note that there is no under the 2016 final rule. initiative. regulation in part 438 that authorizes Response: As we proposed the Response: We believe that provider denial of Medicaid-covered services for amendment and are finalizing it here, education is critical whenever a state an enrollee who is eligible for those § 438.3(t) does not require any changes implements changes to how crossover services based on the enrollee’s for states and MCOs, PIHPs, and PAHPs claims are routed to the Medicaid eligibility as well for Medicare. that are already complying with the managed care plan responsible for Comment: One commenter suggested 2016 final rule. This final rule amends processing them. We encourage states to providing Medicare eligibility data to § 438.3(t) to provide states with conduct such education prior to MCOs, PIHPS, and PAHPs through data additional flexibility to adopt a different implementing any process changes. feeds, file transfers, or an online portal methodology to ensure that the For the concern that without for efficient coordination of benefits, to appropriate MCO, PIHP, or PAHP will education, providers would not know improve care coordination and receives all applicable crossover claims where to submit claims for Medicare outcomes. One commenter encouraged for which the MCO, PIHP, or PAHP is cost-sharing, this provision is designed free and timely access to all clinical and responsible, subject to some limited to remove from providers the burden of administrative data to promote parameters to ensure that the applicable having to identify the Medicaid coordination among managed care provider is provided information on the managed care plan in which each dually plans. The commenter suggested state’s remittance advice. This eligible patient is enrolled, and submit creating a standardized process by additional flexibility might result in the bill for the Medicare cost-sharing to which managed care organizations can states developing and using more the correct plan. Under our proposed receive timely claims and clinical data efficient and economical processes for regulation, the crossover claim is still from both Medicaid and Medicare. The handling cross-over claims applicable to routed to the Medicaid managed care commenter noted that the proposed Medicaid managed care enrollees. plan. States may continue to require that plans enter into a COBA with Medicare changes may limit full integration in Comment: One commenter who to route crossover claims directly to the instances where a beneficiary in a supported the proposed changes plan. In the alternative, states that elect Medicaid managed long term care plan encouraged CMS to monitor states that to receive crossover claims from is enrolled in an unaligned (that is, adopt alternative methodologies to Medicare (or elect any other offered by a separate organization) ensure that providers still receive methodology than having the Medicaid Medicare Advantage plan such as a Dual payments in a timely manner. Eligible Special Needs Plan offered by a managed care plans enter into COBAs Response: While this regulation does different organization than offers the with Medicare) would route the claims not establish a timeframe for the state to Medicaid plan in which the person is to the plan and issue remittance advice forward the crossover claim to its enrolled. to the applicable provider. In both cases, Response: We appreciate the value of managed care plan, we note that the the claims will be routed to the making such data available to plans. We existing regulations on timely claims Medicaid managed care plan; there is no are separately exploring whether we payment in the Medicaid FFS context need for the provider to take any action have authority to do so within existing apply. Specifically, § 447.45(d)(4)(ii) to identify or submit the crossover claim limits, such as those established under specifies that the state Medicaid agency to the plan. We believe this is fully in the Health Insurance Portability and must pay the Medicaid claim relating to line with our ‘‘Patients over Paperwork’’ Accountability Act of 1996 (HIPAA) a Medicare claim within 12 months of initiative. (Pub. L. 104–191, enacted August 21, receipt or within 6 months of when the We also sponsor an enhanced 1996). For the comment on enrollment agency or provider receives notice of the secondary COBA feed (also known as in different managed care plans for disposition of the Medicare claim. A the ‘‘Medicaid Quality project’’), which Medicaid and Medicare, we note that state that uses an alternative is available to states that have a COBA the Medicare crossover process is methodology under § 438.3(t) and and participate in the Medicare limited to Original Medicare (Medicare receives crossover claims from Medicare crossover process. This secondary feed Part A and B). Claims for cost sharing would need to ensure payment within ensures that states receive a complete for a Medicare Advantage enrollee are this timeframe. To do so, the state array of Medicare FFS adjudicated Part beyond the scope of this regulation. would need to forward crossover claims A and B claims for individuals that the Comment: One commenter requested to a Medicaid plan and ensure the plan states submitted to CMS on their that we itemize all claim inclusion and pays it within 6 months of when the eligibility file. The state must be in exclusion selection criteria for state initially received it. receipt of the normal crossover claims professional claim services. Comment: A few commenters who file to be eligible to receive the second Response: We do not have the opposed the proposed changes enhanced COBA feed. authority to make the requested change. recommended that, if the regulation is Comment: One commenter who The National Uniform Claims finalized as proposed and a state elects opposed the proposed changes Committee (NUCC), which establishes to devise its own system, the state be expressed concern that any process in the standards for 837 professional required to promptly educate which there is an intermediary would claims and the CMS–1500 form, has participating health care providers create confusion and delay. The chosen not to array professional and about any ensuing changes in the state’s commenter noted that a smoothly DME claims by type of bill (TOB), as updated remittance advice. One operating crossover claim process happens with institutional claims, commenter expressed concern that some reduces burden on providers, and may which are under the purview of the health care providers would not be make them more willing to serve National Uniform Billing Committee promptly made aware of the new Qualified Medicare Beneficiaries and (NUBC). requirements to submit multiple claims other dually eligible individuals. The Comment: One commenter requested to the managed care plan for payment commenter suggested simplifying and that we allow plans to continue their consideration, resulting in unpaid streamlining the procedures so that all COBA with, and receive crossover claims through no fault of their own, crossover claims can be handled claims directly from, Medicare in states and that this would be antithetical to promptly by one entity, either the state

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Medicaid agency or the MCO. The plan to address the payment of range to be actuarially sound (81 FR commenter also noted that when CMS Medicare cost-sharing. 27567). However, to make the rate adopted § 438.3(t), it allowed states time To address the commenter’s concern setting and the rate approval process to have Medicaid managed care plans about when states indicate multiple more transparent, we changed that get COBAs in place, and that if more denials on the state’s remittance advice, process in the 2016 final rule at § 438.4 time is needed, the better course would we are clarifying our intent by finalizing to require that states develop and certify be to extend the time for enforcement § 438.3(t) with additional text specifying as actuarially sound each individual rather than to modify the regulation. that the state’s remittance advice must rate paid per rate cell to each MCO, Response: We share the preference for inform the provider that the claim was PIHP, or PAHP with enough detail to reducing the complexity of the not denied by the state but was understand the specific data, crossover claim process and agree with redirected to a managed care plan for assumptions, and methodologies behind the commenter that complexity in the adjudication. We regret that our intent that rate (81 FR 27567). We noted in that crossover process can be a disincentive was not clear in the proposed rule and 2016 final rule that states could to serving dually eligible individuals. believe this clarification will minimize continue to use rate ranges to gauge an The § 438.3(t) regulatory language that provider confusion and reduce the risk appropriate range of payments on which we proposed and are finalizing requires of providers inadvertently perceiving to base negotiations with an MCO, PIHP, that if a state uses an alternate forwarded claims as denied. or PAHP, but would have to ultimately methodology, it must ensure that the After consideration of the public provide certification to us of a specific appropriate managed care plan (that is, comments and for the reasons rate for each rate cell, rather than a rate the MCO, PIHP, or PAHP whose articulated in the proposed rule and our range (81 FR 27567). We believed that contract covers the services being billed responses to comments, we are this change would enhance the integrity on the claim) receives all applicable finalizing § 438.3(t) as proposed with of the Medicaid rate-setting process and crossover claims, and ensure the one modification to clarify that when a align Medicaid policy more closely with remittance advice conveys that the state elects not to require its managed actuarial practices used in setting rates claim is forwarded rather than denied. care plans to enter into COBAs with for non-Medicaid plans (81 FR 27568). In either scenario, the provider is Medicare, the remittance advice issued Since publication of the 2016 final relieved of the burden of determining by the state must indicate that the state rule, we heard from stakeholders that which entity—the state or Medicaid has not denied payment but that the the requirement to certify a capitation managed care plan—is liable for the claim has been sent to the MCO, PIHP, rate per rate cell, rather than to certify Medicare cost-sharing. or PAHP for payment consideration. In a rate range, has the potential to Comment: Several commenters addition, we are finalizing the diminish states’ ability to obtain the best opposed the proposed changes and regulation text with slight grammatical rates when contracts are procured requested we leave the current corrections to use the present tense through competitive bidding. For regulatory requirements in place. Many consistently. example, we heard from one state that of these commenters noted that the historically competitively bid the flexibility in the proposed change could 2. Actuarial Soundness Standards administrative component of the increase provider administrative burden (§ 438.4) 3 capitation rate that the requirement to and confusion when states indicate a. Option to Develop and Certify a Rate certify a capitation rate per rate cell may multiple denials on the state’s Range (§ 438.4(c)) prevent the state from realizing a lower remittance advice to providers (that is, rate that could have been available Before the 2016 final rule was when they forward a crossover claim to through the state’s procurement process. published, we considered any capitation an MCO, PIHP, or PAHP) and that it States that negotiate dozens of managed rate paid to a managed care plan that would create further confusion when care plans’ rates annually have also fell anywhere within the certified rate the Medicaid managed care plan then cited the potential burden associated processed the claim and notified the with losing the flexibility to certify rate 3 In Texas v. United States, No. 7:15–cv–151–O, provider on the plan’s remittance slip op. at 40, 62 (N.D. Tex. Mar. 5, 2018), appeal ranges. States have claimed that the advice. Some also expressed concern docketed, No. 18–10545 (5th Cir. May 7, 2018) elimination of rate ranges could that alternate methodologies would (‘‘Texas’’), six states challenged the portion of the potentially increase administrative costs increase provider practice costs— regulation previously codified at 42 CFR and burden to submit separate rate especially for small practices. 438.6(c)(1)(i)(C) (2002) (now codified in portions of 42 CFR 438.2, 438.4), defining ‘‘actuarially sound certifications and justifications for each Response: As noted in the proposed capitation rates’’ as capitation rates ‘‘that . . . capitation rate paid per rate cell. rule and in this final rule, an important [h]ave been certified . . . by actuaries who meet the To address states’ concerns while factor prompting the proposed change qualification standards established by the American ensuring that rates are actuarially sound was that some states and providers Academy of Actuaries and follow the practice and Federal resources are spent standards established by the Actuarial Standards raised concerns after the original Board,’’ on the basis that Actuarial Standard of appropriately, we proposed to add provision was finalized in the 2016 final Practice (‘‘ASOP’’) 49 defines ‘‘actuarially sound § 438.4(c) to provide an option for states rule requiring a state to abandon capitation rates’’ to mean rates that account for all to develop and certify a rate range per effective alternative processes would fees and taxes, including the Health Insurance rate cell within specified parameters. Provider Fee (‘‘HIPF’’). In a decision issued on actually add to provider burden and March 5, 2018, the court declared the challenged We designed our proposal to address increase risk of payment delays. We portion of the regulation to be ‘‘set aside’’ under the our previously articulated concerns over believe that state flexibility would Administrative Procedure Act, 5 U.S.C. 706(2)(B) the lack of transparency when large rate permit carefully crafted alternative through (C). Texas, slip op. at 62. In its decision, ranges were used by states to increase or the court specifically allowed CMS to ‘‘continue to arrangements to continue in a way that use ASOP 49 to make internal decisions whether decrease rates paid to the managed care benefits providers, plans, and states. We capitation rates are ‘actuarially sound,’ ’’ and only plans without providing further reiterate that this proposal retains a ‘‘cannot use ASOP 49 to . . . require Plaintiffs to notification to us or the public of the system in which providers are only pay the HIPF.’’ Texas, slip op. at 21. As of July change. We noted that the rate range 2019, the court had not issued a final judgment. The required to bill once (to Medicare), and government has appealed the court’s March 5, 2018 option at proposed paragraph (c) would that the claim will be transferred to decision; during the pendency of the appeal, the allow states to certify a rate range per Medicaid or the Medicaid managed care government is complying with the court’s order. rate cell subject to specific limits and

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would require the submission of a rate to the start of the rating period and must We further noted in the 2016 final recertification if the state determines comply with all other regulatory rule that the prohibition on rate ranges that changes are needed within the rate requirements including § 438.4, except was meant to enhance the integrity and range during the rate year. Under our § 438.4(b)(4) as specified. During the transparency of the rate setting process proposal, we noted that an actuary must contract year, states using the rate range in the Medicaid program, and to align certify the upper and lower bounds of option in § 438.4(c)(1) would not be able Medicaid policy more closely with the the rate range as actuarially sound and to modify capitation rates within the actuarial practices used in setting rates would require states to demonstrate in +/¥ 1.5 percent range allowed under for non-Medicaid health plans. We their rate certifications how the upper existing § 438.7(c)(3); we proposed to noted that the use of rate ranges was and lower bounds of the rate range were codify this as § 438.4(c)(2)(ii). We noted unique to Medicaid managed care and actuarially sound. that this provision would enable us to that other health insurance products Specifically in § 438.4(c)(1), we give states the flexibility and that were subject to rate review submit proposed the specific parameters for the administrative simplification to use and justify a specific premium rate. We use of rate ranges: (1) The rate certified rate ranges. We noted in the stated in the 2016 final rule our belief certification identifies and justifies the proposed rule that while the use of rate that once a managed care plan has assumptions, data, and methodologies ranges is not standard practice in rate entered into a contract with the state, specific to both the upper and lower development, our proposal would align any increase in funding for the contract bounds of the rate range; (2) the upper with standard rate development should correspond with something of and lower bounds of the rate range are practices by requiring recertification value in exchange for the increased certified as actuarially sound consistent when states elect to modify capitation capitation payments. We also provided with the requirements of part 438; (3) rates within a rate range during the additional context that our policy on the upper bound of the rate range does rating year. States wishing to modify the rate ranges was based on the concern not exceed the lower bound of the rate capitation rates within a rate range that some states have used rate ranges range multiplied by 1.05; (4) the rate during the rating year would be to increase capitation rates paid to certification documents the state’s required, in proposed § 438.4(c)(2)(iii), managed care plans without changing criteria for paying MCOs, PIHPs, and to provide a revised rate certification any obligations within the contract or PAHPs at different points within the demonstrating that the criteria for certifying that the increase was based on rate range; and (5) compliance with initially setting the rate within the managed care plans’ actual expenses specified limits on the state’s ability to range, as described in the initial rate during the contract period. In the 2016 pay managed care plans at different certification, were not applied final rule, we reiterated that the points within the rate range. States accurately; that there was a material prohibition on rate ranges was using this option would be prohibited error in the data, assumptions, or consistent with the contracting process from paying MCOs, PIHPs, and PAHPs methodologies used to develop the where managed care plans are agreeing at different points within the certified initial rate certification and that the to meet obligations under the contract rate range based on the willingness or modifications are necessary to correct for a fixed payment amount (81 FR agreement of the MCOs, PIHPs, or the error; or that other adjustments are 27567–27568). PAHPs to enter into, or adhere to, appropriate and reasonable to account We noted how the specific risks intergovernmental transfer (IGT) for programmatic changes. agreements, or the amount of funding described in the proposed rule the MCOs, PIHPs, or PAHPs provide We acknowledged that our proposal concerned us, and as such, were the through IGTs. We proposed these had the potential to reintroduce some of reason for specific conditions and specific conditions and limitations on the risks that were identified in the 2016 limitations on the use of rate ranges that the use of rate ranges to address our final rule related to the use of rate we proposed. Our rate range proposal concerns noted in this final rule; that is, ranges in the Medicaid program. In the was intended to prevent states from that rates are actuarially sound and 2016 final rule, we generally prohibited using rate ranges to shift costs to the ensure appropriate stewardship of the use of rate ranges, while finalizing Federal Government. There are some Federal resources, while also permitting § 438.7(c)(3) to allow de minimis states that currently make significant ¥ limited state flexibility to use certified changes of +/ 1.5 percent to provide retroactive changes to the contracted rate ranges. We stated in the proposed some administrative relief to states for rates at, or after, the end of the rating rule our belief that the proposed small changes in the capitation rates. period. As we noted in the 2016 final conditions and limitations on the use of This change was intended to provide rule, we do not believe that these rate ranges struck the appropriate some flexibility with rates while changes are made to reflect changes in balance between prudent fiscal and eliminating the ambiguity created by the underlying assumptions used to program integrity and state flexibility. rate ranges in rate setting and to be develop the rates (for example, the We invited comment on these specific consistent with our goal to make the rate utilization of services, the prices of proposals and whether additional setting and rate approval processes more services, or the health status of the conditions should be considered to transparent. We specifically noted in the enrollee), but rather we are concerned ensure that rates are actuarially sound. 2016 final rule that states had used rate that these changes are used to provide Under proposed § 438.4(c)(2)(i), states ranges to increase or decrease rates paid additional reimbursements to the plans certifying a rate range would be required to the managed care plans without or to some providers (81 FR 27834). to document the capitation rates payable providing further notification to us or Additionally, we noted that states to each managed care plan, prior to the the public of the change or certification would need to demonstrate that the start of the rating period for the that the change was based on actual entirety of rate ranges (that is, lower and applicable MCO, PIHP, and PAHP, at experience incurred by the MCOs, upper bound) compliant with our points within the certified rate range PIHPs, or PAHPs that differed in a proposal are actuarially sound. As noted consistent with the state’s criteria in material way from the actuarial in the 2016 final rule, 14 states used rate proposed paragraph (c)(1)(iv). States assumptions and methodologies ranges with a width of 10 percent or electing to use a rate range would have initially used to develop the capitation smaller (that is, the low end and the to submit rate certifications to us prior rates (81 FR 27567 through 27568). high end of the range were within 5

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percent of the midpoint of the range), recertify rates when there are changes Response: We understand but in some states, the ranges were as made within the approved rate range commenters’ concerns related to the use wide as 30 percent (81 FR 27834). We and for states to document the specific of rate ranges in Medicaid managed noted that we believed that our proposal rates for each managed care plan. care. We also acknowledge our own would limit excessive ranges because Commenters also noted support for the fiscal and program integrity concerns proposed § 438.4(c)(1)(i) and (ii) would proposal that states cannot pay managed which were noted in the 2016 final rule, require the upper and lower bounds of care plans at different rates within the as well as in the 2018 proposed rule. the rate range to be certified as range based on IGT agreements. Several However, we proposed this rate range actuarially sound and that the rate commenters noted that the specific provision because we heard from states certification would identify and justify conditions proposed by CMS must be that this was a critical flexibility to the assumptions, data, and implemented and strictly enforced to reduce administrative burden in state methodologies used to set the bounds. ensure that actuarial soundness is Medicaid programs. We developed our While we believed that our proposal achieved within the rate ranges. A few proposal to carefully strike a balance struck the right balance between commenters urged CMS to adopt all of between state flexibility and program enabling state flexibility and our the conditions set forth in § 438.4(c) if integrity. Balancing this flexibility with statutory responsibility to ensure that rate ranges are finalized. the fiscal and program integrity managed care capitation rates are Response: We continue to believe, concerns was the driving reason for actuarially sound, we noted that our particularly with the support of including comprehensive guardrails approach may reintroduce undue risk in commenters, that the 5 percent, or +/ around the use of rate ranges in the Medicaid rate-setting. ¥2.5 percent from the midpoint, rate proposal and this final rule. To ensure Therefore, we requested public range will permit increased flexibility in appropriate Federal oversight, we comments on our proposal in general rate setting, while the specific specifically proposed parameters to and on our approach. We requested conditions proposed will also ensure ensure that rate ranges: (1) Do not public comment on the value of the that the rates are actuarially sound. The inappropriately use IGTs to draw down additional state flexibility described in proposed parameters and guardrails additional Federal dollars with no our proposal relative to the potential for carefully strike a balance between state correlating benefit to the Federal the identified risks described in the flexibility and program integrity and we Government or the Medicaid program; proposed rule and in the 2016 final rule, are finalizing them, with some (2) are bounded at the upper and lower including other unintended modifications as discussed in response ends with rates that are actuarially consequences that could arise from our to other comments. sound consistent with the regulations at proposal that we have not yet identified Comment: Several commenters §§ 438.4 through 438.7; and (3) strike or described. We requested public the appropriate balance between comment on whether additional opposed the proposal to allow states to certify rate ranges and urged CMS not to prudent fiscal and program integrity and conditions or limitations on the use of state flexibility. With regard to this last rate ranges would be appropriate to help finalize it. Some of these commenters expressed concerns that rate ranges point, we specifically proposed that mitigate the risks we identified. We also states using rate ranges must document requested public comment from states decrease transparency, do not ensure that rates are actuarially sound, and do in the rate certification the criteria used on the utility of state flexibility in this to select the specific rate within the area—specifically, we requested that not enable CMS to ensure the adequacy of state and Federal investments in range for each managed care plan under states provide specific comments about contract with the state. The guardrails their policy needs and clear patient care. Some commenters noted finalized in § 438.4(c) will enable CMS explanations describing how utilizing that our proposal represents diminished to review the establishment and use of rate ranges effectively meets their needs Federal oversight of the adequacy of rate ranges by states and ensure that all or whether current regulatory payment rates to Medicaid managed rates actually paid to managed care requirements on rate ranges were care plans and that it would result in plans are actuarially sound. To address sufficiently flexible to meet their needs. lower payments to managed care plans, specific concerns about unsound We also requested that states provide which could limit patient access to care. capitation rates, this final rule requires quantitative data to help us quantify the One commenter specifically expressed both the upper and lower bounds of the benefits and risks associated with the concern that wider rate ranges may rate range to be actuarially sound; proposal. We also encouraged states and result in lower rates to managed care other stakeholders to comment on the plans and in turn result in contracts therefore, actuarially unsound rates needs, benefits, risks, and risk being awarded to less qualified plans, would not be consistent with § 438.4(c). mitigations described in the proposed which may lead to early contract We agree with commenters that the rule. terminations, plan turnover, and existing regulation that permits a The following summarizes the public instability for beneficiaries; this +/¥1.5 percent adjustment to certified comments received on our proposal to commenter also noted that such plans rates can help states appropriately add § 438.4(c) and our responses to may be unable to pay competitive address mid-year programmatic changes those comments. market rates, which could reduce or mid-year rate adjustments. However, Comment: Many commenters patient access to care. Commenters also we also believe that the additional supported the proposed option to stated that the rate range provision is option to certify a rate range can be develop and certify a 5 percent rate unnecessary since the existing +/¥1.5 helpful to states, especially in range, stating it allows for increased percent adjustment under § 438.7(c)(3) circumstances where states are flexibility in rate setting. Commenters is adequate to provide states with competitively bidding the capitation noted that the rate range proposal will administrative flexibility. One rates. We also agree with commenters remove ambiguities in determining commenter expressed concern that the that rate ranges can obfuscate payment actuarial soundness and will put rate range proposal would result in rates, and that is why we included appropriate limits on unsustainable reduced services for enrollees and specific guardrails around the use of rates. Some commenters specifically instability for managed care plans and rate ranges in the proposed rule and are noted support for the requirements to providers. finalizing those requirements. For

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example, § 438.4(c)(1)(i) requires that reiterate that the regulations in 42 CFR percent, or +/¥2.5 percent from the the state’s rate certification identify and part 438 contain other beneficiary midpoint, is a reasonable rate range to justify the assumptions, data, and protections meant to ensure that plans permit the administrative flexibility methodologies used to develop the are not arbitrarily reducing services to requested by states and also to ensure upper and lower bounds of the rate managed care enrollees. For example, that all rates within the entire rate range range. Also, § 438.4(c)(2)(i) requires that § 438.210 requires that the services are actuarially sound. We proposed, and states document the capitation rates, covered under the managed care are finalizing, regulatory requirements prior to the start of the rating period, for contract must be furnished in an that the rate certification identify and the managed care plans at points within amount, duration, and scope that is no justify the assumptions, data, and the rate range, consistent with the state’s less than the amount, duration, and methodologies specific to both the criteria for paying managed care plans at scope for the same services furnished to upper and lower bounds of the rate different points within the rate range. beneficiaries under FFS Medicaid. We range (paragraph (c)(1)(i)), and that both This means that the contract and rate would also highlight the requirements the upper and lower bounds of the rate certification must be submitted for CMS in § 438.206 regarding the timely range are certified as actuarially sound approval before the rating period begins. availability of services that states and (paragraph (c)(1)(ii)). We believe that the We specifically included this timing managed care plans must ensure for all 5 percent, or +/¥2.5 percent from the requirement to limit the obfuscation of managed care enrollees. midpoint, rate range is more appropriate rates. We believe that the guardrails we Comment: Several commenters to ensure that these requirements can be proposed and are finalizing, such as supported the proposal to allow rate satisfied, rather than an unspecified these two examples, provide a level of ranges but recommended that the range limit, or a limit that is so wide that it transparency on the use of rate ranges be expanded beyond 5 percent. Some would not be possible to find both the and provide a mechanism to avoid commenters requested that CMS expand upper and lower bounds of the rate obfuscation, especially since this the rate range provision to 10 percent. range to be actuarially sound. regulation requires the actuary to Commenters also requested that CMS Regarding comments about the factors describe and justify the assumptions, restore rate ranges to pre-2016 used in determining a rate range, such data, and methodologies used to regulatory levels, noting their belief that as maturity of the program, credibility/ develop the rate range in the actuarial limits on a rate range are not necessary quality of the base data, amount of certification. if the requirement of paying actuarially statistical variability in the underlying sound rates remains in place. Several claim distribution, and size of the We understand that several commenters also recommended a population, we believe that such factors commenters were concerned that rate narrower rate range to ensure the would be permissible for actuaries to ranges could be used to lower payments actuarial soundness of the final rates consider as part of the assumptions, to managed care plans, thereby leading and recommended that actuaries be data, and methodologies specific to both to reduced services for enrollees and required to consider specific factors in the upper and lower bounds of the rate instability for managed care plans and determining the width (or size) of the range in accordance with generally providers; however, we have rate range, such as maturity of the accepted actuarial principles and incorporated safeguards to prevent such program, credibility/quality of the base practices, and the requirements for rate outcomes. Under § 438.4(c)(1)(ii), both data, amount of statistical variability in setting in §§ 438.4, 438.5, 438.6, and the upper and lower bounds of the rate the underlying claim distribution, and 438.7. If actuaries use these factors in range must be certified as actuarially size of the population. Commenters determining the rate range, it would be sound consistent with the requirements suggested additional rate ranges with a appropriate to document these factors in in part 438. Actuarially sound width (or size) of +/¥2 percent (total the rate certification as required under capitation rates must provide for all range of 4 percent) or +/¥3 percent § 438.4(c)(1)(i) and (ii). However, we reasonable, appropriate, and attainable (total range of 6 percent) from the decline to require that actuaries must costs that are required under the terms midpoint, or two times the risk margin consider these factors when determining of the contract and for the operation of reflected in the capitation rates as the width (or size) of the rate range, as the managed care plan for the time alternatives to our proposal. Some such an approach is overly prescriptive. period and the population covered commenters considered the proposed 5 We believe that actuaries may consider under the terms of the contract. Since percent range to be overly broad and other factors when identifying and the lower bounds of rate ranges must recommended smaller ranges for the justifying the assumptions, data, and also be actuarially sound and developed rates to remain actuarially sound. Some methodologies specific to both the in accordance with the regulations in commenters gave specific scenarios by upper and lower bounds of the rate part 438 governing actuarial soundness which the proposed 5 percent rate range range. and rate development, we believe that may be insufficient and recommended Comment: Some commenters rates within the range must all be that CMS not finalize a prescriptive +/ submitted technical recommendations actuarially sound. Under § 438.4(c) as ¥ rate range to permit additional state about the rate range option, including finalized, states using rate ranges must flexibility. that the calculation of the rate range also document the criteria for paying Response: We are declining to adopt should exclude risk adjustments and managed care plans at different points any of these specific recommendations, pass-through payments, that states within the rate range and must as some commenters requested wider should be able to apply or adjust risk document the capitation rates prior to permissible ranges, while other adjustment mechanisms outside of the start of the rating period—this commenters requested narrower setting the certified rate range, that the means that the criteria used to set permissible ranges. Because of the mix calculation of rate ranges should not managed care plans’ capitation rates of public comments on this topic, we reflect incentive payments for managed must be documented prior to the start of believe that we struck the right balance care plans, and that state budget factors the rating period. We believe that these in the proposed rule by permitting a rate should not influence the calculation of requirements will ensure that states are range up to 5 percent, or +/¥2.5 percent rates within the rate range. Other not arbitrarily reducing payments to from the midpoint, between the lower commenters recommended that managed care plans. We also want to and upper bound. We believe that 5 administrative expenses should not be

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subject to rate range variances. A few adjustment methodology in the bound of the rate range cannot exceed commenters recommended that certain certification and certify the the lower bound of the rate range by government-mandated costs be methodology, the state’s actuary is not more than 5 percent, or +/¥2.5 percent considered outside of the rate range, required to certify risk-adjusted rate from the midpoint. including the Health Insurance Provider ranges (that is, the rate ranges with the Comment: A few commenters Fee (HIPF). One commenter also risk adjustment methodologies applied requested clarification on the use of the recommended that rate ranges be to reflect the actual payments de minimis +/¥1.5 percent range that is limited to include only underlying potentially available to the managed currently codified in § 438.7(c)(3). benefit changes. care plan). The Federal requirements for Commenters requested detail on Response: Under § 438.4(c)(1)(ii), both including risk adjustment mechanisms whether the proposal to allow rate the upper and lower bounds of the rate in the capitation rates are found in ranges adds new parameters on the use range must be certified as actuarially § 438.7(b)(5). As part of the 2016 final of the de minimis flexibility that is sound consistent with the requirements rule, we acknowledged that risk currently codified in § 438.7(c)(3). of part 438. This means that the adjustment methodologies can be Commenters also requested clarity on calculation of the rate range under calculated and applied after the rates are how the new rate range provision and § 438.4(c) must include all of the certified (81 FR 27595); therefore, we the +/¥1.5 percent flexibility can be components of the capitation rate that finalized specific standards for used together. are currently required to be included in retrospective risk adjustment Response: As proposed and finalized, the rate development and certification methodologies at § 438.7(b)(5)(ii). § 438.4(c) does not add or require under §§ 438.4, 438.5, 438.6, and 438.7. Further, the regulation at additional parameters on the use of the ¥ This includes pass-through payments, § 438.7(b)(5)(iii), which we finalized in +/ 1.5 percent adjustment as permitted administrative expenses, taxes, the 2016 final rule, provides that a new under § 438.7(c)(3) for any state that licensing and regulatory fees, rate certification is not required when does not use rate ranges. However, government-mandated costs (including approved risk adjustment under § 438.4(c)(2)(ii), states that use the HIPF and other taxes and fees), and methodologies are applied to the final rate ranges are not permitted to modify underlying benefit costs, which are all capitation rates because the approved the capitation rates under § 438.7(c)(3). required components of developing the risk adjustment methodology must be States are permitted to either use the adequately described in the original rate rate range option under § 438.4(c)(1) or capitation rates under our existing ¥ regulations.4 We agree that it would be certification; payment of rates as use the de minimis +/ 1.5 percent inappropriate to include the specific modified by that approved risk range that is currently codified in incentive payments for managed care adjustment methodology would be § 438.7(c)(3), but states are not plans made under § 438.6(b)(2) in the within the scope of the rate certification permitted to use both mechanisms in calculation of the rate range, as per that adequately describes the risk combination. As noted in the 2018 longstanding policy since the 1990’s, adjustment mechanism. We also proposed rule, we believe that this those incentive arrangements are clarified in the 2016 final rule, under prohibition on using rate ranges in provided in excess of the approved the requirements in § 438.7(c)(3), that combination with the de minimis capitation rate and are already limited the application of a risk adjustment revision permitted under § 438.7(c)(3) is to 105 percent of the approved methodology that was approved in the necessary to ensure program integrity capitation payments attributable to the rate certification under § 438.7(b)(5) did and guard against other fiscal risks. As finalized at § 438.4(c)(1)(i), the rate enrollees or services covered by the not require a revised rate certification certification must identify and justify incentive arrangement. We also agree for our review and approval (81 FR the assumptions, data, and that it would be inappropriate for state 27568). However, we noted that the methodologies specific to both the budget factors to influence the payment term in the contract would upper and lower bounds of the rate calculation of rates within the rate range have to be updated as required in range. The rate range cannot be wider since such factors are not considered § 438.7(b)(5)(iii). Requirements for risk than 5 percent, or +/¥2.5 percent from valid rate development standards (that adjustment and risk sharing the midpoint; the de minimis revision is, state budget factors are not relevant mechanisms in § 438.6 must also be permitted under § 438.7(c)(3) cannot be to the costs required to be included in met. Therefore, as long as the Federal requirements are met for risk used in combination with this rate setting the capitation rates in range. It is our belief that the upper and accordance with §§ 438.4, 438.5, 438.6, adjustment, we agree that such mechanisms can be appropriately lower bounds of a 5 percent rate range and 438.7). can remain actuarially sound as long as Regarding comments about risk applied outside of the certified rate all of the Federal requirements for rate adjustment, we generally agree with range (meaning, applied to the rates development, including the commenters that risk adjustment after calculation of the rate range), requirements we are finalizing in mechanisms can be applied outside of consistent with existing Federal regulations and our analysis in the 2016 § 438.4(c), are met. If states were setting the certified rate range, permitted to use rate ranges in consistent with existing Federal final rule. Comment: One commenter combination with the de minimis regulations at § 438.7(b)(5). While the recommended that CMS describe the revision permitted under § 438.7(c)(3), state’s actuary is required to certify rate permitted rate range in terms of a this could result in final rates that are ranges and must describe the risk percentage. outside of the 5 percent range, and this Response: We confirm for this is not permitted. As provided in this 4 While proceedings in Texas v. United States, No. 7:15–cv–151–O, slip op. (N.D. Tex. Mar. 5, commenter that the permissible rate rule in a separate response, we continue 2018), appeal docketed, No. 18–10545 (5th Cir. May range is expressed as a percentage. to believe that 5 percent is a reasonable 7, 2018) (‘‘Texas’’), are ongoing, CMS will not Section 438.4(c)(1)(iii), as finalized in rate range to permit the administrative require that the HIPF be accounted for in capitation this rule, requires that the upper bound flexibility requested by states. We rates for the six plaintiff states in Texas (Indiana, Kansas, Louisiana, Nebraska, Texas, and Wisconsin) of the rate range does not exceed the believe that the 5 percent rate range is in order for such rates to be approved as actuarially lower bound of the rate range multiplied appropriate to ensure that the rate sound under 42 CFR 438.2 & 438.4(b)(1). by 1.05. This means that the upper development requirements in part 438

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can be satisfied, rather than a wider rate development requirements in part 438 ability to make a permissible +/¥1 range where it may not be possible to can be satisfied, rather than a wider rate percent change provides states find both the upper and lower bounds range where it may not be possible to flexibility to make small changes while of the rate range to be actuarially sound. find both the upper and lower bounds easing the administrative burden of rate Comment: Several commenters of the rate range to be actuarially sound. review for both states and CMS. Further, expressed concern about the However, we are persuaded that our permitting small changes facilitates requirement to recertify modified rates proposal at § 438.4(c)(2)(iii), which CMS’ review process of rate within the rate range, noting that required states to recertify capitation certifications in accordance with the recertification is too rigid and is rates for modifications of the capitation requirements for actuarially sound burdensome for both states and the rates within the rate range, regardless of capitation rates because we would not Federal Government. One commenter whether the modification was for minor require revised rate certifications for requested that additional programmatic changes or a material minor programmatic changes that result documentation could be provided rather error, was too rigid and would likely in minor and potentially immaterial than a requirement to recertify rates. A add unnecessary administrative burden changes to the capitation rates; few commenters expressed concern that and costs for states. We reached this therefore, CMS’ review of rate states cannot modify capitation rate conclusion for minor changes within the certifications can be more focused on ranges using the de minimis flexibility rate range that would not result in substantial issues that impact the in § 438.7(c)(3) and requested that CMS scenarios where such changes resulted capitation rates. allow states to employ both approaches in capitation rates outside of the 5 Comment: Commenters requested to increase flexibility and reduce the percent, or +/¥2.5 percent from the clarification on the acceptable criteria need for recertification when rates midpoint, range. Therefore, we are for paying managed care plans at change because of minor programmatic finalizing § 438.4(c)(2)(iii) as permitting different points within the rate range. changes. Some commenters requested changes (increases or decreases) to the Specifically, commenters requested if that mid-year rate changes be permitted capitation rates per rate cell within the rates can vary based on state within the rate range during the rating rate range up to 1 percent during the negotiations with managed care plans or year without the need to recertify the rating period without submission of a a competitive bidding process. rates to reduce burden and actuarial new rate certification, provided that Response: We note that capitation costs for states. Some commenters also such changes are consistent with a rates, including permissible rate ranges recommended that CMS permit de modification of the contract as required under § 438.4(c), must comply with all minimis modifications to rates used in § 438.3(c) and are subject to the rate setting requirements in §§ 438.4, within the 5 percent rate range. requirements at § 438.4(b)(1). Just as we 438.5, 438.6, and 438.7. This means, as Response: We disagree with do not permit rate ranges in finalized in § 438.4(b)(1), that capitation commenters that states should be able to combination with the de minimis rates must have been developed in use the de minimis rule in § 438.7(c)(3) revision permitted under § 438.7(c)(3), accordance with the standards specified in combination with a rate range. We we will not permit any changes that in § 438.5 and generally accepted proposed and are finalizing a could result in final rates that are actuarial principles and practices. prohibition on such combinations in outside of the 5 percent range or in rate Under this final rule, § 438.4(b)(1) also § 438.4(c)(2)(ii). States may use either ranges that have upper and lower requires that any differences in the the rate range option under § 438.4(c) or bounds that are larger than 5 percent assumptions, methodologies, or factors use the de minimis +/¥1.5 percent apart. used to develop capitation rates for range that is currently codified in Any modification to the capitation covered populations must be based on § 438.7(c)(3), but states are not rates within the rate range greater than valid rate development standards that permitted to use both mechanisms in the permissible +/¥1 percent amount represent actual cost differences in combination. As noted in the 2018 will require states to provide a revised providing covered services to the proposed rule, we proposed rate certification for CMS approval that covered populations (see section I.B.2.b. § 438.4(c)(2)(ii) to enable appropriate demonstrates compliance with the of this final rule for a discussion of this state flexibility and administrative criteria proposed and finalized at provision in § 438.4(b)(1)). We clarify simplification without compromising § 438.4(c)(2)(iii)(A) through (C). We this here to ensure that commenters are program integrity or other fiscal risks. It believe that this modification to what aware that the standards for capitation is our belief that the upper and lower we proposed for this regulation will rate development, including the bounds of a 5 percent, or +/¥2.5 address commenters’ concerns related to development of rate ranges under percent from the midpoint, rate range mid-year programmatic changes or mid- § 438.4(c), do not change with the use of should be permissible only as long as all year rate adjustments. We note that the rate ranges under § 438.4(c). Regarding of the Federal requirements for rate permissible +/¥1 percent standard the acceptable criteria for paying development are met. If states were under § 438.4(c)(2)(iii) is slightly managed care plans at different points permitted to use rate ranges in smaller than the de minimis standard within the rate range, which must be combination with the de minimis (+/¥1.5 percent) for changes that do not documented in the rate certification revision permitted under § 438.7(c)(3), require a new rate certification under documents under § 438.4(c)(1)(iv), we this could result in final rates that are § 438.7(c)(3) when rate ranges are not confirm that such criteria could include outside of the 5 percent range and used. We believe that it is appropriate state negotiations with managed care therefore could result in a rate that is to use the smaller amount under plans or a competitive bidding process, not actuarially sound. We continue to § 438.4(c)(2)(iii) when rate ranges are as long as states document in the rate believe that 5 percent is a reasonable used because when states use rate certification how the negotiations or the rate range to permit the administrative ranges, they are already afforded competitive bidding process produced flexibility requested by states, but also additional flexibility, as rates are different points within the rate range. to ensure that each rate within the entire permissible within the upper and lower For example, if specific, documentable rate range is actuarially sound. We bounds of the rate range, than they are components of the capitation rates believe that the 5 percent rate range is afforded when certifying the rates to a varied because of state negotiations or a appropriate to ensure that the rate specific point. We believe that the competitive bidding process, the rate

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certification must document those Further, we explained how the methodologies that vary, the specific specific variations, as well as document requirement to develop and certify as data and methodologies used for the how those variations produced different actuarially sound each individual rate upper and lower bounds of each rate points within the rate range, to comply paid per rate cell to each managed care cell. We believe that these requirements with § 438.4(c)(1)(iv) and (c)(2)(i). We plan with enough detail to understand ensure that managed care plans and understand that capitation rate the specific data, assumptions, and stakeholders have access to a minimum development necessarily involves the methodologies behind that rate would and standard level of information, for use of actuarial judgment, such as enhance the integrity of the Medicaid reasons outlined in the public adjustments to base data, trend rate setting process (81 FR 27567). We comments. We believe that these projections, etc., and that could be agree with commenters that a significant requirements are also appropriate and impacted by specific managed care plan level of transparency is necessary, necessary to ensure a minimum level of considerations (for example, one particularly if states are using rate transparency when states utilize rate managed care plan’s utilization ranges for competitive bidding ranges under § 438.4(c). We also believe management policies are more purposes. We believe that managed care that this level of information will help aggressive versus another managed care plans and other stakeholders should to ensure that capitation rates are plan’s narrow networks); under this have access to the necessary information appropriately based on actual final rule, states must document such and data to ensure that rates are experience and are actuarially sound criteria as part of the rate certification to actuarially sound, and we believe that since plans will have access to such comply with § 438.4(c)(1)(iv) and such transparency will also help to information prior to executing a (c)(2)(i). ensure that competitive bids are managed care contract. Comment: Several commenters appropriately based on actual Regarding the public comments recommended that CMS add minimum experience and appropriately fund the recommending public comment periods, transparency requirements on the use of program, and that the bids are technical expert panels, dispute rate ranges. A few commenters actuarially sound. Providing managed resolution processes, and specific recommended that states be required to care plans with approved rate ranges studies on access to care, we decline to provide managed care plans with the prior to bidding, with sufficient time adopt these specific recommendations. CMS approved rate ranges and the data and opportunity for managed care plans’ While we believe that states should seek underlying those rate ranges prior to review and input, along with the data broad stakeholder feedback, we do not bidding, with sufficient time and underlying those rate ranges ensures believe that it is necessary to create new opportunity for managed care plans’ that there is transparency in the setting and expansive Federal requirements to review and input. Some commenters and use of rate ranges. accomplish this goal. In our experience, recommended that states be required to Therefore, we are finalizing a states are already working with many provide a comment period for managed requirement at § 438.4(c)(2)(iv) to stakeholder groups, including their care plans to review the rate ranges. One require states, when developing and managed care plans, and we believe that commenter recommended that CMS certifying a range of capitation rates per states should continue to have engage with managed care plans rate cell as actuarially sound, to post discretion in how they convene through a technical expert panel to specified information. States are stakeholder groups and obtain develop appropriate standards for rate required under § 438.10(c)(3) to operate stakeholder feedback to inform ranges. Another commenter a public website that provides certain Medicaid managed care payment policy. recommended that CMS hold a public information. As finalized, If states want to utilize public comment comment period during which § 438.4(c)(2)(iv) requires that states must periods, technical expert panels, or stakeholders can raise issues related to post on their websites specified conduct specific studies on access to rate ranges before and during the information prior to executing a care to help inform their rate setting, bidding process each year. Commenters managed care contract or contract including rate ranges, states are also recommended that CMS require a amendment that includes or modifies a welcome to utilize such approaches. We dispute resolution process when states rate range. We are including this also understand that commenters are and managed care plans do not agree on standard to ensure that managed care interested in Federal dispute resolution the rate ranges. One commenter plans and stakeholders have access to processes; however, we do not believe recommended that CMS require states to the information with sufficient time and that is an appropriate role for CMS in conduct studies to ensure that the rate opportunity for review and input, and to the Medicaid program. When plans and/ ranges are sufficient to facilitate patient ensure that the information is available or other stakeholders do not agree on access to care. to meaningfully inform plans’ execution rates, we would refer those groups to the Response: In the proposed rule, we of a managed care contract with the state Medicaid agencies to appropriately specifically requested public comment state. address specific rate setting concerns. on whether additional conditions or At § 438.4(c)(2)(iv)(A) through (C), we Since state Medicaid agencies are the limitations on the use of rate ranges are finalizing the list of information that direct administrators of the Medicaid would be appropriate to help mitigate must be posted on the state’s website program in their respective states, we the risks we identified. Based on the required by § 438.10(c)(3): (A) The believe that this approach is more comments we received, we understand upper and lower bounds of each rate appropriate. that commenters have significant cell; (B) a description of all assumptions Comment: Some commenters concerns about the lack of transparency that vary between the upper and lower expressed concern that requiring states inherent in the use of rate ranges. The bounds of each rate cell, including for to document the capitation rates at lack of transparency in the use of rate the assumptions that vary, the specific points within the rate range prior to the ranges has also been a significant assumptions used for the upper and start of the rating period is too rigid and concern for us; when we finalized the lower bounds of each rate cell; and (C) unrealistic. Commenters noted that the 2016 final rule, we explained that a description of the data and time and labor-intensive process of elimination of rate ranges would make methodologies that vary between the developing and certifying actuarially the rate setting and the rate approval upper and lower bounds of each rate sound rates can, and often does, result process more transparent (81 FR 27567). cell, including for the data and in unexpected delays that push the

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process into the rating period for which and represent cost-shifting to the proposal does not limit states from the rates are being developed. Federal Government. using permissible sources of the non- Commenters recommended extending Because of these specific concerns, we Federal share to fund costs under the flexibility to states around submission decline to adopt commenters’ managed care contract. Under timing in a manner that maintains recommendations about the timing § 438.4(c)(1)(v), the state is not proper CMS oversight and is consistent guardrails included in § 438.4(c), permitted to use as a criterion for paying with current CMS practice. One including the recommendation that we managed care plans at different points commenter further recommended that if delay this proposal by 3 years. We are within the rate range either of the the timing requirement is finalized, it finalizing the rule with the requirement following: (1) The willingness or should be delayed by 3 years. in § 438.4(c)(2)(i) that states document agreement of the managed care plans or the capitation rates (consistent with the their network providers to enter into, or Response: We acknowledge that our requirements for developing and adhere to, IGT agreements; or (2) the proposed requirement in § 438.4(c)(2)(i) documenting capitation rates) at points amount of funding the managed care that states document the capitation rates within the rate range prior to the start plans or their network providers at points within the rate range prior to of the rating period. However, since rate provide through IGT agreements. This the start of the rating period means, as ranges were previously prohibited prohibition is specific to states using a practical matter, that states electing to under the 2016 final rule (and before amounts transferred pursuant to an IGT use rate ranges must submit contracts this final rule), we believe a transition agreement to pay managed care plans at and rate certifications to us prior to the period is appropriate to allow states that different points within the rate range start of the rating period. We also note elect to utilize the rate range option at under § 438.4(c) and is not a prohibition that section 1903(m)(2)(A)(iii) of the Act § 438.4(c) time to appropriately develop on states’ authority to use permissible and § 438.806 require that the Secretary rate ranges and submit the rate sources of the non-Federal share to fund must provide prior approval for MCO certifications and contracts in advance costs under the managed care contract. contracts that meet certain value of the start of a rating period. Therefore, Further, we explicitly clarify here that thresholds before states can claim FFP. we are delaying the effective date of this certain financing requirements in statute This longstanding requirement is provision to rating periods starting on or and regulation are applicable across the implemented in the regulation at after July 1, 2021. Medicaid program irrespective of the § 438.806(c), which provides that FFP is Comment: A few commenters delivery system (for example, fee-for- not available for an MCO contract that expressed concern about the proposal to service, managed care, and does not have prior approval from us. prohibit states from paying MCOs, demonstration authorities), and are This requirement is necessary and PIHPs, and PAHPs at different points similarly applicable whether a state appropriate to ensure that rate ranges within the certified rate range based on elects to use rate ranges or not. Such the willingness or agreement of the are not used to shift costs onto the requirements include, but are not MCOs, PIHPs, or PAHPs to enter into, or Federal Government and to protect limited to, limitations on financing of adhere to, intergovernmental transfer fiscal and program integrity. As we the non-Federal share applicable to (IGT) agreements, or the amount of noted in the 2018 proposed rule, one of health care-related taxes and bona fide funding the MCOs, PIHPs, or PAHPs the goals of the guardrails we proposed, provider-related donations. provide through IGTs. One commenter and are finalizing here, for use of rate We are concerned that without these ranges is to prevent states from using expressed concern that the proposal is too restrictive on states’ ability to make specific parameters in the regulation, rate ranges to make significant use of non-Federal share sources and states could try to use rate ranges to retroactive changes to the contracted that our proposal constrains states’ inappropriately use IGTs to draw down rates at or after the end of the rating authority under sections 1902(a)(2) and additional Federal dollars with no period; this goal is served by the 1903(w) of the Act to draw upon a correlating benefit to the Federal requirement that rate ranges and the variety of state and local sources to fund Government or the Medicaid program. specific rates per cell be documented the non-Federal share of medical To address commenters’ concerns and provided to CMS prior to the assistance costs, including in the related to increasing levels of provider beginning of the rating period. While we managed care context. One commenter reimbursement for safety-net providers, are not prohibiting outright all stated that the prohibition on varying we note that states can use the authority retroactive rate changes, the limits on payments within a certified rate range for state directed payments under when rates can be changed under based on the existence of IGT § 438.6(c) to direct specific payments to § 438.4(c)(2) will necessarily limit the arrangements is an expansive Federal providers. However, we clarify here that types of retroactive changes that raise restriction on the longstanding ability of certain financing requirements in statute the most issues. As we noted in the states to make use of a variety of non- and regulation are applicable across the 2016 final rule and the 2018 proposed Federal share sources to improve Medicaid program irrespective of the rule, we do not believe that retroactive reimbursement to safety-net providers delivery system (for example, fee-for- changes are made to reflect changes in in managed care. Commenters service, managed care, and the underlying assumptions used to recommended that the regulation be demonstration authorities), and are develop the rates (for example, the amended to allow using IGT agreements similarly applicable whether a state utilization of services, the prices of in conjunction with other criteria for elects to direct payments under services, or the health status of the paying managed care plans at different § 438.6(c). Such requirements include, enrollee), but rather we are concerned points within the rate range. but are not limited to, limitations on that these changes are used to provide Response: We disagree that our financing of the non-Federal share additional reimbursements to the proposal unnecessarily constrains applicable to health care-related taxes managed care plans or to some states’ authority under sections and bona fide provider-related providers without adding corresponding 1902(a)(2) and 1903(w) of the Act to donations. These financing new obligations under the contract. We draw upon a variety of state and local requirements similarly apply when a do not believe that such changes are sources to fund the non-Federal share of state elects to direct payments under consistent with actuarially sound rates medical assistance costs, as our § 438.6(c). We understand that safety-

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net providers play a critical role in data and methodologies used for the generally accepted actuarial principles serving underserved populations in upper and lower bounds of each rate and practices. states, including Medicaid managed cell. In the 2016 final rule (81 FR 27566), care enrollees. We also understand that States certifying a rate range must we adopted § 438.4(b)(1) largely as safety-net providers are critical to document the capitation rates payable to proposed and provided additional maintaining network adequacy and each managed care plan prior to the guidance and clarification in response adequate access to care in many start of the rating period for the to public comments. We stated that the communities, including rural areas of applicable MCO, PIHP or PAHP under practice intended to be prohibited in the state, and we do not believe our § 438.4(c)(2)(i). As noted previously in § 438.4(b)(1) was variance in capitation proposal unnecessarily constrains this final rule, this requirement means rates per rate cell that was due to the states’ authority under sections that states electing to use a rate range different rates of FFP associated with 1902(a)(2) and 1903(w) of the Act to would have to submit rate certifications the covered populations. We also draw upon a variety of state and local to us prior to the start of the rating provided an example in the 2016 final sources to fund the non-Federal share of period and must comply with all other rule, in which we explained that we medical assistance costs, as our regulatory requirements including have seen rate certifications that set proposal does not limit states from § 438.4, except § 438.4(b)(4) as specified. minimum provider payment using permissible sources of the non- In order to publish additional guidance requirements or established risk margins Federal share to fund costs under the needed to implement this requirement, for the managed care plans only for managed care contract. we are delaying the effective date of this covered populations eligible for higher After consideration of the public provision until the first contract rating percentages of FFP. Under the 2016 comments and for the reasons period beginning on or after July 1, final rule, such practices, when not articulated in the proposed rule and our 2021. States that elect to adopt rate supported by the application of valid responses to comments, we are ranges must comply with § 438.4(c) as rate development standards, were not finalizing § 438.4(c) as proposed with amended effective July 1, 2021 for permissible. We further explained that the following modifications: Medicaid managed care rating periods the regulation did not prohibit the state • At § 438.4(c)(2)(iii), we are starting on or after July 1, 2021. from having different capitation rates finalizing authority for a state to make per rate cell based on differences in the b. Capitation Rate Development changes to the capitation rates within projected risk of populations under the Practices That Increase Federal Costs the permissible rate range of up to 1 contract or based on different payment and Vary With the Rate of Federal percent of each certified rate within the rates to providers that were required by Financial Participation (FFP) rate range without the need for the state Federal law (for example, section (§ 438.4(b)(1) and (d)) to submit a revised rate certification. 1932(h) of the Act). In the 2016 final Under final § 438.4(c)(2)(iii), a state may In the 2016 final rule, at § 438.4(b), we rule, we stated that, as finalized, increase or decrease the capitation rate set forth the standards that capitation § 438.4(b)(1) provided that any per rate cell within the rate range up to rates must meet to be approved as differences among capitation rates 1 percent of each certified rate during actuarially sound capitation rates according to covered populations must the rating period provided that any eligible for FFP under section 1903(m) be based on valid rate development changes of the capitation rate within the of the Act. Section 438.4(b)(1) requires standards and not on network provider permissible +/¥1 percent amount must that capitation rates be developed in reimbursement requirements that apply be consistent with a modification of the accordance with generally accepted only to covered populations eligible for contract as required in § 438.3(c) and are actuarial principles and practices and higher percentages of FFP (81 FR subject to the requirements at meet the standards described in § 438.5 27566). § 438.4(b)(1). Any modification to the dedicated to rate development Since publication of the 2016 final capitation rates within the rate range standards. In the 2016 final rule (81 FR rule, we have continued to hear from greater than the permissible +/¥1 27566), we acknowledged that states stakeholders that more guidance is percent amount will require states to may desire to establish minimum needed regarding the regulatory provide a revised rate certification for provider payment rates in the contract standards finalized in § 438.4(b)(1). At CMS approval and to meet the with the managed care plan. We also least one state has stated that if requirements listed in paragraphs explained that because actuarially arrangements that vary provider (c)(2)(iii)(A) through (C). sound capitation rates must be based on reimbursement pre-date the differences • At § 438.4(c)(2)(iv), we are the reasonable, appropriate, and in FFP for different covered finalizing a requirement that states, attainable costs under the contract, populations, the regulation should not when developing and certifying a range minimum provider payment be read to prohibit the resulting of capitation rates per rate cell as expectations included in the contract capitation rates. We explained in the actuarially sound, must post the must necessarily be built into the 2018 proposed rule that while we following specified information on their relevant service components of the rate. believe that the existing text of public websites: (A) The upper and We finalized in the regulation at § 438.4(b)(1) is sufficiently clear, we lower bounds of each rate cell; (B) a § 438.4(b)(1) a prohibition on different also want to be responsive to the description of all assumptions that vary capitation rates based on the FFP comments from stakeholders and to between the upper and lower bounds of associated with a particular population eliminate any potential loophole in the each rate cell, including for the as part of the standards for capitation regulation. Therefore, we proposed to assumptions that vary, the specific rates to be actuarially sound. We revise § 438.4(b)(1) and added a new assumptions used for the upper and explained in the 2015 proposed rule (80 paragraph § 438.4(d) to clearly specify lower bounds of each rate cell; and (C) FR 31120) and the 2016 final rule (81 FR our standards for actuarial soundness. a description of the data and 27566) that different capitation rates We did not propose changes to the methodologies that vary between the based on the FFP associated with a existing regulatory requirement in upper and lower bounds of each rate particular population represented cost- § 438.4(b)(1) that capitation rates must cell, including for the data and shifting from the state to the Federal have been developed in accordance methodologies that vary, the specific Government and were not based on with the standards specified in § 438.5

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and generally accepted actuarial § 438.4(b)(1) and (d): (1) A state may not that modifications to a final certified principles and practices but proposed to use higher profit margin, operating capitation rate comply with our revise the remainder of § 438.4(b)(1). margin, or risk margin when developing regulatory requirements. We requested We proposed that any differences in capitation rates for any covered public comments on our revisions to the assumptions, methodologies, or population, or contract, than the profit § 438.4(b)(1) and new § 438.4(d), factors used to develop capitation rates margin, operating margin, or risk margin including on whether these changes for covered populations must be based used to develop capitation rates for the were sufficiently clear regarding the rate on valid rate development standards covered population, or contract, with development practices that are that represent actual cost differences in the lowest average rate of FFP; (2) a state prohibited in § 438.4(b)(1). providing covered services to the may not factor into the development of The following summarizes the public covered populations. Further, we capitation rates the additional cost of comments received on our proposal to proposed that any differences in the contractually required provider fee revise § 438.4(b)(1) and add § 438.4(d) assumptions, methodologies, or factors schedules, or minimum levels of and our responses to those comments. used to develop capitation rates must provider reimbursement, above the cost Comment: Many commenters not vary with the rate of FFP associated of similar provider fee schedules, or supported the proposal to prohibit with the covered populations in a minimum levels of provider certain rate development practices and manner that increases Federal costs reimbursement, used to develop to require a state to provide written consistent with a new proposed capitation rates for the covered documentation that rate variations are paragraph (d). Our proposal was population, or contract, with the lowest based on actual cost differences. Many intended to eliminate any ambiguity in average rate of FFP; and (3) a state may commenters also opposed this proposal the regulation and clearly specify our not use a lower remittance threshold for and noted that there are often legitimate intent that variation in the assumptions, a medical loss ratio for any covered and actuarially sound reasons for methodologies, and factors used to population, or contract, than the varying pricing assumptions between develop rates must be tied to actual cost remittance threshold used for the rate cells that are independent of differences and not to any differences covered population, or contract, with differing levels of FFP. Commenters that increase Federal costs and vary the lowest average rate of FFP. We stated that there are valid actuarial with the rate of FFP. The proposed proposed § 438.4(d)(1) to be explicit reasons where varying rating revisions to § 438.4(b)(1) used the about certain rate development practices components would be supported by phrase ‘‘assumptions, methodologies, that increase Federal costs and vary actuarial experience and data. and factors’’ to cover all methods and with the rate of FFP. Our proposal was Commenters recommended that were data used to develop the actuarially to explicitly prohibit the listed rate CMS to finalize the proposed amendments to § 438.4(b)(1) and (d), we sound capitation rates. development practices under any and In conjunction with our proposed do it in a way that would allow states all scenarios; we also noted that the rate revisions to § 438.4(b)(1), we also to continue to have differentials in development practices under proposed a new paragraph (d) to margins, payment levels, and MLR § 438.4(d)(1) were not intended to provide specificity regarding the rate remittance thresholds for higher FFP represent an exhaustive list of practices development practices that increase contracts when those differences are that increase Federal costs and vary Federal costs and vary with the rate of justified in data and actuarial with the rate of FFP, as we recognized FFP. We proposed in § 438.4(d) a experience. that there may be additional capitation regulatory requirement for an evaluation Commenters stated that valid rate rate development practices that have the of any differences in the assumptions, development practices would be same effect and would also be methodologies, or factors used to prohibited under the proposal, develop capitation rates for MCOs, prohibited under our proposed rule. In including using a lower margin PIHPs, and PAHPs that increase Federal the 2018 proposed rule, we explained assumption for populations with more costs and vary with the rate of FFP our goal of ensuring that the regulatory stable costs, varying MLR thresholds associated with the covered standards for actuarial soundness based on actual administrative cost populations. We explained that this clearly prevent cost-shifting from the differences, adjusting the underwriting evaluation would have to be conducted state to the Federal Government. gain used, and using higher for the entire managed care program and Finally, in § 438.4(d)(2), we proposed reimbursement for highly specialized include all managed care contracts for to specify that we may require a state to providers or services or in areas where all covered populations. We proposed to provide written documentation and it is difficult to recruit providers. require this evaluation across the entire justification, during our review of a Commenters stated that the proposal is managed care program and all managed state’s capitation rates, that any too prescriptive and duplicative of care contracts for all covered differences in the assumptions, current requirements and recommended populations to protect against state methodologies, or factors used to that CMS allow states to use contracting practices in their Medicaid develop capitation rates for covered assumptions that reflect different levels managed care programs that may cost- populations or contracts, not otherwise of risk so that rate cells are shift to the Federal Government. We referenced in paragraph (d)(1), represent appropriately funded. Commenters noted that this would entail actual cost differences based on the stated that restricting actuarial variables comparisons of each managed care characteristics and mix of the covered from being determined by certain contract to others in the state’s managed services or the covered populations. We program characteristics will result in care program to ensure that variation noted that our proposal was consistent rates that are not actuarially sound. A among contracts does not include rate with proposed revisions to § 438.7(c)(3), few commenters also believed that the setting methods or policies that would to add regulatory text to specify that proposal could unintentionally result in be prohibited under our proposal. adjustments to capitation rates would be new cost-shifting to the Federal We also proposed at § 438.4(d)(1) to subject to the requirements at Government, such as requiring higher list specific rate development practices § 438.4(b)(1), and to require a state to margin assumptions for certain that increase Federal costs and would be provide documentation for adjustments populations or requiring higher levels of prohibited under our proposal for permitted under § 438.7(c)(3) to ensure provider reimbursement in specific

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programs. One commenter requested Government and were not based on capitation rates associated with the rate that the regulation differentiate generally accepted actuarial principles of FFP for different covered situations where rate development and practices. In the 2016 final rule (81 populations. Further, we explicitly assumptions are intended to increase FR 27566), we finalized, at § 438.4(b)(1), clarify here that § 438.4(b)(1) is not Federal costs from those where such an a prohibition on different capitation premised on nor require a state’s outcome is incidental and that CMS rates based on the FFP associated with intention to shift costs to the Federal should only prohibit the former. a particular population as part of the Government; we believe that an intent Several commenters recommended standards for capitation rates to be to cost shift is immaterial compared to that instead of prohibiting certain rate actuarially sound. Also in the 2016 final the actual effect of cost shifting. development practices, CMS should rule (81 FR 27566), we provided Therefore, as part of this final rule, we instead require documentation and additional guidance and clarification in are finalizing amendments to justification that variations related to response to public comments that the § 438.4(b)(1) to codify this policy margin, provider reimbursement, or practice intended to be prohibited in clearly. Section 438.4(b)(1), as amended, MLR are actuarially valid. One § 438.4(b)(1) was variance in capitation continues to require that capitation rates commenter recommended that CMS rates per rate cell that was due to the be developed in accordance with the only require such documentation in different rates of FFP associated with standards specified in § 438.5 and circumstances when we believe that the the covered populations; that discussion generally accepted actuarial principles variation is related to FFP. One included an example where rate and practices. We are also finalizing the commenter expressed concern that the certifications set minimum provider proposed new and revised regulation text that any differences in the requirement to provide documentation payment requirements or established duplicates existing policy. One assumptions, methodologies, or factors risk margins for the managed care plans commenter requested clarification on used to develop capitation rates for only for covered populations eligible for whether the written justification is part covered populations must be based on higher percentages of FFP. We note that of the rate certification process and valid rate development standards that setting minimum provider payment supporting documents, the managed represent actual cost differences in requirements for covered populations care contract review, or is an additional providing covered services to the under the managed care contract is requirement. covered populations and that any permissible as long as such Response: Our goal in proposing these differences in the assumptions, revisions to § 438.4(b)(1) and (d) was to requirements apply broadly, are not methodologies, or factors used to clarify the standards that capitation selectively applied to only those develop capitation rates must not vary rates must meet to be approved as covered populations eligible for higher with the rate of FFP associated with the actuarially sound capitation rates percentages of FFP, are supported by covered populations in a manner that eligible for FFP under section 1903(m) valid rate development standards that increases Federal costs. We are not of the Act. Our proposal was also represent actual cost differences in finalizing the text proposed in intended to eliminate any ambiguity in providing covered services to the paragraph (d)(1) to address the concerns the regulations and to clearly specify covered populations, and do not shift from commenters that proposed that variation in the assumptions, costs to the Federal Government. In the § 438.4(d)(1) was too restrictive and methodologies, and factors used to 2016 final rule, we explained how overlooked scenarios where the develop rates must be tied to actual cost § 438.4(b)(1), as adopted there, required proposed list of prohibited rate differences and not to any differences that any differences among capitation development practices may be that increase Federal costs and vary rates according to covered populations actuarially appropriate. with the rate of FFP. We remain must be based on valid rate We will generally use the list of committed to these goals, and to our development standards and not on prohibited rate development practices overarching goals of improving fiscal network provider reimbursement in interpreting the prohibition finalized and program integrity within Medicaid requirements that apply only to covered in paragraph (b)(1) and we will consider managed care rate setting. However, we populations eligible for higher the state’s documentation and believe it is appropriate to finalize the percentages of FFP (81 FR 27566). In the justification in applying the prohibition. proposal with changes to address the 2018 proposed rule (83 FR 57268), we We originally proposed § 438.4(d)(1) in concerns of commenters that our clarified our policy that § 438.4(b)(1) conjunction with our proposed proposal was too restrictive and was intended to prohibit variances in revisions to § 438.4(b)(1) to provide overlooked scenarios by which our capitation rates based on the rate of FFP, specificity regarding the rate prohibited rate development practices even if such variances in capitation development practices that we believed under proposed § 438.4(d) may be rates were the result of variances in increased Federal costs and varied with actuarially appropriate in limited provider reimbursement that pre-date the rate of FFP; however, based on circumstances. the differences in FFP for different public comments, we agree with We reiterate that our overarching covered populations. We explained that commenters that there could be policy goal of prohibiting variation in our current proposal would eliminate legitimate and actuarially sound reasons capitation rates associated with the FFP ambiguity on this point and eliminate for varying pricing assumptions for a particular population, which we any potential loophole in § 438.4(b)(1) between rate cells that are (and must be) explained in the 2015 proposed rule, by more clearly specifying the scope of independent of differing levels of FFP, 2016 final rule, and the 2018 proposed the prohibition. We reiterate these and that there could be valid actuarial rule, has not changed and is not published statements here as part of this reasons for an actuary to vary rating changing as part of this final rule. final rule and remind commenters that components that would be supported by Specifically, we explained in the 2015 CMS has not changed our position on actuarial experience and data. proposed rule (80 FR 31120) that this topic. As finalized with the Therefore, as part of this final rule, we different capitation rates based on the amendments in this final rule, are not finalizing the list of rate FFP associated with a particular § 438.4(b)(1) prevents states from cost- development practices that we proposed population represented cost-shifting shifting onto the Federal Government in § 438.4(d)(1). We agree with the from the state to the Federal and prohibits any variances in commenters that we are unable to

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predict every future scenario and there We are finalizing this requirement for an services to the covered populations, we might be situations where one or more evaluation across the entire managed would find the assumptions to be of the items on that list of rate care program and all managed care consistent with valid rate development development practices is actuarially contracts for all covered populations to standards. If a population has appropriate. We remind commenters protect against any potential loopholes documented higher costs, supported by that it is still our view that these rate where state managed care contracting actual experience, we would not find development practices generally practices may cost-shift to the Federal the pricing assumptions to be in increase Federal costs and vary with the Government. Specifically, as noted in violation of finalized § 438.4(b)(1), even rate of FFP. As such, in situations where the proposed rule, this requirement if the higher cost population is also one one of those practices is not actuarially would entail comparisons of each with a higher FFP percentage. However, appropriate and where it increases managed care contract to others in the we emphasize that varying pricing Federal costs, we will apply state’s managed care program to ensure assumptions must not include using a § 438.4(b)(1) to deny rates that have that variation among contracts does not rate development practice that increases been developed based on such practices. include rate setting methods or policies Federal costs and varies with the rate of To fully evaluate scenarios where that would be prohibited under FFP when not supported by valid rate differences in the assumptions, § 438.4(b)(1). development standards that represent methodologies, or factors used to Comment: A few commenters noted actual cost differences in providing develop capitation rates appear to vary that risk margin differences can apply covered services to the covered with the rate of FFP, we believe that we between TANF, ABD, and LTSS populations. As finalized in this rule will need additional information and populations and expressed concern that under § 438.4(b)(1), any differences in explanation from the state. If states or the proposal would require the assumptions, methodologies, or actuaries intend to utilize these rate inappropriate comparisons between factors used to develop capitation rates development practices, we need to be populations that have legitimate cost must not vary with the rate of FFP able to require written documentation differences. Other commenters provided associated with the covered populations and justification that any differences in that the proposed regulation may have in a manner that increases Federal costs the assumptions, methodologies, or the unintended effect of causing unless those variances represent actual factors used to develop capitation rates actuaries to increase margins on cost differences in providing covered for covered populations or contracts disabled or LTSS populations to services to the covered population. represent actual cost differences based maintain justifiable higher margin Under the regulations governing rate on the characteristics and mix of the assumptions for non-LTSS populations, setting at §§ 438.4 through 438.7, covered services or the covered which could increase Federal and state including as revised in this final rule, populations. We had originally costs for the Medicaid program. states and actuaries can vary the pricing proposed a requirement for submission Commenters stated that from an assumptions based on actual cost of information and documentation for actuarial standpoint, the percentage risk differences in providing covered this purpose under § 438.4(d)(2). Since margin may appropriately vary by services to the covered populations we are not finalizing § 438.4(d), we are population characteristics due to under the contract, but the prohibition finalizing this proposed standard as part insurance risk differences. Commenters on shifting costs to the Federal of the new text in § 438.4(b)(1). To also explained that populations may Government through use of such have very different PMPM costs and, in variances remains. We also believe that address commenters’ request for clarity, particular, that expansion populations there are other tools that can be used to we note that such written may require higher risk margins to mitigate the issues that were raised by documentation and justification would account for unknown risks associated commenters without inappropriately be required as part of CMS’ review of with a population not previously shifting costs onto the Federal the rate certification. covered by the Medicaid program. Government and running afoul of We are finalizing the introduction in Commenters recommended that CMS § 438.4(b)(1). Although we are not proposed paragraph (d) as part of the monitor for inappropriate rate setting finalizing a list of specifically new text in § 438.4(b)(1) that the practices or require additional prohibited rate development practices evaluation of compliance with documentation if we believe that cost- (as proposed at § 438.4(d)), it is still our § 438.4(b)(1) be on a program-wide shifting is occurring, but these view that these rate development basis, including all managed care commenters recommended that CMS practices generally increase Federal contracts and covered populations. The not finalize the proposal prohibiting costs and vary with the rate of FFP, and final rule continues to prohibit any specific rate development practices. One as such, are generally prohibited under differences in the assumptions, commenter stated that existing CMS § 438.4(b)(1) as finalized in this rule. If methodologies, or factors used to authority enables us to enforce states or actuaries intend to utilize these develop capitation rates that vary with appropriate rate setting and that the rate development practices (for the rate of FFP associated with a proposed revisions to § 438.4(b)(1) and example, higher margin assumptions for covered population in a manner that (d) are unnecessary. non-LTSS populations), we will require increases Federal costs. To ensure that Response: We understand the issues written documentation and justification this requirement is met, the final rule raised by commenters and reiterate that that any differences in the assumptions, requires an evaluation of any differences to the degree the pricing assumptions methodologies, or factors used to in the assumptions, methodologies, or are based on actual cost differences in develop capitation rates for covered factors used to develop capitation rates providing covered services to the populations or contracts represent for MCOs, PIHPs, and PAHPs that covered populations under the contract, actual cost differences based on the increase Federal costs and vary with the these varying pricing assumptions characteristics and mix of the covered rate of FFP associated with the covered would be permissible under services or the covered populations. populations. This evaluation must be § 438.4(b)(1) as valid rate development Comment: Several commenters conducted for the entire managed care factors. To the degree that varying provided that our proposal to restrict program and include all managed care pricing assumptions represent actual capitation rate development practices contracts for all covered populations. cost differences in providing covered that are based on minimum levels of

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provider reimbursement would likely when not supported by the application populations eligible for higher result in unintended consequences for of valid rate development standards, are percentages of FFP, are supported by states seeking to comply with the not permissible. Any differences among valid rate development standards that provisions under at least two scenarios: capitation rates according to covered represent actual cost differences in (1) States would be required to decrease populations must not shift costs to the providing covered services to the provider reimbursement rates to the Federal Government and must be based covered populations and do not shift lowest common denominator of the on valid rate development standards costs to the Federal Government. We lowest FFP contracts, which could rather than network provider note that varying pricing assumptions diminish access to care for some reimbursement requirements that apply based on provider payment Medicaid populations; or (2) States to covered populations eligible for requirements mandated by state would be required to increase provider higher percentages of FFP even in cases legislation that shift costs to the Federal reimbursement rates to the highest where provider reimbursement Government do not constitute actual common denominator of the higher FFP requirements for such populations are cost differences in providing covered contracts for the lowest FFP contracts, mandated by state statute. Furthermore, services. which could increase Federal and state we reiterate that setting minimum To the extent that states need to Medicaid expenditures. Commenters provider payment requirements for enhance reimbursement for specific also provided that many states have covered populations under the managed providers or specific services, we contracts for a specific population, such care contract is not permissible if such believe that states can utilize other as a population at the average FMAP requirements shift costs to the Federal means to accomplish that goal, such as enhancing fees for covered services rate, with state statute setting the rate Government, even if such differential across all of their programs rather than structure at the state’s FFS rates; in provider payments are authorized under varying fee schedules only for higher these circumstances, this proposal § 438.6(c). For example, we have seen FMAP populations. We also understand would make the state’s FFS rate one state use § 438.4(b)(1) to vary that some states may have legislatively structure the standard by which other provider reimbursement for covered mandated fee schedules; however, as managed care contracts would be populations eligible for higher long as such states comply with all evaluated, which may not be actuarially percentages of FFP, as mandated by applicable regulatory requirements and appropriate. A few commenters also state law and not on valid rate are not including additional costs or expressed concern that fee schedule development standards, and this state variation is limited under the proposal mandating higher levels of has stated that when such arrangements reimbursement for higher FMAP and noted that there is often a need to pre-date differences in FFP, the increase the fee schedules for certain populations, states can comply with regulation should not be read to prohibit mandated fee schedules and this provider types to meet network the resulting capitation rates. Our adequacy and encourage provider regulation without a conflict. Mandated proposal and the amendment to fee schedules that comply with all participation. These commenters § 438.4(b)(1) we are finalizing here expressed concern that such limitations applicable regulatory requirements and eliminates that particular argument as a do not result in higher payment for on provider fee schedules may unfairly potential loophole. Regardless of when burden managed care plans. higher FMAP populations may be used the differential rates were started, as the basis for rate setting for the Commenters urged CMS not to finalize § 438.4(b)(1) as amended in this rule managed care contracts. We emphasize this provision as part of the proposal. requires that differential rates be based that varying pricing assumptions must Response: We understand the issues on valid rate development standards not include using a rate development raised by commenters and reiterate that and that they not shift costs to the practice that increases Federal costs and to the degree the pricing assumptions Federal Government; such non- varies with the rate of FFP when not are based on actual cost differences in compliant differential rates must be supported by valid rate development providing covered services to the eliminated. As revised, § 438.4(b)(1) standards that represent actual cost covered populations under the contract, prevents states from cost-shifting onto differences in providing covered these varying pricing assumptions the Federal Government and prohibits services to the covered populations would be permissible under any variances in capitation rates based regardless of whether such differences § 438.4(b)(1) as valid rate development on the rate of FFP for different covered are mandated by state legislation. As factors. To the degree that varying populations, regardless of whether finalized in this rule under § 438.4(b)(1), pricing assumptions represent actual arrangements that vary provider any differences in the assumptions, cost differences in providing covered reimbursement are mandated by state methodologies, or factors used to services to the covered populations, we statute and/or pre-date the differences develop capitation rates must not vary would find the assumptions to be in FFP for different covered with the rate of FFP associated with the consistent with valid rate development populations. We note that this state also covered populations in a manner that standards. If a population has stated that the different rates were increases Federal costs. documented higher costs, supported by intended to better align Medicaid rates Although we are not finalizing a list actual experience, we would not find with commercial rates but did not of prohibited rate development practices the pricing assumptions to be in demonstrate that differential provider (as proposed at § 438.4(d)), it is still our violation of finalized § 438.4(b)(1). payments for one covered population view that these rate development However, in our experience in was a valid rate development factor. As practices generally increase Federal reviewing and approving capitation noted above in a previous response to costs and vary with the rate of FFP, and rates, we have seen rate certifications public comments in this section, setting as such, are prohibited in most cases that set minimum provider payment minimum provider payment under § 438.4(b)(1) as finalized in this requirements for the managed care plans requirements for covered populations rule. If states or actuaries intend to for covered populations eligible for under the managed care contract is utilize these rate development practices, higher percentages of FFP. We note here permissible as long as such we will require written documentation that such practices, when they shift requirements apply broadly, are not and justification that any differences in costs to the Federal Government and selectively applied to covered the assumptions, methodologies, or

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factors used to develop capitation rates applied the same methodologies for Act, enacted October 24, 2018, amended for covered populations or contracts developing the administrative costs section 1903(m) of the Act to add a new represent actual cost differences based within the capitation rate, and therefore, paragraph (m)(9). Section 1903(m)(9) on the characteristics and mix of the the corresponding MLR remittance provides a time-limited opportunity covered services or the covered threshold is based on those same (after fiscal year 2020 but before fiscal populations. underlying methodologies. In such a year 2024) for states that collect an MLR Comment: A few commenters situation, we would not find this remittance from their Medicaid expressed concern with the proposal (at approach to be a violation of managed care plans for the eligibility proposed § 438.4(d)(1)(iii)) that states § 438.4(b)(1) despite the different MLR group described in section may not use a lower MLR remittance thresholds used in setting the rates for 1902(a)(10(A)(i)(VIII) to apply the state’s threshold for expansion populations high and low FMAP populations. regular Federal medical assistance than the MLR remittance threshold used We emphasize that varying pricing percentage (FMAP) match rate for TANF, ABD, and LTSS contracts. assumptions must not include using a (calculated pursuant to section 1905(b) Commenters stated that it is impractical rate development practice that increases of the Act) to determine the Federal and not actuarially sound to use an Federal costs and varies with the rate of share of that remittance instead of the average MLR remittance threshold FFP when not supported by valid rate higher FMAP match rate specified without acknowledging the actual costs development standards that represent under 1905(y) for use in connection of each managed care program and actual cost differences in providing with the Medicaid expansion group. covered population. One commenter covered services to the covered Since this statutory provision is limited noted that remittance thresholds vary as populations. We note that varying to requirements on the amounts paid to a function of the administrative load of pricing assumptions based only on the Federal Government on certain MLR a product and is unrelated to the FFP for provider payment requirements remittances within the specified the program. Some commenters mandated by state legislation do not parameters of the statute, and not expressed concern that the proposal will constitute actual cost differences in related to varying the remittance force states to reduce MLR remittance providing covered services. As finalized thresholds for specific populations or thresholds for all managed care in this rule under § 438.4(b)(1), any contracts, section 4001 of the SUPPORT contracts, which will increase Federal differences in the assumptions, for Patients and Communities Act is Medicaid costs. Some commenters also methodologies, or factors used to outside the scope of this final rule. stated that there are valid actuarial develop capitation rates must not vary Specifically, we clarify for this reasons to establish a higher MLR with the rate of FFP associated with the commenter that this final rule does not remittance threshold for LTSS covered populations in a manner that implicate the requirements under populations, and that states should not increases Federal costs. Although we are section 4001 of the SUPPORT for be prohibited from designing such not finalizing a list of prohibited rate Patients and Communities Act regarding reasonable approaches based on development practices (as proposed at the amounts paid to the Federal actuarially sound practices. § 438.4(d)(1)), it is still our view that Government on certain MLR Commenters provided that the these rate development practices remittances. administrative costs for an LTSS generally increase Federal costs and Comment: A few commenters program as a percent of revenue is lower vary with the rate of FFP, and as such, requested clarification regarding than an expansion program (managed are prohibited in most cases under whether the proposal would apply to care plan covering the Medicaid benefits § 438.4(b)(1) as finalized in this rule. If CHIP programs. for the expansion population). As such, states or actuaries intend to utilize these Response: We clarify here that our if a minimum MLR threshold is rate development practices, we will proposal under § 438.4(d) was never developed with an equal likelihood of require written documentation and intended to and our amendment of being triggered by each program, the justification that any differences in the § 438.4(b)(1) does not apply to CHIP LTSS MLR threshold would need to be assumptions, methodologies, or factors programs. The CHIP requirements for higher for the LTSS program. used to develop capitation rates for rate development are found in Response: We agree with commenters covered populations or contracts § 457.1203, which does not incorporate and acknowledge that our proposed rule represent actual cost differences based or reference the Medicaid managed care failed to account for varying MLR on the characteristics and mix of the regulations on actuarial soundness and thresholds for high-cost populations, covered services or the covered rate setting. such as LTSS populations. We agree populations. Comment: A few commenters that if a minimum MLR threshold is Comment: One commenter expressed expressed concern that CMS refers to a developed with an equal likelihood of concern that the proposal does not list of prohibited rate development being triggered, the MLR may need to be account for recent statutory changes practices that are ‘‘including but not higher for LTSS programs because the made by section 4001 of the Substance limited to’’ certain practices. These administrative costs, as a percent of Use-Disorder Prevention that Promotes commenters expressed concern that this revenue, may be lower. Under Opioid Recovery and Treatment non-exhaustive list requires additional § 438.4(b)(1) as finalized here, we will (SUPPORT) for Patients and clarification and recommended that require states to provide valid reasons Communities Act (Pub. L. 115–271, specific rate development practices be for varying the MLR threshold enacted October 24, 2018), which allows identified through notice and comment component in contracts where the FFP states to retain a larger share of the rulemaking. percentages are different. For approval remittances collected from managed Response: The list of specific rate of rates that are developed using such care plans by remitting funds back to development practices that we proposed different MLR thresholds, a state could the Federal Government for expansion to prohibit outright in proposed demonstrate that it has used factors to enrollees at the state’s standard rate of § 438.4(d) is not being finalized. develop rates based on valid rate FFP, provided that certain statutory However, should such practices be used development standards and not on conditions are met. and result in rates that violate the differences that increase Federal costs Response: Section 4001 of the standard we proposed and are finalizing and vary with the rate of FFP, and it has SUPPORT for Patients and Communities in the amendment of § 438.4(b)(1), the

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resulting rates will not be approved. We This provision was proposed as part of compliance. This means that the state’s confirm for commenters that should we paragraph (d)(2). rate development for CY 2021 would find it necessary to prohibit specific rate • At § 438.4(b)(1), we are not need to use base data that is compliant development practices in the future, we finalizing any references to paragraph with § 438.5(c)(2). would do so through notice and (d). The following summarizes the public comment rulemaking. Here, however, 3. Rate Development Standards: comments received on our proposal to we are limiting how rates must be Technical Correction (§ 438.5(c)(3)(ii)) revise § 438.5(c)(3)(ii) and our responses developed to ensure that differences in to those comments. the assumptions, methodologies, and In the 2016 final rule, we finalized at Comment: A few commenters factors used to develop rates are based § 438.5(c)(3) an exception to the base supported the proposed language on valid rate development factors that data standard at § 438.5(c)(2) in change. One of these commenters represent actual cost differences and do recognition of circumstances where supported the proposal to use the term states may not be able to meet the not vary with the rate of FFP in a ‘‘identified’’ in § 438.5(c)(3)(ii) instead standard at paragraph (c)(2) regarding manner that increases Federal costs. of the word ‘‘discover,’’ which was used base data. We explained in the 2016 After consideration of the public in the preamble of the 2016 final rule to final rule preamble (81 FR 27574) that comments and for the reasons describe the regulation. One of these states requesting the exception under articulated in the proposed rule and our commenters also urged CMS to ensure § 438.5(c)(3) must submit a description responses to comments, we are that the base data used by a state of why the exception is needed and a finalizing our proposed amendments to submitting a corrective action be corrective action plan detailing how the § 438.4(b)(1) with modifications and are improved to meet the standards in state will bring their base data into not finalizing the proposed addition of § 438.5 and recommended that CMS § 438.4(d); specifically, we are finalizing compliance no more than 2 years after the rating period in which the enforce these requirements. One of these amendments to § 438.4(b)(1) as follows: commenters also requested that the base • At § 438.4(b)(1), we are finalizing deficiency was discovered. data be required to include all available the proposal to add regulation text to Regrettably, the regulation text and emerging experience, such as provide that any differences in the regarding the corrective action timeline pharmacy utilization experience. assumptions, methodologies, or factors at § 438.5(c)(3)(ii) was not as consistent used to develop capitation rates for with the preamble or as clear as we Response: We agree with commenters covered populations must be based on intended. The regulation text finalized that the term ‘‘identified’’ in the valid rate development standards that in 2016 provided that the state must regulatory text is appropriate, and represent actual cost differences in adopt a corrective action plan to come therefore, we used it in the proposed providing covered services to the into compliance ‘‘no later than 2 years rule and this final rule. We also agree covered populations and that any from the rating period for which the with commenters that states and differences in the assumptions, deficiency was identified.’’ The actuaries should be utilizing base data methodologies, or factors used to preamble text described the required that is compliant with the standards and develop capitation rates must not vary corrective action plan as detailing how requirements set forth in the 2016 final with the rate of Federal financial the problems ‘‘would be resolved in no rule, and we assure commenters that participation (FFP) associated with the more than 2 years after the rating period CMS is enforcing those rules. While we covered populations in a manner that in which the deficiency was also agree with commenters that our increases Federal costs. discovered.’’ This discrepancy resulted base data standards should include the • At § 438.4(b)(1), we are finalizing in ambiguity that confused some use of appropriate available and that the evaluation of compliance with stakeholders as to when the corrective emerging experience, we did not § 438.4(b)(1) be on a program-wide action plan must be completed and propose any changes to the standards basis, including all managed care when a state’s base data must be in governing base data and are not contracts and covered populations. The compliance. To remove this ambiguity, finalizing any changes to those final rule will require an evaluation of we proposed to replace the word ‘‘from’’ standards in § 438.5(c)(1) and (2). We any differences in the assumptions, at § 438.5(c)(3)(ii) with the phrase ‘‘after remind commenters that the general methodologies, or factors used to the last day of.’’ The preamble of the rule for base data at § 438.5(c)(2) already develop capitation rates for MCOs, 2016 final rule used the term requires states and their actuaries to use PIHPs, and PAHPs that increase Federal ‘‘discovered’’, while the regulatory text the most appropriate data, with the costs and vary with the rate of FFP used the term ‘‘identified.’’ We basis of the data being no older than associated with the covered proposed to retain the term ‘‘identified’’ from the 3 most recent and complete populations. This evaluation must be in the regulatory text since we believed years prior to the rating period, for conducted for the entire managed care this term to be more appropriate in this setting capitation rates. Such base data program and include all managed care context. We explained that our must be derived from the Medicaid contracts for all covered populations. proposed change would clarify the population, or, if data on the Medicaid This provision was proposed as part of corrective action plan timeline for states population is not available, derived the introduction text to paragraph (d). to achieve compliance with the base from a similar population and adjusted • At § 438.4(b)(1), we are also data standard; that is, states would have to make the utilization and price data finalizing the authority for CMS to the rating year for which the corrective comparable to data from the Medicaid require a state to provide written action period request was made, plus 2 population. Data must also be in documentation and justification that years following that rating year to accordance with actuarial standards for any differences in the assumptions, develop rates using the required base data quality. methodologies, or factors used to data. For example, if the state’s rate After consideration of the public develop capitation rates for covered development for calendar year (CY) comments and for the reasons populations or contracts represent 2018 did not comply with the base data articulated in the proposed rule and our actual cost differences based on the requirements, the state would have 2 responses to comments, we are characteristics and mix of the covered calendar years after the last day of the finalizing the amendment to services or the covered populations. 2018 rating period to come into § 438.5(c)(3)(ii) as proposed.

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4. Special Contract Provisions Related to use of risk-sharing mechanisms, we did noted that section 1903(m)(2)(A)(iii) of Payment (§ 438.6) not specifically prohibit retroactive the Act, as well as implementing a. Risk-Sharing Mechanism Basic adoption and use of risk-sharing regulations at § 438.806, require that the Requirements (§ 438.6(b)) mechanisms. However, since Secretary must provide prior approval publication of the 2016 final rule, we for MCO contracts that meet certain In the ‘‘Medicaid and Children’s have found that some states have value thresholds before states can claim Health Insurance Program (CHIP) applied new or modified risk-sharing FFP. This longstanding requirement is Programs; Medicaid Managed Care, mechanisms retrospectively; for implemented in the regulation at CHIP Delivered in Managed Care, example, some states have sought § 438.806(c), which provides that FFP is Medicaid and CHIP Comprehensive approval to change rates, or revise a not available for an MCO contract that Quality Strategies, and Revisions medical loss ratio (MLR) requirement, does not have prior approval from us. Related to Third Party Liability’’ after the claims experience for a rating We have, since the early 1990s, proposed rule (the 2015 proposed rule) period became known to the state and interpreted and applied this (80 FR 31098, June 1, 2015), we the managed care plan. As noted in the requirement by not awarding FFP until proposed to redesignate the basic 2018 proposed rule, we acknowledge the contract has been approved and requirements for risk contracts the challenges in setting prospective permitting FFP back to the initial date previously in § 438.6(c)(2) as § 438.6(b). capitation rates and encourage the use of a contract approved after the start of In § 438.6(b)(1), we proposed a non- of appropriate risk-sharing mechanisms; the rating period if an approvable exhaustive list of risk-sharing in selecting and designing risk-sharing contract were in place between the state mechanisms (for example, reinsurance, mechanisms, states and their actuaries and the managed care plan. This risk corridors, and stop-loss limits) and are required to only use permissible practice is reflected in the State required that all such mechanisms be strategies, use appropriate utilization Medicaid Manual, section 2087. specified in the contract. In the and price data, and establish reasonable The following summarizes the public preamble, we stated our intent to risk-sharing assumptions. comments received on our proposal to interpret and apply § 438.6(b)(1) to any We also acknowledged in the 2018 amend § 438.6(b)(1) and our responses mechanism or arrangement that has the proposed rule how, despite a state’s best to those comments. effect of sharing risk between the MCO, efforts to set accurate and appropriate Comment: Several commenters PIHP, or PAHP, and the state (80 FR capitation rates, unexpected events can supported the proposed amendment 31122). We did not receive comments occur during a rating period that that risk-sharing mechanisms be on paragraph (b)(1) and finalized the necessitate a retroactive adjustment to documented in a state’s contract and paragraph as proposed in the 2016 final the previously paid rates. We explained rate certification documents prior to the rule (81 FR 27578) with one that when this occurs, states should start of the rating period. Commenters modification. comply with § 438.7(c)(2), which noted that doing so would improve In the 2016 final rule, we included the provides the requirements for making a transparency and facilitate CMS’ standard from the then-current rule retroactive rate adjustment. Section oversight of these risk-sharing (adopted in 2002 in the ‘‘Medicaid 438.7(c)(2) clarifies that the retroactive mechanisms. One commenter noted the Program; Medicaid Managed Care: New adjustment must be supported by an proposed amendment to § 438.6(b)(1) Provisions’’ final rule (67 FR 40989, appropriate rationale and that sufficient would promote a more reliable and June 14, 2002) (hereinafter referred to as data, assumptions, and methodologies predictable method for risk-adjusting the ‘‘2002 final rule’’)) that risk-sharing used in the development of the payments to managed care plans. mechanisms must be computed on an adjustment must be described in Commenters also stated that risk-sharing actuarially sound basis. The 2015 sufficient detail and submitted in a new mechanisms should be documented in proposed rule inadvertently omitted the rate certification along with the contract the contract prior to the start of the requirement that risk-sharing amendment. rating period to provide certainty to mechanisms be computed on an To address the practice of adopting or both states and their contracted actuarially sound basis but we finalized amending risk-sharing mechanisms managed care plans. § 438.6(b)(1) with that standard retroactively, we proposed to amend Response: We appreciate commenters’ included in the 2016 final rule (81 FR § 438.6(b)(1) to require that risk-sharing support and agree that risk-sharing 27578). As managed care contracts are mechanisms be documented in the mechanisms should be documented in a risk-based contracts, mechanisms that contract and rate certification state’s contract(s) and rate share or distribute risk between the state documents prior to the start of the rating certification(s) prior to the start of the and the managed care plan are period. We also proposed to amend the rating period for all of the reasons inherently part of the capitation rates regulation at § 438.6(b)(1) to explicitly commenters provided. As risk-sharing paid to plans for bearing the risk. prohibit retroactively adding or mechanisms are intended to address the Therefore, the risk-sharing mechanisms modifying risk-sharing mechanisms uncertainty inherent in setting should be developed in conjunction described in the contract or rate capitation rates prospectively, we with the capitation rates and using the certification documents after the start of believe that states should develop risk- same actuarially sound principles and the rating period. sharing requirements prior to the start of practices. In the proposed rule, we the rating period and that risk-sharing We explained in the 2018 proposed acknowledged that our proposed mechanisms should be developed in rule how we expect states to identify requirement that risk-sharing accordance with actuarially sound and apply risk-sharing requirements mechanisms be documented in a state’s principles and practices. prior to the start of the rating period contract and rate certification Comment: Several commenters stated because they are intended to address the documents prior to the start of the rating that retroactive adjustments should not uncertainty inherent in setting period meant, as a practical matter, that be limited to adjustments to rates but capitation rates prospectively. Because states electing to use risk-sharing should also apply to risk-sharing we believed that the 2016 final rule was mechanisms would have to submit mechanisms. These commenters stated clear on the prospective nature of risk- contracts and rate certifications to us that states transitioning new sharing and our expectations around the prior to the start of the rating period. We populations or services into managed

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care programs, such as LTSS, are more relative risk factors when predicting or development of capitation rates are likely to need retroactive adjustments to explaining costs of services covered different from actual experience. payment structures due to the unknown under the contract for defined Common risk mitigation strategies risks in covering new populations in populations or for evaluating include a medical loss ratio (MLR) with managed care for the first time. retrospectively the experience of MCOs, a remittance, a risk corridor, or a Response: We disagree with PIHPs, or PAHPs contracted with the risk-based reconciliation payment. commenters on permitting retroactive state. The requirements regarding risk Under § 438.6(b)(1), we included a non- adjustments to risk-sharing adjustment are found at §§ 438.5(g) and exhaustive list of risk-sharing mechanisms. We do not believe that it 438.7(b)(5). Risk-sharing mechanisms, mechanisms, such as reinsurance, risk is appropriate to modify risk-sharing on the other hand, are any means, corridors, or stop-loss limits. We also mechanisms between states and plans mechanism, or arrangement that has the defined risk corridor in § 438.6(a) as a after the claims experience for a rating effect of sharing risk between the MCO, risk-sharing mechanism in which states period is known, because such PIHP, or PAHP, and the state. A risk and MCOs, PIHPs, or PAHPs may share retroactive changes undercut the need mitigation strategy is a means to protect in profits and losses under the contract for states and plans to address the state, or the managed care plan, outside of a predetermined threshold uncertainty prospectively. We are not against the risk that assumptions (not amount. Because the regulations in part foreclosing retroactive adjustments to only based on health status of enrollees) 438 do not use the term ‘‘risk mitigation rates when appropriate. As provided by underlying the rate development will strategy,’’ we do not believe it is § 438.7(c)(2), if the state determines that not match later actual experience. In necessary to define the term or add it to a retroactive adjustment to the other words, ‘‘risk-sharing’’ is about the the regulations. Section 438.6(b)(1) is capitation rate is necessary, the aggregate actual experience, while ‘‘risk clear that all risk-sharing mechanisms retroactive adjustment must be adjustment’’ is about paying based on are subject to its scope. supported by a rationale for the the health status of enrollees at the Comment: One commenter requested adjustment and the data, assumptions, individual level and how health status CMS add risk pools to the list of risk- and methodologies used to develop the is assumed to result in higher costs. sharing arrangements in § 438.6(b)(1) to magnitude of the adjustment must be Second, we explain how the clarify that such arrangements are adequately described with enough detail regulations that address these concepts subject to actuarial soundness to allow CMS or an actuary to determine interact or do not interact. We confirm requirements and must be documented the reasonableness of the adjustment. here that § 438.6(b)(1), including the in the managed care contract These retroactive adjustments must be proposed change that we are finalizing prospectively. certified by an actuary in a revised rate here, does not regulate and has no Response: If a risk pool is used as a certification and submitted as a contract impact on risk adjustment as addressed mechanism to share risk between the amendment to be approved by CMS. in §§ 438.5(g) and 438.7(b)(5). We also MCO, PIHP, or PAHP, and the state, These types of changes are distinct from confirm that our proposed change to then we agree with commenters that a application of a previously set risk- § 438.6(b)(1) does not impact states’ risk pool is subject to the requirements sharing mechanism that is retrospective. ability to revise or adjust capitation in § 438.6(b)(1). We reiterate that any While CMS will not permit a retroactive rates retroactively under § 438.7(c)(2) mechanism, strategy, or arrangement change to the risk-sharing mechanism when unexpected events or that protects the state or the MCO, PIHP, under this final rule, the state can programmatic changes occur during a or PAHP against the risk that the pursue a retroactive change to the rating period that necessitate a assumptions used in the initial capitation rates if the requirements retroactive change or adjustment to the development of capitation rates are under § 438.7(c)(2) are satisfied. previously paid rates. Section different from actual experience is Comment: Commenters requested that 438.7(c)(2) clarifies that the retroactive subject to the requirements in CMS clarify the difference between risk adjustment (or change) to capitation § 438.6(b)(1). We decline to add a adjustment and risk mitigation. One rates must be supported by an specific mention of ‘‘risk pools’’ into the commenter requested that CMS create appropriate rationale and that sufficient regulations because we believe that definitions for risk adjustment and risk data, assumptions, and methodologies § 438.6(b)(1) adequately indicates that it mitigation. Commenters also requested used in the development of the applies to all risk-sharing mechanisms that CMS clarify that the proposed adjustment must be described in and only lists certain mechanisms as change in this section does not apply to sufficient detail and submitted in a new examples. risk adjustments as permitted in rate certification along with the contract Comment: One commenter requested § 438.7(b)(5). Another commenter noted amendment. Changes to a risk-sharing clarification from CMS regarding that the new language explicitly mechanism are not changes to the whether restrictions on profits are to be prohibiting retroactively adding or capitation rates themselves; they are considered a risk-sharing mechanism, modifying risk-sharing mechanisms may changes to an arrangement or including minimum MLR requirements be seen as not allowing retroactive rate mechanism that results in a separate and contractual profit caps. Another adjustments and requested that CMS payment from a state to a managed care commenter requested that the proposed add language to this section that clearly plan or a remittance to a state from a risk-sharing mechanism be open to states retroactive rate adjustments under managed care plan. modifications while CMS is reviewing § 438.7(c)(2) are still permitted. Section 438.6(b)(1) applies to any and the rates, so that if CMS does not accept Response: First, we clarify here that all mechanisms or arrangements that the initially proposed risk-sharing risk-sharing mechanisms, which can have the effect of sharing risk between mechanism, then the state can modify include a risk mitigation strategy, are a the MCO, PIHP, or PAHP, and the state and propose to CMS an alternative, distinct and separate concept from risk on an aggregate level. We believe that acceptable strategy. adjustment. We note that ‘‘risk this concept includes risk mitigation Response: We confirm that a mitigation’’ is not a phrase used in part strategies and other arrangements that minimum MLR requirement with a 438. Risk adjustment is defined at protect the state or the MCO, PIHP, or remittance would be considered a risk- § 438.5(a) as a methodology to account PAHP against the risk that the sharing mechanism and subject to the for the health status of enrollees via assumptions used in the initial requirements in § 438.6(b)(1). We also

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confirm that additional restrictions on costs, and refinements to risk adequately described with enough detail profits or contractual profit caps would adjustment methodologies that improve to allow CMS or an actuary to determine also be considered risk-sharing rate accuracy. One commenter requested the reasonableness of the adjustment. mechanisms under this regulation. To CMS allow for appropriate flexibility for These retroactive adjustments must be the degree that arrangements (like the states to make applicable retroactive certified by an actuary in a revised rate examples provided by the commenter or modifications to risk-sharing certification and submitted as a contract other arrangements) function to mechanisms through the development amendment to be approved by CMS. explicitly share risk between states and of an exception process as an option to After consideration of the public managed care plans, such arrangements account for either lack of performance comments and for the reasons would be risk-sharing mechanisms and or unforeseen events that detrimentally articulated in the proposed rule and our subject to the requirements in impact performance or trend. responses to comments, we are § 438.6(b)(1). Regarding possible Response: We disagree with finalizing § 438.6(b)(1) as proposed. commenters about permitting modifications to a risk-sharing b. Delivery System and Provider retroactive adjustments to risk-sharing mechanism while CMS is reviewing the Payment Initiatives Under MCO, PIHP, mechanisms, and we also disagree with rates, we confirm for commenters that or PAHP Contracts (§ 438.6(a) and (c)) such modifications would only be creating an exception process to permit possible prior to the start of the rating such retroactive adjustments to risk- As finalized in the 2016 final rule, period to comply with the final sharing arrangements. We do not believe § 438.6(c)(1) permits states to, under the regulation text. The requirements in that it is appropriate to modify risk- circumstances enumerated in § 438.6(b)(1) to document the risk- sharing mechanisms between states and § 438.6(c)(1)(i) through (iii), direct the sharing mechanism in the contract and plans after the claims experience for a managed care plan’s expenditures under the contract. Among other criteria, such rate certification documents prior to the rating period is known, as we believe directed payment arrangements require start of the rating period, as well the that this approach undercuts the need prior approval by CMS, per prohibition on adding or modifying risk- for states and plans to address § 438.6(c)(2); our approval is based on sharing mechanisms after the start of the uncertainty prospectively using risk- meeting the standards listed in rating period, would apply to states, sharing mechanisms. As discussed in § 438.6(c)(2), including that the state plans, and CMS. If states are seeking the proposed rule and in our responses expects the directed payment to CMS review and approval prior to the here, we have specific concerns that advance at least one of the goals and start of the rating period, CMS and permitting modification of risk-sharing objectives in the state’s quality strategy states can work toward modifications mechanisms after claims experience for for its Medicaid managed care program. that would ensure that arrangements are a rating period is known could be used inappropriately to shift costs onto the We have been reviewing and approving reasonable, appropriate, and compliant directed payment arrangements with Federal requirements, as long as Federal Government. We note that we are not foreclosing submitted by states since the 2016 final such modifications are in place and retroactive rate adjustments (that is, rule, and we have observed that a documented in the contract and rate changes to the rates themselves as significant number of them require certification documents for the rating opposed to changes to the risk-sharing managed care plans to adopt minimum period prior to the start of the rating mechanism) when appropriate, such as rates, and that most commonly, these period and CMS’ approval of such when substantial coverage changes minimum rates are those specified documents. occur mid-year, adjustments are under an approved methodology in the Comment: Several commenters necessary to address disease outbreaks, Medicaid state plan. We explicitly opposed the proposed change and launches of high-cost prescription clarify here that certain financing requested CMS allow states flexibility to drugs, or other unforeseen requirements in statute and regulation retroactively adjust risk-sharing circumstances that increase benefit costs are applicable across the Medicaid mechanisms. Commenters expressed (some of the examples provided by program irrespective of the delivery concern that the proposed section may commenters). We agree that it would be system (for example, fee-for-service, restrict states from employing important appropriate to implement retroactive managed care, and demonstration tools for paying plans in a volatile rate adjustments to accommodate authorities), and are similarly applicable health care environment. Commenters unexpected programmatic changes; whether a state elects to direct payments noted that the addition of new however, modifying existing risk- under § 438.6(c). Such requirements technologies, drugs, and populations to sharing mechanisms, or adding new include, but are not limited to, the Medicaid managed care program risk-sharing mechanisms, after claims limitations on financing of the non- often require retroactive adjustment of experience for a rating period is known Federal share applicable to health care- plan payments. Commenters further is not the appropriate tool for states to related taxes and bona fide provider- noted that rates may be adjusted, but use to address such concerns. States related donations. states have also effectively employed should adjust rates using the Due to the frequency and similarities risk-sharing mechanisms to ensure that appropriate requirements under of these types of directed payment plans receive appropriate payment. § 438.7(c)(2) to address unexpected arrangements, we proposed to Commenters stated that continuing to events that necessitate a retroactive specifically address them in an allow retroactive addition or adjustment (that is, change) to amendment to § 438.6. At § 438.6(a), we modification of risk-sharing previously paid rates. As provided by proposed to add a definition for ‘‘state mechanisms will allow states to pay § 438.7(c)(2), if the state determines that plan approved rates’’ to mean amounts plans adequately when substantial a retroactive adjustment to the calculated as a per unit price of services coverage changes occur mid-year. A few capitation rate is necessary, the described under CMS approved rate commenters noted that states often retroactive adjustment must be methodologies in the state Medicaid make adjustments to rates to address supported by a rationale for the plan. We also proposed to revise disease outbreaks, launches of high-cost adjustment and the data, assumptions, § 438.6(c)(1)(iii)(A) to specifically prescription drugs, other unforeseen and methodologies used to develop the reference a directed payment circumstances that increase benefit magnitude of the adjustment must be arrangement that is based on an

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approved state plan rate methodology. service under the contract. We explicitly providing that payment We explicitly noted how, as with all explained how authorizing these arrangements under paragraph directed payment arrangements under additional types of payment models for (c)(1)(iii)(A) do not require prior § 438.6(c), a directed payment states to implement would eliminate the approval from us; we proposed to retain arrangement established under need for states to modify their payment the requirement that such payment proposed paragraph (c)(1)(iii)(A) would models as only minimum or maximum arrangements meet the criteria in have to be developed in accordance fee schedules to fit neatly into the paragraphs (c)(2)(ii)(A) through (F). We with § 438.4, the standards specified in construct of the current rule. justified this proposed revision as a § 438.5, and generally accepted actuarial Along with the proposed changes in means to reduce administrative burden principles and practices. § 438.6(c)(1)(iii)(A), we also proposed a for many states by eliminating the need We explained in the proposed rule corresponding change to the approval to obtain written approval prior to that supplemental payments contained requirements in § 438.6(c)(2). In the implementation of this specific directed in a state plan are not, and do not 2016 final rule, we established an payment arrangement that utilizes constitute, state plan approved rates as approval process that requires states to previously approved rates in the state proposed in § 438.6(a); we proposed to demonstrate in writing that payment plan. With the redesignation of include a statement to this effect under arrangements adopted under paragraphs (c)(2)(ii)(A) through (F), we proposed paragraph (c)(1)(iii)(A). We § 438.6(c)(1)(i) through (iii) meet the proposed to keep in place the existing noted in the proposed rule our view that criteria specified in § 438.6(c)(2) prior to requirements for our approval to be a rate described in the approved rate implementation. Since implementing granted. methodology section of the state plan this provision of the 2016 final rule, In the 2016 final rule, we specified at reflects only the per unit price of states have noted that the approval § 438.6(c)(2)(ii)(C) that contract particular services. Supplemental process for contract arrangements that arrangements which direct expenditures payments are not calculated or paid include only minimum provider made by the MCO, PIHP, or PAHP based on the number of services reimbursement rate methodologies that under paragraph (c)(1)(i) or (ii) for rendered on behalf of an individual are already approved by CMS and delivery system or provider payment beneficiary, and therefore, would be included in the Medicaid state plan are initiatives may not direct the amount or separate and distinct from state plan substantially the same as the approval frequency of expenditures by managed approved rates under our proposal. We requirements under the Medicaid state care plans. At that time, we believed also proposed to define supplemental plan. Some states have stated that the that this requirement was necessary to payments in § 438.6(a) as amounts paid written approval process in § 438.6(c)(2) deter states from requiring managed care by the state in its FFS Medicaid delivery is unnecessary given that a state will plans to reimburse particular providers system to providers that are described have already justified the rate specified amounts with specified and approved in the state plan or under methodology associated with particular frequencies. However, based on our a waiver and are in addition to the services in the Medicaid state plan (or experience in reviewing and approving amounts calculated through an a state plan amendment) to receive directed payment arrangements since approved state plan rate methodology. approval by us that the rates are the 2016 final rule, we now recognize Further, we proposed to redesignate efficient, economical, and assure quality that this provision may have created current paragraph (c)(1)(iii)(A) as of care under section 1902(a)(30)(A) of unintended barriers to states pursuing paragraph (c)(1)(iii)(B) and to revise the the Act. innovative payment models. Some regulation to distinguish a minimum fee Therefore, to avoid unnecessary and states have adopted or are pursuing schedule for network providers that duplicative Federal approval processes, payment models, such as global provide a particular service using rates we proposed to eliminate the prior payment initiatives, which are designed other than state plan approved rates approval requirement for payment to move away from a volume-driven from those using state plan approved arrangements that are based on state system to a system focused on value and rates. To accommodate our proposal, we plan approved rates. To do so, we population health. These innovative also proposed to redesignate current proposed to redesignate existing payment models are based on the state paragraphs (c)(1)(iii)(B) and (C) as paragraph (c)(2)(ii) as (c)(2)(iii), to add directing the amount or frequency of paragraphs (c)(1)(iii)(C) and (D), a new paragraph (c)(2)(ii), and to expenditures by the managed care plan respectively. redesignate paragraphs (c)(2)(i)(A) to achieve the state’s goals for We also noted that as we have through (F) as paragraphs (c)(2)(ii)(A) improvements in quality, care, and reviewed and approved directed through (F), respectively. We also outcomes under the payment model. payment arrangements submitted by proposed to revise the remaining Therefore, we proposed to delete states since publication of the 2016 final paragraph at § 438.6(c)(2)(i) to require, existing § 438.6(c)(2)(ii)(C) which would rule, we have observed that our as in the current regulation, that all permit states to direct the amount or regulation does not explicitly address contract arrangements that direct the frequency of expenditures made by some types of potential directed MCO’s, PIHP’s, or PAHP’s expenditures managed care plans under paragraph payments that states are seeking to under paragraphs (c)(1)(i) through (iii) (c)(1)(i) or (ii). As a conforming change, implement. To encourage states to must be developed in accordance with we proposed to redesignate existing continue developing payment models § 438.4, the standards specified in § 438.6(c)(2)(ii)(D) as that produce optimal results for their § 438.5, and generally accepted actuarial § 438.6(c)(2)(iii)(C). local markets and to clarify how the principles and practices; we proposed to Under existing § 438.6(c)(2)(i)(F) regulatory standards apply in such delete the remaining regulatory text (which we proposed to redesignate as cases, we proposed to add a new from current paragraph (c)(2)(i). § 438.6(c)(2)(ii)(F)), a contract § 438.6(c)(1)(iii)(E) that would allow In proposed new paragraph (c)(2)(ii), arrangement directing a managed care states to require managed care plans to we specified prior approval plan’s expenditure may not be renewed adopt a cost-based rate, a Medicare requirements for payment arrangements automatically. While § 438.6(c)(2)(i)(F) equivalent rate, a commercial rate, or under paragraphs (c)(1)(i) and (ii) and does not permit an automatic renewal of other market-based rate for network (c)(1)(iii)(B) through (E). We proposed a contract arrangement described in providers that provide a particular amended paragraph (c)(2)(ii) as paragraph (c)(1), it does not prohibit

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states from including payment the state has developed and described innovation and enable states to better arrangements in a contract for more than its plan for implementing a multi-year optimize their programs to one rating period. We have received payment arrangement, including the accommodate their own unique policy numerous payment arrangement state’s plan for multi-year evaluation, and demographic conditions. Other proposals from states requesting a multi- and the impact of a multi-year payment commenters noted that Medicare, year approval of their payment arrangement on the state’s goal(s) and commercial, and market-based rates arrangement to align with their delivery objective(s) in the state’s quality strategy would, in some cases, reduce provider system reform efforts or contract in § 438.340; and (3) the state has reimbursement rates and jeopardize requirements. affirmed that it will not make any quality and access to Medicaid services. To provide additional guidance to changes to the payment methodology, or A few commenters were concerned states on the submission and approval magnitude of the payment, described in about the ability of managed care plans process for directed payments, on the contract for all years of the multi- to manage risk as it relates to state- November 2, 2017, we issued a CMCS year payment arrangement without our directed payment arrangements. One Informational Bulletin (CIB) entitled prior approval. If the state determines commenter stated that the regulatory ‘‘Delivery System and Provider Payment that changes to the payment requirements under § 438.6(c) were too Initiatives under Medicaid Managed methodology, or magnitude of the rigid for managed care plans and can Care Contracts’’ (available at https:// payment, are necessary, the state must degrade the utility and effectiveness of www.medicaid.gov/federal-policy- obtain prior approval of such changes value-based arrangements. guidance/downloads/cib11022017.pdf). using the process in paragraph (c)(2). Based on the diverse range of public The CIB explained that based on our We noted that in addition to codifying comments and our continued experience with implementation of criteria for the approval of multi-year experience with state directed payments § 438.6(c)(2), we recognize that some payment arrangements, the proposed since the proposed rule was published states are specifically pursuing multi- new paragraph (c)(3)(i) would address in November 2018, we have decided not year payment arrangements to transform any potential ambiguity on the narrow to finalize the revisions proposed at their health care delivery systems. The issue of the permissibility of states to § 438.6(c)(1)(iii)(E) and (c)(2)(ii)(C) in CIB also described that states can enter into multi-year payment this final rule. However, we will develop payment arrangements under arrangements with managed care plans. consider addressing these and other § 438.6(c)(1)(i) and (ii), which are Finally, in alignment with our state directed payment policies in future intended to pursue delivery system guidance in the November CIB, we rulemaking. We thank commenters for reform, over a period of time that is proposed to specify at paragraph their valuable input and will use it to longer than one year so long as the state (c)(3)(ii) that the approval of a payment inform our future rulemaking. explicitly identifies and describes how arrangement under paragraph (c)(1)(iii) The following summarizes the public the payment arrangement will vary or would be for one rating period only. We comments received on our proposal to change over the term of the explained that while we understood that amend § 438.6(a) and (c) and our arrangement. value-based purchasing payment responses to those comments. In the 2018 proposed rule, we stated arrangements or those tied to larger Comment: Several commenters that some payment arrangements, delivery system reform efforts can be supported the changes to § 438.6(a), particularly value-based purchasing more complex and may take longer for including the addition of a definition for arrangements or those tied to larger a state to implement, we believed that state plan approved rates and the delivery system reform efforts, can be more traditional payment arrangements additional clarification in more complex and may take longer for and fee schedules permitted under § 438.6(c)(1)(iii)(A) that supplemental a state to implement. We noted that paragraph (c)(1)(iii) should continue to payments are not, and do not constitute, setting the payment arrangement for be reviewed and evaluated on an annual state plan rates. Several commenters longer than a one-year term would basis by both states and us. We disagreed with proposed provide a state with more time to explained how it was important to § 438.6(c)(1)(iii)(A) and recommended implement and evaluate whether the continue ensuring that such payment that CMS revise the proposed arrangement meets the state’s goals and arrangements under paragraph (c)(1)(iii) definitions of state plan approved rates objectives to advance its quality strategy are consistent with states’ and our goals and supplemental payments to under § 438.340. We reiterated our and objectives for directed payments acknowledge the legitimacy and position from the CIB that we interpret under Medicaid managed care contracts. importance of supplemental payments the regulatory requirements under We proposed several revisions in in the Medicaid program. One § 438.6(c) to permit multi-year payment § 438.6(c) including specifying different commenter recommended that we arrangements when certain criteria were types of potential directed payments define or explain our meaning for ‘‘per met. The CIB identified the criteria for such as arrangements based on a unit’’. One commenter requested that multi-year approvals of certain directed Medicare equivalent rate, a commercial CMS confirm that state plan approved payment arrangements, and we rate, a cost-based rate, or other market- rates also include state plan approved proposed to codify those criteria in a based rate (§ 438.6(c)(1)(iii)(E)) and payments that are based on a provider’s new § 438.6(c)(3). permitting states to direct the amount or actual or projected costs. One Specifically, we proposed in new frequency of expenditures by deleting commenter requested that CMS clarify paragraph (c)(3)(i) that we would existing § 438.6(c)(2)(ii)(C). Some whether the proposed definition of condition a multi-year approval for a commenters were supportive, some supplemental payments in § 438.6(a) payment arrangement under paragraphs were not, and others raised related included disproportionate share (c)(1)(i) and (ii) on the following criteria: policy issues with state directed hospital (DSH) or graduate medical (1) The state has explicitly identified payments that we believe warrant education (GME) payments. and described the payment arrangement additional consideration. For example, Response: We do not agree with in the contract as a multi-year payment several commenters stated that these commenters that further revisions are arrangement, including a description of proposals increased flexibility for states needed to address the role of the payment arrangement by year, if the to design directed payment supplemental payments in the Medicaid payment arrangement varies by year; (2) arrangements which would help drive program; we believe that our policies

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finalized in this final rule, specifically phrase ‘‘amounts calculated through an retrospectively for specific reasons, such to define the term ‘‘supplemental approved state plan rate methodology’’ as when payments are made based on a payments’’ for purposes of part 438, to ‘‘state plan approved rates.’’ This provider’s actual costs. We emphasize including § 438.6, and to adopt (in revision eliminates ambiguity and uses that payment amounts calculated for § 438.6(d)(6)) a period for pass-through terminology that is being finalized in specific covered services identifiable as payments to be used for states this final rule. having been provided to an individual transitioning new services or new We also believe that the definition of beneficiary must be directly tied to the populations to Medicaid managed care, state plan approved rates should provision of covered services to demonstrate that CMS understands the include the clarification that was Medicaid beneficiaries, which is why role of supplemental payments in the proposed in § 438.6(c)(1)(iii)(A) that these payment amounts are consistent Medicaid program. We note that our supplemental payments are not, and do with our definition of ‘‘state plan proposed definition of ‘‘supplemental not constitute, state plan approved rates approved rates’’ under part 438, payments’’ may not have been as clear as they are not directly attributable to a including § 438.6 (and why these as it could be, so we are finalizing the covered service furnished to an payment amounts are not considered definition by adding ‘‘or demonstration’’ individual beneficiary. We are finalizing supplemental payments for the to recognize 1115 demonstration the definition of the term ‘‘state plan purposes of § 438.6). authority as well as waiver authority. approved rates’’ in § 438.6(a) with this Comment: A few commenters Regarding the definition of ‘‘per unit,’’ clarifying sentence included in the requested clarification that state plan we have reconsidered the use of that definition instead of at paragraph approved rates include FFS payments term and acknowledge that this (c)(1)(iii)(A). that are described and approved in the definition may not have been clear. To Comment: A few commenters state plan when the payment is for a correct this, we have revised the requested clarification on the difference specific service or benefit provided to definition to remove ‘‘per unit’’ and between a state plan approved rate and enrollees covered under a contract. instead, reference amounts calculated a supplemental payment. Commenters Response: As finalized in this rule, for specific covered services identifiable noted that in some states there are state plan approved rates means as having been provided to an situations where there is a per unit price amounts calculated for specific covered individual beneficiary described under set at an amount higher than the services identifiable as having been CMS approved rate methodologies in Medicaid fee schedule for a class of provided to an individual beneficiary the Medicaid State plan. Moreover, we providers, and this higher price has described under approved rate explicitly clarify here that certain been approved in the state plan. The methodologies in the Medicaid state financing requirements in statute and difference between the higher rate and plan. As defined here, the term ‘‘state regulation are applicable across the the Medicaid fee schedule amount is plan approved rates’’ includes Medicaid Medicaid program irrespective of the paid retrospectively, but the total FFS payments for a specific service or delivery system (for example, fee-for- payment is still based on the number of benefit provided to enrollees when the service, managed care, and units incurred for the applicable payment methodology results in demonstration authorities), and are services. Commenters questioned amounts calculated for specific covered similarly applicable whether a state whether rates in this situation would be services identifiable as having been elects to direct payments under a state plan approved rate or a provided to an individual beneficiary § 438.6(c). Such requirements include, supplemental payment. and has been approved in the state plan. but are not limited to, limitations on Response: As finalized in this rule, As long as the payment amounts are financing of the non-Federal share state plan approved rates means calculated for specific covered services applicable to health care-related taxes amounts calculated for specific covered identifiable as having been provided to and bona fide provider-related services identifiable as having been an individual beneficiary and described donations. provided to an individual beneficiary under CMS approved rate We agree with commenters that described under the CMS approved rate methodologies in the state plan, the clarification is needed regarding methodologies in the Medicaid state payment amounts will meet our whether ‘‘supplemental payments,’’ as plan. We confirm for commenters that definition for state plan approved rates the term is defined and used in § 438.6, state plan approved rates can include under § 438.6(c). includes DSH or GME payments. It was payments that are higher than the Comment: Some commenters never our intent to include DSH or GME traditional Medicaid FFS fee schedule recommended changing the language in payments in our definition of for a specific class of providers when proposed § 438.6(a) to indicate that state supplemental payments for the the payment methodology has been plan approved rates means amounts purposes of Medicaid managed care approved in the state plan and is for paid on a ‘‘per claim’’ basis by the state under part 438. Therefore, we are specific covered services identifiable as in its FFS Medicaid delivery system to finalizing the definition of supplemental having been provided to an individual providers for services as described payments at § 438.6(a) with an beneficiary. We have also revised the under CMS approved rate additional sentence stating that DSH definition to note that supplemental methodologies in the Medicaid state and GME payments are not, and do not payments are not, and do not constitute, plan. Other commenters recommended constitute, supplemental payments. We state plan approved rates. Supplemental changing the language for supplemental note that DSH and GME payments payments approved under a Medicaid payments to mean amounts paid would not meet the definition, finalized state plan are often made to providers in separately by the state in its FFS at § 438.6(a), of state plan approved a lump sum and often cannot be linked Medicaid delivery system to providers rates because such payments are not to specific covered services provided to that are described and approved in the calculated as amounts for specific an individual Medicaid beneficiary; state plan or under a waiver thereof and covered services identifiable as having therefore, supplemental payments are are in addition to state plan approved been provided to an individual not directly attributable to a covered rates. One commenter requested that beneficiary. We are also finalizing a service furnished to an individual CMS consider changing the proposed technical change to the definition of beneficiary. We understand that some definition of supplemental payments to supplemental payments by revising the payment methodologies are calculated be amounts paid by the state in its FFS

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Medicaid delivery system to providers terminology that is being finalized in turn have an impact on program that are described and approved in the this final rule. expenditures. state plan or under a waiver thereof; are Comment: Many commenters Comment: A few commenters not for a specific service or benefit supported the proposals that eliminate requested clarification on whether prior provided to a specific enrollee covered the prior approval requirement for approval under § 438.6(c) would be under the contract; and are in addition payment arrangements that use state required if a state implemented a to the amounts calculated through an plan approved rates, allowing states to uniform percentage increase for approved state plan rate methodology. mirror FFS rates in their managed care managed care plan provider payments plans and develop rates tied to a variety concurrently with an increase to the Response: After reviewing the specific state’s FFS rates. These same recommendations made by commenters, of payment options. Commenters noted that the proposals reduce states’ and commenters noted that the managed we do not believe that these specific care plan provider payments would not revisions to the definitions are CMS’ administrative burden and create greater flexibility for states to develop match the state’s FFS rates and that the necessary. However, we have stable, long-term payment strategies that per unit prices of services for managed reconsidered the use of ‘‘per unit’’ and can be applied equally in both FFS and care and FFS would vary. acknowledge that this may not have managed care delivery systems. Response: In the scenario described been clear. To correct this, we have Commenters noted that the proposals by the commenters, the state’s revised the definition to remove ‘‘per allow for flexibility that can help states requirement for managed care plans to unit’’ and instead, reference amounts and CMS focus on those payment provide a uniform increase to health calculated for specific covered services methodologies that are truly care providers would be consistent with identifiable as having been provided to unprecedented or novel, while bringing § 438.6(c)(1)(iii)(C) as proposed and finalized, which permits states to an individual beneficiary described financial predictability to safety-net require their managed care plans to under CMS approved rate providers who rely on Medicaid provide a uniform dollar or percentage methodologies in the Medicaid State funding. Some commenters opposed the increase for providers that provide a plan. The recommendation to use the proposed changes to eliminate prior particular service covered under the term ‘‘per claim’’ instead of ‘‘per unit’’ approval for state plan approved rates, contract, provided that the other in the definition for state plan approved stating that the proposals do not provide requirements in § 438.6(c) are met. rates is also not necessary as we are not a mechanism for frequent and consistent Section 438.6(c)(2)(ii), as finalized in finalizing the term ‘‘per unit’’ as oversight or ensure that the proposals this rule, requires that contract described elsewhere. The other will provide access to care. recommendations add the phrases ‘‘paid arrangements that direct the managed Response: We agree that our care plan’s expenditures under separately’’ and ‘‘are not for a specific modifications to § 438.6(c)(2)(ii) will service or benefit provided to a specific § 438.6(c)(1)(iii)(B) through (D) must reduce state and Federal burden by have written approval from CMS prior enrollee covered under the contract’’ to eliminating the requirement that states the definition of supplemental to implementation. This means that the obtain written prior approval for uniform percentage increase for payments. These recommendations do payment arrangements that have already not add clarity to the definition, and we managed care plan provider payments been approved by CMS in the Medicaid would require prior approval. We note believe that these same concepts are state plan. We disagree with already present in our proposed that a state-directed payment mandating commenters that our proposed changes a managed care plan pay the state’s FFS definitions in § 438.6(a). For example, in would increase unintended risk or a rates is authorized under the definition of supplemental lack of Federal oversight because we are § 438.6(c)(1)(iii)(A) and prior approval payments, we proposed and are only eliminating the prior approval would not be required under finalizing the phrase ‘‘and are in requirement for those payment § 438.6(c)(2)(ii), as amended in this rule addition to’’ which could include arrangements which have already been under this section. whether the payment amounts are paid reviewed and approved by CMS under Comment: A few commenters separately or not. We also do not believe the Medicaid state plan. We do not requested clarification on the that it is necessary to add the phrase believe that a duplicative review and requirement of written approval for ‘‘are not for a specific service or benefit approval process has value or provides state-directed payments under proposed provided to a specific enrollee covered any necessary additional Federal § 438.6(c)(1)(iii)(A). These commenters under the contract’’ to the definition of oversight. We believe that prudent noted that the proposed regulation supplemental payments because we program management is necessary to states that these arrangements ‘‘do not believe that our proposed definition is efficiently and effectively administer the require written approval prior to broad enough to include this concept, Medicaid program and eliminating implementation’’ and questioned if especially since the definition for state unnecessary and duplicative review these arrangements ever require written plan approved rates means that processes will improve states’ efforts to approval from CMS. payments are calculated as amounts implement payment arrangements that Response: If the state requires calculated for specific covered services meet their local goals and objectives. To managed care plans to adopt a identifiable as having been provided to ensure appropriate oversight and minimum fee schedule for network an individual beneficiary and prudent program management, we have providers that provide a particular supplemental payments are paid in initiated a review of state-directed service covered under the contract using addition to those state plan approved payments and may issue future state plan approved rates as defined in rates. We are also finalizing a technical guidance and/or rulemaking based on § 438.6(a), written approval is not change to the definition of supplemental the findings of this evaluation. This required from us under § 438.6(c)(2)(ii), payments by revising the phrase review was initiated based on our as amended in this rule. This means that ‘‘amounts calculated through an experience reviewing state requests for states may implement these specific approved State plan rate methodology’’ state-directed payments, as we have payment arrangements, which have to ‘‘State plan approved rates.’’ This seen proposals for significant changes to already been reviewed and approved by revision eliminates ambiguity and uses provider reimbursement, which may in CMS under the Medicaid state plan,

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without obtaining any additional nonetheless to arrangements described implement the payment arrangements approvals from CMS under § 438.6(c). in § 438.6(c)(1)(iii)(A), we expect that under paragraph (c)(1)(iii)(A) if the However, this exemption from the prior states will maintain their evaluation contract requirement is implemented as approval requirement only applies to plans and will continue monitoring and a minimum fee schedule and if it required use by managed care plans of evaluating these payment arrangements. comports with other regulatory the state plan approved rates for the FFS Further, the other criteria listed in requirements. We note that after program. If the state requires a managed § 438.6(c)(2)(ii), such as the prohibition consideration of the overall goals and care plan to apply increases or other related to IGTs, continue to apply even purposes of § 438.6(c), we have adjustments to those state plan if we do not require the state to reconsidered our proposal in approved rates, it is not an arrangement document that compliance to us, and we § 438.6(c)(1)(iii)(E) to permit states to described in paragraph (c)(1)(iii)(A), and may require states to submit evidence of direct their Medicaid managed care therefore, paragraph (c)(2)(ii) would compliance with the criteria in plans to use a cost-based rate, Medicare- apply and require prior written § 438.6(c)(2)(ii)(A) through (F) if we equivalent rate, commercial rate, or approval. have reason to believe the state is not other market-based rate as explained Comment: One commenter requested complying with the requirements. elsewhere in this regulation. that CMS confirm that the evaluation Under the plain language of Comment: Commenters requested that requirement at § 438.6(c)(2)(ii)(D) and § 438.6(c)(2)(ii), all contract CMS finalize the proposals at § 438.6(c) the prohibition against automatic arrangements that direct a managed care with the condition that such renewal at § 438.6(c)(2)(ii)(F) are plan’s expenditures, regardless of arrangements only be applied in a inapplicable to state direction that a whether the payment arrangement manner that accounts for potential managed care plan use the state plan requires prior approval under adverse effects on access to care or other minimum fee schedules under § 438.6(c)(2), must meet the criteria unintended impacts to dental benefits. § 438.6(c)(1)(iii)(A). If CMS will still listed in paragraphs (c)(2)(ii)(A) through Commenters requested that states be require documentation of these factors, (F). In addition, we clarify here that required to consult and seek public this commenter recommended CMS certain financing requirements in statute comment from dental plans and allow that documentation to be and regulation are applicable across the providers prior to including dental incorporated into the traditional rate Medicaid program irrespective of the services in a value-based payment certification submission to avoid delivery system (for example, fee-for- model. duplicative administrative review service, managed care, and Response: We proposed and are processes. demonstration authorities). Such finalizing additional types of payment Response: Under § 438.6(c)(2)(ii), requirements include, but are not arrangements that states may direct their contract arrangements that require limited to, limitations on financing of managed care plans to use for paying managed care plans to adopt a the non-Federal share applicable to providers that furnish covered services, minimum fee schedule for network health care-related taxes and bona fide to enable states to achieve specific state providers that provide a particular provider-related donations. These goals and objectives related to Medicaid service under the contract using state financing requirements similarly apply plan approved rates do not require prior when a state elects to direct payments payment, access to care, and other approval from us; however, we under § 438.6(c), including delivery system reforms at a local level. proposed and are finalizing that such § 438.6(c)(1)(iii)(A). Under § 438.6(c)(2), we require that directed payment arrangements must Comment: One commenter states demonstrate that the arrangement meet the criteria described in recommended that CMS provide complies with specific criteria prior to § 438.6(c)(2)(ii)(A) through (F). These guidance to states on adopting the implementing the payment criteria include that states have an Medicaid FFS outpatient drug arrangements. One of those criteria is evaluation plan that measures the reimbursement methodology as a that the payments advance at least one degree to which the payment minimum fee schedule or a separate and of the goals and objectives in the state’s arrangement advances at least one the distinct cost-based rate for pharmacy Medicaid managed care quality strategy state’s quality goals and objectives, and payments in the Medicaid managed care (such as an access to care, or quality of that such payment arrangements are not program. care, goal and/or objective); another is renewed automatically. We confirm Response: Under § 438.6(c)(1)(iii)(A), that the state has an evaluation plan to here, only for payment arrangements states are permitted to contractually assess the degree to which the payment that utilize minimum fee schedules require their managed care plans to arrangements achieve the state’s based on state plan approved rates (as adopt a minimum fee schedule for objectives. While it might be specified in § 438.6(c)(1)(iii)(A)), that providers that provide a particular theoretically possible for a state to while there is no regulatory requirement service covered under the contract using design and mandate a particular for the submission of any state plan approved rates. The state plan provider payment arrangement that does documentation from the state to approved rates, under the definition not consider access to care as part of demonstrate that state directed finalized at § 438.6(a), can include the setting the provider payment, there are arrangements described in Medicaid FFS outpatient drug other regulatory requirements (such as § 438.6(c)(1)(iii)(A) meet the criteria reimbursement methodologies that are required quantitative network adequacy described in § 438.6(c)(2)(ii)(A) through approved by CMS and in the Medicaid standards) in part 438 that ensure that (F), these criteria apply and CMS may state plan. States may implement states consider access to care in require states to submit evidence of payment arrangements under paragraph contracting with managed care plans. compliance with the criteria in (c)(1)(iii)(A), which have already been We believe that our regulations, § 438.6(c)(2)(ii)(A) through (F) if we reviewed and approved by CMS under including § 438.6(c) and other have reason to believe the state is not the Medicaid state plan, without requirements in part 438, are sufficient complying with the requirements. obtaining any additional approvals from to ensure that payment arrangements Because the requirement to comply with us under § 438.6(c). If cost-based rate account for potential adverse effects on these criteria, even if written approval methodologies are approved in the access to care or other unintended from us is not required, applies Medicaid state plan, states could impacts; therefore, we decline to adopt

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additional conditions as part of this tactics aimed at encouraging the arrangements and criteria identified in final rule. provision of high-quality and cost- § 438.6(c) struck the appropriate balance We also decline to adopt new efficient care, and that CMS can between the need for autonomy by regulations or new requirements that continue to add value in this area by managed care plans and flexibility for states consult and seek public comment disseminating various state approaches state Medicaid agencies (81 FR 27582 from plans and providers before and sharing both policy and operational and 27583). mandating a payment arrangement that best practices. Section § 438.6(c) is not intended to is permitted under § 438.6(c). While we Response: We agree with commenters take discretion away from managed care believe that states should be seeking that managed care plans should have plans in managing their risk; rather, broad stakeholder feedback when adequate authority and flexibility to be § 438.6(c) is intended to help states developing and implementing delivery able to effectively manage risk and have implement delivery system and system reforms and performance discretion in managing their contracts provider payment initiatives under payment initiatives, we do not believe with providers. This was part of our Medicaid managed care contracts and that it is necessary to create new Federal rationale for adopting the limits on pass- permit states to direct specific payments requirements to accomplish this goal. In through payments and state-directed made by managed care plans to our experience, states are already payments in § 438.6 in the 2016 final providers under certain circumstances working with many stakeholder groups rule (81 FR 27587–27592). We also agree to assist states in furthering the goals when designing and implementing new with commenters that plans should be and priorities of their Medicaid programs. We believe that the payment payment requirements for providers in able to deploy specific tactics aimed at the managed care context, and we requirements under § 438.6(c) can assist encouraging the provision of high- believe that states should continue to both states and managed care plans in quality and cost-efficient care. However, have discretion in how they convene achieving their overall objectives for while we do not agree with commenters stakeholder groups and obtain delivery system and payment reform that additional revision to § 438.6(c) is stakeholder feedback to inform state and performance improvement without necessary at this time, after Medicaid policy in this specific area. compromising managed care plans’ consideration of the overall goals and Comment: One commenter requested ability to manage risk with their purposes of § 438.6(c) and public that CMS clarify that states may set providers. We also note that the comments, we have reconsidered our minimum payment rates for providers requirements under § 438.6(c) do not within a class that meet certain criteria. proposal to delete existing prohibit managed care plans from The commenter noted that such criteria § 438.6(c)(2)(ii)(C) which prohibits adopting their own (or additional) could include the provision of a states from directing the amount or value-based payment arrangements that particular type of service, such as a frequency of expenditures made by are aimed at encouraging the provision public health service. managed care plans under of high-quality and cost-efficient care. Response: We agree that states are § 438.6(c)(1)(i) or (ii). While we stated in We expect states and managed care permitted to establish state-directed the proposed rule that this provision plans to work together in developing payments and direct them equally, and may have created unintended barriers to and implementing delivery system using the same terms of performance, states pursuing innovative payment reforms that will be the most impactful for a class of providers providing models, after further consideration, we for each state’s local needs. services under a contract. We explained believe the § 438.6(c) criteria established We also decline to require that states this in the 2016 final rule (81 FR 27586) in the 2016 final rule struck the consult managed care plans before and our position on this standard has appropriate balance between the need implementing a payment arrangement not changed since the 2016 final rule, for autonomy by managed care plans under § 438.6(c). While we believe that and we agree that states could develop and flexibility for state Medicaid states should be seeking broad minimum payment rates under agencies (81 FR 27582 and 27583). stakeholder feedback, including from § 438.6(c) for a class of providers in Further, we believe retaining this managed care plans, when developing accordance with the requirements in provision will achieve our goal of and implementing delivery system § 438.6(c)(2)(ii)(B). ensuring managed care plans have the reforms and performance payment Comment: A few commenters were authority and flexibility to effectively initiatives, we do not believe that it is concerned about the ability of managed manage risk and discretion in managing necessary to create new Federal care plans to manage risk as it relates to their contracts with providers. We requirements to accomplish this goal. In state-directed payment arrangements. acknowledge that state direction of our experience, states are already Commenters recommended that CMS provider payments by managed care working with many stakeholder groups, confirm that managed care plans retain plans, as permitted under § 438.6(c), can including managed care plans, when the ability to manage risk effectively and require that managed care plans adopt designing and implementing new have discretion in managing their specific payment parameters for payment requirements under § 438.6(c), contracts relating to minimum fee specified providers and can require that and we believe that states should schedules and pay increases, as well as managed care plans participate in continue to have discretion in how they maximum fee schedules. Commenters specified value-based purchasing or convene stakeholder groups and obtain recommended that CMS require states to performance improvement initiatives; stakeholder feedback to inform state consult with managed care plans prior however, we believe that managed care Medicaid policy. to implementing state directed plans retain the ability to reasonably Comment: Several commenters payments. One commenter stated that manage risk and still have adequate supported the allowance of multi-year the regulatory requirements under discretion in managing their contracts approval of directed payment § 438.6(c) were too rigid for managed with providers, even in circumstances arrangements under certain conditions care plans and can degrade the utility where states may require managed care in § 438.6(c)(3). Commenters praised the and effectiveness of value-based plans to adopt specific parameters for added flexibility, citing that these arrangements. Commenters also noted provider payment. We discussed these payment arrangements encourage that plans, similar to states, should be issues in the 2016 final rule and why providers to make multi-year given the flexibility to deploy specific the specific permitted payment commitments to quality outcomes and

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savings goals, reduce administrative particularly for uniform dollar or automatic renewals of payment burden, and support the expansion of percentage increases, and we believe at arrangements if either the state or the value-based payment models. A few this time that we should continue to managed care plan can attest that the commenters urged CMS to expand the monitor these payment arrangements on key characteristics of the payment proposal permitting multi-year an annual basis. Moreover, to ensure arrangement that were used to make the approvals at § 438.6(c)(3)(i) to include appropriate oversight and prudent initial determination remain in place. payment arrangements under paragraph program management, we have initiated Commenters stated that an automatic (c)(1)(iii); commenters suggested that a review of state-directed payments and renewal option would encourage more this would require a state to explicitly may issue future guidance and/or participation among physicians and identify the payment arrangement in a rulemaking based on the findings. This physician specialty groups in various contract as multi-year, describe its review was initiated based on our value-based contracts. implementation plan including multi- experience reviewing state requests for Response: We do not agree with year evaluation, and seek CMS approval state-directed payments, as we have commenters that we should permit for changes. Commenters noted that seen proposals for significant changes to automatic renewals of payment annual approvals for directed payments provider reimbursement, which may in arrangements under § 438.6(c). Section are challenging for states because of the turn have an impact on program 438.6(c)(2)(ii)(F), which was adopted in lack of data to support the required expenditures. the 2016 final rule, prohibits payment annual evaluation to renew payment Regarding commenters’ concerns arrangements under § 438.6(c) from arrangements. One commenter about the lack of data to support the being renewed automatically. In the requested that CMS reconsider the required annual evaluation in 2016 final rule, we explained that requirement that state-directed § 438.6(c)(2), we understand that states because we sought to evaluate and payments under § 438.6(c)(1)(iii) be will not always have finalized measure the impact of these payment approved annually because states evaluation results before requesting the reforms, such agreements could not be generally implement minimal changes next year’s approval; however, we renewed automatically (81 FR 27583). to fee schedules from one year to the expect states to have a finalized Automatic renewal is not consistent next and delays in CMS approval of evaluation plan. As noted in the with our view that these payment directed payments create uncertainty for November 2017 CIB, directed payments arrangements must be reviewed to states, managed care plans, and the must have an evaluation plan to assess ensure that the requirements in provider community. the degree to which the directed § 438.6(c)(2) are met and continue to be payment arrangement achieves its met. Our policy on this issue has not Response: We agree with commenters objectives. The basis and scope of the changed. Under § 438.6(c)(3), we are that multi-year approval of specific evaluation plan should be finalizing in this rule, the option for payment arrangements listed at commensurate with the size and states to seek multi-year approval of paragraphs (c)(1)(i) and (ii) can reduce complexity of the payment arrangement. specific payment arrangements listed at administrative burden and support the For example, a state implementing a paragraphs (c)(1)(i) and (ii), as we expansion of value-based payment minimum fee schedule to promote believe this will encourage more models. We also agree that multi-year access to care may be able to utilize providers to make commitments to approval of payment arrangements existing mechanisms to evaluate the quality outcomes and support the listed at paragraphs (c)(1)(i) and (ii) can effectiveness of the payment expansion of value-based payment encourage providers to make multi-year arrangement, such as external quality models. These payment arrangements commitments to quality outcomes. We review (EQR) or an existing consumer or will continue to be reviewed on a also understand that commenters would provider survey. States also have the periodic basis. like the option for multi-year approval ability to identify performance measures Comment: One commenter requested for payment arrangements listed at that are most appropriate for this that CMS clarify in § 438.6(c)(3) that a paragraph (c)(1)(iii); however, we evaluation and may wish to consider state does not need prior CMS approval decline to adopt this recommendation. using performance measures currently to adjust for inflation or rebase an We continue to believe that the approval being used by the state or other existing approved multi-year payment threshold. of a payment arrangement under measure sets in wide use across the Response: We do not agree with paragraph (c)(1)(iii) should be for one Medicaid, CHIP, and Medicare programs commenters that prior approval is not rating period. As we explained in our to facilitate alignment and reduce needed to adjust rates for inflation or proposed rule (83 FR 57272), while we administrative burden. when states rebase rates for an approved understand and acknowledge that value- Regarding commenters’ concerns payment methodology, as this is not based purchasing payment related to delays in CMS approval of consistent with paragraph (c)(3)(i)(C) as arrangements and those tied to larger directed payments, we committed in our proposed and finalized. Under this final delivery system reform efforts can be November 2017 CIB to a timely review rule, the state must affirm that it will more complex, we believe that more process for states. CMS committed to not make changes to the payment traditional payment arrangements and process § 438.6(c) preprints that do not methodology, or magnitude of the fee schedules under paragraph (c)(1)(iii) contain significant policy or payment payment, described in the managed care should continue to be reviewed and issues within 90 calendar days after contract for all years of the multi-year evaluated on an annual basis by both receipt of a complete submission. Since payment arrangement without our prior states and CMS to ensure that the publishing this CIB, we have continued approval. If a state plans to adjust the payments are consistent with states’ and to be committed to this timeframe, and payments for inflation or rebase a CMS’ goals and objectives for directed in our recent experience in processing previously approved payment payments under Medicaid managed care and approving § 438.6(c) payment arrangement, the state must obtain prior contracts. Based on our experience with arrangements, we are generally working approval of such changes under implementing state directed payments, with states to approve these payments paragraph (c)(2), consistent with the text states have been submitting proposals to within 90 calendar days. in paragraph (c)(3)(i)(C). This approach CMS for significant changes to provider Comment: Some commenters is consistent with our view that these fee schedules under § 438.6(c)(1)(iii), recommended that CMS consider payment arrangements must be

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reviewed to ensure that the • At § 438.6(a), deleted the phrase In the 2016 final rule, we also noted requirements in § 438.6(c)(2) are met, ‘‘per unit price for services’’ and that section 1903(m)(2)(A) of the Act including that the payments continue to replaced it with ‘‘for specific services requires that capitation payments to be consistent with § 438.4, the standards identifiable as having been provided to managed care plans be actuarially sound specified in § 438.5, and generally an individual beneficiary’’. and clarified our interpretation of that accepted actuarial principles and • At § 438.6(c)(1)(iii)(A), finalizing standard as meaning that payments practices. the provision without the sentence that under the managed care contract must Comment: One commenter requested states supplemental payments contained align with the provision of services to clarification on whether state directed in a state plan are not, and do not beneficiaries covered under the payments under § 438.6(c)(1)(iii)(A) are constitute, state plan approved rates. contract. We clarified the statutory and subject to approval for one rating period regulatory differences between or are excluded from this limitation c. Pass-Through Payments Under MCO, payments made on a FFS basis and on because they are already approved PIHP, and PAHP Contracts (§ 438.6(d)) a managed care basis (81 FR 27588). We under the state plan rate methodology. provided an analysis and comparison of Response: Under § 438.6(c)(2)(ii) as In the 2016 final rule, and the 2017 section 1902(a)(30)(A) of the Act finalized, payment arrangements under ‘‘Medicaid Program; The Use of New or regarding FFS payments and paragraph (c)(1)(iii)(A) do not require Increased Pass-Through Payments in implementing regulations that impose written prior approval from CMS; Medicaid Managed Care Delivery aggregate upper payment limits (UPL) therefore, the approval timeframes in Systems’’ final rule (82 FR 5415), we on rates for certain types of services or § 438.6(c)(3) are not applicable to those finalized a policy to limit state direction provider types to section 1903(m)(2)(A) payment arrangements. of payments, including pass-through regarding the requirement that Comment: A few commenters payments, at § 438.6(c) and (d). We capitation payments in managed care requested that CMS establish time defined pass-through payments at contracts be actuarially sound and parameters for CMS’ review and § 438.6(a) as any amount required by the implementing regulations that require approval of state directed payment state, and considered in calculating the payments to align with covered services proposals. actuarially sound capitation rate, to be delivered to eligible populations. Based Response: While we decline to adopt added to the contracted payment rates on that analysis, we concluded that commenters’ request to establish paid by the MCO, PIHP, or PAHP to pass-through payments were not specific time parameters for our review hospitals, physicians, or nursing consistent with our regulatory standards and approval of payment arrangements facilities that is not for the following for actuarially sound rates because they under § 438.6(c), we committed in our purposes: A specific service or benefit do not tie provider payments to the November 2017 CIB to a timely review provided to a specific enrollee covered provision of specific services. Despite process for states. We committed to under the contract; a provider payment this conclusion, we acknowledged in process § 438.6(c) preprints that do not methodology permitted under the 2016 final rule that, for many states, contain significant policy or payment § 438.6(c)(1)(i) through (iii) for services pass-through payments have been issues within 90 calendar days after and enrollees covered under the approved in the past as part of Medicaid receipt of a complete submission. Since contract; a subcapitated payment managed care contracts and served as a publishing this CIB, we have continued arrangement for a specific set of services critical source of support for safety-net to be committed to this timeframe, and and enrollees covered under the providers caring for Medicaid in our recent experience in processing contract; graduate medical education beneficiaries (81 FR 27589). We and approving § 438.6(c) payment (GME) payments; or federally-qualified therefore adopted a transition period for arrangements, we are generally working health center (FQHC) or rural health states that had already transitioned with states to approve these payments clinic (RHC) wrap around payments. We services or eligible populations into within 90 calendar days. noted in our 2017 pass-through payment managed care and had pass-through final rule that a distinguishing After consideration of the public payments in their managed care characteristic of a pass-through payment comments and for the reasons contracts as part of the regulations that is that a managed care plan is articulated in the proposed rule and our generally prohibit the use of pass- contractually required by the state to responses to comments, we are through payments in actuarially sound pay providers an amount that is finalizing § 438.6(a) and (c) as proposed capitation rates. Although § 438.6(d) disconnected from the amount, quality, with the following modifications: was not explicitly limited to pass- or outcomes of services delivered to • At § 438.6(a), included a sentence through payments in the context of an enrollees under the contract during the in the definition of supplemental established managed care program, the rating period of the contract (82 FR payments that states DSH and GME use of pass-through payments in place 5416).5 We noted that when managed payments are not, and do not constitute, as of the 2016 final rule as an upper care plans only serve as a conduit for supplemental payments; and included a limit on permitted pass-through passing payments to providers technical change to the definition of payments during the transition periods independent of delivered services, such supplemental payments by revising the described in § 438.6(d) effectively payments reduce managed care plans’ phrase ‘‘amounts calculated through an precludes new managed care programs ability to control expenditures, approved State plan rate methodology’’ from adopting pass-through payments effectively use value-based purchasing to ‘‘State plan approved rates.’’ under the current law. strategies, implement provider-based • At § 438.6(a), included a sentence We used the 2016 final rule to quality initiatives, and generally use the (which had been proposed to be identify the pass-through payments in full capitation payment to manage the codified in § 438.6(c)(1)(iii)(A)) in the managed care contract(s) and rate care of enrollees. definition of state plan approved rates certification(s) that were eligible for the that a state’s supplemental payments pass-through payment transition period. 5 Medicaid Program; The Use of New or Increased contained in a state plan are not, and do Pass-Through Payments in Medicaid Managed Care We provided a detailed description of not constitute, state plan approved rates Delivery Systems, Final Rule, (82 FR 5415–5429, the policy rationale (81 FR 27587 under our definition. January 18, 2017). through 27592) for why we established

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pass-through payment transition periods Medicaid FFS for populations that are the beginning of the first rating period and limited pass-through payments to already enrolled in managed care) and in which the services were transitioned hospitals, nursing facilities, and populations (that is, adding new from payment in a FFS delivery system physicians, and this policy rationale has populations to Medicaid managed care to a managed care contract, provided not changed. We focused on the three when previously those populations that during the 3 years, the services provider types identified in § 438.6(d) received all Medicaid services through continue to be provided under a because these were the most common FFS delivery systems). managed care contract with an MCO, provider types to which states made Specifically, we proposed in PIHP, or PAHP. supplemental payments within Federal § 438.6(d)(6)(i) through (iii) that states We proposed paragraphs (d)(6)(iii)(A) UPLs under state plan authority in may require managed care plans to through (C) to address the maximum Medicaid FFS. make pass-through payments, as defined aggregate pass-through payment Since implementation of the 2016 and in § 438.6(a), to network providers that amounts permitted to be directed to 2017 final rules, we have worked with are hospitals, nursing facilities, or hospitals, nursing facilities, and many states that have not transitioned physicians, when Medicaid populations physicians for each rating period of the some or all services or eligible or services are initially transitioning or specified 3-year pass-through payment populations from their FFS delivery moving from a Medicaid FFS delivery transition period; that is, we proposed system into a managed care program. system to a Medicaid managed care three paragraphs to identify the We have understood that some states delivery system, provided the following maximum aggregate amount of the pass- would like to begin to transition some requirements are met: (1) The services through payments for each rating period services or eligible populations from will be covered for the first time under of the 3-year pass-through payment FFS to managed care but would also like a Medicaid managed care contract and transition period that the state can to continue to make supplemental were previously provided in a Medicaid require the managed care plan to make payments to hospitals, physicians, or FFS delivery system prior to the first to ensure that pass-through payments nursing facilities. In the 2018 proposed rating period, as defined in § 438.2, of under proposed § 438.6(d)(6) are less rule, we acknowledged the challenges the specified transition period for pass- than or equal to the payment amounts associated with transitioning through payments (‘‘pass-through attributed to and actually paid as FFS supplemental payments into payments payment transition period’’); (2) the supplemental payments to hospitals, based on the delivery of services or state made supplemental payments, as nursing facilities, or physicians, value-based payment structures. We defined in § 438.6(a), to hospitals, respectively, during the 12-month acknowledged the transition from one nursing facilities, or physicians during period immediately 2 years prior to the payment structure to another requires the 12-month period immediately 2 first rating period of the pass-through robust provider and stakeholder years prior to the first rating period of payment transition period for each engagement, broad agreement on the pass-through payment transition applicable provider type. This means approaches to care delivery and period for those specific services that that the aggregate pass-through payment, establishing systems for will be covered for the first time under payments under the new 3-year pass- measuring outcomes and quality, a Medicaid managed care contract (this through payment transition period must planning, and evaluating the potential 12-month period is identified in be less than or equal to the payment impact of change on Medicaid financing § 438.6(d)(2) and used in calculating the amounts attributed to and actually paid mechanisms. We also recognized that base amount for hospital pass-through as FFS supplemental payments in implementing value-based payment payments under § 438.6(d)(3)); and (3) Medicaid FFS. structures or other delivery system the aggregate amount of the pass- To include pass-through payments in reform initiatives, and addressing through payments that the state requires the managed care contract(s) and transition issues, including ensuring the managed care plan to make is less capitation rates(s) under new paragraph adequate base rates, are central to both than or equal to the amounts calculated (d)(6), we proposed that the state would delivery system reform and to in proposed paragraph (d)(6)(iii)(A), (B), have to calculate and demonstrate that strengthening access, quality, and or (C) for the relevant provider type for the aggregate amount of the pass- efficiency in the Medicaid program. each rating period of the pass-through through payments for each rating period To address states’ requests to continue payment transition period—this of the pass-through payment transition making supplemental payments for requirement means that the aggregate period was less than or equal to the certain services and assist states with amount of the pass-through payments amounts calculated as described in transitioning some or all services or for each rating period of the specified proposed paragraph (d)(6)(iii)(A), (B), or eligible populations from a FFS delivery pass-through payment transition period (C) for the relevant provider type. In system into a managed care delivery that the state requires the managed care § 438.6(d)(6)(iii), we proposed that for system, we proposed to add a new plan to make must be less than or equal determining the amount of each § 438.6(d)(6) that would allow states to to the payment amounts attributed to component for the calculations make pass-through payments under new and actually paid as FFS supplemental contained in proposed paragraphs managed care contracts during a payments to hospitals, nursing facilities, (d)(6)(iii)(A) through (C), the state must specified transition period if certain or physicians during the 12-month use the amounts paid for services during criteria are met. We explained that period immediately 2 years prior to the the 12-month period immediately 2 when we refer to transitioning services first rating period of the pass-through years prior to the first rating period of from FFS Medicaid to Medicaid payment transition period for each the pass-through payment transition managed care plan(s) for purposes of applicable provider type. period. As a practical matter, the our proposal at § 438.6(d)(6), we are We also proposed at § 438.6(d)(6)(iv) proposed calculation would require the referring to both when a state expands that the state may require the MCO, state to use Medicaid Management the scope of its managed care program PIHP, or PAHP to make pass-through Information System (MMIS) adjudicated in terms of services (for example, payments for Medicaid populations or claims data from the 12-month period covering behavioral health services services that are transitioning from a immediately 2 years prior to the first through Medicaid managed care that FFS delivery system to a managed care rating period of the pass-through were previously provided under delivery system for up to 3 years from payment transition period. This

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timeframe and use of 2-year old data amounts that were attributed to and rating period of the pass-through was chosen so that the state has actually paid as FFS supplemental payment transition period. complete utilization data for the service payments during the 12-month period • Step 3: Multiply the amount in Step type that would be subject to the pass- immediately 2 years prior to the first 1 by the ratio produced by Step 2. through payments. Under our proposal rating period of the pass-through • for this calculation, the state would also payment transition period. Step 4: The aggregate amount of be required to restrict the amount used • Step 2: Divide (a) the payment pass-through payments that the state in each component of the calculation to amounts, excluding supplemental may require the MCO, PIHP, or PAHP to the amount actually paid through a payments, paid for the services that are make for each rating period of the 3-year supplemental payment for each being transitioned from payment in FFS pass-through payment transition period applicable provider type. Our proposal to the managed care contract for each must be demonstrated to be less than or referred to the most common provider applicable provider type by (b) the total equal to the result achieved in Step 3. payment amounts paid through types to which states made In the proposed rule, we provided the supplemental payments within Federal payment rates for services provided in following formula to help illustrate the UPLs under state plan authority in FFS for each applicable provider type to aggregate amount of pass-through Medicaid FFS. In the proposed rule, we determine the ratio. In making these provided the following four basic steps calculations, the state must use the payments for each rating period of the for making the calculation: amounts paid for each provider type pass-through payment transition period • Step 1: For each applicable provider during the 12-month period for each applicable provider type: type, identify the actual payment immediately 2 years prior to the first

In the proposed rule, we also Next, in Step 2, the state determines we also proposed, in § 438.6(d)(6)(iv), to provided an example to help the ratio of the payment amounts paid allow states a transition period of up to demonstrate how the calculation would in FFS for inpatient hospital services 3 years to transition FFS supplemental be performed. In the example, we that will be transitioned from payment payments into payments linked to assumed that a state Medicaid program in a FFS delivery system to the managed services and utilization under the paid $60 million in claims in FFS for care contract for the specific provider managed care contract. We proposed the inpatient hospital services in CY 2016. category and requisite period in relation 3-year pass-through payment transition To acknowledge the Medicaid FFS UPL, to the total payment amounts paid in period to provide states with time to we assumed that those same services FFS for all inpatient hospital services integrate pass-through payment would have been reimbursed at $100 within the same provider category arrangements into allowable payment million using Medicare payment during the same period. For example, if structures under actuarially sound principles. The difference between the the state paid $36 million in FFS for capitation rates, including value-based amount that Medicare would have paid inpatient hospital services for a specific purchasing, enhanced fee schedules, and the amount Medicaid actually paid population out of the $60 million in Medicaid-specific delivery system in claims is $40 million. total claims paid in FFS for inpatient reform, or the other approaches hospital services during 2016, and the consistent with § 438.6(c). We noted For Step 1, of the $40 million state wants to transition the population that a state may elect to use a shorter difference, the state actually paid $20 associated with the $36 million in paid transition period but would be million in supplemental payments to claims to the managed care contract, permitted a maximum of 3 years to inpatient hospitals in CY 2016. For this then the ratio is $36 million divided by phase out the pass-through payments. example, we assumed that CY 2016 was $60 million, or 60 percent. We explained that we believed that the the 12-month period immediately 2 In Step 3, the state multiplies the $20 proposed 3-year pass-through payment years prior to the first rating period of million in actual supplemental transition period was appropriate the pass-through payment transition payments paid by 60 percent (the ratio because the services (and corresponding period in which inpatient hospital identified in step 2), resulting in $12 supplemental payments) would not yet services would be transitioned to a million. The $12 million is the amount have been transitioned at all into managed care contract; therefore, we used in Step 4 as the total amount that managed care contracts; therefore, we assumed the pass-through payments the state would be permitted under our believed that states should be in a better were to be made during CY 2018. This proposal to require the managed care position to design payment structures transition to managed care could be plans to make in pass-through payments that appropriately account for these either by moving Medicaid beneficiaries to inpatient hospitals for each rating payments during the transition to from FFS to coverage under managed period during the pass-through payment managed care (unlike the current pass- care contracts that cover inpatient transition period. through payments rules, which only hospital services or by moving inpatient In an effort to provide network provide transition periods for pass- hospital services into coverage under an providers, states, and managed care through payments that have already existing managed care program (that is, plans with adequate time to design and been incorporated into managed care for enrollees who are already enrolled in implement payment systems that link contracts and rates prior to the adoption managed care for other services). provider reimbursement with services, of specific limits on the state direction

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of payments made by managed care period to avoid unnecessary disruption paragraphs (d)(6)(iii)(A) through (C), we plans). We specifically invited comment to any safety-net provider systems that are also finalizing the text using the on whether the 3-year pass-through they have developed in their Medicaid phrase ‘‘State plan approved rates’’ payment transition period was an programs when the state moves services instead of ‘‘payment rates’’ to clarify appropriate amount of time. or populations into managed care. We how those ratios do not include Unlike the 2016 final rule, our understand that some states have supplemental payments. proposal did not set a specific calendar previously used pass-through payments We encourage states to plan for how date by which states must end pass- to increase reimbursement for safety-net FFS supplemental payments can be through payments; rather, our proposal providers; however, we note that there incorporated into standard capitation provided a transition period for up to 3 are other mechanisms that states can use rates or permissible payment years from the beginning of the first to increase reimbursement to providers arrangements in a managed care rating period in which the services were in a managed care program that do not program as quickly as possible. transitioned from payment in a FFS implicate the pass-through payment Comment: A few commenters delivery system to a managed care restrictions. For example, states can use requested that CMS clarify how DSH contract, provided that during the 3 the payment arrangements under payments will be considered when years, the services continue to be § 438.6(c) to direct managed care plans determining the amount of FFS provided under a managed care contract to link the delivery of services and supplemental payments that can be with an MCO, PIHP, or PAHP. We noted quality outcomes for Medicaid managed continued as pass-through payments in that by providing states, network care enrollees under the managed care managed care. Commenters noted that it providers, and managed care plans time contract. However, we reiterate here that appears from the preamble discussion and flexibility to integrate current pass- certain financing requirements in statute that the new pass-through payment through payment arrangements into and regulation are applicable across the provision is intended to be limited to permissible managed care payment Medicaid program irrespective of the non-DSH supplemental payments, but structures, states would be able to avoid delivery system (for example, fee-for- the proposed definition of supplemental disruption to safety-net provider service, managed care, and payments in § 438.6(a) could be systems that they have developed in demonstration authorities), and are interpreted as including DSH payments. their Medicaid programs. A few commenters also requested clarity The following summarizes the public similarly applicable whether a state on the treatment of GME payments comments received on our proposal to elects to direct payments under amend § 438.6(d)(6) and our responses § 438.6(c). Such requirements include, when determining the amount of FFS to those comments. but are not limited to, limitations on supplemental payments that can be Comment: Many commenters financing of the non-Federal share continued as pass-through payments in supported the proposal to allow states to applicable to health care-related taxes managed care. Several commenters include new pass-through payments and bona fide provider-related recommended that CMS allow for GME which encourage providers to donations. These financing funding to be distributed to providers participate in new managed care requirements similarly apply when a directly by the state. arrangements. Commenters noted that state elects to direct payments under Response: We never intended for DSH allowing states to have a set period of § 438.6(c) or the payment transition or GME payments to be included in our time to transition away from existing periods under § 438.6(d). We continue proposed definition of supplemental FFS supplemental payment programs to view pass-through payments as payments in § 438.6(a) and therefore when the state moved services (or problematic and not consistent with our never intended for the pass-through populations) into a managed care regulatory standards for actuarially payments subject to the limits in program will be helpful in preventing sound rates because they do not tie paragraph (d) to apply to DSH or GME abrupt reductions in services or access provider payments with the provision of payments. As proposed in the 2018 to providers because of the lack of services to Medicaid beneficiaries proposed rule, one of the requirements supplemental payments. Commenters covered under the contract. Therefore, for the new pass-through payment noted that pass-through payments are while we proposed and are finalizing a transition period was that the state had critical for ensuring that safety-net pass-through payment transition period previously made supplemental providers remain profitable enough to under § 438.6(d)(6), that transition payments, as defined in § 438.6(a), to continue to treat their patients. period is limited and the amount of hospitals, nursing facilities, or Commenters also noted that states have pass-through payments permitted physicians during the 12-month period long used these payments to combat during that period is subject to immediately 2 years prior to the first provider shortages in areas of need by restrictions as outlined in the rating period of the transition period. As increasing reimbursement for providers regulation. In the proposed rule, we noted in this final rule in the responses who accept a proportionally large provided the 4 step calculation noted to comments for § 438.6(a) (Definitions), number of Medicaid patients. above and the proposed regulation text we agree with commenters that the Response: We agree that the new pass- incorporated the steps in paragraphs definition of supplemental payments through payment transition period (d)(6)(iii)(A) through (C) and in must be revised to clarify that DSH and under § 438.6(d)(6) can assist states with paragraph (d)(6)(iv) without GME payments are not supplemental transitioning some or all services or affirmatively identifying the process as payments as that term is defined and eligible populations from a FFS delivery steps 1 through 4. We are finalizing the used for part 438. DSH and GME system into a managed care delivery regulation with a technical edit to payments are made under separate and system. We believe the new pass- § 438.6(d)(6)(iii)(A) through (C) to distinct authorities in the Medicaid through payment transition period will clarify that both the numerator and program under 42 CFR part 447. As provide states, network providers, and denominator of the ratio described in discussed in I.B.4.b. of this final rule, managed care plans time and flexibility Step 2 should exclude any we are finalizing the definition of to integrate such payment arrangements supplemental payments as defined in supplemental payments at § 438.6(a) into permissible managed care payment § 438.6(a) made to the applicable with a modification to include a structures. States can use the transition providers and counted in Step 11. In sentence in the definition that states

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DSH and GME payments are not, and do 2018 (83 FR 57274). If the first month three equal reductions or otherwise to not constitute, supplemental payments. of the managed care contract is January the aggregate payment maximum, but The existing definition of pass- 2018, the first month of the 12-month the regulation we are finalizing does not through payment in § 438.6(a) excludes period described in § 438.6(d)(6)(ii) and require or discourage states use of this GME payments. We have not revised (iii) is January 2016. approach. that definition since the 2016 final rule We understand that commenters Comment: A few commenters noted so the prohibition on pass-through would like us to include additional that a state’s transition to phasing out payments in § 438.6(d) does not apply to provider types under § 438.6(d)(6)(iii), pass-through payments may take longer GME payments. Further, under existing or that we expand the phrase ‘‘relevant than 3 years and suggested that CMS § 438.60, state Medicaid agencies may provider type’’ that is used in increase the transition period to 5 years. make direct payments to network § 438.6(d)(6)(iii) to include more One commenter urged CMS to allow providers for GME costs approved under granular provider classifications; pass-through payments for network the state plan without violating the however, we decline to make these hospitals to be phased out on a longer prohibition of additional payments for modifications. As noted in the 2016 timeline than the proposed 3-year services covered under managed care final rule (81 FR 27590) and the 2018 transition period, until at least July 1, contracts. proposed rule (83 FR 57272), we 2027. One commenter suggested that the Comment: Some commenters focused on the three provider types 3-year transition period was inadequate requested that CMS confirm the identified in § 438.6(d) because these and that a 10-year transition period was standard ‘‘12-month period immediately were the most common provider types more appropriate under § 438.6(d)(6). 2 years prior’’ that is used in for which states made supplemental Response: We do not agree with § 438.6(d)(6)(ii) and (iii). These payments within Federal UPLs under commenters that we should increase the commenters requested that CMS state plan authority, and we note that length of the pass-through payment confirm that the first month of the 12- these are the provider types for which transition period under § 438.6(d)(6). month period used to calculate the states have typically sought to continue We continue to view pass-through maximum aggregate payment is 24 making payments as pass-through payments as problematic and not months (and not 36 months) before the payments under managed care consistent with our regulatory standards first month of the first rating period for programs. Further, the rules at for actuarially sound rates because they the managed care contract into which § 438.6(d)(6) need to be consistent with do not tie provider payments with the the new services or populations are the existing pass-through payment moving. Commenters also requested that regulations at § 438.6(d)(3) and (5), provision of services. However, as noted additional flexibility be applied to the which currently recognize pass-through in the 2018 proposed rule, we term ‘‘relevant provider type’’ to payments for hospitals, nursing understand that network providers, consider more granular provider facilities, and physicians. We focused states, and managed care plans need classifications relevant to a specific on the three provider types identified in adequate time to design and implement supplemental payment mechanism, § 438.6(d) because these were the most payment systems that link provider such as academic medical hospitals. common provider types to which states reimbursement with services when the Commenters also requested clarity on made supplemental payments within state is transitioning new services or whether the transition mechanism will Federal UPLs under state plan authority new populations to a managed care 1 contract. We proposed and are finalizing require three equal reductions (33 ⁄3 in Medicaid FFS. percent annually) to the calculated Unlike existing hospital pass-through this amendment to § 438.6(d) to assist aggregate supplemental payment payments made under § 438.6(d)(3), with that. However, we still believe that maximum or whether reductions are which requires a phasedown of the the 3-year pass-through payment required under the new transition pass-through payment amounts over the transition period provides states with a period. transition period (up to 10 years), we reasonable amount of time to integrate Response: We confirm that the confirm for commenters that the pass- pass-through payment arrangements standard ‘‘12-month period immediately through payment transition period of 3- into allowable payment structures under 2 years prior’’ that is used in years at § 438.6(d)(6) does not require actuarially sound capitation rates, § 438.6(d)(6)(ii) and (iii), as well as the three equal reductions to the calculated including value-based purchasing, standard that is currently codified in aggregate payment maximum. We also enhanced fee schedules, Medicaid- existing pass-through payment confirm that the pass-through payment specific delivery system reform, or the regulations at § 438.6(d)(2) in relation to transition period under § 438.6(d)(6) other approaches consistent with the calculation of the base amount for does not require any reductions or a § 438.6(c). Further, states that have not hospital pass-through payments under phase-down across the 3-year transition yet transitioned these services (and § 438.6(d)(3), means that the first month period. As noted in the proposed rule, corresponding supplemental payments) of the twelve-month period used to a state may elect to use a shorter into managed care contracts should be calculate the maximum aggregate transition period but would be in a better position to design payment payment is twenty-four months before permitted a maximum of 3-years to structures that appropriately account for the first month under managed care. In phase out the pass-through payments. these payments during the transition to the 2018 proposed rule, we provided an The regulation does not require any managed care. We find the commenters’ example that illustrates our response reductions from one year to the next recommended timeframes of 5 years, 10 here: in the example we assumed that during the 3-year transition period in years, and through July 1, 2027 to be CY 2016 was the 12-month period § 438.6(d)(6), but once the 3-year unreasonably long, and we believe that immediately 2 years prior to the first transition period ends, all of the pass- a transition period of these lengths rating period of the pass-through through payments must be completely would unnecessarily delay the payment transition period in which phased out of the managed care transition of these payments into inpatient hospital services were to be contracts and rates because the allowable payment structures under transitioned to a managed care contract; prohibition in § 438.6(d) applies. We actuarially sound capitation rates. therefore, we noted in the example that note that states are permitted to phase Therefore, we decline to make the pass-through payments were for CY the pass-through payments down by modifications to the length of the

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transition period and will finalize 3- sound capitation rates, including value- through payments under managed care years at § 438.6(d)(6). based purchasing, enhanced fee programs. We also do not want our rules Comment: Some commenters stated schedules, Medicaid-specific delivery at § 438.6(d)(6) to be inconsistent with that pass-through payments should not system reform, or the other approaches the existing pass-through payment be prohibited so long as the overall consistent with § 438.6(c). Since the regulations at § 438.6(d)(3) and (5), payments made to Medicaid managed 2016 final rule, we have worked with which currently recognize pass-through care plans are actuarially sound. One many states to transition some or all of payments for hospitals, nursing commenter noted that our proposal the state’s pass-through payments into facilities, and physicians. would redefine state supplemental FFS actuarially sound capitation rates that Regarding the request for clarity on payments and could exclude do not limit the plan’s discretion or whether nurse practitioners are transitioning pass-through payments to permissible payment arrangements included in the physician pass-through state directed payment arrangements in under § 438.6(c). States can work with payment category, we clarify here that the future. This commenter requested their managed care plans and network nurse practitioners are not included in clarification on whether these pass- providers to transition the amounts the physician category for purposes of through payments under the new currently provided through pass- the pass-through payment transition transition period could be transitioned through payments in approvable ways, periods under § 438.6(d). While CMS into state directed payments at the end such as actuarially sound capitation has not defined the term ‘‘physician’’ in of the 3-year transition period. rates that do not limit the plan’s regulation for purposes of the pass- Commenters also requested that CMS discretion or the approaches consistent through payment transition periods collect and make pass-through payment with § 438.6(c). under § 438.6(d), we rely on section data publicly available so that Regarding the recommendation that 1905(a)(5) of the Act, which stakeholders can examine the amount of CMS collect and make pass-through incorporates the definition for physician pass-through payments and to whom payment data publicly available, we from sections 1861(r)(1) and (r)(2) of the they are being made. have traditionally deferred to states for Act, and the implementing regulation at Response: We disagree with making specific components of rate 42 CFR 440.50 to provide meaning for commenters that pass-through development publicly available. We physicians’ services for the purpose of payments, beyond those payments note that pass-through payments are medical assistance under Title XIX. permitted under a pass-through added to the contracted payment rates Under sections 1861(r)(1) and 1861(r)(2) payment transition period, should be and considered in calculating the of the Act, the term ‘‘physician’’ means permissible under Medicaid managed actuarially sound capitation rate; a doctor of medicine or osteopathy care. As explained in our proposed rule, therefore, pass-through payments are a legally authorized to practice medicine pass-through payments are not specific component of capitation rate and surgery by the state in which he or consistent with our regulatory standards development. As such, we will continue she performs such services, and a doctor for actuarially sound rates because they to defer to states on making these of dental surgery or of dental medicine do not tie provider payments with the amounts publicly available. who is legally authorized to practice provision of services. When managed Comment: A few commenters noted dentistry by the state in which he or she care plans only serve as a conduit for that current CMS regulations apply only performs such services and who is passing payments to providers to hospitals, nursing facilities, and acting within the scope of his or her independent of delivered services, such physicians. These commenters license, to the extent that such services payments reduce managed care plans’ requested that CMS change the may be performed under state law either ability to control expenditures, terminology from ‘‘physician’’ to by a doctor of medicine or by a doctor effectively use value-based purchasing ‘‘provider’’ to ensure that all health care of dental surgery or dental medicine if strategies, implement provider-based providers are eligible for the pass- furnished by a physician. quality initiatives, and generally use the through payments. Some commenters Comment: One commenter suggested full capitation payment to manage the requested clarity on whether nurse updating the language in § 438.6(d)(6)(i) care of enrollees. We have also practitioners are included in the to read: ‘‘The Medicaid populations or previously provided a detailed physician pass-through payment services will be covered for the first description of our policy rationale (81 category. time under a managed care contract and FR 27587 through 27592) related to Response: We understand that were previously provided in a FFS pass-through payments and our position commenters would like us to include delivery system prior to the first rating has not changed. Therefore, we will not additional provider types under period of the transition period.’’ One amend or eliminate the prohibition § 438.6(d)(6)(iii) (such as by replacing commenter suggested that against pass through payments in the term ‘‘physician’’ as used in § 438.6(d)(6)(i) be clarified to allow new § 438.6(d) beyond the specific change § 438.6(d)(6)(iii)(C) to the more general pass-through payments for geographic we proposed for § 438.6(d)(6) to assist and broader term ‘‘provider’’) to areas that are newly transitioning to states with transitioning new recognize additional health care Medicaid managed care. populations or new services to managed providers; however, we decline to make Response: We decline to add the care. these modifications. As noted in the phrase ‘‘The Medicaid population or’’ at We also disagree with commenters 2016 final rule (81 FR 27590) and the the beginning of § 438.6(d)(6)(i) because that § 438.6(d)(6) limits the state’s 2018 proposed rule (83 FR 57272), we it is not necessary. As proposed and ability to transition pass-through focused on the three provider types finalized, § 438.6(d)(6) used the phrase payments to state-directed payment identified in § 438.6(d) because these ‘‘when Medicaid populations or services arrangements under § 438.6(c). We were the most common provider types are initially transitioning from a FFS believe that the pass-through payment for which states made the majority of delivery system to a managed care transition period under § 438.6(d)(6) supplemental payments within Federal delivery system.’’ Therefore, we believe provides states with a reasonable UPLs under state plan authority, and we that the rule is clear on this point. amount of time to integrate pass-through note that these are the provider types for Regarding pass-through payments for payment arrangements into allowable which states have typically sought to geographic areas that are newly payment structures under actuarially continue making payments as pass- transitioning to Medicaid managed care,

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we confirm that the pass-through treatment as a result of the ongoing providing community-based services, payment transition period at opioid crisis. for adults with a serious mental illness § 438.6(d)(6) would be appropriate as We considered proposing changes to (SMI) or children with a serious long as the conditions and requirements the regulation at § 438.6(e) but, after emotional disturbance (SED) who are under § 438.6(d)(6)(i) through (iv) are careful review, did not do so because of receiving medical assistance.7 These met, including that the populations or our belief that the underlying analysis demonstrations enable states to receive services will be covered for the first regarding the transfer of risk that FFP for longer lengths of stay in IMDs time under a managed care contract and underpinned the policy in the 2016 within specified parameters. We also were previously provided in a FFS final rule was appropriate. We also note that section 5052 of the SUPPORT delivery system prior to the first rating conducted a literature and data review for Patients and Communities Act, period of the transition period. When and did not identify any new data which provides a state plan option to states transition a new geographic area sources other than those we relied upon provide Medicaid coverage for certain into Medicaid managed care, the in the 2016 final rule that supported 15 individuals with substance use services and populations in that new days (81 FR 27560). We requested disorders who are patients in certain geographic area are newly moving into public comment on additional data IMDs from October 1, 2019 through managed care. sources that we should review. September 30, 2023, may also provide After consideration of the public The following summarizes the public mechanisms to receive FFP for longer comments and for the reasons comments received and our responses to lengths of stay in IMDs consistent with articulated in the proposed rule and our those comments. section 5052 of the SUPPORT for responses to comments, we are Comment: Several commenters Patients and Communities Act. finalizing § 438.6(d)(6) as proposed with supported the policy to not extend the Comment: One commenter noted that the following modifications: availability of FFP for capitation the 15-day policy has caused confusion • At § 438.6(d)(iii)(A) through (C), payments made for months that include in the industry, stating some managed included the following sentence, ‘‘Both stays longer than 15 days. Commenters care plans have interpreted this part of the numerator and denominator of the stated that making payments under the 2016 final rule to mean IMDs should ratio should exclude any supplemental those circumstances would incentivize reimburse the managed care plans for payments made to the applicable the provision of care in institutions the care provided for only the first 15 providers’’ and using the phrase ‘‘State rather than community-based settings. days if a patient stays beyond day 15. plan approved rates’’ instead of Other commenters disagreed with the Given the confusion around this issue, ‘‘payment rates’’ to clarify how those CMS decision to not extend the the commenter requested that CMS ratios do not include supplemental availability of FFP for capitation clarify that repayments between IMDs payments. payments made for months that include and managed care plans are not covered To ensure states have adequate time stays longer than 15 days. These by the 2016 final rule. to plan and implement a transition from commenters noted that the 15-day limit Response: There is no requirement in a fee-for-service system to a managed is not based on an individual’s care § 438.6(e) that requires IMDs to care delivery system, we are delaying needs and suggested that the 15-day reimburse managed care plans for the the effective date of this provision. limitation creates inappropriate care provided for only the first 15 days States that are initially transitioning incentives around the timing of if a patient stays beyond day 15; nor populations and services from fee-for- admissions. Other commenters does § 438.6(e) address repayment service to managed care must comply recommended alternatives to the 15-day arrangements between a Medicaid with § 438.6(d)(6) as amended effective policy, such as adjusting the length of managed care plan (that is, a MCO or July 1, 2021 for Medicaid managed care stay in the IMD to 25 days. PIHP) and a provider that is an IMD. rating periods starting on or after July 1, Response: We remind commenters Section 438.6(e) only governs the 2021. that we did not propose changes to the availability of FFP when states make capitation payments to an MCO or PIHP d. Payments to MCOs and PIHPs for regulation because we continue to for enrollees aged 21–64 receiving Enrollees That Are a Patient in an believe that the underlying analysis inpatient treatment in an IMD. The rule Institution for Mental Disease (IMD) regarding the transfer of risk that permits FFP to the state for the (§ 438.6(e)) underpinned the policy in the 2016 final rule is appropriate. Our detailed capitation payment only if specified Under the policies we adopted in the analysis and explanation of the rule can conditions are met, including that the 2016 final rule at § 438.6(e), we be found in the 2016 final rule at 81 FR length of stay in the IMD is for a short permitted FFP for a full monthly 27555 through 27563. In the 2018 term stay of no more than 15 days capitation payment to an MCO or PIHP proposed rule, we requested public during the period of the monthly for an enrollee aged 21 to 64 who comment on additional data sources capitation payment. Any requirements received inpatient treatment in an that we should review, and these for repayment from IMDs to managed institution for mental diseases (IMD) for commenters did not provide such data. care plans are not governed by this rule, part of the month when certain We also remind commenters that we but instead appear to be within the requirements are met, including a have developed section 1115(a) scope of the contractual arrangements requirement that the stay in the IMD be demonstration initiatives aimed at (1) between IMDs and managed care plans. for no more than 15 days in the month improving access to and quality of Comment: One commenter requested for which the capitation payment is treatment for Medicaid beneficiaries to that CMS confirm that states are not made (81 FR 27563). Since publication address substance use disorders (SUDs) precluded from using the flexibility of the 2016 final rule, we have heard and the ongoing opioid crisis; 6 and (2) afforded by § 438.6(e) to collect FFP on from states and other stakeholders that designing innovative service delivery FFP should be provided for capitation 7 SMD #18–011: Opportunities to Design systems, including systems for payments made for months that include Innovative Service Delivery Systems for Adults with a Serious Mental Illness or Children with a stays longer than 15 days, especially on 6 SMD #17–003: Strategies to Address the Opioid Serious Emotional Disturbance; available at https:// behalf of Medicaid enrollees who may Epidemic; available at https://www.medicaid.gov/ www.medicaid.gov/federal-policy-guidance/ require substance use disorder (SUD) federal-policy-guidance/downloads/smd17003.pdf. downloads/smd18011.pdf.

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capitation payments made for enrollees within +/¥1.5 percent of a certified rate demonstration authorities). Such under age 21 in an IMD when an is also actuarially sound as that requirements include, but are not individual is receiving substance use percentage is generally not more than limited to, limitations on financing of disorder (SUD) services. the risk margin incorporated into most the non-Federal share applicable to Response: CMS does not agree with states’ rate development process (81 FR health care-related taxes and bona fide the commenter that § 438.6(e) permits 27568). By giving states the flexibility to provider-related donations. states to collect FFP on capitation make small adjustments around the In the 2016 final rule, we highlighted payments made for enrollees under age certified rate, we intended to ease the our concerns that different capitation 21 in an IMD when that individual is administrative burden of rate review on rates based on the FFP associated with receiving SUD services. Section 438.6(e) states while meeting our goals of a particular population could be permits FFP when the state makes a transparency and integrity in the rate- indicative of cost shifting from the state capitation payment to an MCO or PIHP setting process. to the Federal Government and were not for an enrollee aged 21–64 receiving Since the publication of the 2016 final consistent with generally accepted inpatient treatment in an IMD so long as rule, some stakeholders have expressed actuarial principles (81 FR 27566). The certain conditions outlined in the a desire for us to clarify that once a state rate development standards we regulation are met. While § 438.6(e) is has certified the final capitation rate instituted with the final rule sought to not the appropriate authority for paid per rate cell under each risk eliminate such practices. The +/¥1.5 enrollees under the age of 21, many contract, the state can adjust the percent rate changes permitted in states provide inpatient psychiatric and certified rate +/¥1.5 percent at any time § 438.7(c)(3) were not intended to be SUD services for individuals under age within the rating period without used by states to shift costs to the 21 as part of their state plan, which can submitting justification to us. We Federal Government. To protect against include stays in an IMD, subject to the clarified in the 2018 proposed rule that cost shifting and eliminate any potential requirements at part 441 Subpart D. In when states are adjusting a final loophole in § 438.7(c)(3), we proposed accordance with § 438.3(c) and part 438 certified rate within the contract year that any changes of the capitation rate subpart J, if the service provided to within the range of 1.5 percent up or within the permissible 1.5 percent enrollees under the age of 21 is a down from the final certified rate, states would be subject to the requirements in Medicaid state plan service and do not need to submit a revised rate § 438.4(b)(1), which prohibits differing included under the managed care certification or justification to us, unless capitation rates based on FFP and contract, FFP would be available for the documentation is specifically requested requires that any proposed differences monthly capitation payment. by us in accordance with our proposed among capitation rates according to Comment: A few commenters made revisions in paragraph (c)(3) (83 FR covered populations be based on valid recommendations for additional data 57275). rate development standards and not sources that CMS should review to We proposed to amend § 438.7(c)(3) to vary with the rate of FFP associated support the availability of FFP for clarify the scope of permissible changes with the covered populations (see also capitation payments made for months to the capitation rate per rate cell and section I.B.2.b. of this final rule for a that include stays in an IMD. One the need for a contract modification and discussion of § 438.4(b)(1) and this commenter recommended that CMS use rate certification. Proposed § 438.7(c)(3) prohibition on rates varying with the the data that we collect as required by included the existing text authorizing FFP percentage). In addition, the 21st Century Cures Act (Cures Act) the state to increase or decrease the § 438.4(b)(1) requires that rates be (Pub. L. 114–255, enacted December 13, capitation rate per rate cell up to 1.5 developed in accordance with § 438.5 2016) to study the effects of the 15-day percent without submitting a revised and generally accepted actuarial in-lieu-of provision, which also requires rate certification. Proposed paragraph principles and practices; we noted in CMS to issue a report in December 2019. (c)(3) also retained the remaining text in our proposal that using this cross- One commenter also recommended that current § 438.7(c)(3) that such reference to regulate mid-year changes CMS use data that becomes available adjustments to the final certified rate of capitation rates within the +/¥1.5 through approved section 1115(a) SUD must be consistent with a modification percent range would ensure that such demonstrations. of the contract as required in § 438.3(c) changes were not arbitrary or designed Response: We agree with commenters and included new text to specify that to shift costs to the Federal Government. that once data becomes available the adjustments would be subject to the The proposed amendment to through these potential sources, such requirements at § 438.4(b)(1) and to § 438.7(c)(3) would permit us to require data should be used to inform future authorize us to require a state to provide documentation that the adjusted rate policy decisions and rulemaking. We documentation for adjustments complied with our proposed will take these recommendations under permitted under § 438.7(c)(3) to ensure requirements and other criteria related advisement. that modifications to a final certified to the actuarial soundness of rates. As we did not propose any capitation rate comply with the We also proposed § 438.7(e), which modifications to § 438.6(e), we are not requirements in §§ 438.3(c) and (e) and commits us to issuing annual guidance finalizing any changes to § 438.6(e) 438.4(b)(1). We reiterate here that all that describes: (1) The Federal standards under this final rule. capitation rates, regardless of whether for capitation rate development; (2) the they are established through the initial documentation required to determine 5. Rate Certification Submission rate certification or through a contract that the capitation rates are projected to (§ 438.7) amendment, must comply with the provide for all reasonable, appropriate, Section 438.7(c)(3) gives states requirements in §§ 438.3(c) and (e) and and attainable costs that are required flexibility to make de minimis rate 438.4 through 438.7. Further, we under the terms of a contract; (3) the adjustments during the contract year by explicitly clarify here that certain documentation required to determine enabling states to increase or decrease financing requirements in statute and that the capitation rates have been the capitation rate certified per rate cell regulation are applicable across the developed in accordance part 438; (4) by 1.5 percent without submitting a Medicaid program irrespective of the any updates or developments in the rate revised rate certification. We stated in delivery system (for example, fee-for- review process to reduce state burden the 2016 final rule that a rate that is service, managed care, and and facilitate prompt actuarial reviews;

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and (5) the documentation necessary to determined that the fluctuation of +/ without submitting a revised rate demonstrate that capitation rates ¥1.5 percent did not change the certification (83 FR 57275). In the 2016 competitively bid through a actuarial soundness of a capitation rate final rule, when we originally finalized procurement process have been and reasoned that the resulting rate will § 438.7(c)(3), we described the final rule established consistently with the remain actuarially sound (81 FR 27568). as providing the ability for the state to requirements of §§ 438.4 through 438.8. Providing states this flexibility to make adjust the actuarially sound capitation We noted in our proposal that such de minimis adjustments around the rate during the rating period by +/¥1.5 guidance would interpret and provide certified rate eases the administrative percent (81 FR 27568). However, we guidance on the part 438 regulations burden of rate review on states while noticed that the regulatory text in and specify procedural rules for meeting our goals of transparency and § 438.7(c)(3) does not actually contain complying with the regulations; we integrity in the rate-setting process. We this language, even though the preamble specifically explained how the guidance also decline to add new regulation text of the 2016 final rule does describe the would therefore address the information requiring states to document other rate changes under § 438.7(c)(3) as required to be in rate certifications. This changes made during the year that may changes made during the rating period guidance will be published as part of not have changed rates because any or during the contract year. Therefore, the annual rate guide for Medicaid changes would have to be included as we are finalizing a revision to managed care under the PRA package, modifications to the managed care plan § 438.7(c)(3) to include the language CMS–10398 #37, OMB control number contract and submitted to CMS for ‘‘during the rating period’’ as part of the 0938–1148. approval under § 438.3(a). We do not standard for using the 1.5 percent We solicited comments on our believe that requiring additional adjustment. A retroactive adjustment to proposals and whether additional areas documentation is necessary and believe the capitation rate must meet the of guidance would be helpful to states. that our existing processes for the requirements in § 438.7(c)(2) as there is The following summarizes the public submission of contract modifications is no regulatory provision carving de comments received on our proposal to sufficient without adding a new minimis rate changes out of the scope of amend § 438.7 and our responses to documentation requirement for states. § 438.7(c)(2) and the preamble ¥ those comments. We confirm that the +/ 1.5 percent is discussions in the 2016 final rule and Comment: A few commenters to be calculated as a percentage of the 2018 proposed rule limited the de supported the proposal to allow de certified rate. Section 438.7(c)(3) minimis rate changes to those changes minimis adjustments without further permits rate adjustments during the made during the contract year or rating rate justifications. A few commenters contract year by increasing or period. recommended that CMS always require decreasing the capitation rate certified Comment: Several commenters documentation accompanying de per rate cell by 1.5 percent without appreciated the proposal to provide minimis rate changes as well as submitting a revised rate certification. annual rate development and certification that revised rates are This means that the certified rate per documentation guidance for capitation actuarially sound. A few commenters rate cell can be adjusted by the +/¥ 1.5 rates, documentation requirements, recommended that CMS should also percent without a revised certification. updates in the rate review process, and require documentation that disclosed However, states cannot use both the de demonstrating competitive bidding. other de minimis changes made during minimis rate adjustment under Some commenters requested that states the year that may not have changed the § 438.7(c)(3) and the newly proposed 5 capitation rates. A few commenters percent, or +/¥ 2.5 percent from the be provided the opportunity to give requested clarification that the +/¥1.5 midpoint, rate range under proposed feedback on proposed changes prior to percent was intended to be calculated as § 438.4(c). As proposed and finalized, implementation. Some commenters a percentage of the certified rate. One § 438.4(c)(2)(ii) prohibits a state that is recommended that the following topics commenter requested that CMS clarify using a rate range from also modifying be addressed in any subregulatory that states cannot use the de minimis capitation rates under § 438.7(c)(3) by +/ guidance: value-added benefits, changes rate adjustment to reduce rates in this ¥1.5 percent (see also section I.B.2.a. of to rates with changes in scope of final rule beyond the lower bound of the this final rule for a discussion of services, the role of states versus CMS newly proposed five percent rate range. § 438.4(c)). in certifying rates, guidelines for Response: We disagree with Comment: Several commenters documentation, calculation definitions, commenters that recommended that described the regulation under and information on the appropriateness CMS always require documentation or a § 438.7(c)(3) as permitting de minimis of withholds. One commenter requested rate certification for any change in the rate changes during the contract year or that guidance be issued with sufficient rate, even for de minimis rate changes during the rating period. time for managed care plans to negotiate within the +/¥1.5 percent threshold, as Response: While these commenters payment rates with providers. this approach is not consistent with did not specifically recommend a Response: We will take these either our position (explained in the revision to the regulation, the public comments under advisement as we 2016 final rule) that de minimis changes comments highlighted a need for CMS develop and publish future of +/¥1.5 percent do not affect the to clarify this issue here. In developing subregulatory guidance. As we noted in actuarial soundness of the capitation our responses to the public comments, the 2018 proposed rule, we have rate or our intent to provide additional we noticed a technical error in the published rate review guidance every state flexibility under this final rule. regulatory text in § 438.7(c)(3). In the year since 2014, and we proposed Adopted in the 2016 final rule, 2018 proposed rule, we described our § 438.7(e) to demonstrate our § 438.7(c)(3) provides states with the proposal by stating that § 438.7(c)(3) commitment to efficient review and flexibility to make de minimis rate gives states flexibility to make de approval processes. We will continue to adjustments during the contract year by minimis rate adjustments during the work with states and managed care enabling states to increase or decrease contract year by enabling states to plans to ensure greater transparency the capitation rate certified per rate cell increase or decrease the capitation rate regarding the rate review process and by 1.5 percent without submitting a certified per rate cell by 1.5 percent ensure that states are optimally revised rate certification. We (resulting in an overall 3 percent range) informed to prepare and submit rate

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certifications for our review and with regulations adopted’’ to clarify the activities as defined in paragraph (e)(4), approval. regulatory text. which are the activities that are used in After consideration of the public The following summarizes the public the MLR calculation. comments and for the reasons comments received on our proposal to We are aware that Medicare articulated in the proposed rule and our amend § 438.8 and our responses to Advantage adopted different regulations responses to comments, we are those comments. on the treatment of fraud prevention finalizing § 438.7(c)(3) and (e) as Comment: Several commenters expenditures and expanded the proposed, with a modification in supported the proposal to revise definition of QIA in §§ 422.2430 and § 438.7(c)(3) to include the language § 438.8(k)(1)(iii) to replace 423.2430 to include all fraud reduction ‘‘during the rating period’’ as part of the ‘‘expenditures related to activities activities, including fraud prevention, standard for using the 1.5 percent compliant with § 438.608(a)(1) through fraud detection, and fraud recovery. We adjustment. (5), (7), (8) and (b)’’ with ‘‘fraud note that when we finalized the MLR prevention activities as defined in requirements in the 2016 final rule, we 6. Medical Loss Ratio (MLR) Standards: § 438.8(e)(4),’’ consistent with how specifically aligned Medicaid MLR Technical Correction (§ 438.8) § 438.8(e)(4) was finalized in the 2016 standards with the regulations for the final rule. One commenter stated that it The MLR numerator is defined in private market at 45 CFR part 158. As was pleased that CMS did not § 438.8(e); the numerator of an MCO’s, such, the Medicaid MLR rules do not substantially modify the MLR PIHP’s, or PAHP’s MLR for a MLR reference the QIAs in Medicare requirements for Medicaid and CHIP Advantage, and instead we adopted the reporting year is the sum of the MCO’s, managed care plans. terminology used in the private market PIHP’s, or PAHP’s incurred claims; the Response: We believe that it is critical MLR regulations in part 158 related to MCO’s, PIHP’s, or PAHP’s expenditures for our rules to be technically accurate activities that improve health care for activities that improve health care and our proposed revisions correct quality as specified in § 438.8(e)(3). quality; and fraud prevention activities. technical errors from the 2016 final rule. While we will take commenters’ In the 2015 proposed rule (80 FR Comment: One commenter requested recommendations to align with 31109), we proposed at § 438.8(e)(4) that clarification on what activities CMS Medicare Advantage on this point under expenditures related to fraud prevention expects states to require their MCOs, advisement, we are not finalizing such activities, as set forth in § 438.608(a)(1) PIHPs, and PAHPs to report on as a modifications as part of this final rule. through (5), (7), and (8) and (b), may be result of the revision to § 438.8(k)(1)(iii). We note, however, that fraud prevention attributed to the numerator but would One commenter requested clarification activities, subject to the different be limited to 0.5 percent of MCO’s, on whether the technical correction to definitions and limitations specified for PIHP’s, or PAHP’s premium revenues. § 438.8(k)(1)(iii) would allow Medicaid the different programs, are ultimately This proposal was never finalized and and CHIP plans’ fraud-related costs to included in the numerator for the MLR does not align with the MLR be included in the Quality Improvement for Medicaid managed care plans, requirements for Medicare Part C or Part Activities (QIAs) portion of the private market insurance, Medicare D or the private market. We also numerator. Several commenters also Advantage plans, and Medicare Part D proposed at that time a corresponding recommended that CMS align Medicaid plans. requirement, at paragraph (k)(1)(iii), for policy with Medicare Advantage and Comment: Commenters opposed the submission by each managed care plan permit fraud prevention expenditures as proposed technical clarification and of data showing the expenditures for QIAs in the MLR numerator. recommended that CMS reconsider our activities described in § 438.608(a)(1) Response: Our proposed rule did not alignment with regulations in the through (5), (7), and (8) and (b). In the propose any policy changes for the private market at 45 CFR part 158. 2016 final rule (81 FR 27530), we did Medicaid MLR regulation. The technical Response: We disagree with not finalize § 438.8(e)(4) as proposed, amendments were proposed to correct commenters and believe that it is and instead finalized § 438.8(e)(4) to errors from the 2016 final rule and critical for our rules to be technically provide that MCO, PIHP, or PAHP ensure that § 438.8 is internally accurate. Our proposed revisions only expenditures on activities related to consistent. Section 438.8(e) provides, correct technical errors from the 2016 fraud prevention, as adopted for the irrespective of the corrections adopted final rule and we did not propose to private market at 45 CFR part 158, will here, that fraud prevention activities, as reconsider our alignment with be incorporated into the Medicaid MLR defined in paragraph (e)(4), are included regulations in the private market. We do calculation in the event the private in the numerator. With the revision we not see a reason to reconsider or change market MLR regulations were amended. are finalizing to § 438.8(e)(4), the that alignment. However, we erroneously finalized regulation is clear that MCO, PIHP, or After consideration of the public § 438.8(k)(1)(iii) as proposed instead of PAHP expenditures on activities related comments and for the reasons referencing the updated finalized to fraud prevention will be incorporated articulated in the proposed rule and our regulatory language in § 438.8(e)(4). into the Medicaid MLR calculation, responses to comments, we are Therefore, in the 2018 proposed rule, using the same standards for identifying finalizing the technical amendments to we proposed to revise § 438.8(k)(1)(iii) fraud prevention activities in the private § 438.8(e)(4) and (k)(1)(iii) as proposed. to replace ‘‘expenditures related to market MLR regulations at 45 CFR part activities compliant with § 438.608(a)(1) 158. We intend that if and when those 7. Non-Emergency Medical through (5), (7), (8) and (b)’’ with ‘‘fraud part 158 regulations defining fraud Transportation PAHPs (§ 438.9) prevention activities as defined in prevention activities are amended in the In the 2016 final rule, at § 438.9(b)(2), § 438.8(e)(4)’’ to be consistent with our future, the updated standards will we inadvertently failed to exempt changes to § 438.8(e)(4) in the previous likewise be used for the Medicaid MLR NEMT PAHPs from complying with final rule. We also proposed to correct requirements. The correction to § 438.4(b)(9). Section 438.9(b) generally a technical error in paragraph (e)(4) by § 438.8(k)(1)(iii) makes the Medicaid exempts NEMT PAHPs from complying removing the phrase ‘‘fraud prevention MLR requirements consistent by with regulations in part 438 unless the as adopted’’ and adding in its place the requiring reporting from MCOs, PIHPs, requirement is listed. Under the phrase ‘‘fraud prevention consistent and PAHPs of fraud prevention regulation, NEMT PAHPs are not

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required to comply with the MLR increases overall document length, In § 438.10(d)(3), we proposed to standards. The inclusion of all of § 438.4 thereby decreasing the ease of use by make the same substantive changes in § 438.9(b)(2) causes a conflict because enrollees and eliminating the use of proposed for § 438.10(d)(2), as well as to § 438.4(b)(9) specifically addresses certain effective formats such as reorganize the paragraph for clarity. We states’ responsibility to develop postcards and trifold brochures. believed that combining the capitation rates to achieve a medical To address these issues, we proposed requirements for the provision of loss ratio of at least 85 percent. To to revise § 438.10(d)(2) by deleting the alternative formats, taglines, and eliminate that conflict, we proposed to definition of large print as ‘‘no smaller inclusion of the managed care plan’s revise § 438.9(b)(2) by adding ‘‘except than 18-point’’ and adopting the member/customer service unit § 438.4(b)(9).’’ ‘‘conspicuously visible’’ standard for telephone number into one sentence in The following summarizes the public taglines that is codified at 45 CFR paragraph (d)(3), would improve comment received on our proposal to 92.8(f)(1), a regulation implementing readability and clarity. amend § 438.9 and our responses to section 1557 of the Patient Protection those comments. Section 438.10(d)(6) addresses and Affordable Care Act of 2010 requirements for all written materials Comment: One commenter supported (PPACA) (Pub. L. 111–148, enacted the proposal to amend § 438.9(b)(2) to provided by states and MCOs, PIHPs, March 23, 2010 as amended by the PAHPs, primary care case management clarify that NEMT PHAPs are not Health Care and Education required to comply with the MLR (PCCM) and PCCM entities to enrollees Reconciliation Act of 2010 (Pub. L. 111– and potential enrollees. As we proposed standards. 152, enacted March 30, 2010)).9 Section Response: Amending § 438.9(b)(2) to limit the tagline requirement to 1557 of the PPACA prohibits will conform the regulation text to our materials that are critical to obtaining discrimination on the basis of race, policy for how rates for NEMT PAHPs services, we proposed to delete color, national origin, sex, age, or are developed and ensure that there § 438.10(d)(6)(iv). disability in certain health programs, isn’t a Federal requirement for such including Medicaid. We explained our The following summarizes the public plans to develop and report an MLR. comments received on our proposal to After consideration of the public rationale that adopting a more flexible requirement would encourage states to amend § 438.10 and our responses to comments and for the reasons those comments. articulated in the proposed rule and our use effective forms of written responses to comments, we are communication and avoid unnecessarily Comment: Many commenters finalizing the amendment to long documents. For example, taglines supported the proposal to adopt the § 438.9(b)(2) as proposed. in a font size smaller than 18-point ‘‘conspicuously visible’’ standard for would permit states to more easily use taglines in place of the ‘‘no smaller than 8. Information Requirements (§ 438.10) postcards and tri-fold brochures, which 18-point’’ large print definition. Many a. Language and Format (§ 438.10(d)) may be more effective for relaying commenters stated that the proposal certain information since they are In the 2016 final rule, we finalized would provide greater flexibility for shorter and offer more design options communicating with beneficiaries, provisions at § 438.10(d)(2) and (3) and for visual appeal. We noted as well how (d)(6)(iv), requiring that states and increase readability for beneficiaries, states would retain the ability to create reduce costs and logistical efficiencies managed care plans include taglines in additional requirements for greater prevalent non-English languages and in associated with printing and mailing, specificity of font size for taglines for and provide greater consistency with large print on all written materials for written materials subject to § 438.10 as potential enrollees and enrollees. Based overlapping Federal regulations. Many long as they meet the standard of commenters supported the proposal to on print document guidelines from the conspicuously-visible and comply with American Printing House for the Blind, amend § 438.10(d)(2), (3), and (6) but all other Federal non-discrimination requested that CMS define Inc., we defined large print to mean no standards, including providing auxiliary smaller than 18-point font (81 FR ‘‘conspicuously visible.’’ 8 aids and services to ensure effective 27724). Taglines required to be large communication for individuals with Response: We continue to believe that print are those that explain the disabilities. a more flexible requirement for taglines availability of written translation or oral will continue to put enrollees and Additionally, we proposed to replace interpretation, how to request auxiliary potential enrollees on notice of the the requirement to include taglines on aids and services for individuals who availability of written translation, oral ‘‘all written materials’’ with a have limited English proficiency or a interpretation, and auxiliary aids and requirement for taglines only on disability, and the toll-free phone services for people who have limited materials for potential enrollees that number of the entity providing choice English proficiency or a disability while ‘‘are critical to obtaining services’’ in counseling services and the managed helping to avoid unnecessarily long care plan’s member/customer service § 438.10(d)(2). This proposed change would align the documents that require documents. We decline to include a unit. specific definition or minimum font size We explained in the November 2018 taglines with the documents that must be translated into prevalent non-English in § 438.10, other than as specified in proposed rule how our goal remains to current § 438.10(d)(6)(iii). When ensure that materials for enrollees and languages and would facilitate the use of smaller, more user-friendly adopting 45 CFR 92.8(f)(1), a regulation potential enrollees are accessible for implementing section 1557 of the individuals who are vision-impaired. documents. We note that states would have the ability to require taglines on PPACA, the Office for Civil Rights However, since the publication of the (OCR), clarified that assessing the 2016 final rule, states and managed care any additional materials that they choose, as including taglines only on effectiveness of taglines ‘‘is whether the plans have found that requiring taglines content is sufficiently conspicuous and in 18-point font size sometimes documents that are critical to obtaining services would be a minimum standard. visible that individuals seeking services from, or participating in, the health 8 American Printing House for the Blind, Inc. program or activity could reasonably be Print Document Guidelines. http://www.aph.org/ 9 Nondiscrimination in Health Programs and research/design-guidelines/. Activities final rule (81 FR 31376 (May 18, 2016). expected to see and be able to read the

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information.’’ 10 We believe that was erroneously written as singular: visible’’ standard in place of the 18- definition is appropriate for Medicaid ‘‘Written materials that are critical to point font standard does not require managed care programs, and we will use obtaining services for potential enrollees states and managed care plans already this in interpreting and enforcing the must include taglines in the prevalent in compliance to make changes. standards in § 438.10(d)(2) and (3) as non-English language . . .’’ It was not Continued use of 18-point font will revised. Notwithstanding this change in our intention to propose a change along comply with the regulation as amended the regulation text, states and managed those lines and ‘language’’ should have here. This revision simply provides care plans have continuing obligations remained plural in the 2018 proposed states and managed care plans with an under Federal disability rights laws that rule. We are correcting this error in this option to select and use a different in some circumstances require the final rule and finalizing the amendment conspicuously visible font size to provision of large print materials as an to § 438.10(d)(2) with ‘‘languages.’’ achieve the desired outcome. We appropriate auxiliary aid or service, Comment: Many commenters remind states and managed care plans including materials in 18-point or larger disagreed with the proposal to adopt the that they will be held accountable for font size, unless certain exceptions ‘‘conspicuously visible’’ standard for tag compliance with § 438.10(d)(2) through apply.11 Additionally, we remind states lines in place of the ‘‘no smaller than (6) and with ensuring that all necessary and managed care plans of their 18-point’’ large print definition. steps are taken to adequately obligations to comply with all Federal Commenters stated that this change accommodate enrollees and potential and state laws as specified at §§ 438.3(f) would result in reduced access to plan enrollees that request information in and 438.100(d) and that enrollment information by enrollees and potential large print or that request other formats discrimination is expressly prohibited enrollees with visual impairment and or auxiliary aids and services. States in § 438.3(d). States that elect to change the harm caused by this result should and managed care plans have the required font size for taglines should outweigh any possible benefit to other continuing obligations under Title VI work with their managed care plans and stakeholders. One commenter suggested and section 1557 of the PPACA to take stakeholders and local experts on that 12-point Times New Roman be reasonable steps to provide meaningful disabilities to gather input on selecting adopted as the minimum. Several access to programs to individuals who the most appropriate characteristics of commenters stated that while aligning have limited English proficiency. This ‘‘conspicuously visible.’’ requirements across the health system is may require states and managed care We note that OCR issued a notice of favorable, the ‘‘conspicuously visible’’ plans to provide documents and proposed rulemaking on June 14, requirement adopted under the PPACA information in other languages to LEP 2019,12 that proposed to eliminate is overly vague and requested CMS individuals, including documents and § 92.8 and thus the use of the term provide greater clarity to the information that are not ‘‘critical to ‘‘conspicuously visible.’’ In doing so, requirement to eliminate ambiguity. obtaining services’’. Further, in HHS stated that the proposed One commenter recommended that assessing whether states and managed elimination of § 92.8 was intended in CMS include a requirement for states to care plans have met this obligation, the part to reduce redundancies while provide a sample to CMS of what they Department considers whether maintaining enforcement of civil rights determine meets the ‘‘conspicuously recipients of Federal financial assistance statutes (84 FR at 27887). HHS did not visible’’ standard. take steps to identify LEP persons with intend in that proposed rule to direct Response: We acknowledge that whom it has contact, by providing the parameters of tagline requirements adopting ‘‘conspicuously visible’’ is less notice of the availability of language set forth in regulations such as descriptive and specific than ‘‘no less assistance. HHS, Guidance to Federal § 438.10(d), which derive from statutory than 18-point’’ but do not believe that Financial Assistance Recipients authorities other than section 1557 of states will apply the conspicuously Regarding Title VI Prohibition Against the PPACA. Consequently, the intent of visible standard in a way that will National Origin Discrimination the proposed 1557 rule is not reduce access to information or cause Affecting Limited English Proficient inconsistent with Medicaid’s exercise of harm to beneficiaries with disabilities. Persons, https://www.hhs.gov/civil- discretion in amending these States and managed care plans rights/for-individuals/special-topics/ regulations. We believe ‘‘conspicuously understand the importance of the limited-english-proficiency/guidance- visible’’ reflects an appropriate level of information required by § 438.10 and federal-financial-assistance-recipients- protection for enrollees of Medicaid benefit when beneficiaries read and title-vi/index.html. managed care plans and of the utilize the information. We note that Comment: Several commenters stated flexibility that we desire to provide to current § 438.10(d)(6)(iii) requires that that CMS failed to provide any states and managed care plans. all written materials for potential evidentiary basis for how vision- Therefore, regardless of whether that enrollees and enrollees use a font size impaired persons would be able to proposed rule is finalized, we are no smaller than 12 point. We do not access plan information under this finalizing ‘‘conspicuously visible’’ in believe that it will be necessary for us standard and stated that vision § 438.10(d)(2), (3), and (6) as explained to review a sample of what states impairment is more common among the in this final rule. determine to be conspicuously visible; Medicaid-eligible population. Some A typographical error was made in the we expect states and managed care commenters stated that this proposal proposed regulatory text at plans to exercise due diligence in violates section 1557 of the PPACA, § 438.10(d)(2). The word ‘‘language’’ gathering input from experts in which prohibits discrimination on the disabilities and other stakeholders in basis of race, color, national origin, sex, 10 81 FR 31397. developing their materials to comply age, and disability. 11 See, for example, 28 CFR 35.104 (defining with the regulation as revised in this Response: Persons with disabilities, ‘‘auxiliary aids or services’’) and 35.160(a) through final rule. including vision impairments, make up (b); 28 CFR part 164; 28 CFR 36.303(a) through (c) We note that states and managed care a significant proportion of the Medicaid and (h); 45 CFR 84.52(d) and 92.202(a). plans were required to comply with population. Under regulations 12 Docket No.: HHS–OCR–2019–0007 (https:// www.federalregister.gov/documents/2019/06/14/ § 438.10(d) by the beginning of rating implementing the ADA, section 504 of 2019-11512/nondiscrimination-in-health-and- periods that started on or after July 1, the Rehabilitation Act of 1973 and health-education-programs-or-activities). 2017 and finalizing the ‘‘conspicuously section 1557 of the PPACA, states and

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managed care plans must take We encourage states to collaborate with expected to see and be able to read the appropriate steps to provide effective their managed care plans, experts in information. communication to people with older adults and persons with In addition, we expect that states and disabilities. This includes providing disabilities, and other stakeholders to managed care plans will exercise due appropriate auxiliary aids and services determine appropriate characteristics of diligence in determining which to individuals with disabilities ‘‘where ‘‘conspicuously visible’’. However, we documents are critical to obtaining necessary to afford individuals with also remind stakeholders that states, services. Requiring taglines on less than disabilities, . . . [ ] an equal opportunity under their own authority and state law, all written materials is consistent with to participate in, and enjoy the benefits may impose higher or more protective Medicare Advantage, qualified health of, a service, program, or activity of a standards to ensure enrollee access to plans in the Marketplace, and current public entity.’’ (28 CFR 35.160(b)(1); see information than the minimum imposed implementing regulations for section also 28 CFR 36.303; 45 CFR 84.52(d) by § 438.10(d). 1557 of the PPACA as issued by the and 92.202.) ‘‘Auxiliary aids and Comment: Many commenters agreed HHS and OCR. While requiring taglines services’’ is defined to include large with the proposal to only require only on materials that are critical to print, and many other alternative taglines on materials critical to obtaining services is a change from the formats used by individuals who are obtaining services. They agreed that 2016 final rule, we do not believe that blind and vision-impaired. (28 CFR putting taglines on all written materials it will disadvantage certain populations. 35.104; 28 CFR 36.303(b)(1); 45 CFR was unnecessary, impeded the use of Further, the availability of other 92.4.) Thus, separate and apart from certain effective forms of written resources for assistance such as a state’s these regulations, states and managed communication, and created beneficiary support system or a care plans have an obligation to make unnecessarily long documents that were managed care plan’s phone lines and materials and information accessible to not easy for enrollees to use. websites provide additional blind and visually impaired individuals. Response: We agree that requiring opportunities for potential enrollees and Regardless of how states and managed taglines only on materials critical to enrollees to access the information they care plans apply the ‘‘conspicuously obtaining services will help states and need or want. We remind states and visible’’ standard, they must provide managed care plans create consumer- managed care plans that they have auxiliary aids and services, including friendly documents that maximize independent obligations under Title VI large-print type under certain effectiveness for the enrollee. of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, circumstances, to potential enrollees Comment: Many commenters section 1557 of the PPACA, and the and enrollees upon request and at no disagreed with the proposal to replace ADA that may require them to do more cost under § 438.10(d)(3), (d)(5)(ii), and the requirement to include taglines on (d)(6)(iii). While we did not provide any than what 42 CFR part 438 requires. ‘‘all written materials’’ with the empirical studies to address the use of We do not believe that we are creating requirement for taglines only on a ‘‘conspicuously visible’’ standard, we a conflicting standard between materials for potential enrollees and do not believe that is necessary because documents that are ‘‘critical to obtaining enrollees that ‘‘are critical to obtaining it is a qualitative and not a quantitative services’’ versus requiring taglines on services.’’ Many commenters stated that standard; using a standard that focuses ‘‘significant documents’’ as used in taglines have proven to be a low-cost on whether the information is § 92.8. The standard ‘‘critical to and effective means of communicating sufficiently conspicuous and visible that obtaining services’’ cuts to the heart of information to individuals with limited enrollees could reasonably be expected the role of Medicaid managed care English proficiency (LEP) and people to see and be able to read the plans: The provision of services to information avoids the ‘‘one size fits with disabilities and that this change enrollees. By adopting a different all’’ hazard that a quantitative standard would weaken beneficiary protections standard, we preserve for the Medicaid that focuses only on font size could and result in reduced access to plan program the ability to make different raise. We expect that states and information by some enrollees and determinations about which documents managed care plans will be able to use potential enrollees. Commenters also must contain taglines. Therefore, we are size, font, color and other elements of stated that the proposed requirement finalizing the amendments to § 438.10 their printed materials to make would give managed care plans or state using the standard ‘‘critical to obtaining information conspicuously visible. It agencies the ability to decide what services’’ to identify the documents that may be that for some materials, the font materials meet this requirement, must contain taglines. We believe states and color used are as effective, if not possibly resulting in important are in the best positon to apply the more effective, than merely making the materials failing to be included, thereby standard since they have the necessary font larger for individuals with reducing access and ability to make information and familiarity with the disabilities to be able to see and read the well-informed plan decisions for documents to analyze the scope and information. disabled, or LEP individuals. Many purpose of each document. This Comment: One commenter expressed commenters further stated that this standard and the lack of a definitive list concern that the proposed change is inconsistent with section 1557 provides the means to ensure that the ‘‘conspicuously visible’’ standard will of the PPACA and regulations proper documents used in each program result in additional challenges for implemented by HHS’ OCR that and managed care plan contain taglines, managed care plans if states create ‘‘covered entities’’ must provide taglines based on the use and audience of each standards that greatly exceed the on all ‘‘significant’’ documents and document. proposed requirement and as a result, creates conflicting standards. Comment: A few commenters requested that CMS adopt safeguards Response: As noted in this rule, requested that CMS provide a targeted that would allow managed care plans to ‘‘conspicuously visible’’ will be used to list of publications that require taglines. work with states to define standards that assess the effectiveness of taglines based Many commenters requested that CMS balance enrollee accessibility with on whether the content is sufficiently include additional definitions clarifying administrative burden. conspicuous and visible that enrollees which materials are ‘‘critical to Response: We decline to include and potential enrollees in the Medicaid obtaining services’’ to remove ambiguity further criteria or safeguards in § 438.10. managed care plan could reasonably be to the greatest extent possible; however,

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commenters did not provide specific PAHP’s or PCCM entity’s member/ be included in taglines in § 438.10(d)(2) examples. One commenter requested customer service unit. Commenter and (3) includes information on how that CMS consider permitting taglines stated that if the written materials that enrollees can request auxiliary aids and and non-discrimination statements be are critical to obtaining services for services. We believe having all of the provided annually on at least one potential enrollees overlap with written tagline elements in one sentence in each document that is critical to obtaining materials for enrollees, it is unclear paragraph makes the requirements clear services, as opposed to on all what the tagline should say and and easy to understand. We ‘‘significant’’ publications. requested clarification. acknowledge that the availability of Response: Section 438.10(d)(3) Response: As the tagline information auxiliary aids and services is already includes a non-exhaustive list of required in § 438.10(d)(2) and (3) is the addressed as a requirement in documents that are critical to obtaining same except for the telephone number, § 438.10(d)(3), (d)(5)(ii), (d)(6)(iii), and services; we decline to further list we believe the commenter is requesting (g)(2)(xiii) but those references do not documents that are ‘‘critical to obtaining clarification on that aspect. As such, we specifically require that the information services.’’ We do not believe that an clarify that if documents are intended be provided in a tagline nor precisely exhaustive list can be provided in the for use with both potential enrollees and how a potential enrollee or enrollee can § 438.10(d)(3) regulation as each state enrollees, the documents would need to make a request. We believe revising the and managed care plan produces comply with the requirements in both lists in § 438.10(d)(2) and (3) is the most different types of documents and that § 438.10(d)(2) and (3); that is, the effective way to ensure that the states and managed care plans must document would need to include both information on how to request auxiliary apply the standard in the regulation to the toll-free telephone number of the aids and services is provided as a determine which documents are critical entity providing choice counseling tagline on all documents critical to to obtaining services. Providing a list services and the toll-free and TTY/TDY obtaining services. also runs the risk that regulated entities telephone number of the MCO’s, PIHP’s, After consideration of the public focus only on the list without PAHP’s or PCCM entity’s member/ comments and for the reasons conducting the necessary analysis to customer service unit. articulated in the proposed rule and our think through the purpose and scope of Comment: Commenters expressed responses to comments, we are each document to identify each concern that allowing managed care finalizing amendments to § 438.10(d)(2) document that is critical to obtaining plans to decide which documents are and (3) and (d)(6)(iv) substantially as services. We clarify here that including critical to obtaining services has the proposed with a modification to taglines only on documents critical to potential to result in adverse selection, § 438.10(d)(2) and (3) to add how obtaining services is a minimum whereby plans would discourage enrollees can request auxiliary aids and standard, and therefore, states and enrollment by persons with significant services to the list of information managed care plans have the option to health needs. required to be included in taglines and continue requiring (and including) Response: States and managed care to make ‘‘language’’ plural in taglines on all written materials. We plans must comply with all applicable § 438.10(d)(2). also decline to adopt the commenter’s laws under § 438.3(f). Enrollment b. Information for All Enrollees of suggestion that taglines only be required discrimination, including on the basis of MCOs, PIHPs, PAHPs, and PCCM annually on at least one document that health status, as well as on other Entities: General Requirements is critical to obtaining services. prohibited bases, is expressly prohibited (§ 438.10(f)) Finalizing the text as proposed provides in § 438.3(d). Section 438.3(f) requires states and managed care plans with compliance with applicable civil rights In the comprehensive revision to sufficient responsibility and authority to laws, which prohibit discrimination Federal regulations governing Medicaid identify the documents that require more broadly than just with regard to managed care in 2002, we required taglines. Only providing taglines enrollment. We believe that these notice to certain specified enrollees of a annually and on as few as one requirements are sufficient to address provider’s termination within 15 days of document is not sufficient notification this issue and remind stakeholders that a covered plan’s receipt or issuance of to enrollees. nothing in our amendment to § 438.10 the termination notice (67 FR 41015, Comment: One commenter expressed changes these other obligations. 41100). We established the 15-day time- concern that the proposed changes to Comment: One commenter expressed period following receipt of notice § 438.10(d)(2) and (3) seemed to be in concern that the proposal to delete because we wanted to ensure that conflict. Commenter stated that § 438.10(d)(6)(iv) appeared to delete the enrollees received notice of the provider paragraph (d)(2) requires that written requirement that information on how to terminations in advance given the materials that are critical to obtaining request auxiliary aids and services be reality that providers often give little services for potential enrollees include included in a tagline and sought notice of their plans to terminate taglines explaining the availability of clarification as to whether that was participation in a network (67 FR written translations or oral CMS’ intent. 41015). Currently, § 438.10(f)(1) requires interpretation to understand the Response: Our intent was to delete the that a managed care plan must make a information provided and the toll-free requirement that the tagline be large good-faith effort to provide notice of the telephone number of the entity print in a font size no smaller than 18- termination of a contracted in-network providing choice counseling services as point, not to delete the requirement that provider to each affected enrollee required by § 438.71(a). The commenter a tagline provide information on how to within 15 days of receipt or issuance of noted that paragraph (d)(3) requires that access auxiliary aids and services. the termination notice. However, there written materials that are critical to Instructions on how to access auxiliary can be circumstances when plans or obtaining services include taglines aids and services is important providers send a termination notice to explaining the availability of written information that should be included in meet their contractual obligations but translation or oral interpretation to a tagline. To correct this inadvertent continue negotiating in an effort to understand the information provided error, we are finalizing additional resolve the issue(s) that triggered the and include the toll-free and TTY/TDY revisions in paragraphs (d)(2) and (3) so decision to commence termination telephone number of the MCO’s, PIHP’s, that the list of information required to procedures. If the issue(s) can be

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amicably resolved, then the termination notice that we are finalizing in this rule and the established timeframe be notice is usually rescinded and the will permit Medicaid managed care honored for patients transitioning to provider remains in the network. In plans to align their processes across new providers. these situations, the issuance of notices different lines of business, we believe Response: We understand that in by a state to enrollees before resolution that is a bonus benefit to our goal of some situations, permitting managed efforts have been attempted, can cause reducing the potential for confusion to care plans to issue notices of certain alarm and confusion for enrollees who enrollees. We do not believe that states provider terminations within the later of believe that they need to locate a new nor CMS will need to develop new or 30 calendar days prior to the effective provider. unique enforcement mechanisms for date of the termination or 15 calendar In an effort to prevent unnecessary this provision. States have existing days after the receipt or issuance of the notices from being sent to enrollees, we oversight and monitoring processes notice, will result in an enrollee proposed at § 438.10(f)(1) to change the which should be updated to reflect notification period that is shorter than requirement that managed care plans these new timeframes. the notification period currently issue notices within 15 calendar days Comment: One commenter suggested required by § 438.10(f). We clarify here after receipt or issuance of the that CMS require states or plans to that the new timeframe finalized in termination notice to the later of 30 maintain a hotline that enrollees can § 438.10(f) is a minimum notification calendar days prior to the effective date call to ask questions about and better period; managed care plans are of the termination or 15 calendar days understand notices of provider encouraged to provide enrollees more after the receipt or issuance of the terminations to reduce confusion. than the minimum required notification notice. For example, if the plan receives Response: States are required to have period to reduce the possibility of a termination notice from a provider on beneficiary support systems under disruption in care. Additionally, March 1 for a termination that is § 438.71 and managed care plans enrollees should be educated and customarily use their member/customer effective on May 1, the proposed encouraged to utilize the numerous service units to assist enrollees with regulation would require that written resources that can assist them with questions and information to comply notice to enrollees be provided by April locating providers, such as their with § 438.10(c)(7), which requires 1 (30 days prior to effective date) or by managed care plans member/customer plans to have mechanisms to help March 16 (within 15 days of receipt of service units, the state’s beneficiary enrollees and potential enrollees the termination notice), whichever is support system, and their managed care understand the requirements and later. In this example, the managed care plan’s provider directory. Some plan would have to issue a notice to the benefits of the plan. We do not believe enrollees also have a case manager or enrollees by April 1, since it is later. it is necessary to mandate a separate care coordinator from whom they can The following summarizes the public mechanism to address questions about comments we received on our proposal provider termination notices. We receive assistance in locating a to amend § 438.10(f) and our responses encourage plans to be proactive in comparable provider. Managed care to those comments. notifying enrollees about the availability plans often include the contact Comment: Many commenters of the call center and other existing information for comparable providers supported the proposal to change the resources to deal with a provider’s near the enrollee in the notice of requirement that managed care plans termination from the plan’s network. termination and some plans utilize issue termination notices within 15 Comment: Many commenters proactive outreach calls to assist calendar days after receipt or issuance disagreed with the proposal to change enrollees in these situations. We of the termination notice to the later of the requirement that managed care encourage all plans to provide 30 calendar days prior to the effective plans issue termination notices within customized information and assistance termination date or 15 calendar days 15 calendar days after receipt or to prevent disruptions in care from after the receipt or issuance of the issuance of the termination notice to the occurring. We agree with commenters notice. Many commenters agreed with latter of 30 calendar days prior to the that managed care plans should review CMS’ rationale that it would reduce effective termination date or 15 calendar existing authorizations for enrollees beneficiary confusion by reducing the days after the receipt or issuance of the affected by a provider termination to number of unnecessary notices that they notice. Many commenters stated that ensure that disruptions in care are receive. Commenters also noted that the patients should be given as much notice prevented. We remind states and proposal aligns with commercial as possible to find a replacement managed care plans of their obligations coverage practices and provides provider to avoid disruptions in under § 438.206 to ensure that all additional flexibility for managed care continuity of care which can have covered services must be available and plans to negotiate with providers who negative health outcomes and increase accessible in a timely manner and that are considering terminating their costs, especially with regard to if a provider network is unable to network contract and attempt to resolve specialists, patients with chronic provide necessary services covered the provider’s underlying issue. One conditions, disabilities, or linguistic under the contract, the managed care commenter stated that CMS should challenges, and patients in rural areas. plan must timely and adequately work with states to develop, implement, A few commenters stated that the risk provide them out-of-network. States also and deploy enforcement measures for of beneficiary confusion is outweighed have program monitoring obligations this provision. One commenter by the risk to patients who may under § 438.66 that should be used to recommended that CMS should monitor experience gaps in care as they seek monitor for access and continuity of implementation of the new timeline. alternative providers. Another care issues that arise from this change Response: We believe it is prudent to commenter stated that the currently in notification time frame and adjust allow managed care plans time to work approved timeline is not adequate to program policies accordingly. with providers to potentially resolve the maintain continuity of care and should Comment: One commenter underlying issue and maintain a instead be lengthened to at least 90 recommended that notification of provider’s network participation to days. A few commenters provided provider termination should include avoid disrupting care for enrollees. To additional recommendations, including information on how the affected the extent that the new timelines for this ensuring that authorizations for services beneficiary can disenroll or select a plan

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in which his or her provider FFS provider directory.14 Now that the that 67 percent of U.S. adults living in participates. Congress has established new standards households with incomes less than Response: Section 438.56(c) and (d) for provider directories in FFS $30,000 a year owned smartphones in list the reasons for which disenrollment Medicaid, we believe that it is beneficial 2018.15 We discussed access to from a Medicaid managed plan to Medicaid managed care enrollees to information through smartphones in the (including to switch to another plan, if align the requirements for Medicaid proposed rule: Lower-income adults are offered) may be requested by an managed care directories with the FFS more likely to rely on a smartphone for enrollee; termination of a provider from directories, especially since many access to the internet, because they are the plan network is not cause for managed care enrollees also receive less likely to have an internet disenrollment except in limited some services on a FFS basis. The connection at home 16 and recent circumstances under that regulation. proposed amendment would require studies show that the majority of Aside from those reasons, and subject to that the information in a directory Americans have used their smartphones certain limitations, states have the include a provider’s cultural and to access information about their authority to determine additional linguistic capabilities, including the health,17 and consider online access to reasons or periods for disenrollment. languages spoken by the provider or by health information important.18 We States and managed care plans have the skilled medical interpreter explained our belief that providing been addressing changes in provider providing interpretation services at the mobile-enabled access to provider networks based on provider provider’s office. The statute does not directories may provide additional terminations since the beginning of require information on whether the value to enrollees by allowing them to network-based managed care programs. provider has completed cultural access the information anytime, competence training; therefore, we In the absence of significant, systemic anywhere—which is not feasible with a proposed to amend § 438.410(h)(1)(vii) problems that need a Federal solution, paper directory. Mobile applications for to eliminate the phrase ‘and whether the we do not believe that additional beneficiaries are increasingly available provider has completed cultural regulation of states and plans in this in programs serving older adults and competence training.’’ way is necessary. individuals with disabilities and In the 2016 final rule, we finalized at include access to Medicare marketing After consideration of public § 438.10(h)(3) requirements that materials 19 and medical claims on Blue comments and for the reasons information in a paper directory must be Button 20 to empower enrollees to better articulated in the proposed rule and our updated at least monthly and that manage and coordinate their healthcare. responses to comments, we are information in an electronic directory For enrollees that request a paper finalizing the amendment to must be updated no later than 30 directory, we opined that quarterly § 438.10(f)(1) as proposed. calendar days after the managed care updates would not significantly c. Information for All Enrollees of plan receives updated provider disadvantage them as other avenues for MCOs, PIHPs, PAHPs, and PCCM information. In paragraph (h)(1), we obtaining provider information are Entities: Enrollee Handbooks clarified that paper provider directories readily available, such as the managed (§ 438.10(g)) need only be provided upon request, care plan’s customer service unit or the and we encouraged plans to find state’s beneficiary support system. In the 2016 final rule, an erroneous efficient ways to provide accurate To reflect this change in access to data reference was included in directories within the required and modify the requirements for § 438.10(g)(2)(ii)(B) to paragraph timeframes (81 FR 27729). updating a paper provider directory to Since the publication of the 2016 final (g)(2)(i)(A) which does not exist. We permit less than monthly updates if the rule, states and managed care plans proposed in this rule to correct the managed care plan offers a mobile- have raised concerns about the cost of reference to paragraph (g)(2)(ii)(A), enabled directory, we proposed several reprinting the entire directory monthly. which describes the applicable services revisions to § 438.10(h)(3). First, we While the final rule did not require that to which paragraph (g)(2)(ii)(B) refers. proposed to add paragraphs (h)(3)(i) and the directory be reprinted in its entirety We received no public comments on (ii) to § 438.10 which would delineate monthly, many managed care plans this proposal and will finalize requirements for paper directories from were forced to do so to recognize § 438.10(g)(2)(ii)(B) as proposed. those for electronic directories. Second, savings from printing in large quantities. we proposed to add paragraphs d. Information for All Enrollees of To address this inefficiency, as well as (h)(3)(i)(A) and (B) which would reflect, MCOs, PIHPs, PAHPs, and PCCM to provide managed care plans with respectively, that monthly updates are Entities: Provider Directories another option for reducing the number required if a plan does not offer a (§ 438.10(h)) of paper directories requested by mobile enabled directory and that only enrollees due to the lack of access to a quarterly updates would be required for In the 2016 final rule, we added the computer, we proposed to modify the plans that do offer a mobile enabled requirement at § 438.10(h)(1)(vii) requirements for updating a paper directory. Lastly, we proposed to make requiring each managed care plan to provider directory that would permit ‘‘directories’’ singular (‘‘directory’’) at include information in its provider less than monthly updates if the directory on whether the provider has managed care plan offers a mobile- completed cultural competence training. 15 http://www.pewinternet.org/fact-sheet/mobile/. enabled, electronic directory. 16 We added this requirement to the final Id. We noted in the 2018 proposed rule 17 http://www.pewresearch.org/fact-tank/2015/ rule in recognition of the linguistic and that research has shown that 64 percent 04/30/racial-and-ethnic-differences-in-how-people- cultural diversity of Medicaid of U.S. adults living in households with use-mobile-technology/. beneficiaries (81 FR 27724). After the incomes less than $30,000 a year owned 18 https://www.ncbi.nlm.nih.gov/pubmed/ final rule was published, the Cures Act smartphones in 2016 (83 FR 57278); 27413120. amended section 1902 of the Act,13 to 19 2016 Medicare Marketing Guideline 100.6. using updated data, research has shown https://www.cms.gov/Medicare/Health-Plans/ add requirements for publication of a ManagedCareMarketing/Downloads/ 14 Section 5006 of the Cures Act added paragraph 2017MedicareMarketingGuidelines2.pdf. 13 Section 1902(a)(83)(A)(ii)(II) of the Act. (83)(A)(ii)(II) to section 1902(a) of the Act. 20 http://bluebuttonconnector.healthit.gov/.

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§ 438.10(h)(3)(ii) which would avoid Comment: One commenter suggested meaningful ways to display the implying that a managed care plan must that provider self-reported data be information and ensure that their have more than one directory of acceptable to meet the proposed managed care plans do so as well. providers. requirement for the directory to report Comment: A few commenters noted In the proposed rule, we explicitly linguistic and cultural capabilities and that displaying a provider’s cultural and reminded managed care plans that some that, if after solicitation, no capabilities linguistic capabilities without also individuals with disabilities, who are are reported, the directory should list indicating whether the provider took a unable to access web applications or ‘‘none reported’’ as the cultural cultural competence training is not require the use of assistive technology to capabilities of that provider. enough to adequately convey whether access the internet, may require Response: We decline to amend the the individual has the skills or training auxiliary aids and services to access the regulation to specify how to collect to effectively communicate or provide provider directory. In keeping with the cultural competence data, including the language assistance. One commenter requirement that managed care plans degree to which self-reported data is suggested that states should be required must provide auxiliary aids and services reliable, and how a provider’s cultural to maintain a list of providers who have to ensure effective communication for competencies or lack of cultural completed cultural competency individuals with disabilities consistent competencies should be displayed in a training. with section 504 of the Rehabilitation provider directory. We believe states are Response: We clarify that displaying Act of 1973 (Pub. L. 93–112, enacted on better suited to determine how to collect whether a provider has completed September 26, 1973) and section 1557 of this information and how it should be cultural competence training is not the PPACA, these individuals should, displayed, particularly given that some prohibited, it is merely not required upon request, be given the most current states may elect to use a consistent under the amendment to provider directories in the same format for their FFS and managed care § 438.10(h)(1)(vii) that we are finalizing accessible format (paper or electronic) programs. in this rule. If managed care plans that they receive other materials. Comment: Several commenters determine that displaying the disagreed with the proposal to eliminate information is useful, they may We also encouraged managed care the phrase ‘‘and whether the provider continue including it in their directory; plans to perform direct outreach to has completed cultural competence similarly, states can adopt standards to providers on a regular basis to improve training’’ from provider directories. require the directory to include more the accuracy of their provider data and These commenters stated that the information than the Federal minimum to ensure that all forms of direct change is unnecessary, removes adopted in § 438.10(h)(1). Additionally, enrollee assistance (such as telephone important information for many if enrollees do not find a provider’s assistance, live web chat, and nurse beneficiaries seeking new providers and linguistic competency adequate for help lines) are effective, easily providers seeking to make effective effective communication, we encourage accessible, and widely publicized. referrals for existing patients, removes them to contact their managed care plan The following summarizes the public the incentive for providers to complete immediately for assistance. Under comments we received on our proposal cultural competency training, and may § 438.206(b)(1) plans are required to to amend § 438.10(h)(1)(vii) and our increase health disparities in ensure adequate access to all services responses to those comments. underserved beneficiary populations by covered under the contract for all Comment: Several commenters potentially limiting a patient’s enrollees, including those with limited supported the proposal to no longer confidence in choosing a provider that English proficiency or physical or require provider directories to note is best suited for them and preventing mental disabilities. We decline to whether a provider has completed adequate access to healthcare services. require states and managed care plans to cultural compliance training and noted Commenters noted that inclusion of the maintain a list of providers who have that doing so would ease administrative phrase would help ensure that a completed training and defer to states burden on plans and providers by better provider is sensitive to a patient’s and managed care plans to decide if aligning the Medicaid managed care beliefs, practices, and culture, thereby doing so would be useful for their policy with the amendment to section strengthening the patient-provider enrollees. 1902(a)(83) of the Act, made by the relationship and improving the After consideration of public Cures Act. One commenter noted that possibility of better health outcomes. comments and for the reasons completion of the cultural competency Response: We understand that some articulated in the proposed rule and our course was not an indicator of a commenters consider an indication of responses to comments, we are provider’s cultural capabilities for any cultural competence training in finalizing the amendment to particular culture and that many provider directories as useful § 438.10(h)(1)(vii) as proposed. beneficiaries do not understand the information for enrollees and providers. The following summarizes the public significance of the notation in the However, we do not believe that comments received on our proposal to provider directory, thereby reducing its removing a ‘‘yes’’ or ‘‘no’’ indicator amend § 438.10(h)(3) and our responses importance. reflecting the completion of training to those comments. Response: We appreciate the support impacts the usefulness of the other Comment: Many commenters for no longer requiring managed care information presented about cultural supported the proposal to require only plans to include an indication of competencies nor that it necessarily quarterly updates for paper directories cultural competence training as a indicates whether a provider is more for plans that offer a mobile enabled required element in a provider sensitive to patients’ beliefs, practices, directory in lieu of monthly updates. directory. The statute does not require and culture. Given that states are These commenters stated that the information on whether the provider required to also display a provider’s proposal strikes a suitable balance for has completed cultural competence cultural and linguistic capabilities— streamlining access between electronic training and we believe it’s important to which is far more descriptive than a and print formats, increases consistency facilitate states aligning the ‘‘yes/no’’ indicator about training—in with the Medicare Advantage program, requirements for their FFS directories their FFS directories, we believe that reduces administrative burden and with those of their managed care plans. they will select clear, consistent, and environmental impact while having

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minimal negative impact to enrollees, features such as small image sizes to Comment: Commenters recommended and incentivizes plans to invest in allow for fast loading, simplified that CMS clarify that the proposed mobile enabled features that improve navigation that is ‘‘thumb’’ friendly, changes apply to duals programs, beneficiary experience. reduced graphics that do not interrupt including Dual Eligible Special Needs Response: We believe enrollees will access to critical information, and text- Plans (D–SNP) and Medicare-Medicaid appreciate the increased ease of access based phone numbers, physical Plans (MMP). to provider directory information and addresses, or email addresses that can Response: To the extent Part 438 believe that decreasing the rate of trigger a call, directions, or email applies to (1) a D–SNP (if it is also a updates to paper directories when there message from the mobile device to be Medicaid MCO, PIHP, PAHP, and, in is a mobile-enabled electronic included in a mobile-enabled provider some cases, PCCM, or PCCM entity), or alternative to the paper provider directory. Managed care plans may find (2) a MMP under the capitated financial directory is an appropriate way to it helpful to visit HHS’ website for alignment model demonstrations, ensure enrollee access to information Building and Managing websites; it sets § 438.10(h)(3)(i)(B) would also apply. about the network of providers. out different stages of ‘‘mobile’’ that Comment: One commenter Comment: Several of the commenters could serve as a useful guide when recommended that CMS require cited concerns with potential ambiguity determining which enhancements electronic notification to enrollees and regarding the term ‘‘mobile-enabled’’ would be useful to the end user.21 HHS providers of availability of updates and and requested CMS provide a definition guidance notes that when developing another commenter recommended that of the term to ensure that states and exclusively mobile versions of websites, CMS work with states to develop, plans are able to take full advantage of these ‘‘microsites’’ should be designed implement and deploy enforcement the offered flexibility while reducing for mobile accessibility. These sites measures for these provisions. administrative burden for plans that should contain code specific to, and Response: We are not finalizing a new may be required to meet different designed for, mobile web tasks and rule to require electronic notification to standards across multiple states. Several browsing. These microsites often enrollees and providers of updates to commenters recommended that CMS contain pared down information on the the provider directory. We believe the not limit rulemaking to mobile same topics covered on the main site. commenter is referencing updates ‘‘applications’’ and that ability to access Additionally, content should be written necessary for mobile applications. If so, an online printable directory, search in such a way as to be read easily on a the use of a mobile enabled application tool, or provider directory formatted for mobile device, usually in small text is at the option of the state and managed viewing on a mobile device should be groupings of about three to four lines of care plan as a means to provide a considered compliant with the proposed text and provide the most important mobile-enabled provider directory as requirement. information at the top of the page, so described in § 438.10(h)(3). However, if Response: We use the term ‘‘mobile- that the site user has access to the most a software application is used and enabled’’ to mean a mobile website or a important information quickly. updates to the application are required, mobile application; we defer to states By providing guidance on what it we would expect the necessary and managed care plans to determine means for the provider directory to be notifications to be sent to users of the whether a mobile website or application mobile-enabled, we aim to establish a application. We do not believe that is most appropriate for each applicable base for the characteristics of a mobile- states will need to develop new or managed care program and managed enabled website without restricting unique enforcement mechanisms for care plan, provided that the end result website developers. States and managed this provision. is that the provider directory is mobile- care plans can determine whether a Comment: Several commenters enabled as explained here. As we mobile website or application is most expressed that CMS should only require outlined in the proposed rule, we appropriate to provide access that meets that printed provider directories be believe that making the provider the regulatory standard. distributed upon request. directory information usable for We do not consider merely being able Response: Managed care plans must smartphone or mobile technology users to access a managed care plan’s provider provide paper directories upon request is the key point, not the technology or directory from its website on a mobile per § 438.10(h)(1), which provides that format used to accomplish that. A device or a printable online directory to each MCO, PIHP, PAHP, and when mobile-enabled website could include a be mobile-enabled. A website that is not appropriate the PCCM entity, must mobile friendly, mobile optimized, or a mobile-enabled, is usually very difficult make available in paper form upon responsive design. A true mobile to read when accessed using a mobile request and electronic form. We remind enabled website will automatically device, often requiring the user to zoom, managed care plans that if required detect what environment each visitor is scroll, and manipulate the image to information is provided electronically using to access the website, then display view it. Additionally, we clarify that instead of on paper, § 438.10(c)(6) it in the format best for that device, § 438.10(c)(6) already requires that applies. Therefore, use of a mobile- whether a smartphone, tablet, or other required enrollee information, which enabled directory will not satisfy the mobile device is used. With a mobile- would include a provider directory, requirement to provide the provider enabled website, the navigation and provided electronically by a managed directory in electronic form; use of a content are reorganized so that the web care plan must be in an electronic mobile-enabled provider directory is page fits the browser window for the format which can be retained and relevant only for purposes of identifying device used, and the pages are made printed; the standard for mobile-enabled the updating schedule with which a ‘‘lighter,’’ so they download more provider directories, which are only managed care plan must comply under quickly. Our goal with proposing to relevant for purposes of identifying the § 438.10(h). reduce the frequency of paper directory frequency of updates to the paper Comment: A few commenters updates if a mobile-enabled directory is provider directory, is different than recommended that CMS require available is to improve the enrollee’s what is required by § 438.10(c)(6). managed care plans that meet the ability to navigate and utilize the condition for quarterly updates to directory information when accessing it 21 https://www.hhs.gov/web/building-and- produce update flyers upon request or a on a mobile device. We would expect managing-websites/mobile/index.html. customer support phone line with after-

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hours capacity. Some of these entire network if they choose to and that directories are available. Many commenters also expressed that the all information required by § 438.10 commenters stated that there continues customer support phone line should not must be provided in paper form upon to be too high a percentage of people only provide contact information for request, at no cost, and within five among the Medicaid-eligible population providers, but also assist in making business days. Plans subject to this and among people with disabilities that appointments and allow for patients and requirement can provide paper versions do not have sufficient understanding of providers to update Medicaid managed of directories that cover smaller areas (if or have access to mobile devices or care plan network records. permitted by the state) so long as, in broadband internet service 22 to justify Response: We are not incorporating aggregate, the paper directories provide reducing the frequency of updates to these suggestions into the regulatory the necessary information for the plan’s paper directories and that this proposal requirements for managed care plans as entire service area and entire network. would result in increased difficulty and we do not believe that they are Comment: A few commenters burden navigating the healthcare system necessary to ensure enrollee access to requested that CMS consider and accessing care. Several commenters the provider directory. We encourage alternatives to the proposed cited census data indicating half of managed care plans to insert errata requirements for printing provider households with annual incomes under sheets into paper directories to reflect directories such as providing monthly $25,000 lack a computer, broadband the most up-to-date provider updates or inserts. internet access, or both, expressed that information, provide extended customer Response: We believe the commenter the proposed changes are premature service hours, offer appointment setting is suggesting that errata sheets alone given the absence of research on assistance, and utilize effective should be permitted to be sent to enrollee preferences for print versus electronic mechanisms for collecting enrollees in lieu of an entire directory mobile/electronic formats, and stated provider directory information. but the comment is not clear as an errata that CMS should engage in active Comment: One commenter sheet is merely an update to what is compliance monitoring and recommended that printed provider included in the provider directory, so enforcement actions when plans fail to directories be provided in a format that sending only the errata sheet would not meet existing standards. One permit directories for certain geographic seem useful if the paper directory that commenter cited the National areas—as Medicare permits—rather than was being updated with new provider Association of Insurance by the entire managed care plan’s information had not first been provided. Commissioners’ (NAIC) recent update to service area. This commenter further If being used to meet the monthly paper their network adequacy model act noted that in a large state, provider director update requirement in which included provisions requiring information for the entire state may not § 438.10(h)(3), errata sheets must be plans to update their provider directory be useful to members in a specific inserted into a paper directory. We at least monthly. region and that member’s need provider point the commenter to the response in Response: We acknowledge that not information on a reasonable service area this final rule which clarifies another all Medicaid enrollees have a based on where they access health option that states may permit; smartphone or internet access, but services. Another commenter specifically, that the printing of partial studies have shown that 67 percent of recommended that printed directories directories is permissible when U.S. adults living in households with for an entire service region of a managed requested by an enrollee and if allowed incomes less than $30,000 a year owned care plan should only be required by the state. smartphones in 2018.23 We understand annually. Comment: One commenter stated that that the challenges of paper printing do Response: Section 438.10(h) requires managed care plans exempted from the not diminish a segment of the that each MCO, PIHP, PAHP, and when requirement to timely update their population’s need for paper directories, appropriate PCCM and PCCM entity paper directories should be required to nor should it diminish plans’ efforts to make available—in paper form upon display conspicuously on their paper produce accurate paper directories.24 request and electronic form—certain directories and websites that real-time However, we do not believe those issues specified information about the assistance is available along with the lessen the value of increasing access to providers in its network. There is no number to call to obtain such assistance. the directory for those portions of the requirement in § 438.10(h) for a single Response: We do not believe that population that choose to utilize directory to be printed for a managed additional revision to paragraph (h)(3) electronic methods. Per § 438.10(h)(3), care plan’s entire service area. States along these lines is necessary. The managed care plans must update paper can permit or require their managed phone number for assistance is already provider directories at least monthly care plans to print directories for areas required in § 438.10(d)(3) which after the managed care plan receives less than the entire service area if the specifies that managed care plans must updated provider information. Managed state has determined that best meets the include a tagline on all provider care plans could take steps to alleviate needs of their enrollees given known directories and that taglines must discrepancies between directory utilization and travel patterns within contain the toll-free and TTY/TDY updates such as inserting an errata sheet the state. This would allow more telephone number of the plan’s before mailing, printing on demand a customized, consumer friendly customer/member services unit. This directory that covers less than a plan’s directories to be sent and is well suited requirement for providing the tagline entire service area when requested by an to on-demand printing rather than bulk about the customer/member services enrollee, and ensuring that their printing. On-demand printing allows unit applies regardless whether the customer service, care management, and managed care plans to print the managed care plan makes available a nurse help line (if applicable) staff have directory data from the current on-line mobile-enabled provider directory and version, thus allowing enrollees using regardless of the updating schedule for 22 https://www.pewresearch.org/fact-tank/2017/ printed versions to receive the same the provider directory. 04/07/disabled-americans-are-less-likely-to-use- information as enrollees using an Comment: Many commenters technology/. 23 electronic directory. We remind disagreed with the proposal to only http://www.pewinternet.org/fact-sheet/mobile/. 24 https://www.pewresearch.org/fact-tank/2017/ managed care plans that enrollees must require quarterly updates to paper 04/07/disabled-americans-are-less-likely-to-use- be able to access information on a plan’s provider directories if mobile enabled technology/.

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access to the most updated data and are increasing concerns about the appropriate at the state level and are prepared to assist enrollees with appropriateness of uniformly applying best suited to define the number and locating network providers. Managed time and distance standards to the types of providers that fall into the care plans should also ensure that their specified provider types across all ‘‘specialist’’ category based on network primary care providers have programs. In some situations, time and differences under managed care easy access to updated provider distance may not be the most effective contracts, as well as state Medicaid directory information since primary care type of standard for determining programs. Therefore, we believed it was providers are frequently the source of network adequacy and some states have inappropriate for us to define specialty referrals for enrollees. Lastly, found that the time and distance ‘‘specialist’’ at the Federal level (81 FR managed care plans should be sensitive analysis produces results that do not 27661). Since the publication of the to the disparities in the use of electronic accurately reflect provider availability. 2016 final rule, we have received information when providing resources For example, a state that has a heavy numerous questions from states and for their telephone hotline, and reliance on telehealth in certain areas of other stakeholders about who should providing auxiliary aids and services to the state may find that a provider to define the types of providers to be people with disabilities. enrollee ratio is more useful in included as specialists. We clarified that After consideration of public measuring meaningful access, as the our proposal would give states the comments and for the reasons enrollee could be well beyond a normal authority under the final rule to define articulated in the proposed rule and our time and distance standard but can still ‘‘specialist’’ in whatever way they deem responses to comments, we are easily access many different providers most appropriate for their programs. To finalizing the amendments to on a virtual basis. To address states’ make this authority clear, we proposed § 438.10(h)(3) as proposed. concerns and facilitate states using the to revise § 438.68(b)(1)(iv) to add ‘‘(as 9. Disenrollment: Requirements and most effective and accurate standards designated by the state)’’ after Limitations (§ 438.56) for their programs, we proposed to ‘‘specialist.’’ This proposed change revise § 438.68(b)(1) and (2) by deleting would eliminate potential uncertainty We inadvertently included PCCMs the requirements for states to set time regarding who has responsibility to and PCCM entities in § 438.56(d)(5) and distance standards and adding a select the provider types included in related to grievance procedures. Because more flexible requirement that states set this category for the purposes of PCCMs and PCCM entities are not a quantitative network adequacy network adequacy. required by § 438.228, which does standard for specified provider types. Currently, § 438.68(b)(1)(viii) requires impose such a requirement on MCOs, We explained in the proposed rule that states to establish time and distance PIHPs and PAHPs, to have an appeals quantitative standards that states may standards for ‘‘additional provider types and grievance process, we proposed to elect to use include, but are not limited when it promotes the objectives of the revise § 438.56(d)(5) to delete references to, minimum provider-to-enrollee ratios; Medicaid program, as determined by to PCCMs and PCCM entities. We note maximum travel time or distance to CMS, for the provider type to be subject that states may impose additional providers; a minimum percentage of to time and distance access standards.’’ requirements on their managed care contracted providers that are accepting In the 2016 final rule, we finalized the plans but believe that our regulations new patients; maximum wait times for language in § 438.68(b)(1)(viii) because should be internally consistent on this an appointment; hours of operation it provided the flexibility to address point. future national provider workforce requirements (for example, extended No public comments were received on shortages and future network adequacy evening or weekend hours); and this provision. For the reasons outlined standards (81 FR 27660). Since the 2016 combinations of these quantitative in the proposed rule, we are finalizing final rule was published, states have measures. We encouraged states to use the amendment to § 438.56(d)(5) as expressed concern that if we rely on this the quantitative standards in proposed. authority and its flexibility of combination—not separately—to ensure identifying ‘‘additional provider types,’’ 10. Network Adequacy Standards that there are not gaps in access to, and managed care plans may have to assess (§ 438.68) availability of, services for enrollees. network adequacy and possibly build Currently, § 438.68(b)(1) requires We stated that this proposed change network capacity without sufficient states to develop time and distance would enable states to choose from a time. Based on this state input, we standards for specified provider types if variety of quantitative network proposed to remove § 438.68(b)(1)(viii) covered under the contract. In the 2016 adequacy standards that meet the needs to eliminate any uncertainty states may final rule, we declined to set other of their respective Medicaid programs in have regarding this requirement. national requirements or specific more meaningful and effective ways, The following summarizes the public benchmarks for time and distance (for particularly for LTSS programs given comments received on our proposal to example, 30 miles or 30 minutes) as we the often very limited supply of amend § 438.68 and our responses to believed it best not to be overly providers and the potential functional those comments. prescriptive and we wanted to give limitations of the LTSS population. We Comment: Many commenters states the flexibility to build upon the proposed to remove § 438.68(b)(2)(i) and supported the proposal to delete the required time and distance standards as (ii) and reflect all LTSS network requirement for states to establish time they deemed appropriate and adequacy requirements in § 438.68(b)(2). and distance standards and instead meaningful for their programs and Currently, § 438.68(b)(1) specifies the require any quantitative standard. populations. (81 FR 27661). We provider types for which states are Commenters stated that not requiring proposed revisions to § 438.68(b)(1) to required to establish network adequacy the use of time and distance increases require states to use a quantitative standards and § 438.68(b)(1)(iv) requires flexibility to states and will have a standard, rather than only a time and states to establish time and distance positive impact on more accurately distance standard, for providers. We standards for ‘‘specialist, adult and assessing access to telemedicine. Many explained in the proposed rule how as pediatric.’’ As noted in the 2016 final commenters offered recommendations states have worked to comply with the rule, we believed that states should set including requiring states to use a 2016 final rule, they have alerted us to network adequacy standards that are combination of data-driven quantitative

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and qualitative standards for capacity, fill prescriptions such as mail order and the availability and practical usage of availability, and accessibility that have home delivery, which do not lend telehealth in their state. been cooperatively developed with themselves easily to inclusion under Comment: Several commenters stated stakeholders to ensure appropriate typical network adequacy standards. that CMS should, at minimum, network access and patient satisfaction Commenters stated CMS should give encourage states to consider the that is reasonable and achievable. A few states the flexibility to set different following when establishing standards commenters recommended requiring standards for pharmacies due to their and measuring network adequacy: states to establish separate standards for unique features. Regionalization of specialty care; co- rural and urban areas that align with the Response: We expect states and health located service offerings; enrollee ratios Medicare Advantage managed care plans to routinely monitor their network by specialty; geographic accessibility program. One commenter recommended performance against the standards including proximity to state lines; setting a maximum number of measures established by the state under § 438.68 foreseeable road closures; wait times by that can be implemented by states. as amended in this final rule; we believe specialty based on provider hours and Response: While we agree that states that states will set these standards in availability; volume of technological should use a combination of data-driven alignment with, and taking into account, and specialty services available to serve quantitative and qualitative standards the needs of the covered population. We the needs of covered persons requiring that have been developed with also expect that states will take technologically advanced or specialty stakeholder input to comprehensively corrective action when necessary. The care; diagnostics or ancillary services; assess network adequacy, we do not timeframes for submission of network patient experience survey data, and believe that it is appropriate to include adequacy documentation required by minimum appropriate providers that as a requirement in the regulation. § 438.207(c) is a minimum, and states available to meet the needs of children As we noted in the proposed rule, we and managed care plans should use and adults with special health care encourage states to use the quantitative network adequacy measurement as a needs. standards in combination—not tool that can be utilized at any time to Response: We believe these factors separately—to ensure that there are not proactively identify trends and address could be valuable additions to states’ gaps in access to and availability of issues. Under § 438.68, network network adequacy review process, and services for enrollees. We decline to adequacy standards can be set at therefore, encourage states to consider require states to establish separate whatever level a state deems them, although we decline to mandate standards for rural and urban areas or to appropriate; thus, states that have plans their use in § 438.68. We also remind align their standards with those used in utilizing subnetworks, could establish states to be cognizant of the mental the Medicare Advantage program, but and measure network adequacy at that health parity provisions applicable to note that § 438.68(b)(3) permits states to level. We decline to specify additional MCOs, PIHPs, and PAHPs in vary network adequacy standards for the provider types as suggested by § 438.910(d) when selecting measures of same provider type based on geographic commenters in § 438.68(b)(1) nor to add network adequacy. Plans also need to be areas. We also decline to limit the more categories or types of mindful of their responsibilities for number of measures a state can ‘‘pharmacies’’ in § 438.68(b)(1)(vi), but mental health parity under part 438, implement to assess network adequacy. clarify here that the provider types subpart K, in network development and We believe states are in the best position listed are a minimum. States are free to evaluation. We believe that states are in to determine the most appropriate apply network adequacy standards to the best position to determine the most number and type of quantitative additional provider types as they deem appropriate measures for use in their measures to provide them with the appropriate for their programs. programs to address the local needs of information needed to effectively Comment: One commenter their populations. manage their programs, as well as fulfill recommended stipulating that telehealth Comment: A few commenters their obligations under §§ 438.206 and providers may only be counted toward recommended baseline or minimum 438.207. a managed care plan’s network provider time and distance, patient- Comment: Commenters recommended adequacy when that provider is actively provider ratios, and timely access requiring states and health plans to providing services to CHIP/Medicaid standards which could be used to routinely monitor their standards and beneficiaries in that community and the inform state-developed network network performance for alignment with managed care plan has demonstrated adequacy standards. A few commenters needs of the enrolled population and that its telehealth coverage policies and suggested specific minutes and miles that states enforce these standards practices offer parity to telehealth standards while another suggested through corrective action when providers. specific appointment wait time necessary. Additionally, commenters Response: We defer to each state to standards. One commenter stated that recommended requiring states to determine the criteria to be applied to giving states too much flexibility could measure network access at the telehealth providers and how such result in significant variability across subnetwork level, that is, when a providers would be taken into account states thereby increasing administrative managed care plan restricts its enrollees when evaluating network adequacy of burden for plans which operate in to using only a portion of the plan’s the state’s Medicaid managed care multiple states. larger network, if managed care plans plans. Section 438.68(b) does not set Response: As we stated in the 2016 impose subnetwork access requirements criteria of this nature that states must final rule (81 FR 27661), we decline ‘‘to on enrollees. Some commenters use. Under § 438.68(c)(1)(ix), states must adopt quantitative standards for time recommended requiring adequacy consider the availability and use of and distance.’’ Underlying that 2016 standards for specific specialties and telemedicine when developing their final rule with regard to § 438.68(b) and provider types. A few commenters network adequacy standards. If states our 2018 proposed rule is a belief that suggested that CMS encourage states to elect to include telehealth providers in states should be allowed to set acknowledge differences in provider their network adequacy analysis, we appropriate and meaningful quantitative types, particularly for pharmacies, as believe that the states will establish standards for their respective programs. patients have multiple options outside criteria that appropriately reflect the States are in the best position to set of brick-and-mortar establishments to unique nature of telehealth, as well as specific quantitative standards that

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reflect the scope of their programs, the populations that access LTSS provided 10–001 (https://www.medicaid.gov/ populations served, and the unique in the home. Federal-Policy-Guidance/downloads/ demographics and characteristics of Response: We decline to adopt or SMD10001.PDF). each state.’’ We reiterated this position implement these recommendations as Comment: Many commenters in the proposed rule and continue to we believe that providing states with the disagreed with the proposal to delete believe that we should defer to states flexibility to identify the type of the requirement for states to set time and not set Federal standards as quantitative standard, as well as the and distance standards and instead prescriptive as the commenters suggest. standard itself for purposes of require a quantitative minimum access We understand that providing states this establishing and measuring network standard. Commenters stated that level of flexibility could result in widely adequacy in Medicaid managed care current requirements already provide varied standards but given the diversity programs, is appropriate in light of the states with adequate flexibility in and complexity of Medicaid managed traditional role of states in establishing network adequacy care programs, such variation may be administering Medicaid. We continue to standards and are necessary to avoid warranted. We encourage states and believe that we should defer to states narrowing of existing networks to managed care plans to collaborate on and not set overly prescriptive Federal ensure plans make every effort to the development of network adequacy standards. We note here that we safeguard patient access. Several standards and for plans that participate convened a group of states to gather commenters expressed that not enough in Medicaid in multiple states, to share information on their best practices and time has passed since the associated information with states so that best lessons learned about network provisions in the 2016 final rule became practices and lessons learned can be adequacy. The resulting document was effective to form an evidentiary basis leveraged to improve network adequacy published in April 2017: Promoting from which to determine whether the measurement in all states. States should Access in Medicaid and CHIP Managed proposed changes are necessary. consider using technical expert panels Care: A Toolkit for Ensuring Provider Response: We believe that, while and multiple sources of stakeholder Network Adequacy and Service useful and appropriate for many plans input to ensure that they develop robust Availability and is available at https:// and areas, time and distance analysis and appropriate network adequacy www.medicaid.gov/medicaid/managed- may not always produce results that measures for their programs. care/downloads/guidance/adequacy- accurately reflect provider availability Comment: A few commenters and-access-toolkit.pdf. This toolkit, within a network. We believe that suggested that CMS provide additional designed as a resource guide for state deleting the requirement to use a time clarification and detail regarding Medicaid and CHIP agency staff, is and distance standard for all of the ‘‘quantitative network adequacy intended to: Assist state Medicaid and required provider types will enable standards,’’ specifically asking if CMS CHIP agencies with implementing the states to choose from a variety of recommends weighing variables a requirements of the new Federal rule quantitative network adequacy certain way, whether variables will be related to network adequacy and service standards that meet the needs of their adjusted for different provider types that availability standards; provide an respective Medicaid managed care might have varying data based on their overall framework and suggest metrics programs in more meaningful and demands and location, what will be the for monitoring provider network effective ways. We clarify that the reporting sources for network adequacy adequacy and service availability, as proposed change to § 438.68(b)(1) does data and if they are self-reported, how well as Medicaid and CHIP managed not require states currently using a time will states ensure minimal subjectivity care enrollees’ access to care overall; and distance standard to cease using, or in the data, and how will standards and highlight effective or promising make changes to, their standard. The such as ‘‘minimum percentage of practices that states currently use to proposed change merely offers states an contracted providers that are accepting develop and monitor provider network option to use a different adequacy new patients’’ be implemented. and access standards, and promote standard if they believe that time and Response: We decline to include access to care. We encourage states and distance is not the most appropriate additional specificity in § 438.68 managed care plans to review the standard for their program. addressing considerations for state Toolkit as they establish standards Comment: Many commenters noted development or implementation of under § 438.68. that removal of current measures may network adequacy standards. We Comment: One commenter noted that result in additional burden to providers, believe the list in § 438.68(c) reflects an states should be required to consult as well as enrollees residing in rural appropriate level of detail. The with American Indian/Alaskan Native areas and would increase risk and commenters’ suggestions may be useful (AI/AN) tribes to determine quantitative negatively impact health outcomes for to states and we encourage states to network adequacy standards and children and underserved populations. consider them as appropriate. specialists to which the standards Response: We do not believe that Comment: A few commenters would apply, such that gaps in coverage providing states with the option to use recommended that CMS outline and limitations in access to care for AI/ a different quantitative standard than possible quantifiable standards that ANs in tribal communities are time and distance will add provider could supplement time and distance minimized. burden or negatively impact health standards or provide additional Response: We agree that states should outcomes for children and underserved guidance regarding the types of engage in robust stakeholder populations. Our expectation is that if quantitative network adequacy engagement when developing their states use a variety of quantitative standards that could be adopted by a network adequacy standards to ensure measures designed to produce the most state. A few commenters suggested that inclusion of appropriate provider types accurate and comprehensive assessment CMS convene a group of stakeholders or based on the needs of the covered possible of network adequacy of experts to address issues regarding populations. We remind states of their providers needed for services covered network adequacy standards such as obligations for tribal consultation as under the contract, providers and clear definition and suggested specified in Section 1902(a)(73) of the enrollees should benefit from that guidelines of what constitutes network Act as well as additional guidance because adequate access to necessary adequacy, including as they relate to issued in State Medicaid Director Letter providers will have been ensured.

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Comment: One commenter stated that was not our intent to imply that services covered under the contract are the proposed rule fails to meet the telehealth offers the full array of available and accessible to enrollees, statutory requirement that the Medicaid services that are otherwise available to and § 438.68, which requires states to managed care plans provide assurances a patient who is physically present in a develop network adequacy standards, that it ‘‘maintains a sufficient number, provider’s office. We used telehealth as work together to ensure that states meet mix, and geographic distribution of an example of a situation where their obligations under the Act. We providers of services’’ as directed in measuring access using a time and acknowledge that states may find some section 1932(b)(5) of the Act and that distance standard may not be optimally of those standards to be appropriate for time and distance standards are the only effective to evaluate the adequacy of a their Medicaid managed care programs standards described in the proposed provider network and the ability of the and that adopting existing measures rule which can make these assurances. plan to ensure access to services. We may reduce the amount of time states This commenter further stated that CMS agree that states need to balance the use have to spend developing standards, as lacks the legal authority to eliminate the of telehealth with the availability of well as reduce operational burden on statutory requirement that Medicaid providers that can provide in-person managed care plans that also participate managed care plans assure the state and care and enrollees’ preferences for in other programs. States should review the Secretary that it maintains a receiving care to ensure that they standards used by other programs and sufficient ‘‘geographic distribution of establish network adequacy standards evaluate their potential usefulness in providers of services.’’ under § 438.68 that accurately reflect their Medicaid managed care programs. Response: We disagree that time and the practical use of both types of care in However, we believe that state distance is the only standard that can their state. Under § 438.68(c)(1)(ix), flexibility on this point is paramount produce information sufficient to enable states must consider the availability and and will not impose alignment as a a managed care plan to attest that it use of telemedicine when developing requirement. maintains a sufficient number, mix, and their network adequacy standards. Comment: Several commenters geographic distribution of providers of Comment: Some commenters supported the proposal to give states the services. Time and distance standards recommended requiring states to authority to define ‘‘specialist’’ in are one of many quantitative measures establish standards that align with other whatever way they deem appropriate for that states and managed care plans can regulatory provisions (such as those their programs. Some commenters use, alone or in combination, to assess applicable to Qualified Health Plans offered suggestions for specific types of provider networks and ensure a (QHPs) or Medicare Advantage plans), specialists that we should require states sufficient number, mix, and distribution and the Medicaid statute at section to include in their definition of of providers. Quantitative standards that 1932(c) of the Act (cited by the ‘‘specialist.’’ A few commenters states may elect to use include, but are commenter as 42 U.S.C. 1396u–2(c)), recommended that CMS provide not limited to, minimum provider-to- which requires states to establish guidance to states on specialties that enrollee ratios; maximum travel time or standards for access to care so that should be considered or included in distance to providers; a minimum covered services are available within each category listed in § 438.68(b)(1) percentage of contracted providers that reasonable timeframes and in a manner and prioritize provider types to help are accepting new patients; maximum that ensures continuity of care and avoid undue administrative burden on wait times for an appointment; hours of adequate primary care and specialized plans due to variability across states. operation requirements (for example, services capacity. The commenters Response: We appreciate the extended evening or weekend hours). stated that alignment with these comments in support of our proposal to We clarify that our proposal in no way provisions would ensure reasonable clarify that states have the authority to eliminates the statutory requirement timelines for access to care and designate ‘‘specialists’’ to which that managed care plans assure the state continuity of care. A few commenters network adequacy standards will apply and the Secretary that it maintains a recommended requiring states, under § 438.68(b)(1). We decline to sufficient geographic distribution of contracted managed care plans, and identify additional specific specialties providers of services. That requirement pharmacy benefit managers to follow or provider types for states to include in is unaffected by this change and Medicare Part D regulatory guidance on this category. We believe states are best implemented by § 438.207. access to specialty medications. suited to identify the provider types for Comment: Many commenters Response: We decline to require states which specific access standards should expressed concern with CMS’ rationale to align their network adequacy be developed in order to reflect the for the proposal regarding the impact of standards with the standards applicable needs of their populations and telemedicine on the efficacy of time and to other programs (such as standards for programs. We note that States’ network distance standards (83 FR 57278). QHPs, Medicare Advantage or Medicare adequacy standards are included in Commenters noted that telehealth and Part D). We believe that the states their quality strategies and are subject to telemedicine cannot offer the full array establishing and assessing their publication and public comment of services that are otherwise available managed care plans’ networks using the consistent with existing transparency to a patient who is physically present in standards required in § 438.68 will provisions in § 438.340(c)(1). a provider’s office. Commenters stated ensure compliance with the statute. Comment: Many commenters that states should be required to develop However, we clarify that § 438.68 is disagreed with the proposal to allow separate network adequacy standards consistent with section 1932(c)(1)(A)(i) states to define ‘‘specialist’’ in whatever for telemedicine, but maintain standards of the Act, which requires states to way they deem appropriate and for traditional service delivery, and develop and implement a quality recommended that CMS identify noted that in-person access should strategy that includes standards for specific provider types as specialists. remain a priority when measuring access to care so that covered services One commenter stated that CMS should network access as many situations are are available within reasonable define specialists to include providers not applicable for the use of technology- timeframes and that ensure continuity who focus on a specific area of health enabled care. of care. We believe that the managed and include sub-specialists who have Response: We understand the care regulations at § 438.206, which additional training beyond that of a commenters’ concerns but clarify that it requires that states ensure that all specialist. Some commenters

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recommended requiring states to designations among states, or affect the requirements about non-discrimination include specific specialists including accuracy of national quality measures. is necessary or appropriate. hematologists, adult and pediatric Network adequacy standards are Comment: A few commenters agreed oncologists, surgical specialists, utilized by managed care plans and with the proposal to eliminate the pulmonologists, allergists, and states to assess network adequacy at an requirement for states to establish time emergency physicians. One commenter aggregate level on a periodic basis. and distance standards for ‘‘additional recommended that CMS revise its Meaning, network adequacy standards provider types’’ identified by CMS proposed language to state ‘‘(as are not used to determine the because it will foster experimentation designated by the state in a manner that availability of, or authorize care by, a and innovation to improve care delivery ensures access to all covered services),’’ particular type of provider for an as well as streamline assessment of which would reiterate the need for individual enrollee. We believe that network adequacy. states to ensure that managed care § 438.206 is sufficiently clear on states’ Response: We believe removing the plan’s provider networks guarantee full and managed care plans’ responsibilities requirement for states to establish time access to all benefits covered under the for ensuring that all covered services are and distance standards for ‘‘additional state plan and are representative of the available and accessible to enrollees in provider types’’ identified by CMS will types of providers that frequently a timely manner, including specifically enable states to recognize and react provide services to consumers within addressing situations when an enrollee’s more quickly to local needs and their corresponding service areas. managed care plan’s network is unable developing trends in care. Response: We understand to provide necessary services in Comment: Several commenters commenters’ concerns but do not agree § 438.206(b)(4). Managed care plans disagreed with the proposal to no longer CMS should define ‘‘specialist’’ in must necessarily develop their networks require states to establish time and § 438.68(b)(1)(iv). As noted in the 2016 in ways that enable them to comply distance standards for ‘‘additional final rule on this topic, we believe that with all of their obligations under provider types when it promotes the states should set network adequacy §§ 438.206 and 438.207. Lastly, objectives of the Medicaid program.’’ standards that are appropriate at the although we do not see a correlation Commenters stated that the current state level and are best suited to between the specialists a state chooses requirement gives CMS an efficient way designate the number and types of to include for network adequacy to address changes in Medicaid benefits, providers that fall into the ‘‘specialist’’ purposes and provider types necessary workforce shortages, or concerns category based on differences under for calculating quality measures, states regarding access to care without going managed care contracts, as well as state can include specialists that are through the rulemaking process, which Medicaid programs; therefore, we implicated in quality measure impairs CMS’ ability to respond to believe it would be inappropriate for us calculations if they so choose. emergent concerns. Several commenters to identify at the Federal level specific Comment: Several commenters suggested that rather than eliminating specialists for which each state must suggested that the final rule should the provision, it could be amended to establish an access standard (81 FR instruct states that their designations of provide states with advanced notice 27661). We expect states to apply specialists for purposes of § 438.68(b), (specifically one year) before including network adequacy standards to all and any network adequacy standards, a new provider type. A few commenters provider types and specialties necessary must be consistent with existing state stated that any concerns regarding to ensure that all services covered under laws regarding licensure and implementation timelines could be the contract are available and accessible certification, as well as the Medicaid addressed in informal guidance or by to all enrollees in a timely manner as managed care nondiscrimination allowing states to create implementation required by § 438.206. regulation which prohibits managed standards within certain parameters Comment: Commenters noted that care plans from discriminating against established through agency instruction. allowing states to define ‘‘specialist’’ providers based on their licensure or Response: We believe that deleting may inadvertently limit access for certification. § 438.68(b)(1)(viii) removes an enrollees to covered services, result in Response: States and managed care unnecessary level of administrative higher costs if certain categories of plans must comply with all applicable burden and makes it clear that specialists are no longer in-network, Federal and state laws as specified in designating additional provider types lead to inconsistent application of the §§ 438.3(f) and 438.100(d) and provider that are subject to network adequacy policy when patients see physicians in discrimination is specifically prohibited analysis is a state responsibility. This another state that defines specialists in in §§ 438.12 and 438.214. Specifically, revision is consistent with the other different ways, and decrease quality of § 438.12 prohibits managed care plans revisions proposed at § 438.68(b) care in states that create standards from discrimination in the participation, introductory text and (b)(1)(iv). We which allow less qualified providers (for reimbursement, or indemnification of considered proposing a specific timeline example, nurse practitioners in lieu of any provider who is acting within the for advance notice instead of deleting doctors) to meet ‘‘specialist’’ criteria. scope of his or her license or § 438.68(b)(1)(viii) completely, but One commenter expressed concern that certification under applicable state law, ultimately concluded that that approach allowing states to define ‘‘specialist’’ solely on the basis of that license or was not consistent with the overall goal could negatively affect national quality certification and § 438.214(c) specifies and purpose of § 438.68(b). measures that rely heavily on certain that managed care plans are prohibited Comment: Several commenters provider types rendering care to count from discriminating against providers supported the proposed network towards numerator compliance. that serve high-risk populations or adequacy requirements allowing states Response: We do not agree that specialize in conditions that require to use any quantitative standard when allowing states to designate which costly treatment. We do not believe that developing network adequacy standards specialists are subject to the required the requirement on states to establish for long term services and supports network adequacy standards is likely to network adequacy standards in programs, specifically noting limit access, increase costs, lead to § 438.68(b) contravenes or limits these appreciation for flexibility in lower quality of care, promote other provisions, or that an amendment determining how networks are inconsistent application due to differing to § 438.68 to incorporate similar developed and stated that CMS’

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emphasis on states developing Chapter V ‘‘Network and Access for access. We agree that facilitating the standards that ensure beneficiary access Standards and Monitoring for Special maintenance of the support networks and provider availability rather than just Provider and Service Types.’’ that will help enrollees transition back time and distance is appropriate. Comment: Several commenters to and stay in the community after an Response: We appreciate the disagreed with the proposal to delete institutional stay is important and we comments in support of our revisions to the requirement for states to set time urge states and managed care plans to reorganize § 438.68(b)(2) to reflect and distance standards for LTSS consider this in the development of consistency with the requirement in providers and stated that such standards their network adequacy standards. § 438.68(b)(1) for states to develop are highly beneficial to guiding how After consideration of the public network adequacy standards for LTSS network adequacy standards are comments and for the reasons specified provider types. developed and judged, and that these articulated in the proposed rule and our Comment: Commenters suggested that standards are particularly relevant for responses to comments, we are CMS develop meaningful and LTSS given the provider shortages for finalizing § 438.68 as proposed. appropriate network adequacy direct-care staff in many areas. standards (including national standards) Commenters further stated that time and 11. Adoption of Practice Guidelines for LTSS providers that recognize the distance standards help ensure that (§ 438.236) realities of various settings and there are providers available in a given In the 2016 final rule, we attempted locations in which these services are area and provide home care agencies, to remove the terminology ‘‘contracting delivered as well different provider managed care plans, and state agencies health care professionals’’ throughout types (agency employees versus with a standard that is easy to use and the rule because it is not defined in any independent personal care workers). understand to assess whether provider regulation or statute and we believed One commenter also stated that any shortages are due to long travel times that use of ‘‘network provider’’ as national standards developed by CMS that require additional compensation. defined in § 438.2 was more accurate. should be subject to a stakeholder notice Another commenter stated that for We inadvertently missed removing the and comment period and ensure that nursing facility and other institutional- term at § 438.236(b)(3). To correct this, standards support consumer choice of type LTSS providers, time and distance we proposed to remove the words providers and community living. One standards also ensure that enrollees are ‘‘contracting health care professionals’’ commenter encouraged CMS to provide able to maintain their relationships with and insert ‘‘network providers’’ in states with increased guidance rather their community and family during § 438.236(b)(3). than less, including, network adequacy their time in a facility and that if an The following summarizes the public metrics based on choice standards, enrollee has to enter a facility far way comments received on our proposal to service fulfillment standards, and (either in time or distance), the enrollee amend § 438.236 and our responses to provider ratios. The commenter is less likely to be able to maintain the those comments. continued that guidance should ensure support networks they will ultimately Comment: One commenter supported that networks for LTSS services in need to successfully transition back into the proposed language change to remove which the provider travels to the the community. the words ‘‘contracting health care enrollee are just as robust as those in Response: We agree that time and professionals’’ and insert ‘‘network which the enrollee travels to the distance may be useful network providers’’ in § 438.236(b)(3). provider. adequacy standards for certain provider Response: We thank the commenter Response: We decline to set national types and we clarify that our proposed for the support. Consistent Use of network adequacy standards. We revisions do not prohibit nor discourage ‘‘network provider,’’ which is a defined believe it is particularly important that the use of time and distance as a term in § 438.2 promotes clarity in the states have flexibility to set network network adequacy standard. Our regulations. adequacy standards customized for their proposed revisions merely remove the After consideration of public LTSS programs given the wide variation requirement that time and distance comments and for the reasons in program design, the often very standards be used as the standard for all articulated in the proposed rule and our limited supply of providers, the provider types. States and managed care responses to comments, we will finalize provision of services outside of an office plans can continue using time and § 438.236(b)(3) as proposed. setting, and the potential functional distance—alone or in conjunction with 12. Enrollee Encounter Data limitations of the LTSS population. We other standards such as enrollee-to- (§ 438.242(c)) encourage states to solicit stakeholder provider ratios—for any provider types input in the development of their LTSS that they deem appropriate. Nursing In § 438.242(b)(3) of the final rule, we network standards to ensure that they facilities and other institutional-type required that all contracts between a adequately address situations when facilities that provide LTSS are not state and an MCO, PIHP, or PAHP enrollees travel to the provider as well specifically included in § 438.68(b)(1); provide for the submission by the as when the provider travels to the as such, the development and managed care plan of all enrollee enrollee. CMS issued guidance on application of network adequacy encounter data that the state is required setting network adequacy standards in standards to these provider types is at to submit to us under § 438.818. Since April 2017: Promoting Access in state discretion because we do not the final rule, some states and managed Medicaid and CHIP Managed Care: A designate the LTSS provider types for care plans have expressed concern Toolkit for Ensuring Provider Network which specific evaluation standards about, and been hesitant to submit, Adequacy and Service Availability and must be developed and used in certain financial data—namely, the is available at https:// paragraph (b)(2); identifying specific allowed amount and the paid amount. www.medicaid.gov/medicaid/managed- provider types at the Federal level is Some managed care plans consider this care/downloads/guidance/adequacy- unnecessary as states have the requisite information to be proprietary and and-access-toolkit.pdf. This toolkit, knowledge and expertise about the inappropriate for public disclosure. We designed as a resource guide for state services covered under their managed explained in the proposed rule that we Medicaid and CHIP agency staff, care plans to know which provider understand their concern but emphasize includes a specific chapter on LTSS. See types should be individually evaluated the importance of these data for proper

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monitoring and administration of the Patient Protection and Affordable Care subcontractor actually sends to the Medicaid program, particularly for Act of 2010 (PPACA) (Pub. L. 111–148, provider after adjudicating the claim. capitation rate setting and review, enacted March 23, 2010 as amended by This would be the same for claims paid financial management, and encounter the Health Care and Education by the state Medicaid agency or a data analysis. Additionally, the allowed Reconciliation Act of 2010 (Pub. L. 111– managed care plan. and paid amounts of claims are 152, enacted March 30, 2010)) We acknowledge that there are many routinely included on explanation of (‘‘Affordable Care Act’’),25 and will help types of payment arrangements benefits provided to enrollees; thus to identify potential fraud, waste, and including other than a per service making this information already abuse. A few commenters supported payment arrangement, used in Medicaid publicly available. To clarify the this proposal because they believe that managed care and that data fields in T– existing requirement and reflect the managed care plans erroneously state MSIS may need to be populated in importance of this data, we proposed to that this information is trade secret. different ways to accurately capture the revise § 438.242(c)(3) to explicitly Several commenters stated that the data associated with the different include ‘‘allowed amount and paid proposed revision to § 438.242(c) will arrangements. It is critical that amount.’’ We explained in the proposed improve the accuracy, transparency, and Transformed Medicaid Statistical rule that the proposed change to accountability of encounter data. Information System (T–MSIS) data § 438.242(c)(3) would in no way change Response: We agree that it is reflect all data associated to services the rights of Federal or state entities important for states and us to have provided to managed care enrollees, using encounter data for program complete and accurate encounter data including services provided by integrity purposes to access needed for proper program administration. We subcontractors. For example, data. Nor would it change the disclosure appreciate the support and recognition comprehensive data on pharmacy requirements for explanation of benefits of this important program policy from services subcontracted to a pharmacy notices (EOBs) or other disclosures to commenters. benefit manager must be submitted to enrollees about their coverage. Comment: Several commenters T–MSIS with the same level of accuracy In the proposed rule, we noted that requested clarifications about the and completeness as data for claims the health insurance industry has proposed changes to § 438.242(c). A few paid by the managed care plan directly. consistently stated that the contractual commenters requested more guidance The requirements for populating fields payment terms between managed care on the definitions of ‘‘allowed amount’’ in T–MSIS are documented in a data plans and providers are confidential and and ‘‘paid amount’’, and one commenter dictionary and accompanying guidance trade secret information and that the recommended that CMS seek input from issued by CMS. We also have technical disclosure of this information could managed care plans and other assistance available for states that have cause harm to the competitive position stakeholders on the proposed questions about submitting T–MSIS of the managed care plan or provider. definitions. A few commenters data. For more information, visit: We also stated that we would treat data requested clarification on how the https://www.medicaid.gov/medicaid/ as trade secret when the requirements requirement to report allowed and paid data-and-systems/macbis/tmsis/ for such a classification are met. We amounts will apply to subcapitated index.html. The dynamic nature of stated that we recognize the significance arrangements with providers that do not health care payment arrangements of the volume of data collected in the T– have clear payments for individual necessitates that we use flexible and MSIS and take our obligations seriously services and do not use a per service rapid methods for distributing T–MSIS to protect from disclosure information payment structure. Specifically, a few information to states in the most that is protected under Federal law. Our commenters requested clarification efficient and effective manner. As such, goal in proposing to explicitly name regarding whether the allowed and paid including overly specific details to allowed and paid amount in amounts that the state is required to address every type of payment § 438.242(b)(3) is to ensure that the report to CMS are the amounts the arrangement in a regulation is not scope of the collection of encounter data MCO, PIHP, or PAHP or subcontractor prudent nor feasible. States should is clear. We affirmed our commitment to allowed and paid to the direct consult T–MSIS requirements and safeguarding data protected by Federal healthcare provider. guidance documents and request law from inappropriate use and Response: We understand the request technical assistance as needed to ensure disclosure. for additional clarification on how the that their T–MSIS submissions meet The following summarizes the public allowed and paid amount fields should current standards. comments received on our proposal to be populated in T–MSIS submissions. Comment: One commenter stated that amend § 438.242(c) and our responses to For provider claims paid by the the allowed amount is not needed for those comments. managed care plan or subcontractor on administering the Medicaid program Comment: Many commenters a FFS basis, ‘‘allowed amount’’ and because it is not necessary for invoicing supported the proposed revision to ‘‘paid amount’’ have the same meaning Federal rebates or capturing Federal § 438.242(c)(3) and agreed that more as used for completing EOBs sent to reimbursement for Medicaid accurate and complete Medicaid data enrollees; that is, the allowed amount expenditures. Another commenter and transparency are needed and that reflects the amount the managed care stated that the capitation rates should be data on allowed and paid amounts are plan or subcontractor expects to pay for set based on the paid amount, not the critical to monitoring and administering a service based on its contract with the allowed amount, and that if CMS has the Medicaid program. Commenters provider and the paid amount reflects concerns about amounts paid, it should noted that this clarification will the amount the managed care plan or look towards addressing policies that strengthen the ability of state and drive up costs, such as state-mandated Federal officials to monitor managed 25 Sections 6402(c)(3) and 6504(b)(1) of the formularies or any willing provider care plan payments to network Affordable Care Act reorganize, amend, and add to provisions, and adopt proven benefit providers for their effect on access to sections 1903(i)(25) and 1903(m)(2)(A)(xi) of the design tools used in the commercial Act by adding provisions related to routine care, is consistent with statutory reporting of encounter data as a condition for market to keep costs down. provisions regarding reporting of receiving Federal matching payments for medical Response: We disagree with the encounter data established in the assistance. commenter that the information about

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the allowed amount should not be disclosure but recommended that CMS Federal law from inappropriate use and collected. While allowed amount data reinforce this assurance in regulatory disclosure. submitted by managed care plans to language by including an affirmative Comment: One commenter urged states may not be utilized as routinely statement in § 438.242(c) that would CMS to not only ensure that contractual as paid amount data in setting make the submissions subject to payment terms are safeguarded from capitation rates or oversight activities, it applicable Federal and state disclosure, but also stated that nonetheless provides states and CMS confidentiality laws and regulations. A aggregated data that could be used to insight into important aspects of a few commenters stated that they reverse engineer contractual payment managed care plan’s network, namely, appreciate CMS’ recognition that terms is safeguarded. Another its fee schedule and contractually contractual payment terms between commenter requested additional negotiated rates. Analyzing allowed managed care plans and providers may information about the measures CMS amount data can facilitate plan be confidential and trade secret uses or proposes to use to safeguard the comparisons that are not possible with information, the disclosure of which allowed and paid amount data and paid amounts as well as provide insight could potentially harm competition recommended that CMS apply stringent into possible causes for access issues among managed care plans and safeguards in how this information is within a plan’s network. We clarify here providers. used to ensure that this data is only that we did not intend to convey in our Response: We decline to include used for its intended purposes and not proposal that we had ‘‘concerns with additional regulatory text indicating the in manners that have the potential to paid amounts,’’ but rather to clarify the applicability of Federal and state laws adversely impact competition for plans meaning of ‘‘all enrollee encounter and regulations to the collection of and providers. One commenter data’’ in § 438.242(c)(3) as finalized in enrollee encounter data that states are requested that the final rule clarify that the 2016 final rule by explicitly stating required to submit to T–MSIS. We any additional disclosure of allowed the mandatory submission of encounter exercise due diligence to comply with and paid amounts, beyond that made to data includes allowed amount and paid all applicable laws and regulations with the state and CMS, is at the discretion amount data. Under § 438.818, states respect to all data in T–MSIS. We do not of the managed care plan. One must submit all enrollee encounter data believe that this final rule is the commenter stated that they discourage to CMS; § 438.242(c) requires states to appropriate place to discuss fully the requiring submission of allowed and require Medicaid managed care plans to scope and applicability of various paid amounts, and that at a minimum, submit to the state the same encounter confidentiality and data protection laws managed care plans need to better data that must be submitted in their T– to encounter data that must be understand the purpose of this data MSIS submissions to us. As explained submitted under sections 1903(i)(25) collection and CMS’ intended use for this data. in the 2016 final rule, Sections and 1903(m)(2)(A)(xi) of the Act. If, and Response: We understand the concern 6402(c)(3) and 6504(b)(1) of the when, there is a request for disclosure that the large quantity of data Affordable Care Act reorganize, amend, of this data (or if we seek to disclose maintained in T–MSIS could be used to and add to the provisions of sections without a request), we will evaluate the reverse engineer payment terms and fee 1903(i)(25) and 1903(m)(2)(A)(xi) of the applicable law and whether encounter schedules. Safeguarding information Act by adding provisions related to data submissions are protected from that is protected under Federal law from routine reporting of encounter data as a release or disclosure under Federal law. inappropriate use and disclosure is a condition for receiving Federal The facts of each situation, including priority for us. However, there are matching payments for medical the age and scope of the data, are adequate protections in other Federal assistance. Section 1903(i)(25) of the Act necessarily key components in any such law (for example, exemption 4 in the mandates that, effective March 23, 2010, analysis. Freedom of Information Act, 5 U.S.C. Federal matching payments to the states Comment: A few commenters 552(b)(4), the Trade Secrets Act, 18 must not be made for individuals for disagreed that the allowed amount is U.S.C. 1905) so adding a new regulatory whom the state does not report enrollee already in the public domain in the protection here is not appropriate. encounter data to us. The PPACA form of EOBs because EOBs are not Further, we decline to include amendment to section 1903(m)(2)(A)(xi) public documents. Several commenters regulatory text giving plans discretion of the Act specifies that the obligation stated that the allowed amount is over the use and distribution of T–MSIS for an MCO to report ‘‘patient encounter considered proprietary information by data. CMS will comply with all data’’ was, for contract years after most plans and is not appropriate for applicable Federal requirements January 1, 2010, to the state in a public disclosure. associated with use and disclosure of timeframe and level of detail specified Response: We understand data. As we stated in the proposed rule, by the Secretary. The data that must be commenters’ concern; however, there we consider encounter data invaluable collected and reported under these are no restrictions on an enrollee’s use for proper monitoring and provisions is the same, but the or disclosure of their EOBs. We administration of the Medicaid program, population covered by section recognize the significance of managed particularly for capitation rate setting 1903(i)(25) of the Act, compared to the care plans’ concerns and commit to and review, financial management, population covered by section treating these data as confidential under program integrity, and utilization 1903(m)(2)(A)(xi) of the Act, included applicable law when the requirements analysis. As we explained in SMD 13– enrollees of PIHPs and PAHP. (81 FR for such treatment are met. We also 004 (https://www.medicaid.gov/federal- 27737). These statutory changes or the acknowledge the significance of the policy-guidance/downloads/smd-13- data required from Medicaid managed large volume of data collected in T– 004.pdf), our goal is for T–MSIS data to care plans were reflected in §§ 438.242 MSIS as opposed to the very limited be used for initiatives such as to study and 438.818 of the 2016 final rule. amount of data available from encounters, claims, and enrollment data Comment: Several commenters individual EOBs, and the potential uses by claim and beneficiary attributes; appreciated CMS’ commitment to the quantity would enable. We take our analyze expenditures by medical safeguarding data protected by Federal obligations seriously to safeguard assistance and administration law from inappropriate use and information that is protected under categories; monitor expenditures within

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delivery systems and assess the impact to invest significant, if any, IT resources assistance. Section 1903(i)(25) of the Act of different types of delivery system to comply. We decline to adopt a mandates that, effective March 23, 2010, models on beneficiary outcomes; requirement for a calculated allowed Federal matching payments to the states examine the enrollment, service amount over one populated when the must not be made for individuals for provision, and expenditure experience claim is adjudicated. whom the state does not report enrollee of providers who participate in our Comment: A few commenters encounter data to us. Further, section programs; and observe trends or recommended ways to implement the 1903(m)(2)(A)(xi) of the Act specifies patterns indicating potential fraud, proposed change to § 438.242. that an MCO must report ‘‘patient waste, and abuse in the programs so we Commenters stated that, given the encounter data’’ for contract years after can prevent or mitigate the impact of variety of contracting and January 1, 2010, to the state in a these activities. We are committed to subcontracting arrangements, timeframe and level of detail specified collecting accurate and comprehensive consultation should occur between by the Secretary. We do not believe that data, meeting our obligations to Medicaid plans, states, and CMS on the clarification we are adding to the safeguard that data, and using it to reach how best to define and implement this regulation (by incorporating explicit our goals to improve the Medicaid provision to ensure that all appropriate wording that the allowed amount and program and the health outcomes of its costs are captured for rate development. paid amount are part of the required beneficiaries. A few commenters recommended that encounter data reporting) for the Comment: A few commenters there be sufficient time for purpose of emphasizing the importance expressed concerns about the impact of implementation because the use of new of accurate and complete submission by reporting the allowed amount on costs fields in the encounter system will Medicaid managed care plans associated with modifying encounter require considerable programming for necessitates additional consultation or data collection and IT systems for states point of service claims, and one significant implementation efforts. We and health plans. One commenter stated commenter requested a future effective do not believe there is a need for one that the allowed amount is not currently date for these changes. industry standard reporting format an available field in either the National One commenter recommended solely for encounter data submissions. Council for Prescription Drug Programs making reporting the allowed amount We addressed data standardization and (NCPDP) standard reporting layouts optional. One commenter recommended file formats for submission of encounter frequently used by states as the basis for that CMS work with healthcare data in the 2016 final rule in capturing their pharmacy encounters, or stakeholders to create industry standard § 438.242(c)(4), which specifies in the 837 ASC 26 X12 standards used to formats for encounter file submissions submission of encounter data to the report professional claims. One and seek public input through future state in standardized ASC X12N 837 commenter recommended that instead formal rulemaking. Commenters also and NCPDP formats, and the ASC X12N of requiring the allowed amount to be recommended that CMS finalize any 835 format as appropriate. As noted reported with enrollee encounter data, such industry standard formats with previously in our responses to comment CMS should use the approach taken by sufficient time and definitive guidance on the proposal to amend the 837 ASC X12 workgroup that in advance of required use. § 438.242(c)(3), we believe that permits calculation of the allowed Response: The size and scope of populating the existing field in the amount from the fields needed to today’s Medicaid programs need robust, X12N 837 and NCPDP formats, and the calculate it in the data already captured timely, and accurate data to ensure the ASC X12N 835 format will not entail in the current layout. Commenter stated highest financial and program significant burden. that calculating allowed amount in this performance, support policy analyses, Generally, all regulations have future manner would promote greater and maintain ongoing improvement that effective dates, and we do not believe consistency in reporting and allow CMS enables data-driven decision making. we need to set an additionally delayed to achieve its goal of more accurately Encounter data are the basis for any or unique compliance date for identifying administrative costs. number of required or voluntary § 438.242(c)(3) as revised in this final Response: We believe the commenter activities, including rate setting, risk rule given the lengthy history of this is referring to the pre-adjudicated adjustment, quality measurement, requirement. allowed amount field. If so, we value-based purchasing, program After consideration of the public understand that the allowed amount is integrity, and policy development. comments and for the reasons no longer a required field in 837 ASC Since 1999, states have been required to articulated in the proposed rule and our X12 for pre-adjudicated claims. electronically submit data files to MSIS, responses to comments, we are However, Loop 2400 HCP02 (Priced/ including eligibility and paid claims finalizing § 438.242(c) as proposed. Repriced Allowed Amount) data files. The paid claims files have always 13. Medicaid Managed Care Quality element does still exist in the 5010 required the same fields of data that are format and is applicable to post- present on a claim form or standardized Rating System (MAC QRS) (§ 438.334) adjudicated claims. The allowed electronic format. Submitting allowed In the 2016 final rule (81 FR 27686), amount added by the managed care plan and paid amounts for encounter data to we established at § 438.334 the or subcontractor during adjudication is CMS is not a new requirement for states, authority to require states to operate a the data that should be submitted to T– although their compliance rates of Medicaid managed care quality rating MSIS. We clarify here that we are not completeness and accuracy have varied system (QRS) and incorporated this requiring the creation of new fields in widely. Congress enacted sections provision in its entirety into CHIP at any of the standardized transaction 6402(c)(3) and 6504(b)(1) of the PPACA § 457.1240(d). That regulation provides formats referenced in § 438.242(c)(4); which reorganized, amended, and that we, in consultation with states and existing fields should be populated added to the provisions of sections other stakeholders, and after providing consistent with the T–MSIS data 1903(i)(25) and 1903(m)(2)(A)(xi) of the public notice and opportunity to dictionary. As such, we do not believe Act by adding provisions related to comment, will identify performance states nor managed care plans will need routine reporting of encounter data as a measures and a methodology for a condition for receiving Federal Medicaid and CHIP managed care 26 Accredited Standards Committee. matching payments for medical quality rating system. That regulation

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also provides that states will have the include the mandatory measures including issues raised by the Medical option to use the CMS-developed QRS identified in the framework. We noted Care Advisory Committee and the or establish an alternative state-specific that states will retain flexibility to public, any policy revisions or QRS (‘‘state alternative QRS’’), provided include additional measures important modifications made in response to the that the state alternative QRS produces to serving their quality goals and comments, and the rationale for substantially comparable information meeting the needs of their beneficiaries comments not accepted; and other about plan performance. Under the and stakeholder communities. The information specified by CMS. We regulation, any state alternative QRS is purpose of the proposed change is to noted that as part of our general subject to CMS approval. facilitate comparable ratings while oversight responsibilities, we would In the 2016 final rule, we used the continuing to provide flexibility for still review states’ alternative QRS and acronym Medicaid Managed Care states to include additional measures work with states on any identified Quality Rating System QRS (MMC important to serving their beneficiaries deficiencies. We described the proposed QRS). In this final rule, we refer to the and achieving their quality goals. We approach as similar to the oversight Medicaid and CHIP Managed Care also noted that, as the MAC QRS and process we use for states’ Medicaid Quality Rating System (‘‘MAC QRS’’), as our recently launched Medicaid and eligibility verification plans both Medicaid and CHIP are subject to CHIP Scorecard serve related goals, we (§ 435.945(j)), and CHIP eligibility the QRS regulations. expect to coordinate the measures verification plans (§ 457.380(i)), which In the November 14, 2018 proposed selected for the Scorecard and those require states to submit eligibility rule, we proposed to make several selected for the CMS-developed QRS. verification plans to CMS upon request, revisions to the QRS regulations at The Scorecard includes measures from in a manner and format prescribed by § 438.334. These proposed revisions the Child and Adult Core Sets that CMS CMS. However, our proposal for the were intended to better balance the goal identifies and publishes pursuant to state alternative QRS would not have of facilitating inter-state comparisons of sections 1139A and 1139B of the Act required prior approval. plan performance and reducing plan and that are voluntarily reported by The following summarizes the public burden through standardization with states, as well as federally-reported comments received on our proposal to the need for state flexibility and the measures in three areas: State health amend § 438.334 and our responses to practical challenges inherent in system performance, state those comments. producing comparable ratings across administrative accountability, and Comment: We received many heterogeneous states. We proposed no Federal administrative accountability. comments supporting the establishment changes to § 457.1240(d), therefore all Both the Child and Adult Core Sets and of a minimum mandatory measure set proposed changes to § 438.334 would be the Scorecard are reviewed annually that would be applicable across both the incorporated by § 457.1240(d)’s cross- and are expected to continue to evolve. CMS-developed QRS and state reference and apply equally to both a More information about the Scorecard is alternative QRS. A number of state’s Medicaid and CHIP programs. available at https://www.medicaid.gov/ commenters stated that this proposal Specifically, we proposed to revise state-overviews/scorecard/index.html. will reduce administrative burden on the requirement in § 438.334(c)(1)(i) We proposed to revise § 438.334(b) to plans and providers and allow for more (redesignated at paragraph (c)(1)(ii) in provide that the CMS-developed QRS easily comparable data across states. this final rule) to make explicit our will align where appropriate with the Several commenters supported the intention to take feasibility into account Qualified Health Plan (QHP) quality proposal to apply the minimum when requiring that the information rating system developed in accordance mandatory measure set across the CMS- yielded by a state alternative QRS be with 45 CFR 156.1120, the Medicare developed QRS and state alternative substantially comparable to the Advantage 5-Star Rating System, and QRS, noting this will establish a level of information yielded by the CMS- other related CMS quality rating consistency across states but continue to developed QRS, by taking into account approaches. We noted that alignment give states additional flexibility to add differences in state programs that may would be determined as part of the measures important to the state. One complicate comparability. We also ongoing development of the proposed commenter supported coordinating the proposed to add a new paragraph (c)(4) measures and methodologies and would minimum set with Scorecard and to explicitly provide that we would be addressed in the MAC QRS-specific offered to work with CMS on exploring engage with states and other rulemaking. how the QRS and Scorecard can support stakeholders in developing sub Finally, we proposed to revise the one another. regulatory guidance on what it means current introductory language in Response: We thank commenters for for an alternative QRS to yield § 438.334(c)(1) introductory text and their support and are finalizing the substantially comparable information, (c)(1)(ii) to eliminate the requirement proposed policies for (1) adoption by and how a state would demonstrate it that states obtain prior approval from CMS of a minimum mandatory measure meets that standard. CMS before implementing a state set within the full MAC QRS measure Current § 438.334(b) provides that alternative QRS to reduce the upfront set and of a methodology developed in CMS ‘‘will identify performance administrative burden on states and accordance with § 438.334(b) with some measures and a methodology’’ for the speed time to implementation. Instead modifications as discussed in this MAC QRS. We proposed to revise of prior CMS approval, we proposed at section of this final rule; and (2) paragraph (b) to provide that CMS will § 438.334(c)(3) that states would, upon application of the minimum mandatory develop a MAC QRS framework, CMS request, submit the following measure set to state alternative QRS in including the identification of a set of information to CMS to demonstrate § 438.334(c)(1)(i). mandatory performance measures and a compliance with § 438.334(c): The Comment: A number of commenters methodology. state’s alternative QRS framework, recommended that the minimum set of We proposed to redesignate including the performance measures mandatory measures should include § 438.334(c)(1)(i) and (ii) as paragraphs and methodology to be used in measures that are focused on outcomes; (c)(1)(ii) and (iii), respectively, and generating plan ratings; documentation are clinically credible; address proposed to add new paragraph (c)(1)(i) of the public comment process potentially avoidable outcomes; are to require a state alternative QRS to described in § 438.334(c)(2)(i) and (ii), comprehensive in scope; have

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quantifiable financial impact; use supports, and aging populations. A few methodology. Per § 438.334(b)(1), we standard data; and are comparable commenters noted that a mandatory will consult with states and other across states. measure set may not be applicable stakeholders in developing the Response: We will take commenters’ across disparate managed care programs framework including the MAC QRS suggestions under advisement as we within a state that serves unique measure set and subset of minimum continue the stakeholder engagement populations. One commenter did not mandatory measures, which then will and MAC QRS development process support the proposal to require be subject to formal public notice and leading to a future MAC QRS-specific mandatory measures, because the comment so we expect that stakeholders rulemaking. mandatory measures may be in clinical and the public will have ample Comment: One commenter sought domains in which their state already opportunity to provide comment on the confirmation that health plans will not excels. The commenter also noted that measures identified by us, including the be responsible for reporting measures a mandatory measure set would not mandatory measures. that are specific to types of services not consider the resources states with an Further, while the proposed and final included in their benefit packages, in existing QRS may have already spent to rule call for the MAC QRS to be aligned situations where states have provided gain support for the measures already with the QHP QRS, the Medicare carve-outs for those services such as contained in such an existing QRS. Advantage 5-Star rating system and pharmacy, behavioral health or dental. other related CMS quality rating Response: While the reporting Response: We are finalizing the authority and requirements for (1) a approaches (such as Scorecard) where requirements for plans associated with appropriate, this does not mean framework for the MAC QRS, including the MAC QRS are beyond the scope of alignment in all aspects. Differences the identification of the performance this rule, we agree that it would not be would be appropriate, for example, to measures, a minimum mandatory reasonable to hold plans accountable for address the different populations and measure set within the full MAC QRS services that are not included in their services covered in the Medicaid and measure set, methodology, and (2) an contracts and which they do not CHIP programs. provide. We intend to take this and alignment where appropriate with the Comment: Many commenters other considerations related to service qualified health plan (QHP) quality supported our proposal to align the carve-outs and limited benefit plans into rating system developed in accordance CMS-developed MAC QRS with other account as part of the stakeholder with 45 CFR 156.1120, the Medicare CMS rating approaches where engagement process, in development of Advantage 5-Star Rating System, and appropriate. Several commenters agreed the proposed MAC QRS-specific other related CMS quality rating that alignment across programs will rulemaking. approaches in the amendment to reduce administrative burden and Comment: Many commenters § 438.334(b), which we are promote high-quality care. expressed concern with aligning the redesignating as paragraph (b)(1). We Response: As we noted in the MAC QRS with other CMS quality use the term framework to encompass proposed rule, we proposed to expand rating approaches and/or with the all of the critical components of a QRS, the requirement to align the MAC QRS, proposals to develop the minimum set which include, but are not necessarily where appropriate, with other CMS- of mandatory measures and to limited to, the selected performance developed quality rating approaches, coordinate that minimum set with the measures and methodology. Although based on feedback gathered through Scorecard initiative. Several alignment, where appropriate, with early stages of the stakeholder commenters noted deficiencies or gaps other CMS quality rating systems and engagement process that a more in the current QHP and Medicare approaches is required under the rule expansive approach to alignment would Advantage 5-Star Quality Rating System we are finalizing, the regulation, as reduce reporting burden on plans that methodologies, and pointed out that the proposed and finalized, does not limit operate across multiple markets, such as Medicaid/CHIP programs serve different MAC QRS measures only to those Medicare Advantage and the populations than Medicare and QHP included in the Scorecard, the listed Marketplace. We are finalizing the programs and cover different services. rating systems, or other CMS quality amendment to include alignment with As such, these commenters believed rating systems. For example, measures the Medicare Advantage 5-Star rating that alignment with the Medicare not currently included in Scorecard but system and other CMS quality rating Advantage 5-Star Quality Rating System important to beneficiaries and pertinent approaches in addition to the QHP QRS may not provide an accurate picture of to specialty services and specific at § 438.334(b)(1). In the final regulation the care being provided. A few populations (for example, MLTSS text, we are making a technical commenters expressed concern with the measures) will also be considered for modification to the citation of the proposed alignment because Medicaid the full MAC QRS measure set. Medicare Advantage 5-Star rating and CHIP serve a significant number of Moreover, states will continue to have system to indicate that it is described in children and recommended that CMS the flexibility to add measures for 42 CFR part 422, subpart D. ensure pediatric specific ratings are services, programs and populations that Comment: A few commenters available and that the measure set are important to each state, should the requested clarification on the process include measures relevant to children full MAC QRS measure set (including CMS will use to develop the MAC QRS and their caregivers. the minimum mandatory subset) not framework including measures and Some commenters noted that the include specific measures important to methodology and requested that CMS current version of Scorecard contains a particular state for its quality provide a timeline for development of only 16 quality measures and expressed improvement goals. Therefore, we are the MAC QRS framework. concern that a measure set comprised finalizing the amendments to Response: As we noted in the only of Scorecard measures would leave § 438.334(b), redesignated as paragraph proposed rule, we have begun the early large measurement gaps for key (b)(1), with modification to clarify that stages of a stakeholder engagement Medicaid populations, such as adults the MAC QRS framework includes the process needed for the MAC QRS and children with disabilities, pregnant identification of the performance framework. We have conducted women and newborns, persons measures, as well as a subset of interactive listening sessions with receiving long term services and mandatory performance measures, and a various stakeholders, including state

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and health plan stakeholder groups’ requested that health plans be included not useful for Medicaid populations, directors, and interviewed several in the process. One commenter especially vulnerable populations beneficiaries. We also have convened a suggested that CMS should seek input within their state. diverse technical expert panel (TEP) to from The Partnership for Medicaid. Response: We agree that meet periodically to advise us on the Response: We appreciate commenters’ comparability is an important goal and framework, objectives, measures, and interest and willingness to participate in that utilization of meaningful measures methodologies for the MAC QRS. The the development of the MAC QRS. We is key, but we also believe feasibility is TEP includes representatives from state are committed to a stakeholder an important consideration because Medicaid and CHIP agencies, plans, engagement process that captures the states’ covered populations and program beneficiary advocates, and quality diverse viewpoints of the Medicaid and design, as well as their information measurement experts. We intend to CHIP community. Our current technology, data collection and continue this type of stakeholder regulation at § 438.334(b), redesignated reporting capacity, differ. We are engagement to develop the MAC QRS, as § 438.334(b)(1) in this final rule, finalizing paragraph (c)(1)(ii) as culminating in the publication of a MAC provides for CMS consultation with proposed. We will engage with states QRS-specific proposed rule in the states and other stakeholders in the and other stakeholders in developing Federal Register, consistent with at the development of the CMS-developed the sub regulatory guidance specifying requirements in § 438.334(b), which we QRS. Our proposal at § 438.334(c)(4) (for the criteria and process for determining are redesignating as paragraph (b)(1). the Secretary to issue guidance in the substantially comparability We also intend to provide technical consultation with states and other standard, as required under assistance and guidance to states to stakeholders) was intended to codify § 438.334(c)(4). We look forward to assist them with implementation of the our intention similarly to actively working with states and other MAC QRS. engage with states and other stakeholders to strike the right balance As we explained in both the 2015 stakeholders in the development of the between comparability and flexibility Medicaid managed care proposed rule ‘‘substantially comparable’’ guidance for under the standard for state alternative (80 FR 31153) and the 2016 final rule state alternative QRSs as well. We are QRSs, set forth in § 438.334(c)(1)(ii) of response to comments (81 FR 27688), retaining the policy to require the final rule, while producing ratings after finalizing the initial CMS- consultation in development of the that are meaningful and useful for developed QRS, we may periodically CMS-developed QRS in § 438.334(b)(1) beneficiaries, plans, and states. As review it to determine the need for of the final rule and finalizing proposed § 438.334(c)(4) requires that we consult modifications, such as refining the paragraph (c)(4), with a technical with states and other stakeholders methodology and updating the measures modification in both paragraphs to before issuing the guidance on the to ensure continuing alignment. clarify that issuance of the MAC QRS- substantial comparability standard, it However, we realize that the current specific rulemaking and the would be premature to provide specific regulations do not clearly reflect the subregulatory guidance on substantial guidance on that point here. We also policy described in the preambles; comparability will be ‘‘after consulting,’’ expect that the MAC QRS will evolve, therefore, we are adding a new rather than ‘‘in consultation,’’ with and with continued CMS support and paragraph at § 438.334(b)(2) to make states and other stakeholders. We technical assistance to states, what may clear that CMS would follow the same believe this technical change eliminates not be initially feasible may become stakeholder engagement and rulemaking potential confusion about the timing of more feasible over time. process prior to updating the CMS- stakeholder consultation and clarifies Comment: Many commenters developed QRS, including consulting that it is a distinct engagement process recommended additional measures and with States and other stakeholders and that will happen before the rulemaking measure sets for alignment with and then providing public notice and used to adopt or revise the framework inclusion in the MAC QRS. Several opportunity to comment, in accordance for the CMS-developed QRS. We commenters recommended including with paragraph (b)(1) of § 438.334. recognize the broad range of the Medicaid and CHIP Core Measure Comment: Several commenters stakeholders interested in the Sets. Several commenters recommended supported the proposed language development of the MAC QRS and are aligning the MAC QRS measures with change that clarified and reinforced our committed to working with them in the the ‘‘Meaningful Measures’’ initiative by intention to include stakeholders in development of both the MAC QRS and CMS for use across CMS programs. A developing the MAC QRS framework, subregulatory guidance related to few commenters encouraged CMS to including a set of performance alternative QRS. utilize standard, nationally developed measures, a subset of mandatory Comment: Several commenters and consensus-based measures. A few measures, and methodology for supported our proposal, in commenters encouraged CMS to use determining a rating based on reported § 438.334(c)(1)(ii), to take feasibility into reliable and valid measures that reflect measures. A few commenters account when applying the substantial quality of care and plan performance. A recommended working with the Core comparability requirements to a state few commenters recommended that any Measures Quality Collaborative. A few alternative QRS. A few commenters mandatory measures should be relevant commenters recommended including appreciated CMS’s effort to clarify the to long-term care and LTSS programs beneficiaries, providers and researchers considerations that will be taken into and one commenter recommended that in the process. One commenter account in applying the standard and the CMS-developed QRS and any state recommended that Medicaid MCOs providing additional flexibility to states, alternative QRS be required to include have an opportunity to participate in the but continued to question how the at least the domains listed in development of the QRS framework. A substantially comparable standard will § 438.330(c)(1)(ii) on quality of life, few commenters supported CMS’ be implemented. Many other rebalancing, and community proposal to work with stakeholders to commenters expressed concerns that integration. Several commenters develop sub regulatory guidance on this proposal would create too much requested that the mandatory measure what it means for an alternative QRS to flexibility, limiting comparability and set include sufficient measures for yield substantially comparable allowing states to implement inadequate pharmacy, cancer care, screenings and information. A few commenters rating systems with measures that are preventive care. One commenter urged

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CMS to recognize the importance of For more information on the Medicaid comparability standard. We also agree access to care as a summary indicator and CHIP Core Measure Sets see https:// with commenters’ concerns about the when developing a standardized www.medicaid.gov/medicaid/quality-of- risks to ensuring that all state alternative Medicaid QRS. care/performance-measurement/ QRS’s meet the substantial A few commenters suggested index.html. CMS’s comprehensive comparability standard. Therefore, we including Healthcare Effectiveness Data initiative ‘‘Meaningful Measures’’ was are not finalizing our proposal to and Information Set (HEDIS) measures. launched in 2017 and identifies high remove the requirement that states A few commenters also encouraged the priority areas for quality measurement submit alternative QRS to CMS for use of medication use-related metrics and improvement across our programs. approval prior to implementation. As and aligning with the Pharmacy Quality Its purpose is to improve outcomes for discussed in this rule, the prior Alliance (PQA) measures. A few patients, their families and providers approval requirement currently codified commenters requested that CMS define while also reducing burden on at § 438.334(c)(1)(ii) is being pharmacy quality within the QRS and clinicians and providers. More redesignated as paragraph (c)(1)(iii) in urged that measures related to pharmacy information about this initiative may be this final rule with one grammatical performance be standardized, found at https://www.cms.gov/ correction as to the word ‘‘receives’’. In achievable, and have proven criteria Medicare/Quality-Initiatives-Patient- addition, our proposal to amend that measure individual pharmacy Assessment-Instruments/Quality § 438.334(c)(2), which was to revise the performance. One commenter InitiativesGenInfo/CMS-Quality- introductory text solely to be consistent recommended including the Consumer Strategy.html. with the proposal to eliminate the prior Assessment of Healthcare Providers and Comment: A few commenters approval requirement, is not being Systems (CAHPS) survey. Another supported the proposal to eliminate the finalized. commenter recommended aligning with prior-approval requirement in Comment: One commenter requested the Medicare Part D star rating program. § 438.334(c)(1) of the current regulations clarification whether updates to a state’s One commenter encouraged aligning for states opting to develop a state alternative QRS would trigger a CMS with the Dental Quality Alliance for oral alternative QRS, noting this will reduce review or additional stakeholder health. A few commenters encouraged delays in implementing a state outreach. One commenter suggested that CMS to ensure that states have a dental- alternative QRS and will allow for CMS review states’ alternative QRS on specific QRS domain rather than a greater state flexibility. One commenter at least an annual basis to address any single measure within a broader set. supported the proposal but expressed deficiencies. One commenter suggested that measures concern that too much flexibility for Response: As explained in this rule, related to cancer care should be states could create too much variation we are not finalizing the change to the included and that these measures among QRS requirements across states. current requirement that states receive should focus on the specifics of cancer Many other commenters opposed prior-approval from CMS of an treatment, be meaningful to patients and removing the prior-approval alternative QRS prior to its relevant to all oncology specialties. One requirement. Some commenters implementation. For the same reasons, commenter suggested using existing perceived this change could undermine we agree with the commenters that prior summary indicators for the qualified CMS’s oversight authority, or reduce approval of modifications is necessary health plans (QHPs). plan accountability by allowing states to to ensure that the standards for use of Response: We did not propose choose only those measures on which an alternative QRS continue to be met specific measures or measure sets in this the state and/or their contracted health and that states do not make significant rule, which is focused on the plans already perform well and for investment in modifications that CMS overarching authority for the MAC QRS. which there is little room for then determines do not comply with the Consideration of specific measures and improvement. Some commenters substantially comparable standard. Prior measure sets is being addressed in the perceived this change could reduce the approval from CMS of a state alternative ongoing engagement CMS is having ability to share and collect meaningful QRS, including modifications to a state with stakeholders in developing the data, and create additional reporting alternative QRS, is required under the MAC QRS framework. The regulation requirements and burdens on current regulations at § 438.334(c)(1)(ii), we are finalizing at § 438.334(b)(1) physicians. A few commenters were and we are not substantively modifying requires the MAC QRS that CMS concerned that states could receive this requirement in light of our decision develops to align where appropriate feedback from CMS requiring a change not to finalize the proposal to eliminate with CMS quality rating approaches, but in their state alternative QRS late in its the prior approval requirement. This does not preclude our consideration of implementation, after states had already requirement is redesignated as other quality rating systems. We will expended significant time and resources § 438.334(c)(1)(iii), in this final rule. consider them as we continue the in developing and building their Further, we note that § 438.334(c)(2), stakeholder engagement and alternative QRS. These commenters which we are not amending, requires development of the MAC QRS within requested that CMS allow states the that both implementation of a state the authority of § 438.334. option to submit their alternative QRS alternative QRS and modification of an We provide here for readers some for some level of CMS review and approved state alternative QRS require information about some of the CMS approval prior to implementation. Medical Care Advisory Committee input initiatives noted by the commenters. Response: The proposal was intended and a state public notice and comment Section 1139A of the Act requires HHS to provide states with upfront process prior to submission to us for to identify and publish a core measure administrative flexibility and avoid approval. These stakeholder engagement set of children’s health care quality potential delay in implementation. requirements, which apply whether a measures for voluntary use by state However, we also understand the state is implementing an initial state Medicaid and CHIP programs. In concerns of commenters regarding this alternative QRS or making addition, section 1139B of the Act risk to states in expending time and modifications to an existing state similarly requires HHS to identify and resources on an alternative QRS which alternative QRS, continue to apply. We publish a core set of health care quality CMS might subsequently determine believe that CMS review and approval measures for adult Medicaid enrollees. does not meet the substantial of the state alternative QRS prior to

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implementation and prior to a Comment: One commenter requested may periodically update the MAC QRS modification would be substantively that CMS clarify the proposal to framework developed in accordance similar in terms of the standards applied redesignate § 438.334(c)(1)(ii) of the with paragraph (b)(1). and the information considered. We do current text (that requires states to • We are finalizing proposed not believe adding a specific receive CMS prior approval) to revisions to eliminate duplicative requirement for annual CMS review of § 438.334(c)(1)(iii) because it conflicts language in the introductory language in an approved alternative QRS is with CMS’s proposal to eliminate the paragraph (c)(1). necessary given that CMS approval of prior approval requirement. • We are finalizing, as proposed, the initial state alternative QRS and any Response: While we agree this was a revisions to current paragraph (c)(1)(i) modifications are already addressed in technical error in the amendatory (relating to feasibility factors for the the regulation text. As noted in this rule, instructions for the proposed changes substantial comparability standard for a we are codifying at § 438.334(b)(2) the (see 83 FR 57296), we are not finalizing state alternative QRS) and redesignating authority to periodically update and the removal of the prior-approval this as paragraph (c)(1)(ii); finalizing a modify the MAC QRS framework requirement. We are redesignating new paragraph (c)(1)(i) (applying the including a continued process for revised paragraph (c)(1)(i) (relating to minimum mandatory measure set to stakeholder engagement and public the substantial comparability standard state alternative QRS); and redesignating notice and opportunity for comment. for alternative QRS) as paragraph current paragraph (c)(1)(ii) (requiring When we make changes, we will (c)(1)(ii); adding a new paragraph CMS prior-approval of state alternative (c)(1)(i) (applying the minimum QRS) as paragraph (c)(1)(iii)). explain in those future rulemakings and • guidance what it means for states mandatory measure set to alternative We received no comments on the implementing the CMS-developed MAC QRS); and redesignating paragraph several proposed changes to QRS, as well as how the changes affect (c)(1)(ii) (requiring CMS prior-approval § 438.334(c)(3), regarding the the substantial comparability analysis of of alternative QRS) as paragraph information about their alternative QRS any state alternative QRS. We expect to (c)(1)(iii). We are also finalizing the that states would need to provide to CMS. We proposed that states would work with all states to implement future proposed amendment to paragraph provide, in addition to the information MAC QRS modifications. (c)(1) so that it provides that ‘‘a state may implement’’ a state alternative about stakeholder engagement already Comment: Several commenters required by § 438.334(c)(3), a copy of expressed concern that the removal of QRS. The proposed text eliminates a redundancy in the current regulation the alternative QRS framework, CMS prior-approval of alternative QRS text, paragraph (c)(1), which provides including the performance measures also changed the timing of the state- that a state ‘‘may submit a request to and methodology to be used in level public stakeholder process from CMS for approval’’. This language is generating plan ratings, and other prior to submitting an alternative QRS redundant with the requirement in information specified by CMS to proposal to CMS to prior to a state redesignated paragraph (c)(1)(iii) demonstrate compliance with the implementing an alternative QRS. requiring that states receive CMS substantial comparability standard. We Commenters expressed concern that this approval prior to implementing an are finalizing these proposed changes could limit the impact stakeholders alternative QRS. with modification to correct several have with states developing an After consideration of all the grammatical errors, to enumerate the alternative QRS. One commenter comments received and for the reasons additional information to be provided in suggested that CMS should reinforce the outlined in the proposed rule and our separate paragraphs (c)(3)(i) through (iii) importance of the public comment responses to the comments, we are and to more clearly identify the scope process in developing an alternative finalizing the changes to the MAC QRS of the information we may request by QRS and several recommended that regulations at § 438.334 as proposed using a cross-reference to paragraph CMS model the state-level public with some modifications for clarity and (c)(1). comment process on the section 1115(a) with the exception of the proposal to • We are finalizing the proposed demonstration public engagement eliminate the requirement for CMS prior addition of paragraph (c)(4) related to a requirements. approval of a state’s use of an alternative stakeholder engagement requirement Response: As noted, we are not QRS. We are finalizing amendments to and issuance of guidance on the finalizing the proposed removal of CMS § 438.334 as follows: substantial comparability of alternative prior-approval. In addition, we remind • We are finalizing amendments to QRS, with one modification to change readers that § 438.334(c)(2), which we proposed paragraph (b), redesignated it the phrase ‘‘in consultation’’ to ‘‘after did not propose to amend, requires as paragraph (b)(1), with minor consultation.’’ states to obtain input from their Medical modifications. As finalized, paragraph Care Advisory Committee and to (b)(1) includes clarifications about the 14. Managed Care State Quality Strategy provide an opportunity for public MAC QRS framework, including (§ 438.340) comment of at least 30-days prior to the performance measures, a subset of In the November 2018 proposed rule, state submitting to CMS a request for or minimum mandatory measures, and we proposed to make some technical modification of a state alternative QRS. methodology; timing of CMS’s changes to § 438.340 to clarify the Also, current § 438.334(c)(3), as consultation with states and other inclusion of PCCM entities, as described amended and redesignated at paragraph stakeholders; clarifications to the listed in § 438.310(c)(2), as one of the managed (c)(3)(ii), requires states to include examples of the content of the MAC care entities to be included in the state documentation of the public comment QRS; and a technical correction to the managed care quality strategy. process in the request to CMS, including citation to the Medicare Advantage 5- Specifically, because § 438.340(b)(8) did discussion of the issues raised by the Star Quality Rating System. not make clear how PCCM entities MCAC and the public as well as • We are finalizing a new paragraph should be incorporated into the other documentation of any policy revisions at § 438.334(b)(2) to make clear that elements of the quality strategy, we or modifications made in response to CMS, after consulting with States and proposed to delete § 438.340(b)(8) and the comments and rationale for other stakeholders and providing public to add PCCM entities to the list of comments accepted. notice and opportunity to comment, managed care plans identified in the

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quality strategy elements described at § 438.54, requiring states to provide the understanding of gaps and how effective § 438.340(b)(2), (b)(3)(i), (b)(6), and demographic information listed in interventions are in closing those gaps. (c)(1)(ii). We then proposed to § 438.340(b)(6) for each Medicaid One commenter suggested using the redesignate paragraphs (b)(9), (10), and enrollee to the individual’s managed HHS definition of disability status (11) as paragraphs (b)(8), (9), and (10), care plan at the time of enrollment. The currently used in population health respectively, and to make a conforming movement of this requirement from surveys. One commenter suggested revision to the cross reference in § 438.340(b)(6) to § 438.54(b) is a non- including voluntary disability status § 438.340(c)(3)(ii) to refer to substantive, technical change. questions in the Medicaid eligibility redesignated paragraph (b)(10). We The following summarizes the public application. One commenter explained in the 2018 proposed rule comments received on our proposal to recommended that CMS issue guidance why additional revision to add amend § 438.340 and our responses to on how best to collect and share data on references to PCCM entities to other those comments. disability status. One commenter paragraphs in § 438.340(b) was not Comment: A few commenters recommended that states adopt a necessary. supported the technical correction definition of disability status that will Additionally, we proposed to amend related to PCCM entities to delete allow plans to identify individuals who § 438.340(b)(6) which, for the purposes § 438.340(b)(8) and to add references to may need LTSS or individuals with of the states’ plan to reduce health PCCM entities in each regulatory disabilities that may need reasonable disparities within the quality strategy, paragraph regarding the applicable accommodations. quality strategy elements. defines ‘‘disability status’’ based on Response: While we agree that whether the individual qualified for Response: We are finalizing the standardization and comparability are Medicaid on the basis of a disability. proposed changes to delete paragraph important considerations, we are not Specifically, we proposed to remove (b)(8) and to add reference to PCCM able to define disability status for the this definition of disability status entities to paragraphs (b)(2), (b)(3)(i), purposes of other programs. We also because we were concerned that it may and (c)(1)(ii) as proposed. We also had recognize that not all states have the be unintentionally narrow, leading to proposed to add reference to PCCM same data systems or access to all of the under-recognition of individuals with entities in paragraph (b)(6) and are same sources of data on disability disabilities. Because disability status finalizing the substance of that change. status. The only uniform definition of can change over the course of an In conjunction with moving the disability status for purposes of these individual’s lifetime, qualifying for sentence in § 438.340(b)(6) (requiring Medicaid on the basis of disability will the State to provide its plans with regulations would be to limit only be one source of information to certain demographic information), to designation of disability status to determine a beneficiary’s disability which that change was proposed, to beneficiaries who are eligible for status, and not necessarily the only § 438.54(b)(3), we are including Medicaid on the basis of disability, source or the most accurate source of reference to PCCM entities in which we agree with commenters is too this information. In addition, there is no § 438.54(b)(3) as revised in this final narrow. Thus, we have determined it consensus definition of ‘‘disability rule. With the deletion of paragraph best not to establish a uniform status,’’ and the definition applied for (b)(8) in § 438.340, we also are finalizing definition of disability. At the same purposes of Medicaid eligibility is not the proposed redesignation of time, we agree with commenters who necessarily the only definition paragraphs (b)(9), (10), and (11) as are concerned that having no definition appropriate for evaluating health paragraphs (b)(8), (9), and (10), will impede identification of disparities. We also noted that respectively. We note that we are individuals with disabling conditions, providing this demographic information finalizing a conforming technical provision of appropriate services and for each Medicaid enrollee to the change to paragraph (c)(3)(ii) to change utilization of robust quality managed care plan at the time of the internal reference from paragraph measurement to drive improvements in enrollment is a minimum standard (b)(11) to its new designation of care. Therefore, we are neither finalizing under the current regulation and paragraph (b)(10). the proposal to remove the definition of encouraged states to send updated Comment: Several commenters disability status from § 438.340(b)(6) demographic information to an supported the proposal to remove the entirely nor adopting a single definition enrollee’s managed care plan whenever definition of disability status from at the Federal level for this regulation. updated demographic information is § 438.340(b)(6). Several commenters Instead, we are revising § 438.340(b)(6) available to the state. agreed that the current definition of to provide states with flexibility to As we considered the comments on disability status in this regulation is too define in their quality strategy these proposed changes, discussed in narrow but expressed concern that ‘‘disability status.’’ Further, we are this rule, we realized that the regulation removing the definition would make it requiring in § 438.340(b)(6) that the on the state managed care quality difficult to compare health disparity state’s quality strategy include how the strategy is not the most appropriate data across states without a common state will make the determination that a place for the requirement to transmit definition. A few commenters Medicaid enrollee meets the state’s certain information to managed care recommended that there should be a definition, including a description of plans to be located. Since the common or standard approach to the data source(s) that the state will use requirement to transmit this information defining disability status, noting the to identify disability status. To assure is tied to the enrollment of the variation in how it is defined across some uniformity, we are adopting a individual beneficiary in the managed HHS, as well as other Federal agencies. requirement that, at a minimum, states’ care plan, we believe it would be best The commenters stated that the lack of definition of ‘‘disability status’’ include to include this requirement as part of a standardized, routine approach for individuals who qualify for Medicaid on the standards for enrollment. Therefore, defining and identifying the population the basis of disability. We appreciate we are moving this requirement from with disabilities impedes efforts to commenters’ requests for guidance on § 438.340(b)(6) to § 438.54(b) (relating to monitor the population, target care how best to collect and share data on state managed care enrollment systems) appropriately, or develop quality disability status and will consider by adding a new paragraph (b)(3) in measures that could be used to improve developing such guidance in the future.

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With regard to states’ efforts to the eligibility system and add undue information to managed care plans identify enrollees who may need LTSS reporting burden. whenever available. or reasonable accommodations, we note Response: We disagree that states do Response: We appreciate commenters’ that the standards for coordination and not have other data sources to determine support. continuity of care located at § 438.208(c) disability status. In fact, several state After consideration of all comments already require states to implement Medicaid agencies supported our received, and for the reasons outlined in mechanisms to identify persons who proposal because they would prefer to the proposed rule and our responses to need LTSS or have special health care use other and more accurate data the comments received, we are needs, as defined by the state, to MCOs, sources than to rely solely on the finalizing the technical changes related PIHPs and PAHPs. Additionally, information used to establish eligibility. to references to PCCM entities, as § 438.208(c)(1) requires states to specify For example, states may use Title II proposed, in § 438.340(b)(2), (b)(3)(i), this plan in the state’s managed care data, which would indicate whether the and (c)(1)(ii). In paragraph (b)(3)(i), we quality strategy. The mandatory Social Security Administration has are also finalizing a minor grammatical elements of the managed care quality found that the person has a disability. correction to use ‘‘will’’ in place of strategy are identified in § 438.340(b), Further, we did not propose and are not ‘‘would’’ in the last sentence. We are not and the requirement to describe the finalizing a requirement that states are finalizing the proposed addition of the state’s plan for identifying persons who required to use other data sources to term ‘‘PCCM entity’’ to paragraph (b)(6) need LTSS or who have special health ascertain beneficiaries’ disability status as proposed, but are finalizing the care needs is codified at redesignated for purposes of meeting the requirement that the state provide the § 438.340(b)(9) in this final rule). We requirements in § 438.340(b)(6). demographic information listed in also note that qualified individuals with However, if states have other, more § 438.340(b)(6) for each Medicaid a disability, including those who do not accurate sources of information of enrollee to the individual’s MCO, PIHP, need LTSS may be entitled to disability status or any other PAHP, or PCCM entity at the time of reasonable accommodation under demographic factors, we believe it is enrollment at § 438.54(b)(3). We are Federal disability rights law. The appropriate that states be permitted to finalizing the deletion of paragraph provisions we are finalizing here do not use such information as part of their (b)(8) and the redesignation of paragraphs (b)(9), (10), and (11) as change or limit application and plan to identify, evaluate, and reduce, to paragraphs (b)(8), (9), and (10), obligations arising under Federal the extent practicable, health respectively. We are finalizing a disability rights law so we remind states disparities. As finalized, § 438.340(b)(6) conforming technical change to and managed care plans to ensure that enables states to do so. their obligations are met. paragraph (c)(3)(ii) to change the Comment: One commenter expressed internal reference from paragraph Comment: Several commenters concern about states obtaining (b)(11) to its new designation of recommended that if CMS finalizes this demographic information from paragraph (b)(10). proposal, CMS should require states to additional sources and whether the Further, we are not finalizing the include in their quality strategy how methods of gathering and using the deletion of the definition of disability they define disability and the sources of information would respect patient status in § 438.340(b)(6), but instead are information they used to make the health information privacy. modifying the current regulation to determination. Commenters stated that Response: We appreciate the indicate that ‘‘disability status’’ means, doing so would foster greater commenter’s concern. However, the at a minimum, whether the individual transparency and aid in comparability. ability to use information obtained from qualified for Medicaid on the basis of a Response: We agree that transparency other available sources of information disability and to require that states and comparability of health data are on disability status does not create new include in their quality strategy how the important considerations. We are authority for states to obtain such state defines disability status and how finalizing § 438.340(b)(6) with a information. Rather, § 438.340(b)(6) of the state determines whether a Medicaid modification to address the definition of the final rule simply provides states enrollee meets the standard, including ‘‘disability status.’’ We are retaining the with flexibility to use other third party any data sources the state will use to requirement in the current regulation information which the state already is identify disability status. that disability status means whether the permitted to access for a purpose individual qualified for Medicaid on the directly connected to administration of 15. Activities Related to External basis of disability, but that is a the state plan, that is, to improve the Quality Review (§ 438.358) minimum standard for identifying health outcomes of individuals living In the 2018 proposed rule, we disability status rather than the only with disabilities or falling into proposed a technical correction to permitted definition. We are also demographic groups associated with amend the cross references listed in finalizing regulation text to require that poorer health outcomes. Such use is § 438.358(b)(1)(iii), which requires that states include in their quality strategy consistent with the privacy and a review be conducted within the how the state is defining ‘‘disability confidentiality protections afforded previous 3-year period to determine status’’ and how the state will make the beneficiaries under section 1902(a)(7) of MCO, PIHP, and PAHP compliance with determination that a Medicaid enrollee the Act and the HIPAA Privacy Rule, 45 certain managed care standards. meets the standard, including which CFR part 160 and subparts A and E of Specifically, we proposed a technical data sources the state is using to identify part 164. If a data source is not available correction to § 438.358(b)(1)(iii) to insert these individuals. to the state or the state is not authorized cross-references to several standards Comment: A few commenters did not to use a particular data source, our which this review must address but support the proposed change to the regulation at § 438.340(b)(6) does not which had been inadvertently omitted definition of disability status, claiming change that or create authorization for from the 2016 final rule, including that states do not have access to other access by the state. §§ 438.56 (Disenrollment requirements data sources to determine disability Comment: Several commenters agreed and limitations), 438.100 (Enrollee status and requiring them to use other with CMS’ encouragement that states rights) and 438.114 (Emergency and data sources would create confusion in should send updated demographic post-stabilization services). The

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requirements in these regulations have all their managed care plans to undergo exemption information whereas the been included in the EQR protocol for EQR, even those MCOs that could be information states post on their website the compliance review activity since the exempted under § 438.362. To increase may only include current exemption initial release of the protocols in 2003 transparency regarding state use of the information. Several commenters stated and in all subsequent revisions of the exemption from the Medicaid EQR for that CMS should require the protocols. It was not our intent to certain MCOs, we proposed to add a information to be both included in the change the scope of EQR or to delete new § 438.362(c) to require that states EQR technical report as well as these cross-references in the 2016 rule. annually identify on their website, in displayed on the website. These Indeed, we noted in both the 2015 the same location as where EQR commenters noted that posting this proposed rule (80 FR 31156) and the technical reports are posted, the names information in more than one place will 2016 final rule (81 FR 27706) that we of the MCOs it has exempted from EQR, not present a burden to the states since did not intend to make substantive and when the current exemption period they already make exemption changes to eliminate any elements of the began. determinations, inform their EQRO of compliance review EQR activity. We sought comment on whether which plans are exempted from EQR, The following summarizes the public instead to revise § 438.364(a) to require and maintain EQR information on their comments received on our proposal to that states identify the exempted plans websites. Finally, several commenters amend § 438.358 and our responses to and the beginning date of the plan’s noted that if CMS does not require both those comments. current exemption period in their methods, CMS should prioritize sharing Comment: All the commenters on this annual EQR technical reports, either in the information on the state’s website, topic supported the technical correction addition, or as an alternative, to posting as this is more accessible to to add the references to this information directly on the state’s beneficiaries, providers, and other § 438.358(b)(1)(iii) to match the scope of website. We also solicited comments on stakeholders. the regulation and the EQR protocols how states are currently using the Response: We agree with commenters prior to the 2016 final rule. exemption provision and how states that both alternatives are useful. Response: We thank the commenters currently make that information Because they are not mutually for their support. Adding these publicly available. exclusive, we are also finalizing new references to certain requirements for The following summarizes the public regulation text at § 438.364(a)(7) that access standards, structure and comments received on our proposal to states also include in their EQR operations, and quality measurement amend § 438.362 and our responses to technical reports the names of the MCOs and performance ensures that those comments. exempt from EQR by the state, including § 438.358(b)(1)(iii) provides for the same Comment: Several commenters the beginning date of the current scope of EQR as it required prior to supported the proposal to require states exemption period or that no MCOs are amendment by the 2016 final rule. to publicly identify any exempted plans exempt, as appropriate. After consideration of all comments along with the beginning date of their Comment: Some commenters sought received and for the reasons outlined in current exemption period on their clarification with regard to what would the proposed rule and our responses to website or in the annual EQR technical be required of states that do not exempt those comments, we are finalizing the support. Commenters stated that this managed care plans from EQR due to a amendments to § 438.358(b)(1)(iii) as proposal represents little burden to Medicare review. proposed. plans or states but improves Response: We had intended that if no transparency and accountability. Other MCOs are exempt from the Medicaid 16. Exemption From External Quality commenters noted that without this EQR, the state would indicate this fact Review (§ 438.362) exemption information posted on the on the state’s website consistent with Section 438.362 implements section website, the annual EQR technical the new transparency requirement. 1932(c)(2)(C) of the Act, which provides report may be misinterpreted as a Requiring an explicit statement that no that a state may exempt an MCO from comprehensive account of the quality of MCOs have been exempted from the undergoing an EQR when certain all managed care plans in a state, when requirement ensures that this conditions are met. First, the MCO must in actuality there may be plans omitted information is clearly communicated on have a current Medicare contract under from the report. the state’s website. To make this clear, Part C of Title XVIII or under section Response: We thank commenters for we are finalizing the proposed revisions 1876 of the Act, as well as the current their support and agree that to § 438.362 and the additional revision Medicaid contract under section acknowledging the exemptions to § 438.364(a)(7) with additional text to 1903(m) of the Act. Second, the two provided to certain MCOs from the EQR make this requirement explicit. contracts must cover all or part of the provides greater transparency with Comment: A few commenters same geographic area within the state. minimal burden on states. We are recommended that CMS require states to Third, the Medicaid contract must have finalizing with modification the provide direct links to the most current been in effect for at least 2 consecutive proposed revision to § 438.362 to make Medicare performance review for the years before the effective date of the minor grammatical changes and to add MCOs they have exempted from EQR to exemption and during those 2 years, the a new paragraph (c) to require allow consumers and advocates to easily MCO must have been subject to the identification of MCOs exempt from find relevant performance data on Medicaid EQR during those 2 years and Medicaid EQR, or that no MCOs are exempted plans. They stated this would been found to have performed exempt, as appropriate, on the state improve transparency without adding acceptably with respect to the quality, agency website required under any burden to plans or states in terms timeliness, and access to health care § 438.10(c)(3). of redundant reporting. services it provides to Medicaid Comment: Several commenters Response: We do not currently beneficiaries. Neither the statute nor supported the alternative suggestion publish all information about Medicare § 438.362 requires states to exempt that states identify MCOs exempt from performance reviews for every plan. At plans from EQR; however, this is Medicaid EQR activities in the EQR this time, we annually provide summary explicitly provided as an option for technical report, noting that this would information on Medicare Parts C and D states. States have discretion to require allow for historical trending of plan performance, compliance, audits

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and enforcement actions on CMS.gov. the term ‘‘denial of a payment,’’ some § 438.404(a) for the second claim. Moreover, we did not propose to require managed care plans may be generating Whether an adverse benefit states to make public the most current a notice to each enrollee for every determination notice is required must Medicare performance review. denied claim, even those that are denied be determined for each claim Therefore, we are not adopting the for purely administrative reasons (such individually, regardless of whether recommendation made by these as missing the National Provider notices were required for previously commenters. We agree that directing Identifier, missing the enrollee’s sex, or submitted claims. consumers to information about because the claim is a duplicate) and The following summarizes the public Medicare performance reviews would which generate no financial liability for comments received on our proposal to support our transparency goals, and the enrollee. Issuing notices of such amend § 438.400 and our responses to encourage states to provide links to any adverse benefit determinations for those comments. publicly available information, but we which the enrollee has no financial Comment: Many commenters do not think a requirement for that is liability nor interest in appealing simply supported the proposed change to necessary or appropriate to finalize to comply with § 438.404(a) may create eliminate the enrollee notice here. administrative and economic burdens requirement for claims denied for not After consideration of all comments for plans, and unnecessary confusion meeting the definition of a clean claim. received on this topic and for the and anxiety for enrollees who frequently Commenters noted that Medicaid reasons outlined in the proposed rule misunderstand the notices as statements enrollees are inundated with and our responses to those comments, of financial liability. communications from providers and we are finalizing the revision to To alleviate unnecessary burden on insurers, adding to the stress and § 438.362 with an additional the managed care plans and enrollees, confusion they experience when requirement for states to indicate that no we proposed to revise § 438.400(b)(3), to navigating the health care system. MCOs are exempt from EQR if that is specify that a denial, in whole or in Accordingly, they should not be notified the case and technical modifications to part, of a payment for a service because when a denial is based on a technical improve the clarity of the text. We are the claim does not meet the definition error that providers and managed care also finalizing a new paragraph (a)(7) in of a clean claim at § 447.45(b) is not an plans can resolve without enrollee § 438.364 of the final rule to require that adverse benefit determination. Under input. Commenters noted that this information on state exemption of the proposal, the notice requirements in proposed change would reduce MCOs be included as an element of the § 438.404 would not be triggered if the beneficiary anxiety and confusion. annual EQR technical reports or that no denial is solely because the claim is not Response: We appreciate the MCOs are exempt, as appropriate. a clean claim as defined at § 447.45(b). supportive comments and believe Section 447.45(b) defines ‘‘clean claim’’ enrollees and managed care plans will 17. External Quality Review Results as one that can be processed without benefit from the reduction in (§ 438.364) obtaining additional information from unnecessary notices. In the 2018 proposed rule, we the provider of the service or from a Comment: Commenters recommended explained how in § 438.364(d), we had third party, and includes a claim with that the proposed clean claim language inadvertently referenced paragraph (b) errors originating in a State’s claims could cause confusion among managed instead of referencing paragraph (c). We system; it does not include a claim from care plans and states as they attempt to proposed to revise § 438.364(d) to a provider who is under investigation determine how to apply notice amend the incorrect reference. for fraud or abuse, or a claim under requirements in cases where a claim We did not receive comments on this review for medical necessity. We falls under the technical definition a technical correction to § 438.364(d) and, explained that this amendment would clean claim, but the claim denial does for the reasons noted here and in the eliminate burden on plans to send not impact the enrollee. proposed rule, are finalizing it as unnecessary notices and avoid anxiety Response: In cases where a claim proposed. for enrollees receiving such notices and meets the technical definition of a clean claim and payment is denied in whole 18. Grievance and Appeal System: that the proposed change was not expected to expose enrollees to financial or in part, that denial does meet the Statutory Basis and Definitions definition of adverse benefit (§ 438.400) liability without notice, or jeopardize their access to care or rights to appeal. determination and the managed care We proposed to revise the definition We also provided guidance on how plan must send the notice required in of ‘‘adverse benefit determination’’ in we would interpret the proposed change § 438.404. The revision to § 438.400(b) to clarify treatment of to the definition of adverse benefit § 438.400(b)(3), as proposed and as denials of claims on the basis that they determination. While notices to finalized, only addresses claims that do are not clean claims. In the 2016 final enrollees for claims that do not comply not meet the definition of clean claim in rule at § 438.400(b)(3), we finalized the with the clean claim definition in § 447.45(b). Whether a claim denial definition of an ‘‘adverse benefit § 447.45(b) would not be required under ‘‘impacts the enrollee’’ is not part of the determination’’ including denials in our proposed amendment to definition of an adverse benefit whole or in part of payment for service. § 438.400(b)(3), the notice requirements determination and does not affect a The term adverse benefit determination for all future claims (including managed care plan’s responsibility for was proposed and finalized in the 2016 resubmission of the same claim) would sending the notice required in final rule as a replacement for the term have to be independently determined. § 438.404. To make our intent clear, we ‘‘action,’’ which had been defined with For example, if a provider resubmits a will add ‘‘solely’’ in the final text of the same definition in the 2002 rule. clean claim after the initial one was not § 438.400(b)(3) to clarify that the only Under § 438.404(a), managed care plans processed because it did not comply claim denials for all or part of the are required to give enrollees timely with the requirements in § 447.45(b), payment that do not trigger the notice of an adverse benefit and the managed care plan subsequently notification requirements are those determination in writing and consistent issues an adverse benefit determination, denials that result solely from the claim with the requirements in § 438.10 the managed care plan would still be not meeting the definition of clean generally. Given the broad meaning of required to issue a timely notice under claim in § 447.45(b).

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Comment: Several commenters provision to undermine that. By limiting whether the claim was submitted with requested that CMS not finalize the the carve out from the definition of all necessary information, and therefore, proposed clean claim language and adverse benefits determination to generate no financial liability or reason instead specify more directly that notice situations where the denial is because to appeal for the enrollee, is requirements are not triggered in the claim does not meet the definition advantageous to enrollees nor facilitates situations where a member will be held of clean claim, we believe we struck the engagement in their care. A claim harmless or is not financially appropriate balance between reducing denied solely for not being a clean claim responsible despite a full or partial burden and confusion for enrollees and does not impact any future adjudication denial of a payment for service. maintaining an important enrollee of that same claim based on program Alternatively, commenters noted that protection. benefit level and medical necessity, CMS could provide additional context With regard to the request for which would be subject to the adverse for the definition of ‘‘clean claim’’ by additional context, we do not believe we benefit determination notice provision including guidance and a range of can, or should, develop a list of in § 438.400(b)(3). As we stated in the practical examples. The examples examples for the regulation text. The 2018 proposed rule, whether an adverse should make clear that the notices are potential number of reasons for denying benefit determination notice is required not triggered in the denial cases a claim because it does not meet the must be determined for each claim, mentioned in the preamble such as definition of clean claim is unlimited regardless of whether notices were missing data or duplicate submissions, and any attempt to create an exhaustive required for previously submitted nor are they triggered in other similar list of examples would likely cause claims. Adverse benefit determination cases such as clear billing errors or ambiguity and confusion. The obligation notices are a valuable and important practices involving waste or abuse. to determine if a claim meets the beneficiary protection and we believe Commenters stated that either change definition in § 447.45(b), that is, is a that finalizing this provision strikes a would still provide for independent claim that can be processed without reasonable balance. We appreciate the determinations on the need for notices obtaining additional information from commenter’s suggestion to retain the at a later point, for example, after a the provider of the service or from a current definition and allow enrollees to resubmitted claim, if an enrollee could third party rests with the managed care opt-out, but we decline to implement then be subject to financial liability. plan and must be determined for each that suggestion. Response: We decline to adopt the claim, regardless of whether notices After consideration of the public commenters’ suggestion to exempt all were required for previously submitted comments received and for the reasons claims that do not result in enrollee claims. Plans must apply the definition articulated in the proposed rule and our liability from the definition of adverse in § 447.45(b) consistently and responses to comments, we are benefit determination. While this may reasonably and have an obligation to finalizing the revision to the definition seem a minor expansion of the types of comply with their responsibilities in of adverse benefit determination in claims our revision targets, it actually connection with adverse benefit would, in some states, increase the determinations, as that term is defined § 438.400(b) substantially as proposed number of eliminated notices in § 438.400 as finalized here. The with the addition of ‘‘solely’’ for clarity. exponentially. These notices are an concept of a ‘‘clean claim,’’ including as 19. Grievance and Appeal System: important beneficiary protection as they defined in § 447.45(b), is ubiquitous in General Requirements (§§ 438.402 and may be the only notification an enrollee the health care system and we do not 438.406) receives alerting them that a claim has believe that this is a difficult standard been submitted on their behalf. If the to apply. We proposed changes to enrollee then begins to receive bills Comment: Several commenters §§ 438.402(c)(3)(ii) and 438.406(b)(3) to from the provider, they are already opposed the proposed change and stated eliminate the requirements that an oral aware of the situation and have the that these types of denials should appeal be submitted in writing to be information needed to appeal or obtain continue to be treated as adverse benefit effective. In the 2016 final rule, we information from the managed care plan determinations that trigger notice adopted the requirement that an oral about their cost sharing rights and requirements. Commenters stated that it appeal must be followed by a written, responsibilities. Further, the provision is important to err on the side of signed appeal at § 438.402(c)(3)(ii). This of these notices when there is a denial providing more transparency and requirement was also included at of coverage (or payment), is consistent information to enrollees so they can be § 438.406(b)(3), regarding handling of with the principle that enrollees are as fully engaged in their care as grievances and appeals, where managed entitled to be active participants in their possible. One commenter noted that if a care plans must treat oral inquiries health care; without full understanding consumer is not aware of a denied seeking to appeal an adverse benefit of what is covered, enrollees are not claim, the provider may send a bill if determination as appeals and that such able to make knowledgeable decisions Medicaid is secondary to private oral inquiries must be confirmed in about their health care coverage and insurance. Another commenter writing. We stated in the 2018 proposed their use of health care. recommended the continuation of the rule that managed care plans have found From a program integrity perspective, requirement to send notices for these that some enrollees may take too long to another benefit of these notices is the types of denials but allow for a process submit the written, signed appeal, while opportunity it provides the enrollee to for enrollees to opt out of receiving the others fail to submit the written appeal detect potential fraudulent claims. For notices about these specific types of at all. This creates problems for example, if a provider is billing for denials if they so choose. enrollees who wait for extended periods services that were never rendered, the Response: We agree that adverse of time for a resolution and for managed adverse benefit determination notice is benefit determination notices do care plans who must invest resources to likely the enrollee’s first alert to the improve transparency and provide encourage enrollees to submit the situation. Enrollees can play an claim information to enrollees that they documentation, as well as uncertainty important role in the detection and may find useful. However, we do not for managed care plans as to how to reporting of potential fraud, waste, and generally believe receiving a notice on comply with § 438.406 (Handling abuse, and it was not our intent in this claim denials that are related solely to Grievances and Appeals) when the

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enrollee never submits the written, including following up on appeal file an appeal, such as individuals with signed appeal. requests in a timely manner, processing disabilities, individuals who are We proposed to eliminate the requests and initiating the appeals incapacitated, individuals with limited requirement for enrollees to submit a process. The filing of the written appeal English proficiency and individuals written, signed appeal after an oral helps to ensure that data are available with health aids, health care proxies, appeal is submitted in on appeals filed and processed, as well powers of attorney and translators, §§ 438.402(c)(3)(ii) and 438.406(b)(3). as data on the disposition of appeals. because they would be able to request We explained our belief that the Commenters urged CMS to create a way an appeal in a manner and at a time that removal of the requirement would to incorporate a written record that is is most convenient for them. reduce barriers for enrollees who would less burdensome on the enrollee, Response: Finalizing the elimination not have to write, sign, and submit the perhaps assigning a confirmation of the requirement for a written appeal appeal, would enable plans to resolve number to the oral transaction, to ensure to be submitted in follow up to an oral appeals more quickly, and would that the appeal is received and appeal in §§ 438.402(c)(3) and decrease the economic and documented for the appeals process. 438.406(b)(3), does not eliminate the administrative burden on plans. This Response: We clarify that finalizing option for enrollees to submit appeals in proposed change would also harmonize this provision does not eliminate the writing. Enrollees can submit an appeal the managed care appeal process with option for enrollees to submit appeals in orally or in writing; the choice of the state fair hearing process because writing; any enrollee that is not method is a decision left to the enrollee. § 431.221(a)(1)(i) requires state comfortable filing their appeal orally We expect that enrollees (or their Medicaid agencies to permit an due to concerns that the appeal may not representatives) who believe that a individual or authorized representative be documented or tracked written request is better suited to their of the individual to submit state hearing appropriately, can file it in writing. own needs will file written appeals. requests via different modalities— Further, the regulation change we are Comment: Several commenters including telephone—without requiring finalizing in §§ 438.402(c)(3)(ii) and supported the elimination of the a subsequent written, signed appeal. 438.406(b)(3) does not change any requirement for a written, signed appeal Although we proposed to eliminate the reporting, tracking, documentation or but recommended that CMS require requirement in § 438.406(b)(3) that an other requirements on the managed care states to create redundancy protection to oral appeal must be followed by a plan. To the extent that the managed ensure that oral requests for appeals are written, signed appeal, we did not care plan needs to assign a tracking fully and accurately recorded. propose to change the current regulatory number, make written (or electronic) Commenters stated that managed care language there that specifies that oral records summarizing the oral request entities may fail to acknowledge and inquiries seeking to appeal an adverse made by the enrollee, or take other steps document oral requests, raising concern benefit determination are treated as to comply with the requirements for the that the lack of a written record would appeals. appeal and grievance system, those have create a ‘‘he said, she said’’ situation The following summarizes the public not changed. All that this final rule comments received on our proposal to changes is whether the enrollee must between the appealing enrollee and the revise §§ 438.402(c)(3)(ii) and follow up in writing after making an managed care plan. 438.406(b)(3) and our responses to those oral request for an appeal. We believe Response: We agree that oral appeals comments. there are adequate regulatory need to be accurately documented but Comment: Many commenters requirements supporting the appeal we decline to require a specific method supported the elimination of the process; specifically, § 438.228 requires or impose specific requirements along requirement for a written, signed appeal states’ contracts with MCOs, PIHPs, and those lines. Managed care plans should after an oral appeal is submitted. PAHPs to have a grievance and appeal use whatever means they deem most Commenters stated an oral appeal system that meets the requirements of appropriate and that comply with should be sufficient to begin the appeals subpart F and § 438.416 specifies the § 438.416, which requires that each process alone, and subsequent written, recordkeeping requirements for grievance or appeal record must signed requirements add an unnecessary grievances and appeals. We believe that contain, at a minimum: A general barrier to enrollees filing an appeal with data collected on appeals may actually description of the reason for the appeal the managed care plan. Commenters improve because excluding oral appeals or grievance; the date received; the date stated that the elimination of the written that were not followed up in writing or of each review or, if applicable, review requirement benefits all parties not followed up in a timely fashion meeting; resolution at each level of the involved, as it reduces the additional based on review of a plan’s appeal or grievance, if applicable; date administrative burdens for both the performance, would have of resolution at each level, if applicable; enrollee and the plan. inappropriately skewed the resolution and the name of the covered person for Response: We continue to believe timeframes. Without these delays, whom the appeal or grievance was filed. eliminating the requirement for appeal resolution data should more Additionally, the record must be enrollees to submit a written appeal accurately reflect a managed care plan’s accurately maintained in a manner after filing an oral appeal will facilitate performance. Managed care plans may accessible to the state and available enrollees receiving resolutions to their find a method such as a confirmation upon request to CMS. Given that appeals much more quickly. number useful and we encourage them managed care plans may have to defend Comment: Several commenters to consider it along with any other their appeal decisions at a state fair expressed concern that no longer method that they find efficient and hearing if one is requested by the requiring a written request will harm effective to accurately track oral appeals enrollee, we believe managed care plans enrollees by removing the evidence of and to ensure that the plan is compliant will select an appropriate an appeal request. Commenters stated with the appeal and grievance system documentation method that accurately that this type of change may requirements in part 438, Subpart F. captures the appeal in sufficient detail. inadvertently cause states to no longer Comment: A few commenters stated Finally, states have the ability to specify be able to hold plans accountable for the that requiring a written request may a specific documentation method in a overall grievance and appeal system, make it easier for certain populations to managed care plan’s contract if they

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wish to do so and this final rule does necessary information, seek assistance range. These commenters stated not change that. for the state fair hearing process, and providing enrollees with as much time Comment: One commenter make the request for a state fair hearing as possible to prepare for a hearing is recommended CMS clarify in the (81 FR 27516). However, we have heard substantially more important than regulation language how a state or from stakeholders that the 120-calendar providing states with the ability to align managed care plan can make a day requirement has created an their managed care and FFS delivery determination that a verbal contact from inconsistency in filing timeframes system timeframes for filing requests for a member constitutes an oral appeal. between Medicaid FFS and managed a state fair hearing. Commenters noted Commenter requested that CMS include care, creating administrative burdens for that it takes time to collect evidence, the language that a member would need states and confusion for enrollees. The gather proper documentation and seek to specifically use or questions that the FFS rule limits the timeframe legal help, and noted that it is essential managed care plan needs to ask to beneficiaries have to request a hearing that beneficiaries have every ensure that there is understanding that to no more than 90 days opportunity to make their case. an appeal is being requested orally. (§ 431.221(d)).27 It was not our intent to Response: We understand the Commenter noted that for the purposes burden states with additional tracking of commenters’ concerns but do not of tracking of appeals and response the fair hearing process in multiple believe that enrollees will be times, a date of when the appeal process systems, on multiple timeframes. Nor do disadvantaged in states that elect to officially starts is necessary, as any lack we want to confuse enrollees in states limit their managed care enrollees to the of clarity as to what constitutes an oral where some services are provided minimum 90 calendar days to file for a appeal will negatively impact the setting through FFS and others through state fair hearing. We believe 90 of an official appeal start date. managed care. calendar days is sufficient time for Response: We do not believe it is Therefore, we proposed to revise enrollees to gather documentation and necessary for us to provide a script for § 438.408(f)(2) to stipulate that the seek legal assistance if desired. We either enrollees or managed care plans. timeframe for enrollees to request a state remind commenters that the compliance Section 431.221(a) has allowed states to fair hearing will be no less than 90 date for § 438.408(f)(2) was the rating permit oral filings for state hearing calendar days and no greater than 120 period for contracts starting on or after requests since 1979. As such, we believe calendar days from the date of the July 1, 2017, and therefore, states should enrollees have a sufficient level of MCO’s, PIHP’s, or PAHP’s notice of already be in compliance with the 120 understanding of, and experience in, resolution. We stated the proposed calendar day filing limit. Finalizing this using an oral appeal filing process and revision would allow states that wished change does not require states to change will benefit from the consistency to align managed care with the FFS their filing limit, it simply provides between the process described in filing timeframe to do so without states with an option if they elect to § 431.221(a)(1)(i) and the amendment jeopardizing the enrollee’s ability to exercise it. being finalized in this rule. As noted in gather information and prepare for a Comment: Commenters expressed concern that many beneficiaries are this rule, enrollees retain the right to file state hearing. This proposal would also a written appeal if they prefer that medically fragile, frail, or actively ill or allow states that have already method. We note that states have the injured and that CMS should be implemented the 120-calendar day flexibility to mandate specific processes proposing steps to ensure state timeframe to maintain that timeframe for their managed care plans to follow Medicaid programs fully educate their without the need for additional changes. for handling oral appeals if they elect to beneficiaries about the steps required The following summarizes the public do so. and timing of internal appeals and comments received on our proposal to After consideration of the public Medicaid state fair hearings. amend § 438.408(f)(2) and our responses comments received and for the reasons Response: We do not believe that a to those comments. articulated in the proposed rule and our change in the managed care regulations Comment: Many commenters responses to comments, we are is necessary for this purpose. Managed supported the proposal to move from a finalizing §§ 438.402(c)(3)(ii) and care plans are required to provide fixed 120 calendar days to a more 438.406(b)(3) as proposed. information on appeal and state fair flexible range of 90–120 calendar days. hearing rights and processes under 20. Resolution and Notification: Commenters noted that this would §§ 438.10(g)(2)(xi) and 438.408(e)(2)(i). Grievances and Appeals (§ 438.408) improve consistency and reduce Section 438.10(g)(2)(xi) requires We proposed a revision to member confusion by avoiding two enrollee handbooks to contain § 438.408(f)(2) to require the timeframe different timelines depending on the grievance, appeal, and state fair hearing for an enrollee to request a state fair service delivery model (that is, managed procedures and timeframes, in a state- hearing after receiving an adverse care or FFS), as well as provide developed or state-approved description decision from a managed care plan consistency for stakeholders. and § 438.408(e)(2)(i) requires a notice would be no less than 90 calendar days Commenters noted that benefits of such of appeal resolution to include the right and no more than 120 calendar days alignment, including minimizing to request a state fair hearing and how from the date of the MCO’s, PIHP’s, or confusion and administrative costs, and to do so. We believe this provides PAHP’s notice of resolution; under this encouraging more timely resolution of sufficient and appropriate means of proposal, the state would set the cases. conveying this information to enrollees. specific deadline within these limits. Response: We agree that finalizing Comment: One commenter Previously, in the 2016 final rule, we this provision as proposed can benefit recommended that CMS reduce the revised the timeframe for managed care enrollees and states. timeframe to 60 days because the longer enrollees to request a state fair hearing Comment: Several commenters timeline exposes enrollees and plans to to 120 calendar days from a plan’s opposed the proposed 90–120 day increased financial risk since the decision; this was codified at beneficiary can be held financially 27 42 CFR 431.221(d) states that the agency must § 438.408(f)(2). We adopted this allow the applicant or beneficiary a reasonable responsible for the services rendered timeframe because we believed it would time, not to exceed 90 days from the date that during the time the appeal is proceeding give enrollees more time to gather the notice of action is mailed, to request a hearing. as specified in § 438.420(d).

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Response: We understand the 013, issued on August 31, 2009 and Response: We thank commenters for commenter’s concern about enrollee October 21, 2009, respectively. The their support. exposure to financial liability but provisions in the 2016 final rule both 2. Information Requirements decline to adopt a 60-day filing reflected and superseded this earlier (§ 457.1207) timeframe. As we stated in the 2016 guidance. final rule, because the continuation of Since the publication of the 2016 final Section 457.1207 sets forth the CHIP benefits option includes the active rule, and subsequent technical requirements for providing enrollment participation of the enrollee (that is, the corrections to the rule in a correction notices, informational materials, and enrollee can elect the extent and notice published on January 3, 2017 (82 instructional materials for enrollees and duration of the services that they wish FR 37) (the 2017 correction notice), we potential enrollees of managed care to continue receiving), the enrollee has have observed the need for additional entities by adopting, by cross-reference, some ability to control the amount of minor technical or clarifying changes to the Medicaid requirements in § 438.10. liability they are willing to assume in the CHIP managed care provisions, We addressed in the 2018 proposed rule certain situations. (81 FR 27637). We primarily to clarify that certain three cross references that should not also clarify that regardless of the upper Medicaid managed care requirements do apply to CHIP and that we inadvertently limit on the filing timeframe, enrollees not apply to CHIP. These changes were included in the CHIP regulatory text. are free to request a state fair hearing included in the November 14, 2018 Section 438.10(c)(2) requires state immediately upon receiving the proposed rule. The public comments Medicaid agencies to use the state’s managed care plan’s notice of adverse received on the proposed CHIP beneficiary support system as specified appeal resolution. There is no required provisions in the 2018 proposed rule in § 438.71. We did not intend to adopt ‘‘wait time’’ between receiving a plan’s and our responses are described in this the Medicaid beneficiary support notice of adverse appeal resolution and final rule. system requirements for CHIP in the making the request for a state fair B. CHIP Managed Care Provisions of the 2016 final rule; therefore, we proposed hearing. We believe that this ability for Rule and Analysis of and Responses to to modify the language in § 457.1207 to an enrollee to promptly file for a state Public Comments exclude § 438.10(c)(2) from the cross- fair hearing, plus the protection reference used to incorporate the The following sections, arranged by available in the context of continuation Medicaid requirements into the CHIP subject area, are a summary of the of benefits under § 438.420, provides regulations. comments we received regarding ample protection against this particular specific CHIP proposals. Some of the Section 438.10(g)(2)(xi)(E) requires harm and are therefore not revising the comments raise issues that are beyond that the enrollee handbook of Medicaid appeal timeframe for requesting a state the scope of the proposed rule. We are managed care entities notify Medicaid fair hearing for this reason. enrollees that, when requested, benefits After consideration of the public not summarizing or responding to those comments. will continue when the enrollee files an comments received and for the reasons appeal or state fair hearing (also known articulated in the proposed rule and our 1. Compliance Dates for Part 457 as ‘‘aid paid pending’’). Because CHIP responses to comments, we are Managed Care Provisions enrollees are not entitled to finalizing the amendment to The 2016 final rule provides that continuation of benefits pending an § 438.408(f)(2) as proposed. unless otherwise noted, states will not appeal, we intended to exclude the II. Children’s Health Insurance be held out of compliance with new requirement to notify CHIP enrollees of Program (CHIP) Managed Care requirements in part 457 adopted in the this requirement from the handbook of 2016 final rule until CHIP managed care CHIP plans. Because § 457.1207 of the A. Background contracts as of the state fiscal year 2016 final rule inadvertently included a The American Recovery and beginning on or after July 1, 2018, so cross reference applying this handbook Reinvestment Act of 2009 (ARRA) (Pub. long as the states (and applicable CHIP requirement in CHIP, we proposed to L. 111–5, enacted February 17, 2009), managed care contracts) complied with modify the language in § 457.1207 to the Children’s Health Insurance the previously applicable regulations exclude § 438.10(g)(2)(xi)(E) from the Program Reauthorization Act of 2009 (that is, the regulations in place before cross-reference used to incorporate the (CHIPRA) (Pub. L. 111–3, enacted on the 2016 final rule) (81 FR 27499). Since Medicaid requirements into the CHIP February 4, 2009), and the PPACA made the 2016 final rule was published, some regulations. applicable to CHIP several Medicaid stakeholders expressed that they Additionally, § 438.10(g)(2)(xii) managed care provisions in section 1932 believed that the preamble was not clear requires that the enrollee handbooks for of the Act, including section 1932(a)(4), about when states need to comply with Medicaid MCOs, PIHPs, PAHPs, and Process for Enrollment and Termination the CHIP managed care regulations. We PCCM entities must provide information and Change of Enrollment; section clarified in the 2018 proposed rule that, on how to exercise an advance directive, 1932(a)(5), Provision of Information; except as otherwise noted, compliance as set forth in § 438.3(j). CHIP section 1932(b), Beneficiary Protections; with the revisions to the CHIP managed regulations do not include advanced 1932(c), Quality Assurance Standards; care regulations in part 457 of the 2016 directive requirements, and therefore, section 1932(d), Protections Against final rule is required as of the first day we did not intend that managed care Fraud and Abuse; and section 1932(e), of the state fiscal year beginning on or plans be required to notify CHIP Sanctions for Noncompliance. In after July 1, 2018, regardless of whether enrollees on how to exercise advanced addition, the PPACA applied to CHIP or not the managed care contract in directives. As a result, we proposed to sections 1902(a)(77) and 1902(kk) of the effect is a multi-year contract entered modify the language in § 457.1207 to Act related to provider and supplier into a previous fiscal year or is a new eliminate an erroneous reference screening, oversight, and reporting. Our contract effective for the first state fiscal applying the Medicaid information 2016 final rule implemented these year beginning on or after that date. requirement regarding advance statutory provisions and built on initial Comment: Several commenters directives to CHIP. guidance provided in State Health supported the clarification provided The following is a summary of the Official (SHO) letters 09–008 and 09– regarding CHIP’s compliance date. public comments we received on our

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proposal to amend § 457.1207 and our managed care entities to provide doing so, subject to the state’s 10 responses to them. important information to enrollees and percent cap on administrative Comment: Several commenters potential enrollees about the entity’s expenditures under section 2105(a)(2) of supported the proposed clarifications provision of services through, for the Act. However, because the and technical corrections. example, enrollee handbooks and underlying Medicaid advance directive Response: We are finalizing our provider directories. Section requirement does not apply in the proposal to amend § 457.1207 as 2105(a)(1)(D)(v) allows for claiming of context of CHIP, we decline to adopt a proposed. ‘‘other reasonable costs incurred by the requirement for states to require their Comment: One commenter state to administer the plan’’ as a CHIP CHIP managed care entities make this recommended CMS provide an administrative expense, subject to the information available. explanation of its position regarding state’s 10 percent cap on administrative After consideration of the public ‘‘aid paid pending’’. expenditures under section 2105(a)(2) of comments and for the reasons outlined Response: As we explain in this final the Act. If the state chooses to provide in the proposed rule and our responses rule and as we noted in our response to the information to CHIP enrollees to comments, we are finalizing as comments received in the 2016 final through the beneficiary support system proposed the amendment to § 457.1207 rule (81 FR 27768), the right to benefits established for Medicaid enrollees, the to exclude paragraphs (c)(2), pending the outcome of a grievance or state may claim that expenditure as a (g)(2)(xi)(E), and (g)(2)(xii) of § 438.10 appeal does not derive from section CHIP administrative expense. the cross-reference used to incorporate 1932(b)(4) of the Act, but from the For the requirements in § 438.71 the Medicaid requirements into the constitutional due process protections (relating to LTSS), as we discussed in CHIP regulations. afforded to beneficiaries of an our response to comments received in 3. Structure and Operations Standards entitlement program under Goldberg v. the 2016 rule (81 FR 27757), states are (§ 457.1233) Kelly, 397 U.S. 254 (1970) and its not required to cover home and progeny, including provision of benefits community-based services (that is, In the 2016 final rule, at to beneficiaries who are being LTSS) in their separate CHIPs. § 457.1233(b), we adopted the terminated from or denied coverage Therefore, LTSS beneficiary support is provisions in § 438.230 related to MCO, pending appeal. Unlike Medicaid, CHIP not usually applicable to states with a PIHP, PAHP and PCCM entity is not an entitlement program, and separate CHIP. States that choose to requirements for contracting with therefore the right to benefits pending cover LTSS have flexibility to determine subcontractors. However, in appeal is not available to CHIP the role the MCOs and other entities § 457.1233(b) we inadvertently included beneficiaries. have in authorizing LTSS. PCCMs instead of PCCM entities. We Comment: One commenter Comment: One commenter proposed to revise § 457.1233(b) to recommended affording states the recommended that CMS allow states to conform to the requirement that discretion to apply beneficiary support provide information regarding advance § 438.230 applies to PCCM entities. provisions to CHIP enrollees and to directives to CHIP enrollees and that Also, at § 457.1233(d), we adopted the make FFP available for states doing so. FFP be available to states that do so. provisions in § 438.242 that require Response: The Medicaid provision to Response: As we noted in our states operating a separate CHIP to provide beneficiary support in § 438.71 response to comments received in the collect enrollee encounter data from and cross-referenced under the 2016 final rule (81 FR 27760), the managed care plans. In finalizing beneficiary information requirements in mandatory Medicaid standards § 438.242, we also intended to apply to § 438.10(c)(2) requires states to provide regarding advance directives described CHIP the requirements of § 438.818, counseling to Medicaid enrollees in §§ 438.3(j) and 422.128 do not apply which is cross-referenced in § 438.242 regarding choice of managed care plans to CHIP and we do not believe that they and requires the submission of enrollee and assistance with LTSS, among other should. We believe that the Medicaid encounter data to CMS. We proposed to requirements. While CHIP does not advance directives provisions would revise § 457.1233 to make explicit our adopt Medicaid’s requirements to create a significant burden on states and intention to apply the terms of § 438.818 ensure beneficiary choice of managed MCOs, PIHPs, and PAHPs in the CHIP to CHIP. care plans at enrollment in § 438.52 and context, with correspondingly little Finally, in the 2016 final rule at states are not required to cover LTSS benefit for beneficiaries, as there are § 457.1233(d) we made a technical error under CHIP, states are required by very few adult beneficiaries in CHIP and regarding the CHIP applicability date. § 457.110 to provide information to all very few children need an advance Our cross-reference to § 438.242 CHIP applicants and enrollees in order directive. States may choose to require inadvertently applied the Medicaid for these families to make informed a managed care entity to provide applicability date of July 1, 2017 for the decisions about their choice of health information about advance directives to health information system requirements plans and providers. Under § 457.110, managed care enrollees since the instead of the later compliance date states must provide information to CHIP requirements in § 457.1207 (cross- generally applicable to CHIP (which is applicants and enrollees about covered referencing § 438.10, including as of the first day of the state fiscal year benefits, cost sharing requirements, § 438.10(g)) represent the minimum beginning on or after July 1, 2018) that names and locations of participating amount of information that must be was specified in the 2016 final rule and providers, and other information related provided to enrollees in an enrollee discussed in section II.B.1 of this final to CHIP. A state is permitted to use its handbook. A state could also choose to rule. Therefore, we also proposed to Medicaid beneficiary support system to require its CHIP managed care entities revise § 457.1233(d) to make this fulfill the CHIP enrollment assistance to provide certain CHIP enrollees (for technical correction. and information requirements; states example, pregnant women) with The following is a summary of the simply are not required to do so. We information about how to execute an public comments we received on our note also that our revisions to advance directive, similar to the proposals to amend § 457.1233. § 457.1207 do not remove application to requirement for Medicaid set out at Comment: Several commenters CHIP of any of the numerous other § 438.3(j), and may receive FFP as a supported the technical corrections and requirements in § 438.10 that require CHIP administrative expenditure for clarification about collection of enrollee

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encounter data in the CHIP structure We noted in the November 2018 that they would be more appropriately and operations standards regulatory proposed rule how changes proposed to placed in §§ 457.1240(d) and (e). sections. § 438.340 (regarding the managed care Comment: Several commenters Response: We thank the commenters state quality strategy) were addressed as opposed the proposal to remove for their support. technical, conforming changes to the consultation with the MCACs regarding After consideration of the comments CHIP regulation (§ 457.1240(e)) that the state’s quality strategy as a and for the reasons outlined in the incorporates § 438.340. Comments on requirement for CHIP and suggested that proposed rule and our responses to the the proposed changes in § 438.340 states be required, or encouraged, by comments, we are finalizing as (relating to the managed care state CMS to seek and respond to MCACs, proposed the amendments to paragraphs quality strategy), are discussed in the other advocacy groups, and key (b) and (d) of § 457.1233. preamble at section I.B.14 of this final stakeholder groups involved in CHIP 4. Quality Measurement and rule while comments received specific quality measurement and improvement Improvement (§ 457.1240) to CHIP, which adopts the Medicaid activities to provide their perspective requirements for the state quality and expertise. In the 2016 final rule, we aligned the strategy, are addressed in section II.B.8 quality assessment and performance Response: We appreciate the of this final rule. improvement program standards for commenters’ recognition of the The following is a summary of the CHIP MCOs, PIHPs and PAHPs (with important role stakeholder groups play public comments we received on our minor exceptions) with the Medicaid in advising states on CHIP quality proposal to amend § 457.1240 and our standards at § 438.330 by adopting strategies and agree with the responses. references to § 438.330 in § 457.1240(b). commenters about the importance of Where appropriate, § 457.1240, as Comment: Several commenters this involvement. Because we agree that finalized in the 2016 final rule, also supported the clarifications and stakeholder input is important, applied these Medicaid standards to technical corrections of the § 457.1240(e) generally incorporates PCCM entities. However, we requirements to collect and submit those components from the Medicaid inadvertently failed to include a cross- quality performance measurement data managed care rule at § 438.340 by cross- reference to one of the Medicaid to PCCM entities. referencing § 438.340 with, as finalized standards at § 438.330(b)(2), relating to Response: We thank commenters for here, only an exclusion for the MCAC the collection and submission of quality their support and are finalizing the consultation in § 438.340(c)(1)(i). Thus, performance measurement data, which proposed correction. CHIP adopts the Medicaid requirement we intended to apply to PCCM entities Comment: One commenter noted that to make the quality strategy available for in CHIP. We proposed revisions to proposed § 457.1240 included a public comment before submitting the § 457.1240(b) to correct this omission reference to ‘‘§ 438.330(c)(1)(i)’’ even strategy to CMS (at § 438.340(c)(1)) and and reflect application of § 438.330(b)(2) though this reference does not address to make the review of the effectiveness to PCCM entities in CHIP. consultation with the Medical Care of the quality strategy conducted by the Additionally, we inadvertently failed Advisory Committee, which is the state at least every 3 years available to to exclude references to consultation requirement that we proposed to remove the public (at § 438.340(c)(2)). Further, with the State’s Medical Care Advisory for CHIP. states must ensure ongoing public Committee as a state requirement when Response: We appreciate the involvement in the state’s CHIP state the state drafts or revises the state’s commenter bringing this error to our plan under § 457.120(b). However, the quality strategy in § 438.340(c)(1)(i) attention. We agree that the correct regulations at § 431.12, which require (which we incorrectly identified as reference should be to § 438.340(c)(1)(i). each state to establish an MCAC, specify § 438.330(c)(1)(i) in the 2018 proposed We are making the proposed correction that the MCAC advise the Medicaid rule) and when the state requests, or in the final rule by finalizing an agency about health and medical care modifies the use of an alternative amendment to § 457.1240(e), which services (emphasis added). While states managed care QRS under cross-references § 438.340 to incorporate have the flexibility to consult their § 438.334(c)(2)(i) and (c)(3). requirements for a written quality MCAC for purposes of their CHIP Establishment of a Medical Care strategy for assessing and improving the quality strategy, and we encourage them Advisory Committee (MCAC) is quality of health care and services to do so, the CHIP regulations do not required for Medicaid programs under furnished to CHIP enrollees. As require establishment of a similar § 431.12. Regulations at finalized in this rule, § 457.1240(e) advisory committee for CHIP. §§ 438.334(c)(2)(i) and (c)(3) and excludes the reference to consultation Consultation with the MCAC has never 438.340(c)(1)(i) require that the state with the MCAC (described in been a regulatory requirement for CHIP seek input from the MCAC in § 438.340(c)(1)(i)) from the agencies, and we did not intend to developing a state alternative QRS and incorporation of Medicaid managed care create a mandate for them to do so managed care quality strategy. However, requirements into CHIP. In addition, we implicitly through a cross reference in there is no requirement that states have noted that § 457.1240(d), which the 2016 managed care regulation. In establish a MCAC for CHIP similar to cross-references § 438.334 and addition, to require consultation with that in § 431.12, and therefore, the incorporates the requirement for a the Medicaid MCAC would require that consultation requirements with the managed care quality rating system, also the MCAC exceed its regulatory state’s MCAC in §§ 438.340(c)(1)(i) and fails to exclude from the CHIP mandate. Therefore, we decline to adopt 438.334(c)(2)(i) and (c)(3) are not regulation the requirement that the state a requirement for consultation with the applicable to CHIP. We proposed to consult with the MCAC. We are also MCAC in connection with CHIP revise § 457.1240 to eliminate the finalizing an amendment to managed care programs and the MCAC consultation requirements from § 457.1240(d) to exclude comprehensive quality assessment and the incorporation of the Medicaid § 438.334(c)(2)(i) and (c)(3) from performance improvement programs requirements relating to adoption of a application to CHIP. These items were that managed care entities must be QRS and managed care quality strategy proposed in § 457.1240(b) of the required to establish and implement for CHIP. proposed rule but we have determined under § 457.1240(d) and (e).

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After consideration of the public adverse benefit determination the denial we proposed at § 457.1260(c)(2) comments and for the reasons outlined of enrollee’s request to exercise his or language that would effectively replicate in the proposed rule and our responses her choice to obtain services outside the the requirements in § 438.404(b)(3) but to comments, we are finalizing our network under § 438.52. We did not substitute the reference to ‘‘state fair proposal to reflect application of adopt § 438.52 in CHIP, and therefore, hearings’’ with the reference to part 457, § 438.330(b)(2) to PCCM entities in CHIP this should not have been included in subpart K. We also proposed, at with some minor non-substantive the definition of adverse benefit § 457.1260(c)(3), that states provide revisions to § 457.1240(b). We are determination for CHIP. Our proposed timely written notice for termination, reformatting and revising the text in two regulation text at § 457.1260(a)(2) would suspension, or reduction of previously ways. First, we are redesignating most of incorporate the definitions adopted in authorized CHIP-covered services, the current regulation text in § 438.400, other than this one provision which mirrors the timing of notice § 457.1240(b) as § 457.1240(b)(1) and from the definition of adverse benefit requirements in § 457.1180. designating a separate paragraph (b)(2) determination. • Handling of grievances and appeals for the regulation text providing that, in • General requirements for appeals (§ 438.406): We proposed at the case of a CHIP contract with a PCCM and grievances (§ 438.402): In the 2016 § 457.1260(d) that the state must ensure entity, the requirements of final rule, in § 457.1260 we adopted all that the CHIP managed care entities § 438.330(b)(2) and (3), (c), and (e) of § 438.402 into CHIP. This included an comply with the provisions in apply. Second, we are revising the text optional external medical review at § 438.406. to improve the readability of the § 438.402(c)(1)(i)(B). However, at • Resolution and notification regulation. § 457.1120(a), CHIP already provides (§ 438.408): We proposed revisions in We inadvertently proposed to codify states with two options to conduct an § 457.1260(e) to address the concerns exceptions to the applicability of external review of a health services about references to state fair hearings §§ 438.334 and 438.340 (regarding matter. The additional optional external and external medical reviews discussed consultation with the MCAC) in medical review was superfluous. We in this rule. Proposed § 457.1260(e)(2) § 457.1240(b). In the final rule, we are proposed to effectively eliminate this mirrored the language of § 438.408(a) finalizing these exceptions in the additional, optional external medical but we proposed to restate the text appropriate paragraphs of § 457.1240. In review from the CHIP managed care (rather than cross-reference Medicaid § 457.1240(d), we state that appeal process by excluding the managed care regulation) so that the use § 438.334(c)(2)(i) and (c)(3) related to language of § 438.402(c)(1)(i)(B) in the of ‘‘this section’’ in the text referred to consultation with the MCAC do not list of appeal and grievance provisions the language in § 457.1260 instead of apply to the requirements related to the that were incorporated from the § 438.408. In addition, proposed managed care quality rating system for Medicaid managed care appeals § 457.1260(e)(3) through (7) effectively CHIP. In § 457.1240(e) we state that requirements in proposed § 457.1260(b). restated the requirements imposed § 438.340(c)(1)(i) related to the MCAC In addition, we proposed provisions § 438.408(b)(3), (e)(2), (f)(1) introductory does not apply to the requirements in § 457.1260(b)(2) through (4) that text, (f)(1)(i), and (f)(2), respectively, related to the managed care quality would apply in place of the provisions with references to part 457, subpart K, strategy for CHIP. This is substantively in § 438.402(c)(1)(i)(A), (c)(1)(ii), and instead of referring to ‘‘state fair consistent with our proposal to exclude (c)(2), respectively, by substituting hearings’’ as the Medicaid managed care references to consultation with the references to ‘‘state fair hearings’’ from regulation does. We did not include the MCAC from the CHIP requirements. the Medicaid rules with references to Medicaid external medical review part 457, subpart K (which provides for provisions (§ 438.408(f)(1)(ii)) from the 5. Grievance System (§ 457.1260) certain CHIP applicant and enrollee list of appeal and grievance provisions In the 2016 final rule, we aligned protections, including external review) that we proposed to incorporate in CHIP with the Medicaid grievance and in proposed regulation text that proposed § 457.1260. However, our appeals provisions in subpart F of part otherwise generally mirrored text in proposed regulation text at § 457.1260(e) 438, by incorporating them into § 438.402. This approach is incorporated the resolution and § 457.1260, with two substantive substantively consistent with the notification requirements of Medicaid exceptions. First, § 457.1260 provides current rule. Our proposed regulation grievance and appeals rules as set out at that references to ‘‘state fair hearings’’ in text, at § 457.1260(b), would continue to § 438.408(b), (c)(1) and (2), (d), (e)(1), part 438 should be read as referring to incorporate Medicaid grievance and and (f)(3). part 457, subpart K (which imposes appeals system establishment and • Services not furnished (§ 438.424): certain CHIP applicant and enrollee operation rules in § 438.402(a), (b), and The current regulation inadvertently protections). Second, § 457.1260 (c)(2) and (3). incorporated and applied the Medicaid excludes the applicability date in • Timing of notice of adverse benefit standard at § 438.424(b), which requires § 438.400(c) from applying in the CHIP determinations (§ 438.404): We realized a state to pay for disputed services context. Following publication of the that there may have been some furnished while an appeal is pending— 2016 final rule, we became aware of a confusion about whether states should which we did not intend to apply to number of concerns related to how follow the timing of notice of adverse CHIP. The Medicaid rule at § 438.420, § 457.1260 currently incorporates the benefit determination requirements regarding the continuation of benefits requirements applicable to Medicaid described in § 438.404(c)(1) or in while an appeal is pending does not managed care plans, including the § 457.1180. We proposed to clarify that apply to CHIP. Therefore, the CHIP following: we did not intend to incorporate the regulation at § 457.1260 should not • Definition of adverse benefit requirements of part 431, subpart E into include either § 438.420 or § 438.424(b), determination (§ 438.400): We CHIP from § 438.404(c)(1). We which provides that a state must pay for inadvertently failed to exclude a proposed, at § 457.1260(c)(1), that states disputed services furnished while the reference to paragraph (6) of the must ensure that the CHIP managed care appeal is pending if the decision to definition of ‘‘adverse benefit entities comply with the provisions in deny authorization of the services is determination’’ in § 438.400; this §§ 438.404(a), (b)(1), (2), and (4) through reversed. Therefore, we did not propose paragraph includes in the definition of (6) and (c)(2) through (6). In addition, to incorporate § 438.420 or § 438.424(b)

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in proposed § 457.1260. Proposed that rural exception would constitute an that states provide enrollees and § 457.1260(i) mirrored § 438.424(a), adverse benefit determination, FFP applicants of ‘‘timely written notice’’ of except for substituting the reference to would be available. We do not believe any adverse determination. Rather than ‘‘state fair hearings’’ with the reference that additional regulation text is aligning the standard for CHIP plans to to part 457, subpart K. in requiring CHIP necessary for § 457.1260 to address the provide notice to enrollees with the managed care entities to provide denied ability of a state to expand the definition standards for Medicaid plans, we agree services as expeditiously as the of ‘‘adverse benefit determination’’ to that alignment with the timeliness enrollee’s health requires, but no later include denials of optional benefits that standards for states to notify CHIP than 72 hours, from the date the the state may adopt for its CHIP. We are beneficiaries of other adverse benefit managed care entity receives notice finalizing § 457.1260(a)(2) as proposed. determinations is appropriate. reversing its denial. Comment: One commenter requested Therefore, in the final rule we state in In sum, we proposed revisions to the that states be able to adopt the Medicaid § 457.1260(c)(3) that CHIP plans must regulation text in § 457.1260 that state fair hearing process for CHIP and provide the enrollee with timely written adopted some provisions of the receive FFP for using the Medicaid state notice of adverse benefit Medicaid appeals and grievances hearing process. determinations, which is consistent requirements in total (such as in Response: States are already with the timeliness standard in §§ 438.406, 438.410, 438.414 or 438.416) permitted to use the Medicaid fair 457.1180, except for expedited service and some only in part (such as in hearing process for CHIP pursuant to authorization decisions. This makes the §§ 438.400, 438.402, 438.404, 438.408, § 457.1120. Section 457.1120(a) timeframes for notice consistent across and 438.424). We solicited comments on provides that a state must have one of §§ 457.1260 and 457.1180. CHIP does whether our more detailed regulation two review processes: (1) A process that not address expedited service text, which incorporates specific meets the requirements of §§ 457.1130 authorization decisions in § 457.1180. provisions of subpart F of part 438, was through 457.1180, which set forth Therefore, for these types of decisions, sufficiently clear and detailed for the specific standards about the matters we are finalizing at § 457.1260(c)(3) the appropriate administration of grievances subject to review, core elements of the use of the Medicaid notice timing and appeals in the CHIP context. review process, impartiality, time requirement in § 438.404(c)(6) (which The following is a summary of the frames, continuation of enrollment, and cross references § 438.210(d)(2)). public comments we received on our notices; or (2) a process that complies Comment: Several commenters sought proposal to amend § 457.1260 and our with State review requirements clarification on the continued inclusion responses to those comments. currently in effect for all health (in § 457.1260) of references to Comment: A few commenters insurance issuers (as defined in section continuation of benefits despite the fact supported the proposed changes to the 2791 of the Public Health Service Act) CHIP grievance system to require the in the State. The Medicaid state fair that CHIP beneficiaries are not entitled state to require MCOs, PIHPs and hearing process is compliant with the to continued benefits pending appeal. PAHPs to comply with incorporated standards outlined in §§ 457.1130 One commenter specifically suggested provisions (in §§ 438.402, 438.404, through 457.1180 (66 FR 2635–2640). that we remove the reference to 438.406, 438.408, and 438.414) and Many states already use the Medicaid § 438.404(b)(6) in proposed noted that these changes would fair hearing process for this purpose. § 457.1260(c)(1) and the proposed expedite the grievance process. The proposed clarifying amendments language at § 457.1260(e)(4)(ii) and (iii) Response: We appreciate the support to § 457.1260 to remove references to because each of these relate to the for our proposal at § 457.1260 regarding the Medicaid state fair hearing process continuation of benefits during an the grievance system. would not eliminate states’ option to appeal even though CHIP does not Comment: One commenter requests utilize the Medicaid state fair hearing adopt the Medicaid continuation of that states be able to use the Medicaid process to satisfy the CHIP requirements benefits requirements in § 438.420. In definition of ‘‘adverse benefit in § 457.1120(a)(1). The proposed addition, several commenters suggested determination’’ in § 438.400(b) and revisions, which we are finalizing with that we include the right to continue to receive FFP for doing so, even though modifications in this final rule, simply receive benefits pending an appeal in CHIP is not adopting § 438.400(b)(6). clarify how the appeals and grievances § 438.420 and the related requirement That section includes in the definition process under part 438, subpart F relate for payment for reversed adverse benefit of ‘‘adverse benefit determination’’ any to the state CHIP review requirements in determinations when benefits were denial of an enrollee’s request to § 457.1120. provided pending appeal § 438.424(b) exercise his or her choice to obtain Comment: One commenter requested because preservation of enrollee health services outside the network under clarification regarding the applicable and due process require that enrollees § 438.52 as a result of Medicaid choice timelines for adverse benefit retain access to services during the at enrollment requirements and certain notifications for CHIP in proposed resolution of any dispute regarding their exceptions to this rule for rural areas. § 457.1260(c). The commenter suggested entitlement to them. Alternatively, Response: We previously did not that we had proposed conflicting several commenters suggested that CMS adopt § 438.52 in CHIP in the 2016 final requirements in proposed at least permit states to continue rule because CHIP does not require § 457.1260(c)(3) and proposed benefits while pending appeal and choice of plans at enrollment, and § 457.1260(c)(1), which cross-references require states to notify enrollees of this therefore, this should not have been § 438.404(c)(3). Further, the commenter option. included in the definition of adverse suggested that § 438.404(c)(3) addressed Response: First, we thank commenters benefit determination for CHIP. the timing of appeals and grievances but for pointing out where our proposed However, if a state optionally provided not the timing of notices for denials and regulation text for § 457.1260 included for choice of plan at enrollment, created limitations of services. cross-references to requirements from a rural exception that, like Response: We agree with the part 438 that are relevant to the aid § 438.52(b)(2)(ii), allowed for an commenter that the timelines as pending appeal policy. As there is no enrollee to obtain services outside the proposed were confusing. The CHIP continuation of benefits/aid pending network and established that a denial of standard in § 457.1180 simply requires appeal requirement in CHIP, we are not

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finalizing any of the related references days to request a state review, which is determination,’’ except for paragraph in § 457.1260. out of alignment with Medicaid. (6); ‘‘appeal,’’ ‘‘grievance,’’ and Second, we are not finalizing Response: We agree that timeframes ‘‘grievance and appeal system.’’ references to any right or policy should be aligned across delivery • General requirements. We are regarding the continuation of benefits systems and programs and appreciate finalizing as proposed § 457.1260(b)(1). pending appeal in § 457.1260(c)(2) or commenters bringing to our attention We are finalizing paragraph (b)(2) with (3), (e)(4)(ii) and (iii), or (i). As we have our inadvertent failure to align the a minor modification to cite to previously explained (83 FR 57284), the timeframe in proposed § 457.1260(e)(7) § 457.1260(e) instead of § 438.408. We right to benefits pending the outcome of with the revisions for Medicaid in are not finalizing the proposal at a CHIP review does not derive from proposed § 438.408(f)(2). We are § 457.1260(b)(3) because it is section 1932(b)(4) of the Act, but from modifying the regulation text in duplicative of what we are finalizing at the constitutional due process proposed § 457.1260(e)(7), redesignated paragraph (e)(3). We are finalizing what protections afforded to beneficiaries of as paragraph (e)(5), to achieve the was proposed at paragraph (b)(4) as an entitlement program under Goldberg intended alignment. Under § 457.1260(b)(3) regarding the ability of v. Kelly, 397 U.S. 254 (1970) and its § 457.1260(e)(5) of the final rule, states a provider or authorized representative progeny, including provision of benefits have the same flexibility they have in to file a grievance, request an appeal, or to beneficiaries who are being Medicaid to provide enrollees with request state external review for an terminated from or denied coverage between 90 and 120 calendar days to enrollee. pending appeal. Unlike Medicaid, CHIP request a state external review of a • Notice of Adverse Benefit is not an entitlement program and plan’s adverse benefit determination. Determination. We are finalizing therefore the right to benefits pending Comment: One commenter questioned § 457.1260(c) to address the content and appeal is not available to CHIP why CHIP MCOs have to comply with timing requirements for notices of beneficiaries. Therefore, in summary, to § 438.408(f)(3) (proposed at adverse benefit determinations, with address these clarifications and respond § 457.1260(e)(1)) when there is no state substantial revisions to the timeframes to these comments, we are: fair hearing requirement for CHIP. for these notices. We are finalizing • Finalizing § 457.1260(c)(2) and (3), Response: Although we proposed that § 457.1260(c)(1) to require that the state with revisions; the substance of the Medicaid ensure that its CHIP managed care • Not finalizing § 457.1260(e)(4)(ii) regulations at § 438.408(f)(3) (regarding entities comply with the provisions at and (iii); and the parties to be included in a fair § 438.404(a) and (b)(1), (2), and (5) • Finalizing § 457.1260(i) with hearing) apply to CHIP, we agree that regarding the content of the notice of an revisions to eliminate references to aid the proposed application of all of adverse benefit determination. We are pending appeal. § 438.408(f)(3) to CHIP was an error, also finalizing additional content Comment: One commenter suggested because § 438.408(f)(3) is explicitly requirements for these notices in that the language proposed at about the parties to be at the State fair paragraph (c)(2). Taken together, § 457.1260(e)(3) and (6) was duplicative, hearing. CHIP has separate regulations, § 457.1260(c)(1) and (2) mean that the as both deemed exhaustion of the plan’s found in subpart K of part 457 of the following information must be provided appeal process and permitted an regulations, governing the review to an enrollee as part of a notice of enrollee to seek State external review in process for CHIP beneficiaries. adverse benefit determinations: accordance with part 457, subpart K, if Therefore, we are not finalizing at ++ The adverse benefit determination an MCO, PIHP or PAHP failed to § 457.1260(e)(1) the proposal that CHIP the MCO, PIHP, or PAHP has made or comply with the notice and timing managed care entities comply with intends to make. requirements for an adverse decision § 438.408(f)(3)). ++ The reasons for the adverse outlined in § 457.1260. After consideration of the public benefit determination, including the Response: We agree, and therefore, are comments and for the reasons outlined right of the enrollee to be provided upon not finalizing the regulation text at in the proposed rule and our responses request and free of charge, reasonable proposed § 457.1260(e)(6). We are to comments, we are finalizing, with access to and copies of all documents, finalizing the deemed exhaustion several modifications, the regulation records, and other information relevant provision at § 457.1260(e)(3) and text proposed at § 457.1260 regarding to the enrollee’s adverse benefit including there a statement that the the appeal and grievance systems. A determination. Such information enrollee may initiate a state external summary of the changes is as follows: includes medical necessity criteria, and • review in accordance with part 457, Throughout § 457.1260, we are any processes, strategies, or evidentiary subpart K, in such cases. We also note finalizing parenthetical text to identify standards used in setting coverage an additional duplication of this the scope and nature of the limits. deemed exhaustion requirement in the requirements from part 438 that we are ++ The circumstances under which proposed language at § 457.1260(b)(3) so incorporating to apply to CHIP MCOs, an appeal process can be expedited and we are not finalizing that duplicative PIHPs, and PAHPs. In addition, we have how to request it. provision either. Proposed corrected cross-references throughout ++ The enrollee’s right to request an § 457.1260(b)(4) is redesignated as § 457.1260 as needed to refer to the appeal of the MCO’s, PIHP’s, or PAHP’s paragraph (b)(3) in the final rule. sections within § 457.1260 in lieu of the adverse benefit determination, Comment: Several commenters stated Medicaid cross-references. including information on exhausting the that they appreciated Medicaid aligning • Statutory basis and definitions. We MCO’s, PIHP’s, or PAHP’s one level of in § 438.408(f)(2) the timeframes for are finalizing § 457.1260(a)(1) and (2) as appeal and the right to request a State enrollees to request a state fair hearing proposed. Paragraph (a)(1) identifies the external review in accordance with the across the managed care and fee for applicable statutory provisions terms of subpart K of part 457; service delivery systems by giving states regarding CHIP managed care entities ++ The procedures for the enrollee to the flexibility to choose a time period having an appeals and grievance system. exercise his or her rights to an appeal. between 90 and 120 days. The CHIP Paragraph (a)(2) incorporates the We are finalizing provisions regarding proposal at § 457.1260(e)(6) maintained definitions of the following terms from the timing of the notice at the requirement that enrollees have 120 § 438.400(b): ‘‘adverse benefit § 457.1260(c)(3). As explained in our

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response to comments about the timing to request and receive benefits while the standards include, among other things, of notices of adverse benefit review is pending and that the enrollee requirements related to provider determinations, CHIP managed care may be held liable for the costs of those enrollment, auditing, implementation entities will have to comply with a benefits if the adverse benefit and maintenance of arrangements or standard that notices be ‘‘timely,’’ determination was upheld. procedures that are designed to detect consistent with the requirement in ++ We are finalizing paragraph (e)(5) and prevent fraud, waste, and abuse. In § 457.1180, rather than within a specific with modifications. We are finalizing as the 2016 final rule, we inadvertently timeframe for notices of adverse benefit proposed in paragraph (e)(5) that an failed to exclude from our cross- determination, except in cases of enrollee may request a state external reference to the Medicaid managed care expedited service authorizations. In the review only upon exhausting the CHIP program integrity provisions a circumstances of expedited service managed care entity’s appeal process. regulation that should not apply to authorization decisions, the terms of We are adding to paragraph (e)(5) the CHIP. Specifically, CHIP does not adopt § 438.404(c)(6) (incorporating timeframe for requesting a state external the Medicaid actuarial soundness § 438.210(d)(2) by cross reference) review, which was proposed in requirements, therefore, states do not apply. Section 438.210(d)(2) sets out paragraph (e)(7). need to use the specified plan timeframes for expedited authorization ++ We are modifying that proposal to information collected in § 438.608(d)(1) determinations. align with § 438.408(f)(2), by requiring and (3) for setting actuarially sound • Handling of grievances and that enrollees must have no less than 90 capitation rates as required in Medicaid; appeals. We are finalizing § 457.1260(d) days and no more than 120 days after we proposed to modify the language of as proposed, to require states to ensure the plan’s date of resolution to request § 457.1285 to reflect this technical that CHIP managed care entities comply a review. correction. with the provisions at § 438.406 with The following is a summary of the regard to the handling of grievances and 6. Sanctions (§ 457.1270) public comments we received on our appeals. In the 2016 final rule, CHIP adopted, proposal to amend § 457.1285. • Resolution and notification. We are at § 457.1270, the Medicaid Comment: A few commenters finalizing § 457.1260(e) with revisions. requirements related to sanctions in the supported the proposed clarifications ++ In paragraph (e)(1), we are managed care context in part 438, and technical corrections to program finalizing as proposed the requirement subpart I. We inadvertently did not integrity safeguards. that states ensure CHIP managed care include a provision in § 457.1270 that Response: We thank commenters for entities comply with the provisions at states may choose to establish sanctions their support. § 438.408(b) (relating to the timeframe for PCCMs and PCCM entities as Comment: One commenter noted that for resolution of grievances and specified in § 438.700(a). In addition, the proposed regulatory text at appeals), (c)(1) and (2) (relating to the we did not indicate that references in § 457.1285 included a typographical extension of timeframes for resolution of § 438.706(a)(1) and (b) should be read to error in failing to include a reference to grievances and appeals), (d) (relating to refer to the requirements of subpart L of § 438.608(d)(4) as proposed. The rule the format of the notice of resolution for part 457, rather than references to text states, ‘‘except that the terms of grievances and appeals), and (e)(1) sections 1903(m) and 1932 of the Act. § 438.604(a)(2) and (d)(4) of this chapter (relating to the content of the notice of We proposed to revise the language of do not apply;’’ however, the text should resolution for grievances and appeals). § 457.1270 to reflect these technical read ‘‘except that the terms of However, we are not finalizing the changes. §§ 438.604(a)(2) and 438.608(d)(4) of proposal to require compliance with The following is a summary of the this chapter do not apply.’’ § 438.408(f)(3) because the parties to an public comments we received on our Response: Section 438.608(d)(4) is the appeal in the CHIP managed care proposals to amend § 457.1270. correct cross-reference as we explained contexts are set forth at part 457, Comment: A few commenters in the preamble of the 2018 proposed subpart K. supported the clarifications and rule, and we make that correction in the ++ We are finalizing paragraph (e)(2) technical corrections to the regulatory final rule. as proposed with a clarification that the sanctions applicable in § 457.1270. Comment: One commenter requested state-established timeframes for Response: We are finalizing the that CHIP adopt the Medicaid state resolution of each grievance and appeal amendments to § 438.1270. monitoring requirements in § 438.66. must not exceed the timeframes After consideration of the public Response: This comment is outside identified in paragraph (e)(1) of comments and for the reasons outlined the scope of this rule. We did not § 457.1260, which incorporates the in the proposed rule and our responses propose to incorporate § 438.66 into the timeframes in § 438.408(b) and (c)(1) to comments, we are finalizing the CHIP regulations and therefore cannot and (2). amendments to § 457.1270 as proposed do so in the final rule as such a ++ We are finalizing § 457.1260(e)(3) with slight modification. We are adding substantive change in the with additional text specifying that an parentheticals in the regulation text to responsibilities of a state with regard to enrollee may seek state external review help readers understand what general its CHIP and the managed care entities in accordance with part 457, subpart K, subject is addressed in the Medicaid with which the state contracts should be after the plan’s appeal process is cross-references in § 457.1270(b) and (c). subject to public notice and comment. exhausted. We also refer the commenter to ++ We are finalizing paragraph (e)(4) 7. Program Integrity Safeguards § 457.204, which authorizes CMS regarding the content of the notice of (§ 457.1285) compliance actions when a state fails to appeal resolution with only the Section 457.1285 sets forth the CHIP comply with its oversight proposal that such notice include the requirements for program integrity responsibilities under these regulations enrollee’s right to seek state external safeguards for managed care entities by for a managed care contract. review in accordance with the terms of adopting the Medicaid requirements in After consideration of the public part 457, subpart K, and how to do so. subpart H of part 438, except for the comments and for the reasons outlined We are not finalizing the proposal to terms of § 438.604(a)(2), by cross- in the proposed rule and our responses require that the notice include the right reference. These cross-referenced to comments, we are finalizing the

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regulation text at § 457.1285 as • Medicaid managed care QRS changes to §§ 438.8(k), 438.10, 438.56, proposed with one modification. We are (§ 438.334): As discussed in the section 438.68, 438.236, 438.242, 438.334, modifying the regulatory text at I.B.13. of this final rule, we proposed 438.340, 438.358, 438.364(d), 438.400, § 457.1285 to exclude §§ 438.604(a)(2) revisions to § 438.334(b), (c)(1) 438.402, and 438.406, we direct and 438.608(d)(4), rather than introductory text, and (c)(1)(ii), commenters to the responses to their § 438.604(a)(2) and (d)(4), from being redesignating current paragraphs comments on the Medicaid proposals applied in CHIP. (c)(1)(i) and (ii) as paragraphs (c)(1)(ii) adopted by CHIP. and (iii), respectively, and adding new Comment: Several commenters 8. CHIP Conforming Changes To Reflect paragraph (c)(1)(i). We also proposed disagreed with the proposal revisions in Medicaid Managed Care Proposals revisions to redesignated paragraph § 438.68(b), adopted by cross-reference In the 2016 final rule, CHIP adopted (c)(1)(ii) and adding new paragraph to CHIP through § 457.1218, to eliminate many of the Medicaid regulations via (c)(4). Section 438.334 is adopted in the requirement for states to establish cross-reference. We proposed to revise CHIP at § 457.1240(d). time and distance standards for the list some of these Medicaid regulations. The • Managed care state quality strategy of specified provider types and to cross-references to these revised (§ 438.340): As discussed in the eliminate the requirement for standards regulations are unchanged in this final preamble at section I.B.14. of this final to be developed for ‘‘additional provider rule. We explained in the proposed rule rule, we proposed revisions to types’’ identified by CMS. Alternatively, that the changes made to the following § 438.340(b)(2), (b)(3)(i), (b)(6), and these commenters requested that CMS Medicaid regulations in this final rule (c)(1)(ii). We also proposed removing establish specific minimum quantitative would also apply, by existing cross- § 438.340(b)(8), and redesignating standards for the specified provider reference, to CHIP. We welcomed paragraphs (b)(9), (10), and (11) as types, including for pediatricians, comments on the proposed changes paragraphs (b)(8), (9), and (10), pediatric specialists, and pediatric specifically as they apply to CHIP: respectively. Section 438.340 is dentists, and to also identify additional • MLR standards (§ 438.8(k)): As incorporated into the CHIP regulations types of pediatric provider types to be discussed in section I.B.6. of this final at § 457.1240(e). included in network adequacy rule, we proposed revisions to • Activities related to EQR standards, including pediatric medical § 438.8(k)(1)(iii) and (e)(4). Section (§ 438.358): As discussed in section subspecialties, providers at FQHCs and 438.8(k) is incorporated into the CHIP I.B.15. of this final rule, we proposed pediatric dental specialties. regulations in § 457.1203(e) and (f). revisions to § 438.358(b)(1)(iii). Section Response: We refer commenters to section I.B.10 of the preamble and the • Information requirements 438.358 is incorporated into the CHIP responses provided therein to address (§ 438.10): As discussed in section I.B.8 regulations at § 457.1250(a). • comments received for these proposed of this final rule, we proposed several EQR Results (§ 438.364(d)): As revisions to § 438.68. As we stated there, revisions to § 438.10. Section 438.10 is discussed in section I.B.17 of this final we believe removing the requirement for incorporated into the CHIP regulations rule, we proposed revisions to states to establish time and distance at §§ 457.1206(b)(2) (via cross-reference § 438.364(d). Section 438.364 is incorporated into CHIP regulations at standards for specified providers and to § 457.1207), 457.1207, and removing authority for CMS to add 457.1210(c)(5) (via cross-reference to § 457.1250(a). • Statutory basis, definitions, and additional provider types will enable § 457.1207). states to recognize and react more • Disenrollment: Requirements and applicability (§ 438.400): As discussed in section I.B.18. of this final rule, we quickly to local needs and developing limitations (§ 438.56): As discussed in trends in care. The list of providers for section I.B.9. of this final rule, we proposed revisions to § 438.400(b)(3). Section 438.400 is incorporated into the which states must develop quantitative proposed revisions to § 438.56(d)(5) by network adequacy standards includes deleting ‘‘PCCMs or PCCM entities.’’ CHIP regulations at § 457.1260. • General requirements (§§ 438.402 pediatric primary care, pediatric Section 438.56 is adopted in CHIP at and 438.406): As discussed in section specialists, pediatric behavioral health, § 457.1212. I.B.19. of this final rule, we proposed and pediatric dental. We believe this list • Network adequacy standards revisions to §§ 438.402(c)(3)(ii) and provides the appropriate balance (§ 438.68): As discussed in section 438.406(b)(3). Sections 438.402 and between assuring that states maintain I.B.10. of this final rule, we proposed 438.406 are incorporated in CHIP in appropriate networks for the child revisions to the provider-specific § 457.1260. population, and providing flexibility to network adequacy standards in The following is a summary of the states to react to the specific needs of § 438.68(b). The Medicaid network public comments we received on our their population and provider landscape adequacy standards are applied to CHIP proposal to CHIP conforming changes to in their state. States already have the per § 457.1218. authority to add additional provider • reflect Medicaid managed care Practice guideline (§ 438.236): As proposals. types to their network adequacy discussed in the preamble at section Comment: We received several standards to meet the needs of their I.B.11. of this final rule, we proposed comments supporting CHIP’s proposals CHIP programs and enrollees. revisions to § 438.236(b)(3) by deleting to align with the Medicaid requirements Comment: One commenter expressed contracting health care professionals where appropriate. concern with CMS retaining the general and replacing it with network providers. Response: We thank commenters for requirement for actuarial soundness in Section 438.236 is incorporated into the their support. CHIP rates at § 457.1203. The CHIP regulations at § 457.1233(c). Comment: We received several commenter stated that CMS should • Health information systems comments that did not include specific apply the Medicaid actuarial soundness (§ 438.242): As discussed in section comments on the CHIP proposal to requirements to CHIP and reconsider its I.B.12. of this final rule, we proposed incorporate these Medicaid proposals position. revisions to the health information but referred us to their comments on the Response: We agree that states must systems requirements in § 438.242. Medicaid proposals. develop payment rates for MCOs, PIHPs, Section 438.242 is adopted in CHIP at Response: Because CHIP proposed to and PAHPs for CHIP using actuarially § 457.1233(d). adopt, by cross-reference, the proposed sound principles, as required under

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§ 457.1203(a) of the 2016 final rule. 438.358, 438.364(d), 438.400, 438.402, • The quality, utility, and clarity of However, as we stated in the 2016 final and 438.406 as finalized in this final the information to be collected. rule, Title XXI does not provide the rule. • Recommendations to minimize the same specificity about rate development information collection burden on the III. Collection of Information standards as Title XIX, and while we affected public, including automated Requirements agree that we have authority under collection techniques. section 2101 of the Act to establish Under the Paperwork Reduction Act In our November 14, 2018 (83 FR additional standards, we have of 1995 (PRA) (44 U.S.C. 3501 et seq.), 57264) proposed rule, we solicited determined it would not be appropriate we are required to provide 60-day notice public comment on each of the to impose all of the Medicaid rate- in the Federal Register and solicit aforementioned issues for the following setting standards on separate CHIPs at public comment before a collection of sections of the rule that contained this time, including those cited by information requirement is submitted to information collection requirements commenters. Under § 457.1201 of the the Office of Management and Budget (ICRs). 2016 final rule, states are required to (OMB) for review and approval. For the We did not receive any PRA-related include payment rates in their managed purpose of the PRA and this section of public comments and are finalizing all care contracts submitted to CMS upon the preamble, ‘‘collection of provisions as proposed. request of the Secretary. As we stated in information’’ is defined under 5 CFR A. Wage Estimates the 2016 final rule, as we continue to 1320.3 of the PRA’s implementing gain additional experience with rate regulations. To fairly evaluate whether a To derive average costs, we used data setting in CHIP, we may consider collection of information should be from the U.S. Bureau of Labor Statistics’ developing additional standards for approved by OMB, section 3506(c)(2)(A) May 2018 National Occupational CHIP in the future. of the PRA requires that we solicit Employment and Wage Estimates for all After consideration of the public comment on the following issues: salary estimates (http://www.bls.gov/ comments, we are finalizing application • The need for the information oes/current/oes_nat.htm). Table 1 to CHIP of the changes to the Medicaid collection and its usefulness in carrying presents the mean hourly wage, the cost managed care requirements in out the proper functions of our agency. of fringe benefits and overhead §§ 438.8(k), 438.10, 438.56, 438.68, • The accuracy of our estimate of the (calculated at 100 percent of salary), and 438.236, 438.242, 438.334, 438.340, information collection burden. the adjusted hourly wage.

TABLE 1—NATIONAL OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES

Fringe Occupation Mean benefits and Adjusted Occupation title code hourly wage overhead hourly wage ($/hr) ($/hr) ($/hr)

Business Operations Specialist ...... 13–1000 35.52 35.52 71.04 Computer Programmer ...... 15–1131 43.07 43.07 86.14 Actuary ...... 15–2011 55.89 55.89 111.78 Office and Administrative Support Worker ...... 43–9000 17.28 17.28 34.56

As indicated, we are adjusting our data also showed 42 states that contract COBA with Medicare, or requiring an employee hourly wage estimates by a with 519 MCOs, 14 states that contract alternative method for ensuring that factor of 100 percent. This is necessarily with 134 PIHPs or PAHPs, 16 states that each MCO, PIHP, and PAHP receives all a rough adjustment, both because fringe contract with 21 non-emergency appropriate crossover claims. If the state benefits and overhead costs vary transportation PAHPs, 16 states with 26 elects to use an alternative methodology significantly from employer to PCCM or PCCM entities, and 20 states the methodology must ensure that the employer, and because methods of that contract with one or more managed submitting provider is promptly estimating these costs vary widely from care plans for managed LTSS). informed on the state’s remittance study to study. Nonetheless, we believe To estimate the burden for these advice that the claim has been sent to that doubling the hourly wage to requirements in part 457, we utilized the MCO, PIHP, or PAHP for payment estimate total cost is a reasonably state submitted data for enrollment in consideration. We estimate it will take accurate estimation method. managed care plans for CY 2016. The 1 hour at $86.14/hr for a computer enrollment data reflected 9,013,687 programmer to implement the message B. Information Collection Requirements managed care enrollees. This data also on the remittance advice. Given that 23 (ICRs) showed that 32 states use managed care of the 33 states with duals in managed entities for CHIP enrollment. To estimate the burden for the care have already required their plans to requirements in part 438, we utilized 1. ICRs Regarding Standard Contract obtain COBAs, we estimate that half of state submitted data for enrollment in Requirements (§ 438.3(t)) the remaining states (5 states) will elect managed care plans for CY 2017. The The following requirements and to pursue an alternative method. In enrollment data reflected 55,601,033 burden will be submitted to OMB for aggregate, we estimate a one-time enrollees in MCOs, 17,702,565 enrollees approval under control number 0938– burden of 5 hours (5 states × 1 hr at a in PIHPs or PAHPs, and 5,462,769 0920 (CMS–10108). Subject to renewal, cost of $430.70 (5 hr × $86.14/hr)). Over enrollees in PCCMs, for a total of it was last approved on December 16, the course of OMB’s anticipated 3-year 80,242,585 managed care enrollees. This 2016, and remains active. approval period, we estimate an annual includes duplicative counts when Amendments to § 438.3(t) will permit burden of 1.33 hours (5 hr/3 years) at a enrollees are enrolled in multiple states to choose between requiring their cost of $143.57 ($430.70/3 years). We managed care plans concurrently. This MCOs, PIHPs, and PAHPs to sign a are annualizing the one-time burden

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estimate since we do not anticipate any will require documentation from no claims payment. We are not estimating additional burden after the 3-year more than 3 states annually and that it a burden for this provision at this time. approval period expires. will take a state’s actuary 1 hour to 6. ICRs Regarding Network Adequacy Additionally, for the 5 states that elect prepare the documentation. For the 3 Standards (§ 438.68(a)) to require an alternative method, the states that may be required to submit amendments to § 438.3(t) will alleviate documentation, in aggregate we estimate The following requirements and the 25 managed care plans that are an annual burden of 3 hrs (3 plans × 1 burden will be submitted to OMB for operating within those states of the one- hr for an actuary) at a cost of $335.34 approval under control number 0938– time requirement to obtain a COBA. In (3 hrs × $111.78/hr specialist). 0920 (CMS–10108). Subject to renewal, aggregate, we estimate a one time it was last approved on December 16, savings of¥100 hr (25 plans × ¥4 hr for 4. ICRs Regarding Information 2016, and remains active. a business operations specialist) and Requirements (§ 438.10(d)(2) and (3)) Amendments to § 438.68(a) will ¥ × eliminate a requirement that states $7,104 (100 hr $71.04/hr). As this Amendments to § 438.10(d)(2) and develop time and distance standards for will be a one-time savings, we annualize (d)(3) will no longer require states or provider types set forth in § 438.68(b)(1) this amount to –33.33 hr (100 hr/3 plans to add taglines in prevalent ¥ ¥ and for LTSS providers if covered in the years) and $2,368 ( $7,104/3 years). languages to all written materials, nor to MCO, PIHP, or PAHP contract. The For the 5 states that elect to require use 18-point font size. Instead, states provision replaces the requirement to that their plans obtain a COBA, in and plans will have the ability to adopt time and distance standards with aggregate we estimate a one-time burden include taglines only on materials × a requirement to adopt a quantitative of 100 hrs (25 plans 4 hr for a business critical to obtaining services and could standard to evaluate network adequacy. operations specialist) at a cost of $7,104 select any font size they deem to be × We estimated in the May 6, 2016 final (100 hrs $71.04/hr specialist). As this conspicuously visible. While we have rule (81 FR 27777) a burden of $12,892 will be a one-time burden, we annualize no data indicating how many states (20 states × 10 hrs at $64.46/hr for a this amount to 33.33 hr (100 hr/3 years) experienced increased document length business operations specialist) during and $2,368 ($7,104/3 years). We are or an increase in postage costs as a the first year of developing the time and annualizing the one-time burden result of these requirements, we believe distance network adequacy standards estimate since we do not anticipate any that this provision will likely reduce for the provider types specified in additional burden after the 3-year paper, toner, and postage costs for some § 438.68(b)(1). We further estimated a approval period expires. states and managed care plans. one-time state burden of $10,313.60 (16 Assuming that this change saves one 2. ICRs Regarding Special Contract states × 10 additional hours at $64.46/ sheet of paper (average price $25 per Provisions Related to Payment hr for a business operations specialist) 5000 sheet carton or $0.005 per sheet), (§ 438.6(c)) to develop LTSS standards (81 FR toner (average price $125 for 25,000 The following requirements and 27777). In each case we did not estimate pages or $0.005 per sheet), and postage burden will be submitted to OMB for additional burden for states after the ($0.38 bulk postage per ounce) per approval under control number 0938– first year. enrollee, we estimate a savings of 1148 (CMS–10398 #52). Subject to ¥ ¥ Since time and distance is one of renewal, it was last approved on March $2,542,513 ([ $0.005 per sheet of many quantitative network adequacy paper × 74,779,816 enrollees or sheets of 1, 2018, and remains active. ¥ standards, for states that used time and Amendments to § 438.6(c) will paper] + [ $0.005 toner per sheet of × distance prior to the 2016 final rule or remove the requirement for states to paper 74,779,816 enrollees or sheets of ¥ × for those that have adopted time and obtain prior approval for directed paper] + [ $.024 ($0.38/bulk postage × distance to comply with the 2016 final payment arrangements that utilize state 0.16 oz per sheet of paper) 74,779,816 rule, discontinuing the use of time and plan approved rates. To obtain prior enrollees or sheets of paper]). The distance is merely an option that they approval, states submit a preprint to estimates are based on commonly may elect if they believe another CMS. Based on our experience, we available prices for bulk paper, toner, measure better reflects the needs of their estimate that 20 states may elect and bulk postage rate. We estimate the ¥ program. Additionally, as clarified in annually to request approval for 40 $2,542,513 will be shared equally the 2016 final rule (81 FR 27661), states directed payments that utilize a state between the states and managed care have always had the ability to have approved FFS fee schedule. By plans given that they each provide network adequacy standards in addition eliminating the requirement that states written materials to enrollees and to time and distance if they choose. We submit a preprint for each arrangement, potential enrollees. believe the change increases flexibility we estimate that a state would save 1 5. ICRs Regarding Information for states without affecting burden on hour at $71.04/hr for a business Requirements § 438.10(h)(3)(i)(B) states since it does not require states to operations specialist per directed take any action. payment arrangement. In aggregate, we Amendments to § 438.10(h)(3) will estimate an annual savings of ¥40 permit states that elect to offer a mobile 7. ICRs Regarding Grievance and Appeal hours (20 states × ¥2 preprints/year × enabled provider directory to update the System: General Requirements 1 hr per preprint) and ¥$2,842 (¥40 hr hardcopy provider directory quarterly (§§ 438.402(c)(3)(ii) and 438.406(b)(3)). × $71.04/hr). instead of monthly. We are unable to The following requirements and estimate with any accuracy the cost of burden will be submitted to OMB for 3. ICRs Regarding Rate Certification creating a mobile enabled provider approval under control number 0938– Submission (§ 438.7(c)(3)) directory; however, we assume it is 0920 (CMS–10108). Subject to renewal, Amendments to § 438.7(c)(3) will substantially more than the savings that it was last approved on December 16, permit CMS to require states to submit may be recognized from reducing the 2016, and remains active. documentation attesting that +/¥ 1.5% frequency of updating the directory Amendments to §§ 438.402(c)(3)(ii) modifications to a capitation rate since many of the data elements that are and 438.406(b)(3) will no longer require comply with specified regulatory in the directory must be maintained enrollees to follow up an oral appeal requirements. We estimate that CMS accurately for other purposes, such as with a written appeal. This change will

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alleviate the burden on plans to follow select any font size they deem to be rule, the amendments to § 438.400(b) up with enrollees that do not submit the conspicuously visible. While we have will revise the definition of an ‘‘adverse written appeal. We estimate it will take no data indicating how many states benefit determination’’ to exclude up to 2 hours at $34.56/hr for an Office experienced increased document length claims that do not meet the definition of and Administrative Support Worker to and an increase in postage costs as a ‘‘clean claim’’ at § 447.45(b), thus call or send letters to enrollees in an result of these requirements, we believe eliminating the requirement for the plan effort to receive the written appeal. We that the provision will likely reduce to send an adverse benefit notice. While estimate that 300 plans in 20 states have paper, toner, and postage costs for some we have no data on the number of an average of 200 oral appeals that are states. Assuming that, the change saves adverse benefit notices are sent due to not followed up with a written appeal. one sheet of paper (average price $25 denials of unclean claims, we believe In aggregate, we estimate an annual per 5,000 sheet carton or $0.005 per that at least one unclean claim may be private sector savings of ¥120,000 sheet), toner (average price $125 per generated for half of all enrollees; thus, × × hours (300 plans 200 appeals 2 hr) 25,000 pages or $0.005 per sheet), and this provision could reduce paper, ¥ ¥ × and $4,147,200 ( 120,000 hr postage ($0.38 bulk purchase per ounce) toner, and postage costs for some states. $34.56/hr). per enrollee, we estimate a savings of Assuming that the change saves one ¥ $1,983,013.15 [$.005 per sheet of sheet of paper (average price $25 per 8. ICRs Regarding Information × paper 9,013,687 sheets of paper] + 5,000 sheet carton or $0.005 per sheet), Requirements (§ 457.1207) × $.005 toner per sheet of paper toner (average price $125 for 25,000 The following requirements and 9,013,687 sheets of paper] + pages or $0.005 per sheet), and postage burden will be submitted to OMB for ¥ ( $1,892,874.27= [$0.21/oz bulk ($0.38 bulk postage per ounce) per approval under control number 0938– × postage 9,013,687 sheets of paper]). enrollee, we estimate a savings of 0920 (CMS–10108). Subject to renewal, The estimates are based on commonly ¥$1,757,669.16 [ $.005 per sheet of it was last approved on December 16, available prices for bulk paper and paper × ¥4,506,844 adverse benefit 2016, and remains active. toner. × ¥ Section 438.10(d)(2) and (3) are notices] + [$.005 toner 4,506,844 9. ICRs for Grievance and Appeal adverse benefit notices] + [ $0.38/oz adopted by cross-reference in the CHIP × ¥ regulations at § 457.1207. As discussed System: Definitions (§ 457.1260) bulk postage 4,506,844 adverse in section II.B.2 of this final rule, The following requirements and benefit notices]. The estimates are based amendments to § 438.10(d)(2) and (3) burden will be submitted to OMB for on commonly available prices for bulk will remove requirements for states or approval under control number 0938– paper and toner purchases and bulk plans to add taglines in prevalent 0920 (CMS–10108). Subject to renewal, postage rates. languages to all written materials, nor to it was last approved on December 16, C. Summary of Added Burden and use 18-point font size. Instead, states 2016, and remains active. Burden Reduction Estimates and plans will have the ability to Section 438.400(b) is adopted by include taglines only on materials cross-reference in the CHIP regulations Tables 2 and 3 set out our annual critical to obtaining services and could at § 457.1260. As discussed in this final burden and burden reduction estimates. TABLE 2—SUMMARY OF ANNUAL PRA-RELATED REQUIREMENTS AND BURDEN UNDER PART 438

Burden Number of Number of per Total Labor Cost per Total cost Annualized Annualized CFR section respondents responses response annual rate response ($) Frequency hours costs (hours) hours $/hr ($) ($)

§ 438.3(t) ...... 5 5 1 5 86.14 86.14 430 Once ...... 0.333 143 § 438.3(t) ...... 5 25 ¥4 ¥100 71.04 ¥284 ¥7,104 Once ...... ¥33.333 ¥2,368 § 438.3(t) ...... 5 25 4 100 71.04 284 7,104 Once ...... 33.333 2,368 § 438.6(c) ...... 20 2 ¥1 ¥40 71.04 ¥71.04 ¥2,842 Annual ..... ¥40 ¥2,841 § 438.7(c)(3) ...... 3 3 1 3 111.78 111.78 335.34 Annual..... 3 335.34 § 438.10(d)(2) and (3) ...... 42 74,779,816 n/a n/a n/a ¥0.005 ¥373,899.08 Annual ..... n/a ¥373,899.08 § 438.10(d)(2) and (3) ...... 42 74,779,816 n/a n/a n/a ¥0.005 ¥373,899.08 Annual ..... n/a ¥373,899.08 § 438.10(d)(2) and (3) ...... 42 74,779,816 n/a n/a n/a ¥0.024 ¥1,794,715.58 Annual ..... n/a ¥1,794,715.58 § 438.10(h) ...... § 438.402(c)(3)(i) ...... 300 60,000 ¥2 ¥120,000 34.56 ¥69.12 ¥4,147,200 Annual ..... ¥120,000 ¥4,147,200

Total ...... 342 74,779,818 varies ¥120,032 varies varies ¥6,691,789 n/a ...... ¥120,040 ¥6,692,746

TABLE 3—SUMMARY OF ANNUAL PRA-RELATED REQUIREMENTS AND BURDEN UNDER PART 457

Burden Number of Number of per Total Labor Cost per Total cost Annualized Annualized CFR section respondents responses response annual rate response ($) Frequency hours costs (hours) hours $/hr ($) ($)

§ 457.1207 ...... 32 9,013,687 n/a n/a n/a $0.005 ¥$45,068.44 Annual ..... n/a ¥$45,068.44 § 457.1207 ...... 32 9,013,687 n/a n/a n/a 0.005 ¥45,068.44 Annual ..... n/a ¥45,068.44 § 457.1207 ...... 32 9,013,687 n/a n/a n/a 0.21 ¥1,892,874.27 Annual ..... n/a ¥1,892,874.27 § 457.1260 ...... 32 4,506,844 n/a n/a n/a 0.005 ¥22,534.22 Annual ..... n/a ¥22,534.22 § 457.1260 ...... 32 4,506,844 n/a n/a n/a 0.005 ¥22,534.22 Annual ..... n/a ¥22,534.22 § 457.1260 ...... 32 4,506,844 n/a n/a n/a 0.38 ¥1,712,600.72 Annual ..... n/a ¥1,712,600.72

Total ...... 192 40,561,593 n/a n/a n/a 0.61 ¥3,740,680.31 Annual ..... n/a ¥3,740,680.31

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IV. Regulatory Impact Analysis section (see section III. of this final overall capitation rate under a managed rule). Aside from our analysis on burden care contract, and that we had seen A. Statement of Need reduction in the COI section, we believe pass-through payments that had As described in detail in section I.B. that the only provision in this final rule represented 25 percent, or more, of the of this final rule, many of the revisions that may have an economic impact is overall managed care contract and 50 to part 438 outlined in this final rule are the provision with revisions to managed percent of individual rate cells. In our part of the agency’s broader efforts to care pass-through payments because of analysis of that final rule, we concluded reduce administrative burden and to the general magnitude associated with that while it was difficult for CMS to achieve a better balance between managed care payments and our conduct a detailed quantitative analysis appropriate Federal oversight and state previous efforts to analyze financial given considerable uncertainty and lack flexibility, while also maintaining impacts associated with managed care of data, we believed that without the critical beneficiary protections, ensuring pass-through payments. pass-through payment final rule, which fiscal integrity, and improving the The May 6, 2016 final rule (81 FR prohibited new and increased pass- quality of care for Medicaid 27830) and the January 18, 2017 pass- through payments that were not in place beneficiaries. This final rule streamlines through payment final rule (82 FR 5425) as of the effective date of the May 6, the managed care regulations by both contained regulatory impact 2016 final rule, states will continue to reducing unnecessary and duplicative analyses that discussed the financial increase pass-through payments in ways administrative burden and further and economic effects of pass-through that were not consistent with the pass- reducing Federal regulatory barriers to payments. In the May 6, 2016 final rule, through payment transition periods help ensure that state Medicaid agencies we did not project a significant fiscal established in the May 6, 2016 final are able to work efficiently and impact for § 438.6(d). When we rule. effectively to design, develop, and reviewed and analyzed the May 6, 2016 Since there is still considerable implement Medicaid managed care final rule, we concluded that states will uncertainty regarding accurate and programs that best meet each state’s have other mechanisms to build in the reliable pass-through payment data, we local needs and populations. amounts currently provided through are only including a qualitative B. Overall Impact pass-through payments in approvable discussion in this RIA. Under ways, such as approaches consistent § 438.6(d)(6), we are finalizing our We have examined the impact of this with § 438.6(c). If a state was currently proposal to assist states with final rule as required by Executive building in $10 million in pass-through transitioning some or all services or Order 12866 on Regulatory Planning payments to hospitals under their eligible populations from a Medicaid and Review (September 30, 1993), current managed care contracts, we FFS delivery system into a Medicaid Executive Order 13563 on Improving assumed that the state will incorporate managed care delivery system by Regulation and Regulatory Review the $10 million into their managed care allowing states to make pass-through (January 18, 2011), the Regulatory rates in permissible ways rather than payments under new managed care Flexibility Act (RFA) (September 19, spending less in Medicaid managed contracts during a specified transition 1980, Pub. L. 96–354), section 1102(b) of care. We expected that the long pass- period if certain criteria in the final rule the Act, section 202 of the Unfunded through payment transition periods are met. One of the requirements in the Mandates Reform Act of 1995 (March provided under the May 6, 2016 final final rule is that the aggregate amount of 22, 1995; Pub. L. 104–4), Executive rule will help states to integrate existing the pass-through payments for each Order 13132 on Federalism (August 4, pass-through payments into actuarially rating period of the transition period 1999), the Congressional Review Act (5 sound capitation rates or permissible that the state requires the managed care U.S.C. 804(2)), and Executive Order Medicaid financing structures, plan to make must be less than or equal 13771 on Reducing Regulation and including enhanced fee schedules or the to the payment amounts attributed to Controlling Regulatory Costs (January other approaches consistent with and actually paid as Medicaid FFS 30, 2017). § 438.6(c) that tie managed care supplemental payments to hospitals, Executive Orders 12866 and 13563 payments to services and utilization nursing facilities, or physicians in direct agencies to assess all costs and covered under the contract. Medicaid FFS. This means that under benefits of available regulatory In the January 18, 2017 pass-through this new pass-through payment alternatives and, if regulation is payment final rule, we noted that a transition period, the aggregate necessary, to select regulatory number of states had integrated some payments added to Medicaid managed approaches that maximize net benefits form of pass-through payments into care contracts as pass-through payments (including potential economic, their managed care contracts for must be budget neutral to the aggregate environmental, public health and safety hospitals, nursing facilities, and payments transitioned from Medicaid effects, distributive impacts, and physicians. We also noted that as of the FFS. We also note that under the new equity). Pursuant to the Congressional effective date of the May 6, 2016 final pass-through payment transition period, Review Act (5 U.S.C. 801 et seq.), the rule, we estimated that at least eight states will only have 3 years to include Office of lnformation and Regulatory states had implemented approximately these payments as pass-through Affairs designated this rule as not a $105 million in pass-through payments payments before needing to transition ‘‘major rule’’, as defined by 5 U.S.C. for physicians annually; we estimated the payments into allowable payment 804(2).’’ that at least three states had structures under actuarially sound We did not receive any public implemented approximately $50 million capitation rates. comments on our assumptions or in pass-through payments for nursing We acknowledge that relative to the analysis. facilities annually; and we estimated current pass-through payment baseline, We have examined the provisions in that at least 16 states had implemented this final rule permits states to this final rule and determined that most approximately $3.3 billion in pass- incorporate new pass-through payments of the revisions to part 438 outlined in through payments for hospitals under a new transition period when this final rule are expected to reduce annually. We noted that the amount of states are transitioning some or all administrative burden as we noted in pass-through payments often services or eligible populations from a the Collection of Information (COI) represented a significant portion of the Medicaid FFS delivery system into a

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Medicaid managed care delivery system; will be required to calculate and C. Anticipated Effects however, the net financial impact to demonstrate that the aggregate amount The Regulatory Flexibility Act (RFA) state and Federal governments, and the of the pass-through payments for each requires agencies to analyze options for Medicaid program, must be zero given rating period of the transition period is regulatory relief of small businesses. For the requirements in this final rule that less than or equal to the amounts purposes of the RFA, small entities aggregate pass-through payments under attributed to and actually paid as include small businesses, nonprofit the new transition period must be less Medicaid FFS supplemental payments organizations, and small governmental than or equal to the payment amounts to hospitals, nursing facilities, or jurisdictions. Most hospitals and most attributed to and actually paid as physicians. As a practical matter, states other providers and suppliers are small Medicaid FFS supplemental payments will be required to use MMIS- entities, either by nonprofit status or by in Medicaid FFS. Since the final rule adjudicated claims data from the 12- having revenues of less than $7.5 only permits payment amounts month period immediately 2 years prior million to $38.5 million in any 1 year. attributed to Medicaid FFS to be made to the first rating period of the transition Individuals and states are not included under Medicaid managed care contracts, period for the purposes of these in the definition of a small entity. We this is not an increase in Medicaid calculations, and we will verify that the believe that all Medicaid managed care payments; rather, these payments only pass-through payment amounts are plans have annual revenues in excess of represent a movement of funding across permissible under this final rule, $38.5 million; therefore, we do not Medicaid delivery systems for a limited including that the aggregate payments believe that this final rule will have a and targeted amount of time when added to Medicaid managed care significant economic impact on a Medicaid populations or services are contracts as pass-through payments substantial number of small businesses. initially transitioning from a Medicaid must be budget neutral to the aggregate We sought comment on this belief. FFS delivery system to a Medicaid payments transitioned from Medicaid We did not receive any public managed care delivery system. Without FFS. Therefore, we are not projecting a comments on our assumptions or the transition period, we believe that specific fiscal impact to state or Federal analysis. Therefore, we are not existing Federal pass-through payment governments, or the Medicaid program, preparing an analysis because we have requirements could incentivize states to as we expect the net financial impact of determined, and the Secretary certifies, retain some Medicaid populations or this provision to be budget neutral. We that this final rule will not have a Medicaid services in their Medicaid FFS requested public comments on our significant impact on the operations of programs. We also believe that some assumptions and analysis as part of the a substantial number of small states may choose to delay proposed rule. businesses. implementation of Medicaid managed We did not receive any public In addition, section 1102(b) of the Act care programs, especially if states have requires CMS to prepare an RIA if a rule not already been working with comments on our assumptions or analysis. may have a significant impact on the stakeholders regarding existing operations of a substantial number of Medicaid FFS supplemental payments. We are setting out savings based on small rural hospitals. This analysis must As we noted in this final rule, we amendments being finalized in this rule conform to the provisions of section 604 wanted to ensure that Federal pass- to § 438.400(b) which will revise the of the RFA. For purposes of section through payment rules do not definition of an ‘‘adverse benefit 1102(b) of the Act, we define a small unintentionally incent states to keep determination’’ to exclude claims that rural hospital as a hospital that is populations or services in Medicaid do not meet the definition of ‘‘clean located outside a Metropolitan FFS, and we do not want Federal rules claim’’ at § 447.45(b), thus eliminating Statistical Area and has fewer than 100 to unintentionally create barriers that the requirement for the plan to send an beds. We do not anticipate that the prevent states from moving populations adverse benefit notice per § 438.404(a). provisions in this final rule will have a or services into Medicaid managed care. While we have no data on the number substantial economic impact on most As noted in the 2016 final rule (81 FR of adverse benefit notices that are sent hospitals, including small rural 27852), potential benefits to the changes due to denials of unclean claims, we hospitals. The provisions in this rule in the Medicaid managed care rule believe that at least one unclean claim place no direct requirements on include improved health outcomes for may be generated for half of all enrollees individual hospitals, and we note that Medicaid enrollees through improved (37,389,908); thus, this proposal could any impact on individual hospitals will care coordination and case management, reduce paper, toner, and postage costs vary according to each hospital’s current as well as improved access to care. We for some managed care plans. If we and future contractual relationships believe that this limited and targeted assume that in the aggregate, this change with MCOs, PIHPs, and PAHPs. We transition period will help states further saves one sheet of paper (average price expect that any additional burden (or these goals. $25 per 5,000 sheet carton or $0.005 per burden reduction) on small rural Finally, as noted throughout this final sheet), toner (average price $125 for hospitals should be negligible. We 25,000 pages or $0.005 per sheet), and rule, this limited and targeted transition × sought comment on this analysis and period is only available if the state $0.024 bulk postage ($.038/per ounce our assumptions. Therefore, we are not actually made Medicaid FFS 0.16 oz per sheet of paper) per enrollee, preparing an analysis for section 1102(b) supplemental payments to hospitals, we estimate an annual savings of of the Act because we have determined, nursing facilities, or physicians during $1,084,307.30 and the Secretary certifies, that this final the 12-month period immediately 2 Based on the calculations in the rule will not have a significant impact years prior to the first rating period of Collection of Information (COI) section on the operations of a substantial the transition period, and the aggregate (see section III. of this final rule, Tables number of small rural hospitals. amount of the pass-through payments 2 and 3), and the additional cost savings We did not receive any public that the state requires the managed care identified for § 438.400(b) described comments on our assumptions or plan to make must be less than or equal above, we are estimating that this final analysis. to the amounts paid under Medicaid rule will result in an annual cost savings Section 202 of the Unfunded FFS. As noted in this final rule, states of $12,071,068. Mandates Reform Act of 1995 (UMRA)

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also requires that agencies assess with at least two prior regulations. requirements included in this final rule anticipated costs and benefits before Many of the revisions to part 438 to identify potential alternatives to issuing any rule whose mandates outlined in this final rule are expected proposed provisions. require spending in any 1 year of $100 to reduce administrative burden; Comment: One commenter expressed million in 1995 dollars, updated therefore, this rule is an E.O. 13771 concerns that the only alternative annually for inflation. In 2020, that is deregulatory action. We estimate that considered was leaving the 2016 final approximately $156 million. We believe this final rule generates $11,704,348 rule as is. This commenter noted that that this final rule will have no million in annualized cost savings, there were already errors acknowledged consequential effect on state, local, or discounted at 7 percent relative to year in the previous rule and noted that tribal governments or on the private 2016, over a perpetual time horizon. rather than improving on the rule, these sector. Details on the estimated cost savings of changes will not benefit families and We did not receive any public this final rule can be found in the their children. comments on our assumptions or preceding analyses. We did not receive any public Response: We understand the analysis. commenter’s concerns; however, as Executive Order 13132 establishes comments on our assumptions or analysis. noted, we undertook a comprehensive certain requirements that an agency review of the current regulations and must meet when it issues a final rule D. Alternatives Considered developed proposals to achieve a better that imposes substantial direct One alternative we considered was balance between appropriate Federal requirements costs on state and local leaving the 2016 final rule as it is today; oversight and state flexibility. As the governments, preempts state law, or however, since the rule was finalized in commenter did not offer other otherwise has federalism implications. 2016, we continued to hear from alternatives for CMS to consider, we are This final rule does not impose any stakeholders that the 2016 final rule was not including additional alternatives substantial direct costs on state or local overly prescriptive and included under this final rule, other than the governments; however, the provision at provisions that were not cost-effective alternatives already discussed. § 438.4(b)(1) may preempt state law if for states to implement. As a result, we E. Uncertainties the differences among capitation rates undertook a review of the current for covered populations are not based regulations to ascertain if there were We have attempted to provide a on valid rate development standards ways to achieve a better balance framework for common definitions and and instead are based solely on network between appropriate Federal oversight processes associated with the statutory provider reimbursement requirements and state flexibility, while also provisions being implemented by this for covered populations that are maintaining critical beneficiary rule. It is possible that some states may mandated by state statute. protections, ensuring fiscal integrity, need to use alternative definitions to be We did not receive any public and improving the quality of care for consistent with state law, and we sought comments on our assumptions or Medicaid beneficiaries. This final rule is comment on these kinds of issues with analysis. the result of that review and streamlines the intent to modify and add to the Executive Order 13771, titled the managed care regulations by common terminology in this final rule Reducing Regulation and Controlling reducing unnecessary and duplicative as appropriate based on the comments Regulatory Costs, was issued on January administrative burden and further received. 30, 2017. Section 2(a) of Executive reducing Federal regulatory barriers to We did not receive any public Order 13771 requires an agency, unless help ensure that state Medicaid agencies prohibited by law, to identify at least comments on our assumptions or are able to work efficiently and analysis. two existing regulations to be repealed effectively to design, develop, and when the agency publicly proposes for implement Medicaid managed care In accordance with the provisions of notice and comment, or otherwise programs that best meet each state’s Executive Order 12866, this final rule issues, a new regulation. In furtherance local needs and populations. was reviewed by the Office of of this requirement, section 2(c) of We sought comment on a number of Management and Budget. Executive Order 13771 requires that the requirements included in this final rule F. Accounting Statement new incremental costs associated with to identify potential alternatives to new regulations shall, to the extent proposed provisions. As discussed in this RIA, the benefits, permitted by law, be offset by the The following is a summary of the costs, and transfers of this final rule are elimination of existing costs associated public comments we received on the identified in Table 4.

TABLE 4—ACCOUNTING STATEMENT

Units Primary Category estimate Low estimate High estimate Period Notes Year dollars Discount rate covered

Benefits

Non-Quantified ...... Benefits include: consistency with the statutory requirements in section 1903(m) of the Act and regulations for actuarially sound capitation rates; improved transparency in rate development processes; greater incentives for payment approaches that are based on the utilization and delivery of services to enrollees covered under the contract, or the quality and outcomes of such services; improved support for delivery system reform that is focused on improved care and quality for Medicaid beneficiaries; and improved health outcomes for Medicaid enrollees through improved care coordination and case management, as well as improved access to care.

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TABLE 4—ACCOUNTING STATEMENT—Continued

Units Primary Category estimate Low estimate High estimate Period Notes Year dollars Discount rate covered

Costs

Annualized Monetized $ millions/year ...... ¥12 ...... 2018 ...... Annual

Non-Quantified ...... Costs to state or Federal governments should be negligible. Burden and/or burden reduction estimates associated with the activities (other than information collections as defined in the Paperwork Reduction Act) that will be necessary for generating the benefits listed in this final rule.

Transfers

Non-Quantified ...... Relative to the current pass-through payment baseline, this final rule permits states to incorporate new pass-through payments under a new transition period when states are transitioning some or all services or eligible populations from a FFS delivery system into a managed care delivery system; however, the net financial impact to state and Federal governments, and the Medicaid program, must be zero given the requirements in this rule that aggregate pass-through payments under the new transition period must be less than or equal to the payment amounts attributed to and actually paid as FFS supplemental payments in Medicaid FFS. Therefore, we are not projecting a specific fiscal impact to state or Federal governments, as we expect the net financial impact of the provision to be budget neutral.

List of Subjects to enter into a COBA with Medicare, require a State to provide written that methodology must ensure that the documentation and justification that 42 CFR Part 438 submitting provider is promptly any differences in the assumptions, Grant programs-health, Medicaid, informed on the State’s remittance methodologies, or factors used to Reporting and recordkeeping advice that the State has not denied develop capitation rates for covered requirements. payment and that the claim has been populations or contracts represent 42 CFR Part 457 sent to the MCO, PIHP, or PAHP for actual cost differences based on the payment consideration. characteristics and mix of the covered Administrative practice and * * * * * services or the covered populations. procedure, Grant programs-health, ■ * * * * * Health insurance, Reporting and 3. Section 438.4 is amended by recordkeeping requirements. revising paragraph (b)(1) to read as ■ 4. Section 438.4 is further amended, follows: For the reasons set forth in the effective July 1, 2021, by adding preamble, the Centers for Medicare & § 438.4 Actuarial soundness. paragraph (c) to read as follows: Medicaid Services amends 42 CFR * * * * * § 438.4 Actuarial soundness. chapter IV as set forth below: (b) * * * * * * * * (1) Have been developed in (c) Option to develop and certify a PART 438—MANAGED CARE accordance with the standards specified in § 438.5 and generally accepted rate range. (1) Notwithstanding the ■ 1. The authority citation for part 438 actuarial principles and practices. Any provision at paragraph (b)(4) of this continues to read as follows: differences in the assumptions, section, the State may develop and Authority: 42 U.S.C. 1302. methodologies, or factors used to certify a range of capitation rates per rate cell as actuarially sound, when all ■ develop capitation rates for covered 2. Section 438.3 is amended by of the following conditions are met: revising paragraph (t) to read as follows: populations must be based on valid rate development standards that represent (i) The rate certification identifies and § 438.3 Standard contract requirements. actual cost differences in providing justifies the assumptions, data, and * * * * * covered services to the covered methodologies specific to both the (t) Requirements for MCOs, PIHPs, or populations. Any differences in the upper and lower bounds of the rate PAHPs responsible for coordinating assumptions, methodologies, or factors range. benefits for dually eligible individuals. used to develop capitation rates must (ii) Both the upper and lower bounds In a State that enters into a Coordination not vary with the rate of Federal of the rate range must be certified as of Benefits Agreement (COBA) with financial participation (FFP) associated actuarially sound consistent with the Medicare for Medicaid, an MCO, PIHP, with the covered populations in a requirements of this part. or PAHP contract that includes manner that increases Federal costs. The (iii) The upper bound of the rate range responsibility for coordination of determination that differences in the does not exceed the lower bound of the benefits for individuals dually eligible assumptions, methodologies, or factors rate range multiplied by 1.05. for Medicaid and Medicare must specify used to develop capitation rates for (iv) The rate certification documents the methodology by which the State MCOs, PIHPs, and PAHPs increase the State’s criteria for paying MCOs, ensures that the appropriate MCO, Federal costs and vary with the rate of PIHPs, and PAHPs at different points PIHP, or PAHP receives all applicable FFP associated with the covered within the rate range. crossover claims for which the MCO, populations must be evaluated for the (v) The State does not use as a PIHP, or PAHP is responsible. If the entire managed care program and criterion for paying MCOs, PIHPs, and State elects to use a methodology other include all managed care contracts for PAHPs at different points within the than requiring the MCO, PIHP, or PAHP all covered populations. CMS may rate range any of the following:

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(A) The willingness or agreement of data and methodologies used for the actuarial principles and practices. Risk- the MCOs, PIHPs, or PAHPs or their upper and lower bounds of each rate sharing mechanisms may not be added network providers to enter into, or cell. or modified after the start of the rating adhere to, intergovernmental transfer ■ 5. Section 438.5 is amended by period. (IGT) agreements; or revising paragraph (c)(3)(ii) to read as * * * * * (B) The amount of funding the MCOs, follows: (c) * * * PIHPs, or PAHPs or their network (1) * * * providers provide through IGT § 438.5 Rate development standards. (iii) The State may require the MCO, agreements. * * * * * PIHP, or PAHP to: (2) When a State develops and (c) * * * (A) Adopt a minimum fee schedule certifies a range of capitation rates per (3) * * * for network providers that provide a rate cell as actuarially sound consistent (ii) States that request an exception particular service under the contract with the requirements of this paragraph from the base data standards established using State plan approved rates as (c), the State must: in this section must set forth a defined in paragraph (a) of this section. (i) Document the capitation rates, corrective action plan to come into (B) Adopt a minimum fee schedule for prior to the start of the rating period, for compliance with the base data standards network providers that provide a the MCOs, PIHPs, and PAHPs at points no later than 2 years after the last day particular service under the contract within the rate range, consistent with of the rating period for which the using rates other than the State plan the criteria in paragraph (c)(1)(iv) of this deficiency was identified. approved rates defined in paragraph (a) section. * * * * * of this section. (ii) Not modify the capitation rates ■ (C) Provide a uniform dollar or under § 438.7(c)(3). 6. Section 438.6 is amended— ■ percentage increase for network (iii) Not modify the capitation rates a. In paragraph (a) by adding the providers that provide a particular within the rate range, unless the State is definitions of ‘‘State plan approved service under the contract. increasing or decreasing the capitation rates’’ and ‘‘Supplemental payments’’ in (D) Adopt a maximum fee schedule rate per rate cell within the rate range alphabetical order; ■ for network providers that provide a up to 1 percent during the rating period. b. By revising paragraphs (b)(1), particular service under the contract, so However, any changes of the capitation (c)(1)(iii), and (c)(2); and ■ long as the MCO, PIHP, or PAHP retains rate within the permissible 1 percent c. By adding paragraphs (c)(3). the ability to reasonably manage risk range must be consistent with a The revisions and additions read as and has discretion in accomplishing the modification of the contract as required follows: goals of the contract. in § 438.3(c) and are subject to the § 438.6 Special contract provisions related (2) Process for approval. (i) All requirements at paragraph (b)(1) of this to payment. contract arrangements that direct the section. Any modification to the (a) * * * MCO’s, PIHP’s, or PAHP’s expenditures capitation rates within the rate range State plan approved rates means under paragraphs (c)(1)(i) through (iii) greater than the permissible 1 percent amounts calculated for specific services of this section must be developed in range will require the State to provide identifiable as having been provided to accordance with § 438.4, the standards a revised rate certification for CMS an individual beneficiary described specified in § 438.5, and generally approval, which demonstrates that— under CMS approved rate (A) The criteria in paragraph (c)(1)(iv) accepted actuarial principles and methodologies in the Medicaid State practices. of this section, as described in the initial plan. Supplemental payments contained rate certification, were not applied (ii) Contract arrangements that direct in a State plan are not, and do not the MCO’s, PIHP’s, or PAHP’s accurately; constitute, State plan approved rates. (B) There was a material error in the expenditures under paragraphs (c)(1)(i) Supplemental payments means data, assumptions, or methodologies and (ii) and (c)(1)(iii)(B) through (D) of amounts paid by the State in its FFS used to develop the initial rate this section must have written approval Medicaid delivery system to providers certification and that the modifications prior to implementation. Contract that are described and approved in the are necessary to correct the error; or arrangements that direct the MCO’s, (C) Other adjustments are appropriate State plan or under a demonstration or PIHP’s, or PAHP’s expenditures under and reasonable to account for waiver thereof and are in addition to paragraph (c)(1)(iii)(A) of this section do programmatic changes. State plan approved rates. not require written approval prior to (iv) Post on the website required in Disproportionate share hospital (DSH) implementation but are required to meet § 438.10(c)(3) the following information and graduate medical education (GME) the criteria in paragraphs (c)(2)(ii)(A) prior to executing a managed care payments are not, and do not constitute, through (F) of this section. To obtain contract or contract amendment that supplemental payments. written approval, a State must includes or modifies a rate range: * * * * * demonstrate, in writing, that the (A) The upper and lower bounds of (b) * * * arrangement— each rate cell; (1) If used in the payment (A) Is based on the utilization and (B) A description of all assumptions arrangement between the State and the delivery of services; that vary between the upper and lower MCO, PIHP, or PAHP, all applicable (B) Directs expenditures equally, and bounds of each rate cell, including for risk-sharing mechanisms, such as using the same terms of performance, the assumptions that vary, the specific reinsurance, risk corridors, or stop-loss for a class of providers providing the assumptions used for the upper and limits, must be documented in the service under the contract; lower bounds of each rate cell; and contract and rate certification (C) Expects to advance at least one of (C) A description of the data and documents for the rating period prior to the goals and objectives in the quality methodologies that vary between the the start of the rating period, and must strategy in § 438.340; upper and lower bounds of each rate be developed in accordance with (D) Has an evaluation plan that cell, including for the data and § 438.4, the rate development standards measures the degree to which the methodologies that vary, the specific in § 438.5, and generally accepted arrangement advances at least one of the

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goals and objectives in the quality ■ 7. Section 438.6 is further amended, (B) Nursing facilities. For nursing strategy in § 438.340; effective July 1, 2021, by adding facility services, calculate the product of (E) Does not condition provider paragraph (d)(6) to read as follows: the actual supplemental payments paid participation in contract arrangements and the ratio achieved by dividing the under paragraphs (c)(1)(i) through (iii) § 438.6 Special contract provisions related amount paid through state plan to payment. of this section on the provider entering approved rates for nursing facility into or adhering to intergovernmental * * * * * services that are being transitioned from transfer agreements; and (d) * * * payment in a FFS delivery system to the (F) May not be renewed (6) Pass-through payments for States managed care contract by the total automatically. transitioning services and populations amount paid through payment rates for (iii) Any contract arrangements that from a fee-for-service delivery system to nursing facility services made in the direct the MCO’s, PIHP’s, or PAHP’s a managed care delivery system. State’s FFS delivery system. Both the expenditures under paragraph (c)(1)(i) Notwithstanding the restrictions on numerator and denominator of the ratio or (ii) of this section must also pass-through payments in paragraphs should exclude any supplemental demonstrate, in writing, that the (d)(1), (3), and (5) of this section, a State payments made to the applicable arrangement— may require the MCO, PIHP, or PAHP to providers. (A) Must make participation in the make pass-through payments to network (C) Physicians. For physician services, value-based purchasing initiative, providers that are hospitals, nursing calculate the product of the actual delivery system reform or performance facilities, or physicians under the supplemental payments paid and the improvement initiative available, using contract, for each rating period of the ratio achieved by dividing the amount the same terms of performance, to a transition period for up to 3 years, when paid through state plan approved rates class of providers providing services Medicaid populations or services are for physician services that are being under the contract related to the reform initially transitioning from a fee-for- transitioned from payment in a FFS or improvement initiative; service (FFS) delivery system to a delivery system to the managed care (B) Must use a common set of managed care delivery system, provided contract by the total amount paid performance measures across all of the the following requirements are met: through payment rates for physician payers and providers; (i) The services will be covered for the services made in the State’s FFS (C) May not set the amount or first time under a managed care contract delivery system. Both the numerator frequency of the expenditures; and and were previously provided in a FFS (D) Does not allow the State to recoup and denominator of the ratio should delivery system prior to the first rating any unspent funds allocated for these exclude any supplemental payments period of the transition period. arrangements from the MCO, PIHP, or made to the applicable providers. PAHP. (ii) The State made supplemental (iv) The State may require the MCO, (3) Approval timeframes. (i) Approval payments, as defined in paragraph (a) of PIHP, or PAHP to make pass-through of a payment arrangement under this section, to hospitals, nursing payments for Medicaid populations or paragraphs (c)(1)(i) and (ii) of this facilities, or physicians during the 12- services that are initially transitioning section is for one rating period unless a month period immediately 2 years prior from a FFS delivery system to a multi-year approval is requested and to the first year of the transition period. managed care delivery system for up to meets all of the following criteria: (iii) The aggregate amount of the pass- 3 years from the beginning of the first (A) The State has explicitly identified through payments that the State requires rating period in which the services were and described the payment arrangement the MCO, PIHP, or PAHP to make is less transitioned from payment in a FFS in the contract as a multi-year payment than or equal to the amounts calculated delivery system to a managed care arrangement, including a description of in paragraph (d)(6)(iii)(A), (B), or (C) of contract, provided that during the 3 the payment arrangement by year, if the this section for the relevant provider years, the services continue to be payment arrangement varies by year. type for each rating period of the provided under a managed care contract (B) The State has developed and transition period. In determining the with an MCO, PIHP, or PAHP. described its plan for implementing a amount of each component for the * * * * * multi-year payment arrangement, calculations contained in paragraphs ■ 8. Section 438.7 is amended by including the State’s plan for multi-year (d)(6)(iii)(A) through (C), the State must revising paragraph (c)(3) and adding evaluation, and the impact of a multi- use the amounts paid for services during paragraph (e) to read as follows: year payment arrangement on the State’s the 12-month period immediately 2 goals and objectives in the State’s years prior to the first rating period of § 438.7 Rate certification submission. quality strategy in § 438.340. the transition period. * * * * * (C) The State has affirmed that it will (A) Hospitals. For inpatient and (c) * * * not make any changes to the payment outpatient hospital services, calculate (3) The State may increase or decrease methodology, or magnitude of the the product of the actual supplemental the capitation rate per rate cell, as payment, described in the contract for payments paid and the ratio achieved by required in paragraph (c) of this section all years of the multi-year payment dividing the amount paid through and § 438.4(b)(4), up to 1.5 percent arrangement without CMS prior payment rates for hospital services that during the rating period without approval. If the State determines that are being transitioned from payment in submitting a revised rate certification, as changes to the payment methodology, or a FFS delivery system to the managed required under paragraph (a) of this magnitude of the payment, are care contract by the total amount paid section. However, any changes of the necessary, the State must obtain prior through state plan approved rates for capitation rate within the permissible approval of such changes under hospital services made in the State’s range must be consistent with a paragraph (c)(2) of this section. FFS delivery system. Both the modification of the contract as required (ii) Approval of a payment numerator and denominator of the ratio in § 438.3(c) and are subject to the arrangement under paragraph (c)(1)(iii) should exclude any supplemental requirements at § 438.4(b)(1). of this section is for one rating period. payments made to the applicable Notwithstanding the provisions in * * * * * providers. paragraph (c) of this section, CMS may

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require a State to provide ■ e. Revising paragraphs (h)(1)(vii) and (h) * * * documentation that modifications to the (h)(3). (1) * * * capitation rate comply with the The revisions read as follows: (vii) The provider’s cultural and requirements in §§ 438.3(c) and (e) and linguistic capabilities, including § 438.10 Information requirements. 438.4(b)(1). languages (including American Sign * * * * * Language) offered by the provider or a * * * * * (d) * * * (e) Provision of additional guidance. skilled medical interpreter at the (2) Make oral interpretation available provider’s office. CMS will issue guidance, at least in all languages and written translation annually, which includes all of the available in each prevalent non-English * * * * * following: language. Written materials that are (3) Information included in— (i) A paper provider directory must be (1) The Federal standards for critical to obtaining services for updated at least— capitation rate development. potential enrollees must include (2) The documentation required to (A) Monthly, if the MCO, PIHP, taglines in the prevalent non-English determine that the capitation rates are PAHP, or PCCM entity does not have a languages in the State, explaining the projected to provide for all reasonable, mobile-enabled, electronic directory; or availability of written translations or appropriate, and attainable costs that are (B) Quarterly, if the MCO, PIHP, oral interpretation to understand the required under the terms. PAHP, or PCCM entity has a mobile- information provided, information on (3) The documentation required to enabled, electronic provider directory. how to request auxiliary aids and determine that the capitation rates have (ii) An electronic provider directory services, and the toll-free telephone been developed in accordance with the must be updated no later than 30 number of the entity providing choice requirements of this part. calendar days after the MCO, PIHP, counseling services as required by (4) Any updates or developments in PAHP, or PCCM entity receives updated § 438.71(a). Taglines for written the rate review process to reduce State provider information. materials critical to obtaining services burden and facilitate prompt actuarial must be printed in a conspicuously- * * * * * reviews. ■ 12. Section 438.54 is amended by (5) The documentation necessary to visible font size. (3) Require each MCO, PIHP, PAHP, adding paragraph (b)(3) to read as demonstrate that capitation rates and PCCM entity to make its written follows: competitively bid through a materials that are critical to obtaining procurement process have been § 438.54 Managed care enrollment. services, including, at a minimum, established consistent with the provider directories, enrollee * * * * * requirements of §§ 438.4 through 438.8. handbooks, appeal and grievance (b) * * * ■ 9. Section 438.8 is amended— notices, and denial and termination (3) States must provide the ■ a. In paragraph (e)(4) by removing the notices, available in the prevalent non- demographic information listed in phrase ‘‘fraud prevention as adopted’’ English languages in its particular § 438.340(b)(6) for each Medicaid and adding in its place the phrase service area. Written materials that are enrollee to the individual’s MCO, PIHP, ‘‘fraud prevention consistent with critical to obtaining services must also PAHP, or PCCM entity at the time of regulations adopted’’; and be made available in alternative formats enrollment. ■ b. Revising paragraph (k)(1)(iii). upon request of the potential enrollee or * * * * * The revision reads as follows: enrollee at no cost, include taglines in ■ 13. Section 438.56 is amended by § 438.8 Medical loss ratio (MLR) standards the prevalent non-English languages in revising the paragraph (d)(5) heading * * * * * the State and in a conspicuously visible and paragraphs (d)(5)(i) and (iii) to read (k) * * * font size explaining the availability of as follows: (1) * * * written translation or oral interpretation (iii) Fraud prevention activities as to understand the information provided, § 438.56 Disenrollment: Requirements and limitations. defined in paragraph (e)(4) of this information on how to request auxiliary section. aids and services, and include the toll- * * * * * free and TTY/TDY telephone number of (d) * * * * * * * * (5) Use of the MCO’s, PIHP’s, PAHP’s ■ the MCO’s, PIHP’s, PAHP’s, or PCCM 10. Section 438.9 is amended by entity’s member/customer service unit. grievance procedures. (i) The State revising paragraph (b)(2) to read as Auxiliary aids and services must also be agency may require that the enrollee follows: made available upon request of the seek redress through the MCO’s, PHIP’s, § 438.9 Provisions that apply to non- potential enrollee or enrollee at no cost. or PAHP’s grievance system before emergency medical transportation PAHPs. * * * * * making a determination on the * * * * * (f) * * * enrollee’s request. (b) * * * (1) The MCO, PIHP, PAHP, and, when * * * * * (2) The actuarial soundness appropriate, the PCCM entity, must (iii) If, as a result of the grievance requirements in § 438.4, except make a good faith effort to give written process, the MCO, PIHP, or PAHP § 438.4(b)(9). notice of termination of a contracted approves the disenrollment, the State * * * * * provider to each enrollee who received agency is not required to make a his or her primary care from, or was determination in accordance with ■ 11. Section 438.10 is amended by— ■ a. Revising paragraph (d)(2) and (3); seen on a regular basis by, the paragraph (d)(4) of this section. ■ b. Removing paragraph (d)(6)(iv); terminated provider. Notice to the * * * * * ■ c. Revising paragraph (f)(1); enrollee must be provided by the later ■ 14. Section 438.68 is amended by— ■ d. In paragraph (g)(2)(ii)(B) by of 30 calendar days prior to the effective ■ a. Revising paragraphs (b)(1) removing the reference ‘‘paragraph date of the termination, or 15 calendar introductory text and (b)(1)(iv); (g)(2)(i)(A) of this section’’ and adding days after receipt or issuance of the ■ b. Removing paragraph (b)(1)(viii); in its place the reference ‘‘paragraph termination notice. and (g)(2)(ii)(A) of this section’’; and * * * * * ■ c. Revising paragraph (b)(2).

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The revisions read as follows: public notice and opportunity to ■ b. By removing paragraph (b)(8); comment, may periodically update the ■ c. By redesignating paragraphs (b)(9), § 438.68 Network adequacy standards. Medicaid managed care QRS framework (10), and (11) as paragraphs (b)(8), (9), * * * * * developed in accordance with and (10), respectively; (b) * * * paragraph (b)(1) of this section. ■ d. In newly redesignated paragraph (1) Provider types. At a minimum, a (c) * * * (b)(9) by removing ‘‘; and’’ and adding State must develop a quantitative (1) A state may implement an a period in its place. network adequacy standard for the alternative Medicaid managed care ■ e. By revising paragraph (c)(1)(ii); and following provider types, if covered quality rating system that utilizes ■ f. In paragraph (c)(3)(ii) by removing under the contract: different performance measures or the reference ‘‘paragraph (b)(11)’’ and * * * * * applies a different methodology from adding in its place the reference (iv) Specialist (as designated by the that described in paragraph (b) of this ‘‘paragraph (b)(10)’’. State), adult, and pediatric. section provided that— The revisions read as follows: (i) The alternative quality rating * * * * * § 438.340 Managed care State quality (2) LTSS. States with MCO, PIHP, or system includes the mandatory strategy PAHP contracts which cover LTSS must measures identified in the framework developed under paragraph (b) of this * * * * * develop a quantitative network (b) * * * section; adequacy standard for LTSS provider (2) The State’s goals and objectives for (ii) The ratings generated by the continuous quality improvement which types. alternative quality rating system yield must be measurable and take into * * * * * information regarding MCO, PIHP, and consideration the health status of all PAHP performance which is § 438.236 [Amended] populations in the State served by the substantially comparable to that yielded MCO, PIHP, PAHP, and PCCM entity ■ 15. Section 438.236 is amended in by the framework developed under described in § 438.310(c)(2). paragraph (b)(3) by removing the term paragraph (b) of this section to the (3) * * * ‘‘contracting health care professionals’’ extent feasible, taking into account such and adding in its place the term (i) The quality metrics and factors as differences in covered performance targets to be used in ‘‘network providers.’’ populations, benefits, and stage of ■ measuring the performance and 16. Section 438.242 is amended by delivery system transformation, to improvement of each MCO, PIHP, revising paragraph (c)(3) to read as enable meaningful comparison of PAHP, and PCCM entity described in follows: performance across States. § 438.310(c)(2) with which the State (iii) The State receives CMS approval contracts, including but not limited to, § 438.242 Health information systems. prior to implementing an alternative the performance measures reported in * * * * * quality rating system or modifications to (c) * * * an approved alternative Medicaid accordance with § 438.330(c). The State (3) Submission of all enrollee managed care quality rating system. must identify which quality measures encounter data, including allowed and performance outcomes the State * * * * * will publish at least annually on the amount and paid amount, that the State (3) In requesting CMS approval, the website required under § 438.10(c)(3); is required to report to CMS under State must include the following: § 438.818. (i) The alternative quality rating and, * * * * * system framework, including the * * * * * (6) The State’s plan to identify, ■ performance measures and methodology 17. Section 438.334 is amended by evaluate, and reduce, to the extent revising paragraphs (b) and (c)(1) and (3) to be used in generating plan ratings; and, practicable, health disparities based on and adding paragraph (c)(4) to read as age, race, ethnicity, sex, primary follows: (ii) Documentation of the public comment process specified in language, and disability status. For § 438.334 Medicaid managed care quality paragraphs (c)(2)(i) and (ii) of this purposes of this paragraph (b)(6), rating system. section, including discussion of the ‘‘disability status’’ means, at a * * * * * issues raised by the Medical Care minimum, whether the individual (b) Quality rating system. (1) CMS, Advisory Committee and the public. qualified for Medicaid on the basis of a after consulting with States and other The request must document any policy disability. States must include in this stakeholders and providing public revisions or modifications made in plan the State’s definition of disability notice and opportunity to comment, response to the comments and rationale status and how the State will make the will develop a framework for a for comments not accepted; and, determination that a Medicaid enrollee Medicaid managed care quality rating (iii) Other information specified by meets the standard including the data system (QRS), including the CMS to demonstrate compliance with source(s) that the State will use to identification of the performance paragraph (c) of this section. identify disability status. measures, a subset of mandatory (4) The Secretary, after consulting * * * * * performance measures, and a with States and other stakeholders, shall (c) * * * methodology, that aligns where issue guidance which describes the (1) * * * appropriate with the qualified health criteria and process for determining if (ii) If the State enrolls Indians in the plan quality rating system developed in an alternative QRS system is MCO, PIHP, PAHP, or PCCM entity accordance with 45 CFR 156.1120, the substantially comparable to the described in § 438.310(c)(2), consulting Medicare Advantage 5-Star Rating Medicaid managed care quality rating with Tribes in accordance with the System described in subpart D of part system in paragraph (b) of this section. State’s Tribal consultation policy. 422 of this chapter, and other related * * * * * * * * * * CMS quality rating approaches. ■ 18. Section 438.340 is amended— ■ 19. Section 438.358 is amended by (2) CMS, after consulting with States ■ a. By revising paragraphs (b)(2), revising paragraph (b)(1)(iii) to read as and other stakeholders and providing (b)(3)(i), and (b)(6); follows:

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§ 438.358 Activities related to external claim’’ at § 447.45(b) of this chapter is (b) Subcontractual relationships and quality review. not an adverse benefit determination. delegation. The State must ensure, * * * * * * * * * * through its contracts, that each MCO, (b) * * * ■ 23. Section 438.402 is amended by PIHP, PAHP, and PCCM entity complies (1) * * * revising paragraph (c)(3)(ii) to read as with the subcontractual relationships (iii) A review, conducted within the follows: and delegation requirements as previous 3-year period, to determine the provided in § 438.230 of this chapter. MCO’s, PIHP’s, or PAHP’s compliance § 438.402 General requirements. * * * * * with the standards set forth in subpart * * * * * (d) Health information systems. The D of this part, the disenrollment (c) * * * State must ensure, through its contracts, requirements and limitations described (3) * * * that each MCO, PIHP, and PAHP in § 438.56, the enrollee rights (ii) Appeal. The enrollee may request complies with the health information requirements described in § 438.100, the an appeal either orally or in writing. systems requirements as provided in emergency and post-stabilization ■ 24. Section 438.406 is amended by § 438.242 of this chapter, except that the services requirements described in revising paragraph (b)(3) to read as applicability date in § 438.242(e) of this § 438.114, and the quality assessment follows: chapter does not apply. The State is and performance improvement required to submit enrollee encounter requirements described in § 438.330. § 438.406 Handling of grievances and appeals. data to CMS in accordance with * * * * * § 438.818 of this chapter. * * * * * ■ 20. Section 438.362 is amended by (b) * * * * * * * * adding paragraph (c) to read as follows: (3) Provide that oral inquiries seeking ■ 29. Section 457.1240 is amended by to appeal an adverse benefit revising paragraphs (b), (d), and (e) to § 438.362 Exemption from external quality read as follows: review. determination are treated as appeals. * * * * * * * * * * § 457.1240 Quality measurement and (c) Identification of exempted MCOs. ■ 25. Section 438.408 is amended by improvement. The State must annually identify, on the revising paragraph (f)(2) to read as * * * * * website required under § 438.10(c)(3) follows: (b) Quality assessment and and in the same location where the EQR § 438.408 Resolution and notification: performance improvement program. (1) technical reports are posted in Grievances and appeals. The State must require, through its accordance with § 438.364(c)(2)(i), the * * * * * contracts, that each MCO, PIHP, and names of the MCOs exempt from (f) * * * PAHP establish and implement an external quality review by the State, (2) State fair hearing. The enrollee ongoing comprehensive quality including the beginning date of the must have no less than 90 calendar days assessment and performance current exemption period, or that no and no more than 120 calendar days improvement program for the services it MCOs are exempt, as appropriate. from the date of the MCO’s, PIHP’s, or furnishes to its enrollees, in accordance ■ 21. Section 438.364 is amended by PAHP’s notice of resolution to request a with the requirements and standards in adding paragraph (a)(7) and revising State fair hearing. § 438.330 of this chapter, except that the terms of § 438.330(d)(4) of this chapter paragraph (d) to read as follows: * * * * * (related to dually eligible beneficiaries) § 438.364 External quality review results. PART 457—ALLOTMENTS AND do not apply. (a) * * * GRANTS TO STATES (2) In the case of a contract with a (7) The names of the MCOs exempt PCCM entity described in paragraph (f) from external quality review by the ■ 26. The authority citation for part 457 of this section, § 438.330(b)(2) and (3), State, including the beginning date of continues to read as follows: (c), and (e) of this chapter apply. the current exemption period, or that no Authority: 42 U.S.C. 1302. * * * * * (d) Managed care quality rating MCOs are exempt, as appropriate. ■ 27. Section 457.1207 is revised to read system. The State must determine a * * * * * as follows: (d) Safeguarding patient identity. The quality rating or ratings for each MCO, information released under paragraph § 457.1207 Information requirements. PIHP, and PAHP in accordance with the (c) of this section may not disclose the The State must provide, or ensure its requirements set forth in § 438.334 of identity or other protected health contracted MCO, PAHP, PIHP, PCCM, this chapter, except that the terms of information of any patient. and PCCM entities provide, all § 438.334(c)(2)(i) and (c)(3) of this ■ 22. Section 438.400 is amended in enrollment notices, informational chapter (related to consultation with the paragraph (b) by revising paragraph (3) materials, and instructional materials Medical Care Advisory Committee) do of the definition of ‘‘Adverse benefit related to enrollees and potential not apply. (e) Managed care quality strategy. The determination’’ to read as follows: enrollees in accordance with the terms of § 438.10 of this chapter, except that State must draft and implement a § 438.400 Statutory basis, definitions, and the terms of § 438.10(c)(2), (g)(2)(xi)(E), written quality strategy for assessing applicability. and (g)(2)(xii) of this chapter do not and improving the quality of health care * * * * * apply. and services furnished CHIP enrollees as described in § 438.340 of this chapter, (b) * * * ■ 28. Section 457.1233 is amended by except that the reference to consultation Adverse benefit determination * * * revising paragraphs (b) and (d) to read with the Medical Care Advisory (3) The denial, in whole or in part, of as follows: payment for a service. A denial, in Committee described in whole or in part, of a payment for a § 457.1233 Structure and operation § 438.340(c)(1)(i) of this chapter does service solely because the claim does standards. not apply. not meet the definition of a ‘‘clean * * * * * * * * * *

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■ 30. Section 457.1260 is revised to read (2) In addition to the requirements terms of subpart K of this part, and how as follows: referenced in paragraph (c)(1) of this to do so. section, the notice must explain: (5) Except as provided in paragraph § 457.1260 Grievance system. (i) The enrollee’s right to request an (e)(3) of this section, an enrollee may (a) Statutory basis and definitions— appeal of the MCO’s, PIHP’s, or PAHP’s request a State external review only (1) Statutory basis. This section adverse benefit determination, after receiving notice that the MCO, implements section 2103(f)(3) of the including information on exhausting the PIHP, or PAHP is upholding the adverse Act, which provides that the State CHIP MCO’s, PIHP’s, or PAHP’s one level of benefit determination. The State must must provide for the application of appeal described at § 438.402(b) of this provide enrollees no less than 90 section 1932(a)(4), (a)(5), (b), (c), (d), chapter referenced in paragraph (b)(1) of calendar days and no more than 120 and (e) of the Act (relating to this section, and the right to request a calendar days from the date of the requirements for managed care) to State external review in accordance MCO’s, PIHP’s, or PAHP’s notice of coverage, State agencies, enrollment with the terms of subpart K of this part; resolution to request a State external brokers, managed care entities, and and review. The parties to the State external managed care organizations. Section (ii) The procedures for the enrollee to review include the MCO, PIHP, or 1932(b)(4) of the Act requires managed exercise his or her rights provided PAHP, as well as the enrollee and his or care plans to establish an internal under this paragraph (c). her representative or the representative grievance procedure under which an (3) The MCO, PIHP, or PAHP must of a deceased enrollee’s estate. enrollee, or a provider on behalf of such provide timely written notice to the (f) Expedited resolution of appeals. an enrollee, may challenge the denial of enrollee of the adverse benefit The State must ensure that its coverage of or payment for covered determination. The terms of contracted MCOs, PIHPs, and PAHPs benefits. §§ 438.404(c)(6) and 438.210(d)(2) of comply with the provisions at § 438.410 (2) Definitions. The following this chapter apply in the circumstances of this chapter. (g) Information about the grievance definitions from § 438.400(b) of this of expedited service authorization and appeal system to providers and chapter apply to this section— decisions. subcontractors. The State must ensure (i) Paragraphs (1) through (5) and (7) (d) Handling of grievances and appeals. The State must ensure that its that its contracted MCOs, PIHPs, and of the definition of ‘‘adverse benefit PAHPs comply with the provisions at determination’’; and contracted MCOs, PIHPs, and PAHPs comply with the provisions at § 438.406 § 438.414 of this chapter. (ii) The definitions of ‘‘appeal’’, (h) Recordkeeping requirements. The of this chapter. ‘‘grievance’’, and ‘‘grievance and appeal State must ensure that its contracted (e) Resolution and notification: system’’. MCOs, PIHPs, and PAHPs comply with Grievances and appeals. (1) The State the provisions at § 438.416 of this (b) General requirements. (1) The must ensure that its contracted MCOs, chapter. State must ensure that its contracted PIHPs, and PAHPs comply with the MCOs, PIHPs, and PAHPs comply with (i) Effectuation of reversed appeal provisions at § 438.408(b) (relating to resolutions. If the MCO, PIHP, or PAHP, the provisions of § 438.402(a), (b), and the timeframe for resolution of (c)(2) and (3) of this chapter with regard or the result of a State external review, grievances and appeals), (c)(1) and (2) in accordance with the terms of subpart to the establishment and operation of a (the extension of timeframes for grievances and appeals system. K of this part, reverses a decision to resolution of grievances and appeals), deny, limit, or delay services, the MCO, (2) An enrollee may file a grievance (d) (relating to the format of the notice and request an appeal with the MCO, PIHP, or PAHP must authorize or of resolution for grievances and provide the disputed services promptly PIHP, or PAHP. An enrollee may request appeals), and (e)(1) (relating to the a State external review in accordance and as expeditiously as the enrollee’s content of the notice of resolution for health condition requires but no later with the terms of subpart K of this part grievances and appeals) of this chapter. after receiving notice under paragraph than 72 hours from the date it receives (2) Each MCO, PIHP, or PAHP must notice reversing the determination. (e) of this section that the adverse resolve each grievance and appeal, and ■ 31. Section 457.1270 is revised to read benefit decision is upheld by the MCO, provide notice, as expeditiously as the as follows: PIHP, or PAHP. enrollee’s health condition requires, (3) If State law permits and with the within State-established timeframes that § 457.1270 Sanctions. written consent of the enrollee, a may not exceed the timeframes (a) General. The State must comply provider or an authorized representative specified in this paragraph (e). with §§ 438.700 through 438.704, may request an appeal or file a (3) In the case of an MCO, PIHP, or 438.706(c) and (d), and 438.708 through grievance, or request a State external PAHP that fails to adhere to the notice 438.730 of this chapter. review in accordance with the terms of and timing requirements in this section, (b) Optional imposition of temporary subpart K of this part, on behalf of an the enrollee is deemed to have management. Except as provided in enrollee. When the term ‘‘enrollee’’ is exhausted the MCO’s, PIHP’s, or PAHP’s paragraph (c) of this section, the State used throughout this section, it includes appeals process. The enrollee may may impose temporary management providers and authorized initiate a State external review in under § 438.702(a)(2) of this chapter as representatives consistent with this accordance with the terms of subpart K referenced in paragraph (a) of this paragraph (b). of this part. section, only if it finds (through onsite (c) Timely and adequate notice of (4) For appeals not resolved wholly in surveys, enrollee or other complaints, adverse benefit determination. (1) The favor of an enrollee, in addition to the financial status, or any other source) any State must ensure that its contracted information required under paragraph of the following: MCOs, PIHPs, and PAHPs comply with (e)(1) of this section and § 438.408(e)(1) (1) There is continued egregious the provisions at § 438.404(a) and (b)(1), of this chapter, the content of the notice behavior by the MCO, including but not (2), and (5) of this chapter (regarding the of appeal resolution must include the limited to behavior that is described in content of the notice of an adverse enrollee’s right to request a State § 438.700 of this chapter (as referenced benefit determination). external review in accordance with the in paragraph (a) of this section), or that

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is contrary to any of the requirements of any other sanction that may be imposed) accordance with the terms of subpart H this subpart. if it finds that an MCO has repeatedly of part 438 of this chapter, except that (2) There is substantial risk to failed to meet substantive requirements the terms of §§ 438.604(a)(2) and enrollees’ health. in this subpart. The State must also 438.608(d)(4) of this chapter do not (3) The sanction is necessary to grant enrollees the right to terminate apply. ensure the health of the MCO’s enrollment without cause, as described enrollees— in § 438.702(a)(3) of this chapter as Dated: September 14, 2020. (i) While improvements are made to referenced in paragraph (a) of this Seema Verma, remedy violations under § 438.700 of section, and must notify the affected Administrator, Centers for Medicare & this chapter as referenced in paragraph enrollees of their right to terminate Medicaid Services. (a) of this section. enrollment. Dated: September 21, 2020. (ii) Until there is an orderly ■ 32. Section 457.1285 is revised to read Alex M. Azar II, termination or reorganization of the as follows: MCO. Secretary, Department of Health and Human (c) Required imposition of temporary § 457.1285 Program integrity safeguards. Services. management. The State must impose The State must comply with the [FR Doc. 2020–24758 Filed 11–9–20; 11:15 am] temporary management (regardless of program integrity safeguards in BILLING CODE 4120–01–P

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