In the first major overhaul of Medicaid managed care requirements in more than a decade, the Centers for Medicare and Medicaid Services published new rules on April 25 that affect how Medicaid works for the nearly two-thirds of beneficiaries who get their coverage through private managed care plans.

It aligns key rules and practices with those of marketplace and Medicare Advantage, including the addition of reporting medical loss ratio to Medicaid to ensure managed care plans focus on delivering care, not profits, CMS said.

The rule finalizes a medical loss ratio at 85 percent. Insurers must spend at least 85 percent of their Medicaid revenue on medical care to improve quality. The remaining 15 percent may be spent for administrative reasons such as salaries and marketing, CMS said.

Health plans that don't meet the goal will face future penalties in having their state rates lowered.

On the health information technology front, the rules encourage – but don't require – commitment to the principles of health information exchange

"Health information technology and the electronic exchange of health information are important tools for achieving the care coordination objectives proposed," according to the final rule.

HHS "supports the principle that all individuals, their families, their healthcare and social service providers, and payers should have consistent and timely access to health information in a standardized format that can be securely exchanged among the patient, providers, and others involved in the individual’s care," it states.
 
"Further, the Department is committed to accelerating health information exchange through the use of health IT across the broader care continuum and across payers. Health IT that facilitates the secure, efficient and effective sharing and use of health-related information when and where it is needed is an important contributor to improving health outcomes, improving health care quality and lowering health care costs."

Specifically, the rule points to ONC's Nationwide Interoperability Roadmap and 2016 Interoperability Standards Advisory as containing the "best available standards and implementation specifications to enable priority HIE functions." Providers, payers, and vendors are encouraged to take them into account "as they implement interoperable HIE across the continuum of care, including care settings such as behavioral health, long-term and post-acute care, and community service providers."

CMS also sets the conditions for broader applications of telehealth, specifically as a way to bolster network adequacy standards.

"Several commenters recommended that CMS add elements (to the rule) to include triage lines or screening systems, as well as the use of telemedicine, e-visits, and/or other evolving and innovative technological solutions," officials write.

"We agree with commenters that such services and technological solutions could impact the needs of enrollees in a particular area and could change the manner and extent to which other network providers are needed and utilized. We encourage states to consider how current and future technological solutions could impact their network adequacy standards."

An estimated 72 million Americans currently rely on Medicaid as their source of health insurance coverage, 14 million more than in 2013, CMS said. This is largely due to the Affordable Care Act's coverage expansion.

The improvements modernize the way managed care health plans operate so that Medicaid and CHIP continue to provide cost-effective, high quality care to consumers, according to Monday's announcement by Andy Slavitt, CMS acting administrator and Vikki Wachino, CMS deputy administrator and director for the Center for Medicaid and CHIP Services.

The rule strengthens states' efforts to support delivery system reform and authorizes the first-ever Medicaid and CHIP quality rating system so that states can publicly report plan quality information, and people can use that information to select plans, CMS said.

The rule also addresses quality of care standards, as well as focusing on improved communications, such as electronic notices to beneficiaries and creating online provider directories.

"States are making gains in using population based payments, episodes of care and quality-based payments," write Slavitt and Wachino in a blog post. "In addition, states operate 30 health home programs that focus on coordinating care for people with chronic conditions like obesity, diabetes and mental health conditions. Over the last several years, sates have undertaken significant efforts through State Innovation Models, integrated care models, and delivery system reform incentive programs to create alignment with physicians and hospitals to provide the highest quality of care. And we have proven that when we and states dedicate ourselves to changing the delivery of care, we get results."

Read the final rule here.