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MCO rule under fire for introducing medical loss ratio

Industry praises network adequacy measures, alignment with CHIP

The Centers for Medicare & Medicaid Services (CMS) released its proposed rule to update Medicaid managed care organization (MCO) regulations yesterday, and the rule is already under fire for proposing a medical loss ratio (MLR) of 85 percent for managed care plans.

Medicare Advantage and Medicare Part D, as well as private plans, are all subject to the MLR today, but Medicaid managed care plans are not, the National Journal noted.

Under the proposed rule, the MLR would go into effect in 2017. While states collect from private insurers who fail to meet the Affordable Care Act's MLR--80 percent for individual and small-group plans, 85 percent for large-group plans--they would not collect from MCOs.

Jeff Myers, president and CEO of the trade group Medicaid Health Plans of America, told the National Journal that a federal standard for an MLR might bring unintended consequences to a program administered largely on a state-by-state basis. MCOs operate in 39 states and cover approximately 46 million of the nation's 70 million Medicaid beneficiaries, FierceHealthPayer previously reported.

"[G]iven the uniqueness of Medicaid, trying to artificially to put something that might work very well with other forms of insurance doesn't seem to me to make a lot of sense," Myers said.

America's Health Insurance Plans agreed. "[A]n arbitrary cap on health plans' administrative costs could undermine many of the critical services--beyond medical care--that make a difference in improving health outcomes for beneficiaries, such as transportation to and from appointments, social services, and more," Interim CEO Dan Durham said in a statement.

Overall, though, Myers told Kaiser Health News that he is "very supportive" of the direction CMS intends to take with the MCO regulations, which has not been updated since 2002.

In particular, Myers and others praised the proposal's aim to better align Medicaid with the Children's Health Insurance Program and to make states certify that managed care patients have sufficient access to doctors and hospitals, KHN reported.

The rule also proposes a quality-rating system for Medicaid managed care plans, though CMS deputy administrator Vikki Wachino told KHN it's too soon to tell what that system will look like.

Comments on the proposed rule, which will be published in the Federal Register June 1, are due July 27.

For more:
- here's the National Journal article
- read the AHIP statement
- here's the Kaiser Health News article
- read the CMS proposed rule (.pdf)

Related Articles:
CMS updates Medicaid managed care organization rules
What to expect from the Medicaid managed care proposal
CMS to tighten Medicaid managed care organization regulations
Managed care continues to spark debate