CMS’s Final Medicaid Rule Tweaks the Proposed Rules Related to Marketing, Physician Incentive Arrangements and Long-term Care

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This article is the second in a series that takes an in-depth look at the new federal Medicaid managed care final rule and its effect on Medicaid managed care organizations, health care providers and other industry stakeholders. This installment addresses new marketing, physician incentive arrangements and long-term care requirements. Future articles in this series will address new requirements for the Medicaid managed care program relating to health information technology advancements and program integrity.

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On April 25, 2016, the Centers for Medicare & Medicaid Services (CMS), released the Medicaid managed care final rule entitled, “Medicaid and Children’s Health Insurance Program (CHIP) Programs; Medicaid Managed Care, CHIP Delivered in Managed Care, and Revisions Related to Third Party Liability.” The final rule revamps the 14-year-old managed care delivery system regulations by increasing state accountability and incentives to promote improved quality of care and access, strengthening program integrity, increasing consumer protection and reducing services churn. The final rule was published in the Federal Register on May 6, 2016.

Though largely unchanged from the proposed rule, the final rule includes several notable revisions and clarifications. In addition to changes to the medical loss ratio (MLR) provisions, as addressed in the first article of this series, the final rule increases CHIP’s marketing flexibility, clarifies the definition of physician incentive plans (PIPs), and strengthens long-term care.


What Constitutes “Marketing?”

No alternations were made to the final definition of marketing under Section 435.104 which included primary care case managers (PCCMs). However, CMS made a few noteworthy clarifications in its responses to comments, while also urging managed care plans to consult with their state to determine the permissibility of activities that are not expressly prohibited by the final rule. First, CMS confirmed that although any use of information to influence an enrollee’s decision to enroll in a managed care plan falls under the definition of “marketing.” That definition does not include a plan’s transmittal of information to its enrollees to address (1) health behaviors, (2) covered benefits, (3) the managed care plan’s network and (4) incentives for health behaviors or receipt of services solely for information purposes. CMS confirmed that event sponsorship by a managed care plan may be considered marketing if the sponsorship does not conform to Section 438.104. Finally, a plan may provide information about its other lines of business at a public event without violating Section 438.104; however, any “marketing” materials distributed at such event fall under the regulation’s purview.

States Encouraged to Sanction PIHPs’ and PAHPs’ Marketing Violations

With respect to sanctions for violations of the marketing requirements in Section 438.104, the final rule includes only minor changes designed to clarify the text. CMS finalized its proposed deletion of pre-paid inpatient health plans (PIHPs) and pre-paid ambulatory health plan (PAHPs) from Section 438.700(c), and the addition of PCCMs. Section 438.700(c) provides for sanctions if a state determines that marketing materials were distributed in violation of Section 438.104. CMS encouraged states to cover PIHPS and PAHPS under their sanction laws.

Applicability of State and Committee Review of CHIP’s Marketing Materials

In the proposed rule, CMS would have applied Section 438.104(c) to CHIPs, which would have required that, following a CHIP’s submission of marketing materials to the state for approval, the state would be required to consult with the Medical Care Advisory Committee (the MAAC) in the course of the state’s review. Following comments related to the CHIPs’ marketing flexibility, CMS finalized Section 457.1224 to exclude CHIPs from the requirements in Section 438.104(c). CMS recognized that the MAAC was created to advise Medicaid, not the CHIP, but encouraged states to consult with the MAAC nonetheless.


Under the proposed rule, the existing provisions related to PIPs were moved from Section 438.6 to Section 438.3. The outdated reference to “M+C organization” (a Medicare+Choice organization) was updated to “MA organization.” Other than these minor edits, CMS made only slight clarifications to the final rule related to PIPs.

CMS clarified that PIPs are a type of incentive arrangement between managed care plans and providers but do not constitute “incentive arrangements” that are governed by Section 438.6(a) and (b). CMS stressed that the PIP provisions do not regulate arrangements between managed care plans and network providers. CMS also clarified that standards related to physician health incentive plans are located in Section 457.1201(h), whereas standards related to mental health parity are located in 457.101(l).

Long-Term Supports and Services (LTSS)

Among the more significant changes made in the final rules, based on public comments, were those related to LTSS. CMS expanded the proposed clinically specific definitions to include LTSS, integrating LTSS with historically managed health care-only services. These modifications were consistent with states’ goals, which included community integration of individuals using LTSS, promotion of beneficiary access to LTSS, and improvement of the quality of LTSS.

LTSS Moves under the Medicaid Umbrella

Throughout the final rule, CMS deleted “health” from several sections in order to be more inclusive of enrollees who receive LTSS. For example, CMS made several modifications to the final rule governing the grievance and appeals system in Section 438.400. One such modification included generalizing the definition of “adverse benefit determination” (by deleting “health” from “health setting”) which resulted in the addition of managed long-term supports and services (MLTSS) programs and population to the grievance and appeals system.

A similar change was made to the final rule governing enrollee for-cause disenrollment. The section originally stated, “Other reason, including poor quality of care, lack of access to services covered under the contract, or lack of access to providers experienced in dealing with the enrollee’s health care needs.” “Health” was deleted from the section, expanding the section’s for-cause criterion to care generally, rather than health care only, to encompass LTSS.

Enrollee Rights Clarified and Coverage Increased

Another for-cause disenrollment reason for enrollees receiving LTSS was clarified in the final rule. CMS finalized the section to correct an omission by adding that enrollees must experience a “disruption in their residence or employment,” including moving to a different home or loss of job, in order to take advantage of for-cause disenrollment. This modification is consistent with the section to the preamble of the proposed rule (80 Fed. Reg. 31136) which declares that states must allow enrollees to dis-enroll and switch to another managed care plan or fee-for-service plan when the termination of a provider from their MLTSS network would result in a disruption of the enrollees’ care due to change in their residence or employment.

CMS made a fairly significant change to the proposed rule mandating that managed care organizations (MCOs), PIHPs and PAHPs develop treatment or service plans for enrollees using LTSS. As proposed, that requirement applied to these entities only if required by the state. The final section reflects a requirement for treatment or service plans for enrollees using LTSS, regardless of a state mandate. Such treatment or service plans for enrollees using LTSS must meet the requirements under Section (b)(i) through (v). See Section 438.208(c)(3).

Consistent with the goals of promoting long-term care for aging baby boomers, CMS finalized the requirement that “medically necessary services” in contracts between states and providers must specify such services in a manner that addresses not only the opportunity for an enrollee receiving LTSS to have access to the benefits of community living, but also to achieve person-centered goals and to allow enrollees to live and work in the setting of their choice.

A general modification was made to the proposed definition of LTSS in Section 438.2 to include a “worksite” in the list of settings where an enrollee may be supported to work, expanding LTSS enrollee support. In addition, the definition for “health care services,” typically only clinically based, was modified in Section 438.20 to incorporate LTSS in quality measurement improvement and external quality reviews (EQR) protocols. This revised definition is consistent with CMS’s 2012 guidance on the application of EQR protocols to MLTSS.

The expansion of reimbursable medically necessary services and worksite locations compliments CMS’s final rule related to home and community-based services (HCBS), at 79 Fed. Reg. 2948, published on January 16, 2014, (HCBS Final Rule). The HCBS Final Rule restricted service settings by establishing that services provided in nursing facilities, institutions for mental disease and intermediate care facilities are not HCBS but also expanded service settings to the greater community. These revisions, among others in the rule, are designed to promote autonomy, dignity, and choice and preference of service providers for the elderly population.

CMS also strengthened LTSS provider quality-assessment requirements by modifying the proposed rule to require that, in addition to providing mechanisms that asses the quality of care furnished to enrollees, LTSS providers must also participate with states to prevent, detect and remediate critical incidents related to the home and community-based waiver program requirements under 438.330(b)(5)(ii). In an effort to increase state monitoring and access to LTSS, governed by Section 438.340(b), CMS inserted a cross-reference effectively requiring that states implement mechanisms to identify persons who need LTSS.


Although the final rule’s provisions related to marketing, PIPs and LTSS remain largely unchanged, marketing requirements and related sanctions are now specifically applicable to PCCMs. MCOs, PIHPs, PAHPs and PCCMs must take steps to ensure their PIPs meet CMS standards. Although PIPs are a type of incentive arrangement, they are not defined as such under the final rule for the purposes of regulatory requirements. The LTSS-related changes in the final rule are of particular significance. As the LTSS expansion trend continues, LTSS providers can expect expanded Medicaid coverage for health and related services coupled with increased regulation and quality assessment following the final rule.