7 Things to Know About Medicaid Managed Care Contracting - 3Gen Consulting

1. 7 Things to Know About Medicaid Managed Care Contracting Today At more than 90 million people, Medicaid sits near the top of the list of the United States’ largest insurers. It covers not just low-income families, but also pregnant women, disabled people, children with complex health situations, and older adults. It delivers services through both fee-for-service and capitated managed care systems. Most states use the capitation model in the delivery of some level of their Medicaid benefits – as of 2021, around 72% of Medicaid members were enrolled in comprehensive managed care. The details of this delivery are covered in payer contract negotiations and a contract between the Medicaid agency and the managed care organization (MCO) [1]. While these contracts last at least three to five years, changes should be tracked carefully to ensure revenue cycle health. Here are some of the most important things to be aware of in managed care contracting and payer provider contract management today [2]. 1. Risk-Based MCOs Make Up Most Medicaid Spending

2. Of the $804 billion in federal spending on Medicaid services, around 52% was made to comprehensive MCOs. Proportions vary by state, but three out of four MCO states have been found to funnel at least 40% of their total Medicaid funding to MCO payments. State variation is a result of factors including: ● Medicaid population health profile ● Whether long-term supports and services are included in MCO contracts ● Proportion of the state Medicaid population that’s enrolled under MCOs ● Whether high-cost/high-risk beneficiaries are included in MCO enrollment It’s likely that the share of funds going to MCOs could increase, especially as states expand Medicaid to cover higher-cost and higher need beneficiaries, as well as long-term services and adults who fall under ACA coverage. 2. Social Determinants Are a Priority in Payor Contracting Many MCOs are working to address social determinants of health (SDoH) in an effort to reduce health disparities and improve health equity. To start 2023, CMS launched guidance on “in lieu of” services (ILOS) under the Medicaid program to address unmet health-related social needs and reduce health disparities. Health leaders responsible for payor contracting should keep up with this evolving trend. 3. Capitation Rates Have to Be Actuarially Sound Federal law requires that the payments made to Medicaid MCOs must be actually sound – meaning that the capitation rates “are projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the managed care plan for the time period and the population covered under the terms of the contract.” The COVID-19 pandemic opened the door to increased enrollment along with drops in utilization. Because of this, CMS gave states the option to modify their managed care contracting agreements. Many states implemented risk corridors that allowed for recoupment of funds. Over three out of every four of the states that implemented a risk corridor reported recoupments for payments that were made between 2020 and 2022 or that they expected future recoupments. Since the unwinding of Medicaid, these plans and states face the chance of more fiscal uncertainty, increasing the likelihood they’ll engage in further risk mitigation behaviors around payor contracting. 4. States Actively Make Decisions About the Services They Carve In and Out of MCO Contracting Agreements While MCOs largely feature comprehensive services for their beneficiaries, they also sometimes carve out specific services from MCO contracts to limited benefit plans or fee-for-service systems. These often include services like: ● Dental ● Pharmacy ● Behavioral health

3. ● Long-term services and supports But these carve-outs vary. Most states that engage in managed care contracting with an MCO report that pharmacy benefits are carved into managed care, while eight reports they are carved out of MCO contracts (reported as of July 2023). 5. MCO Enrollment Is Concentrated Within Five Firms In total, states contract with 287 Medicaid MCOs. These are a mix of government, private for-profit and private non-profit plans. Of these firms, five made up 50% of all enrollment to Medicaid MCOs. They are: ● Centene ● Anthem (“Elevance” as of 2022) ● Aetna/CVS ● UnitedHealth Group ● Molina These are all publicly traded organizations that fall under the Fortune 500 and four of the companies are ranked as Fortune 100. Even through the unwinding, the three firms, UnitedHealth, Molina, and Centene have reported growth in Medicaid revenue. 6. CMS Has Strengthened Access Standards In early 2024, CMS finalized rules with the goal of strengthening access standards along with state enforcement and monitoring. Prior to this release, states had significant flexibility in their ability to define network adequacy standards, as well as in their determination of how MCO compliance and access was monitored and enforced. This new rule contained a few provisions worth highlighting. ● It established national maximum wait time standards around routine appointments (including OB/Gyn services and outpatient substance use disorder and outpatient mental health). States must not implement remedy plans. These are required to address areas where managed care plans need to address areas of improvement to support better access. States are now required to conduct “secret shopper” surveys to validate the accuracy of provider directories and compliance with wait time standards. These surveys must be independent and will go into effect in 2028. States now also are required to submit payment analysis annually. This analysis compares certain managed care provider rates against Medicare with the goal of illustrating how payment rights could be impacting access. These go into effect in 2026. ● ● ● 7. Financial Incentives Are Tied to Quality Measures States across the country use quality metrics in monitoring their programs. This includes capitation withholds, value-based state-directed payments to quality measures, and performance bonuses and penalties. More than three out of every four MCO states have reported that they use at least one

4. incentive to promote improved quality of care. As things stand, performance information at the plan-level hasn’t often been publicly available, a blow to transparency. The coming years in healthcare payer contract negotiations promise to be full of changes in managed care contracting. To get support from an experienced vendor that can help you navigate the growing complexities of healthcare payer contract negotiation, start here. References [1] H. Maniates, "Why did they do it that way? Understanding managed care," NAMD, 22 January 2024. Available: https://medicaiddirectors.org/resource/understanding-managed-care/. [2] E. Hinton and J. Raphael, "10 Things to Know About Medicaid Managed Care," KFF, 1 May 2024. Available: https://www.kff.org/medicaid/issue-brief/10-things-to-know-about-medicaid-managed-care/. Original Source - https://www.3genconsulting.com/7-things-to-know-about-medicaid-managed-care-contracting-toda y