CMS this year began implementing portions of its landmark Medicaid managed care rule — the first major update to the program since 2002 — including a key provision that states include requirements for managed care plans to calculate and report a medical loss ratio (MLR). But in a March letter from CMS Administrator Seema Verma and then-HHS Secretary Tom Price, M.D., encouraging states to seek waiver authority to innovate within their Medicaid programs, they promised to conduct a “full review of managed care regulations in order to prioritize beneficiary outcomes and state priorities.”

So what happened?

James Golden, Ph.D., director of the Division of Managed Care Plans at CMS, told attendees at the Medicaid Health Plans of America Annual Conference, held Oct. 29-31 in Washington, D.C., that CMS is now in the process of that review and is considering certain areas.

“CMS’s regulatory focus should be more on holding states accountable for outcomes rather than doing overly detailed front-end review of process, so one thing that is very clear is there is a preference for outcome over process,” he said.

“In general, states should have the flexibility to innovate along the various criteria and then the reg should only be narrowed where necessary to achieve a few things.” These general areas are: (1) compliance with federal Medicaid statute, (2) alignment with other payers and programs, (3) fiscal program integrity, (4) positive beneficiary experiences and (5) promoting both state flexibility and accountability.

CMS has received a lot of input from stakeholders regarding things the agency should take a second look at and is considering, such as plans’ desire to see more specificity around the rate development process, he said.

Another wish that plans have expressed is that CMS reconsider the value of and/or eliminate the requirement for an 85% minimum MLR, which will be used in the development of capitation rates for contracts beginning on or after July 1, 2019. But Golden asked that plans and associations “think about their position on that a little bit” and defended MLR as a widely understood indicator of a state and/or plan’s financial positioning.

“More and more states are trying to use [MLR] as part of risk mitigation strategies on the newly eligible,” he observed. “And where we’ve seen situations where plans have lost a lot of money and things have been challenging in the state with regard to the capitated rates, very little communicates the situation better than describing the MLR that occurred in the state over some time period either for all the plans collectively or individually.”

While CMS declined to provide more detail on the timeline of its review, sources say some revised version of the rule is expected in the first quarter of 2018. In the meantime, the Center for Medicaid and CHIP Services on Nov. 2 released an informational bulletin clarifying policies for new provider payment initiatives under Medicaid managed care contracts. View the bulletin at