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 Provider Group Expresses Concerns About CMS Proposed Rule On Medicaid Pass-Through Payments

States continue to transform the payment and delivery of Medicaid-financed long term services and supports by shifting them to managed care programs.
As the number of programs increases, the Centers for Medicare & Medicaid Services (CMS) is looking closely at the payment structures that are at the heart of managed care.
CMS has issued a proposed rule that seeks to codify guidance issued earlier this year related to the use of new or increased pass-through payments in Medicaid managed care. This proposed rule applies to states with Medicaid managed care delivery systems in place, or those that are in the process of implementing managed care.
Pass-through payments are defined as any amount required by the state to be added to the contracted payment rates and considered in calculating the actuarially sound capitation rate to be divided between the managed care plan and skilled nursing facilities.
CMS believes that these pass-through payments are not consistent with the standards for actuarially sound managed care rates because they do not directly tie provider payments with the provision of services.
The final Medicaid managed care rule released this spring restricts the authority of states to direct how Medicaid managed care plans pay providers, which includes pass-through payments, for contracts on or after July 1, 2017.
In the final Medicaid managed care rule, CMS allowed a five-year transition period for pass-through payments to nursing centers. This provision raised the question of whether new pass-through payment programs or changes to existing programs would be permitted during the transition period.
The recently released proposed rule specifies that adding new or increasing existing pass-through payments beyond what was included in managed care contracts and rate certifications as of July 5, 2016, when the final rule went into effect—including retroactive adjustments or amendments—will not be permitted.
CMS says that new or increased pass-through payments would complicate the transition of these payments to permissible provider payment arrangements.
The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) submitted comments to CMS expressing concerns about the proposed rule.
“It is critical to ensure that states and plans are equipped and able to provide high-quality and needed care for complex patients with varying needs,” says Mike Cheek, senior vice president for reimbursement policy and legal affairs at AHCA/NCAL. “The shift from fee-for-service to managed care has revealed a myriad of challenges for providers and beneficiaries resulting in delays and/or disruptions to beneficiary care. With the increasing presence of managed care, beneficiary and provider protections are critical to the delivery of patient-centered and quality care.”
In its comments, AHCA/NCAL says, “CMS acknowledges that pass-through payments have served as a critical source of support for safety-net providers who provide care to Medicaid beneficiaries. This is particularly true for nursing facilities, which rely heavily on Medicaid to pay for the services they provide to most of their patients.”
“Some states have used supplemental payments to address inadequate Medicaid base rates,” [NI1] says Cheek. “Under managed care, payments to providers are often based on the state’s fee-for-service structure. Therefore, CMS and states should ensure that providers are paid adequate base rates before making significant changes to pass-through payments. Any changes to these financing mechanisms must allow for a realistic phase-in time and ensure beneficiary access to care from providers across the continuum of care.”
AHCA/NCAL’s comments note that “CMS’ proposals would significantly impact states that had not yet launched their managed care programs before July 5, 2016, but intended to implement them before July 2022. Many of these states already rely on pass-through payment programs in fee-for-service, and likely decided to transition to managed care under the assumption that they would be able to address provider payment inadequacy using pass-through payment programs.”
AHCA/NCAL urges CMS to provide states that had received federal approval to transition to managed care before the Medicaid managed care regulations were finalized the opportunity to implement their managed care programs using pass-through payment mechanisms with the understanding that they would need to be phased out by July 2022.
AHCA/NCAL also is concerned about CMS’ intent to apply a total dollar amount limit to pass-through payments. “The application of a total dollar limit would have an adverse impact on states that have greater managed care enrollment during a transition year than the rate year used to calculate the limit.”
AHCA/NCAL says that if CMS decides to move forward with a limit based on historical pass-through payment amounts, it should apply these limits based on the approved rate certifications on a per member per month basis.
In light the concerns raised in its comments, AHCA/NCAL urges CMS not to finalize the proposed rule on use of new or increased pass-through payments in Medicaid managed care.
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