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.
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
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
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
“Some states have used supplemental
payments to address inadequate
Medicaid base rates,” 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
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.”
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