1. Medicaid Managed Care Rate Reviews November 5 2015

2. Disclaimer  Please note that the presenters are speaking in a personal capacity, and do not represent the Centers for Medicare and Medicaid Services (CMS). The information and opinions contained herein are those of the presenters, and do not represent those of CMS.

3. Overview  Introduction to Medicaid and Medicaid managed care  Medicaid managed care rate review process  Background, process, and findings of the 2014 rate reviews  Background, process, and findings of the 2015 rate reviews  Planning for the 2016 rate reviews

4. Medicaid  Healthcare program jointly funded by states and the Federal government  The states are allowed flexibility in the benefits and populations covered  Minimum required benefits and populations are stipulated by the federal government  ACA provided for a coverage expansion; in states that chose to expand, virtually everyone with income below 138 percent of the Federal Poverty Limit is eligible for coverage

5. Medicaid Managed Care  States use at risk contracts to capitate Managed Care Organizations (MCOs), or HMOs to provide a subset, or all of the covered benefits to enrollees  Use of managed care has increased rapidly now accounts for $147.1 billion or 34 percent of Medicaid benefit expenditures  Of the states that expanded in 2014, 23 chose to do so through managed care

6. Actuarial Soundness  Regulatory requirements found at 42 CFR 438.6.c  Stipulates that rates must be actuarially sound  Actuarially sound rates are defined as rates that: A. Have been developed in accordance with generally accepted actuarial principles and practices; B. Are appropriate for the populations to be covered, and the services to be furnished under the contract; and C. Have been certified, as meeting the requirements of this paragraph (c), by actuaries who meet the qualification standards established by the American Academy of Actuaries and follow the practice standards established by the Actuarial Standards Board.

7. Medicaid Managed Care Rate Review Process

8. Parties Involved  State and their actuary – responsible for developing the capitation rates  CMS Regional Office (RO) – coordinates most of the direct contact with the state, and is responsible for approval of rates and contracts  CMS Center for Medicaid and CHIP Services (CMCS) – develops CMS policy related to Medicaid managed care  CMS Office of the Actuary (OACT) – provides actuarial services for CMS and has become involved in managed care rate reviews

9. Historical Capitation Rate Review Process  The rate and contract reviews were historically conducted by RO staff members  The RO staff members used a checklist to guide their reviews  Consult with CMCS  Focus on the actuarial certification submitted by the state

10. Issues  GAO study released August 2010  Findings:  Inconsistent reviews  Variation in RO practices  Recommendations:  Implement a mechanism to track state compliance  Clarify guidance to CMS officials conducting reviews  Lawsuits and allegations of fraud and misconduct

11. OACT Involvement  In 2012 CMCS began consulting with OACT on ad hoc issues in certain states’ rates  States involved in lawsuits, and whistle blower allegations  Complex policy and actuarial adjustments to the rates  In 2013 CMS began reviewing states’ proposed methodology to account for Section 1202 (Primary Care Physician Payment Increase) in managed care rates, and OACT was involved in several state reviews.

12. 2014 Medicaid Managed Care Rate Reviews  Background  Process  Findings

13. 2014 Medicaid Managed Care Rate Reviews  Background  ACA provided for a coverage expansion; in states that chose to expand, virtually everyone with income below 138 percent of the Federal Poverty Limit is eligible for coverage  Under the ACA the Federal Government pays for 100 percent of the expansion for CY 2014 – 2016, gradually decreasing to 90 percent in CY 2020

14. 2014 Medicaid Managed Care Rate Reviews  Process  CMS issued the 2014 Medicaid Managed Care Rate Setting Consultation Guide in September 2013  http://www.medicaid.gov/medicaid-chip-program- information/by-topics/delivery-systems/managed- care/downloads/2014-managed-care-rate-setting- consultation-guide.pdf http://www.medicaid.gov/medicaid-chip-program- information/by-topics/delivery-systems/managed- care/downloads/2014-managed-care-rate-setting- consultation-guide.pdf

15. 2014 Medicaid Managed Care Rate Reviews  Process (continued)  CMS issued the 2014 Medicaid Managed Care Rate Setting Consultation Guide in September 2013  CMS developed 4 “critical elements” for states to include in their rate certifications for CMS review  Considerations of data, assumptions, and methodologies used to develop rates  Risk mitigation  Same assumptions to build non-benefit component for currently eligible and New Adult population  Pricing New Adult population benefits

16. 2014 Medicaid Managed Care Rate Reviews  Process (continued)  CMS had a conference call with each state and their actuaries to answer questions from the Consultation Guide  OACT reviewed the rate certifications  Questions and answers

17. 2014 Medicaid Managed Care Rate Reviews  Findings  CMS (OACT, CMCS, RO), States, and States’ actuaries work together to accomplish the shared goal of addressing items from the 2014 Medicaid Managed Care Rate Setting Consultation Guide  Considerations of data, assumptions, and methodologies used to develop rates  Risk mitigation  Same assumptions to build non-benefit component for currently eligible and New Adult population  Pricing New Adult population benefits

18. 2014 Medicaid Managed Care Rate Reviews  Findings  Risk mitigation  CMS and states discussed risk mitigation  States had different approaches to risk mitigation  Provider reimbursement rates  Varying levels of documentation in certifications

19. Looking Back on 2014  Common issues identified in reviews  Documentation  Varying quality of documentation  Development of assumptions specific to ACA expansion  Reviewed assumptions developed by state actuaries

20. Looking Back on 2014  Common issues identified in reviews  Data  Reliance on financial data, lack of encounter, price data  Assumptions and methodology  Documentation on trend  Varying levels of detail on programmatic change adjustments  Documentation on development of rate ranges  Development of non-benefit component assumptions

21. Looking Back on 2014  Process  2014 rate certification review focused mainly on the differences between the New Adult population and currently eligible rate development  Timing of certifications submitted for review  Make states aware of CMS’ expectations

22. 2015 Medicaid Managed Care Rate Reviews  Background  Process  Findings

23. 2015 Medicaid Managed Care Rate Reviews  Background  OACT reviewed New Adult population rate certifications in 2014  OACT and CMS contractors reviews all Medicaid managed care rate certifications in 2015

24. 2015 Medicaid Managed Care Rate Reviews  Process  CMS issued the 2015 Medicaid Managed Care Rate Setting Consultation Guide in September 2014  http://www.medicaid.gov/medicaid-chip-program- information/by-topics/delivery-systems/managed- care/downloads/2015-medicaid-manged-care-rate- guidance.pdf http://www.medicaid.gov/medicaid-chip-program- information/by-topics/delivery-systems/managed- care/downloads/2015-medicaid-manged-care-rate- guidance.pdf

25. 2015 Medicaid Managed Care Rate Reviews  Process (continued)  CMS issued the 2015 Medicaid Managed Care Rate Setting Consultation Guide in September 2014  Differences between 2014 and 2015 Guide  2014 Guide specifically addressed New Adult population  2015 Guide addresses all populations  2014 Guide is 3 pages, 2015 Guide is 9 pages

26. 2015 Medicaid Managed Care Rate Reviews  Process (continued)  CMS held webinars to present 2015 Guide  OACT and contractors reviews the rate certifications  Questions and answers

27. 2015 Medicaid Managed Care Rate Reviews  Findings  OACT continues to review states’ Medicaid managed care actuarial rate certifications  CMS and states work together to share information on rate setting

28. Looking Back on 2015  Common issues identified in reviews  Documentation  Greater detail in many certifications  Some certifications missing substantial amount of information  Following rate guide – use of index  Actuarial judgment  Many cases where actuarial judgment provided as answer instead of data, analysis, justification  Role of actuarial judgment  Data  Reliance on financial data, lack of encounter, price data  Rebasing, reliance on data from previous certifications  Adjustments  Trend  Documentation, level of detail (by service, by population)  Other information to show reasonableness – historical trends, sources, methodology

29. Looking Back on 2015  Common issues identified in reviews  Managed care efficiency  Documenting assumptions  Current level of efficiency  Program changes  Information on program change  Description of impact of change, adjustment  Non-benefit costs  Documentation, level of detail (by type of cost)  Margin  Other information to show reasonableness – historical trends, sources, methodology  Rate ranges  Methods, assumptions used to develop rate range  Clarity in certification

30. Looking Back on 2015  Process  Refining scope and focus of reviews  Defining and explaining expectations  Improving efficiency of review overall, at all levels

31. 2016 Medicaid Managed Care Rate Reviews  Planning  CMS issued the 2016 Medicaid Managed Care Rate Development Guide in September 2015  Draft Guide published on CMS website June 2015  CMS (OACT and CMCS) held 3 webinars to review 2015 Medicaid manage care rate reviews, discuss 2016 Guide, and answer questions after final 2016 Guide was published

32. 2016 Medicaid Managed Care Rate Reviews  Planning  CMS issued the 2016 Medicaid Managed Care Rate Development Guide in September 2015  http://www.medicaid.gov/medicaid-chip-program- information/by-topics/delivery-systems/managed- care/downloads/2016-medicaid-rate-guide.pdf http://www.medicaid.gov/medicaid-chip-program- information/by-topics/delivery-systems/managed- care/downloads/2016-medicaid-rate-guide.pdf

33. 2016 Medicaid Managed Care Rate Reviews  Planning  CMS issued the 2016 Medicaid Managed Care Rate Development Guide in September 2015  Differences between 2015 and 2016 Guide  Clarity  Improved definitions, description of required information  Section on MLTSS  Specific issues related to MLTSS rate-setting  Additional detail on certain areas  Pass-through payments  In lieu of services

34. 2016 Medicaid Managed Care Rate Reviews  Additional consideration  ASOP 49 (Medicaid Managed Care Capitation Rate Development and Certification)  Standard became effective for actuarial communications issued on or after August 1 2015

35. Conclusion  OACT involvement helpful for federal and state government  Opportunity for actuarial involvement in rate setting