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Medicaid and CHIP Final Rule Creates Flexibility in the States

On November 9, 2020, the Centers for Medicare & Medicaid Services (“CMS”) released the 2020 Medicaid and Children’s Health Insurance Program (“CHIP”) managed care final rule. The previous rule was released in 2016 and was extremely strict with its requirements, causing some states to struggle to comply. Since 2016, CMS’s goal has been to reduce the financial and administrative burden of the program, as well as reducing any federal regulatory barriers.

When the 2016 rule was released, many commenters wished for greater state-to-state flexibility to establish Medicaid and CHIP payments because every state had different needs for its enrollees. The 2020 final rule took note of that concern and now allows states much greater flexibility to set up payment schedules. CMS expects that the final rule will increase state flexibility in administering the program without having to cut off anyone’s access to the program—This would not have been possible based on the 2016 final rule.

Specifically, the final rule significantly revised eight areas of the regulatory framework:

  • Setting Actuarially Sound Capitation Rates: Methods used to develop capitation rates must be based on valid standards representing actual cost differences in various populations.
  • Pass-Through Payments: If a state moves from a fee-for-service delivery system to a managed care one, the state must pay pass-through payments for up to three years at an amount lower than the fee-for-service rates.
  • State-Directed Payments: States with managed care plans can now adopt payment models based on the fee-for-service fee schedule without needing prior authorization from CMS.
  • Network Adequacy Standards: States are now able to add a more flexible network adequacy standard as well as define “specialists” in whatever way they see fit for administration of their program.
  • Risk Sharing Mechanisms: States cannot change or add risk-sharing mechanisms in a managed care contract once the rating period has begun.
  • Quality Rating System (“QRS”) A set of mandatory performance measures has been added, the scope of alignment of the Medicaid and CHIP QRS has been expanded, CMS will be less stringent in comparing alternative state QRS information to CMS QRS information, and CMS intends to create sub-regulatory guidance on QRS standards.
  • Appeals and Grievances: After an oral appeal, enrollees are no longer required to submit a written appeal before requesting a hearing. Enrollees now have 90 to 120 calendar days to request a hearing, and denials that fail to meet the “clean claim” standard will no longer be a reason for an adverse benefit determination.
  • Requirements for Beneficiary Information: If the managed care plan offers an electronic provider directory, it must be updated quarterly. Additionally, provider termination notices must now be sent out at least 30 days before termination.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in Medicaid, CHIP, and other rules and regulations. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney  at 248-544-0888 or



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