On November 2, 2015, the Centers for Medicare and Medicaid Services (CMS) published a Final Rule with Comment Period (the “Final Rule”) establishing new processes that States must follow to demonstrate compliance with the requirements in the federal Medicaid law relating to provider reimbursement.  Specifically, under Section 1902(a)(30)(A) of the Social Security Act, States’ reimbursement to providers for Medicaid services must be “consistent with the efficiency, economy, and quality of care and sufficient to enlist enough providers so that care and services are available [to Medicaid beneficiaries] at least to the same extent that such services are available to the general population in the geographic area” (the “access requirement”).

A Change from the Status Quo

Up to present, the federal regulations implementing the statutory access requirement have been largely procedural.  Each State must describe in its Medicaid State plan the methods used in setting payment rates for each provider type, and State Medicaid agencies are required to provide notice of changes in statewide methods and standards for setting payment rates.  As CMS noted in the preamble to the Final Rule, the present rules seem oriented more toward ensuring that reimbursement rates are not too high (i.e. consistent with “efficiency” and “economy”) than to ensuring that rates are high enough to guarantee meaningful access to services.

Regulations Call for Increased Transparency

Under the new Medicaid access regulations, each State will be required to develop an access monitoring review plan.  The plan must address whether beneficiary needs are met; the availability of care by geographic area, provider type, and service site; changes in utilization by geographic area; population characteristics; and actual or estimated levels of payment to providers by other payers.  The data sources and methodologies that support the State’s analysis must also be identified in the plan.

The review plan is the framework that the State will use to conduct an access review and analysis, in which the State must separately document access to various categories of services, including primary care, physician specialist services, and behavioral health services.  States must conduct the first access monitoring review by July 1, 2016.  Thereafter, a review and analysis of each service category must be completed every three years.

Importantly, under the new regulations, if a State intends to reduce provider payment rates or restructure provider payments in a way that may negatively impact access to care, it must include the reimbursement change in a State plan amendment.  The State must include with its amendment an access review completed within the previous year showing that the payment changes will not threaten beneficiary access to Medicaid covered care and services.

The Final Rule requires States to consider public input on beneficiary access to services.  Conduits for public input may include hotlines, an ombudsman, or grievance and appeal procedures.  States must promptly respond to public input with “appropriate investigation, analysis, and response” and must also track the input and responses, essentially creating a reviewable record.  The Final Rule also addresses, in a very cursory fashion, the remedial steps that may be required if a monitoring review reveals that access is insufficient and that the state is out of compliance with federal law.

Diminished Role of the Federal Courts in Monitoring the Sufficiency of Medicaid Payments

This Final Rule was published more than four years after CMS’ Notice of Proposed Rulemaking, which was published in May 2011.  CMS acknowledged in the preamble to the Final Rule that the recent Supreme Court decision in Armstrong v. Exceptional Child Center, Inc., 135 S. Ct. 1378 (2015), was an important impetus to finalize the regulation.  The Supreme Court held in Armstrong that individuals and providers do not have a private right of action to bring a civil lawsuit in federal court to enforce compliance with the statutory Medicaid access requirement.  One consequence of the Armstrong decision, CMS noted, is that CMS review of State Plan amendments relating to provider reimbursement is more critical than ever to ensure that Medicaid payment rates are sufficient to ensure adequate access to services, in light of the diminished role of the courts.

The Final Rule attempts to balance CMS’s role in approving State Plan Amendments relating to provider reimbursement with the States’ need for flexibility in designing Medicaid programs.  CMS emphasized in the Final Rule that there is no uniform standard to evaluate whether Medicaid payments are sufficient to provide access.

It is important to note that this Final Rule applies only to Medicaid fee-for-service rates and schedules.  It does not directly affect reimbursement of providers by Medicaid managed care organizations or under Medicaid waivers or demonstration projects.   Please contact us if you would like further information about any of the changes described above.