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MCOs to gain relaxed network adequacy standards

Ingrid Stiver Senior Manager, Health Research Institute, PwC US November 19, 2020

A new final rule from CMS relaxes network adequacy standards for managed Medicaid and Children’s Health Insurance Program (CHIP) plans, removing the requirement for states to set time and distance standards and instead giving states the flexibility to set quantitative network adequacy standards that are most appropriate for them. The new rule could pave the way for more telehealth by Medicaid and CHIP managed care plans (here is CMS’ fact sheet on the new rule). Most provisions of the 2020 final rule take effect Dec. 14, with some taking effect July 1.

States can now consider provider-to-enrollee ratios, the minimum percentage of providers accepting new patients, the maximum wait time for an appointment, the hours of operation for a provider (including extended or weekend hours), the maximum travel time or distance to providers, or a combination of these and other quantitative measures when designing their network adequacy standards for managed Medicaid and CHIP plans. In the final rule, CMS acknowledges that virtual care can provide meaningful access to providers and that the previous time and distance standards did not appropriately take this into account.

The rule comes on the heels of a 2016 final rule issued by the Obama administration that updated administrative requirements for states and Medicaid and CHIP managed care plans, including requiring states to establish time and distance standards for certain provider types for network adequacy. The 2020 final rule was originally proposed by the Trump administration in November 2018, two years after the 2016 rule was finalized by the Obama administration. In a press release about the 2020 final rule, CMS Administrator Seema Verma said that previous, more prescriptive regulations had failed and that the 2020 “final rule was designed to improve federal oversight and state flexibility while maintaining beneficiary protections and providing high quality of care.”

HRI impact analysis

The updated network adequacy requirements that allow states to design quantitative standards that best fit their needs could give yet another boost to virtual care. States and payers now have more flexibility to consider virtual care options when determining network adequacy. Providers with robust virtual care programs could also benefit, if states and health plans move to include more virtual care options in their networks.

Health industry trade associations have been largely publicly silent on the 2020 final rule and specifically on network adequacy, but many provided comments in early 2019 on the 2018 proposed rule. The American Hospital Association (AHA) issued a statement about the 2020 final rule stating concerns about the removal of the time and distance network adequacy requirements, echoing the concerns outlined in its January 2019 comment letter.

The American Medical Association (AMA) has not commented on the final rule. In its comments on the 2018 proposed rule, the AMA said that it supported the previous time and distance requirements and that telehealth was not a substitute for on-site services. It urged CMS not to eliminate the time and distance requirements.

Payer trade organizations, including America’s Health Insurance Plans (AHIP) and the Association for Community Affiliated Plans (ACAP) have also been silent on the 2020 final rule but supported the network adequacy changes in their January 2019 comment letters on the proposed rule.

Comments on the proposed rule by the AHA, AMA, AHIP and ACAP were made an entire year before the COVID-19 pandemic and the resulting explosion of virtual care. In a survey of 2,511 US consumers conducted by HRI in September, 25% of consumers with Medicaid said they received care virtually during the pandemic, compared with only 17% who had received such care before the pandemic.

Questions remain about the future of virtual care, especially after the pandemic. But there does seem to be agreement that virtual care will play a larger role in healthcare delivery, with many providers now incorporating virtual care into their broader strategy.

The 2020 final rule applies to managed care organizations (MCOs) that contract with states to operate Medicaid and CHIP plans on behalf of the state. ACAP estimated that 83% of the nearly 80 million Medicaid enrollees were enrolled in a Medicaid managed care plan in the plan year beginning July 2018.

The 2020 final rule on Medicaid and CHIP managed care is one of many regulations expected to be finalized in the coming weeks by the Trump administration before President-elect Joe Biden takes office in January. George Washington University’s Columbian College of Arts & Sciences Regulatory Studies Center found a significant amount of regulatory activity in the final three months of presidential administrations dating back to the Carter administration. What the Biden administration will do with this specific rule, which both clarifies and reverses some of the provisions put in place by the 2016 final rule issued by the Obama administration, remains unknown.

However, with a global pandemic and a recession in full swing, it is unlikely that the Biden administration will put effort toward mostly administrative regulations like this one. For more on Biden’s healthcare agenda, see HRI’s recent report here.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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