MACPAC suggests Congress authorize states to mandate managed care

Congress should amend Section 1932(a)(2) of the Social Security Act (SSA) to allow states to require all beneficiaries to enroll in Medicaid managed care programs under state plan authority, without a waiver, according to the Medicaid and CHIP Payment and Access Commission (MACPAC).

Other recommendations

During its January session, MACPAC approved the managed care recommendation, which will be added to the commission’s draft March 2018 report to Congress alongside two December 2017 recommendations that Congress (1) extend Section 1915(b) waiver approvals from two to five years; and (2) revise Section 1915(c) waivers to waive freedom of choice and allow selective contracting.


Other concerns raised by MACPAC in December 2017 included: (1) whether the managed care recommendation should include long-term services and supports; (2) the adequacy of protections for vulnerable beneficiaries under state plan authority; and (3) that the recommendation to allow mandatory managed care enrollment requires oversight of states and plans to ensure beneficiary needs are met.

States try to manage expectations for Medicaid managed care

When CMS updated regulations regarding Medicaid managed care in May 2016, it was the first significant update to these regulations since 2002. Over the past year, as speakers at the American Health Lawyers’ Association Institute on Medicare and Medicaid Payment on March 29, 2017, noted, states have started the multi-year process of complying with the new rules, while dealing with resources issues at the state level and political change in Washington, D.C.

About 80 percent of the 73 million Medicaid enrollees are in some kind of managed care program, according to Lindsey Browning with the National Association of Medicaid Directors. Thirty-nine states and the District of Columbia have contracted with managed care entities to deliver care to all or some of their Medicaid beneficiaries.

Four options

Prior to the issuance of the revised regulations (81 FR 27498, May 6, 2016) states had basically one option for putting a managed care plan in place—requesting a Medicaid state plan amendment from HHS. Under the revised regulations states now have four options to implement managed care waivers under various provisions of the Social Security Act: (1) a Sec. 1932 state plan waiver; (2) a Sec. 1915(a) waiver (waiving competitive procurement process); (3) a Sec. 1915(b) waiver, requiring all enrollees, including dual eligibles and children with special health care needs to enroll in managed care; and (4) a Sec. 1115 waiver (which may permit coverage of services not otherwise covered in Medicaid) (see CMS modernizes Medicaid managed care, Health Law Daily, May 6, 2016).

James Golden, director, Division of Managed Care Plans at CMS, noted that full implementation of the revised regulations will take three to five years, and that the key to success is how well states work with affected stakeholders—both managed care entities and beneficiaries. “CMS expects the states to take the lead in setting standards,” Golden said.

State challenges

Browning highlighted two key challenges that states face – setting up adequate networks of providers so managed care beneficiaries can actually access health care; and limited staff capacity to drive expansion of Medicaid managed care alongside a number of other Medicaid related regulations.

Impact of new administration

A further complication, Browning noted, is the new Trump Administration and new leadership for HHS and CMS. She noted that the new CMS Administrator, Seema Verma, indicated an interest in re-examining all recent rules related to Medicare and Medicaid during her confirmation hearing. Browning also pointed to the Executive Order issued by President Trump which requires all agencies to create a Task Force to review existing regulations with the goal of repealing many of them. Browning noted that both Verma and HHS Secretary Tom Price are interested in increased state flexibility around health programs.

In addition, Browning said that any changes to the Affordable Care Act (ACA) (P.L. 111-148) may impact the new Medicaid managed care regulations, for example, she noted that a key goal of the managed care rule was alignment with qualified health plan requirements under the ACA. Would this change if the ACA’s health insurance Exchanges are eliminated? Finally, she said that any structural changes to Medicaid would likely require revised managed care rules.

Managed care for long-term services working for states

Using section 1115 waivers to provide Medicaid managed long-term services and support (LTSS) allows states to expand access to home- and community-based services (HCBS) to beneficiaries at risk of institutionalization. The Kaiser Family Foundation (KFF) surveyed enrollment, spending, and program policies for the 11 states using managed LTSS in 2015, and found that while states used these waivers in an effort to improve administration efficiencies, most of the states did not pursue this method in an attempt to make costs more predictable.

Managed care

States that use managed care for LTSS contract with private health plans, paying these plans a set monthly rate per member. Spending on LTSS as a percentage of all Medicare spending is growing quickly, from 5 percent in 2009 to 15 percent in 2014. In response to this growth, CMS included LTSS provisions in recent revisions to Medicaid managed care regulations (see Final rule modernizes Medicaid managed care, April 26, 2016). States using this payment method are now required to identify and comprehensively assess enrollees with LTSS needs and create stakeholder advisory groups to oversee LTSS programs, while plans must comply with person-centered planning regulations. Even in light of these new responsibilities, states are using managed care to authorize HCBS for multiple populations and add in other Medicaid initiatives in order to streamline coordination.


The KFF analysis revealed some differences in states’ approaches and results in using managed care for LTSS. Most waivers expand financial eligibility for HCBS, while six of the states expand eligibility for HCBS to those who are “at risk” of institutionalization, attempting to prevent the need for costly future services by allowing beneficiaries to remain in their homes. The majority of LTSS waiver beneficiaries in the nine states reporting enrollment by setting were served in the community, but three of 11 states reported an HCBS waiting list. Almost all states require plans to cover a wide range of benefits, including nursing facilities, acute and primary care, and behavioral health services.


The KFF noted that states’ concerns about implementation could inform policymakers considering these programs in the future. In particular, the growing number of seniors and beneficiaries with disabilities, combined with the shortage of LTSS workers, has caused apprehension about keeping up with the pace of needed services. Despite this looming issue, the KFF believes that states will continue to choose managed care to provide LTSS.

Alabama wants to push back Medicaid managed care demonstration

Alabama wants to delay the transition of its Medicaid program to a managed care model. In a letter to CMS, the state requested CMS’ acceptance of amended terms for the state’s Medicaid transition demonstration. The request makes no substantive changes to the program. Its purpose is to allow the state more time to appropriate funding and complete readiness activities.


In 2016, CMS approved a Section 1115 waiver permitting Alabama to transition its Medicaid program to a managed care model relying on regional care organizations (RCOs). Under the waiver, Alabama was granted almost $750 million to start and improve its RCO program. However, even with the federal funds, the state says it does not have the necessary funds to get the program up and running.


The state is requesting to change the demonstration time period from April 1, 2016, through March 31, 2021 to April 1, 2017, through March 31, 2022. The change is driven primarily by financial concerns. Alabama officials say the delay allows more time for the appropriation of additional state funding and completion of readiness activities. Finally, the letter indicated the delay would also help the state meet broader demonstration goals: addressing fragmentation in health care delivery, improving chronic disease prevention and management, improving access and care coordination, improving birth outcomes, and enhancing the financial efficiency of the health care delivery system.