Thursday, March 01, 2012

Grassley Seeks Information on State Rate-setting for Medicaid Managed Care Plans

For Immediate Release
March 1, 2012

WASHINGTON – Sen. Chuck Grassley of Iowa has asked each state for information to help determine whether the states and the federal government are conducting enough oversight of their rate-setting for Medicaid managed care plans. 
“In light of the billions of dollars already spent on Medicaid, including managed care, and the planned expansion of Medicaid, it’s important to look at whether states are setting their managed care payment rates appropriately and in keeping with federal law,” Grassley said. “If the payment rates are out of whack, and scrutiny is lacking, Medicaid money could be ill-spent to the detriment of vulnerable beneficiaries and the taxpayers.

The risk could be especially high when Medicaid provider payment rates are boosted to match higher Medicare rates for two years as Medicaid is expanded under the new federal health care law.”
Grassley’s inquiry comes after the Government Accountability Office in 2010 found inconsistent scrutiny from the federal government of state rate-setting in this area.  GAO cited two states – Tennessee and Nebraska – as examples of those that received inadequate oversight from the federal Centers for Medicare and Medicaid Services.  Now, the state of Minnesota and its contractor non-profit health plans are drawing scrutiny in the state for what some analysts consider high operating margins. States are required to set rates for Medicaid managed care that are actuarially sound, but it’s unclear if the requirement is clearly defined or enforced.

Grassley wrote in his letter to each state, citing the GAO report, “In the 18 months since that report was issued, I have seen nothing to convince me CMS or the states have improved in their ability to confirm that managed care entities are appropriately and correctly reimbursed for the services provided. If an entity is paid too little, the access to and quality of care provided to beneficiaries is jeopardized.  If an entity is paid too much, scarce Medicaid resources are diverted away from providing services to beneficiaries.”

Grassley’s letter includes questions such as whether states have an independent audit requirement for managed care entities and if so, whether the audit entails certain elements; for a list of all managed care entities operating in the state and an accounting of audit occurrences and results; the state’s definition of allowable medical costs under the managed care contracts; and whether states have received any guidance from CMS or sought guidance from CMS on Medicaid managed care rate-setting. 


The federal government will spend nearly $4.5 trillion on Medicaid over the next decade.  That’s only the federal share.  State governments spend additional, significant amounts of money on Medicaid.  “Every dollar that’s spent improperly doesn’t help a Medicaid beneficiary,” Grassley said.  “Getting a handle on managed care payment rates is necessary for the program’s bottom line.”
The new federal health care law boosts federal Medicaid payments to primary care physicians for two years, from Jan. 1, 2013, to Dec. 31, 2014.  For that period, the doctors will receive Medicare payment rates, which are higher than Medicaid payment rates.  At the same time, Medicaid programs and providers will cover more patients, as required under the health care law.
A copy of Grassley’s letter to each state is available here.  The letters are identical.  The 2010 GAO report is available here.