May 4, 2023

CMS Proposes Major Reforms to Medicaid: But A Missed Opportunity for Emergency Medicine

Last week, the Centers for Medicare & Medicaid Services (CMS) issued two proposed regulations that, if finalized, would add new requirements that states must follow when operating their Medicaid programs. Medicaid is currently the largest health insurer in the country, serving 93 million enrollees as of January. As Adam Krushinskie stated in a recent Regs and Eggs blog post, the most critical Medicaid-related issue facing CMS and individual states right now is the fact that approximately 20 million enrollees will soon face open enrollment (and some may lose their coverage) for the first time in years as we collectively “unwind” from the COVID-19 public health emergency. 

Along with handling the unwinding process, CMS wants to shore up some deficiencies in both Medicaid fee-for-service (FFS) and Medicaid managed care and improve access to care for Medicaid enrollees (particularly access to primary and behavioral health services). To CMS’ credit, CMS also would like to add more transparency to Medicaid payments—which, as you know, have been wholly inadequate and do not cover the cost of providing services. However, as I describe below, CMS doesn’t do enough to address the reimbursement issues that are most pertinent to you as emergency physicians.

One of the most consequential proposals for patients in the reg is a new requirement for states to develop and enforce wait time standards for routine appointments for four types of services: “outpatient mental health and substance use disorder (SUD) - adult and pediatric, primary care - adult and pediatric, obstetrics and gynecology (OB/GYN), and an additional type of service determined by the State (in addition to the three listed) in an evidence-based manner for Medicaid.” However, with respect to the payment provisions of the proposed regs, CMS does not require states to increase Medicaid reimbursement—but rather calls on states to make the payment rates more accessible to providers and patients. For example, on the FFS side, CMS is requiring states to publish Medicaid FFS payment rates for all services on a state website that is accessible and easy for the public to use. States must also issue an analysis that compares Medicaid and Medicare payment rates for certain services, including primary care, obstetrical and gynecological services, and outpatient behavioral health. If states propose plan amendments that would result in reductions to payment rates, they have to “demonstrate” that these cuts won’t impact access to care. One of the ways states can prove this is by requiring that Medicaid payment rates are at or above 80 percent of the most recently published Medicare payment rates (as we all know, 80 percent of already-low Medicare rates is woefully insufficient).

On the Medicaid managed care side (which is how the majority of states structure their Medicaid programs), CMS is also requiring states to submit an annual payment analysis that compares managed care plans’ payment rates for routine primary care services, obstetrical and gynecological services, and outpatient mental health and substance use disorder services as a proportion of Medicare’s payment rates. CMS is also somewhat beefing up its enforcement of network adequacy requirements. The lack of enforcement of network adequacy standards has been an issue for years!

Looking through these and the other proposals in the regs, there is a glaring omission that ACEP has tried over and over to get CMS to pay close attention to: addressing the repeated violations of Prudent Layperson Standard (PLP) by Medicaid managed care plans. As a reminder, the PLP is an extremely important patient protection which allows people who reasonably think they are having an emergency to come to the emergency department (ED) without worrying about whether the services they receive will be covered by their insurance. In many cases, patients do not know whether they are having medical emergencies when they come to the ED. You as emergency physicians, in turn, cannot determine a patient’s final diagnosis (or whether they have an emergency or non-emergent medical condition) based on the patient’s symptoms when they first present to the ED. Many conditions share very similar symptoms, and a full work-up and examination is frequently required (sometimes with additional diagnostic tests) before it becomes clear what the ultimate diagnosis is.

CMS has made it very clear that denying coverage based solely on a retroactive review of diagnosis codes is a violation of the PLP. As you may recall, ACEP and the Emergency Department Practice Management Association (EDPMA) successfully convinced CMS to insert language that strongly reinforces the PLP into the first regulation implementing the No Surprises Act. However, what is less clear is whether another inappropriate practice-- downcoding based on the use of diagnosis codes—is a violation of the PLP. ACEP believes that it is. If claims are downcoded by health insurers, the services are still covered by the insurers (rather than denied), but the level of service on the claim (i.e., the payment amount) is changed. 

In the past, CMS has put out statements suggesting that modifying payments based on a diagnosis list is a potential violation of the PLP. In a State Medicaid Director letter issued in 2000, CMS stated that “whenever a payer denies coverage or modifies a claim for payment, the determination of whether the prudent layperson standard has been met must be based on all pertinent documentation, must be focused on the presenting symptoms (and not on the final diagnosis), and must take into account that the decision to seek emergency services was made by a prudent layperson..” (emphasis added). CMS has stepped in on at least one occasion (in Kansas) to halt a downcoding policy based on the rationale included in the State Medicaid Director letter—but in other cases has failed to intervene. Insurers in the Medicaid managed care market have therefore exploited this ambiguity in CMS’ policies and inconsistent enforcement of the PLP and have continued to institute policies that automatically downcode ED evaluation and management (E/M) services based on a review of a list of diagnosis codes that are supposed to reflect non-emergent care (including, most recently, in Virginia).

ACEP has met with CMS numerous times to discuss this issue, and specifically stressed the importance of addressing these violations in response to a request for information CMS put out in 2022 about how to improve payment adequacy in Medicaid. We are therefore disappointed that CMS doesn’t mention the need for Medicaid managed care plans to follow this important law, and CMS’ efforts to enforce it, in these regs.

All in all, while ACEP supports many of the proposals in the regs and appreciates CMS’ attempts to improve this critical program, we do see it as a missed opportunity for emergency medicine. Medicaid may be one of the largest (if not the largest) payors for your emergency department. If we can’t tackle some of the egregious practices of Medicaid managed care plans (such as violations of the PLP) and get these plans to pay adequate reimbursement rates, then the safety net will begin to erode, and Medicaid enrollees will unfortunately suffer the consequences.

Comments on the proposed regs are due in early July and ACEP plans on providing a robust response. We will keep you updated as these proposals go through the regulatory process and are finalized.

Until next week, this is Jeffrey saying, enjoy reading Regs with your Eggs!

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