The Medicaid Managed Care Rule

In April of 2016, the federal Centers for Medicare & Medicaid Services (CMS) published the Medicaid and CHIP Managed Care Final Rule.  The rule, many provisions of which went into effect July 1, 2017, is a sweeping update to the regulatory framework for Medicaid managed care for the first time in many years. The rule places new restrictions on how health care providers may receive supplemental payments in the Medicaid managed care context, which is a significant change for California’s public health care systems.

For years, California’s public health care system have financed and received supplemental payments for services provided to patients enrolled in Medi-Cal managed care plans. These supplemental payments add up to more than $1 billion in federal funds each year and supplement the state’s low reimbursement rates at no additional cost to the state.  They are a critical source of funding, allowing public health care systems to continue providing a disproportionate share of their overall care to low-income patients.

In order to come into compliance with the new regulation and maintain existing funding, public health care systems had to restructure their supplemental payments to include two new elements – the Quality Incentive Program (QIP) and Enhanced Payment Program (EPP). QIP represents a new pay-for-performance program for California’s public health care systems that converts funding from previously existing supplemental payments into a value-based structure, meeting the Managed Care Rule’s option that allows payments tied to performance.  EPP creates a funding pool to supplement base rates public health care systems receive through Medi-Cal manaed care contracts. CAPH continues to work with CMS on updates to the programs.

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