Title 42—Public Health--Volume 1
PART 438—MANAGED CARE
§ 438.810   Expenditures for enrollment broker services.
(a) Definitions. As used in this section—
Enrollment activities means activities such as distributing, collecting, and processing enrollment materials and taking enrollments by phone, in person, or through electronic methods of communication.
Enrollment broker means an individual or entity that performs choice counseling or enrollment activities, or both.
Enrollment services means choice counseling, or enrollment activities, or both.
(b) Conditions that enrollment brokers must meet. State expenditures for the use of enrollment brokers are considered necessary for the proper and efficient operation of the State plan and thus eligible for FFP only if the broker and its subcontractors meet the following conditions:
(1) Independence. The broker and its subcontractors are independent of any MCO, PIHP, PAHP, PCCM, PCCM entity or other health care provider in the State in which they provide enrollment services. A broker or subcontractor is not considered “independent” if it—
(i) Is an MCO, PIHP, PAHP, PCCM, PCCM entity or other health care provider in the State;
(ii) Is owned or controlled by an MCO, PIHP, PAHP, PCCM, PCCM entity or other health care provider in the State; or
(iii) Owns or controls an MCO, PIHP, PAHP, PCCM, PCCM entity, or other health care provider in the State.
(2) Freedom from conflict of interest. The broker and its subcontractor are free from conflict of interest. A broker or subcontractor is not considered free from conflict of interest if any person who is the owner, employee, or consultant of the broker or subcontractor or has any contract with them—
(i) Has any direct or indirect financial interest in any entity or health care provider that furnishes services in the State in which the broker or subcontractor provides enrollment services;
(ii) Has been excluded from participation under Title XVIII or XIX of the Act;
(iii) Has been debarred by any Federal agency; or
(iv) Has been, or is now, subject to civil money penalties under the Act.
(3) Approval. The initial contract or memorandum of agreement (MOA) for services performed by the broker has been reviewed and approved by CMS.
§ 438.812   Costs under risk and nonrisk contracts.
(a) Under a risk contract, the total amount the State agency pays for carrying out the contract provisions is a medical assistance cost.
(b) Under a nonrisk contract—
(1) The amount the State agency pays for the furnishing of medical services to eligible beneficiaries is a medical assistance cost; and
(2) The amount the State agency pays for the contractor's performance of other functions is an administrative cost.
§ 438.816   Expenditures for the beneficiary support system for enrollees using LTSS.
State expenditures for the person or entity providing the services outlined in § 438.71(d) are considered necessary for the proper and efficient operation of the State plan and thus eligible for FFP only if all of the following conditions are met:
(a) Costs must be supported by an allocation methodology that appears in the State's approved Public Assistance Cost Allocation Plan in § 433.34 of this chapter.
(b) The costs do not duplicate payment for activities that are already being offered or should be provided by other entities or paid by other programs.
(c) The person or entity providing the services must meet the requirements in § 438.810(b)(1) and (2).
(d) The initial contract or MOA for services performed has been reviewed and approved by CMS.
§ 438.818   Enrollee encounter data.
(a) FFP is available for expenditures under an MCO, PIHP, or PAHP contract only if the State meets the following conditions for providing enrollee encounter data to CMS:
(1) Enrollee encounter data reports must comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) security and privacy standards and be submitted in the format required by the Medicaid Statistical Information System or format required by any successor system to the Medicaid Statistical Information System.
(2) States must ensure that enrollee encounter data is validated for accuracy and completeness as required under § 438.242 before submitting data to CMS. States must also validate that the data submitted to CMS is a complete and accurate representation of the information submitted to the State by the MCOs, PIHPs, and PAHPs.
(3) States must cooperate with CMS to fully comply with all encounter data reporting requirements of the Medicaid Statistical Information System or any successor system.
(b) CMS will assess a State's submission to determine if it complies with current criteria for accuracy and completeness.
(c) If, after being notified of compliance issues under paragraph (b) of this section the State is unable to make a data submission compliant, CMS will take appropriate steps to defer and/or disallow FFP on all or part of an MCO, PIHP, or PAHP contract in a manner based on the enrollee and specific service type of the noncompliant data. Any deferral and/or disallowance of FFP will be effectuated utilizing the processes specified in §§ 430.40 and 430.42 of this chapter.
§ 438.900   Meaning of terms.
For purposes of this subpart, except where the context clearly indicates otherwise, the following terms have the meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the total amount of specified benefits that may be paid under a MCO, PIHP, or PAHP.
Annual dollar limit means a dollar limitation on the total amount of specified benefits that may be paid in a 12-month period under a MCO, PIHP, or PAHP.
Cumulative financial requirements are financial requirements that determine whether or to what extent benefits are provided based on accumulated amounts and include deductibles and out-of-pocket maximums. (However, cumulative financial requirements do not include aggregate lifetime or annual dollar limits because these two terms are excluded from the meaning of financial requirements.)
Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefits are benefits defined in section 1905(r) of the Act.
Financial requirements include deductibles, copayments, coinsurance, or out-of-pocket maximums. Financial requirements do not include aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits for items or services for medical conditions or surgical procedures, as defined by the State and in accordance with applicable Federal and State law, but do not include mental health or substance use disorder benefits. Any condition defined by the State as being or as not being a medical/surgical condition must be defined to be consistent with generally recognized independent standards of current medical practice (for example, the most current version of the International Classification of Diseases (ICD) or State guidelines). Medical/surgical benefits include long term care services.
Mental health benefits means benefits for items or services for mental health conditions, as defined by the State and in accordance with applicable Federal and State law. Any condition defined by the State as being or as not being a mental health condition must be defined to be consistent with generally recognized independent standards of current medical practice (for example, the most current version of the Diagnostic and Statistical Manual of Mental Disorders (DSM), the most current version of the ICD, or State guidelines). Mental health benefits include long term care services.
Substance use disorder benefits means benefits for items or services for substance use disorders, as defined by the State and in accordance with applicable Federal and State law. Any disorder defined by the State as being or as not being a substance use disorder must be defined to be consistent with generally recognized independent standards of current medical practice (for example, the most current version of the DSM, the most current version of the ICD, or State guidelines). Substance use disorder benefits include long term care services.
Treatment limitations include limits on benefits based on the frequency of treatment, number of visits, days of coverage, days in a waiting period, or other similar limits on the scope or duration of treatment. Treatment limitations include both quantitative treatment limitations, which are expressed numerically (such as 50 outpatient visits per year), and nonquantitative treatment limitations, which otherwise limit the scope or duration of benefits for treatment under a plan or coverage. ( See § 438.910(d)(2) for an illustrative list of nonquantitative treatment limitations.) A permanent exclusion of all benefits for a particular condition or disorder, however, is not a treatment limitation for purposes of this definition.
§ 438.905   Parity requirements for aggregate lifetime and annual dollar limits.
(a) General parity requirement. Each MCO, PIHP, and PAHP providing services to MCO enrollees must comply with paragraphs (b), (c), or (e) of this section for all enrollees of a MCO in States that cover both medical/surgical benefits and mental health or substance use disorder benefits under the State plan. This section details the application of the parity requirements for aggregate lifetime and annual dollar limits.
(b) MCOs, PIHPs, or PAHPs with no limit or limits on less than one-third of all medical/surgical benefits. If a MCO, PIHP, or PAHP does not include an aggregate lifetime or annual dollar limit on any medical/surgical benefits or includes an aggregate lifetime or annual dollar limit that applies to less than one-third of all medical/surgical benefits provided to enrollees through a contract with the State, it may not impose an aggregate lifetime or annual dollar limit, respectively, on mental health or substance use disorder benefits.
(c) MCOs, PIHPs, or PAHPs with a limit on at least two-thirds of all medical/surgical benefits. If a MCO, PIHP, or PAHP includes an aggregate lifetime or annual dollar limit on at least two-thirds of all medical/surgical benefits provided to enrollees through a contract with the State, it must either—
(1) Apply the aggregate lifetime or annual dollar limit both to the medical/surgical benefits to which the limit would otherwise apply and to mental health or substance use disorder benefits in a manner that does not distinguish between the medical/surgical benefits and mental health or substance use disorder benefits; or
(2) Not include an aggregate lifetime or annual dollar limit on mental health or substance use disorder benefits that is more restrictive than the aggregate lifetime or annual dollar limit, respectively, on medical/surgical benefits.
(d) Determining one-third and two-thirds of all medical/surgical benefits. For purposes of this section, the determination of whether the portion of medical/surgical benefits subject to an aggregate lifetime or annual dollar limit represents one-third or two-thirds of all medical/surgical benefits is based on the total dollar amount of all combinations of MCO, PIHP, and PAHP payments for medical/surgical benefits expected to be paid under the MCO, PIHP, or PAHP for a contract year (or for the portion of a contract year after a change in benefits that affects the applicability of the aggregate lifetime or annual dollar limits). Any reasonable method may be used to determine whether the dollar amount expected to be paid under the MCOs, PIHPs, and PAHPs will constitute one-third or two-thirds of the dollar amount of all payments for medical/surgical benefits.
(e) MCO, PIHP, or PAHP not described in this section —(1) In general. A MCO, PIHP, or PAHP that is not described in paragraph (b) or (c) of this section for aggregate lifetime or annual dollar limits on medical/surgical benefits, must either—
(i) Impose no aggregate lifetime or annual dollar limit, on mental health or substance use disorder benefits; or
(ii) Impose an aggregate lifetime or annual dollar limit on mental health or substance use disorder benefits that is no more restrictive than an average limit calculated for medical/surgical benefits in the following manner. The average limit is calculated by taking into account the weighted average of the aggregate lifetime or annual dollar limits, as appropriate, that are applicable to the categories of medical/surgical benefits. Limits based on delivery mechanisms, such as inpatient/outpatient treatment or normal treatment of common, low-cost conditions (such as treatment of normal births), do not constitute categories for purposes of this paragraph (e)(1)(ii). In addition, for purposes of determining weighted averages, any benefits that are not within a category that is subject to a separately-designated dollar limit under the contract are taken into account as a single separate category by using an estimate of the upper limit on the dollar amount that a MCO, PIHP, or PAHP may reasonably be expected to incur for such benefits, taking into account any other applicable restrictions.
(2) Weighting. For purposes of this paragraph (e), the weighting applicable to any category of medical/surgical benefits is determined in the manner set forth in paragraph (d) of this section for determining one-third or two-thirds of all medical/surgical benefits.
§ 438.910   Parity requirements for financial requirements and treatment limitations.
(a) Clarification of terms —(1) Classification of benefits. When reference is made in this section to a classification of benefits, the term “classification” means a classification as described in paragraph (b)(2) of this section.
(2) Type of financial requirement or treatment limitation. When reference is made in this section to a type of financial requirement or treatment limitation, the reference to type means its nature. Different types of financial requirements include deductibles, copayments, coinsurance, and out-of-pocket maximums. Different types of quantitative treatment limitations include annual, episode, and lifetime day and visit limits. See paragraph (d)(2) of this section for an illustrative list of nonquantitative treatment limitations.
(3) Level of a type of financial requirement or treatment limitation. When reference is made in this section to a level of a type of financial requirement or treatment limitation, level refers to the magnitude of the type of financial requirement or treatment limitation.
(b) General parity requirement —(1) General rule and scope. Each MCO, PIHP and PAHP providing services to MCO enrollees in a State that covers both medical/surgical benefits and mental health or substance use disorder benefits under the State plan, must not apply any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification furnished to enrollees (whether or not the benefits are furnished by the same MCO, PIHP, or PAHP). Whether a financial requirement or treatment limitation is a predominant financial requirement or treatment limitation that applies to substantially all medical/surgical benefits in a classification is determined separately for each type of financial requirement or treatment limitation. The application of the rules of this paragraph (b) to financial requirements and quantitative treatment limitations is addressed in paragraph (c) of this section; the application of the rules of this paragraph (b) to nonquantitative treatment limitations is addressed in paragraph (d) of this section.
(2) Classifications of benefits used for applying rules. If an MCO enrollee is provided mental health or substance use disorder benefits in any classification of benefits described in this paragraph (b)(2), mental health or substance use disorder benefits must be provided to the enrollee in every classification in which medical/surgical benefits are provided. In determining the classification in which a particular benefit belongs, a MCO, PIHP, or PAHP must apply the same reasonable standards to medical/surgical benefits and to mental health or substance use disorder benefits. To the extent that a MCO, PIHP, or PAHP provides benefits in a classification and imposes any separate financial requirement or treatment limitation (or separate level of a financial requirement or treatment limitation) for benefits in the classification, the rules of this section apply separately for that classification for all financial requirements or treatment limitations. The following classifications of benefits are the only classifications used in applying the rules of this section:
(i) Inpatient. Benefits furnished on an inpatient basis.
(ii) Outpatient. Benefits furnished on an outpatient basis. See special rules for office visits in paragraph (c)(2) of this section.
(iii) Emergency care. Benefits for emergency care.
(iv) Prescription drugs. Benefits for prescription drugs. See special rules for multi-tiered prescription drug benefits in paragraph (c)(2) of this section.
(c) Financial requirements and quantitative treatment limitations —(1) Determining “substantially all” and “predominant” —(i) Substantially all. For purposes of this section, a type of financial requirement or quantitative treatment limitation is considered to apply to substantially all medical/surgical benefits in a classification of benefits if it applies to at least two-thirds of all medical/surgical benefits in that classification. If a type of financial requirement or quantitative treatment limitation does not apply to at least two-thirds of all medical/surgical benefits in a classification, then that type cannot be applied to mental health or substance use disorder benefits in that classification.
(ii) Predominant. (A) If a type of financial requirement or quantitative treatment limitation applies to at least two-thirds of all medical/surgical benefits in a classification as determined under paragraph (c)(1)(i) of this section, the level of the financial requirement or quantitative treatment limitation that is considered the predominant level of that type in a classification of benefits is the level that applies to more than one-half of medical/surgical benefits in that classification subject to the financial requirement or quantitative treatment limitation.
(B) If, for a type of financial requirement or quantitative treatment limitation that applies to at least two-thirds of all medical/surgical benefits in a classification, there is no single level that applies to more than one-half of medical/surgical benefits in the classification subject to the financial requirement or quantitative treatment limitation, the MCO, PIHP, or PAHP may combine levels until the combination of levels applies to more than one-half of medical/surgical benefits subject to the financial requirement or quantitative treatment limitation in the classification. The least restrictive level within the combination is considered the predominant level of that type in the classification. (For this purpose, a MCO, PIHP, or PAHP may combine the most restrictive levels first, with each less restrictive level added to the combination until the combination applies to more than one-half of the benefits subject to the financial requirement or treatment limitation.)
(iii) Portion based on MCO, PIHP or PAHP payments. For purposes of this section, the determination of the portion of medical/surgical benefits in a classification of benefits subject to a financial requirement or quantitative treatment limitation (or subject to any level of a financial requirement or quantitative treatment limitation) is based on the total dollar amount of all combinations of MCO, PIHP, and PAHP payments for medical/surgical benefits in the classification expected to be paid under the MCOs, PIHPs, and PAHPs for a contract year (or for the portion of a contract year after a change in benefits that affects the applicability of the financial requirement or quantitative treatment limitation).
(iv) Clarifications for certain threshold requirements. For any deductible, the dollar amount of MCO, PIHP, or PAHP payments includes all payments for claims that would be subject to the deductible if it had not been satisfied. For any out-of-pocket maximum, the dollar amount of MCO, PIHP, or PAHP payments includes all payments associated with out-of-pocket payments that are taken into account towards the out-of-pocket maximum as well as all payments associated with out-of-pocket payments that would have been made towards the out-of-pocket maximum if it had not been satisfied. Similar rules apply for any other thresholds at which the rate of MCO, PIHP, or PAHP payment changes.
(v) Determining the dollar amount of MCO, PIHP, or PAHP payments. Subject to paragraph (c)(1)(iv) of this section, any reasonable method may be used to determine the dollar amount expected to be paid under a MCO, PIHP, or PAHP for medical/surgical benefits subject to a financial requirement or quantitative treatment limitation (or subject to any level of a financial requirement or quantitative treatment limitation).
(2) Special rules —(i) Multi-tiered prescription drug benefits. If a MCO, PIHP, or PAHP applies different levels of financial requirements to different tiers of prescription drug benefits based on reasonable factors determined in accordance with the rules in paragraph (d)(1) of this section (relating to requirements for nonquantitative treatment limitations) and without regard to whether a drug is generally prescribed for medical/surgical benefits or for mental health or substance use disorder benefits, the MCO, PIHP, or PAHP satisfies the parity requirements of this section for prescription drug benefits. Reasonable factors include cost, efficacy, generic versus brand name, and mail order versus pharmacy pick-up/delivery.
(ii) Sub-classifications permitted for office visits, separate from other outpatient services. For purposes of applying the financial requirement and treatment limitation rules of this section, a MCO, PIHP, or PAHP may divide its benefits furnished on an outpatient basis into the two sub-classifications described in this paragraph (c)(2)(ii). After the sub-classifications are established, the MCO, PIHP or PAHP may not impose any financial requirement or quantitative treatment limitation on mental health or substance use disorder benefits in any sub-classification that is more restrictive than the predominant financial requirement or quantitative treatment limitation that applies to substantially all medical/surgical benefits in the sub-classification using the methodology set forth in paragraph (c)(1) of this section. Sub-classifications other than these special rules, such as separate sub-classifications for generalists and specialists, are not permitted. The two sub-classifications permitted under this paragraph (c)(2)(ii) are:
(A) Office visits (such as physician visits); and
(B) All other outpatient items and services (such as outpatient surgery, facility charges for day treatment centers, laboratory charges, or other medical items).
(3) No separate cumulative financial requirements. A MCO, PIHP, or PAHP may not apply any cumulative financial requirement for mental health or substance use disorder benefits in a classification that accumulates separately from any established for medical/surgical benefits in the same classification.
(4) Compliance with other cost-sharing rules. Each MCO, PIHP, and PAHP must meet the cost-sharing requirements in § 438.108 when applying Medicaid cost-sharing.
(d) Nonquantitative treatment limitations —(1) General rule. A MCO, PIHP, or PAHP may not impose a nonquantitative treatment limitation for mental health or substance use disorder benefits in any classification unless, under the policies and procedures of the MCO, PIHP, or PAHP as written and in operation, any processes, strategies, evidentiary standards, or other factors used in applying the nonquantitative treatment limitation to mental health or substance use disorder benefits in the classification are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation for medical/surgical benefits in the classification.
(2) Illustrative list of nonquantitative treatment limitations. Nonquantitative treatment limitations include -
(i) Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative;
(ii) Formulary design for prescription drugs;
(iii) For MCOs, PIHPs, or PAHPs with multiple network tiers (such as preferred providers and participating providers), network tier design;
(iv) Standards for provider admission to participate in a network, including reimbursement rates;
(v) MCO, PIHP, or PAHP methods for determining usual, customary, and reasonable charges;
(vi) Refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols);
(vii) Exclusions based on failure to complete a course of treatment;
(viii) Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the MCO, PIHP, or PAHP; and
(ix) Standards for providing access to out-of-network providers.
(3) Application to out-of-network providers. Any MCO, PIHP or PAHP providing access to out-of-network providers for medical/surgical benefits within a classification, must use processes, strategies, evidentiary standards, or other factors in determining access to out-of-network providers for mental health or substance use disorder benefits that are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors in determining access to out-of-network providers for medical/surgical benefits.
§ 438.915   Availability of information.
(a) Criteria for medical necessity determinations. The criteria for medical necessity determinations, made by a MCO or by a PIHP or PAHP providing services to an MCO enrollee, for mental health or substance use disorder benefits must be made available by the MCO, PIHP, or PAHP administrator to any enrollee, potential enrollee, or contracting provider upon request. MCOs, PIHPs, and PAHPs operating in compliance with § 438.236(c) will be deemed compliant with the requirements in this paragraph (a).
(b) Reason for any denial. The reason for any denial by a MCO, PIHP, or PAHP of reimbursement or payment for services for mental health or substance use disorder benefits in the case of any enrollee must be made available by the MCO, PIHP, or PAHP administrator to the enrollee.
(c) Provisions of other law. Compliance with the disclosure requirements in paragraphs (a) and (b) of this section is not determinative of compliance with any other provision of applicable Federal or State law.
§ 438.920   Applicability.
(a) MCOs, PIHPs, and PAHPs. The requirements of this subpart apply to each MCO, PIHP, and PAHP offering services to enrollees of a MCO, in States covering medical/surgical and mental health or substance use disorder services under the State plan. These requirements regarding coverage for services that must be provided to enrollees of an MCO apply regardless of the delivery system of the medical/surgical, mental health, or substance use disorder services under the State plan.
(b) State responsibilities. (1) In any instance where the full scope of medical/surgical and mental health and substance use disorder services are not provided through the MCO, the State must review the mental health and substance use disorder and medical/surgical benefits provided through the MCO, PIHP, PAHP, and fee-for service (FFS) coverage to ensure the full scope of services available to all enrollees of the MCO complies with the requirements in this subpart. The State must provide documentation of compliance with requirements in this subpart to the general public and post this information on the State Medicaid Web site by October 2, 2017. Such documentation must be updated prior to any change in MCO, PIHP, PAHP or FFS State plan benefits.
(2) The State must ensure that all services are delivered to the enrollees of the MCO in compliance with this subpart.
(c) Scope. This subpart does not—
(1) Require a MCO, PIHP, or PAHP to provide any mental health benefits or substance use disorder benefits beyond what is specified in its contract, and the provision of benefits by a MCO, PIHP, or PAHP for one or more mental health conditions or substance use disorders does not require the MCO, PIHP or PAHP to provide benefits for any other mental health condition or substance use disorder;
(2) Require a MCO, PIHP, or PAHP that provides coverage for mental health or substance use disorder benefits only to the extent required under 1905(a)(4)(D) of the Act to provide additional mental health or substance use disorder benefits in any classification in accordance with this section; or
(3) Affect the terms and conditions relating to the amount, duration, or scope of mental health or substance use disorder benefits under the Medicaid MCO, PIHP, or PAHP contract except as specifically provided in §§ 438.905 and 438.910.
§ 438.930   Compliance dates.
In general, contracts with MCOs, PIHPs, and PAHPs offering Medicaid State plan services to enrollees, and those entities, must comply with the requirements of this subpart no later than October 2, 2017.