DEPARTMENT OF HEALTH & HUMAN SERVICES 
Health Care Financing Administration  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
February 20, 1998  
Dear State Medicaid Director:  
This letter is one in a series that provides guidance on the implementation of the Balanced Budget Act of 1997 
(BBA). The BBA contains numerous provisions relating specifically to managed care. In order to provide 
guidance on these as quickly as possible, we are issuing a number of managed care policy letters (list of those 
already issued is attached). This letter is the fifteenth in the managed care series. Its purpose is to advise you of 
three provisions relating to beneficiary protections. Further guidance on each of the provisions will be 
forthcoming in regulations.  
Protection of Enrollee-Provider Communications 
Under current law, Medicaid beneficiaries are entitled to receive from their health care provider, the full range 
of medical advice and counseling that is appropriate for their condition. The BBA expands upon this basic right 
by explicitly precluding a managed care organization (MCO) from establishing restrictions that interfere with 
enrollee-provider communications. Under the provision, a covered health care professional who is acting within 
his/her scope of practice, must be permitted to freely advise a patient about his/her health status and discuss 
appropriate medical care or treatment for that condition or disease regardless of whether the care or treatment is 
covered under the contract with the MCO.  
While the new law precludes MCOs from interfering with enrollee-provider communications, it does not 
require MCOs to provide, reimburse for, or provide coverage of counseling or referral services for specific 
services, if the MCO objects to the service on moral or religious grounds. (Please note, however, that States 
remain responsible for assuring access to all covered services). In these cases, the MCO must inform 
beneficiaries in writing of its policies before and during enrollment. If the MCO changes its policies with regard 
to a specific counseling or referral service, the organization must provide written notification to enrollees within 
90 days of the change. The MCO determines the means of communication.  
A covered health care professional means a doctor of medicine or osteopathy. The term may also include any of 
the following professionals if their services are covered under the contract: podiatrist, optometrist, chiropractor, 
psychologist, dentist, physician assistant, physical or occupational therapist and therapy assistant, speech-
language pathologist, audiologist, registered or licensed practical nurse (including nurse practitioner, clinical 
nurse specialist, certified registered nurse anesthetist, and certified nurse-midwife), licensed certified social 
worker, registered respiratory therapist, and certified respiratory therapy technician.  
Antidiscrimination of Providers 
Under the BBA, an MCO may not discriminate with respect to participation, reimbursement, or indemnification 
as to any provider who is acting within the scope of the provider's license or certification under applicable State 
law, solely on the basis of such license or certification. This provision should not be construed as an any willing 
provider law as it does not prohibit MCOs from limiting provider participation to the extent necessary to meet 
the needs of the organization's enrollees. This provision also does not interfere with measures established by an 
MCO that are designed to maintain quality and control costs consistent with the responsibility of the 
organization.  
Demonstration of Adequate Capacity 
Under the BBA, a Medicaid managed care organization (MCO) must provide States and HCFA with adequate 
assurances (in a time and manner determined by the HCFA) that the organization, with respect to its service 
area, has the capacity to serve the expected enrollment. The documentation submitted by an MCO must assure 
that the organization:   (cid:131)  offers an appropriate range of services and access to preventive and primary care services for the 
populations expected to be enrolled in such service area, and   
(cid:131)  maintains a sufficient number, mix, and geographic distribution of providers of services.   
 
Additional requirements relating to access are contained in the BBA's Quality provisions. Under these 
provisions, HCFA, in consultation with the States, will establish access standards and State quality assessment 
and improvement strategies will have to be consistent with those standards beginning January 1, 1999. While 
standards are under development under each provision, we intend to continue the existing process under 1115 
and 1915(b) waiver programs for evaluating access. MCOs, in turn, should continue to supply the same type of 
documentation they currently submit to assure services are available in compliance with the standards included 
in approved waiver programs.  
If you have any questions regarding these provisions, please contact Nicole Martin at 410-786-1068, or by e-
mail at nmartin3@hcfa.gov.  
Sincerely,  
/s/  
Sally K. Richardson   
Director   
Center for Medicaid and State Operations  
Attachments  
cc: All HCFA Regional Administrators   
All HCFA Associate Regional Administrators for Medicaid and State Operations   
Lee Partridge - American Public Welfare Association   
Joy Wilson - National Conference of State Legislatures   
Jennifer Baxendell - National Governors Association   
HCFA Press Office  
  
   Attachment 
Summary of Selected Medicaid Managed Care Provisions in the Balanced Budget Act of 1997 
  
Protection of Enrollee-Provider Communications (BBA 4704(a) -- SSA 1932(b)(3)) 
Under a contract under section 1903(m) of the Social Security Act ("Act"), a Medicaid managed care 
organization (MCO) must not prohibit or otherwise restrict a covered health professional from advising his/her 
patient about the health status of the individual or medical care or treatment for the individual's condition or 
disease, regardless of whether benefits for that care or treatment are provided under the contract, if the 
professional is acting within the lawful scope of practice.  
The term "health care professional" means a physician (as defined in section 1861(r) of the Act) or other health 
care professional if coverage for the professional's services is provided under the MCO's contract for the 
services. A health care professional includes the following: podiatrist, optometrist, chiropractor, psychologist, 
dentist, physician assistant, physical or occupational therapist and therapy assistant, speech-language 
pathologist, audiologist, registered or licensed practical nurse (including nurse practitioner, clinical nurse 
specialist, certified registered nurse, registered nurse anesthetist, and certified nurse-midwife), licensed certified 
social worker, registered respiratory therapist, and certified respiratory therapy technician.  
The law does not require, and was not intended to require, a Medicaid MCO to provide, reimburse for, or 
provide coverage of, a counseling or referral service if the MCO objects, on moral or religious grounds, to a 
particular service being provided and if the MCO makes available information on its policies regarding that 
service to prospective enrollees before or during enrollment and to enrollees within 90 days after the date that 
the MCO adopts a change in policy regarding such a counseling or referral service. The MCO determines the 
means by which it makes the information available.  
Nothing in this provision affects the disclosure requirement under State law or under the Employee Retirement 
Income Security Act of 1974.  
Antidiscrimination (BBA 4704(a) -- SSA 1932(b)(7)) 
A Medicaid managed care organization shall not discriminate with respect to participation, reimbursement, or 
indemnification as to any provider who is acting within the scope of the provider's license or certification under 
applicable State law, solely on the basis of such license or certification. This law shall not be construed to 
prohibit an organization from including providers only to the extent necessary to meet the needs of the 
organization's enrollees or from establishing any measure designed to maintain quality and control costs 
consistent with the responsibilities of the organization.  
Demonstration of Adequate Capacity and Services (BBA 4704(a) -- SSA 1932(b)(7)) 
Each Medicaid MCO shall provide the State and Secretary with adequate assurances (in a time and manner 
determined by the Secretary) that the organization, with respect to a service area, has the capacity to serve the 
expected enrollment in such service area, including assurances that the organization:  
(cid:131)  offers an appropriate range of services and access to preventive and primary care services for the 
populations expected to be enrolled in such service area, and   
(cid:131)  maintains a sufficient number, mix, and geographic distribution of providers of services.   
   BBA MANAGED CARE STATE LETTERS  
Section Subject Date Issued  
4701 SPA Option for Managed Care 12/17/97  
4704(a) Specification of Benefits 12/17/97  
4707(a) Marketing Restrictions 12/30/97  
4704(a) Miscellaneous Managed Care Provisions 12/30/97  
4704(b)  4706  4707(a)  4707(c)  4708(b)  4708(c)  4708(d)  
4701 Choice, MCE Definition, Repeal of 75/25, and Approval Threshold 1/14/98  
4703  
4708(a)  
4705 External Quality Review 1/20/98  
4704(a) Mental Health Parity 1/20/98  
4701(a) Enrollment, Termination, and Default Assignment 1/21/98  
4702 PCCM Services Without Waiver 1/21/98  
4707(a) Sanctions for Noncompliance 2/20/98  
4701(a) Provision of Information & Effective Dates 2/20/98  
4710(a)  
4704(a) Emergency Services 2/20/98  
4704(a) Grievance Procedures 2/20/98  
4707(a) Prohibiting Affiliations with Debarred Individuals 2/20/98