Medicaid Program; Medicaid Managed Care

SUMMARY: This proposed rule would amend the Medicaid regulations to

allow the States greater flexibility by giving them the option to

require Medicaid recipients to enroll in managed care entities without

obtaining waivers. These revisions, which are authorized by the

Balanced Budget Act of 1997, would establish new beneficiary

protections in areas such as quality assurance, grievance rights, and

coverage of emergency services. They would eliminate certain

requirements viewed by State agencies as impediments to the growth of

managed care programs, such as the enrollment composition requirement,

the right to disenroll without cause at any time, and the prohibition

against enrollee cost-sharing. They would also permit State agencies to

amend their State plans to require enrollment in managed care

organizations subject to certain conditions, including limits on whose

enrollment can be mandated, and a requirement for beneficiary choice.

In addition, this rule would extend most of these new requirements to

prepaid health plans.

DATES: Comments will be considered if we receive them at the

appropriate address, as provided below, no later than 5 p.m. on

November 30, 1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: HCFA-2001-P, P.O. Box 7517,

Baltimore, MD 21207-0517.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses: Room 413-G Hubert H.

Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201,

or Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: Subparts A and B--Michael Fiore (410)

786-0623; Subpart C--Kristin McGinn (410) 786-4581; Subpart E--Ann Page

(410) 786-0083; Nicole Martin (410) 786-1068; Subpart F--Nicole Martin

(410) 786-1068; Brenda Jackson (816) 426-3406; Subpart H--Tim Roe (410)

786-2006; Subpart I--Tim Roe (410) 786-2006; Subpart J--Michael Fiore

(410) 786-0623.

SUPPLEMENTARY INFORMATION: Because of staffing and resource

limitations, we cannot accept comments by facsimile (FAX) transmission.

In commenting, please refer to file code 2CFA-2001-P. Comments received

timely will be available for public inspection as they are received,

generally beginning approximately 3 weeks after publication of a

document, in Room 443-G of the Department's offices at 200 Independence

Avenue, SW., Washington, DC, on Monday through Friday of each week from

8:30 a.m. to 5 p.m. (phone: (202) 690-7890).

Copies: To order copies of the Federal Register containing this

document, send your request to: New Orders, Superintendent of

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asynchronous dial-in. Internet users can access the database by using

the World Wide Web;

I. Introduction

Title XIX of the Social Security Act (the Act) established the

Medicaid program, under which matching Federal funds are provided to

State agencies to pay for coverage of health care services to low-

income pregnant women, families and aged, blind, and disabled

individuals. The Medicaid program is administered by States according

to Federal statutory and regulatory requirements, under the aegis of a

``State plan'' that must be approved by the Health Care Financing

Administration (HCFA). At the program's inception, most health coverage

under the Medicaid program was provided by reimbursing health care

providers on a fee-for-service basis for services furnished to Medicaid

beneficiaries.

Note: The term ``beneficiaries'' is used throughout the preamble

to refer to individuals eligible for and receiving Medicaid

benefits. The term ``recipients'' is used in the text of the

regulation and is synonymous to ``beneficiary''.

Increasingly, however, State agencies have provided Medicaid

coverage through managed care contracts, under which a health

maintenance organization (HMO) or other similar entity is paid a fixed

monthly capitation payment for each beneficiary enrolled with the

entity for health coverage. Enrolled beneficiaries are required to

receive the majority of health care services through the managed care

entity. In most States, enrollment in such managed care arrangements is

currently mandatory for at least certain categories of beneficiaries.

Prior to the enactment of the Balanced Budget Act of 1997 (BBA), States

agencies were required to obtain a waiver of a statutory ``freedom of

choice requirement'' in order to operate such mandatory managed care

programs, as discussed below. No such waiver was required for

arrangements involving voluntary enrollment in managed care.

Chapter One of the Medicaid provisions (Subtitle H) of the BBA

significantly strengthens Medicaid managed care programs by modifying

prior law to: (1) reflect the more widespread use of managed care by

State agencies to serve Medicaid beneficiaries; (2) build on the

increased expertise acquired by HCFA and the State agencies in the

administration of managed care programs; (3) incorporate the knowledge

that has been learned from Medicaid, Medicare and private sector

managed care programs and their oversight organizations; and (4)

provide a framework that will allow HCFA and State agencies to continue

to incorporate further advances in the oversight of managed care,

particularly as it pertains to the protection of beneficiaries and the

quality of care delivered to Medicaid enrollees. This proposed rule

would implement most of the provisions of that chapter (that is,

sections 4701 through 4710). It addresses BBA provisions that reduce

the need for State agencies to obtain waivers to implement certain

managed care programs; eliminate enrollment composition requirements

for managed care contracts; increase beneficiary protections for

enrollees in Medicaid

[[Page 52023]]

managed care entities; improve quality assurance; establish solvency

standards; protect against fraud and abuse; permit a period of

guaranteed eligibility for Medicaid beneficiaries; and improve certain

administrative features of State managed care programs.

The development of this regulation has been guided by knowledge

shared with us by a number of constituencies and experts over the past

decade. We have addressed the issues identified by advocates regarding

the rights of Medicaid beneficiaries, particularly vulnerable

populations, and how they can be protected as State agencies

increasingly replace fee-for-service Medicaid delivery systems with

managed care programs. In doing so, we have been guided by the

Consumers Bill of Rights and Responsibilities (CBRR) issued in November

1997, by the President's Advisory Commission on Consumer Protection and

Quality in the Health Care Industry. A Presidential directive ordered

the Medicaid program to comply, to the extent permitted by law, with

the recommendations in the CBRR. As a result, when writing this

regulation, we incorporated the CBRR recommendations whenever

authorized by law.

The knowledge and experience that State agencies have shared with

us has also influenced the content of this proposed rule. Numerous

State agencies have used waivers of Title XIX requirements authorized

under section 1115 of the Act referred to as ``1115 waivers'' to

implement research and demonstration projects to test innovative

managed care programs. As part of our approval of a State agency waiver

program, an evaluation of the effectiveness of these interventions is

required. Many of these demonstrations have addressed the effectiveness

of different approaches to Medicaid managed care programs. We have also

incorporated knowledge learned from ``freedom of choice'' waivers

authorized under section 1915(b) of the Act that also allows State

agencies to waive limited provisions of the Act in order to implement

managed care programs, consistent with State-specific design features.

These waiver applications are also evaluated based on their impact on

access to services, quality of care, and cost effectiveness. Our

experiences with State agencies in overseeing both these types of

waiver programs have influenced the development of this regulation. It

should be noted here that, even with the implementation of BBA, State

agencies still retain the option of applying for Federal waiver

authority under sections 1915(b) and 1115 of the Act.

In the last decade, private sector group purchasers, quality

oversight organizations, the managed care industry, and quality

improvement experts have greatly advanced our knowledge base of how

managed care can be made more effective in serving consumers, through

research, program evaluations, and tests of new administrative,

payment, and healthcare delivery systems. We have attempted to

incorporate the knowledge shared by these organizations, along with

literature evaluating managed care, to develop the specifications for

State Medicaid managed care purchasing programs and expect to continue

work with these organizations and the State agencies.

Several principles also guided the development of this proposed

rule. First, when there was not clear evidence that one single approach

to operationalizing statutory language was more effective than other

approaches, we attempted to provide State agencies with sufficient

flexibility to continue to be innovative in the development and

improvement of their State Medicaid managed care programs. We deviated

from this principle when there was not a clear need for State

flexibility or when there was a potential to develop Medicaid

regulatory language that is the same as the language used in the

Medicare+Choice (M+C) rule published on June 26, 1998 at 63 FR 34967.

That rule implements Medicare managed care provisions in the BBA, many

of which are similar to the Medicaid provisions implemented in this

proposed rule. Consistency between the Medicare and the Medicaid

programs was intended to reduce the demand on the managed care industry

to comply with multiple, different sets of standards. Second, this

proposed rule was developed with a clear emphasis on consumer

protections and an increased focus on quality in managed care. Third,

the regulations were written to support State agencies in their role as

``health care purchasers,'' in addition to their role as ``health care

regulators.'' State agencies, like group purchasers in the private

sector, are continuing to seek better value for their health care

dollars, when ``value'' means the best possible combination of both

quality and price. Relevant subparts of this proposed rule attempt to

provide State agencies with the tools needed to become better

purchasers.

Finally, with respect to quality-related provisions, we opted to

take a more conservative approach and not impose greater regulatory

burden, without a strong evidence base. If commenters believe that

additional or stronger requirements are needed, we ask that comments

include, if possible, the evidence base in support of any such proposed

modifications.

This proposed rule would create a new part of the Code of Federal

Regulations (Part 438). All new managed care regulations created under

the authority of the BBA, other sections of existing Medicaid

regulations pertaining to managed care, and appropriate cross

references will appear in this new part. By creating this new part, we

are attempting to help users of the regulations to better comprehend

the overall regulatory framework for managed care. More detailed

discussions of the content of each of the subparts of this proposed

rule are found at the beginning of each subpart.

II. Background

A. Statutory Basis

Section 4701 of the BBA creates section 1932 of the Act, changes

terminology in Title XIX of the Act (most significantly, the BBA uses

the term ``managed care organization'' to refer to entities previously

labeled ``health maintenance organizations''), and amends section

1903(m) of the Act to require that contracts and managed care

organizations (MCOs) comply with applicable requirements in the new

section. Among other things, section 1932 of the Act permits State

agencies to require most groups of Medicaid beneficiaries to enroll in

managed care arrangements without section 1915(b) or section 1115

waiver authority. Under the law prior to the BBA, a State agency was

required to obtain Federal authority to waive beneficiary free choice

of providers in order to restrict their coverage to managed care

arrangements. Section 1932 of the Act also defines the term ``managed

care entity'' (MCE) to include MCOs and primary care case managers;

establishes new requirements for managed care enrollment and choice of

coverage; and requires MCEs and State agencies to provide specified

information to enrollees and potential enrollees.

Section 4702 of the BBA amends section 1905 of the Act to permit

State agencies to provide primary care case management services without

waiver authority. Instead, primary care case management services may be

made available under a State's Medicaid plan as an optional service.

Section 4703 of the BBA eliminates a former statutory requirement

that no more than 75 percent of the enrollees in an MCO be Medicaid or

Medicare beneficiaries.

Section 4704 of the BBA creates section 1932(b) of the Act to add

[[Page 52024]]

increased protections for those enrolled in managed care arrangements.

These include, among others, the application of a ``prudent

layperson's'' standard to determine whether emergency room use by a

beneficiary was appropriate; criteria for showing adequate capacity and

services; grievance procedures; and protections for enrollees against

liability for payment of an organization's or provider's debts in the

case of insolvency.

Section 4705 of the BBA creates section 1932(c) of the Act which

requires State agencies to develop and implement quality assessment and

improvement strategies for their managed care arrangements and to

provide for external, independent review of managed care activities.

Section 4706 of the BBA provides that, with limited exceptions, an

MCO must meet the same solvency standards set by State agencies for

private HMOs, or be licensed or certified by the State as a risk-

bearing entity.

Section 4707 of the BBA creates section 1932(d) of the Act to add

protections against fraud and abuse, such as restrictions on marketing

and sanctions for noncompliance.

Section 4708 of the BBA adds a number of provisions to improve the

administration of managed care arrangements. These include, among

others, provisions raising the threshold value of managed care

contracts that require the Secretary's prior approval, and permitting

the same copayments in MCOs as apply to fee-for-service arrangements.

Section 4709 of the BBA allows State agencies the option to provide

6 months of guaranteed eligibility for all individuals enrolled in an

MCE.

Section 4710 of the BBA specifies the effective dates for all the

provisions identified in sections 4701 through 4709.

B. Overview of Medicaid Managed Care

Medicaid managed care programs have been in existence almost since

the inception of the Medicaid program in 1965. In New York State,

Medicaid beneficiaries were enrolled in the Health Insurance Plan of

Greater New York beginning in 1967. The State of Washington began

contracting with Group Health of Puget Sound in 1970, and, by 1972,

various regional operations of Kaiser-Permanente served Medicaid

beneficiaries in three different States. Initially, there were no

statutory or regulatory provisions specifically addressing the use of

managed care by State agencies.

As a result of the increasing use of managed care in Medicaid,

Medicare, and the private sector, however, statutory provisions and

regulations have since been adopted to specifically address Medicaid

managed care. In 1976, the Health Maintenance Organization Act put

forth the first specific Federal requirements for Medicaid contracts

with HMOs or comparable organizations, by essentially requiring, with

some exceptions, that ``comprehensive'' specified services, be entered

into only with Federally qualified HMOs. By 1981, little more than 1

percent of Medicaid beneficiaries were enrolled in managed care.

Further legislative and regulatory changes made in 1981 and 1982 made

possible more widespread use of managed care by State agencies but were

also accompanied by increased requirements in some areas (for example,

The Omnibus Budget Reconciliation Act of 1981 (OBRA 1981) required that

Medicaid enrollees be allowed to voluntarily disenroll without cause

from HMOs, but was subsequently amended to permit a 6-month lock-in for

individuals enrolled in Federally qualified HMOs. Until the BBA,

modification of the laws and regulations governing Medicaid managed

care subsequent to OBRA 1981 and the Tax Equity and Fiscal

Responsibility Act of 1982 has occurred in a piecemeal manner. The BBA

represents the first major revision of the statutes governing Medicaid

managed care in over a decade.

The period from 1981 to the present has seen significant changes in

Medicaid managed care programs. While only approximately 250,000

Medicaid beneficiaries were enrolled in managed care programs in 1981,

by 1997 this number had increased to over 15 million. Over 50 percent

of the entire Medicaid population now receive at least some services

through a health plan or a primary care case management arrangement. In

the last decade, a number of studies and reports have documented that

State agencies need both flexibility and assistance to implement new

approaches and tools to effectively administer their contracts with

managed care organizations. A 1997 GAO Report entitled, ``Medicaid

Managed Care--Challenge of Holding Plans Accountable Requires Greater

State Effort,'' indicated the need for priority attention to

beneficiary information and education, and access to care and quality

monitoring.

As noted above, Medicaid managed care contracts were originally

entered into by some State agencies without any specific statutory

provision for such arrangements. When the Congress acted to regulate

managed care arrangements, it limited the applicability of these

statutory requirements to contracts that were comprehensive in the

services they covered.

Specifically, the statutory requirements enacted by the Congress in

section 1903(m) of the Act have always applied to contracts for

inpatient services and any one of other services specified in section

1903(m)(2)(A) of the Act, or for any three of the non-inpatient

services specified therein. Managed care contracts that were less than

comprehensive remained exempt from all statutory managed care

requirements. In recognition of this fact, we have in the past

exercised our authority under section 1902(a)(4) of the Act to specify

``methods of administration'' that were ``necessary for proper and

efficient administration'' to impose regulatory requirements on

entities that were exempt from the statutory requirements in section

1903(m) of the Act, either because they provided less than

comprehensive services or because they were specifically exempted by

the Congress from complying with requirements under section 1903(m) of

the Act. These entities were called ``prepaid health plans,'' or

``PHPs.''

The regulatory requirements we applied to PHPs were not as

stringent as those under section 1903(m) of the Act in many areas. For

example, while PHPs were subject to an enrollment composition

requirement like comprehensive HMO contractors, the PHP enrollment

composition requirement could be waived by the State for ``good

cause.'' PHPs also were not subject to the requirement under section

1903(m) of the Act that beneficiaries have the right to disenroll

without cause at any time, and beneficiaries enrolled in the PHPs could

have their ability to disenroll restricted under section 1915(b) waiver

authority, when the right to disenroll required under section 1903(m)

of the Act could not be waived.

In part because of the less stringent requirements that applied to

PHPs, there has been a substantial growth in PHP enrollment. Some of

these PHPs are single service managed care plans (for example,

behavioral health plans) and their enrollees are also enrolled in other

managed care plans for their routine primary and acute care. Other

PHPs, such as the Health Insurance Plan (HIP) of New York, provide a

full range of services but were exempted by Congress from the

requirements in section 1903(m) of the Act. As discussed more fully

below, in this proposed rule, we are proposing to require that most

current PHPs meet most of the requirements that will apply to MCOs.

[[Page 52025]]

Concurrent with the increasing need for stronger Medicaid managed

care programs has been the development of improved tools, techniques,

and strategies for delivering and monitoring managed care programs. In

1991, we began the Quality Assurance Reform Initiative (QARI) to

provide technical assistance tools and assistance to State agencies. In

1993, we produced a QARI guide entitled, ``A Health Care Quality

Improvement System for Medicaid Managed Care--A Guide for States,''

that contained four areas of guidance for States: (1) a framework for

quality improvement systems for Medicaid managed care programs; (2)

guidelines for internal quality assurance programs of Medicaid HMOs and

PHPs; (3) guidelines for clinical and health services focus areas and

use of quality indicators and clinical practice guidelines; and (4)

guidelines for the conduct of external quality reviews conducted under

section 1902(a)(30)(C) of the Act. In 1995, HCFA, working in

collaboration with the National Committee for Quality Assurance (NCQA)

and the American Public Human Services Association, produced a Medicaid

version of Health Plan Employer Data and Information Set (HEDIS). HEDIS

is a standardized quality performance measurement system used by

private sector purchasers of managed care services modified for use by

State Medicaid agencies. NCQA, under contract with HCFA, also developed

``Health Care Quality Improvement Studies in Managed Care Settings:

Design and Assessment--A Guide for State Medicaid Agencies.'' In 1997,

the Agency for Health Care Policy and Research (AHCPR) produced a set

of consumer survey instruments and measurement tools under the auspices

of the Consumer Assessment of Health Plan Study (CAHPS). The CAHPS

instruments include measures and tools specifically designed for use by

State agencies. Also in 1997, the George Washington University Center

for Health Policy Research published a compendium of provisions of

State contracts with Medicaid managed care organizations. This

nationwide study of Medicaid managed care contracts has provided

valuable information that can be used by all State agencies in the

design and management of their managed care contracts.

These and multiple other tools can be applied to the efforts of

State agencies to become even more effective in purchasing managed care

services for Medicaid beneficiaries. This proposed rule provides an

opportunity to clarify for MCOs, beneficiaries, and State agencies, how

these advances in the management and oversight of health care can be

applied to Medicaid managed care programs.

Through these regulations, we promote uniform national application

of knowledge and best practices learned from these initiatives. While

we promote uniform best practice, the Medicaid statute has always given

State agencies latitude to design their Medicaid programs, as long as

they meet certain minimum Federal standards. Current Federal

requirements in the Medicaid managed care area are imposed either as

conditions for Federal matching funds to support contracts with MCOs,

as conditions for receiving a waiver of freedom of choice under section

1915(b) of the Act, or as conditions for falling within the section

1932 of the Act exception to the freedom of choice requirement in

section 1902(a)(23) of the Act. In the first case, failure to comply

with section 1932 of the Act requirements could result in a

disallowance of Federal financial participation (FFP) in contract

payments. In the latter two cases, if the State agency fails to meet

conditions for the section 1932 of the Act exception to the freedom-of-

choice requirement in section 1902(a)(23) of the Act, or has its

section 1915(b) waiver non-renewed or terminated for a failure to meet

waiver conditions, the State agency would be out of compliance with the

freedom of choice requirement in section 1902(a)(23) of the Act, and

the State agency would be subject to a compliance enforcement action

under section 1904 of the Act.

Because the Medicaid program is a State administered program

subject to Federal guidance and rules, Medicaid regulations do not

generally adopt the same approach to regulating managed care

organizations as Federal Medicare regulations. Instead, Medicaid rules

generally regulate State agencies and place requirements in their

contracts with managed care organizations or managed care programs.

This proposed rule adopts this direction in implementing the new

requirements in the BBA, and, as discussed below, extending these

requirements to PHPs.

Section 4710(c) of the BBA provides for a limited exemption from

the BBA requirements in sections 4701 through 4710 for approved waiver

programs under the authority of section 1115 or 1915(b) of the Act.

Specifically, none of the provisions contained in sections 4701 through

4710 of the BBA will affect the terms and conditions of any approved

waiver under section 1115 or 1915(b) of the Act, because the waiver was

in effect on the date of the enactment of the BBA (that is, August 5,

1997.)

In general, any provision of a State's approved section 1115 or

1915(b) waiver program (which was approved or effective as of August 5,

1997) that is specifically addressed in the State's waiver proposal,

statutory waivers, special terms and conditions, operational protocol,

or other official State policy or procedures approved by HCFA, would

not be affected by the BBA provisions, even if it differs from the BBA

managed care requirements. As long as the BBA provisions are addressed

in the State's approved waiver materials, no determination needs to be

made as to whether the State's policy or procedures meet or exceed the

BBA requirements. If the BBA provisions are not addressed, then the

State agency must meet the BBA requirements, except as specified below

for newly submitted or amended waivers.

The exemption from the BBA requirements will apply to all States'

section 1915(b) waiver programs until the date that the waiver

authority approved or in effect as of August 5, 1997 expires. As of the

date of any section 1915(b) waiver renewal or any temporary extension

of that authority granted after August 5, 1997, the State agency will

be required to comply with all BBA requirements that are in effect.

Exemptions from the BBA managed care provisions will apply to those

section 1115 demonstration waivers approved or in effect as of August

5, 1997, which may be extended for up to 3 years under the authority of

section 4757 of the BBA. These waiver extensions are specifically

limited to the Medicaid section 1115 comprehensive statewide health

care reform demonstrations, which must be approved under the same terms

and conditions that applied before the extension. Therefore, any

exemptions from the BBA requirements to which these programs are

entitled may continue during the period of the extended waiver

authority.

For newly submitted or amended section 1115 waivers, the Secretary

of DHHS retains the discretionary authority to waive the BBA managed

care provisions. Generally, waivers are granted allowing State agencies

some flexibility in operating their Medicaid programs while promoting

the proper and efficient administration of a State's plan. In

particular, for the BBA provisions related to increased beneficiary

protections and quality assurance standards, we anticipate that

[[Page 52026]]

the BBA provisions will apply effective with the BBA enactment unless a

State agency can demonstrate that a waiver program beneficiary

protection or quality standard would equal or exceed what the BBA

requires.

III. Provisions of the Proposed Rule

Under our proposal, virtually all managed care regulations would be

set forth in 42 CFR part 438. This new part would integrate existing

sections from part 434. We propose this restructuring to assist the

reader in easily accessing all managed care regulations. The proposed

new organizational format for part 438 is as follows:

Subpart A--General Provisions

Subpart B--State Responsibilities

Subpart C--Enrollee Protections

Subpart D--[Reserved]

Subpart E--Quality Assessment and Performance Improvement

Subpart F--Grievance Systems

Subpart G--(Reserved)

Subpart H--Certifications and Program Integrity Protections

Subpart I--Sanctions

Subpart J--Conditions for FFP

The basis and purpose of the provisions of this proposed rule are

described below.

A. General Provisions (Subpart A)

1. Basis and Scope (Sec. 438.1)

Section 438.1 of the regulations sets forth the basis and scope of

part 438, including the fact that regulations in this part implement

authority in sections 1902(a)(4), 1903(m), 1905(t), and 1932 of the

Act. Section 438.1 of the regulations also briefly describes these

statutory provisions.

2. Definitions (Sec. 438.2)

Section 438.2 includes definitions of terms that apply for purpose

of part 438. These definitions reflect revisions in terminology made in

section 4701(b) of the BBA. The most significant of these changes is

the use of the term Managed Care Organization (MCO) to refer to

entities with comprehensive risk contracts that were formerly referred

to by the term ``health maintenance organization'' (HMO). There is a

new statutory definition of Medicaid MCO, which builds on the pre-BBA

definition of HMO. As was the case with respect to the pre-BBA

definition of HMO, absent a statutory exemption, an entity must be

found to meet the definition of MCO in order to enter into a Medicaid

``comprehensive risk contract'' (defined in Sec. 430.5, discussed below

in section III. C.). The new statutory definition defines an MCO as one

of several listed types of full risk arrangements (for example, HMOs, a

provider sponsored organization, a ``M+C organization'' that contracts

with Medicare) or any other ``public or private entity'' that complies

with advanced directive requirements in section 1902(w) of the Act, and

meets a modified version of the same two requirements included in the

pre-BBA definition of HMO. The first of these two requirements,

involving access to services covered under the contract, is unchanged

by the BBA. See section 1903(m)(1)(A)(i) of the Act. The second

requirement, involving meeting State-approved solvency standards, has

been amended to require (with some exceptions discussed in section 3

below) that the MCO be licensed as an HMO or as a risk bearing entity.

(See section 1903(m)(1)(A)(ii), (c) of the Act.) Finally, the new

statutory definition provides that an entity that is a Federally-

qualified HMO under title XIII of the Public Health Service Act is

deemed to meet the above access and solvency requirements (but not the

advance directive requirements).

In Sec. 438.2, we essentially have adopted the statutory definition

of MCO. Because the managed care entities specifically listed in the

revised version of section 1903(m)(1)(A) of the Act all necessarily

fall within the category ``public or private organization,'' our

definition refers only to a ``public or private entity'' that meets the

requirements in question. Because Federally qualified HMOs are deemed

to meet the access and solvency requirements in sections

1903(m)(1)(A)(i), (A)(ii), and (C) of the Act, we do not apply these

requirements to Federally qualified HMOs in our definition of MCO.

Finally, we have retained a third requirement from the current

regulation implementing the pre-BBA definition of HMO. See

Sec. 434.20(c)(1). This provision requires that the entity be organized

primarily for the purpose of providing health care services.

Section 438.2 of the regulations also includes existing definitions

of current managed care terms, and the statutory definitions of

``managed care entity'' (MCE), primary care case management, and

primary care case manager. While most existing managed care definitions

are unchanged, we are proposing to revise the definition of PHP to

exclude from the current definition entities that have comprehensive

risk contracts, but have been exempted by the Congress from the

requirements in section 1903(m) of the Act. We are making this change

in light of our decision in proposed Sec. 438.8 (discussed below) to

apply most of section 1903(m) MCO requirements to PHPs. In cases in

which the Congress has explicitly directed that particular entities,

which we currently treat as PHPs, be exempt from the requirements in

section 1903(m) of the Act, we did not believe it would be appropriate

to apply section 1903(m) requirements to such entities by regulation.

The entities that the Congress has determined should be exempted from

section 1903(m) requirements even if they have comprehensive risk

contracts include the entities described in section 1903(m)(2)(B) of

the Act. Also exempt from section 1903(m) requirements are certain

``health insuring organizations'' (``HIOs'') that the Congress has

expressly exempted from the requirements in section 1903(m) of the Act,

that is, HIOs that began operating before 1986 and certain county-

operated HIOs in California. Our revised definition of PHP would have

the effect of giving entities described in section 1903(m)(2)(B) of the

Act the same status as HMOS that were exempted by the Congress from

section 1903(m) of the Act. Currently, entities described in section

1903(m)(2)(B) of the Act are included in the definition of PHP, and

subject to PHP regulations that are not as strict as the rules that

have applied to HMOs.

The new requirements enacted by the Congress in the BBA apply to

managed care arrangements in one or more of three ways. First, section

1903(m)(2)(A)(xi) of the Act requires that MCOs and MCO contracts

comply with all applicable requirements in the new section 1932 of the

Act enacted by the BBA. Thus, these requirements apply to an MCO

whether the MCO is participating in a mandatory managed care enrollment

program (either under section 1932(a) of the Act or a waiver) or is

offered as a purely voluntary enrollment option.

Requirements in section 1932 of the Act also apply as conditions

for meeting the definition of ``primary care case manager'' (which

incorporates the definition of ``primary care case management

contract'' requiring compliance with MCE requirements in section 1932

of the Act). Meeting this definition is required in order for a non-MCO

to participate as an enrollment option under a mandatory managed care

enrollment program under section 1932(a) of the Act. Meeting this

definition also makes an entity eligible for automatic re-enrollment

under section 1903(m)(2)(H) of the Act, whether enrollment was

originally voluntary or mandated. Finally, meeting this definition

permits an entity to offer ``primary care case management services as a

State plan service under section

[[Page 52027]]

1905(a)(25) of the Act. Lastly, certain requirements in section 1932 of

the Act apply only in the context of a mandatory managed care

enrollment program under section 1932(a) of the Act. The latter

includes specific requirements on comparative information, as found in

Sec. 438.10; methods for establishing certain enrollment practices, as

found in Sec. 438.56; and the default enrollment process, as found in

Sec. 438.56.

The terms managed care organization (MCO) and managed care entity

(MCE) are used in the statute and in this rule to identify where

different requirements apply. As defined in Sec. 438.2, an MCO is

either a Federally qualified HMO or any other public or private entity

that is organized primarily for the purpose of providing health care

services, makes the services it provides to its Medicaid enrollees as

accessible (in terms of timeliness, amount, duration, and scope) as

those services are to other Medicaid recipients within the area served

by the entity, and meets the solvency standards of Sec. 438.116. Thus,

in general, HMOs that participate in Medicaid are labeled as MCOs. For

purposes of this rule, as described in detail under Sec. 438.8, most

requirements that apply to MCOs also apply to prepaid health plans

(PHPs).

The term MCE is defined in Sec. 438.2 as either an MCO with a

comprehensive risk contract under section 1903(m) of the Act or a

primary care case manager. As specified in the statute, primary care

case managers are only subject to the requirements in this proposed

rule that specifically apply to MCEs except, as described in Sec. 438.8

when certain primary care case managers meet the definition of a PHP.

These requirements are specified in individual sections of this

proposed rule, but include some or all of the requirements pertaining

to information (Sec. 438.10), choice of MCEs (Sec. 438.52), enrollment

and disenrollment (Sec. 438.56), marketing activities (Sec. 438.104),

and emergency and post-stabilization services (Sec. 438.114).

3. Contract Requirements (Sec. 438.6)

Proposed Sec. 438.6 contains most of the existing managed care

provisions currently found in part 434, revised to reflect changes made

by the BBA.

Proposed Sec. 438.6(a), like the current Sec. 434.20(a), provides

that State agencies may enter into comprehensive risk contracts only

with certain specified entities. In addition to entities meeting the

definition of MCO, certain other entities are listed that either are

exempt from the requirement in section 1903(m)(1)(A) of the Act that

comprehensive risk contractors meet the definition of MCO, or are

exempt altogether from the statutory requirements in section

1903(m)(2)(A) of the Act, and from the requirements in this proposed

rule.

Section 438.6(b) includes the requirement currently in Sec. 434.23,

that contracts must specify the actuarial basis for capitation payments

and must provide that capitation payments and any other payments

provided for in the contract do not exceed the upper payment limits set

forth in Sec. 447.361.

Section 438.6(c) includes the enrollment requirements currently in

Sec. 434.25. We specify that an MCE contract must provide for an open

enrollment period when the MCE accepts individuals eligible for

enrollment in the order in which they apply without restriction, unless

authorized by the Regional Administrator, up to the limits specified in

the contract. In Sec. 438.6(c)(2), we have added language expressly

providing for three exceptions to the requirement that enrollment be

voluntary.

Section 438.6(d) includes language currently in Sec. 434.20(d) and

provide that an MCO contract may cover services not provided under the

State plan to non-enrolled beneficiaries. These additional services may

be provided without regard to statewideness and comparability

requirements. If enrollment is voluntary, the additional services may,

under section 1915(a) of the Act, be provided without regard to

statewideness and comparability. If enrollment is mandated under

section 1932(a) of the Act, the statute provides that contracts can be

carried out without regard to statewideness and comparability

requirements. If enrollment is mandated under sections 1915(b) or 1115

of the Act, HCFA waives statewideness and comparability requirements if

additional services are offered.

Section 438.6(e) would retain the requirement currently found in

Sec. 434.20(e)(1), that contracts comply with the general contract

requirements in Sec. 438.6. Among these requirements is the requirement

that contracts conform to the procurement rules in 45 CFR part 74.

Section 438.6(f) contains the current requirement in Sec. 434.38

that risk contracts must provide the Medicaid agency and the Department

of Health and Human Services, including HCFA, the right to inspect or

audit financial records of the MCO or its subcontractors.

Section 438.6(h) contains the ``advance directive'' requirements

currently found in Sec. 434.28, which also must be met in order for an

entity to qualify as an MCO.

Section 438.6(i) implements the statutory requirement that ``HIOs''

which began operating on or after January 1, 1986 and are not otherwise

exempted by statute, comply with all requirements in section

1903(m)(2)(A) of the Act if they have a comprehensive risk contract,

including the requirement that they meet the definition of MCO. This

provision would replace the current Sec. 434.44.

Finally, proposed Sec. 438.6(g) would implement the physician

incentive plan requirements in section 1903(m)(2)(A)(x) of the Act,

which currently are implemented in paragraphs (2) through (4) of

Sec. 434.70(a) of the regulations. Section 1903(m)(2)(A)(x) of the Act

requires that MCOs comply with the physician incentive plan

requirements in section 1876(i)(8) of the Act, which apply to entities

with Medicare risk contracts under section 1876 of the Act. Section

1876(i)(8) of the Act prohibits certain physician incentive payments

and requires that incentive plans that place physicians at

``substantial financial risk'' for services they do not provide must

conduct enrollee surveys, and provide ``adequate and appropriate''

stop-loss protection. Section 1876(i)(8) of the Act is implemented in

Sec. 417.479, which defines ``substantial financial risk'' and

``adequate and appropriate'' stop-loss protection. The existing

Medicaid physician incentive regulations in Sec. 434.70(a)(2) through

(4) incorporate the requirements in Sec. 417.479.

Under section 1876(k)(1)(B) of the Act (enacted by the BBA),

Medicare risk HMO contracts under section 1876 of the Act may not be

renewed after January 1, 1999, and organizations with such contracts

must enter into M+C contracts under the new Part C of Title XVIII if

they wish to continue to contract with Medicare. The physician

incentive rules in part 417 of the regulations that implement section

1876(i)(8) of the Act will no longer have any applicability, and will

eventually be removed from the Code of Federal Regulations.

Section 1852(j)(4) of the Act, which applies to M+C organizations,

contains the same substantive requirements governing physician

incentive plans as section 1876(i)(8) of the Act. We have implemented

section 1852(j)(4) of the Act as part of the new M+C regulations in

part 422, published as an interim final rule on June 26, 1998 (63 FR

34967). While the substantive requirements and standards in section

1852(j)(4) of the Act are identical to

[[Page 52028]]

those in section 1876(i)(8) of the Act, the regulations in part 422

implementing section 1852(j)(4) of the Act differ from those in part

417 implementing section 1876(i)(8) of the Act in one significant

respect. Because the data in question are now available from other

sources, we deleted a reporting requirement involving capitation

arrangements. (See 63 FR 35002.) Because the regulations in part 417

will no longer apply in 1999, we did not revise the regulations in part

417 to eliminate this reporting requirement.

Even though the Medicaid statute continues to cite to section

1876(i)(8) of the Act, proposed Sec. 438.6(g) incorporates new

regulations in part 422 that implement the same substantive

requirements, but as set forth in section 1852(j)(4) of the Act.

Section 438.6(j) specifies additional rules that apply to contracts

with primary care case managers. These rules relate to the provision of

care and services within reasonable and adequate hours of operation;

specification for arrangements or referral to other physicians or

practitioners; prohibitions on discrimination in enrollment,

disenrollment, or re-enrollment; and provisions on enrollee rights to

disenroll.

4. Provisions That Apply to PHPs. (Sec. 438.8)

As discussed above in section II.B., PHPs are entities with

Medicaid prepaid managed care contracts that are not subject to the

statutory requirements in section 1903(m) of the Act, either because

they do not have comprehensive risk contracts, or because they are

exempted by statute from these requirements. PHPs are, however, subject

to regulatory requirements which were promulgated by us under our

authority at 1902(a)(4) of the Act to provide for methods of

administration determined to be necessary for proper and efficient

operation of State Medicaid programs. Under these previous regulations,

in part 434, PHPs are subject to many of the same requirements that

have been applied to HMOs.

The most significant HMO requirements that were not applied (or

applied in some way) to PHPs under existing regulations were the

statutory enrollment composition requirements in Sec. 434.26, which

require that no more than 75 percent of enrollees be eligible for

Medicare or Medicaid and the right to disenroll without cause, which is

in Sec. 434.27(b). While PHPs were subject to an enrollment composition

requirement, it could be waived by the State agency under

Sec. 434.26(b)(4) for ``good cause'' and this was done routinely. Also,

since PHP enrollees were not subject to the right to disenroll without

cause (see Sec. 434.27(b) that implements section 1903(m)(2)(A)(vi) of

the Act, which cannot be waived under section 1915(b) of the Act),

State agencies were able to mandate enrollment in a single PHP, or

provide for limits on the right to disenroll from a PHP, under a

section 1915(b) freedom-of-choice waiver program.

In addition to the above requirements, PHPs were also exempted from

the advance directive requirements in Sec. 434.28, and the physician

incentive plan requirements in Sec. 434.70(a)(2) through (4), and were

not subject to the sanctions provided for in Sec. 434.67. Thus, while

entities that the Congress chose to exempt from statutory requirements

in section 1903(m) of the Act were subject to regulatory requirements,

they were exempted from most requirements in section 1903(m) of the

Act.

The BBA, and the legislative history of the Medicaid managed care

provisions in the BBA, are silent on the question of how PHPs are to be

treated. The BBA did not make any changes to the definition of a

comprehensive risk contract that is subject to the requirements in

section 1903(m) of the Act, or to statutory provisions exempting

certain comprehensive risk contractors from section 1903(m)

requirements. The BBA did not change the fact that managed care

entities regulated as PHPs are subject only to whatever regulatory

requirements we may wish to retain or establish.

We considered retaining a ``two tier'' regulatory scheme, under

which PHPs would be subject to a lesser level of requirements than

MCOs. Under this approach, which is similar to that taken in the

current regulations, PHPs that had statutory exemptions from MCO

requirements would receive the benefit of such exemptions to the extent

they were not subject to the more vigorous MCO requirements under

section 1903(m) of the Act. We determined, however, that the new BBA

requirements contain important beneficiary protections that should be

extended broadly, to most PHPs. Applying these BBA requirements to the

few organizations exempted by statute, however, would virtually deprive

them entirely of the benefit of the exemption the Congress intended.

For this reason, as noted above, we have revised the definition of PHP

to exclude these statutorily exempt entities, and include only entities

that do not have comprehensive risk contracts. Based on this revised

definition of PHPs, all entities with statutory exemptions from section

1903(m) of the Act would be treated the same as exempted HIOs are now

treated under current law.

In the case of the overwhelming majority of PHPs, however, that are

not addressed by the Congress, we propose to use our authority in

section 1902(a)(4) of the Act to provide for ``proper and efficient''

methods of administration to give enrollees in these PHPs the benefits

of most of the new BBA requirements applied to MCOs. Section 438.8

identifies those provisions of the MCO regulations that apply to PHPs

and PHP contracts. Under Sec. 438.8, PHPs would be subject to most of

the requirements in Sec. 438.6, with the exception of the advance

directive requirements in Sec. 438.6(h) and the physician incentive

plan requirements in Sec. 438.6(g).

PHPs would also be required to follow the information requirements

in Sec. 438.10 that apply to MCOs, the provider discrimination

prohibition in Sec. 438.12, the enrollment and disenrollment

requirements under Sec. 438.56(e) through (h), the conflict of interest

safeguards in Sec. 438.58, the beneficiary protections in subpart C of

part 438, and the grievance and appeal requirements in subpart F of

part 438, except for Sec. 438.424(b) since PHPs are not subject to

section 1903(m)(2)(A) of the Act, which pertains to disallowances for a

failure to meet section 1903(m)(2)(A) requirements. (See discussion

below.)

In the case of quality requirements in subpart E of part 438, PHPs

would have to comply with all MCO requirements that apply to services

provided by the PHP.

Under Sec. 438.8(e), the State agency must require, at a minimum,

through its contract, that the PHP meet all of the requirements that

MCOs must meet relating to minimum performance levels and performance

improvement levels that apply to services furnished by the PHP. The

nature of some PHPs may not allow them to report on performance

measures in all of the clinical and non-clinical areas as MCOs can.

Also, some PHS may not be able to undertake performance projects in the

same clinical areas as MCOs can address. The State agency must evaluate

the applicability of the MCO performance measures and improvement

project areas when establishing the PHP's contractual obligations for

its quality assessment and performance improvement program.

We invite comments particularly as to which MCO requirements we

propose to

[[Page 52029]]

apply to PHPs, and which ones we do not.

We note that while the Congress did not address PHPs in the BBA, it

did provide a definition of ``primary care case manager'' that some

PHPs could meet. Section 1905(t)(2) of the Act defined a primary care

case manager as including ``a physician group practice or an entity

employing or having other arrangements with physicians.'' This

definition does not preclude payment on a capitation basis.

Based on historical experience, we would expect that in most cases,

services furnished to a beneficiary enrolled with a primary care case

manager would be reimbursed on a fee-for-service basis to the extent

that a primary care case manager is paid on a capitation basis for less

than a comprehensive array or set of services. The primary care case

manager would also meet the definition of a PHP and be subject to the

requirements in Sec. 438.8. In such a case, the primary care case

manager would be both a PHP and an MCE. To the extent that the MCO

rules that apply to PHPs are stricter than the MCE rules, which

ordinarily would apply to a primary care case manager, the primary care

case manager would have to follow the MCO rules in such a case, by

virtue of its status as a PHP.

While we are proposing to apply MCO requirements to PHPs, State

agencies may apply for Federal waiver authority, either under sections

1915(b) or 1115 of the Act, to seek relief from some of the provisions.

For example, a State agency may request 1915(b) waiver authority for a

behavioral health managed care program in which enrollees are mandated

to use a single behavioral health PHP. In this instance, the Secretary

has the discretionary authority to grant waivers of freedom of choice,

under section 1902(a)(23) of the Act, and the beneficiary the right to

disenroll (which for PHPs is authorized under section 1902(a)(4) of the

Act, and therefore, can be waived) to enable the State agency to

establish or continue such a program.

5. Information Requirements (Sec. 438.10)

Previously, in Medicaid managed care waiver programs, we have

required, as a condition for freedom of choice waivers, that

beneficiaries be fully informed of the choices available when enrolling

with an MCE. Section 1932(a)(5) of the Act, enacted in section

4701(a)(5) of the BBA, describes the kind of information that must be

made available to Medicaid enrollees and potential enrollees. It also

requires that this information, and all enrollment notices and

instructional materials related to enrollment in MCEs, be in a format

that can be easily understood by the individuals to whom it is

directed. We propose to implement these provisions in Sec. 438.10.

Section 438.10(a) through (h) apply to any use of managed care (State

option, waiver, or voluntary) and Sec. 438.10(i) applies only to State

option.

As a general rule, each State agency, MCE, and enrollment broker

must meet the requirements of Sec. 438.10 that pertain to language and

format requirements (as specified in Sec. 438.10(b) and (c)). However,

a distinction is made within the regulation as to which information

needs to be provided by the MCO, MCE, primary care case manager, and

State agency. Further, a distinction is made between which information

needs to be provided routinely and which information needs to be

provided only upon request.

In Sec. 438.10(b) we establish requirements for the languages in

which information must be made available. We are proposing to require

that State agencies establish a methodology for determining the

prevalent languages spoken by populations in a geographic area and

include provisions in their MCE contracts to ensure that materials are

available in those specified languages. For example, State agencies

could develop methodologies for estimating the composition of the

Medicaid population by cultural groups that speak languages other than

English, that is, cultural groups that represent at least 5 percent of

the Medicaid population. Enrollees and potential enrollees must be

informed about how to obtain this information. Specific methodologies,

such as those based upon a consideration of geographic composition,

population density, or enrolled population are not imposed by this

regulation, as the most appropriate approach to fulfilling this

requirement may vary from State to State. However, we are proposing

that the State agency, enrollment broker, and MCE be required to have

translation services available for each enrollee and potential enrollee

who has limited English proficiency, and that potential enrollees be

informed about how to obtain these services.

In Sec. 438.10(c)(1), we propose to implement the requirement in

section 1932(a)(5)(A) of the Act that all enrollment notices and

informational and instructional materials relating to enrollment in

MCEs be provided in a manner and form that are easily understood by

Medicaid enrollees and potential enrollees. This requirement applies to

all State agencies, enrollment brokers, and MCEs, and is taken directly

from section 1932(a)(5)(A) of the Act. Generally, materials should be

understandable to enrollees at a fourth-fifth grade reading level, or

at another level established by the State agency that adequately

reflects the potential population to be enrolled. Materials should use

an easily readable typeface (such as 14 point), frequent headings, and

should provide short, simple explanations of key concepts. Technical or

legal language should be avoided whenever possible. Use of focus groups

and cognitive testing may be beneficial in determining the

appropriateness of the information. In addition, in Sec. 438.10(c)(2)

we propose that enrollment notices as well as informational and

instructional materials relating to enrollment in MCEs take into

account the specific needs of enrollees and potential enrollees. This

would include furnishing information in alternative formats for the

visually impaired (through other medias such as, large print, Braille,

or audio tapes) and for individuals with limited reading proficiency

(through video or audio tapes).

In Sec. 438.10(d), we propose that the MCO, or the State agency, if

the State agency prohibits the MCO from providing it, must furnish this

information to each enrollee within a reasonable time after notice of

enrollment. If the State agency prohibits the MCO from furnishing this

information, we propose to require that the State agency furnish the

information within a reasonable time after notice of enrollment.

Further, we propose that the MCO furnish this information to potential

enrollees upon request, when not prohibited by the State agency through

restrictions on marketing or some other means. In this instance, the

State agency, or the subcontractor of the State agency, must provide

the information. Annually thereafter the MCO must notify enrollees of

their right to request and obtain the information from the MCO. We have

proposed this requirement because we do not believe that enrollees can

effectively access their benefits if they are not furnished adequate

information concerning such fundamental elements as enrollees' rights

and responsibilities. Further, it is our belief that it is not

sufficient for MCOs to merely make this information available at

designated locations. Therefore, in keeping with the Congress' intent

to provide adequate information to potential enrollees and actual

enrollees, according to the Secretary under section 1902(a)(iv) of the

Act to establish requirements necessary to ensure * * * proper and

efficient operation * * *, we propose to require

[[Page 52030]]

MCOs to provide this information. In addition, as is the case in most

mandatory managed care systems currently in operation, we propose to

require that this information be provided by the MCOs at the time of

enrollment, rather than making this information available upon request,

as written in the statute.

In Sec. 438.10(e) we set forth the type of information which, under

section 1932(a)(5)(B) of the Act, MCOs must provide to enrollees and

potential enrollees in their service area, upon request. As discussed

below, we propose to require that this information be provided to all

new MCO enrollees regardless of whether they request this information.

Consistent with section 1932(a)(5)(B) of the Act, proposed

Sec. 438.10(e) would provide that the information that must be

furnished to enrollees and potential enrollees include at least the

following:

Benefits offered, and the amount, duration, and scope of

benefits and services available under the contract. Sufficient detail

should be furnished to ensure that beneficiaries receive the services

to which they are entitled, such as pharmaceuticals, mental health, and

substance abuse services.

Procedures for obtaining services, including authorization

requirements. These procedures should include the procedures for

obtaining pharmaceuticals and mental health and substance abuse

services, as well as the procedure for obtaining out-of-area coverage.

Names and locations of current network providers,

including identification of those not accepting new patients. At a

minimum, information on the provider networks should include

information on primary care physicians, specialists, and hospitals. We

also suggest that information be provided regarding ancillary care

providers on which enrollees with special health care needs may be

dependent for care. If this information is not included, information

must be provided to potential enrollees explaining how they can obtain

this supplemental information. Enrollees making a decision about

whether to enroll in a particular MCO may rely on the provider listing

in making their selection, and may assume that they will be able to

obtain covered services from any of the providers listed. Therefore, if

a provider is not accepting new Medicaid enrollees, this must be

clearly indicated, as this provider may not be a choice for new

enrollees.

Any restriction on the enrollee's freedom of choice among

network providers. It is essential that the MCO's informational

materials emphasize any limitations on enrollees' provider selections.

If the MCO contracts with formal subnetworks, or the MCO's arrangement

with primary care providers allow for the establishment of informal

subnetworks, the MCO's informational materials must clearly indicate

which providers are available under each subnetwork. The materials must

also explain the procedures under which an enrollee may request

referral to an affiliated provider not included in the subnetwork.

The extent to which an enrollee may obtain services from

out-of-network providers. For example, enrollees should be notified of

their right to obtain family planning services from any Medicaid-

participating provider (unless otherwise restricted).

Provisions for after-hours and emergency coverage.

Policies on referrals for specialty care and other

services not furnished by the enrollee's primary care provider.

Cost sharing, if any.

Enrollee rights as described in Secs. 438.56 and 438.320

and enrollee responsibilities. Information on responsibilities should

include, but is not limited to responsibilities such as providing

information needed for treatment, compliance with the MCO's procedures

for obtaining services, and becoming involved in specific health care

decisions.

Information on complaint, grievance, and fair hearing

rights described in Sec. 438.414(b) and if the State agency chooses to

furnish appeal rights to providers, information on these appeal rights.

We note that while section 1932(a)(5)(A)(ii) of the Act provides for

furnishing information on ``procedures available to * * * a health care

provider to challenge or appeal'' an MCO decision, there is no Federal

Medicaid requirement that such procedures be provided for by MCOs. To

the contrary, as discussed below, the requirement in section 1932(b)(4)

of the Act that MCOs have grievance procedures refers to rights

extended to an enrollee ``or a provider on behalf of an enrollee.''

While State agencies must develop grievance and appeal processes

for enrollees in accordance with subpart F of part 438, this

requirement is not meant to imply that State agencies must establish

grievance and appeal processes for individual health care providers

beyond the fair hearing process. However, if such processes exist,

information on the processes must be made available to enrollees and

potential enrollees in accordance with the requirements of this

section.

As noted above, section 1932(a)(5) of the Act requires that MCOs

provide the above information to enrollees and potential enrollees

``upon request.'' We believe that in the case of beneficiaries who have

actually enrolled in the MCO, the above information is essential to an

enrollee's ability to access necessary care and exercise his or her

rights under the law. Therefore, under our authority in section

1902(a)(4) of the Act to provide for necessary and proper methods of

administration, we propose in Sec. 438.10(d) that an MCO be required to

provide the above information to each enrollee within a reasonable time

after it receives from the State agency or the enrollment broker,

notice of the individual's enrollment. This proposed regulatory

requirement is consistent with the standard practice of managed care

organizations, State law requirements in many States, and requirements

that apply under the Medicare program. We invite comment on this

requirement.

As required under section 1932(a)(5) of the Act, proposed

Sec. 438.10(d) would also require an MCO to provide information to

potential enrollees upon request, when not prohibited by the State

agency through restrictions on marketing or some other means (in which

case the State agency or subcontractor of the State agency must provide

the information). Annually thereafter, the MCO must notify enrollees of

their right to request and obtain this information from the MCO.

Proposed Sec. 438.10(f), would provide that an MCO is required to

provide enrollees and potential enrollees, when not prohibited by the

State agency through restrictions on marketing or some other means; in

which case the State agency, or subcontractor of the State agency must

provide the following information:

Health plans' and health care facilities' licensure,

certification, and accreditation status; and

Information on health professionals, including but not

limited to, education and board certification and recertification.

Unlike the information elements in Sec. 438.10(e) under which the

MCO must provide the information to enrollees, in Sec. 438.10(f) we

propose that the information be furnished to enrollees and potential

enrollees only upon request. We are making this distinction because it

is our belief that while some beneficiaries may be interested in

receiving these elements of information, and must be able to obtain

them, they are not elements of information that every beneficiary

typically uses in selecting a provider. By making the

[[Page 52031]]

information available by request, interested beneficiaries can obtain

the information, and MCOs are not required to furnish information that

will not be used.

In Sec. 438.10(g), in accordance with section 1932(a)(5)(D) of the

Act, we are proposing to require that a State agency, before or during

enrollment, inform enrollees of any benefits to which they may be

entitled under the Medicaid program, but which are not made available

to them through the MCE. For example, enrollees should be informed

about how to access mental health coverage if it is not a service

covered by the MCE or the MCE provides only limited coverage. This

information must be provided directly by the State agency or through

the MCE. The notice must provide information on where and how enrollees

may access benefits such as mental health coverage not available

through the MCE. In addition, this notice must include any cost-sharing

requirements imposed as well as information on how transportation

services not covered by the MCE will be furnished.

At Sec. 438.10(h), consistent with section 1932(a)(5)(b) of the

Act, we propose to require that primary case managers furnish, upon

request, information regarding grievance and appeal processes available

to enrollees, including the procedures for obtaining services during

the appeals process. While not a requirement for primary care case

managers, we suggest that State agencies provide potential enrollees

and enrollees of primary care case managers with any additional

information, such as on their rights and responsibilities, that would

better enable them to receive quality health care and participate in

the decision-making process.

In Sec. 438.10(i) we propose to implement section 1932(a)(5)(C) of

the Act to require that comparative information be provided by State

agencies that implement mandatory managed care programs under the

authority in section 1932(a)(1)(A) of the Act. This information must be

provided directly by the State agency or through the MCE at least

annually, as well as upon request. The information must be presented in

a comparative chart-like form that facilitates comparison among MCEs

and must be available in the prevalent languages spoken by populations

in the geographic area. It should include the following information for

each MCE: (1) the service area of the MCE; (2) the benefits covered;

(3) any cost-sharing imposed by the MCE; and (4) to the extent

available, quality and performance indicators, including, but not

limited to, disenrollment rates, as defined by the State agency and

consumer satisfaction. State agencies should specify the meaning of

``disenrollment rates'' and the voluntary disenrollment from one plan

to another plan.

6. Provider Discrimination (Sec. 438.12)

At Sec. 438.12, we are proposing requirements consistent with

section 1932(b)(7) of the Act. Those requirements state that an MCO

must 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. The requirements

further state that the regulation does not prohibit an organization

from including providers only to the extent necessary to meet the needs

of the MCO's enrollees, from establishing different payment rates for

different specialties, or from establishing measures designed to

maintain quality and control costs consistent with the responsibilities

of the MCO.

Section 438.12 should not be construed as an ``any willing

provider'' provision. We believe that the Congress intended in section

1932(b)(7) of the Act only to ensure that MCOs do not adopt arbitrary

policies concerning non-physician providers who, in the past, may have

been discriminated against because they do not hold the same licenses

and certifications as practicing physicians. Any such discriminatory

actions may have provided beneficiaries with fewer choices and may have

reduced beneficiaries' overall access to quality health care.

Accordingly, MCOs should implement policies with respect to provider

participation, reimbursement, and indemnification that are not

arbitrary, but rather relate to quality factors such as outcome

measures and satisfaction surveys, and other legitimate business

concerns.

We also provide in Sec. 438.12 that MCOs must contract with all

health care professionals in the manner provided in Sec. 438.314

(discussed in section 4 below).

B. State Responsibilities (Subpart B)

1. State Plan and Contract Requirements: General Rule (Sec. 438.50)

In this section, we are proposing language to implement section

1932(a) of the Act, which permits State agencies to enroll their

Medicaid beneficiaries in managed care entities on a mandatory basis

without a waiver under sections 1915(b) or 1115 of the Act. Under

section 1932(a)(1)(A) of the Act and Sec. 438.50 of the proposed

regulations, a State agency no longer needs to request, obtain, and

seek periodic renewal of HCFA waivers to restrict freedom of choice for

most Medicaid beneficiaries. Rather, a State agency may amend its

Medicaid plan to require these Medicaid beneficiaries to enroll in

managed care entities, without being out of compliance with the freedom

of choice provisions.

We are requiring State agencies to submit a Medicaid State plan

amendment (SPA) to implement the managed care provisions under section

1932(a) of the Act and the implementing regulations at Sec. 438.50. As

specified in the current regulations at Sec. 430.16, we must make a

decision to approve or disapprove a State agency's request within 90

days of receipt of the SPA, or we may request additional information

from the State agency. If we ask for additional information, we must

make a decision to approve or disapprove a State's SPA within 90 days

of receipt of the State agency's response to the additional information

request. As with other SPAs, the effective date provisions specified in

the current regulations at Secs. 430.20 and 447.256 apply to SPAs

submitted to implement a section 1932(a) of the Act request. Thus,

section 1932(a) SPAs thus may be effective as early as the first day of

the quarter in which a State's SPA is submitted to HCFA.

Under proposed Sec. 438.56(b), the following populations are

excluded from mandatory managed care enrollment under this State plan

option:

Dual Medicare-Medicaid eligibles;

Native Americans who are members of Federally-recognized

tribes except when the MCE is either the Indian Health Service or an

Indian Health program operated by a tribe or tribal organization under

a contract, grant, cooperative agreement, or compact with The Indian

Health Service.

Children (under 19 years of age) who are:

--Eligible for Supplemental Security Income benefits under Title XVI of

the Act;

--Described in section 1902(e)(3) of the Act;

--In foster care or other out-of-home placement;

--Receiving foster care or adoption assistance; or

--Receiving services through a family-centered, community-based,

coordinated care system receiving grant funds under section

501(a)(1)(D) of the Act.

[[Page 52032]]

While State agencies are prohibited from enrolling the above groups

under the State plan option, a State agency may use a section 1915(b)

waiver or section 1115 demonstration authority to mandate enrollment

for these individuals in a managed care system. A State agency would be

required to demonstrate how the individuals' special needs and

circumstances would be met under the managed care arrangements. There

is a growing body of State experience and best practices regarding

enrollment of these groups. We will use this knowledge when evaluating

whether a particular State's waiver request does demonstrate that their

program will adequately address the needs and complexities of these

groups that set them apart from the groups that can be mandatorily

enrolled without a waiver.

Under Sec. 438.50(b), State agencies wishing to utilize the

authority in Sec. 438.50 would be required to provide assurances of

State compliance with all applicable requirements, and under paragraph

(c), assurances that contracts will comply with all applicable

requirements.

2. Choice of Managed Care Entities (Sec. 438.52)

Subject to the exceptions specified below, under section 1932(a)(3)

of the Act, a State agency that requires Medicaid beneficiaries to

enroll in an MCO must offer to its beneficiaries a choice of at least

two managed care entities (MCEs). This is consistent with the

longstanding requirement under section 1915(b) waivers that

beneficiaries have at least two options. This requirement derived from

the fact that the right to disenroll provided in section

1903(m)(2)(A)(vi) of the Act could not be waived under section 1915(b)

of the Act. Thus, in the case of a comprehensive risk contract subject

to section 1903(m) of the Act (formerly HMO contracts, now MCO

contracts), a beneficiary has always had the right to disenroll to

another option. Section 1932(a)(3) of the Act reflects this existing

mandatory managed care policy. MCEs are MCOs under section

1903(m)(1)(A) of the Act or primary care case managers under section

1905(t) of the Act. Therefore, a State agency could comply with this

provision by offering a choice of two practitioners for a primary care

case management system as long as each practitioner is a separate

primary care provider.

Section 1932(a)(3) of the Act provides two exceptions to the

general choice of coverage requirement in section 1932(a)(3)(A) of the

Act. First, under section 1932(a)(3)(B) of the Act, in rural areas, a

State agency may restrict choice of coverage to a single managed care

entity if certain conditions are met. In those situations, the State

agency must allow the beneficiary to choose from at least two

physicians or case managers (to the extent that at least two physicians

or case managers are available to furnish care and services in the

area), and the State agency must allow the beneficiary to obtain

assistance from any other provider outside the network in appropriate

circumstances, as established by the State agency under HCFA

regulations. Second, in the case of certain HIOs (specifically, pre-

1986 HIOs or the county-operated HIOs in California that are exempt

from section 1903(m) of the Act), the choice requirement in section

1932(a)(3)(A) of the Act is deemed to be met if a choice of at least

two providers within the entity is provided.

In defining the term ``rural,'' for purposes of the rural area

exception in section 1932(a)(3)(B) of the Act, we are permitting State

agencies the flexibility to either choose between two existing Medicare

definitions of rural areas found in parts 412 and 491 of this chapter,

or to obtain our approval of a definition developed by the State

agency. We are proposing to prohibit a State agency from designating

the entire State as a rural area.

While we are proposing to allow State agencies a choice of three

options for defining rural areas, we are specifically requesting public

comments on whether it would be more appropriate to apply a single

definition for rural areas, and which definition would be the most

appropriate one. In addition, we are soliciting comments on whether an

alternative definition to the two existing Medicare definitions of

rural areas found in Parts 412 and 491 of this chapter would be more

appropriate, and if so, what the definition should be. A single

definition could result in a more consistent approach of a rural area

definition for purposes of this exception.

If a State agency elects to implement this rural exception, the BBA

requires us to promulgate regulations under which State agencies can

establish the ``appropriate circumstances'' under which an individual

will be permitted to obtain care from any provider. In

Sec. 438.52(c)(2), we propose the following as appropriate

circumstances under which a State agency must permit beneficiaries to

seek out-of-plan treatment: (1) when a service or type of provider is

not available within the MCE network; (2) when a provider is not part

of the MCE network, but has an existing relationship with the

beneficiary; or (3) when the only plan or provider available to the

beneficiary does not, because of moral or religious objections, furnish

the service the enrollee seeks. We also propose that State agencies

have the discretion to determine additional circumstances that warrant

out-of-network treatment. The State agency must ensure that enrollees

are informed of the appropriate circumstances for out-of-plan

treatment. We invite comments and additional suggestions in this area.

3. Enrollment and Disenrollment: Requirements and Limitations.

(Sec. 438.56)

Section 1932(a)(4) of the Act contains new requirements that apply

to the enrollment of beneficiaries in MCEs under a mandatory enrollment

program under section 1932(a)(1)(A) of the Act and new disenrollment

rights that apply to all MCEs, whether enrollment is voluntary or

mandated under section 1932(a)(1)(A) of the Act or a 1915(b) waiver.

The State agency must provide assurances that in implementing a

mandatory enrollment program under section 1932(a)(1)(A) of the Act the

following Medicaid beneficiaries are not required to enroll:

(1) Beneficiaries who are eligible for Medicare;

(2) Indians who are members of Federally recognized tribes, except

when the MCE is The Indian Health Service or an Indian health program

operated by a tribe or a tribal organization under a contract, grant,

cooperative agreement, or compact with the Indian health service.

(3) Children under 19 years of age who are eligible for SSI under

Title XVI of the Act; under section 1902(e)(3) of the Act; in foster

care or other out-of-home placement, receiving foster care or adoption

assistance; or receiving services through a family-centered, community-

based, coordinated care system that receives grant funds under section

501(a)(1)(D) of title J, and is defined by the State agency in terms of

either program participation or special health care needs.

Under section 1932(a)(4)(A) of the Act, enrolled beneficiaries may

terminate or change their enrollment for cause at any time, unless the

beneficiary is enrolled in a single MCO or a primary care case

management system in a rural area as described above in Sec. 438.52. In

this situation, the beneficiary may not disenroll from the single plan

but may change providers within the plan or obtain assistance from any

other provider outside the network in appropriate circumstances as

defined in

[[Page 52033]]

Sec. 438.52(c)(2). Beneficiaries must also be permitted to disenroll

without cause with a particular MCE within the first 90 days of the

initial enrollment period of up to 12 months, and annually thereafter.

In addition to applying to all enrollees under a mandatory enrollment

program under section 1932(a)(1)(A) of the Act, this disenrollment

provision is incorporated in the definition of primary care case

management contract in section 1905(t)(3) of the Act, and in a revised

version of section 1903(m)(2)(A)(vi) of the Act, and thus applies to

all primary care case management contracts and comprehensive risk

contracts subject to section 1903(m) of the Act. This right to

disenroll without cause during the first 90 days of enrollment, with a

particular MCE and at least annually thereafter, replaces the pre-BBA

version of section 1903(m)(2)(A)(vi)of the Act, which provided

enrollees with the right to disenroll without cause at any time, or in

the case of Federally qualified HMOs and certain other entities, at

least every 6 months.

Under the pre-BBA version of section 1903(m)(2)(A)(vi) of the Act,

a 12-month lock-in was possible only under a section 1115

demonstration, since section 1115(a)(2) authority was required in order

to exempt an HMO from the requirement in that version of section

1903(m)(2)(A)(vi) of the Act permitting that an enrollee disenroll

without cause at any time, or every six months.

In addition to extending the maximum enrollment period from 6

months to 12 months and allowing for a 90-day, without-cause

disenrollment period, section 1932(a)(4) of the Act:

Applies this lengthened enrollment to all managed care

entities (MCEs), rather than a specific type of HMO;

Requires that recipients be notified of their ability to

disenroll or change plans during an enrollment period that occurs at

least every 12 months, and at least 60 days before the start of each

enrollment period; and

Eliminates all previous statutory provisions on enrollment

and termination of enrollment.

These provisions apply to enrollment and disenrollment in all types

of MCEs in all Medicaid managed care programs, with the exception of a

temporary exemption for the duration of section 1115 or 1915(b) waiver

periods already approved before the BBA was enacted. Once these current

waiver periods expire, these provisions will apply unless HCFA grants

an exemption from them under section 1115 demonstration authority.

Also, section 4757 of the BBA permits an extension for up to 3 years

for section 1115 waivers approved or in effect as of August 5, 1997.

These waiver extensions must be approved under the same terms and

conditions that applied before the extension. Therefore, any exemptions

from the BBA requirements to which these programs are entitled may

continue during the period of the extended waiver authority.

Section 1932(a)(4)(D)(I) of the Act, also contains the following

requirements for the enrollment process when State agencies use the

State plan amendment authority in section 1932(a)(1) of the Act to

implement managed care on a mandatory basis:

--Individuals already enrolled with an MCE must be given priority to

continue that enrollment if the MCE does not have the capacity to

enroll all individuals seeking enrollment under the program. Thus,

State agencies are required to establish a method for establishing

enrollment priorities for managed care entities if they do not have

sufficient capacity to enroll new individuals, and to give priority to

the continued enrollment of individuals already enrolled with the

entity.

State agencies must establish a default enrollment process under

which individuals who do not elect an MCE during their enrollment

period are assigned to one that meets the requirements of section

1903(m) or 1905(t) of the Act. Under this default assignment process,

individuals who do not select a plan must be enrolled by the State

agency into an entity that takes into consideration the maintenance of

existing provider-individual relationships or relationships with

providers that have traditionally served Medicaid beneficiaries. If

this cannot be accomplished, the State agency must equitably distribute

the individuals among available qualified MCEs.

As mentioned above, these requirements are limited to programs

established under the State plan amendment authority for mandatory

managed care enrollment.

We note that the language in section 1932(a)(4)(A)(ii) of the Act

indicates that the 90-day period to disenroll without cause is to begin

on the date the individual ``receives notice of such enrollment* * *''

However, we recognize that a literal application of this starting date

could make this provision extremely difficult for State agencies to

administer, and therefore provide in Sec. 438.56(e)(1)(ii)(A) that the

general rule is that the 90 days will begin when enrollment is

effective. We provide, however, that if notice to the recipient is

delayed, the 90-day period may be extended to compensate for that

delay.

We provide that the 90-day period for disenrollment without cause

applies only when an individual first enrolls with a particular MCE.

The language in section 1932(a)(4) of the Act regarding the 90-day

period for disenrollment without cause expressly provides for a 90-day

period that begins with enrollment with ``the'' MCE in which the

beneficiary is enrolled. Thus, beneficiaries are entitled to a 90-day

``without cause'' period for disenrollment any time they enroll in a

new MCE. Section 1932(a)(4) of the Act provides for a notice of

termination rights under which an enrollee must be informed of his or

her ability to terminate or change enrollment at least 60 days before

the start of each enrollment period. This 60-day period gives

individuals the opportunity to change MCEs effective with the start of

their initial enrollment period with a particular MCE. If they choose

to remain in the same plan, they have had their opportunity for

disenrollment without cause and declined it. However, enrollees who

change plans, would have an opportunity to try out the new MCE and

determine whether they wish to remain enrolled through the enrollment

period. This interpretation is consistent with the statutory language,

which refers to a 90-day period beginning with the date of enrollment

with ``the entity,'' and is also consistent with what we believe to be

the intent of this provision. We believe that this provision was

designed to provide a beneficiary with a period of time to ``try out''

an MCE and see whether it is right for him or her. A beneficiary who

has already had such a 90-day period with a particular MCE does not

need another one in order to try out that MCE. However, further

restricting the application of the 90-day without cause period would

mark a departure from statutory language.

Section of the Act 1932(a)(4) of the Act permits individuals to

disenroll at any time without cause during the initial 90 days of

enrollment with an MCE, and during enrollment periods of at last every

12 months, thereafter. This is problematic when only one MCE option

exists, such as under the rural area and HIO exceptions provided under

sections 1932(a)(3)(B) and (C) of the Act. We believe that in

authorizing mandatory enrollment in a single entity under these

exceptions, while imposing as a condition the right to choose among

individual providers within the entity, Congress was providing for an

implicit exception to the general rule under section 1932(a)(4) of the

Act that an

[[Page 52034]]

enrollee must be able to disenroll from an MCE. Under these exceptions

we are proposing in Sec. 438.56(e)(2) that the requirements in section

1932(a)(4)(A) of the Act be deemed satisfied by providing that

beneficiaries can disenroll to a different primary care physician or

case manager. Thus, individuals may disenroll from their current

primary care provider, but must continue as an enrollee in the managed

care entity. This would make it unnecessary for a State agency to

operate a parallel FFS system for those individuals who disenroll. We

note that this ``exception'' to the ordinary operation of the

requirement in section 1932(a)(4) of the Act would also be incorporated

in section 1903(m)(2)(A)(vi) of the Act, which cannot be waived under a

section 1915(b) waiver program. Thus, under our proposed rule, a State

agency could offer a single MCE in a rural area under a section 1915(b)

waiver, as long as the requirements in Sec. 438.52(c) are satisfied.

(The issue of section 1903(m)(2)(A)(vi) of the Act does not arise for

the HIOs addressed in Sec. 438.52(d), since they are exempt from

section 1903(m) requirements.)

In accordance with section 1932(a)(4)(B) of the Act, we provide in

proposed Sec. 438.56(g) for the enrollee's opportunity to disenroll or

change enrollment at least 60 days before the enrollment opportunity.

Section 1932(a)(4), of the Act requires State agencies to permit

disenrollment without cause at least every 12 months after the

individuals's enrollment with an MCO. State agencies may fulfill this

requirement by having an annual open season for all MCO enrollees or

establishing an open enrollment opportunity for each individual based

on the individual's date of enrollment.

This provision also proposes that for recipients enrolled under the

State plan option as established through section 1932(a)(1) of the Act,

the State agency must establish a method whereby individuals already

enrolled with an MCE must be given priority to continue that enrollment

where the MCE does not have the capacity to enroll all individuals

seeking enrollment under the program. In accordance with section 1932

(a)(4)(D) of the Act, we propose Sec. 438.56(d)(2). This provision

stipulates that in applying the default assignment provision under

section 1932(a)(1) programs, State agencies are required to establish

an enrollment process that takes into consideration existing provider

and individual relationships and traditional Medicaid providers, and if

these are not possible, utilize an assignment process that equitably

distributes enrollees among qualified, available MCEs.

Except when State agencies have a fee-for-service experience or

prior MCO enrollment data regarding an individual, it may be difficult

to establish a provider and individual relationship for default

assignment purposes. We recommend that State agencies ask potential

enrollees in this situation for the names of providers from whom they

receive services and whether they would wish to continue this

relationship. When the beneficiary identifies a provider who is

participating and has additional capacity, this information should be

used in determining the individual's assignment. In this instance, the

State agency makes the assignment to any MCO in which that provider

participates.

When the State agency cannot get a response, the beneficiary has no

preference, or the named provider does not participate, consideration

must be given to ``traditional providers''. The definition in section

1932(a)(4) of the Act specifically describes providers who have

``traditionally served beneficiaries under this Title.'' As such, we

believe the definition of a traditional provider should be defined as a

provider who has been the main source of care for any recipient during

the last year and has experience and expertise in dealing with the

Medicaid population.

Thus, we propose under Sec. 438.56(d)(3) that existing provider-

individual relationships be defined as the provider who was the main

source of care for the recipient in the last year. This can be

established through State records of previous MCE enrollment or FFS

experience, or through contact with the beneficiary. Under

Sec. 438.56(d)(4) we would define ``traditional providers'' to be any

provider who has been the main source of care for a beneficiary within

the last year, and has expertise and experience in dealing with the

Medicaid population. If the State agency has no recent claims history,

cannot get a response from the beneficiary, or the named provider does

not participate, the State agency must give consideration to

traditional providers as defined above. If no traditional providers are

available, remaining individuals are to be equitably distributed among

qualified MCEs with adequate capacity.

Under Sec. 438.56(d), we propose that with respect to the lock-in

and termination of enrollment provisions, default assignment be

considered to be the ``election'' of a plan. The lock-in provision

previously contained in section 1903(m)(2)(A)(vi) of the Act contains

the same language: ``individuals who have elected to enroll with the

plan. . . .'' This language also is in the new BBA requirement on

disenrollment. The provision has always been applied to individuals who

were default-assigned as well as to those who actually elected to

enroll in their plans. As such, we believe that this practice may be

continued.

Sections 438.56(f) and 438.56(g) of the Act set forth agency

procedures including the notice requirements of grievance and appeal

rights, and the requirement that a request for disenrollment for cause

be submitted in writing to the State agency (or to the MCE if the State

agency permits MCEs to process disenrollments). When a State agency

permits an MCE to process disenrollment requests, we would require the

beneficiary to submit the disenrollment request to the MCE, and require

the MCE to make a copy for the State agency.

In Sec. 438.56(f)(2)(i), we propose that the MCE may approve the

request for disenrollment if the State agency permits MCEs to process

disenrollments for cause. In addition, the MCE must notify the enrollee

and State agency in writing that the disenrollment request was approved

and indicate the effective date of the disenrollment consistent with

paragraph (f)(4) of this section, which requires that disenrollment is

effective no later than the first day of the second month following the

month in which the enrollee made the request for disenrollment. In

Sec. 438.56(f)(2)(iii), we propose that if the MCE, for whatever

reason, does not take action to approve the enrollee's request for

disenrollment, for which it must notify the State agency within a

reasonable timeframe as determined by the State, the State agency will

make a good cause determination based on reasons cited in the

enrollee's request and information provided by the MCE at the State

agency's request.

Section 438.56(h) incorporates Public Law 101-508 section 4732(c),

effective November 5, 1990, as well as the provision set forth in

section 4702(b)(1) of the BBA, to allow State agencies to provide in

their State plans and contracts with MCEs for the automatic

reenrollment of recipients who become disenrolled from the MCE solely

by virtue of becoming temporarily (four months or less) ineligible for

Medicaid. We note that the provisions in Sec. 438.56(e) through (h)

apply to PHPs.

4. Conflict of Interest Safeguards (Sec. 438.58)

State agencies can not enter into contracts with any MCO, unless

the

[[Page 52035]]

State agency has in effect conflict-of-interest safeguards with respect

to its officers and employees, and local officers and employees who

have responsibilities relating to contracts with such MCOs or the new

default enrollment process. These safeguards must be at least as

effective as the Federal safeguards provided under section 27 of the

Office of Federal Procurement Policy Act (41 USC 423). This provision

applies to contracts entered into or renewed by October 1, 1997 and

signed by both parties.

This proposed rule is necessary to conform our regulations to

section 1932(d)(3) of the Act, which requires that State agencies have

conflict-of-interest safeguards ``at least as effective'' as Federal

procurement safeguards. The Federal Procurement Policy Act specifies

prohibitions for former and current employees from entering into any

type of communications with individuals or third parties to unduly

influence their decisions. These provisions include the following:

Prohibited conduct by competing contractors.

Prohibited conduct by procurement officials.

Refusal to engage in discussion with competing contractor.

Disclosure to unauthorized persons.

Certification and enforcement matters.

This proposed rule will ensure that there is no undue influence or

preference given to an MCO because a State employee has an interest in

that MCO. It will force State agencies to have stringent safeguards

over individuals for the proper and efficient administration of a State

Plan.

Before section 1932(d)(3) of the Act was added by section 4207 of

the BBA, section 1902(a)(4)(C) of the Act provided that Medicaid State

and local officers or employees, former officers or employees, and

partners of former officers or employees were prohibited from

committing any act that is prohibited by Section 207 or 208 of title 18

of the United States Code. Section 207 or 208 of title 18, prohibits

former and current employees from entering into communications to

influence on behalf of any other persons.

5. Limit on Payment to Other Providers (Sec. 438.60)

We propose to redesignate Sec. 434.57 as Sec. 438.60, with

appropriate changes in terminology.

6. Continued Service to Recipients (Sec. 438.62)

We propose to redesignate Sec. 434.59 as Sec. 438.62 with

appropriate changes in terminology.

7. Computation of Capitation Payments (Sec. 438.64)

We propose to redesignate Sec. 434.61 as Sec. 438.64 with

appropriate changes in terminology.

8. Monitoring Procedures (Sec. 438.66)

We propose to redesignate Sec. 434.63 as Sec. 438.66 with non-

substantive revisions and appropriate changes in terminology.

C. Subpart C--Enrollee Protections

1. Benefits (Sec. 438.100)

This section requires that contracts with MCOs must specify the

services that the organization is required to furnish to Medicaid

enrollees. If services covered under the State plan are not covered

under the contract, the State agency must make arrangements to furnish

these services to the Medicaid enrollee and provide written

instructions on how to obtain the services.

2. Enrollee-Provider Communications (Sec. 438.102)

Under current law, Medicaid beneficiaries are entitled to receive

from their health care providers, the full range of medical advice and

counseling that is appropriate for their condition. The BBA expands

upon this basic right by precluding an MCO from establishing

restrictions that interfere with enrollee-practitioner communications.

Under the provision, a covered health care professional (we use the

term ``practitioner'' interchangeably with the statutory definition of

``health care professional'') who is acting within his or her scope of

practice, must be permitted to freely advise a patient about his or 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-

practitioner 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 the State agency remains

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.

This provision is consistent with a similar provision on anti-gag

rule provisions contained in the M+C regulation. In addition, this

provision is consistent with the CBRR provision regarding participation

in treatment decisions whereby all treatment options should be

discussed between a provider and his or her patient.

3. Marketing Activities (Sec. 438.104)

We currently require under Sec. 434.36 that each MCO have in its

contract the methodology for assuring that marketing plans, procedures,

and materials are accurate and do not mislead, confuse, or defraud

either recipients or the Medicaid agency. Section 1932(d)(2) of the Act

established by Section 4707(a) of the BBA further strengthens consumer

protections and prohibits fraud and abuse by restricting marketing

activities by managed care entities. Section 1932(d)(2) of the Act

requires that marketing materials be distributed to the entire service

area covered under contract and that marketing materials not be

distributed without the prior approval of the State agency. Marketing

materials may not contain false or materially misleading information.

We propose to implement these BBA provisions and prohibit certain other

marketing practices under Sec. 438.104.

For the purposes of this regulation, we propose in Sec. 438.104(a)

to define marketing materials as materials produced in any medium, by

or on behalf of an MCE, used to communicate with individuals who are

not its enrollees and which can reasonably be interpreted as intended

to influence the individuals to enroll or reenroll in that particular

MCE.

a. Required Marketing Activities. In Sec. 438.104(b)(2)(ii) we

propose to reflect the requirement in section 1932(d)(2)(B) of the Act

that MCEs must distribute marketing materials to the entire service

area in which they have contracts under sections 1903(m) or 1903(t)(3)

of the Act.

b. Prohibited Marketing Activities. In Sec. 438.104(b)(2) we

propose to reflect the provision in section 1932(d)(2)(A)(i) of the Act

that provides that prior approval from the State agency must be

obtained before an MCE or any agent or independent contractor of the

MCE distributes any marketing materials within any State. According to

the last sentence in section 1932(d)(2)(A)(i) of the Act this prior

approval requirement

[[Page 52036]]

was to take effect on a date specified by the Secretary in consultation

with the State agency. Following such consultation, this requirement

became effective on July 1, 1998. For purposes of this requirement, we

define marketing materials in Sec. 438.104(a) as discussed above.

In addition, we propose in Sec. 438.104(b) to implement the

provision in section 1932(d)(2)(A)(i)(II) of the Act on the

distribution by MCEs, or any agents, of marketing materials that

contain false or materially misleading information by requiring that

MCE contracts specify the methods by which compliance with this

requirement is assured. Examples of misleading marketing information

would be an assertion that the beneficiary must enroll with the MCE to

get Medicaid benefits, or that the MCE is recommended or endorsed by

HCFA.

In Sec. 438.104(b)(2)(iv), we propose to reflect the prohibition in

section 1932(d)(2) of the Act on the MCE or any agent attempting to

influence enrollment with the MCE in conjunction with the sale of any

other insurance.

For example, the entity or independent contractor of such entity

may not assert that a recipient will lose Medicaid benefits if he or

she does not enroll in the entity's plan. Further, the entity or

independent contractor may not claim that it is recommended or endorsed

by us.

In Sec. 438.104(b)(2)(iv), we propose to reflect the prohibition in

section 1932(d)(2) of the Act on the MCE or any agent attempting to

influence enrollment with the MCE in conjunction with the sale of any

other insurance. We interpret this to mean that managed care entities

may not entice a potential enrollee to join the MCE by offering the

sale of any other type of insurance as a bonus for enrollment. However

we invite comment on this provision since no legislative history is

available to help determine if this interpretation is accurate. The

conditions that we have prescribed to ensure accurate information for

an informed beneficiary are set forth in Sec. 438.10 (discussed in

section 1 above), which is referenced in Sec. 438.10.

In Sec. 438.104(b)(2)(iii) we propose to reflect the requirement in

section 1932(d)(2)(D) of the Act that MCEs comply with the information

requirements set forth in Sec. 438.10 to ensure that each potential

enrollee receives accurate oral and information in order that the

potential enrollee can make an informed decision whether or not to

enroll.

In Sec. 438.104(b)(2)(v) we propose to reflect the prohibition in

section 1932(d)(2)(E) of the Act barring an MCE, directly or

indirectly, from conducting door-to-door, telephonic, or other ``cold

call'' marketing of enrollment. MCEs and their employees are prohibited

from conducting these marketing practices either by themselves

(directly) or by using an agent, affiliated provider, or contractor

(indirectly). This provision does not prohibit MCEs from engaging in

other State approved activities, such as marketing at health fairs,

procuring billboards, bus signs, or other broadcast advertising

materials, and contacting in person, potential enrollees who request

further information about the entity. However, it is the prerogative of

the State agency to further limit marketing practices beyond those

prohibited or required by federal law. Cold call marketing is defined

in proposed Sec. 438.104(a) as any unsolicited personal contact with a

potential enrollee by an employee, affiliated provider or contractor of

the entity for the purpose of influencing enrollment with such entity.

This would include such activities as a physician or other member of

the medical staff or salesperson or other managed care entity,

employee, or independent contractor approaching a beneficiary in order

to influence the potential enrollees decision to enroll with a

particular plan.

c. Consultation in State agency approval of marketing materials. In

Sec. 438.104(c) we propose to reflect the requirement in section

1932(d)(2)(A)(ii) of the Act that State agencies provide for

consultation with a Medical Care Advisory Committee (MCAC) in the

process of reviewing and approving marketing materials. Currently, MCAC

is listed in the regulations at Sec. 431.12. The current MCAC must

include Board-certified physicians and other representatives of the

health professions who are familiar with the medical needs of low-

income population groups and with the resources available and required

for their care; members of consumers' groups that include Medicaid

recipients and consumer organizations such as labor unions,

cooperatives, consumer sponsored prepaid group practice plans, and

others; and the Director of the Public Welfare Department or the Public

Health Department, whichever does not head the Medicaid agency. State

agencies do not have to use the current MCAC but can establish a new

MCAC for consultation in reviewing and approving marketing material. If

a new MCAC is established, it must be composed of the identical

membership described above and in Sec. 431.12.

4. Liability for Payment (Sec. 438.106)

In Sec. 438.106 we propose to reflect the requirement in section

1932(b)(6) of the Act (enacted in section 4704(a) of the BBA), to

require that MCOs must protect Medicaid beneficiaries from being held

responsible for payment liabilities incurred by the MCO or by a health

care provider with a contractual, referral, or other arrangement with

the MCO. For example, if the MCO were to become bankrupt, the Medicaid

enrollee would not have to assume responsibility for costs that the MCO

was responsible for covering, nor any of the debts of the providers

affiliated with the MCO. In addition, if the MCO fails to receive

payment from the State agency, or if a provider fails to receive

payment from the State agency or the MCO, the Medicaid enrollee cannot

be held responsible for these payments. The Medicaid enrollee cannot be

held responsible for payments to a provider in excess of the amount

that he or she would have owed if the MCO had directly provided the

service.

We are requesting public guidance on the part of this provision

that refers to beneficiary liability for payments to a provider ``in

excess of the amount he or she would have owed.'' Other than nominal

cost sharing, Medicaid law at section 1916 of the Act specifically

prohibits States or plans from imposing additional cost sharing on

Medicaid beneficiaries. We do not believe Medicaid beneficiaries would

``owe'' an MCO any payment amounts beyond nominal costsharing.

5. Cost Sharing (Sec. 438.108)

This section would reflect amendments made by section 4708(b) of

the BBA, which amended sections 1916(a)(2)(D) and 1916(b)(2)(D) of the

Act. As a result of these changes, the prohibition on cost-sharing for

services furnished by MCOs has been eliminated. Copayments for services

provided by MCOs, thus, may now be imposed in the same manner as

copayments are applied under fee-for-service.

Accordingly, State agencies should use their fee-for-service

payment rates to serve as the basis for determining copayments that can

be assigned for managed care services. State agencies would be allowed

to impose copayment requirements to the same extent that they are

allowed to impose copayment requirements on Medicaid beneficiaries not

enrolled in MCOs. For example, State agencies would have the option of

establishing a standard copayment amount for managed care services that

is determined by applying the

[[Page 52037]]

maximum copayment amounts specified at Sec. 447.54 as applied to the

State agency's fee-for-service payment for that service.

In addition, any beneficiary groups excluded by law from having to

pay copayments under fee-for-service would continue to be excluded from

any copayment responsibility with respect to managed care services.

These beneficiary groups include children, pregnant women, and

institutionalized beneficiaries. Also prohibited are copayments for

emergency services and family planning services.

6. Assurances of Adequate Capacity and Services (Sec. 438.110)

Section 1932(b)(5) of the Act, added by section 4704(a) of the BBA,

requires MCOs to provide to the State agency and the Secretary with

adequate assurances, in a time and manner to be determined by the

Secretary, that each organization, with respect to its service area,

has the capacity to serve the expected enrollment in such service area.

Section 1932(b)(5) of the Act also specifies that these assurances must

demonstrate that each MCO offers an appropriate range of services and a

sufficient number, mix, and geographic distribution of providers of

services.

Current regulations at Sec. 434.6(a)(2) and (5) require that all

contracts, whether with health maintenance organizations, (now called

MCOs), or PHPs, identify the population covered by the contract and

allow for the State agency and HHS to evaluate through inspection or

other means, the quality, appropriateness and timeliness of services

performed under such contract. Under Sec. 434.50(b), a State agency is

required to obtain proof, from each contractor, of the contractor's

ability to provide the services under the contract efficiently,

effectively, and economically. In addition, under Sec. 434.52, a State

agency is required to obtain proof that each contractor furnishes the

health services required by enrolled recipients as promptly as is

appropriate, and that the services meet the agency's quality standards.

In Sec. 438.110, we propose to add additional requirements that

implement the provisions in section 1932(b)(5) of the Act, requiring

MCOs to provide adequate assurances of their capacity and services. We

propose to interpret ``adequate assurances'' referenced in section

1932(b)(5) of the Act to require documentation of the adequacy of

capacity and services in the service area, rather than simply a

``certification'' to this effect.

In Sec. 438.110(a), we propose a general requirement that each MCO

submit documentation to the State agency and to us, demonstrating that

it has the capacity to serve the expected enrollment in its service

area. The nature and purpose of the documentation is further described

in Sec. 438.110(b). In that paragraph, we provide that the

documentation must address three requirements. These are: (1) that the

MCO offers an appropriate range of services, including access to

preventive services, primary care services, and specialty services for

the anticipated number of enrollees in the service area; (2) that the

MCO maintains a network of providers that is sufficient in number, mix,

and geographic distribution; and (3) that the MCO meets the

availability of services provisions in Sec. 438.306 of subpart E. While

section 1932(a)(5)(A) of the Act refers only to ``preventive and

primary care services'', we believe that access to specialty services

is also critical. We accordingly have added specialty services in

proposed Sec. 438.110(b)(1), in accordance with our authority under

section 1902(a)(4) of the Act.

Information that may be provided by an MCO to comply with the above

requirements includes, but is not limited to, documentation that

describes the expected enrollment by geographic location; a list of all

of the primary, preventive and specialty care services to be provided

by the MCO; the names, types, and geographic location of providers and

specialists who will furnish the contracted services; the hours of

operation for each MCO facility and provider site; the timeliness

standards being observed by the MCO; a description of the MCO's plan

for identifying and furnishing care to pregnant women; a description of

the MCO's plan for identifying and assessing beneficiaries with serious

or complex medical conditions; and the MCO's plan for assuring

culturally competent services. These examples are not intended to be an

exhaustive list or mandatory requirements. Rather, the State agency

should tailor its own documentation requirements to assure itself that

the MCO has demonstrated adequate capacity and services, and thereby

has met the availability of services provisions outlined under proposed

Sec. 438.306, discussed in section 4 below.

In Sec. 438.110(c), we propose that the MCO submit the

documentation described in Sec. 438.110(b) to the State agency no less

than every 2 years, but also upon entering or renewing a contract with

the State agency, and at any time when the State agency has determined

that there has been a significant change in the MCO's delivery network

or enrollee population. We emphasize with this requirement that the MCO

must minimally submit the information described in Sec. 438.110(b) to

the State agency at least every two years, even if the contract is in

effect for a longer period. In addition, under this requirement, the

State agency should have sufficient flexibility to determine whether or

not the MCO has maintained adequate capacity in the event that there

has been a significant change in the organization's delivery network or

enrollee population.

In Sec. 438.110(d), we propose that, following the State agency's

review and any changes made to the documentation as a result of that

review, the MCO submit to HCFA the same documentation it sent to the

State agency. This provision is in accordance with BBA statutory

language, which specifically requires that assurances be provided to

the State agency and to HCFA. It is our expectation that the

documentation submitted will be in an electronic format, when possible,

and will include a summary of the contents of the documentation and an

explanation of how each individual piece of the documentation relates

to the availability of services provisions in Sec. 438.306 of subpart

E.

Our intent in proposing these provisions is not to supersede the

State agency as the decision maker of whether or not the MCO has

demonstrated adequate capacity and services. Rather, we propose in

paragraph Sec. 438.110(d) that MCOs seek certification from the State

agency before the organization submits documentation to us. This

certification can be in a format decided upon by the State agency.

However, the content should specify whether the MCO has demonstrated

that it has sufficient capacity and services in accordance with the

requirements of this section and Sec. 438.306 of subpart E.

7. Emergency and Post-Stabilization Services. (Sec. 438.114)

Section 4704(a) of the BBA added section 1932(b)(2) to the Act to

assure that Medicaid managed care beneficiaries have the right to

immediately obtain emergency care and services and the right to post-

stabilization services following an emergency condition under certain

circumstances. Each contract with an MCO and primary care case manager

must require the organization to provide for coverage of emergency

services and post-stabilization services as described below. In section

1932(b)(2)(A)(i) of the Act, while Congress required primary care case

managers and MCOs to provide coverage of emergency services,

[[Page 52038]]

it did not define the word ``coverage'' even though these health care

models generally do not cover emergency services in the same manner. In

proposed Sec. 438.114 we interpret the obligation in section

1932(b)(2)(A)(i) of the Act to provide for coverage of emergency

services to mean that an MCO that pays for hospital services generally,

must pay for the cost of emergency services obtained by Medicaid

enrollees. We interpret coverage in the primary care case management

context to mean that the primary care case managers must allow direct

access to emergency services without prior authorization. We apply

different meanings to the word ``coverage'' because while primary care

case managers are individuals paid on a fee-for-service basis, they

receive a State payment to manage an enrollee's care. While primary

care case managers, unlike MCOs, would not likely be involved in a

payment dispute involving emergency services, they could be involved in

an authorization dispute over whether a self referral to an emergency

room is authorized without prior approval of the primary care case

manager. Accordingly, we propose to provide in Sec. 438.114(d)(2) that

enrollees of primary care case managers are entitled to the same

emergency services coverage without prior authorization that is

available to MCO enrollees under section 1932(b)(2) of the Act.

The BBA further stipulates that emergency services must be covered

without regard to prior authorization or the emergency care provider's

contractual relationship with the organization. These provisions

collectively enable a Medicaid enrollee to immediately obtain emergency

services at the nearest provider when and where the need arises.

Section 1932(b)(2)(B) of the Act defines emergency services as

covered inpatient or outpatient services that are furnished by a

provider qualified to furnish such services under Medicaid that are

needed to evaluate or stabilize an emergency medical condition.

Emergency medical condition is in turn defined in section 1932(b)(2)(C)

of the Act as a medical condition manifesting itself by acute symptoms

of sufficient severity (including severe pain) that a prudent

layperson, who possesses an average knowledge of health and medicine,

could reasonably expect the absence of immediate medical attention to

result in placing the health of the individual (or with respect to a

pregnant woman, the health of the woman or her unborn child) in serious

jeopardy, serious impairment to body functions, or serious dysfunction

of any bodily organ or part. While this standard encompasses clinical

emergencies, it also clearly requires MCOs to base coverage decisions

for emergency services on the severity of the symptoms at the time of

presentation and to cover examinations when the presenting symptoms are

of sufficient severity to constitute an emergency medical condition in

the judgment of a prudent layperson. The above definitions are set

forth in proposed Sec. 438.114(a).

Section 1932(b)(2)(A)(ii) of the Act also provides MCE enrollees

with the right to coverage of post-stabilization'' services after they

have been ``stabilized'' (that is, they no longer have an emergency

medical condition) following an admission for an emergency medical

condition. Specifically, the services that must be covered are those

that must be covered under Medicare rules implementing section

1852(d)(2) of the Act, ``in the same manner'' as such rules ``apply to

M+C plans offered under Part C of title XVIII.'' Under the last

sentence in section 1932(b)(2)(A) of the Act, this requirement was

effective 30 days after the Medicare rules were established, which was

August 26, 1998. The M+C post-stabilization requirements referenced by

section 1932(b)(2)(A)(ii) of the Act are set forth in proposed

Secs. 438.114(a) and 438.114(c)(2), which define ``post-stabilization

services'' and require that MCEs (including primary care case managers)

with risk contracts that cover post-stabilization services must pay for

such post-stabilization services. Specifically, Sec. 438.114(c)(2)

requires that such MCEs must pay for post-stabilization services that

are pre-approved by the MCE, or that have not been pre-approved because

the MCE did not respond to a request for approval within 1 hour of a

request by a provider, or could not be contacted for approval. Under

Sec. 438.114(c)(3), the MCE must continue to pay for post-stabilization

services until other arrangements for care are made and the provider of

post-stabilization services is notified While such an MCE is required

to pay for post-stabilization services, in proposed Sec. 438.114(c)(4)

and (c)(5) we provided that an enrollee of a primary care case manager

is entitled to obtain post-stabilization services under the same terms

as an MCO enrollee, when they are approved by the primary care case

manager, or when the primary care case manager cannot be reached or

fails to respond to a request for authorization within one hour. Where

post-stabilization services are not covered by the MCE risk contract,

the State agency must pay for post-stabilization services that were

requested and either approved by the MCE or not approved, due to

untimely or absent response.

``Post-stabilization care'' means medically necessary, non-

emergency services needed to ensure that the enrollee remains

stabilized from the time that the treating hospital requests

authorization from the MCE until (1) the enrollee is discharged; (2) an

MCE physician arrives and assumes responsibility for the enrollee's

care; or (3) the treating physician and MCE agree to another

arrangement. Because an untimely response to a request for approval

would unduly delay the delivery of the post-stabilization care

services, thereby potentially compromising their effectiveness, we have

established a 1-hour timeframe in the regulation as an enrollee

protection. Because a completely accurate assessment of an enrollee's

need for post-stabilization care services cannot be made until the

enrollee is stabilized, we expect that the provider of the post-

stabilization care services will not request the MCO's approval of the

services until after the enrollee is stabilized, at which time enough

details about the enrollee's condition should be known to allow the

organization to make an informed decision on whether to approve the

care within one hour.

Sections 438.114(c)(2) and 438.114(d)(1) require that MCEs (or the

State agency, under Sec. 438.114(c)(4)) pay for emergency and post-

stabilization services without prior authorization (other than the pre-

approval of post-stabilization services no later than within one hour

of a request for approval).

Proposed Sec. 438.114(d)(1) provides that an MCO must pay for

emergency services regardless of whether the entity that furnishes the

services has a contract with the MCO. Proposed Sec. 438.114(d)(2)

provides that if a primary care case management contract is a risk

contract that covers such services, a primary care case management

system must allow enrollees to obtain emergency services outside of the

primary care case management system.

Proposed Sec. 438.114(e) further clarifies financial

responsibility. In Sec. 438.114, MCOs may not deny payments if, on the

basis of symptoms identified by the enrollee, he or she appeared to

have an emergency medical condition, but turned out not to be a

condition, in which the absence of immediate medical care would result

in serious jeopardy to the health of the individual or, in the case of

a pregnant woman, the health of her unborn child, serious impairment of

bodily function, or serious dysfunction of any bodily organ

[[Page 52039]]

or part. Likewise, the MCO or primary care case manager cannot deny

payment if the enrollee obtained services based on instructions of a

practitioner or other representative of the MCO. Proposed

Sec. 438.114(e)(2) also provides that the MCO is not responsible for

services obtained outside the MCO unless the services are emergency

services or post-stabilization services covered under

Sec. 438.114(c)(2).

Proposed Sec. 438.114(f) provides that the attending physician or

practitioner actually treating the enrollee determines when the

enrollee is sufficiently stabilized for transfer or discharge, and that

this determination is binding on the MCO for coverage purposes.

The above emergency provisions are consistent with most of the

emergency services provisions in the M+C regulations. These regulations

deviate from Medicare in two ways. First, the Medicare statute has

specific provisions for non-emergency, but urgently needed services,

while the Medicaid statute does not contain any similar references.

Second, the primary care case management model is a delivery system

unique to Medicaid; and there is no Medicare counterpart to the special

rules described above that apply to primary care case manager

enrollees. Also, it should be noted that the emergency provisions in

Sec. 438.114 relate directly to, and are consistent with, the CBRR

provision regarding access to emergency services. See discussion in

section I above. The CBRR requires health plans to educate their

members about the availability, location, and appropriate use of

emergency services. It also requires plans to cover emergency screening

and stabilization services both in and out of network without prior

authorization consistent with the prudent layperson standard. The

Medicaid regulations in Sec. 438.306 (network adequacy), Sec. 438.310

(benefits information) as well as Sec. 438.114 address the CBRR issues.

8. Solvency Standards (Sec. 438.116)

Section 4706 of the BBA amended section 1903(m)(1) of the Act by

providing additional requirements for the solvency standards that an

MCO must meet. Previously, MCOs had to make adequate provision against

the risk of insolvency to the satisfaction of the State agency and

provide that enrolled Medicaid beneficiaries were not held liable for

the debts of the MCO in the case of insolvency. Now, under the BBA,

unless they meet one of the exceptions noted below, MCOs must either

meet the same solvency standards that the State agency establishes for

its private HMOs or be licensed or certified by the State agency as a

risk bearing entity. By meeting these standards, these MCOs are

considered to have met the general solvency standards. However, this

provision does not apply to MCOs that do not provide inpatient and

physician services, are public entities, have solvency guaranteed by

the State agency, or are federally qualified health centers (FQHCs) or

are controlled by an FQHC that meets the solvency standards already

established for such centers by the State agency. For further

clarification, the term ``control'' (with respect to an MCO being

controlled by an FQHC) means the possession, whether direct or

indirect, of the power to direct or cause the direction of the

management and policies of the MCO through membership, board

representation, or an ownership interest equal to or greater than 50.1

percent. These MCOs must still meet the general requirement that MCOs

have to make adequate provision against the risk of insolvency to the

satisfaction of the State agency and provide that Medicaid

beneficiaries enrolled were not held liable for the debts of the MCO in

the case of its insolvency.

Under section 4710(b)(4) of the BBA, the new solvency requirements

are applicable for MCO contracts entered into or renewed (that is,

signed by both parties) October 1, 1998 or later. In addition, the

requirements do not apply to fully capitated MCOs under contract as of

the date of enactment of the BBA until 3 years after the date of

enactment of the BBA, which is August 5, 2000. Proposed

Sec. 438.116(c)(6) would reflect these effective dates.

D. Quality Assessment and Performance Improvement (Subpart E)

1. Background

Prior to 1997, Medicaid law and regulations specified certain

quality assurance requirements for HMOs subject to section 1903(m) of

the Act. Section 434.34 required HMOs to have an internal quality

assurance plan that met limited requirements. Section 434.53 required

State agencies to conduct periodic medical audits of HMOs to ensure

that each organization furnished quality and accessible health care to

all Medicaid enrollees. Section 1902(a)(30)(C) of the Act further

required State agencies to conduct, on an annual basis, an independent,

external review of the quality of services furnished under each State

agency contract with an HMO. Other requirements that were related to

the quality of services included grievance procedures for beneficiaries

enrolled in HMOs (Sec. 434.32), emergency medical services

(Sec. 434.30), enrollee choice of health professional (Sec. 434.29),

other State monitoring procedures (Sec. 434.63), and use of sanctions

for HMO failure to provide medically necessary services resulting in an

adverse effect on the enrollee (Sec. 434.67).

Before enactment of the BBA, Medicaid law also included several

proxy measures or indirect assurances relating to quality. The law

required State agencies to contract with HMOs that met specific

enrollment composition requirements (that is, at least 25 percent of a

health plan's enrollment was to consist of persons not covered by

Medicare or Medicaid) and required State agencies to establish solvency

standards for HMOs serving Medicaid beneficiaries.

Additional general provisions governing State Medicaid programs

required State agencies to ensure that access and quality of services

provided under managed care were comparable to those provided under the

fee-for-service program. However, prior to the enactment of the BBA,

neither the statute nor the regulations specified the specific methods

or standards to support these assurances.

HCFA and State agencies developed tools and interpretive guidance

to provide more specific and standardized methods for quality assurance

and improvement. As described above in the Overview of Medicaid Managed

Care section, we developed ``A Health Care Quality Improvement System

for Medicaid Managed Care--A Guide for States,'' as the product of the

Quality Assurance Reform Initiative (QARI). Other technical assistance

tools and guidance were developed subsequently.

In 1996, HCFA undertook the Quality Improvement System for Managed

Care (QISMC) initiative to accomplish several goals: (1) to update the

1993 QARI guidelines; (2) to develop coordinated Medicare and Medicaid

quality standards that would reduce duplicative or conflicting efforts;

(3) to make the most efficient and effective use of recent developments

in the art and science of quality measurement, while allowing

sufficient flexibility to incorporate developments in this rapidly

evolving discipline; and (4) to assist the Federal government and State

agencies in becoming more effective ``value-based'' purchasers of

health care for vulnerable populations. In developing QISMC, we worked

with representatives from, and with tools developed by, health plans,

State agencies, advocacy organizations, and experts in quality

measurement and improvement such as the National Committee for Quality

Assurance, the

[[Page 52040]]

Foundation for Accountability (FACCT) and the Joint Commission on the

Accreditation of Healthcare Organizations. With the assistance of the

experts and their products, we identified the approaches, tools and

techniques that we believe would most effectively measure and improve

health care quality in managed care both today and in the years to

come. From the perspective of the Medicaid program, in developing

QISMC, we have endeavored to balance the need to establish a high

minimum threshold for entities interested in contracting with States

agencies, with the desire to ensure that MCOs continually improve the

quality of the care they provide.

QISMC standards articulate a vision for how managed care will be

provided that is consistent with the standards sought by other forward

looking purchasers in the private and public sectors. An initial draft

of QISMC was released for public input in January 1998, with further

input sought through May 1998. An Interim QISMC document will be

released this fall.

The quality assurance provisions of the BBA espouse the same

philosophy and goals for performance improvement as are reflected in

QISMC. Accordingly, in implementing the BBA provision, we have drawn

extensively upon the knowledge and expert guidance that informed the

design of QISMC. These proposed regulations set forth actions that we

view as necessary on the part of State agencies to fulfill the

provisions of the BBA. The forthcoming QISMC ``interim'' document is

comprised of standards, which will be consistent with the regulatory

requirements on the State agencies in this proposed rule and on the

health plans in the interim final rule for the M+C program, and

additional implementation and monitoring guidelines. Should the

standards in either of these regulations change as they are finalized,

QISMC will similarly change as it moves from ``interim'' to ``final''

State agencies have the authority to develop their own approaches,

which we will review and evaluate. While HCFA will not require State

agencies to use the QISMC guidelines, we will consider MCO strategies

that are based on QISMC to be in compliance with these proposed

regulations that relate to the internal MCO quality activities. We

believe that State agencies that use QISMC will be more effective

business partners by using standards consistent with those of the

Medicare program, and will be able to assure Medicaid beneficiaries and

their advocates, and others, that the State agency is moving

effectively to promote high quality care.

It is in this context that we interpret and propose to implement

the BBA provisions governing quality and beneficiary protections in

Medicaid managed care. This preamble provides a general introduction to

the following proposed regulations to implement section 1932(c)(1),

which describes requirements for States' quality assessment and

improvement strategies as applied to contracts with Medicaid managed

care organizations (MCOs).

2. Overview of State Strategies

Under section 1932(c)(1) of the Act, as added by section 4705(a) of

the BBA, each State agency that elects to furnish services to Medicaid

beneficiaries through an MCO must develop and implement a quality

assessment and performance improvement strategy to ensure that

beneficiaries have access to and receive quality health care and other

services related to quality. This requirement applies whether the

arrangement is mandatory or voluntary. Prior to the BBA, the Medicaid

statute included a number of disjointed, incremental provisions

addressing quality. Additionally, some of these provisions were

duplicative (for example, the regulatory requirement at Sec. 434.53 for

periodic audits of managed care plans by State agencies and the

requirement that HMOs receive an external review of quality from an

agent of the State found in section 1902(a)(30)(C) of the Act). In

addition, regulatory provisions had failed to allow for improvements in

the technology of measuring and improving quality (for example, use of

performance measures and consumer surveys). As a consequence, it was

unclear how the various statutory and regulatory requirements were to

fit together to effectively and efficiently ensure (and where

appropriate improve) quality. This uncertainty potentially placed

Medicaid beneficiaries at risk for not having the strongest possible

oversight of their health care.

Limits to available resources in both the public and private

sectors for quality of care measurement and improvement also increase

the importance of the efficient and effective use of quality oversight

tools through well-considered, coordinated strategies. Since it is not

possible for any quality oversight system to measure every episode of

care furnished to any particular patient or all patients (consumers),

it is very important for the quality oversight tools employed by any

health care delivery system to be utilized in a way that maximizes

their efficiency and effectiveness. For the first time, Medicaid law,

in section 1932(c)(1)(A) of the Act, requires that each State Medicaid

program design and implement an overarching quality assessment and

performance improvement strategy designed to address the effectiveness

of its managed care program. Under section 1932(c)(1)(B) of the Act,

this strategy must be ``consistent with standards'' that we establish

in regulations. Subpart E of part 438 contains the HCFA standards

established pursuant to section 1932(c)(1)(B) of the Act. We believe

that the quality assessment and performance improvement strategy

developed by each State agency should be used as a tool to ensure that

contracts with MCOs are effective in delivering quality health care

services. Through the use of its quality strategy, each State agency

has a mechanism to use in planning for the effective and efficient use

of the multiple tools for quality assessment and improvement that are

being produced in the public and private sectors. Each State agency

must also ensure that the State strategy it develops is comprehensive

in nature and provides for the coordinated, efficient delivery of

quality health care. Therefore, it is each State agency's

responsibility to continually review its quality strategy, and to work

collaboratively with its MCOs and other stakeholders in order to ensure

that it is functioning effectively and is meeting the goal of the State

agency.

Under our proposed regulations, discussed in greater detail below,

each State strategy would at a minimum be required to include various

program standards, including access, structure and operations, and

quality measurement and improvement standards for managed care

organizations. Each State strategy would be required to ensure, through

its access standards, that MCOs have a health care delivery system in

place that can provide enrollees with available and appropriate

services, including additional or supplemental services not provided

directly by the MCO. We are also proposing that standards must be

developed to ensure that the MCO's delivery network ensures access to

covered services, as in Sec. 438.306. Such standards would be required

to assess whether the MCO has a sufficient volume of providers to

ensure adequate access to services, whether the MCO provides adequate

access to medically appropriate speciality care, and that services are

provided in a timely and culturally competent manner. In addition, as

discussed above, each State agency is required by statute to ensure

that beneficiaries are given a choice of

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managed care entities, with limited exceptions as discussed in

Sec. 438.52.

As part of the access standards we are proposing, each State agency

would be required to ensure that all covered services are available and

accessible to enrollees. Through its contracts with MCOs, State

agencies must ensure that MCOs meet standards relating to continuity of

care and coordination of services as specified in proposed

Sec. 438.308, discussed below. The contracts would also be required to

include descriptions of the benefits that an MCO would provide, as well

as the processes for prior authorization, grievances, and appeals

(proposed Sec. 438.310).

Each State strategy would also be required to include standards

related to aspects of how a managed care organization is structured and

operated that directly relate to quality of care; for example, each MCO

would be required to implement a documented process for selection and

retention of affiliated providers, as specified in proposed

Sec. 438.314. These standards would also address aspects of a State

agency's contract with an MCO that must be in place to ensure that

beneficiaries receive quality health care, and that beneficiaries are

afforded certain protections with respect to the care and services they

receive. Therefore, the State strategy would have to include standards

for the information that will be provided to enrollees and others

regarding all available MCOs (as specified in proposed Sec. 438.318),

written policies with respect to an enrollee's rights within the MCO

(as specified in proposed Sec. 438.320), standards relating to the

enrollment and disenrollment processes for enrollees in MCOs (in

accordance with proposed Sec. 438.326), confidentiality of enrollee

health information within MCOs (as specified in proposed Sec. 438.324),

and adherence to established grievance systems, established as

specified in the proposed subpart F of this part. Finally, each State

agency would be required to ensure that each MCO, as specified in

proposed Sec. 438.330 oversees and is accountable for any functions or

responsibilities that the MCO delegates to any subcontractor.

In addition to access, structure, and operational standards, each

State strategy would be required to include measurement and improvement

standards to ensure that each MCO undertakes and reviews a quality

assessment and performance improvement program and maintains a health

information system capable of achieving the objectives of this subpart.

Section 1932(c)(1)(A)(iii) of the Act requires that the State

agency's quality assessment and improvement strategy include procedures

for monitoring and evaluating the quality and appropriateness of care

and services to enrollees that reflect the full spectrum of populations

enrolled under an MCO's contract. This subpart of the proposed rule

proposes minimum procedures that the State agency would be required to

use when monitoring and evaluating each MCO.

The annual, external independent review of each MCO required by

section 1932(c)(2) of the Act, as created by section 4705 of the BBA,

will also serve as an essential component of the State agency's plan

for monitoring and evaluating each MCO. The provisions in section

1932(c)(2), however, will be implemented in separate rulemaking in the

near future. In the interim, before this separate rulemaking is

finalized, State agencies must continue to provide for an annual,

external independent review of the quality of care provided by each

MCO, as required by section 1902(a)(30)(C) of the Act.

Essential to the successful implementation of the State strategy is

a system capable of collecting and analyzing all necessary data.

Therefore, the State agency would be required under this proposed rule

to establish a data system sufficient to support its strategy.

3. Review of State Agency Strategies

After each State agency has developed its quality strategy, it

would be required under this proposed rule to review the entire

strategy to ensure the effectiveness of the overall State level program

at achieving its desired results. It is important for the State agency

to review each component of the strategy as well as the entire strategy

to ensure that quality care is being delivered to beneficiaries and

that performance improvement is occurring. Under this proposed rule, it

would be the State agency's responsibility to specify the goals and

desired results for its quality strategy and to ensure that these goals

and desired results are being met. The reviews of the State strategy

would be conducted on a regular and periodic basis as determined by

each State agency to be appropriate, but no less frequently than every

3 years. The frequency should be determined by the State agency with

input from enrollees and their advocates, managed care organizations,

and other stakeholders with respect to the State's progress towards

meeting its desired outcomes.

Enforcement of the requirements of the State strategy will be at

least as important as the development and review of the strategy. As

State agencies develop their enforcement strategies, HCFA encourages

them to recognize that technical assistance to plans may be necessary

to help them meet performance goals. HCFA encourages State agencies to

provide such technical assistance and to be flexible as they work with

plans of different types to meet the standards. Therefore, the

regulation does allow for the imposition of sanctions. As specified in

proposed subpart I of this part, State agencies are required under the

BBA to establish a process for imposing intermediate sanctions against

MCOs. There are different types of intermediate sanctions outlined in

subpart I. We encourage State agencies to use these intermediate

sanctions or to develop their own. In addition, State agencies have the

authority under section 1932(e)(4) of the Act (implemented in proposed

Sec. 438.718) to terminate an MCO's contract, if the MCO no longer

meets the applicable requirements of sections 1903(m), 1905(t)(3) or

1932 of the Act. Therefore, termination of an MCO's contract could

occur if the MCO no longer meets the specifications of the State

strategy, as specified in this subpart. Finally, section

1903(m)(2)(A)(xi) of the Act required that MCOs comply with applicable

requirements in section 1932 of the Act, as a condition for Federal

matching in the MCO's contract, as discussed below. See discussion of

Sec. 438.306, below. A failure by an MCO to comply with State

requirements established pursuant to the proposed regulations in

subpart E could also result in a disallowance of Federal matching in

the MCO's contract.

Proposed Provisions of Subpart E

4. Scope (Sec. 438.300)

This section sets forth the scope of subpart E.

5. State Responsibilities (Sec. 438.302)

This section sets forth the State responsibilities in implementing

its quality strategy. Specifically, proposed Sec. 438.302 would require

that each State agencies that contracts with an MCO have a strategy for

assessing and improving the quality of managed care services provided

by the MCO, ensure compliance with standards established by the State

agency, consistent with subpart E, and conduct regular, periodic

reviews to evaluate the effectiveness of its strategy, as the State

agency determines appropriate, but at least every 3 years. We selected

3 years as the maximum interval for review and evaluation of State

strategies, because

[[Page 52042]]

the field of quality is evolving at a fast pace, and State agencies,

working with input from advocates, managed care organizations, quality

experts and others, need to reevaluate their strategies in light of new

developments and changing priorities.

6. Elements of State Quality Strategy (Sec. 438.304)

This proposed section sets forth the minimum elements of a State

quality strategy, including (1) contract provisions that incorporate

the standards specified in subpart E; (2) Procedures for assessing the

quality and appropriateness of care and services furnished to all

Medicaid enrollees under the contract, including, but not limited to,

continuous monitoring and evaluation of MCO compliance with the

standards; (3) arranging for annual, external independent reviews of

quality outcomes, and timeliness of, and access to, services covered

under each MCO contract; (4) appropriate use of intermediate sanctions;

(5) an information system sufficient to support initial and ongoing

operation and review of the State's quality strategy; and (6)

standards, at least as stringent as those required under proposed

Secs. 438.306 through 438.342. With regard to external independent

review, we will shortly promulgate proposed regulations addressing the

External Quality Review Organizations, as required by the BBA.

In developing a strategy, we would expect that State agencies will

work with beneficiaries and their advocates, quality experts, managed

care organizations, and other stakeholders to develop performance goals

that are clear, fair, and achievable.

Access Standards

7. Availability of Services (Sec. 438.306)

a. Scope. Section 1932(c)(1)(A)(i) of the Act, as added by section

4704 of the BBA, requires State agencies that contract with MCOs under

section 1903(m) of the Act to develop a quality assessment and

improvement strategy that includes standards for access to care so that

all covered services are available within reasonable timeframes and in

a manner that ensures continuity of care, adequate primary care, and

specialized services capacity.

b. Choice. As part of the State quality assessment and improvement

strategy, if a State agency limits freedom of choice, the State agency

must comply with the requirements of Sec. 438.52, discussed in section

II.D.2. above, which specifies the choices that the State agency must

make available.

c. Access to Services not Covered Under Contract. Under proposed

Sec. 438.306(c), if an MCO contract does not cover all services under

the State plan, the State agency must arrange for those services to be

made available from other sources and instruct all enrollees on where

and how to obtain them, including how transportation is provided.

d. Delivery Network. Current regulations at Sec. 434.6(a) require

that contracts include provisions that define a sound and complete

procurement, identify the population covered under the contract, and

specify the amount, duration, and scope of medical services to be

provided. They also provide that the State agency and HHS may evaluate

through inspection or other means, the quality, appropriateness, and

timeliness of services performed under the contract. In Sec. 434.50(b)

of those same regulations, a Medicaid agency must obtain proof from

each contractor of its ability to provide services under the contract

efficiently, effectively, and economically. Section 434.52 further

requires the State agency to obtain proof that each contractor

furnishes the health services required by enrolled recipients as

promptly as is appropriate, and that the services meet the State

agency's quality standards.

In Sec. 438.306(d), we propose new requirements, pursuant to

section 1932(c)(1)(B) of the Act and in accordance with the

requirements in section 1932(c)(1)(A)(i) of the Act, to ensure that all

covered services under a contract are available and accessible to

enrollees. These requirements are imposed on State agencies, which in

turn must enforce these requirements on MCOs.

In Sec. 438.306(d)(1), we propose that the State agency require all

MCOs to maintain and monitor a network of appropriate providers that is

supported by written arrangements and is sufficient to provide adequate

access to covered services. This requirement is more detailed than the

M+C regulation. This specificity was included to ensure that State

agencies and MCOs fully consider all components when determining

adequate access. In this context, adequate access generally means that

all contracted services, other than out-of-area emergency care

services, are available within the MCO's network (which generally

consist of employees and facilities of the MCO, and providers who have

entered into written agreements to serve the MCO enrollees).

In proposing this requirement, we recognize that there are some

circumstances that would justify contracts with providers outside of

the approved service area. As an example, a comprehensive MCO operating

solely in a non-metropolitan area may make a particular service, which

is not a primary care or an emergency care service, available outside

the area if it is unable to contract with a sufficient number of

speciality providers within the area. As another example, an MCO may

contract with a provider outside of its service area if, for reasons of

geography, it would be easier for some of its enrollees to reach that

provider than it would be for them to reach a comparable provider

located within the service area.

Because the enrollees' specific needs, the types of providers used

by an MCO to meet those needs, and other factors, such as availability

of public transportation, will vary for each MCO, we are not proposing

a single set of fixed guidelines for all populations and circumstances,

such as prescribed primary physician/enrollee ratios. Rather, we

propose that the State agency set its own standards for MCOs serving

specific areas and populations within its State, and that the State

agency ensure that those Statewide standards are met by all MCOs with

which it contracts. However, standards or ranges of standards that are

currently used are referenced in subsequent paragraphs as examples that

State agencies may consider. The proposed rule anticipates that State

agencies will take responsibility for ensuring that MCOs assess the

needs of the populations they enroll and provide or arrange a network

that will meet those needs. The State agency's review should focus on

the MCO's service planning and on the organization's basic assumptions

for determining that its network is ready to serve Medicaid enrollees

in a given area.

We propose in Sec. 438.306(d)(1)(i) and (d)(1)(ii) that the State

agency's assessment ensure that the MCO's network reflects the

anticipated enrollment in the MCO, with particular attention to

children and pregnant women, and the expected utilization of services.

This includes the aggregate number of providers needed, and their

distribution among different specialities; keeping in mind that numbers

and types will vary according to the MCO's projected population in

terms of age, disability, and prevalence of certain conditions.

Expected utilization may also be affected by practice patterns within

an MCO, such as the rate of referrals for specific services.

Under Sec. 438.306(d)(1)(iii), and (d)(1)(iv), the State agency's

assessment must ensure that each MCO take into

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consideration the numbers and types of providers needed to furnish

contracted services and the number of providers who are not accepting

new patients. The numbers of providers needed to meet an expected level

of demand for service may be based on national norms (such as typical

patient/physician ratios) or on the MCO's past experience. For example,

population-to-primary provider ratios in the range of 1500:1 to 2500:1

have been used to represent adequate staffing levels both in federal

health programs such as the Department of Health and Human Services'

Health Resources and Services Administration, and individual States.

If more than one type of provider is qualified to furnish a

particular item or service, the State agency should ensure that the

MCO's standards define the types of providers to be used, and ensure

that those standards are consistent with State laws requiring such

organizations, when applicable, to make specific types of providers

available. Simple counts of providers, or even providers reportedly

accepting new patients, are insufficient to establish capacity. Rather,

the assessment of capacity necessarily should consider the volume of

services being furnished to patients other than the MCO's enrollees.

In terms of assessing geographic access, we propose in

Sec. 438.306(d)(1)(v) that the State agency ensure the MCO's network is

structured in a way that considers the geographic location of providers

and enrollees, including such factors as distance, travel time, and the

means of transportation normally used by enrollees. In addition, we

propose with this requirement that State agencies and MCOs take into

consideration the physical access of facilities for enrollees with

disabilities. A provider network should be structured in a manner so

that an enrollee residing in the service area should not have to travel

an unreasonable distance, beyond what is customary under a Medicaid

fee-for-service arrangement, to obtain a covered service. This standard

is required under section 1903(m)(1)(A) of the Act and the definition

of MCO in proposed Sec. 438.2. In areas where Medicaid enrollees rely

heavily on public transportation, the State agency should ensure that

the MCO's network is structured so that providers are accessible

through these means within the same timeframes as enrollees who have

their own means of transportation (unless the MCO ensures access

through alternative means, such as home visits). Additionally, State

agencies and MCOs should consider whether or not facilities are

physically accessible when reviewing the MCO's delivery network.

Enrollees with disabilities should have an appropriate choice of

accessible providers.

In proposing Sec. 438.306(d)(1)(v), we recognize that standards

vary across States with respect to geographic access. Some State

agencies contracting with MCOs have established maximum travel and

distance times that include a 30 minute travel time standard. (This

standard is used currently by the Health Resources and Services

Administration in defining rational primary care service areas.) Other

State agencies have established alternative standards such as a 10 to

30 mile travel distance, depending on the local terrain. Both are

examples of geographic access standards that would comply with this

provision. For instance, a State agencies could require that all

primary care services and commonly-used speciality and referral

services be available within 30 minutes driving time or bus time from

any point in the service area, with possible exceptions for certain

rural areas or other low-population/low-density areas where residents

customarily travel greater distances to obtain specialty and referral

services.

In Sec. 438.306(d)(2), we are proposing that the State agency be

required to ensure that MCOs allow women direct access to a women's

health specialist within the MCO's network for women's routine and

preventive services. We have determined that this is necessary in order

to provide ``access * * * in a manner that ensures * * * adequate * * *

specialized services'' as required under section 1932(c)(1)(A)(i) of

the Act. This requirement is proposed in addition to requirements under

Sec. 438.308 that the MCO maintain a primary care provider f

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