Medicaid Health Plans Fear Duals Demos' MLRs May Lead To Arbitrary Fines

Posted: May 30, 2013

Medicaid health plans are concerned that the medical loss ratio requirements in states' duals demonstrations could lead to arbitrary fines, as Virginia and Ohio indicated they may impose fines on plans meeting minimum medical loss ratio requirements between 85 percent and 90 percent but did not provide any other information on what could trigger such action. The plans argue that the MLR requirements are unnecessary for Medicaid health plans that are already subject to other standards and that the memoranda of understanding outlining the demos could set a bad precedent for MLR standards in other states' efforts to integrate care for beneficiaries dually eligible for Medicare and Medicaid.

Both the recently approved Virginia MOU and the Ohio MOU have an identical construct that splits the MLR requirements into two tiers. Plans with an MLR below 85 percent must, on account of the low MLR, return some funds to the government. For plans with an MLR between 85 percent and 90 percent, “the State and CMS may require a corrective action plan or levy a fine on the plan," the Virginia MOU says. Fines will be distributed back to the Medicaid and Medicare programs.

The minimum MLR amount must be used for expenses related to medical claims or those which are related to care and quality of the beneficiaries, the Virginia MOU says. It also says the three-way contracts signed by CMS, a state and health plans will include additional information, and "to the maximum extent possible, the methodology for calculating the MMLR will conform to prevailing regulatory requirements applicable to the other products offered by organizations operating Participating Plans."

Because the provision says MLRs between 85 and 90 percent may trigger a fine or corrective action plan, but does not provide any further information, it seems arbitrary and subjective in its application, Medicaid Health Plans of America Interim Executive Director Joe Moser said, adding that Medicaid health plans "are concerned about the precedent this sets for MLR standards going forward." A fine sounds like a rebate back to the government though it does not specify the conditions in which HHS may apply this sanction, he added. Moser also said that as HHS has said one of its objectives is to standardize MLR requirements at the 85 percent level across all government programs, the language in the MOUs is all the more perplexing.

"Since these demos are new, there is an additional component of uncertainty here about what the MLR will be for these Medicare-Medicaid plans and we would urge the department to err on the side of caution until we know more about the medical/admin cost mix based on experience," Moser said.

Inside Health Policy has learned that the details around the MLR are still being worked out between CMS and Virginia, but that the MLR may allow for flexibility for certain administrative expenses that may be incurred due to time-limited circumstances such as start-up costs. A spokesperson for Virginia's Department of Medical Assistance Services said the state is just beginning the process with CMS, and the MLR information is yet to be determined at this point.

Moser said the plans want to make sure the components of the MLR are defined properly so that they do not inhibit intense care management and quality activities required for a population that is very complex.

Doug Goggin-Callahan at the Medicare Rights Center said that the MLR requirements seem high, and a lot of plans' ability to handle the MLR requirement, along with the other requirements of the MOU, could depend on what counts under the MLR. If case management is counted as a medical expense under the MLR, it becomes much more doable than if those costs are administrative, he said.

Moser also said that the MLR is a poor measure of health plan efficiency and quality. The capitation rates paid are also subject to actuarial soundness standards, Moser noted, which makes a mandatory MLR unnecessary if rates are set appropriately -- a stance states have previously used to argue against the necessity of MLR requirements for Medicaid plans (see related story). -- Michelle M. Stein (mstein@iwpnews.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

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