Proposed Changes To The Payment Error Rate Measurement And Medicaid Eligibility Quality Control Programs In Response To The Affordable Care Act

FACT SHEET

UPDATE: LINK CORRECTION: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-14536.pdf 

FOR IMMEDIATE RELEASE
June 20, 2016

Contact: CMS Media Relations
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Proposed Changes To The Payment Error Rate Measurement And Medicaid Eligibility Quality Control Programs In Response To The Affordable Care Act (CMS-6068-P)

Summary

On June 20, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a notice of proposed rulemaking outlining proposed changes to the Payment Error Rate Measurement (PERM) and Medicaid Eligibility Quality Control (MEQC) programs to implement provisions in the Affordable Care Act’s changes to the way states adjudicate eligibility for Medicaid and the Children’s Health Insurance Program (CHIP). The proposed rule addresses the new eligibility provisions of the Affordable Care Act and makes other general improvements to the PERM and MEQC programs. The proposed rule also includes policies that, if implemented, would reduce state burden and increase the focus on the continuous reduction of improper payment rates. Comments on this proposed rule are due by August 22, 2016.

Background

The PERM program measures improper payments in the Medicaid program and CHIP. The improper payment rates are based on reviews of the fee-for-service (FFS), managed care, and eligibility components of Medicaid and CHIP. In light of changes to the way states adjudicate eligibility for applicants for Medicaid and CHIP under the Affordable Care Act, CMS is not conducting the eligibility measurement component of the PERM program for Fiscal Years (FYs) 2015 through 2018 in order to update the eligibility component measurement methodology and related PERM program regulation. During this time, the 2014 national eligibility improper payment rate will be used as a proxy rate, and all states will conduct a pilot program with rapid feedback for improvement (known as the Medicaid and CHIP Eligibility Review Pilots) to maintain oversight of state eligibility determinations. CMS is proposing changes to the eligibility measurement component of the PERM program in this proposed rule, and the eligibility measurement component will resume as of the effective date of the final rule.

Proposed Changes to the PERM Program

Proposed changes to the PERM program in the proposed rule include:

• Review Period: The PERM program will review Medicaid and CHIP payments made by states July through June of a given year. Under the current rule, the PERM program reviews payments made in a Federal FY (October through September).
• Eligibility Review Responsibility: A federal contractor will conduct PERM eligibility reviews with support from each state. Under the current rule, states are required to conduct eligibility reviews and report the results to CMS.
• Eligibility Universe: The PERM program will conduct eligibility reviews (in addition to medical and data processing reviews) on FFS and managed care payments sampled for the PERM program. The eligibility review will be conducted on the beneficiary associated with the sampled claim. Under the current rule, states create separate universes of eligible individuals that are sampled for eligibility review.
• Federal Improper Payments: Improper payments will be cited if the federal share amount is incorrect (even if the total computable amount is correct). Under the current rule, improper payments are only cited on the total computable amount (i.e., federal share + state share).

• Sample Sizes: A national sample size will be calculated to meet national Medicaid and CHIP improper payment rate precision requirements. The national sample size will then be distributed across states to maximize precision at the state level, and state-specific sample sizes would be based on factors such as each state’s expenditures and previous improper payment rate.  Under the current rule, state-specific sample sizes are calculated based on the state’s previous improper payment rate and state level precision and combined to total the national sample size.
• Corrective Action: States will continue to implement Corrective Action Plans (CAPs) for all errors and deficiencies; however, there will be more stringent requirements added for states that have consecutive PERM eligibility improper payment rates over the 3% national standard established under section 1903(u) of the Social Security Act (the Act).
• Payment Reductions/Disallowances: Potential payment reductions/disallowances under section 1903(u) of the Act will be applicable for eligibility reviews conducted during PERM years in cases where a state’s eligibility improper payment rate exceeds 3%. CMS will only pursue disallowances if a state does not demonstrate a good faith effort to meet the national standard, which is defined as meeting PERM CAP and MEQC pilot requirements.

Other Section(s) Applicable for Announcement

Proposed Changes to the MEQC Program

The MEQC program is a separate eligibility review program set forth in section 1903(u) of the Social Security Act (the Act) and requires states to report to the Secretary the ratio of States’ erroneous excess payments for medical assistance under the state plan to total expenditures for medical assistance.  States review Medicaid cases to determine whether the sampled cases meet applicable Medicaid eligibility requirements.  Section 1903(u) of the Act also sets a 3% threshold for eligibility-related improper payments in any fiscal year and generally requires the Secretary to withhold payments to states with respect to the amount of improper payments that exceed the threshold. Similar to the PERM program, states are not operating the MEQC program for FYs 2015 through 2018 so CMS can update the MEQC methodology and related regulation. CMS is proposing MEQC program changes in this proposed rule, and the MEQC program will resume as of the effective date of the final rule.  The proposed rule restructures the program into a tool that can be used to help states lower their eligibility improper payment rates and into a program that more effectively compliments the PERM program.

Changes to the MEQC program in the proposed rule include:

• The MEQC program will be restructured into a pilot program that states must conduct during their off-years from the PERM program to ensure continuous oversight of both Medicaid and CHIP state eligibility determinations.
• States will be required to review a number of items not fully reviewed through the PERM program (e.g., negative cases).
• States will have flexibility in different areas to focus pilot reviews; however, should a state have consecutive PERM eligibility improper payment rates over the 3% national standard per section 1903(u) of the Act, the state will lose this flexibility and CMS will provide direction for reviews.
• States must submit corrective actions for identified errors.

 

For more information, please visit: https://www.federalregister.gov/public-inspection or click here to view a PDF copy at the Federal Register:

CORRECTION: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-14536.pdf and on 6/22/16 will be available here: http://federalregister.gov/a/2016-14536