The federal government has provided new guidance to states concerning how to ensure that the rates they pay Medicaid managed care organizations are adequate.

While federal law has long required that such rates be “actuarially sound,” the Centers for Medicare & Medicaid Services (CMS), which issued the draft guidance, has released new guidance to advise states about the information it seeks to ensure that proposed rates are truly actuarially sound.

The guidance notes that CMS will follow three principles when evaluating proposed rates to be paid to Medicaid managed care organizations.

• The capitation rates are reasonable and comply with all applicable laws (statutes and regulations) for Medicaid managed care;
• the rate development process complies with all applicable laws (statutes and regulations) for the Medicaid program, including but not limited to eligibility, benefits, financing, any applicable waiver or demonstration requirements, and program integrity; and
• the documentation is sufficient to demonstrate that the rate development process meets generally accepted actuarial practices and principles.

See the CMS document “Draft 2016 Medicaid Managed Care Rate Development Guide” here. The National Association of Medicaid Directors has conveyed its concerns about some aspects of the proposed guidance to CMS; find its letter here.