On July 15, 2019 (84 Fed. Reg. 33722), the Centers for Medicare and Medicaid Services (CMS) published a proposed rule that represents the next chapter in the drama surrounding enforcement of the Medicaid equal access statute, a drama that has been ongoing since its 1987 enactment. This review of the proposed rule recaps and builds on a 2018 post discussing an earlier proposed rule under the statute, which the new rule declines to finalize.

In its latest issuance on the subject, the federal government now proposes to fully retreat from any effort to ensure that states continually monitor access to care in Medicaid’s original fee-for-service system, which continues as the method by which some of the highest-need beneficiaries receive care. Even more strikingly perhaps, if finalized in its current form, the rule will signal the end of any federal agency effort to ensure some level of prospective review before potentially harmful provider payment rate reductions go into effect.

Comments are due by September 13, 2019.

The Medicaid Equal Access Amendment

The Medicaid equal statute dates to a 1987 amendment codifying a requirement that already existed in regulation. The statute (42 U.S.C. § 1396a(a)(30)(A)) in pertinent part reads as follows:

A state plan for medical assistance must:

provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan ... as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area. [Emphasis added.]

The rule, and later the statute, were understood as imposing a rational rate-setting process on the states. The basis for the requirement was the assumption that more competitive rates would yield greater provider participation. Although the relationship between Medicaid rates and provider participation is not always clear, it is also the case that physicians cite low payments as the primary reason why they will not participate.

Furthermore, payment rates may play a particularly important role for specialty care and services, as well as benefits furnished by providers of long-term services and supports. And even if payment increases alone do not significantly increase the percentage of physicians seeing any Medicaid patients, they can influence the number of Medicaid patients physicians will accept.

In numerous cases, beneficiaries and providers used the statute as a basis for litigation to stop what they claimed were potentially harmful rate reductions before they could take effect so that a review could take place. But in 2015, at the urging of multiple states and the Obama administration, the US Supreme Court held in Armstrong v Exceptional Child Ctr., Inc. that the equal access statute in fact is not the type of Medicaid guarantee for which private enforcement against state agencies is permissible and that the power to enforce the statute lay solely with the Department of Health and Human Services (HHS) secretary. That was the end of equal access statute private enforcement litigation.

The 2011 CMS Proposed Rule

In 2011, as states faced high-profile equal access litigation, the Obama administration attempted to intervene through a proposed rule establishing a federal agency oversight system that included prospective review of federal rate reductions. Basing its action on a research approach developed by the Medicaid and CHIP Payment and Access Commission (one of whose core purposes is to evaluate and recommend policy solutions to improve access to care), CMS proposed to establish a reasonably rigorous process including an ongoing access measurement system to be followed by all states coupled with more active, advanced federal oversight of rate reduction proposals. States’ access review measurement systems were to use an evidence-based methodology, with results made public and available for public comment. Reviews were to be regular and ongoing and ultimately would serve as a basis for federal agency review of proposed state changes in provider payment methodologies and rates. Most importantly, states would be expected to conduct an access analysis before submitting a rate change to CMS for review and approval, thereby ensuring a transparent, public process before rate reductions could be approved. While not the same as the power of the courts to enjoin reductions before they took effect (states could go ahead and cut rates as long as they were willing to risk the CMS review process) the proposed review process nonetheless appeared to offer an effective administrative remedy.

The 2015 Armstrong Decision

In 2015, in Armstrong v Exceptional Child Ctr., Inc., the US Supreme Court ruled that the equal access statute precluded private enforcement. According to the majority, in an opinion written by Justice Antonin Scalia, the equal access statute was effectively a federal rate-setting system that lay beyond the competence of the courts to administer and required special expertise that only the HHS secretary could oversee. Justice Stephen Breyer, who concurred, effectively noted that the proper remedy in such a situation would be against the HHS secretary for arbitrary and capricious conduct in approving a harmful rate change not based in evidence. The Obama administration took the position in Court that private enforcement against states should be halted.

Several months later, the administration published a final access monitoring review regulation. A variation on the earlier rule, the final rule nonetheless continued to require evidence-based, regularly updated state access reviews with a special focus on primary care, physician specialty care, behavioral services, obstetric care, and home health care. In addition, the final rule established a prospective federal system for reviewing proposed rate reductions or restructuring that “could result in diminished access” (42 C.F.R. § 447.203(b)(6)) for affected services, with states obligated to provide supporting evidence of access impact collected within the 12 months preceding the proposed reduction. In effect, the process ensured the type of federal administrative record envisioned by Justice Breyer, thereby drawing a clear nexus between the final rule and the protections of the Administrative Procedure Act.

This is where matters stood at the time the Trump administration took office.

The Trump Administration’s Regulatory Rollback

The 2017 Transmittal

In September 2017, CMS issued a transmittal (SMD# 17-004) titled “Medicaid Access to Care Implementation Guidance.” The guidance sought to diminish the effect of the 2015 access rule. Arguing that states “have requested clarification regarding the circumstances in which provider payment reductions would likely not result in diminished access to care,” thereby absolving them of the obligation to submit access review data with a proposed cut, CMS posited three such examples: Medicaid fee-for-service rates paid at Medicare rates; “relatively minor” rate reductions; and states with “high managed care penetration rates.” CMS cited no evidence as to why it believed that such situations do not carry access implications.

The agency then identified three situations, not included as exceptions in the 2015 rule, where no access review would be required prior to state submission: situations in which the reduced rates “continue to be at or above Medicare and/or commercial rates”; situations involving federally ordered reductions in the payment level; and cuts that are the result of changes in Medicare rates to which the state’s payment methodology links.

The agency also elaborated on certain situations involving “nominal payment adjustments” in which determining access impact would be difficult, for example:

changes to a few distinct procedure codes;

“nominal single-year rate freezes or inflationary changes that result in providers receiving less of an increase than anticipated”;

nominal restructuring or rate freezes aimed at addressing a program integrity issue; and

reductions where the payments concern services “primarily delivered” through managed care or involve services prior to transitioning to managed care (such as payments made during a retroactive eligibility period).

In these situations, a public comment process would be sufficient; if no issues were raised or if a state addressed the issues raised, then the state would not have to submit an access analysis along with its proposed plan amendment.

The 2018 Proposed Rule

The 2018 proposed rule continued the themes raised in the 2017 transmittal, addressing matters at the level of true regulatory change that could not be dealt with in simple subregulatory guidance.

The purpose of the proposed rule, discussed in the earlier post, was to exempt certain situations entirely from the access rule requirements, as hinted at in the 2017 transmittal. The rule proposed two exemptions. The first involved states with “high” managed care penetration rates (since managed care access issues are dealt with separately under the managed care rule itself), with the threshold set at 85 percent. The second involved situations in which, according to CMS, the rate reduction was 4 percent or less “within an overall service category” (for example, physician services), or no greater than 6 percent over two years.

The rule provided no insight as to the evidence the agency used to arrive at these exemption triggers. Nor did the agency explain how its managed care exemption comported with the fact that in many states with high managed care penetration, crucial, high-need populations and services nonetheless remain exempt and in the fee-for-service system. Furthermore, the agency offered no explanation of where its “nominal” measurements came from for purposes of the review exemptions.

The 2019 Proposed Rule

This brings us to the 2019 proposed rule. In its proposal, CMS notes the “overwhelming” negative comments received on the 2018 rule. The agency then states: “While we maintain that the thresholds are supportable, we have decided not to finalize the proposed exemptions and instead set out a new approach to understanding access and ensuring statutory compliance while eliminating unnecessary burden on the states.”

This proposed “new approach” turns out to involve completely repealing the Medicaid access monitoring review plan regulation. In proposing to end agency oversight, CMS states as follows:

While the AMRPs [access monitoring review plans] can serve as an overall structure for states to monitor access data, including after rate reductions or restructuring, similar information can be presented by states through the SPA [state plan amendment] submission process to demonstrate compliance with the statute without the need to develop and maintain AMRPs as currently required under the regulations. Additionally, apart from the SPA submission process, states continue to be obligated to ensure their rates are sufficient to maintain compliance with [the equal access law]. If the regulatory amendments in this proposed rule are finalized, we would expect to issue subregulatory guidance concurrently with the publication of the final rule through a letter to State Medicaid Directors to provide information on data and analysis that states will submit with SPAs to support compliance.... We anticipate that this guidance would provide states flexibility to select the types of data they would use to demonstrate the sufficiency of payment rates. Such data might include: rate comparisons, ratios of participating providers to total providers in the geographic area; ratios of participating providers to the beneficiaries in the geographic area; available transportation in the geographic areas; direct comparisons of access for Medicaid beneficiaries to that of the general population in the geographic area; and provider and beneficiary complaints and recommendations.... We expect that the guidance will remind states of their ongoing obligation to ensure sufficient payment rates and that they must demonstrate with the information that they provide through SPAs that the proposed rates or rate structure would satisfy the requirements of the statute. [Emphasis added.]

Translated into plain English, CMS is saying that the agency intends to eliminate policies aimed at ensuring continual access monitoring, as well as any review mechanism for effectively stopping the clock on a state’s planned rate reduction while a federal, evidence-based review takes place. Access monitoring review of plans offered (all states have filed them) provides an ongoing means for measuring access to care—effectively a rolling picture of which parts of a state may be experiencing especially serious access problems for certain types of services, as well as which services appear especially susceptible to problems. Furthermore, CMS also proposes to eliminate the evidence-based review process of pre-reduction reviews.

Today, more than 70 million people depend on Medicaid; millions are particularly vulnerable to elevated health risks and face serious provider shortages. The newest chapter in the access saga means that in the wake of a Supreme Court decision foreclosing private enforcement entirely, the federal government has ended any agency commitment to a substantial prospective administrative role in reviewing rate reductions before they go into effect. There may be serious questions of administrative law as to whether a proposal to essentially turn back the clock to a time of no prospective or concurrent federal oversight or monitoring of rate reductions is reasonable, given the end of private enforcement rights as a result of the Armstrong decision.