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NAMI Submits Comments on Revised
Medicaid Managed Care Regulations

For Immediate Release, October 25, 2001
Contact: Marie Wyffels

On October 19, NAMI delivered comments to the Centers for Medicare and Medicaid Services (CMS) on their revised regulations governing state Medicaid managed care programs. These revised regulations - published on August 16, 2001 - replace a previous set of final regulations issued in the final days of the Clinton Administration. Both are intended to set forth binding standards for states that require Medicaid beneficiaries (including children and adults with severe mental illnesses who are SSI eligible) to enroll in managed care plans. These standards include access to specialists, coverage of emergency care and binding external appeals. These regulations were originally authorized by Congress as part of a 1997 law that allowed states increased authority to enroll Medicaid beneficiaries in managed care plans - and "behavioral health carve-out" plans that manage mental illness treatment. Since 1998, the number of Medicaid beneficiaries in managed care plans has increased significantly to 56% of enrollees.

NAMI's comments on the proposed revised Interim Final regulations are included below. Of particular concern to NAMI are changes in the revised rules that erode protections in the original final regulations issued in January 2001. Among these concerns are access to care during transition periods, screening for special health care needs, requirements for quality assessment and performance review programs and grievance and appeal procedures. As CMS moves forward on the Final Regulation, NAMI will continue to monitor the situation to ensure that adequate enrollee protections are maintained for Medicaid beneficiaries with severe mental illnesses.

The effective date for these regulations is August 16, 2002. The full text of the Bush Administration's Interim Final regulations can be viewed at: Additional information on Medicaid managed care regulations is also available at:

October 19, 2001

Centers for Medicare and Medicaid Services
U.S. Department of Health and Human Services
200 Independence Avenue, S.W., #443-G
Washington, DC 20201

Attn: CMS-2104-P

Dear Sir/Madam:

The National Alliance for the Mentally Ill (NAMI) is pleased to submit the following comments on the Centers for Medicare and Medicaid Services (CMS) Interim Final Regulations amending the agency's January 19, 2001 final regulations on Medicaid managed care. As the nation's largest national organization representing people with severe mental illnesses and their families (210,000 members and 1,200 affiliates), NAMI places a high priority on ensuring necessary federal standards and accountability and consumer protections for managed care plans that contract with state Medicaid programs. Since passage of the Balanced Budget Act (BBA) of 1997, perhaps no population of Medicaid enrollees have been more profoundly impacted by the shift to managed care than children and adults with severe mental illnesses.

When Congress passed the 1997 BBA, NAMI was hopeful that CMS (then known as HCFA) would be able to strike a proper balance in terms of promoting increased state flexibility and the need for federal standards to protect the most vulnerable Medicaid beneficiaries - especially beneficiaries eligible for Medicaid as a result of receiving Supplemental Security Income (SSI) cash benefits. NAMI views this balancing of interests as particularly with important respect to the new authority granted states in 1997 to insist on mandatory enrollment in managed care plans.

Of particular importance to NAMI was a provision in the BBA that required CMS to conduct a study of safeguards needed to ensure access to care for Medicaid enrollees with special health care and chronic conditions. This provision (Section 4705(c)(2)(A)(B)) was championed by Senator Charles Grassley of Iowa and resulted in a November 2000 Report to Congress "Safeguards for Individuals With Special Health Care Needs Enrolled in Medicaid Managed Care" that set forth a range of meaningful beneficiary protections and accountability standards for states and MCOs.

For NAMI's consumer and family membership, managed care in the Medicaid program offered the promise of greater accountability in public sector mental health programs - including provider adherence to research-driven treatment guidelines and adoption of evidence-based programs such as assertive community treatment. Unfortunately since 1997, too many states have used managed care as a means of saving money and have allowed managed care organizations (MCOs) to engage in practices that have limited access to treatment for people with mental illness, e.g. restrictive prescription drug formularies.

For the past several years, NAMI has provided its state affiliates with a comprehensive set of criteria for measuring the effectiveness of managed care programs in the public sector. Among these benchmarks are:

  • comprehensive and scientifically up to date treatment guidelines;
  • adequate availability of hospital care for those who need it;
  • assertive community treatment programs as an alternative to hospitalization for people with severe mental illnesses;
  • access to newest, most effective medications;
  • recognition and appropriate responses to suicide attempts as a medical emergency;
  • meaningful involvement of consumers and families in planning , implementing, and evaluating systems of care;
  • outcomes measurement and utilization in systems improvements;
  • access to rehabilitation services; and
  • access to housing.

These goals were also the basis for a 1998 report that NAMI issued on Medicaid managed care entitled "Stand and Deliver: Action Call to a Failing Industry." This report, as well as NAMI managed care criteria can be viewed at:

CMS's New Interim Final Rule

NAMI is very concerned about the decision of HHS and CMS to pull back the final regulations that were published on January 19, 2001. These regulations closely followed the November 2000 Report to Congress. Even through they took more than three years to develop, the January regulations did establish important new protections for beneficiaries with respect to access to care, grievance and appeal procedures and mandatory enrollment requirements. NAMI is pleased that a number of key provisions were retained in the new revised Interim Final rules. Among these retained protections are:

  • standards for public participation in design and implementation of state plan amendments that include mandatory enrollment in managed care for SSI beneficiaries - with specific inclusion of beneficiaries with special health care needs and their families (Sections 438.50(b)(4) and 438.202(b)),
  • consumer choice to select among two or more MCOs, PHPs in cases of mandatory enrollment (Section 412.62),
  • right of consumers to be free from any form of restraint or seclusion used as a means of discipline or retaliation,
  • requirements for states to provide Medicaid funded services in the "most integrated setting" as defined by Title II of the Americans With Disabilities Act (ADA) - consistent with President Bush's "New Freedom Initiative" (Section 438.6(f)),
  • responsibilities of MCOs to provide diagnostic screening and treatment services to correct a condition discovered through the Medicaid EPSDT benefit, and
  • establishment of actuarially sound capitation rates for risk contracts that reflect the cost of beneficiaries that plans enroll.

At the same time, NAMI wants to go on record with regard to a number of issues where the new Interim Final regulations appear to retreat from the standards set forth in the January 19, 2001 rules.

  1. Screening and identification of beneficiaries with special health care needs

    NAMI is concerned that the proposed rule eliminates the requirement that, at a minimum, states identify enrollees at risk of experiencing special health care needs (particularly children and adults with severe mental illnesses on SSI) and enrollees in state established risk-adjusted, higher payment categories. NAMI is troubled that this new proposal appears to grant states the sole discretion to identify individuals at risk of special health care needs.

  2. Access to treatment and services during transition periods

    The amended information requirements in the August 2001 proposed rule appear to relieve states from any responsibility for helping beneficiaries (and their families) understand the circumstances involved in contract terminations or instances that result in transition between (or out of) plans. This is especially the case with regard to mandatory enrollment in an MCO (mandatory transition to a new plan in the case of a contract termination). NAMI is pleased that the requirements in Section 438.62 will continue to ensure access to services when a contract is terminated or a beneficiary is disenrolled. Unfortunately, the August 2001 proposed rule appears to relieve states of any responsibility to notify enrollees (and their families) regarding access to services during a transition.

  3. Availability of ombudsman services

    The new proposed rule eliminates the requirement for states to have a mechanism in place to help enrollees understand a state's managed care program and made available consumer advocacy programs, information hotlines and other assistance services. In view of the complexity of managed care programs and the vulnerabilities of enrollees with mental illnesses and other special needs, these ombudsman programs are critically important.

  4. Comprehensive assessment and periodic reassessment of special health care needs of beneficiaries

    The November 2000 Report to Congress specifically recommended that states require MCOs to perform comprehensive assessment and periodic reassessment of beneficiaries with special health care needs and seek consumer and family involvement in the development of individualized treatment plans. Unfortunately, the new proposed Interim Final regulation excludes this recommendation. Specifically, the new rule does not guarantee that an enrollee with a special health care need such as severe and persistent mental illness would receive a treatment plan. Moreover, even in cases where an MCO does insist on a treatment plan, the new proposed rule would have the plan be developed by a specialist and primary care provider without the required consumer participation. Finally, the new proposed rule appears to remove specific standards that were part of the January 2001 final rule governing assessment (and periodic reassessment) of an enrollee's health condition as part of any required treatment plans (e.g., appropriateness of needs identified, adequacy of coordination among providers).

  5. Availability of services in the state plan not included in an MCO contract

    The January 2001 final rule would have required states to ensure that all covered services are available and accessible to enrollees. If an MCO contract did not cover all of the services in a state Medicaid plan, the state would have been required to make such services available from other sources and provide enrollees with information on how to access them. NAMI is disturbed that these requirements appear to have been deleted from the new proposed rule. In particular, NAMI is extremely concerned that access to a number of important community-based services that many states include in their Medicaid plans through the Rehabilitation Option (including services that are part of the assertive community treatment model) may be compromised as a result of this change.

  6. Absence of federal standards governing state medical necessity definition

    The August 2001 proposed rule requires that each contract with an MCO specify what constitutes "Medically necessary services" in a way that is no more restrictive than the state's Medicaid plan and addresses the extent to which the MCO is responsible for covering services. An MCO's responsibility for covering "medically necessary services" is further defined on the basis of diagnosis and treatment of health impairments and the ability to attain, maintain or regain functional capacity. While NAMI does not take issue with this definition of medical necessity as generally consistent with the overall health care marketplace, we believe that more could be done to integrate long-term habilitative services that are important for children and adults with severe mental impairments (including services that maintain or preclude deterioration of health or functional ability).

  7. Requirements for states to pay special attention to the beneficiaries with special health care needs when assessing adequacy of provider networks

    As with the January 2001 final rule, the new revised regulation requires MCOs to develop networks that take into account the numbers of providers, their training and experience given the anticipated number of enrollees in a given service area. Unfortunately, the new proposed rule appears to delete the requirement for MCOs to pay particular attention to the needs of enrollees with disabilities (including severe mental illnesses) when developing and maintaining networks. NAMI is concerned that deletion of this requirement has the potential to limit access to specialized psychiatric treatment for children and adults with severe mental illnesses. This requirement has tremendous potential to bring psychiatrists who refuse to treat fee-for-service Medicaid enrollees into the program through the leverage that MCOs have in many regional markets. NAMI urges that the requirement for particular attention to the needs of enrollees with disabilities be restored.

  8. Absence of reference to enrollees with special health care needs as part of standards for MCO internal quality assessment and performance improvement programs

    While the new proposed rule has identical requirements regarding internal quality assessment and performance improvement programs, these standards are weakened in the new regulations with respect to enrollees with special health care needs such as severe and persistent mental illness. Specifically, NAMI is concerned that the new proposed rule relieves states and the MCOs they contract with from developing and monitoring performance measures for specific conditions such as mental illness and other severe disabilities. This is particularly the case where states develop either vague or limited definitions for "special health care needs." NAMI would urge that Section 438.208(b) be amended to specifically reference children and adults receiving SSI benefits, with separate criteria for each sub-population based on disability based research-driven practice guidelines.

  9. Standards for state monitoring of MCO internal grievance and appeal systems for access and timeliness

    The November 2000 Report to Congress specifically recommended that states should monitor internal grievance and appeal systems for every MCO they contract with based on access and timeliness and ensure that they meet due process standards in most state fair hearing systems (notice to enrollees, access to records, impartial hearings, timeliness, etc.). From NAMI's reading of the new proposed Interim Final rules, many of these specific standards appear to be missing. In addition, the proposed rule's criteria for what constitutes an "action" (Section 438.400(b)) appears to be overly narrow and would limit the types of claims for denial of services and benefits that enrollees (or their family members) that might be brought against a plan. Further, NAMI believes that the due process standards could be improved by adding the following requirements:

    • allow family members to bring forward requests for expedited review,
    • ensure that punitive or retaliatory action cannot be brought against a provider that requests expedited resolution,
    • require states to issue written approval of each MCOs internal grievance and appeals system,
    • allow enrollees (and their families) to present evidence in person if they so choose,
    • make assistance available to enrollees on filing appeals and obtaining necessary medical records, and
    • clarify that filing a grievance or state appeal will not negatively affect the way MCOs treat the enrollee.

  10. New standards that allow states split the current designation of pre-paid health plans between those that separately cover inpatient and ambulatory services

It is NAMI's understanding that the August 2001 proposed Interim Final rule would amend the current designation of pre-paid health plans (PPHs) into two categories: those that cover inpatient and institutional services (PIHPs) and all other plans that do not cover inpatient or institutional services (i.e., pre-paid ambulatory health plans or PAHPs). This new distinction in the regulations appears to relieve PAHPs from complying with the enrollee protections set forth in these regulations. This is especially important for NAMI since beneficiaries with severe mental illnesses rely heavily on many of these ambulatory "wrap around" services that are typically funded through the Medicaid Rehabilitation Option. In many states, these services may be part of the state's assertive community treatment program that is Medicaid financed. These services could also include dental care and transportation.

More importantly, NAMI is very concerned that this new distinction in the regulations could create an incentive to encourage PIHPs to become PAHPs in order to relieve themselves of the responsibility for complying with the consumer protection standards in these regulations. This is especially true for behavioral health managed care plans and certain primary care case management plans that provide EPSDT services to children. This new provision in the regulations should not serve as a backdoor for MCOs and other pre-paid health plans to avoid their responsibility to meet these important enrollee protections.


NAMI appreciates the opportunity to comment on these important regulations governing Medicaid managed care. NAMI looks forward to working with CMS to move forward and improve enrollee protections and quality improvement standards for vulnerable Medicaid beneficiaries with severe mental illnesses.

Andrew Sperling
Director of Public Policy