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Bush Administration Delays Medicaid Managed Care Patient Protection Rules And Announces State Flexibility Initiative

For Immediate Release, August 21, 2001
Contact: Chris Marshall

On August 16, HHS Secretary Tommy Thompson announced that regulations establishing binding standards for managed care plans that enroll Medicaid recipients would be delayed for up to a year. In addition, Secretary Thompson noted that HHS would be revising these rules to relax certain safeguards and provide the states with greater flexibility in determining how they are carried out.

The Bush Administration's action halts regulations that were originally proposed in the closing days of the Clinton Administration. These regulations are designed to require state Medicaid programs, and the managed care plans they contract with, to abide by standards similar to those included in the "Patients' Bill of Rights" legislation for private sector health plans now before Congress. These standards include access to specialists, coverage of emergency care and binding external appeals. These regulations were 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.

The regulations were supposed to have gone into effect in April 2001. The Bush Administration had delayed them twice before last week's action. This latest delay gives the Centers for Medicare and Medicaid Services (CMS) until August 2002 to develop revised regulations, although Secretary Thompson has made clear that he expects CMS to publish a revised standards early next year.

Among the standards expected to be revised is a requirement for Medicaid managed care plans and most behavioral health carve-out plans to have in place binding external review panels for enrollees to appeal health plan decisions to deny care. The original proposed rule would have required that disputes over care be decided within three days when a doctor believed that a patient's health or life was in danger (e.g., recommended inpatient psychiatric hospitalization). The revised regulation is expected to extend this timeframe to three "working days" or two weeks if a health plan claimed it needed more time.

Another major change is expected in the rules and standards governing quality measurement and assessment. Both the original and revised rules require states to have in place systems for measuring quality of care, outcomes and quality improvement. However, the revised rule is expected to allow the states, rather than the federal government, to decide which quality measures to examine.

NAMI will continue to monitor development of these revised rules for Medicaid managed care. To view the Administration's announcement delaying the regulations, click on:

Additional background on the issue of Medicaid managed care regulations is available at:

To view NAMI's principles for public sector managed care, click on:

Bush Administration Unveils Initiative to Give States Enhanced Flexibility in Setting Medicaid and SCHIP Coverage

On August 4, HHS Secretary Thompson announced a new plan to grant states greater authority to amend their Medicaid and State Childrens Health Insurance Program (SCHIP) benefit packages in order to leverage additional funds to cover the uninsured. This new program - known as Health Insurance Flexibility and Accountability (HIFA) Initiative - was announced at the summer meeting of the National Governors Association.

This new program is an extension of the Bush Administration's current policy of responding to pleas from governors to create more flexibility in the Medicaid program and allow states to use any savings toward extending coverage to the uninsured. Since taking office in January 2001, CMS has approved 91 new and pending Medicaid and SCHIP waiver requests or state plan amendments. While these waivers and plan amendments have extended coverage to more than 800,000 individuals, some have come at the expense of services targeted to persons with severe disabilities that were previously included in state Medicaid or SCHIP programs.

As with existing 1115 and 1915 waiver authority for the states, this new program will require "budget neutrality" - the state cannot draw down any additional federal Medicaid match dollars for the proposed change. Further, this new initiative requires states to direct any savings to coverage for the uninsured.

Under this new HIFA program states would still be required to maintain their current benefits package for all mandatory Medicaid populations - including children and adults eligible for Supplemental Security Income (SSI). This requirement for states to maintain their current benefit package includes optional services that are directed to mandatory populations. Thus, states utilizing the current rehabilitation option under Medicaid to fund assertive community treatment (PACT) would have to continue doing so for people with severe mental illness on SSI. Likewise, limitations on cost sharing for services (including outpatient prescription drugs) for mandatory populations (e.g., SSI recipients) would continue.

Details on the Administration's Medicaid-SCHIP HIFA Initiative are available at:

More information on NAMI's position on enhanced state Medicaid flexibility - including efforts to promote financing of PACT and repeal the discriminatory Institutions for Mental Disease (IMD) exclusion is available at: