Sellers Dorsey Digest

Federal Updates

News

MACPAC Holds December 2024 Public Meeting

• The Medicaid and CHIP Payment and Access Commission (MACPAC) met on December 12, 2024, and December 13, 2024, to host sessions on and discuss the following topics:
  • State and Federal Tools for Ensuring Accountability of Medicaid Managed Care Organizations (MCOs): The presentation included information on resources available to state and federal regulators to exercise oversight of managed care programs such as procurement, external quality reviews, and denials and appeals. MACPAC conducted a review of federal policy and state MCO contracts. In the state scan, they found that the most common contract sanctions were financial penalties, corrective action plans, contract terminations, administrative/corrective actions, enrollment penalties, and capitation payment penalties. There were fewer incentives within state MCO contracts, with the most common being capitation payment bonuses for meeting or exceeding performance standards. The next steps for this work include stakeholder interviews and an analysis of sanction information from state Managed Care Plan Annual Report (MCPAR) submissions.
  • External Quality Review (EQR) Draft Recommendations: MACPAC staff presented draft recommendations related to EQRs for their March 2025 report to Congress. These recommendations focus on making the findings in annual technical reports clearer and more accessible to stakeholders. The Commission reviewed the proposed recommendations, considering their rationale and the potential impact on various stakeholders, including states, Medicaid MCOs, and beneficiaries. The goal is to improve how Medicaid managed care services are reported and enhance their effectiveness.
  • Transitions of Care for Children and Youth with Special Health Care Needs (CYSHCN): The Commission examined how state Medicaid programs and MCOs operationalize their transitions of care policies for CYSHCN. The Commission found that these transition plans are not often publicly documented, nor did all CYSHCN receive a transition of care plan. It was also noted that state Medicaid and Title V agencies are not required to coordinate on CYSHCN transitions of care. MACPAC staff presented four policy options to the Commissioners to address these issues, which included potential recommendations to Congress, CMS, and HHS.
  • Potential Areas for Comment on CMS Proposed Rule on Medicare Advantage (MA) for CY2026: On December 10, 2024, CMS released a proposed rule impacting Medicare and Medicaid that would, among other things, mandate coverage of certain weight loss drugs, add integration requirements for Dual-Special Needs Plans (D-SNP), and increase awareness of cost-sharing assistance programs. Comments on the proposed rule are due on January 27, 2025. Because this proposed rule impacts Medicaid and dual-eligible beneficiaries, MACPAC felt that it was appropriate to draft a response. They shared potential comments on the topics listed above that align with previous work published by the Commission.
  • Self-Directed Services in Medicaid Home-and Community-Based Services (HCBS): In this session, MACPAC staff discussed self-direction as an HCBS consumer-controlled delivery model. The presentation highlighted program design considerations, enrollment data, evaluation outcomes, and issues to prioritize with stakeholder groups.
  • Panel on Self-Direction for HCBS: MACPAC’s discussion on self-directed care services highlighted key issues related to eligibility and barriers to access with administering self-directed HCBS. The panel explored the benefits, challenges, and design considerations involved, giving Commissioners a chance to hear directly from expert panelists. Commissioners’ engagement with expert panelists provided insights to better understand the perspectives and stakeholder input that states need to consider when developing and running self-direction models.
  • Timely Access to HCBS: Policy Option on Provisional Plans of Care: MACPAC commissioners discussed provisional plans of care that are allowable under Section 1915(c) waivers. Staff recapped relevant themes from stakeholder interviews from five states, including lack of awareness, lack of feasibility, limited capacity, and administrative complexities. MACPAC commissioners opined that CMS should issue guidance regarding states’ Medicaid authority for the adoption of provisional plans of care and relevant policy and operational issues that should be considered when implementing this type of service.
  • HCBS Spending and Utilization: MACPAC partnered with Mathematica to review Medicaid HCBS spending and utilization. As of 2021, more than 2.5 million individuals used HCBS, with a wide variety of subpopulations and intensity of services. 1915(c) waivers accounted for the majority of the $82B spent on HCBS services in 2021. Building from previous work in 2017 using Medicaid Analytic eXtract data, T-MSIS data from 2019 through 2021 was analyzed to identify HCBS and institutional LTSS claims. The resulting data was stratified by beneficiary characteristics and LTSS subpopulation type. The number of HCBS users increased from 2019 to 2021 while institutional LTSS users decreased in the same period. MACPAC provided several graphs that showed the demographic makeup of HCBS users and information on the spending and utilization of HCBS services broken down by subpopulation. Next steps for the Commission include developing an issue brief for high-level findings and utilizing the data set for future work.
  • Findings from a Technical Expert Panel on Medicaid Payment Policies to Support the HCBS Workforce: The MACPAC presentation focused on the impact of workforce shortages in HCBS, emphasizing that these workforce shortages are impacting Medicaid’s ability to support people with long-term care needs in their homes or communities. While some workforce challenges fall outside Medicaid’s scope, many states are exploring ways to use Medicaid payment policies to expand the HCBS workforce and reduce turnover. Previous MACPAC meetings in November 2023 and March 2024 discussed findings from federal and state interviews on strategies to ensure Medicaid payment rates are sufficient to attract and retain workers. Building on these insights, a technical expert panel (TEP) was convened, including federal and state officials, HCBS payment experts, actuaries, beneficiary advocates, and provider groups. The TEP discussion highlighted the importance of aligning rate assumptions and conducting consistent rate reviews to strengthen the HCBS workforce (MACPAC, December 13).

End of Year Health Package That Contains Two-Year Telehealth Extension and Funding for Several Health Care Programs

• On December 17, lawmakers finalized the Continuing Resolution (CR) ahead of the government funding deadline on Friday night. Late on December 18, House Speaker Johnson indicated that the CR package may not be voted on Friday after objections were raised by some House Republican members and President-elect Trump. Included in the CR are extensions for Medicare alternative payment model bonuses and pandemic-era telehealth flexibilities and a 2.5% bonus for Medicare physician payments to offset the anticipated 2.8% cut from CMS as well as PBM reform and other items. The provisions around prior authorizations in Medicare Advantage and site-neutral hospital payment policies were not included in the final text. House Speaker Mike Johnson stated that he intends to follow the House rule that allows members of Congress to review a bill for 72 hours, placing the vote on Friday afternoon. The general funds allocated in the bill will last until March 14. The CR also extends various other key healthcare programs, with pharmacy benefit manager (PBM) and patent reforms used to offset costs. CMS is expected to adjust its fee schedule in line with the new telehealth provisions, likely through an interim final rule that would take effect immediately upon implementation (The Washington Post, December 18; Modern Healthcare, December 17).

Federal Legislation

U.S. Supreme Court Will Not Consider Appeal Challenging Arkansas’ 340B Drug Pricing Law

• On December 13, the U.S. Supreme Court declined to hear an appeal from the Pharmaceutical Research and Manufacturers of America (PhRMA) industry group challenging Arkansas’ 340B drug pricing law. The 340B program, established by Congress 32 years ago, aims to support safety-net healthcare providers by offering discounted outpatient drugs. This decision upholds a lower court’s March ruling that upheld Arkansas’ law, which prohibits drugmakers from limiting 340B drug discounts for providers using contract pharmacies. PhRMA contended that Arkansas’ 340B Drug Pricing Nondiscrimination Act, passed in 2021, conflicts with federal law governing the 340B program, which mandates that drug manufacturers provide discounted drugs to safety-net providers. PhRMA argued in its 2021 complaint that the 340B program is a “completely federal program” and that the state law’s requirements for manufacturers clash with both the federal 340B statute and the agreements drugmakers make with HHS. The case was initially brought before the U.S. District Court for the Eastern District of Arkansas, where the court ruled in favor of the state. PhRMA then appealed to the Eighth Circuit Court of Appeals, which upheld the lower court’s decision. The three-judge panel of the Eighth Circuit ruled that Section 340B of the Public Health Services Act does not preempt Arkansas’ law (Fierce Healthcare, December 13).

State Updates

News

Texas HHSC Requesting $300M to Revamp Medicaid Application Process

• The Texas Health and Human Services Commission (HHSC) is requesting $300M in additional appropriations to ease the burden and streamline the current Medicaid application process. The current process, which involves manually entering applicants’ information into the Texas Integrated Eligibility Redesign System (TIERS), was originally introduced as a pilot program in 2003. Over the years, the state has spent millions on the system. Enrollees and advocacy groups are in support of HHSC’s request, speaking to the need for better technology, reduced decision delays, and language translation services. The $300M would allow the state to hire 1,000 new employees and upgrade its eligibility system and revamp the application process for not only Medicaid but other state programs as well (Texas Tribune, December 11).

Blue Cross and Blue Shield (BCBS) of Alabama Proposes Medicaid Expansion Alternative

• On December 12, the Alabama Reflector reported that BCBS of Alabama proposed a new health program, ALLHealth, that would utilize Medicaid expansion funds to deliver services to approximately 113,000 individuals whose income falls between 100% and 138% FPL and who are not eligible for traditional Medicaid but are unable to afford private coverage. The ALLHealth plan aims to address the coverage gap and provide additional financial support to the state’s rural hospitals, with the state covering only 10% of costs and the federal government paying the remainder (Alabama Reflector, December 12; Health Payer Specialist, December 13).

Centene Will Protest Georgia Medicaid Contract Loss

• Centene’s CEO Sarah London announced that the plan will protest the results of the Medicaid contract awards recently announced in Georgia. Two of the four plans that lost the contract, Centene-affiliated Peach State Health Plan and Elevance-owned Amerigroup Georgia, were incumbent plans. Sentara and CVS Health were also not awarded contracts. CareSource, Humana, Molina Healthcare, and UnitedHealthcare were selected to manage the Medicaid program that covers approximately 1.3 million individuals when the new contracts become effective (Health Payer Specialist, December 13).

SPA and Waiver Approvals

Waivers

• 1115(a)
  • California
    • On December 16, CMS approved a new 1115 waiver for California titled, “Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment” (BH-CONNECT). With this approval, the state receives authority to provide new initiatives that aim to strengthen the behavioral health workforce, incentivize health delivery system improvements, promote health-related social needs (HRSN) services, support the health of children and youth involved in the child welfare system, provide transitional care management for individuals with significant behavioral health needs returning to the community, and provide treatment for serious mental illness (SMI). This demonstration also authorizes expenditure authority for Designated State Health Programs (DSHP) to support workforce initiatives. The demonstration is effective through December 31, 2029.
  • California
    • On December 16, CMS approved an amendment to California’s 1115 waiver, Cal-AIM. CMS approved the amendment to eliminate unnecessary administrative burden to the state and ease implementation of Section 5121 of the Consolidated Appropriations Act, 2023, to provide mandatory coverage for eligible juveniles and targeted low-income children. The state also received approval to provide Title XXI expenditure authority for HRSN and updated the special terms and conditions for already-approved HRSN to align with newly published CMS policy. The demonstration is effective through December 31, 2026.
  • Kentucky
    • On December 12, CMS approved a five-year extension of Kentucky’s 1115 waiver titled, “TEAMKY.” The extension includes renewed authority to provide substance use disorder (SUD) treatment and withdrawal management services for individuals residing in an institution for mental disease (IMD), coverage for former foster care youth, and its reentry demonstration initiative. The state received new authority to provide medically necessary short-term inpatient treatment services for Medicaid eligible adults with serious mental illness who are residing in settings that qualify as IMDs, episodic housing interventions under an HRSN initiative, and Recovery Residence Support Services to provide non-clinical activities that support beneficiaries recovering from SUD. The demonstration is effective through December 31, 2029.
  • West Virginia
    • On December 11, CMS approved a five-year extension of West Virginia’s 1115 waiver titled, “Evolving West Virginia Medicaid’s Behavioral Health Continuum of Care.” The extension includes renewed authority for SUD treatment for individuals residing in an IMD, peer recovery support specialist (PRSS) services. The state received new authority to provide certain housing support, post-overdose response teams, recovery-related support services to help individuals with SUD manage recovery and sustain employment, and expenditure authority to provide prerelease services. The demonstration is effective through December 31, 2029.
  • Nevada
    • On December 11, Nevada submitted a request for an amendment to its 1115 waiver titled, “Nevada’s Treatment of Opioid Use Disorders (OUD) and Substance Use Disorders (SUD) Transformation Project.” The state is seeking authority to cover acute inpatient stays in an institution for mental disease (IMD) for Medicaid-eligible individuals ages 21 to 64 with serious mental illness or severe emotional disturbance, including treatment at state psychiatric hospitals. Nevada aims to align with CMS’s expectations and achieve an average length of stay of 30 days for beneficiaries receiving care in IMDs. The state also plans to address HRSN through housing and nutrition supports. The federal public comment period is open from December 11, 2024, through January 9, 2025.

SPAs

• Services SPAs
  • California (CA-20-0036, effective October 1, 2020): Updates the Alternative Benefit Plan (ABP) to align with the Medicaid State Plan by allowing physician assistants (PAs), nurse practitioners (NPs), and clinical nurse specialists (CNSs) to order home health services, such as durable medical equipment (DME) and medical supplies.
  • California (CA-21-0063, effective July 1, 2021): Updates the Alternative Benefit Plan (ABP) to align with the Medicaid State Plan by adding coverage for Medication Therapy Management (MTM) under Pharmacist services.
  • California (CA-22-0019, effective July 1, 2022): Updates the Alternative Benefit Plan (ABP) to align with the Medicaid State Plan by adding community health worker (CHW) services, asthma preventative services and coverage routine costs for clinical trials.
  • California (CA-22-0051, effective January 1, 2023): Updates the Alternative Benefit Plan (ABP) to align with the Medicaid State Plan by adding coverage for doula services and allowing Federally Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs) to bill for services provided by associate marriage and family therapists and associate clinical social workers.
  • California (CA-24-0007, effective January 1, 2024): Updates the Alternative Benefit Plan (ABP) to align with the Medicaid State Plan by allowing Federally Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs) to bill for services provided by licensed and associate professional clinical counselors.
  • California (CA-24-0038, effective October 1, 2024): Updates the Alternative Benefit Plan to align with the Medicaid State Plan by allowing pharmacies to act as supervisors to Community Health Workers (CHW). The SPA also adds coverage for medication-assisted treatment (MAT), peer support specialist services, mobile crisis teams, and Drug Medi-Cal Organized Delivery Systems SUD treatment.
  • Iowa (IA-24-0002, effective July 1, 2024): Adds coverage for Therapeutic Foster Care (TFC) as a rehabilitative service, expanding a pilot program that was formerly funded with ARPA dollars.
  • Kansas (KS-24-0022, effective October 1, 2024): Authorizes the coverage of prescribed drugs that are not Covered Outpatient drugs, as well as those approved by the FDA for import, when medically necessary.
  • New Jersey (NJ-24-0021, effective September 23, 2024): Adds coverage for Community-Based Mobile Crisis Outreach Response Teams (MCORT) to provide Medicaid enrollees who are suspected to be experiencing a substance use disorder (SUD) or mental health crisis with timely responses, individual assessments, crisis stabilization and time limited rehabilitative services.
  • Washington (WA-24-0044, effective January 1, 2025): Updates the Community First Choice (CFC) benefit to adjust the provider qualifications for those providing assessments.
  • Wisconsin (WI-24-0019, effective July 1, 2024): Allows the Department of Health Services (DHS) to utilize value-based purchasing (VBP) agreements for the Medical Assistance program with drug manufacturers.
• Payment SPAs
  • Arizona (AZ-24-0016, effective October 1, 2024): Updates the Nursing Facility (NF) Differential Adjustment Payment (DAP) until the end of contract year 2025.
  • Arizona (AZ-24-0017, effective October 1, 2024): Updates the Inpatient Hospital Differential Adjustment Payment (DAP) until the end of contract year 2025.
  • Arizona (AZ-24-0019, effective October 1, 2024): Updates payment methodology for long term acute care and rehabilitation inpatient hospital rates.
  • Arizona (AZ-24-0022, effective October 1, 2024): Updates the All Patient Refined Diagnosis Related Group (APR-DRG) payment methodology for inpatient hospital services.
  • California (CA-24-0056, effective January 1, 2025): Assures compliance with federal prior authorization and prompt payment requirements and third party liability requirements as outlined in the Consolidated Appropriations Act of 2022.
  • Georgia (GA-24-0011, effective August 9, 2024): Extends the current hospital provider payment program, for inpatient and outpatient hospitals, through June 30, 2030.
  • Michigan (MI-24-0023, effective January 1, 2024): Discontinues the nursing facility Rate Relief Program and simplifies the long-term care reimbursement methodology to make it more efficient and less labor intensive.
  • North Carolina (NC-24-0023, effective October 1, 2024): Updates the payment methodology for Medically Monitored Inpatient Withdrawal Services.
  • North Carolina (NC-24-0034, effective October 1, 2024): Updates the payment methodology for Ambulatory Withdrawal Management (AWM) without ambulatory detoxification.
  • Wisconsin (WI-24-0017, effective July 1, 2024): Updates the methodology for inpatient hospitals to remove the $541,386 per fiscal year cap on supplemental payments to support new graduate medical education residents.

Private Sector Updates

News

Johnson & Johnson Files Lawsuit Against Cigna Pharmacy Benefit Manager (PBM) and Pharmacy Units

• Cigna’s PBM (Express Scripts) and specialty pharmacy (Accredo Health) have been added as defendants to a lawsuit brought by Johnson & Johnson alleging collusion with initially named pharmaceutical intermediary SaveOnSP, which Cigna acquired in its $54B purchase of Express Scripts in 2018, to deliberately mislead patients and Johnson & Johnson about co-pays, resulting in a tens of millions of dollars higher payout. The suit also alleges that Express Scripts and Accredo paid SaveOnSP a 25% fee related to the savings. The lawsuit pursues compensation for tortious interference, aiding and abetting tortious interference, conspiracy to commit tortious interference, and deceptive trade practices. Court records indicate that neither Express Scripts nor Accredo have formally responded to the lawsuit and due to the case’s complexity, with 470 cases already on the docket, a trial is expected to be several years away (Health Payer Specialist, December 16).

Amae Health Raises $6M from Cedars-Sinai to Expand Care for Severe Mental Illness

• Amae Health, a startup treating severe mental illness (SMI), has secured a $6M investment from Cedars-Sinai to expand its growing network of in-person clinics. The partnership, which began two years ago when Amae Health opened its first Los Angeles clinic, focuses on improving care for conditions like schizophrenia, bipolar disorder, and co-occurring substance use disorders. Amae’s integrated, psychiatry-led model combines mental and physical health services, peer support, and data-driven treatment to provide whole-person care. Cedars-Sinai’s investment enhances collaboration, including smoother patient transitions post-hospitalization and shared research opportunities. With clinics recently launched in New York and North Carolina and plans to expand to Texas, Amae’s growth signals strong investor confidence, following the closing of a $15M Series A round earlier this year (Fierce Healthcare, December 16).

Sellers Dorsey Updates

New Blog: Why Managed Care Monitoring and Oversight is Essential for Medicaid Managed Care

• As Medicaid managed care programs grow, effective monitoring and oversight is essential—not just for compliance, but for improving care quality and access. It is recommended that states and MCOs strengthen their monitoring systems to comply with rising standards and ensure Medicaid beneficiaries receive the quality healthcare they deserve. Our latest blog explores how effective managed care monitoring and oversight can help states and MCOs do just that.
  Click here to read it.

ANNOUNCEMENT: Sellers Dorsey Digest Returns January 9, 2025

• The Firm’s offices will be closed December 24 through January 1. Due to the office closure, there will not be a Digest issue on December 26 and January 2. We will resume Thursday, January 9. Thank you for subscribing and reading the Digest this year. We look forward to providing our readers with the most current insights in healthcare and Medicaid in 2025. Happy New Year!