TITLE 12. HEALTH

DEPARTMENT OF MEDICAL ASSISTANCE SERVICES

Fast-Track Regulation

Title of Regulation: 12VAC30-50. Amount, Duration, and Scope of Medical and Remedial Care Services (amending 12VAC30-50-325).

Statutory Authority: § 32.1-325 of the Code of Virginia, 42 USC § 1396 et seq.

Public Hearing Information: No public hearing is currently scheduled.

Public Comment Deadline: September 25, 2024.

Effective Date: October 10, 2024.

Agency Contact: Meredith Lee, Policy, Regulations, and Manuals Supervisor, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-0552, FAX (804) 786-1680, TDD (800) 343-0634, or email meredith.lee@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance and to promulgate regulations, and § 32.1-324 of the Code of Virginia grants the Director of the Department of Medical Assistance Services (DMAS) the authority of the board when it is not in session.

Purpose: The proposed changes are essential to protect the public health, safety, and welfare of citizens of the Commonwealth because the rate methodology helps ensure the continued financial viability of the Virginia Medicaid program.

Rationale for Using the Fast-Track Rulemaking Process: These regulatory changes are expected to be noncontroversial because the changes align with current DMAS rate-setting practices.

Substance: The proposed changes update the Medicaid capitation rate methodology to align with current DMAS Program of All-Inclusive Care for the Elderly (PACE) rate-setting practices. DMAS has transitioned from fee-for-service data to managed care encounter data for development of the amount that would otherwise have been paid under the State Plan for a comparable population. Rates are set at a percentage discount off of the amount that would have otherwise been paid for the comparable population.

Issues: The advantage to the public is transparency and updated text to reflect the current rate-setting methodology for the PACE population. The advantage to the DMAS and the Commonwealth is that the Virginia Administrative Code will reflect the rate-setting practice that is already being used for PACE and that has already been approved by the Centers for Medicare and Medicaid Services. These changes create no disadvantages to the public, DMAS, the Commonwealth, or the regulated community.

Department of Planning and Budget's Economic Impact Analysis:

The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Code of Virginia and Executive Order 19. The analysis presented represents DPB's best estimate of the potential economic impacts as of the date of this analysis.¹

Summary of the Proposed Amendments to Regulation. On behalf of the State Board of Medical Assistance Services (board), the Director of the Department of Medical Assistance Services (DMAS) proposes to update the rate-setting methodology for the Program of All-Inclusive Care for the Elderly (PACE) services in order to reflect the capitation methodology currently being used.

Background. PACE services are provided to Medicaid members who are 55 years of age or older and who are medically qualified for nursing homes or home-based care. Members may select PACE as an alternative community-based and more holistic approach to their care needs. These individuals neither overnight at the PACE facility nor necessarily receive services each day. While medical care, such as doctor appointments, physical therapy appointments, and occupational therapy appointments is available at the PACE facilities, the facilities provide social support services as well as occasional transportation services. According to DMAS, the General Assembly passed a directive in 2011 to expand the "principles of care coordination to all geographic areas, populations, and services." Based on this mandate, DMAS gradually transitioned more and more Medicaid members into managed care from fee-for-service. As this occurred, DMAS transitioned from using fee-for-service data to managed care data to determine PACE payment rates. To set PACE rates, DMAS has to use data from a comparable population that is not enrolled in PACE. This comparable population consists of non-enrolled PACE members who receive long-term services and supports (LTSS). For many years, this LTSS population was enrolled in fee-for-service. However, in response to General Assembly mandates mentioned previously, DMAS enrolled more and more populations into managed care, including this LTSS population. Consequently, over time, DMAS had to transition from using fee-for-service data to managed care data to set the PACE rates because the comparable LTSS population transitioned from fee-for-service to managed care.

In managed care, a per-member per-month capitation payment is made to the provider. PACE payments are made using capitation rates that represent a percentage of the amount that would otherwise been paid for the comparable population under fee-for-service. The DMAS actuary has transitioned from using fee-for service data to managed care encounter data when determining the amount that would otherwise have been paid for a comparable population. However, the current text of the regulation does not reflect the change in the rate methodology. The proposal would update the text so that it reflects the capitation payment methodology that is already being used for these members, and that has already been approved by the Centers for Medicare and Medicaid Services.²

Estimated Benefits and Costs. The main benefit of this action is to amend the regulation to reflect current rate-setting practices for the PACE population and improve the clarity and the accuracy of the text. Generally, the total payments to the PACE population are to be lower than the payments would have been under the fee-for-service methodology. However, no data are available to demonstrate that this expectation for this mandated change in service delivery method has been met. According to DMAS, there were 1,600 members receiving PACE services as of March 2022, and the approximate cost of these services in fiscal year 2022 was $96 million.

Businesses and Other Entities Affected. DMAS reports that as of March 2022, there were 1,600 members receiving PACE services from 12 providers. No members or providers appear to be disproportionately affected.

The Code of Virginia requires DPB to assess whether an adverse impact may result from the proposed regulation.³ An adverse impact is indicated if there is any increase in net cost or reduction in net revenue for any entity, even if the benefits exceed the costs for all entities combined. As noted, the proposal merely updates the text to reflect the rate-setting methodology for the PACE population. Thus, no adverse impact is indicated.

Small Businesses⁴ Affected.⁵ The proposed amendments do not adversely affect small businesses.

Localities⁶ Affected.⁷ No localities are disproportionately affected. There are no costs to local governments as a result of these changes.

Projected Impact on Employment. The proposed amendments do not affect total employment.

Effects on the Use and Value of Private Property. The proposed amendments do not affect the use and value of private property or the real estate development costs.

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¹Section 2.2-4007.04 of the Code of Virginia requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the analysis should include but not be limited to: (1) the projected number of businesses or other entities to whom the proposed regulatory action would apply, (2) the identity of any localities and types of businesses or other entities particularly affected, (3) the projected number of persons and employment positions to be affected, (4) the projected costs to affected businesses or entities to implement or comply with the regulation, and (5) the impact on the use and value of private property.

² https://www.dmas.virginia.gov/media/4598/va-22-0004-approval-package.pdf.

³ Pursuant to § 2.2-4007.04 D: In the event this economic impact analysis reveals that the proposed regulation would have an adverse economic impact on businesses or would impose a significant adverse economic impact on a locality, business, or entity particularly affected, the Department of Planning and Budget shall advise the Joint Commission on Administrative Rules, the House Committee on Appropriations, and the Senate Committee on Finance. Statute does not define "adverse impact," state whether only Virginia entities should be considered, nor indicate whether an adverse impact results from regulatory requirements mandated by legislation.

⁴ Pursuant to § 2.2-4007.04, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

⁵ If the proposed regulatory action may have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include: (1) an identification and estimate of the number of small businesses subject to the proposed regulation, (2) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents, (3) a statement of the probable effect of the proposed regulation on affected small businesses, and (4) a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation. Additionally, pursuant to § 2.2-4007.1 of the Code of Virginia, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules shall be notified.

⁶ "Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

⁷ Section 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

Agency's Response to Economic Impact Analysis: The Department of Medical Assistance Services has reviewed the economic impact analysis prepared by the Department of Planning and Budget and raises no issues with this analysis.

Summary:

The amendments update the Medicaid capitation rate methodology to align with current Department of Medical Assistance Services (DMAS) Program of All-Inclusive Care for the Elderly (PACE) rate-setting practices. DMAS has transitioned from fee-for-service data to managed care encounter data for development of the amount that would otherwise have been paid under the State Plan for Medical Assistance (State Plan) for a comparable population. Rates are set at a percentage discount to the amount that would have otherwise been paid for the comparable population. DMAS submitted a State Plan amendment to the Centers for Medicare & Medicaid Services that was approved on April 26, 2022.

12VAC30-50-325. Rates and payments.

A. The Commonwealth assures that the capitated rates will be equal to or less than the cost to the agency of providing those same fee-for-service State Plan approved services on a fee-for-service basis, to an equivalent nonenrolled population group based upon the following methodology rates are set at a percent of fee-for-service costs. Rates are set at a percentage of fee-for-service costs.

B. To determine the amount that would otherwise have been paid (AWOP) under the State Plan for a comparable population, the Commonwealth uses base period encounter data adjusted for comparable populations and services to those provided by the Program of All-Inclusive Care for the Elderly (PACE) program, specifically individuals 55 years of age or older who historically receive services in an institutional setting or enrolled in a home and community based services (HCBS) § 1915(c) waiver. The historical data is adjusted to reflect modifications of payment arrangements between the data period and the contract period as well as benefit or eligibility changes that occurred prior to the beginning of the contract period. The base period data is also updated to reflect expected increases in utilization and cost for the contract period covered by the rates. An allowance for administrative costs is added to the AWOPs along with a provision for underwriting gain.

C. The final capitation rates are determined as a percentage discount off of the amount that would otherwise have been paid for these populations.

D. The PACE capitation rates vary by region and by eligibility status (dual-eligible and non-dual-eligible).

E. The State Medicaid Agency Commonwealth assures that the rates were set in a reasonable and predictable manner.

C. F. The Commonwealth will submit all capitated rates to the Centers for Medicare and Medicaid Services (CMS) regional office for prior approval.