September 20, 2002

Center for Medicare and Medicaid Services Publishes Revised Medicaid Managed Care Rule

Holland & Knight Alert
Michael R. Manthei

CMS recently published a revised final rule amending the federal regulations governing Medicaid managed care arrangements.  This Final Rule implements the most sweeping changes to the managed care rules since their introduction in 1978.  Most significantly, the final rule creates a mechanism for states to implement mandatory managed care programs without the need to obtain a waiver under either §1115 of the Social Security Act (SSA or the Act) or under §1915(b) of the SSA.  Mandatory programs violated the old rules, so the only way states could implement mandatory managed care used to be by applying for a "waiver" under one of these two provisions.

In another significant change, the Final Rule repeals the current upper payment limit (UPL) on state payments to MCOs under risk contracts. Under the UPL restrictions, states were not able to receive federal financial participation (FFP) for any MCO payments in excess of what the state would have paid if the Medicaid recipients who were enrolled in the MCO were covered under fee-for-service (FFS) Medicaid. Instead, the new rule states that the state capitation rates paid to MCOs must be certified as “actuarially sound.”

A detailed analysis of these and the other provisions of the Final Rule can be accessed by clicking here and accessing the American Health Lawyers Association member briefing co-authored by Michael Manthei of Holland & Knight's National Health Law Group.  Questions regarding the Final Rule may be directed to Mr. Manthei at

Latest Insights