Lesson 1: What are the major regulations for Medicaid?

Lesson Goal


For you to be aware of the major regulations governing the program, and to know where to go to learn more about them.

Lesson Summary


There are several key areas where you can find the regulations governing Medicaid. At a federal level, the Social Security Act (SSA) is the main source of Medicaid law. Other federal regulations clarify and build upon the Medicaid rules found in the SSA. States also are allowed to create the detail their own rules for their programs if they are compliant with the federal rules.

Key topics covered in this lesson include a review of the federal laws, regulations and guidance for Medicaid rules. State rules found in Medicaid Provider Manuals are also covered. Highlights from the newest federal laws and regulations impacting Medicaid (the Affordable Care Act and the Medicaid Managed Care Rule) are also covered.

The Big Topics in This Lesson


1- The Social Security Act, the Code of Federal Regulations and Other Federal Regulations

The information under this topic covers high the main laws and regulations governing Medicaid from a federal level.The information under this topic covers *INFO HERE*

2- State Plans, Provider Manuals, and Other Federal Regulations

The information under this topic covers the more detailed sections of Medicaid policy and regulations found at the state level.

3- Recent Regulations- The Affordable Care Act, the Medicaid Managed Care Rule, and MACRA

The information under this topic provides an overview of recent regulations impacting Medicaid.

Lesson Video


Lesson Q & A


Click on each question to learn more

Q1: What is the Social Security Act and how does it apply to Medicaid?


The Social Security Act (SSA) is a Federal law originally passed in 1935 to provide financial benefits to the elderly. Amendments to SSA in 1965 created Medicare and Medicaid to provide health benefits for the elderly, disabled and poor. Title XIX of the SSA is the part of the law that governs Medicaid program at the federal level.[1] The foundational components of Medicaid rules around eligibility, covered benefits, federal matching, waivers and other rules are found in SSA.


Q2: What is the Code of Federal Regulations and how does it apply to Medicaid?


The Code of Federal Regulations (CFR) is the collected body of rules and regulations that all the different federal agencies publish each year in the Federal Register. Federal laws leave a certain amount of rulemaking authority up to each agency, and CFR annually captures the detailed rules made within this authority. CFR is split into 50 volumes. Medicaid regulations are include in the Public Health volume, CFR volume 42 (written “42 CFR”).  New and updated Medicaid regulations are first published in the Federal Register, and if they receive final approval, they will be included in the annual update to CFR.

Q3: What other federal rules, policy or guidance govern Medicaid?


There are several other types of administrative guidance used by CMS to govern the Medicaid program. These include the State Medicaid Manual, State Medicaid Director and State Health Official letters. The State Medicaid manual collects guidance on multiple Medicaid program topics from CMS, and is updated as needed by CMS. State Medicaid Director Letters and State Health Official Letters are memos that are sent by CMS to agency officials to provide clarification on numerous topics throughout the year. There are similar bulletins provided for the CHIP program, referred to as CMS CHIP Services (CMCS) Informational Bulletins.

Q4: What is a State Medicaid Plan?


The State Medicaid Plan (“State Plan”) is a essentially a contract between CMS and each state. It is a written document that contains details about state eligibility requirements, compliance with federal regulations and any additional benefits the state will cover beyond the mandatory federal benefit packages. The State Plan also includes information about the state will operate the program and manage the provider network. When a state wants to make a change to its program that requires federal approval, it is done either through a State Plan Amendment (SPA) or a waiver.

Q5: What are the Medicaid Provider Manuals?


Medicaid Provider Manuals are the detailed operations, billing and coverage policy documents published by each state Medicaid program to establish the rules that each provider must follow in order to receive reimbursement. These manuals are broken up into 2 parts: Part 1 Provider Manual topics include information that is applicable to all provider and service types; and Part 2 Provider Manuals with are specific to a service type or “Category of Service.” For example, the Part 2 Provider Manual for Durable Medical Equipment (DME) will include detailed information about who can provide DME, what rates are paid for each type of DME and other rules such as prior authorization and annual limits. Most states have dozens of Part 2 Provider Manuals to capture the policy for each type of provider and category of service. Provider Manuals are typically updated quarterly, and the changes are in effect upon dates noted in the manuals.

Q6: Are there other state regulations that impact Medicaid?


Because of the significant impact of the federal match (CMS pays for most Medicaid costs in most states), most Medicaid operational components are governed by federal policy. The main state-level regulatory activity that affects Medicaid besides regulations already discussed is the budget process. Since states have to balance their budgets each year (the federal government does not), they must be much more conservative in how much state funding they can provide for Medicaid in light of other priorities such as education, roads, or the environment. Most struggle each year to fund their portion of Medicaid, especially as costs continue to grow each year.

Q7: What are the major impacts on Medicaid from the Affordable Care Act?


The Patient Protection and Affordable Care Act (PPACA, also referred to as ACA, ObamaCare and “Health Reform”) contains broadsweeping changes for all healthcare, including Medicaid. The major provisions that impact Medicaid are eligibility expansion, reductions in the Medicaid Disproportionate Share (DSH) payments program,  and the relationship with the Health Insurance Exchanges (also referred to as Exchanges or The Marketplace). Medicaid expansion allows states to receive billions more in federal funding in exchange to covering more people by extending benefits to persons up to 138% FPL. The Federal government paid 100% of the costs of this new population until 2017, when states began to have to pay a % of the new costs. By 2020, states that expanded will have to pay 10% of the costs of the new population. Many states chose not to expand Medicaid due to concerns over the increased costs and significant state budget deficits. ACA also reduces DSH payments by billions of dollars over a few years. These payments are additional payments for hospitals who serve a higher percentage of Medicaid or uninsured patients.  By reducing DSH, additional pressures are put on states to accept the Medicaid expansion funding. In addition to Medicaid expansion, ACA contained many other provisions related to Medicaid such as an increase in payments to primary care providers for 2 years and funding for Medicaid health homes. For Medicaid and the Exchanges, states must manage eligibility and related information for members whose status changes from Medicaid to subsidized Exchange coverage (and vice versa) throughout the year. This interface has proven challenging for many states. There are many other components of ACA that impact Medicaid, but expansion has had the most significant impact to date.

Q8: What is the Medicaid Managed Care Rule and what is the impact on Medicaid?


The Medicaid Managed Care Rule (also referred to as the “Mega Rule”) is a federal rule released by CMS in 2015 and finalized in 2016. The rule provides extensive rules for managed care organizations (MCOs) operating in the Medicaid industry. The rule itself spans more than 600 pages. Major areas addressed by the rule include: creating a Medicaid quality rating system similar to STARS in Medicare, establishing an 85% floor for the Medical Loss Ratio used to evaluate plan performance, implementing best practices for Medicaid Long Term Services and Supports (MLTSS), creating more oversight authority for CMS over rate setting, and new rules related to network adequacy for plans. The rule will have a mixed impact on different Medicaid programs. Much of the content of the regulation has been standard practice in many Medicaid markets for year, and much of the content is formalizing previous guidance from CMS. However, most analysts expect the rule to have significant and long term impacts over the next few years.

Q9: What is MACRA and how does it impact Medicaid?


The Medicare Access and CHIP Reauthorization Act (MACRA) is a rule finalized by CMS in late 2016. MACRA mostly focused on changing how Medicare providers are paid, but there are impacts to Medicaid. The most notable Medicaid impact is on health homes. MACRA is designed to shift more provider payments in value based care models, and CMS has clarified that health homes (widely used in Medicaid) do not count as “alternative payment models.” This exclusion will impact providers who serve Medicare-Medicaid dual members in health homes, and may also impact future Medicaid policy related to value based care.

Medicaid Dictionary

 New Terms from this lesson:

SSA The Social Security Act

CFR The Code of Federal Regulations. A collected body of rules and regulations published by different agencies each year.

SPA State Plan Amendment. State request to make a change to a state program that falls under federal approval.

Medicaid Provider Manual Detailed operations, billing and coverage policy documents published by each state Medicaid program to establish the rules that each provider must follow in order to receive reimbursement.

MACRA The Medicare Access and CHIP Reauthorization Act. A rule primarily focused on changing how Medicare providers are paid.

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