The Centers for Medicare and Medicaid Services (CMS) released the Medicaid Program: Ensuring Access to Medicaid Services final rule on April 22, which will take effect 60 days from publication (July 9, 2024) though many provisions have longer timelines for compliance. This rule, initially proposed in April of 2023, included many provisions requiring states to strengthen access to Medicaid services, broadly improve transparency in the program, and enhance service quality. The rule covers the breadth of services and programs within Medicaid with significant attention to primary care, maternal health, and home and community-based services (HCBS). Many of the changes in the rule are positive and will strengthen the Medicaid program.

However, within the rule was a provision for which the rule became known in the long-term care community. A requirement for 80% of Medicaid rates for three HCBS waiver services—homemaker, home health aide, and personal care—to be passed on to workers as a compensation pass-through. This provision, being the most controversial, has resulted in a common reference to this rule as the “80/20 rule” though it has broader policy implications.

The final rule, despite strong comment opposition, contains the 80% compensation pass-through. CMS made changes in the final rule by clarifying their intent to include some employer costs in the 80% calculation while excluding others. States will develop reporting structures by 2028, with the payment adequacy threshold taking effect in 2030. The most significant change from the proposed rule to the final is the clarification that compliance with the pass-through requirement is at the provider level rather than the state level. Therefore, LeadingAge members offering these services will be mandated to comply with few exceptions.

Payment Adequacy Provisions (80/20)

What services are included?

The final rule requires providers to pass 80% of Medicaid rates on to direct care workers providing three services: homemaker, home health, and personal care in 1915 (c, i, j, & k) authorities along with 1115(a) demonstrations. Notably, this excludes state plan services delivered under section 1905 (e.g. state plan home health services are not included).

The 80/20 provision seemingly does not apply to bundled services where one or more of these services are part of a larger service bundle. For example, in assisted living service definitions vary by state, but generally include some combination of meals, homemaker, and personal care services. Therefore, when a waiver enrollee has a service plan that outlines only assisted living services, those would not be subject to the 80% pass-through requirement. This doesn’t mean that assisted living providers are fully in the clear—it means that when the service is delivered as part of the assisted living service bundle, it will not be subject to the pass-through requirement.

If a provider is serving residents who also have authorization in their service plan for supplemental personal care, homemaker, or home health services, these supplemental services will be subject to the pass-through. Any time services are billed under the singular service type of homemaker, home health aide, or personal care, the provider must consider these for inclusion in reporting on the 80% compensation pass-through. In many states these services will be delivered by a subsidiary or separate organization from the assisted living, simplifying record keeping.

Compliance with the 80/20 pass-through will be measured at the individual provider level, which is a shift from the proposal which required state compliance across all providers and services included.

The rule applies to all direct care workers providing homemaker, home health, and personal care in the covered authorities. This is inclusive of clinical supervision, so long as the clinical supervision isn’t strictly administrative. CMS amended the calculation to entirely exclude provider costs for training, travel, and personal protective equipment (PPE). This means a provider assessing where they are today would subtract those costs from their received Medicaid rate, and then begin the calculation of 80%.

Included within the 80%:

• Wages
• Benefits (health, dental, retirement, life insurance, etc.)
• Education (tuition reimbursement, not training);
• Workers’ compensation and unemployment insurance (this was clarified in the final rule to be included)
• Taxes
• Costs related to clinical supervisory positions that aren’t exclusively administrative

Were there changes in the threshold calculation from the proposed to the final rule?

LeadingAge’s comments on the proposed rule stressed the importance of clinical supervision and the correlation to workers feeling supported and empowered, and reducing turnover. We noted that increased clinical supervision and support of direct care workers promotes employee satisfaction, reducing turnover, and increasing participant satisfaction and quality of services. CMS’s exclusion of training, travel, and PPE is a step in the right direction but fails to adequately incentivize training and continues to disproportionately affect small and rural providers.

Are there any exclusions or exemptions? 

Exclusion of some consumer directed services: The payment adequacy provisions exclude services delivered in budget authority consumer directed models, though this is intuitive since compliance is at the provider level. Agency with Choice and other consumer directed models using a fiscal intermediary or fiscal employer agent will still be required to comply.

Exemptions: The rule allows states to establish standardized exemptions under two categories: hardship and small provider. If states pursue these options, they must report the following to CMS on each exemption:

• The criteria used to determine [the hardship or the small provider category];
• The percentage of providers within the state that qualify; and
• A plan to bring providers meeting the exemption criteria into broader compliance.

The small provider exemption must also establish a pass-through percentage, though it can be lower than the codified 80%. For the small provider exemption, a state can mitigate the above noted reporting requirement if their exemption applies to less than 10% of providers within the state.

What else was in the rule for which states will need to comply?

Person-centered service planning enhancements

States must report, with a compliance date of July 9, 2027, on the percentage of waiver enrollees receiving annual functional assessments and updated reviews of person-centered services plans. The statewide requirement for both metrics is 90%.

No changes made here alter the fundamentals of person-centered service planning.  There was a removal of reference to state laws that may confer decision-making authority to an individual’s representative. This seems to be a clarification that the individual must be a part of the person-centered service planning process, even if their representative is responsible for decisions related to their care, and that obligation is outlined in state law.

Reporting on access to services

The rule implements a number of new reporting requirements that will allow more insights into access to services. States must in compliance with these reporting requirements by July 9, 2027. All of these reporting requirements are through statistically valid random sampling. The requirements are:

• Waiting lists
  • If a state screens for eligibility to be placed on a waiting list, if they rescreen individuals on the waiting list, and timelines for conducting re-screenings.
• Time from service approval to service start date
  • CMS intends to use this metric to understand participant access to services. If there are long wait times from approval of services, indicating a person needs support, until a person begins receiving services, CMS believes this demonstrates a need for further examination and poor access.
• Approved services vs delivered services for homemaker, home health, and personal care.
  • Similar to above, CMS is using this metric for currently enrolled participants to understand missed shifts, mitigate service plan inflation, and support determination of underserved states.

Rate development and transparency (varying timelines)

• States will be required to use an advisory group, to be developed, that will include Medicaid participants and others impacted by rate changes. CMS does not mandate that states must include providers, though states can choose to include them.
• States must develop a public web posting of rates and the development processes, along with information on attributable percentages for each service included within bundled rates.
• States will be required to report to CMS on the percentage of funds passed through to direct care workers for homemaker, home health, personal care, and habilitation. This is separate from the 80/20 pass-through and effective in four years giving states and providers two years of data prior to having to come into compliance with the 80/20 pass-through.
• Significant provider protections were enacted when states intended to reduce payment rates through restructuring. States must provide substantial documentation and rationale to CMS when pursuing a rate reduction. This includes an analysis of how restructuring will affect providers and not jeopardize participant access to services.

These provisions around rate transparency align with LeadingAge’s support of transparency writ large and will support the provider community in advocating for adequate rates.

Mandatory adoption of standardized HCBS quality measures

• States must report every other year on CMS-identified quality measures with the option to report on additional measures.
• Within the reporting structure, states will establish goals with plans for meeting their stated targets.
• Additionally, the Department of Health and Human Services will be required to review and update HCBS quality measures sets every second year.
• States must comply by July 9, 2027.

Changes to advisory and stakeholder groups to require more representation of Medicaid participants and users of services.

States will now be required to publicly post information on meeting schedules, content, and members of the advisory group on a public-facing website. Providers were not explicitly included by CMS, though states aren’t prohibited from including them. States must establish the committees in 2024, though as they revamp these groups and increase membership in these groups that are Medicaid consumers, timelines for full and final compliance range through 2026.

Critical incident management

States must create or adopt a standardized definition of critical incidents and deploy a statewide electronic incident management system. The system must have the capacity to accept, track, and trend critical incidents to inform states’ obligation to prevent future incidents when patterns of adverse events would be predictive of future adverse events. The rule further outlines timeframes for provider reporting of incidents and state response plans, including functional and effective data sharing across agencies, for investigation and resolution. As states enhance their critical incident management software to comply with the requirements, the process for entering or reporting incidents may change. Though this will impose a training burden and transition period for providers, we support these changes.

What’s next?

As we look toward the future for states, the Access Rule requires bold investment by states to evaluate current systems and processes, develop work plans for compliance with new provisions, and establish staff capacity and acumen to meet the expansive requirements. Coupled with other recently released rules in the Medicaid program such as the Managed Care Rule and the Eligibility Streamlining Rule, state Medicaid agencies will be overwhelmed in the coming years.

Providers should pay attention to the proposals and how their states are restructuring stakeholder groups tasked with advising their state Medicaid agency on policy implementation. New requirements may allow for additional provider voices as states grapple with priorities. Many of the requirements on states such as changes to critical incident reporting and cost reporting both for compliance with reporting and the 80/20 threshold will have a substantial impact on providers. To comply with provisions in the rule, states will have to develop cost-reporting templates and procedures for providers. States will use information from providers to meet their reporting obligations to CMS. To the extent possible, leveraging your experiences to influence policy decisions at the state level will affect the sector at large. Please reach out to Georgia at ggoodman@leadingage.org with questions about the rule.

The rule can be found here.

CMS released a chart of timeframes for when states must comply, it can be viewed here.