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Leader McConnell and Chairman Hatch:
We the undersigned, representing health plans, providers and professionals that serve millions of Medicaid enrollees through managed care organizations, are writing to express our serious concerns about the direction of Senate discussions regarding potential reductions of hundreds of billions in federal funding for the Medicaid program. As we strive to protect state Medicaid programs from potentially devastating federal cuts, we are also asking you to protect and preserve an essential underpinning of Medicaid managed care – the oversight and enforcement of actuarially-sound rate setting.

Actuarial soundness requires state-calculated Medicaid plan premium rates to provide for all reasonable, appropriate, and attainable costs, including health benefits, marketing and administrative expenses, any state-mandated assessments and taxes, and required reserves. This is important because, if rates are not actuarially-sound, plans that are contractually obligated to provide benefits to enrollees must do so at rates that that would force them to dangerously limit access to benefits, curtail provider reimbursements, and remain unpaid for other state-mandated requirements.

Far from being a “plan-only” issue, failure to pay actuarially-sound rates has a direct impact on reimbursement rates paid to a plan’s network of providers that deliver benefits to enrollees. In such a scenario, providers either accept inadequate payments – a common critique among policy-makers who are concerned about Medicaid access – or drop out of the network altogether. Without a robust provider network, enrollees will have difficulties accessing their Medicaid benefits and plans cannot meet minimum access requirements. If enough providers drop out of networks, it is impossible for health plans to deliver benefits – leading to a “death spiral” in a Medicaid managed care program that could force plans to withdraw from participation altogether.

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