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In-lieu-of Services and Value-Added Benefits: Implications for Managed Care Rate Setting

The Centers for Medicare & Medicaid Services has indicated that they will release proposed regulations addressing access, in-lieu-of services (ILOS), directed payments, and other managed care topics in 2023.

This session continued the Commission’s work on managed care rate setting by facilitating a discussion on how states’ flexibility under managed care to offer ILOS and value-added benefits is considered in federal guidance, actuarial soundness standards, and the rate setting process. ILOS are medically appropriate, cost-effective alternatives to approved state plan services, while value-added benefits typically are non-medical services funded by health plans’ administrative dollars. During the September 2022 public meeting, Commissioners identified this as a policy area to examine in advance of federal rulemaking.

This presentation provided an overview of our findings on how ILOS and value-added benefits are treated in rate setting and raised potential areas for the Commission’s consideration that could be addressed in a future comment letter.