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Attaining Coverage Through Medicaid Managed Care Options


For states that use Medicaid managed care, there are ways states can attain coverage of the National Diabetes Prevention Program (National DPP) lifestyle change program, including:

  • Medicaid Managed Care Performance Improvement Projects
  • Value-Added Services
  • 1915(b)(3) Waivers
  • Alternative Services Mechanism

These options and additional considerations are outlined in the sections below.



About Medicaid Managed Care

“Medicaid managed care provides for the delivery of Medicaid health benefits and additional services through contracted arrangements between state Medicaid agencies and managed care organizations (MCOs) that accept a set per-member-per-month (capitation) payment for these services.” See

States with managed care delivery systems must comply with federal Medicaid rules and regulations regarding managed care. “These regulations include requirements for a managed care plan to have a quality program and provide appeal and grievance rights, reasonable access to providers, and the right to change managed care plans, among others.” See

Click here for a map to see if your state uses Medicaid managed care.



Medicaid Managed Care Performance Improvement Projects

Performance Improvement Projects (PIPs) are quality improvement projects developed and conducted by Medicaid managed care organizations (MCOs). Because PIPs can focus on either clinical or nonclinical areas like diabetes prevention, they are a potential vehicle for implementing the National DPP lifestyle change program.

For example, a state or MCO interested in focusing their PIPs on improving diabetes prevention and care could choose to implement the National DPP lifestyle change program as part of the project.

Currently states and MCOs have some latitude in the number and topics of PIPs that are implemented, although they must be developed within set CMS protocol. This protocol specifies how a PIP is to be conducted and evaluated including “methods for selecting the topic, defining the study question, selecting indicators and study population, sampling methodology, data collection, implementation of the improvement strategy, analysis of data and interpretation of results, and planning for sustaining improvement.” (Source: Medicaid Performance Improvement Projects: A Means of System Transformation; available here).

PIPs are validated by an external quality review organization (EQRO). Costs associated with developing and implementing PIPs are included as part of the capitated MCO rate paid by the state, which is then eligible to claim federal Medicaid match for appropriate services. Costs related to these projects fall in the numerator for the Medical Loss Ratio (MLR) equation.

One issue to note is that the Medicaid managed care rule finalized in April 2016 outlines that CMS is permitted, in consultation with states and stakeholders, to specify standardized performance measures and topics for PIPs for inclusion in state contracts with MCOs. While states may request exemption from national PIPs, the goal is to make these projects more standardized moving forward.



Value-Added Services

Some MCOs offer “value-added” services to attract Medicaid enrollees to their plan or improve health outcomes. Examples are numerous and vary across plans and states, but typically include health education classes, dental and vision programs, or incentive programs.

Aetna Better Health of KY offered the National DPP lifestyle change program as a value-added or “bonus” benefit to its Medicaid managed care enrollees in 2017.

MCOs may choose to offer the National DPP lifestyle change program as a value-added service if there is a high risk for type 2 diabetes within its member population or a high demand for the program.

Value-added services can be medical or nonmedical services. They fall outside direct care costs and are paid for by the MCO. They are not covered by Medicaid nor do they qualify for federal Medicaid match. However, value-added services are considered to be incurred claims and counted in the numerator of the MLR calculation.

Some states mandate that MCOs provide value-added services as part of their contract with the state, while other states support their use as long as the benefits comply with applicable state and federal laws and regulations related to Medicaid managed care marketing activities and Social Security Act §1128A among others.



1915(b)(3) Waivers

While it does not appear that any states are currently using 1915(b)(3) waivers to cover the National DPP lifestyle change program, these waivers are used to cover similar “programs” (rather than specific services) and may be a viable coverage mechanism for a state.

1915(b)(3) waivers allow states to use the cost savings generated from managed care delivery systems to provide additional services to Medicaid beneficiaries such as maternity care programs, Nurse-Family Partnership programs, and other non-Medicaid services. The additional services are subject to CMS approval and must be for medical or health-related care or other services as described in federal regulation.

1915(b)(3) waivers have a more limited scope of authority than 1115 waivers, but provide states with targeted authority to waive core elements of federal Medicaid regulations, including:

  • Freedom of choice (meaning states may limit the number of qualified providers Medicaid beneficiaries may obtain services from);
  • Statewideness (meaning the waiver can be targeted to specific geographic locations); and
  • Comparability (meaning the state can provide services to the waiver population that may not be comparable to services provided to other Medicaid populations—services may vary by amount, duration, and scope). Populations excluded from the waiver program must be identified.

As with 1115 waivers, 1915(b)(3) waivers must be “cost effective” (which is different than being budget neutral) and the state must assure that:

  • State staff reviewed the calculations for accuracy and attest to their correctness;
  • The actual waiver costs will be less than or equal to the state’s waiver cost projection if the assumptions in its projects stay true;
  • Capitated rates are set following the federal requirements and will be submitted to the CMS Regional Office for approval;
  • Capitated 1915(b)(3) services will be set in an actuarially sound manner (the final Medicaid managed care rule is much more directive on this, including stricter rate cell requirements); and
  • The state will monitor the cost-effectiveness of the waiver.

Whether delivery of the National DPP lifestyle change program can meet these criteria is dependent on the state, the savings it has achieved through its managed care program, and what other (b)(3) programs it currently offers.

In calculating the cost savings from implementing the National DPP lifestyle change program, states will need to estimate how many Medicaid enrollees have prediabetes as well as the type 2 diabetes-related costs that could be averted by implementing the program. See the Cost and Value page of the Coverage Toolkit for more information on estimating the cost-effectiveness or cost-savings of the program, and the Screening & Identification page for more information on identifying Medicaid enrollees eligible for the program.

Section 1915(b)(3) waivers must comply with federal Medicaid requirements and are approved initially for two years and renewed for up to two-year periods (five years if the waiver includes the dual eligible population).



Alternative Services Mechanism

Another option for states and Medicaid MCOs to review is whether the National DPP lifestyle change program could be offered as an “in lieu of service” under the alternative service clause.

“In lieu of services” are services that can be offered in place of other services under MCO contracts if such alternative services or settings are medically appropriate, cost-effective, and are offered on an optional basis for both the MCO and its enrollees (for more information see 42 CFR 438.3(e)).

When determining whether the alternative services mechanism could be used for the provision of the National DPP lifestyle change program, states will need to determine what comparable services this program could replace, whether it is other preventive services or diabetes care management services.

Because the cost and utilization data of the “in lieu of services” is used in the development of actuarially sound rates, states and MCOs will also need to determine whether the National DPP lifestyle change program is an appropriate substitute for current services given that the program’s cost savings are more long term and may not be cost effective for purposes of rate setting.

The use of “in lieu of services” is approved through the rate setting and approval process. The 2016 final Medicaid managed care rule imposes four criteria for the use of “in lieu of services” in managed care contracts.

  1. The state must determine that the alternative service or setting is a medically appropriate and cost-effective substitute as a general matter rather than on an enrollee-specific basis. The use of an “in lieu of services” can be authorized through the contract.
  2. The enrollee cannot be required by the MCO to use the alternative service or setting.
  3. The contract-approved “in lieu of services” are offered at the managed care plans’ discretion.
  4. The cost and utilization data of the “in lieu of services” are used in the rate-setting process, unless statute or regulation specifies otherwise (such as with the use of services in an IMD as an “in lieu of services” which requires a different rate-setting approach).

NOTE: The managed care plan can offer other services voluntarily, but the cost of these services cannot be included in the state’s payment to the plan.

Content last updated: June 26, 2020